Real Est.cred Regulatory News (RECI)

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, TO ANY US PERSONS OR INTO, THE UNITED STATES, AUSTRALIA, CANADA, SOUTH AFRICA OR JAPAN, OR ANY OTHER JURISDICTION, OR TO ANY PERSON, WHERE DOING SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

This announcement is an advertisement and not a prospectus. Investors should not purchase or subscribe for any transferable securities referred to in this announcement except on the basis of information in the prospectus published on 23 February 2017 (the "Prospectus") by Real Estate Credit Investments Limited (the "Company") in connection with the admission of new ordinary shares (the "New Ordinary Shares") to be issued by the Company pursuant to the Initial Placing and the Placing Programme (each as defined below) to the premium segment of the Official List of the Financial Conduct Authority (the "Official List") and to trading on the Main Market for listed securities of the London Stock Exchange (the "London Stock Exchange"). Copies of the Prospectus will shortly be available for viewing on the Company's website and at the National Storage Mechanism at http://www.hemscott.com/nsm.do. This announcement does not constitute or form a part of any offer to sell or issue, or a solicitation of any offer to purchase or otherwise acquire, securities by any US Persons or in the United States or in any other jurisdiction. Neither this announcement nor any part of it shall form the basis of or be relied on in connection with or act as an inducement to enter into any contract or commitment whatsoever.

23 February 2017

Real Estate Credit Investments Limited

Proposed Initial Placing and Placing Programme, Change of Investment Objective and Policy of the Company

and

Notice of Extraordinary General Meeting

Further to the announcement of 9 February 2017, Real Estate Credit Investments Limited ("RECI" or the "Company") today announces that it has published a prospectus approved by the UK Listing Authority in relation to issues of new shares by way of a Placing Programme (the "Prospectus"). The Company intends to raise gross proceeds of a minimum of £20 million by way of an initial placing of New Ordinary Shares (the "Initial Placing"). The price at which each New Ordinary Share will be issued will be 162.5 pence (the "Initial Placing Price").

The Board of Real Estate Credit Investments Limited is pleased to announce a proposed Placing Programme to enable the Company to raise capital in an efficient and cost-effective manner over the next 12 months (the "Placing Programme"). The Placing Price applicable to each subsequent Placing under the Placing Programme will be determined by reference to the Net Asset Value per Ordinary Share as at the month-end immediately preceding the subsequent Placing.

The Company also proposes to amend the Company's investment objective and policy so that the Existing Investment Objective and Policy is replaced by the Proposed Investment Objective and Policy, further details of which are set out below (which together with the Placing Programme, constitute the "Proposals").

The Proposals are conditional upon, amongst other things, certain resolutions being passed at an Extraordinary General Meeting of the Company (the "EGM") to be convened for 22 March 2017. A Circular, containing a notice convening the EGM, will be sent to Shareholders today.

A Circular and Prospectus in relation to the Proposals will shortly be available on the national storage mechanism at http://www.hemscott.com/nsm.do, and will also be available on the Company's website at www.recreditinvest.com

Highlights:

· The Company intends to raise gross proceeds of a minimum of £20 million by way of the Initial Placing of New Ordinary Shares at the Initial Placing Price.

· The Company intends to utilise the net proceeds of the Placing to invest primarily in debt secured by commercial or residential properties in the United Kingdom and Western Europe which might take the form of (i) securitised tranches of secured real estate related debt securities, for example, RMBS and CMBS and (ii) secured real estate loans, debentures or any other form of debt instrument. 

· The proposed Placing Programme is intended to enable the Company to raise additional capital through the issue of up to 65 million New Ordinary Shares in the period from 23 February 2017 to 22 February 2018 as and when it identifies Real Estate Credit Investments that are suitable for acquisition in accordance with its investment objective and policy.

· Assuming 65 million New Ordinary Shares are issued under the Placing Programme, the Company will raise gross proceeds of approximately £106 million based on the latest unaudited Net Asset Value per Ordinary Share of 162.7 pence as at 31 January 2017.

