UK Mortgages Ltd Strategic Update

 
TIDMUKML 
 
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY (IN WHOLE 
OR IN PART), IN, 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. 
 
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF 
THE MARKET ABUSE REGULATION (EU) NO. 596/2014. 
 
22 July 2020 
 
                             UK MORTGAGES LIMITED 
 (a closed-ended investment company incorporated in Guernsey with registration 
                                 number 60440) 
 
                           LEI 549300388LT7VTHCIT59 
 
                               Strategic Update 
 
Further to the announcement of 14 July 2020, the Board of UK Mortgages Limited 
(the "Company" or "UKML") has completed its additional analysis of the benefits 
of the Oat Hill No.2 securitisation (the "Securitisation") and is pleased to 
announce the following strategic update. 
 
Background 
 
The Company's shareholders ("Shareholders") granted approval in August 2019 for 
proposals including revised investment and share buyback policies. As signalled 
at that time, the first opportunity to enact the revised share buyback policy 
was the refinancing of the Oat Hill transaction anticipated at the end of May 
2020. 
 
The Oat Hill transaction was not called at its first refinancing call date of 
27 May 2020 due to the Covid-19 pandemic, but the Securitisation was 
successfully launched and priced just six weeks later on 10 July 2020. The 
Securitisation was issued on terms which will release a significant amount of 
capital and therefore allow the Company to return to its previously stated 
proposal of using excess capital to enable share buybacks whilst the Company's 
share price continues to trade at a discount to the NAV per share. 
 
Additionally, in April 2020 in anticipation of the take-up of the government's 
Covid-19 mortgage payment holiday scheme, the Company reassessed its dividend 
policy and reduced quarterly payments to 0.375p while noting that it was 
expected that the previous level of 1.125p per quarter would be restored when 
the period of market dislocation had passed. The Board, having been advised 
that the first cohort of mortgage payment holidays is now coming to an end and 
indications are that significant numbers of borrowers are recommencing 
payments, is pleased to confirm that the Company is able to reinstate its prior 
dividend policy. 
 
Share Buyback Programme 
 
The Securitisation was issued on terms which will release a significant amount 
of capital, allowing the Company to be able to commence buying back shares once 
the transaction settles at the end of August 2020 (the "Settlement Date"). 
 
The Company announces that with effect from the Settlement Date it expects to 
initiate a share buyback programme to purchase up to the maximum of 14.99% of 
the Company's issued shares, being the maximum number of shares currently 
authorised by Shareholders, if a discount of greater than 5% persists to the 
Company's then prevailing NAV per share. 
 
Dividend Policy 
 
In light of the portfolio performance observed as the UK lockdown begins to 
ease and the successful Securitisation, the Board announces that it intends to 
restore the Company's dividend to its target level of 4.5p annually per share, 
which represents a dividend yield of 7.0% based on the closing share price on 
20 July 2020. 
 
The Board therefore currently intends to declare: 
 
  * an additional interim dividend in respect of the Company's year ended 30 
    June 2020 of 1.5p per share; and 
 
  * four quarterly dividends of 1.125p per share in respect of the Company's 
    current financial year to 30 June 2021. 
 
Payment details will be announced in due course. 
 
Possible Offer 
 
On 20 July 2020, the Board noted the announcement of the same day by M&G 
Investment Management Ltd ("MAGIM") (the "Possible Offer Announcement"), in its 
capacity as manager of M&G Speciality Finance Fund (GBP) SCSp (the "Fund"), 
regarding the possible cash offer by the Fund for the entire issued and to be 
issued share capital of the Company (the "Possible Offer"). 
 
