Tender Offer

UK Mortgages Ltd - Tender Offer

PR Newswire

London, May 28

THE INFORMATION IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION (IN WHOLE OR IN PART) DIRECTLY OR INDIRECTLY IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF THAT JURISDICTION. THIS ANNOUNCEMENT DOES NOT CONSTITUTE A TAKEOVER OFFER OR AN OFFER OF SECURITIES.

Capitalised terms used in this Announcement, unless otherwise defined, have the same meanings as set out in the Circular.

28 May 2021

UK MORTGAGES LIMITED

(a closed-ended investment company incorporated in Guernsey with registration number 60440) LEI 549300388LT7VTHCIT59

Company Update, Sale of Malt Hill No.2 and May Tender Offer

Company Update and Sale of Malt Hill No.2

The Board of UK Mortgages Limited (“UKML”, the “Company”) and TwentyFour Asset Management LLP (“TwentyFour”) are pleased to announce that the Company has completed the sale of the second portfolio of loans originated by the Coventry Building Society that had been securitised in the Malt Hill No.2 transaction.

When the sale of the two Coventry portfolios was first proposed to shareholders in late 2020, it was highlighted that an early realisation may result in a negative impact to the NAV, albeit this short term impact would be expected to be more than offset over the medium term by the combined benefits of divesting from a portfolio of lower yielding assets whilst buying back shares to reduce the Company’s dividend requirement and at the same time investing in higher yielding assets to further boost income.

As previously communicated, the improved execution that was actually achieved reduces that impact, but doesn’t eradicate it. In accordance with the Company’s accounting policy, the impact is reflected in a number of stages as the various components of the transactions are recognised. Several of those components have already been manifested in previous NAV releases and the remainder will flow through in the next two NAV announcements.

These are expected to total approximately 0.25 pence per share of asset mark-to-market cost in the April NAV - the next to be released - which will also reflect the Q1 2021 dividend payment of 1.125 pence per share. This will be followed by approximately 2.86 pence per share in the May NAV to reflect the cost of the swap unwind. These will both be partially offset by the net running income from the Company’s other investments of approximately 0.37 pence per share in each month and growing. Furthermore, the subsequent June NAV will also benefit from the likely positive impact of the ensuing share tender.

Looking to the future, with the ramp-up of the second Keystone warehouse now running more than two months ahead of schedule and approaching target leverage, the growth in that portfolio will become increasingly accretive to net monthly income with no other exceptional outgoings expected for the rest of the year. Thus, once the effects of the Coventry portfolio sales are fully absorbed from the July NAV onwards, by which time we expect monthly income of approximately 0.43 pence per share, dividend cover is expected to increase over the remainder of this year and further into 2022, with the second Keystone portfolio likely to be ready to securitise in Q2 at the current growth rate. This would represent a growth in the level of dividend cover from approximately 1x currently to 1.15x in July and approaching 1.5x by the end of the year; leading to steadily increasing NAV growth.

It is also intended that once any account balancing from the Malt Hill No.2 sale is concluded, further income may also be derived by investing committed capital that will not be required to be utilised until the Keystone warehouse grows further, into AAA rated RMBS notes in the near term, as per the Company’s investment guidelines.

The currently modelled dividend cover progression can be seen in a chart published on the UKML website, www.ukmortgageslimited.com.

Meanwhile the rest of the portfolio continues to perform well, as detailed in the most recent factsheet published last week.

May Tender Offer

The Board previously announced in the shareholder Circular published 26 February 2021, that they would distribute the proceeds (net of expenses and future commitments) of the sale of Malt Hill No. 2 through a tender offer (to be implemented by Numis, acting as principal) and the subsequent repurchase of Ordinary Shares from Numis by the Company.

Having carried out a full review of the Company’s liquid resources, future cash requirements, commitments and costs, the Board has concluded that the May Tender Offer will comprise a capital return of £20,000,000.

Tender Price

The May Tender Offer will take place by way of a tender offer and associated repurchase of up to 13.0 per cent. of the Ordinary Shares at a price of 75p per Ordinary Shares, which represents a 7.0 per cent. discount to the net asset value per Ordinary Share of the Company as at the Latest Practicable Date.

The number of Ordinary Shares to which the Tender Offers will apply

The number of Ordinary Shares subject to the May Tender Offer (and the associated Repurchase) is 26,666,666 which is calculated by dividing £20,000,000 by the Tender Offer Price and rounding down to the nearest whole number. This is 13.0 per cent. of all Ordinary Shares in issue as at the Latest Practicable Date, which represents the “Basic Entitlement” under the Tender Offer and each Qualifying Shareholder is entitled to tender a percentage of their holding equal to (or less than, if they so choose) the Basic Entitlement. By way of example, the Basic Entitlement of a Qualifying Shareholder with 100 Ordinary Shares would be 12 Ordinary Shares. Qualifying Shareholders will also be entitled to apply to tender Ordinary Shares above their Basic Entitlement, which, may be satisfied on a pro rata basis to the extent that other Qualifying Shareholders do not tender up to their respective Basic Entitlements.

Expected Timetable

Notes:

1. References to times above and in the Circular generally are to London time unless otherwise specified.

2. All times and dates in the expected timetable and in the Circular may be adjusted by the Company. Any changes to the timetable will be notified via an RIS.

Enquiries:

UK Mortgages LimitedChristopher Waldron (Chairman) 020 7260 1000

Numis Securities Limited, Financial Adviser and Corporate BrokerHugh Jonathan 020 7260 1000Nathan Brown

Important notice

This announcement is not intended to and does not constitute an offer to buy or the solicitation of an offer to subscribe for or sell or an invitation to purchase or subscribe for any securities or the solicitation of any vote in any jurisdiction. The release, publication or distribution of this announcement in whole or in part, directly or indirectly, in, into or from certain jurisdictions may be restricted by law and therefore persons in such jurisdictions should inform themselves about and observe such restrictions.

Numis Securities Limited ("Numis"), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for UK Mortgages Limited and no one else in connection with the matters set out in this announcement and will not regard any other person as its client in relation to the matters in this announcement and will not be responsible to anyone other than UK Mortgages Limited for providing the protections afforded to clients of Numis, nor for providing advice in relation to any matter referred to herein.

Forward looking statements

This announcement, oral statements made regarding the Proposal, and other information published by the Company may contain statements which are, or may be deemed to be, “forward-looking statements”. Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of the management of The Company about future events, and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. Often, but not always, forwardlooking statements can be identified by the use of forward-looking words such as “plans”, “expects” or “does not expect”, “is expected”, “is subject to”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “should”, “would”, “might” or “will” be taken, occur or be achieved. Although The Company believe that the expectations reflected in such forward-looking statements are reasonable, The Company can give no assurance that such expectations will prove to be correct. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forwardlooking statements. Such forward-looking statements should therefore be construed in the light of such factors. Neither The Company, nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this announcement will actually occur. You are cautioned not to place undue reliance on these forward-looking statements. Other than in accordance with its legal or regulatory obligations (including under the Disclosure Guidance and Transparency Rules of the FCA), the Company is under no obligation, and expressly disclaims any intention or obligation, to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Publication on website and availability of hard copies

Copies can be downloaded from the Company's website:

https://twentyfouram.com/en/funds/uk-mortgages-fund/