· The funds raised from the Placing Programme will be invested in accordance with the Company's strategy and investment objective and policy to grow its portfolio. Liberum Capital Limited ("Liberum") has been appointed as Sole Sponsor, Financial Adviser and Bookrunner in relation to the Initial Placing and the Placing Programme.

· It is intended that the Placing Price applicable to each subsequent Placing will be no less than the Net Asset Value per Ordinary Share as at the month-end immediately preceding the subsequent Placing.

· All New Ordinary Shares will, when issued and fully paid, include the right to receive all dividends or other distributions made, paid or declared, if any, by reference to a record date after the date of their issue. The New Ordinary Shares to be issued under the Initial Placing will not be entitled to the dividend of 2.7 pence per Existing Ordinary Share declared by the Company on 8 February 2017 for the period from 1 October 2016 to 31 December 2016 (the "Q4 2016 Dividend").

· The Board and the Investment Manager wish to update the Existing Investment Objective and Policy to its key components to better reflect the current Investment Portfolio and strategy.

Bob Cowdell, Chairman of Real Estate Credit Investments Limited, commented:

"The Board is pleased to announce the proposed Initial Placing and Placing Programme which, subject to Shareholder approval at the EGM in March, will provide an opportunity for existing and new investors to participate in RECI's pipeline of attractive investment opportunities sourced by Cheyne Capital."

For further information please contact:

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

The anticipated dates and sequence of events relating to the implementation of the Proposals are set out below:

The times and dates set out in the expected timetable of principal events above and mentioned throughout this announcement may be adjusted by the Company, in which event details of the new times and dates will be notified to the UK Listing Authority, and an announcement will be made on a RIS.

References to times in this announcement are to London times unless otherwise stated.

* Please note that the latest time for receipt of the Forms of Proxy in respect of the EGM is 48 hours (excluding any part of a day which is not a Business Day) prior to the time allotted for the EGM.

PLACING PROGRAMME STATISTICS

* Calculated using 31 January 2017 unaudited NAV per Ordinary Share of 162.7 pence. The Placing Price applicable to each subsequent Placing under the Placing Programme will be determined by reference to the Net Asset Value per Ordinary Share as at the month-end immediately preceding the subsequent Placing.

Minimum subscription per investor pursuant to each Placing within the Placing Programme is £10,000.

1. Introduction

The Company is a non-cellular company limited by shares which was incorporated in Guernsey on 6 September 2005 with registered number 43634. The Company has two classes of shares: the Ordinary Shares, which are admitted to listing on the premium segment of the Official List and to trading on the Main Market; and the Current Preference Shares, which are admitted to listing on the standard segment of the Official List and to trading on the Main Market. It has been declared to be an authorised closed-ended collective investment scheme by the Guernsey Financial Services Commission. The Company's investments are managed by Cheyne Capital Management (UK) LLP ("Cheyne Capital" or the "Investment Manager"), a London-based investment management company authorised and regulated by the Financial Conduct Authority.

The Company's strategy offers investors exposure to a diversified portfolio of Real Estate Credit Investments and provides Current Preference Shareholders with stable returns in the form of quarterly dividends. The real estate debt strategy focuses on secured residential and commercial debt in the UK and Western Europe, seeking to exploit opportunities in publicly traded securities and real estate loans. The Company has adopted a long term strategic approach to investing and focuses on identifying value in real estate debt.

The Board and the Investment Manager believe there is the potential to provide returns to Shareholders through investment in Real Estate Credit Investments and as such the Board is also proposing to implement the Placing Programme to enable the Company to raise capital in an efficient and cost-effective manner over the next 12 months. The implementation of the Initial Placing and the Placing Programme are both conditional on Ordinary Shareholder approval.

2. The Proposals

(i) Placing Programme and Initial Placing

The Company intends to issue up to 65 million New Ordinary Shares pursuant to the Placing Programme, which will consist of the Initial Placing and, potentially, one or more subsequent Placings.

The New Ordinary Shares to be issued under the Initial Placing will rank pari passu with the Existing Ordinary Shares save that the New Ordinary Shares will not be entitled to the Q4 2016 Dividend.