The Company confirms that on 15 July 2020 it received an unsolicited and 
conditional proposal from MAGIM in relation to a possible cash offer at 67 
pence per UKML share.  Under the proposal, Shareholders would be entitled to 
receive and retain the 0.375 pence per share dividend for the fourth quarter of 
the Company's financial year ended 30 June 2020 (the "Fourth Interim 
Dividend").  MAGIM stated in the Possible Offer Announcement that any formal 
offer for UKML under the Takeover Code would be conditional on, amongst other 
things, satisfactory completion of diligence and the unanimous and unqualified 
recommendation by the UKML Board of Directors.  MAGIM reserves the right to 
waive any or all of these pre-conditions to a firm offer, in whole or in part. 
MAGIM further reserves the right to announce an offer at a price below 67 pence 
per UKML share in the event that (a) the Board of UKML agrees and recommends an 
offer at the reduced price; (b) a third party announces a firm intention to 
make an offer for UKML; (c) UKML announces, declares or pays a dividend or any 
other distribution or return of capital to its shareholders (other than the 
Fourth Interim Dividend) after the Possible Offer  Announcement (in which case 
MAGIM reserves the right to reduce the offer price by an amount up to the 
amount of such dividend, distribution or return of capital); or (d) UKML 
announces a whitewash transaction pursuant to the Takeover Code. Given today's 
announcement of the Company's intention to declare an additional interim 
dividend of 1.5p per UKML share, the Company draws the attention of 
Shareholders to the aforementioned reservation (c), where MAGIM has reserved 
the right to reduce the offer price by an amount of any dividend distribution 
or return of capital. 
 
The Board considered the proposal together with its financial adviser, Numis 
Securities Limited, and unanimously rejected it on 19 July 2020, having 
concluded that the terms materially undervalue the Company and its prospects. 
The Board of UKML has received no further proposal since the unanimous 
rejection and is not in discussions with MAGIM at this time. 
 
The Company notes that in accordance with Rule 2.6(a) of the Takeover Code, 
MAGIM has until 5.00pm on 17 August 2020, being 28 days after the date of the 
Possible Offer Announcement  , to either announce a firm intention to make an 
offer for the Company in accordance with Rule 2.7 of the Takeover Code or 
announce that it does not intend to make an offer for the Company, in which 
case the announcement will be treated as a statement to which Rule 2.8 of the 
Takeover Code applies. This deadline will only be extended with the consent of 
the Company and the Takeover Panel in accordance with Rule 2.6(c) of the 
Takeover Code. 
 
The Possible Offer Announcement does not amount to an announcement of a firm 
intention to make an offer under Rule 2.7 of the Takeover Code and there can be 
no certainty that any offer will be forthcoming.  Shareholders are urged to 
take no action. 
 
This statement is being made by the Company without the prior agreement or 
approval of MAGIM. 
 
Enquiries: 
 
UK Mortgages Limited 
Christopher Waldron (Chairman)           020 7260 1000 
 
Numis Securities Limited, Financial Adviser and Corporate Broker 
Hugh Jonathan                                     020 7260 1000 
Nathan Brown 
Stuart Ord 
 
 
Sources & Bases of Information 
 
All prices for UKML shares have been derived from the Daily Official List of 
the London Stock Exchange and represent the closing price on the relevant date. 
 
Further information 
 
The Company's dividend guidance in this announcement is a target only and not a 
profit forecast and there can be no assurance that this target will be met. 
 
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 Possible Offer, and other 
information published by UK Mortgages Limited 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 UK 
Mortgages Limited 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. The 
forward-looking statements contained in this announcement include statements 
relating to the expected timing and scope of the possible. Often, but not 
always, forward-looking 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 UK Mortgages Limited believe that the expectations reflected 
in such forward-looking statements are reasonable, UK Mortgages Limited 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 forward-looking 
statements. Such forward-looking statements should therefore be construed in 
the light of such factors. Neither UK Mortgages Limited, 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 UK Listing Rules and the Disclosure and Transparency Rules of the 
FCA), UK Mortgages Limited 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. 
 
