Acquisition of Pipeline Investments

LEI: 213800752UO1CJTV8C39

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2 February 2021

ROUND HILL MUSIC ROYALTY FUND LIMITED

("RHM" or the "Company")

Acquisition of Pipeline Investments

The Board of Round Hill Music Royalty Fund Limited is pleased to announce the Company's acquisition of identified Pipeline Investments as detailed in the prospectus published by the Company on 19 October 2020 (the "Prospectus").

Acquisition of Pipeline Investments

In the Prospectus, the Company identified a portfolio of Catalogues the acquisition of which would be consistent with the Company's Investment Policy and the achievement of its Investment Objective. The Pipeline Investments comprise the existing assets of Round Hill Fund One, a private fund whose investments are managed by Round Hill. The Pipeline Investments were independently valued with an aggregate valuation of US$363 million, and achieved a net publisher's share ("NPS") multiple of 16.2x, on US$22.4 million of NPS for the trailing twelve months ending 30 June 2020.

To ensure the capital raised at the end of 2020 is invested in a timely manner, the Board has resolved to acquire the Pipeline Investments by way of a two-step process.

First Investment

The first step comprises the acquisition of the assets of Round Hill Fund One excluding its shareholding in RH Carlin Holdings LLC ("Carlin") (the "First Investment") which was completed on 1 February 2021. The total cash consideration payable by the Company in respect of the First Investment is US$281,860,320 which represents 86 per cent. of the gross proceeds raised in the Company's IPO and subsequent placing. This consideration represents the independent valuation of the assets acquired as at 30 June 2020. Under the terms of the acquisition, the Company is entitled to receive all income generated by the assets with effect from 1 January 2021, regardless of when the income was earned. The First Investment includes iconic Copyrights from artists such as the Beatles, Marvin Gaye, Celine Dion, Rod Stewart, Phil Collins, James Brown, The Offspring, Kiss, Back Street Boys, Lady A and many more. The First Investment is extremely well diversified by genre and income type with a significant proportion of the Copyrights from the period between the 1960s and the 1990s. Further details of the Catalogues contained in the First Investment are set out in the table below.

Second Investment

The second step will involve the Company's acquisition of a 29.14 per cent. share in the Carlin Copyrights owned by Round Hill Fund One (the "Second Investment"). Carlin's underlying portfolio comprises over 100,000 Copyrights across multiple genres from jazz, country, pop, rock and dance, including classics made famous by artists such as Elvis Presley, Meatloaf, James Brown and Billie Holiday, including songs such as "What A Wonderful World", "Total Eclipse of The Heart", "Happy Together", "Under the Boardwalk", "Are You Lonesome Tonight" and many more. The Company is progressing due diligence into Carlin and its assets, and negotiating the terms of the acquisition documentation. Despite difficulties relating to COVID-19, including the closure of the Copyright Office of the Library of Congress in Washington D.C, and personnel within the legal firms advising the Company contracting the virus, it is currently anticipated that the acquisition of the Second Investment will complete no later than 31 March 2021. The consideration payable by the Company in connection with the acquisition of the Second Investment will reflect the underlying valuation of the Copyrights owned by Carlin as of 30 June 2020.

The Board is also pleased to announce that detailed heads of terms have been agreed with Truist Securities, Inc. ("Truist") under the terms of which Truist will act as lead arranger to provide, arrange or place a revolving facility for the Company (the "RCF") with a syndicate of banks and other institutional lenders. It is anticipated that the RCF will be utilised to part finance the Second Investment as well as to acquire future pipeline opportunities.

Following the completion of the Second Investment, the Company will have fully invested the capital raised in the IPO and subsequent placing. Round Hill continues to build an exciting and high-quality near term pipeline of Catalogues with an acquisition value of approximately US$500 million. The Board is exploring various options to facilitate the acquisition of these opportunities, including a potential equity raise.

Dividend

Following the completion of the Second Investment as described above, the Company anticipates paying to Shareholders the stated annualised dividend of 4.5 per cent. for the financial period to 31 December 2021. The first interim dividend is expected to be declared in March 2021 and paid in June 2021.

Commenting on the acquisition, Trevor Bowen, Chair of the Company said:

"I am delighted to announce the first acquisition of the Company since its IPO, which comprises exceptional songs and catalogues including classic tracks from some of the world's best-known songwriters and artists. With the acquisition now complete, the Company has deployed a significant proportion of the gross proceeds raised in its recent IPO and subsequent placing. The Board remains totally committed to completing the acquisition of the Second Investment by the end of the first quarter of this year, thereby continuing to deliver the Company's investment objective and policy. The Board is pleased that the initial acquisition has been completed well within the anticipated timeline as outlined in the Prospectus and looks forward to working with Round Hill to take advantage of the strong existing pipeline for the benefit of Shareholders."

Josh Gruss, CEO of Round Hill commented:

"All of the team at Round Hill are thrilled to have completed the maiden acquisition by the Company of Copyrights which are already well known to Round Hill in such a timely manner. We are working hard to complete the acquisition of the shareholding in Carlin in short order. Once this has been completed, we can turn our attention to our longer-term pipeline of investment opportunities, where we are witnessing a large amount of exciting and high-quality Catalogues for the fund."

Details of the Catalogues to be acquired as part of the First Investment

The Copyrights comprised in the First Investment have the following characteristics:

· US$282 million independent valuation as at 30 June 2020;

· over 18,000 musical compositions;

· 38 plus individual Catalogues;

· over 85 per cent. of the income generated by the portfolio were in respect of compositions written between 1950 and 2010;

· diversified in terms of genre (Rock (approximately 30 per cent.), Country (approximately

30 per cent.), Pop (approximately 19 per cent.), Classical R&B (approximately 8 per

cent.) and Various (approximately 13 per cent.));

· diversified in terms of income type (performance (approximately 37 per cent.), master

recordings (approximately 28 per cent.), synchronisation (approximately 19 per cent.), mechanical (approximately 12 per cent.) and other (approximately 3 per cent.)); and

· generated net royalty income in excess of US$83 million to date.

Source: Round Hill Music

The Company is committed (subject to any confidentially obligations to which it might be subject) to provide full details in respect of the Catalogues it acquires. As such, more details on the Pipeline Investments, including key assumptions of the third-party valuation, royalty income history of each catalogue and more can be found at: www.roundhillmusicroyaltyfund.com.

Unless the context otherwise requires, capitalised terms used in this announcement have the meanings given to them in the Prospectus.

FOR FURTHER INFORMATION

Notes: 

The Company is a newly incorporated non-cellular Guernsey company. The Company's Investment Objective is to provide investors with an attractive level of regular and growing income and capital returns from investment primarily in high quality, music intellectual property. In order to achieve its Investment Objective the Company will invest in a songwriter's copyright interest in a musical composition or song (being their writer's share, their publisher's share and their performance rights) together with the rights in the recording of the musical composition or song (known as the master recording rights) together with all such rights and assets considered by its investment manager, Round Hill Music LP ("Round Hill") to be ancillary thereto. 

Founded in 2010, Round Hill is a fully integrated owner and operator of music copyright properties and the seventh largest music publishing company in the US. Headquartered in New York with additional offices in Nashville, Los Angeles and London, Round Hill has an experienced management and investment team with an established reputation and extensive experience in the music and finance industries.