The Initial Placing Price has been fixed at 162.5 pence. This price has been set by reference to the 31 January 2017 unaudited Net Asset Value per Existing Ordinary Share of 162.7 pence, adjusted to take into account the Q4 2016 Dividend of 2.7 pence, plus an amount to cover the costs of the Initial Placing.

On the date of the EGM, the latest published Net Asset Value will be the unaudited Net Asset Value per Existing Ordinary Share calculated as at 28 February 2017 (the "February 2017 NAV"), which is expected to be published on or around 7 March 2017. In the event that the February 2017 NAV is greater than the Initial Placing Price, then the Initial Placing will be conditional on the Discount Resolution being approved by Existing Ordinary Shareholders at the EGM.

Subject to the requirements of the Listing Rules, the price at which each New Ordinary Share will be issued pursuant to each subsequent Placing will be no less than the aggregate of the published Net Asset Value per Ordinary Share at the time of issue and such sum as equates to the costs attributable to such Placing and may, in the Directors' sole discretion, include a premium. The Placing Price in relation to each subsequent Placing will be announced by the Company via an RIS announcement.

The number of New Ordinary Shares issued in conjunction with each Placing will be determined based on the Placing Price, but will not exceed, in aggregate, 65 million New Ordinary Shares.

(ii) Background and benefits of the Initial Placing and Placing Programme

The Board, as advised by the Investment Manager, continues to be positive about the investment opportunities available within real estate credit markets. While the outlook for markets generally remains challenging, and acknowledging that there has been some economic uncertainty following the EU referendum last June which caused a reduction in commercial property activity, it is the Investment Manager's view that the UK and German real estate markets in particular (and potentially other Western European real estate markets) continue to offer an attractive combination of reasonable underlying tenant demand, relatively liquid investment markets and a shortage of debt capital.

Given this backdrop, and in light of the positive prospects for further investments by the Company in the short to medium term, the Directors believe that an issue of New Ordinary Shares is in the best interests of the Company and the Shareholders as a whole and will lead to:

· an improved free float, which can enhance liquidity in the Ordinary Shares; and

· a reduction in the total expense ratio by spreading the Company's fixed running costs over a larger Ordinary Shareholder base.

The Net Placing Proceeds will be used for investment in new Real Estate Credit Investments which the Directors believe will provide:

· greater scope to expand and diversify the Investment Portfolio; and

· a better position for the Company to take advantage of the investment opportunities which the Directors and the Investment Manager anticipate arising in the future.

(iii) Placing Programme

The Company intends to issue up to 65 million New Ordinary Shares pursuant to the Placing Programme, subject to the Company being able to source suitable investments in accordance with its Investment Objective and Policy. The maximum number of New Ordinary Shares available under the Placing Programme should not be taken as an indication of the number of New Ordinary Shares finally to be issued.

The Placing Programme is flexible and may have a number of closing dates in order to provide the Company with the ability to issue the New Ordinary Shares over a period of time. The Placing Programme is intended to partially satisfy market demand for the Ordinary Shares and to raise further money for investment in accordance with the Investment Objective and Policy.

If the Required Resolution and, to the extent relevant, the Discount Resolution are passed, but not the Amendment Resolution, the Company intends to use the Net Placing Proceeds to invest in Real Estate Credit Investments in accordance with the Existing Investment Objective and Policy. If the Required Resolution is passed, but the Discount Resolution is not passed and the February 2017 NAV is greater than the Initial Placing Price, the Initial Placing will not proceed; however, this will not affect subsequent Placings under the Placing Programme. If all Resolutions are passed, the Company intends to use the Net Placing Proceeds to invest in Real Estate Credit Investments in accordance with the Proposed Investment Objective and Policy.

The Directors believe, having been so advised by the Investment Manager, that the primary advantage of raising capital pursuant to the Placing Programme will be the opportunity for further investment in the Western European real estate credit markets, particularly in real estate loans secured against commercial and residential real estate assets in the UK, Germany and, potentially, other parts of Western Europe. To the extent that suitable investments are not available (which the Directors do not expect to be the case) the Net Placing Proceeds may also be invested in other assets that fall within the Proposed Investment Objective and Policy to the extent that the Investment Manager identifies investment opportunities that it believes offer attractive returns to the Company.