Dealing Disclosure Requirements 
 
Under Rule 8.3(a) of the Code, any person who is interested in 1% or more of 
any class of relevant securities of an offeree company or of any securities 
exchange offeror (being any offeror other than an offeror in respect of which 
it has been announced that its offer is, or is likely to be, solely in cash) 
must make an Opening Position Disclosure following the commencement of the 
offer period and, if later, following the announcement in which any securities 
exchange offeror is first identified. An Opening Position Disclosure must 
contain details of the person's interests and short positions in, and rights to 
subscribe for, any relevant securities of each of (i) the offeree company and 
(ii) any securities exchange offeror(s). An Opening Position Disclosure by a 
person to whom Rule 8.3(a) applies must be made by no later than 3.30 pm 
(London time) on the 10th business day following the commencement of the offer 
period and, if appropriate, by no later than 3.30 pm (London time) on the 10th 
business day following the announcement in which any securities exchange 
offeror is first identified. Relevant persons who deal in the relevant 
securities of the offeree company or of a securities exchange offeror prior to 
the deadline for making an Opening Position Disclosure must instead make a 
Dealing Disclosure. 
 
Under Rule 8.3(b) of the Code, any person who is, or becomes, interested in 1% 
or more of any class of relevant securities of the offeree company or of any 
securities exchange offeror must make a Dealing Disclosure if the person deals 
in any relevant securities of the offeree company or of any securities exchange 
offeror. A Dealing Disclosure must contain details of the dealing concerned and 
of the person's interests and short positions in, and rights to subscribe for, 
any relevant securities of each of (i) the offeree company and (ii) any 
securities exchange offeror(s), save to the extent that these details have 
previously been disclosed under Rule 8. A Dealing Disclosure by a person to 
whom Rule 8.3(b) applies must be made by no later than 3.30 pm (London time) on 
the business day following the date of the relevant dealing. 
 
If two or more persons act together pursuant to an agreement or understanding, 
whether formal or informal, to acquire or control an interest in relevant 
securities of an offeree company or a securities exchange offeror, they will be 
deemed to be a single person for the purpose of Rule 8.3. 
 
Opening Position Disclosures must also be made by the offeree company and by 
any offeror and Dealing Disclosures must also be made by the offeree company, 
by any offeror and by any persons acting in concert with any of them (see Rules 
8.1, 8.2 and 8.4). 
 
Details of the offeree and offeror companies in respect of whose relevant 
securities Opening Position Disclosures and Dealing Disclosures must be made 
can be found in the Disclosure Table on the Takeover Panel's website at 
www.thetakeoverpanel.org.uk, including details of the number of relevant 
securities in issue, when the offer period commenced and when any offeror was 
first identified. You should contact the Panel's Market Surveillance Unit on 
+44 (0)20 7638 0129 if you are in any doubt as to whether you are required to 
make an Opening Position Disclosure or a Dealing Disclosure. 
 
Publication on website and availability of hard copies 
 
A copy of this announcement and the documents required to be published by Rule 
26 of the Code will be made available on UK Mortgages Limited's website at 
www.twentyfouram.com/funds/uk-mortgages-fund/ by no later than 12 noon (London 
time) on the business day following the date of this announcement. For the 
avoidance of doubt, the contents of the website are not incorporated into and 
do not form part of this announcement. 
 
In accordance with Rule 30.3 of the Code, a person so entitled may request a 
hard copy of this Announcement, free of charge, by contacting Numis on +44 (0) 
20 7260 1000. For persons who receive a copy of this Announcement in electronic 
form or via a website notification, a hard copy of this Announcement will not 
be sent unless so requested. In accordance with Rule 30.3 of the Code, a person 
so entitled may also request that all future documents, announcements and 
information be sent to them in relation to the Acquisition should be in hard 
copy form. 
 
MAR 
 
The information contained within this announcement is deemed by UKML to 
constitute inside information as stipulated under the Market Abuse Regulation. 
 
Upon the publication of this announcement via a Regulatory Information Service, 
this inside information is now considered to be in the public domain. 
 
 
 
END

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