Pending investment of the Net Placing Proceeds in accordance with the Proposed Investment Objective and Policy, the Company may invest the net proceeds in short term money market funds. The Company does not intend to apply leverage to these temporary investments.

Allotment and issue of New Ordinary Shares under the Placing Programme is at the discretion of the Directors. Allotments and issuance may take place at any time prior to the final closing date of the Placing Programme. An announcement of each allotment and issue will be released through an RIS, including details of the number of New Ordinary Shares allotted and issued and the applicable Placing Price. It is anticipated that dealings in the New Ordinary Shares will commence two Business Days after the trade date for each issue of New Ordinary Shares. Whilst it is expected that all New Ordinary Shares issued pursuant to a particular Placing will be issued in uncertificated form, if any New Ordinary Shares are issued in certificated form it is expected that share certificates would be despatched approximately two weeks after the relevant Admission. No temporary documents of title will be issued.

The Placing Programme is not being underwritten and, as at the date of the Prospectus, the actual number of New Ordinary Shares to be issued under the Placing Programme is not known. The number of New Ordinary Shares available under the Placing Programme should not be taken as an indication of the number of New Ordinary Shares to be finally issued.

The Placing Programme is not being made on a pre-emptive basis, therefore Existing Ordinary Shareholders who do not participate in the Placing Programme will have their percentage holding diluted following each issue of New Ordinary Shares. Assuming that the maximum number of New Ordinary Shares are issued under the Placing Programme (being 65 million), this will result in a dilution of approximately 47 per cent. in Existing Ordinary Shareholders' voting control of the Company.

The New Ordinary Shares issued pursuant to the Placing Programme (including pursuant to the Initial Placing) will rank pari passu with the Ordinary Shares then in issue (save that the New Ordinary Shares will not be entitled to receive any dividends or other distributions declared, made or paid in respect of Ordinary Shares by reference to a record date prior to the allotment and issue of the relevant New Ordinary Shares, including, for the avoidance of doubt, the Q4 2016 Dividend).

Each Placee which confirms its agreement (whether orally or in writing) to Liberum to subscribe for New Ordinary Shares under the Placing Programme will be bound by the Placing Programme Terms and Conditions set out in Part VII of the Prospectus. All applications for New Ordinary Shares will be effected through a contract note. Each Placee is required to indicate their acceptance of the Placing Programme Terms and Conditions in making their investment.

The Placing Programme is conditional upon the Existing Ordinary Shareholders passing the Required Resolution at the EGM. To the extent required, the Initial Placing is also conditional upon Existing Ordinary Shareholders passing the Discount Resolution at the EGM. In addition, each allotment and issue of New Ordinary Shares pursuant to the Placing Programme is conditional, inter alia, on:

· Admission of the New Ordinary Shares issued pursuant to such allotment and issue; and

· the Placing Agreement not being terminated in accordance with its terms or a particular Placing not being terminated in accordance with the terms of the Placing Agreement.

In circumstances where these conditions are not fully satisfied, the relevant issue of New Ordinary Shares pursuant to the Placing Programme will not take place. If a Placing does not proceed, subscription monies received will be returned without interest at the risk of the applicant.

Application will be made for the New Ordinary Shares to be issued pursuant to the Placing Programme to be admitted to listing on the premium segment of the Official List of the UK Listing Authority and to trading on the Main Market for listed securities of the London Stock Exchange. It is expected that, subject to the approval of the Required Resolution and the satisfaction or waiver (where applicable) of the conditions in the Placing Agreement, Placings may take place up until 22 February 2018, being the end of the Placing Programme.

All New Ordinary Shares issued pursuant to the Placing Programme will be in registered form and will be delivered in uncertificated form, unless otherwise requested.

It is expected that the Company will arrange for Euroclear UK and Ireland to be instructed to credit the appropriate CREST accounts of the subscribers concerned or their nominees with their respective entitlements to New Ordinary Shares. The names of subscribers or their nominees investing through their CREST accounts will be entered directly on to the share register of the Company. Definitive certificates in respect of New Ordinary Shares in certificated form will be dispatched by post within two weeks of commencement of dealings. Temporary documents of title will not be issued.

Ordinary Shareholders (other than US Persons) holding definitive certificates may elect at a later date to hold such Shares through CREST or in uncertificated form provided they surrender their definitive certificates.

(iv) Proposed amendments to the Existing Investment Objective and Policy

The Existing Investment Objective and Policy of the Company (as set out below) evolved from the legacy investment policy language that has been employed by the Company from its inception. The Board and the Investment Manager wish to update the Investment Objective and Policy to its key components to better reflect the current Investment Portfolio and strategy. The Proposed Investment Objective and Policy is set out below and the key changes, which the Board considers to be material changes, are:

· to reflect more accurately the current Investment Portfolio and strategy, a clarification that the majority of the Company's investments will be in the UK and Germany, but noting that the Company retains the ability to invest in other jurisdictions in Western Europe;

· a clarification of the types of investments which fall within the meaning of 'Real Estate Credit Investments'; and

· a change to the Company's leverage policy to allow for long term finance to be used so that the Company can take advantage of investment opportunities where previously it may not have had sufficient liquidity.

The following is the Proposed Investment Objective and Policy of the Company:

Investment objective

The investment objective of the Company is to provide Ordinary Shareholders with exposure to a diversified portfolio of Real Estate Credit Investments (defined below) and to provide Preference Shareholders with stable returns in the form of quarterly dividends.

Asset allocation

To achieve the investment objective, the Company invests and will continue to invest in real estate credit secured by commercial or residential properties in Western Europe, focussing primarily in the United Kingdom and Germany ("Real Estate Credit Investments"). The Real Estate Credit Investments may take different forms but are likely to be:

(i) secured real estate loans, debentures or any other forms of debt instruments (together "Secured Debt"). Secured real estate loans are typically secured by mortgages over the property or charges over the shares of the property-owning vehicle. Individual Secured Debt investments will have a weighted average life profile ranging from six months to 15 years. Investments in Secured Debt will also be directly or indirectly secured by one or more commercial or residential properties, and shall not exceed a loan to value ("LTV") of 85 per cent. at the time of investment;

(ii) listed debt securities and securitised tranches of real estate related debt securities, for example, residential mortgage-backed securities and commercial mortgage-backed securities (together "MBS"), for the avoidance of doubt, this does not include equity residual positions in MBS;

(iii) other direct or indirect opportunities, including equity participations in real estate, save that no more than 20 per cent. of the Total Assets will be invested in positions with an LTV in excess of 85 per cent. or in equity positions that are uncollateralised. On certain transactions the Company may be granted equity positions as part of its loan terms. These positions will come as part of the Company's overall return on its investments and may or may not provide extra profit to the Company depending on market conditions and the performance of the loan. These positions are deemed collateralised equity positions. All other equity positions that the Company may invest in are deemed uncollateralised equity positions.

Risk diversification

At any given time, certain geographic areas, asset types or industry sectors may provide more attractive investment opportunities than others and, as a result, the Investment Portfolio may be concentrated in those geographic areas, asset types or industry sectors. However, the Company will seek to create a diversified portfolio of investments. It will regularly monitor the extent to which the Investment Portfolio is concentrated in any particular country, region or servicer and the Investment Manager may re-balance the Investment Portfolio as and when it deems it necessary. The Company has adopted guidelines for investments and borrowings to the effect that, except in the case of cash deposits awaiting investment:

(i) no more than 20 per cent. of Total Assets will be lent to or invested in any one group of companies at the time the investment or loan is made;

(ii) no more than 10 per cent. of Total Assets will be invested in other listed investment companies (including listed investment trusts), except where the investment companies themselves have stated investment policies to invest no more than 15 per cent. of their total assets in other listed investment companies (including listed investment trusts);

(iii) no more than 15 per cent. of Total Assets will be invested in other listed investment companies (including listed investment trusts), regardless of their investment policies and the Company will not take legal control, or seek to take legal control, or be actively involved in the management of, any companies or businesses in which it invests, except for:

(a) any SPVs it may establish, should the Board conclude that exercising control or management over such entity is in the best interests of the Company; and

(b) pursuant to the exercise of rights as a consequence of the Group taking steps to preserve or enforce its security in relation to a particular investment.

The Company will not, to a significant extent, be a dealer in investments and neither the Company nor any member of its Group will conduct trading activity which is significant in the context of the Group as a whole.

Company leverage

The Company will limit Company-level recourse leverage for investment purposes to 40 per cent. of NAV. The Preference Shares represent a form of Company-level recourse leverage for investment purposes and are included in this 40 per cent. of NAV limit. Holders of Preference Shares are entitled to receive a preferred income return and, on a winding up of the Company, to receive a preferred return of capital ahead of the holders of Ordinary Shares. To this extent, the rights of Ordinary Shareholders to income and capital are geared by the presence of the Preference Shares. In calculating the Company's leverage for the above, any liabilities incurred under the Company's foreign exchange hedging arrangements shall be disregarded.

In addition to the Company-level recourse leverage, the Company has the ability to utilise a working capital facility (which would include any liabilities incurred under the Company's foreign exchange hedging arrangements), subject to a maximum limit of 10 per cent. of NAV.

Hedging and use of derivatives

The Company's policy is to hedge currency risk on a case by case basis and also, where the Investment Manager considers it appropriate, on a portfolio basis. The Company may bear a level of currency risk that could otherwise be hedged where it considers that bearing such risks is appropriate. Ordinary Shareholders should not expect that all currency risks that arise from time to time in the Investment Portfolio will be hedged. As at the date of the Prospectus, the Company uses a combination of Sterling:Euro options and forwards to hedge its currency exposure.

The Company may, but shall not be obliged to, enter into hedging arrangements in respect of interest rate fluctuations and certain macro risks that may affect the value of the Investment Portfolio.

Save where the Company enters into swap arrangements to gain exposure to an underlying cash asset or assets, or to comply with asset transfer restrictions or similar legal restrictions which prevent the Company from owning a target investment directly, derivative transactions will only be used for the purpose of efficient portfolio management. However, the Company will not make investments via derivatives unless the Company has fully collateralised the derivative position or cannot be exposed to margin calls.

The Company will not enter into derivative transactions for speculative purposes.

A substantial portion of the Investment Portfolio will be denominated in Sterling and Euro. The Company may, and currently does, hedge this exposure, although it is not obliged to do so.

3. Dividends and Dividend Policy

The Prospectus issued today sets out a new dividend policy of the Company:

Current Preference Shares

The Company's available income and assets will first be used to pay the Current Preference Dividends when they become due and payable pursuant to the Articles.

The maximum aggregate Current Preference Dividend that will be payable pursuant to the terms of the Current Preference Shares in any financial year will be approximately £1.7 million.

Ordinary Shares

Subject to the payment of the Current Preference Dividend to the holders of the Current Preference Shares and the applicable requirements and restrictions contained in the Companies Law, the Company may consider making interim dividend payments to Ordinary Shareholders (which includes investors subscribing for New Ordinary Shares pursuant to the Placing Programme), having regard to the net income remaining after the payment of the Current Preference Dividends, potential reinvestment of cash or other uses of income, at a level the Directors deem appropriate, in their sole discretion, from time to time. There is no fixed date on which it is expected that dividends will be paid to Ordinary Shareholders. The Directors intend that the Company pays dividends to Ordinary Shareholders (which includes New Ordinary Shareholders) when it is able and appropriate to do so. It is the intention of the Company to continue to pay a regular, stable dividend with the prospect of additional or incremental payments as investment returns permit.

There is no assurance that the Company will declare or pay dividends on Ordinary Shares or Current Preference Shares and, if dividends are paid, there is no assurance with respect to the amount and timing of any such dividend.

4. Extraordinary General Meeting

The Placing Programme is conditional on the approval of the Required Resolution, which must be passed as an Extraordinary Resolution at the EGM. To the extent relevant, the Initial Placing will also be conditional on the approval of the Discount Resolution, which must be passed as an Ordinary Resolution at the EGM. The Company is also seeking approval of the Amendment Resolution, which must be passed as an Ordinary Resolution at the EGM.

The Required Resolution

· To disapply the pre-emption rights contained in the Articles in respect of 65 million Ordinary Shares, such disapplication to have effect for the duration of the Placing Programme (unless previously renewed, varied or revoked by the Company in a general meeting).

The Discount Resolution

· To approve the Initial Placing Price, if the February 2017 NAV is greater than the Initial Placing Price.

The Amendment Resolution

· To amend the Company's Investment Objective and Policy so that the Existing Investment Objective and Policy is replaced by the Proposed Investment Objective and Policy, as such are set out in the section (iv) of paragraph 2 of this Announcement, with immediate effect.

As noted above, the Placing Programme is conditional on the Required Resolution being approved by Existing Ordinary Shareholders at the EGM.

In the event that the Required Resolution is not passed by the required majority of Existing Ordinary Shareholders attending and voting at the EGM (whether in person or by proxy), the Placing Programme will not proceed.

The Companies Law and the Articles require that any disapplication of pre-emption rights be approved by an Extraordinary Resolution (that is 75 per cent. of the Existing Ordinary Shareholders present and voting, whether in person or by proxy).

The Listing Rules impose an obligation on the Company to obtain Existing Ordinary Shareholder consent for issuances of New Ordinary Shares at a price below the Net Asset Value of Existing Ordinary Shares.

The Initial Placing Price has been fixed at 162.5 pence. This price has been set by reference to the 31 January 2017 unaudited Net Asset Value per Existing Ordinary Share of 162.7 pence, adjusted to take into account the Q4 2016 Dividend of 2.7 pence, plus an amount to cover the costs of the Initial Placing.

On the date of the EGM, the latest published Net Asset Value will be the February 2017 NAV, which is expected to be published on or around 7 March 2017. In the event that the February 2017 NAV is greater than the Initial Placing Price, then the Initial Placing will be conditional on the Discount Resolution being approved by Existing Ordinary Shareholders at the EGM.

In addition, the Listing Rules also impose an obligation on the Company to obtain Shareholder consent for a material change to a Company's Investment Policy following approval of that change by the UK Listing Authority.

In accordance with the Listing Rules, any material change to the Company's Investment Policy must be approved by the UK Listing Authority before approval of the change is sought from the Company's Shareholders. Such approval has been sought from the UK Listing Authority and was obtained on 1 April 2016. Conditional on the Amendment Resolution being approved by Existing Ordinary Shareholders at the EGM, the Company shall adopt the Proposed Investment Objective and Policy set out above in section (iv) of paragraph 2 of this Announcement. If the Required Resolution is passed (and, to the extent the February 2017 NAV is greater than the Initial Placing Price, the Discount Resolution is also passed) but the Amendment Resolution is not passed, the Company intends to use the Net Placing Proceeds to invest in Real Estate Credit Investments in accordance with the Existing Investment Objective and Policy. If the February 2017 NAV is greater than the Initial Placing Price, and the Discount Resolution is not passed, the issue of New Ordinary Shares pursuant to the Initial Placing will not take place. This will not affect subsequent Placings under the Placing Programme.

5. Recommendation

Your Board, as advised by Liberum, considers that the Proposals and the Resolutions are in the best interests of the Company and Shareholders as a whole. Accordingly, the Board unanimously recommends that Existing Ordinary Shareholders vote in favour of each of the Resolutions to be proposed at the EGM. Existing Ordinary Shareholders are therefore urged to complete and return their Proxy Appointment without delay, whether or not they intend to attend the EGM.

DEFINITIONS

In this announcement the words and expressions listed below have the meanings set out opposite them, except where the context otherwise requires:

Important notice

This announcement is an advertisement and not a prospectus and investors should not subscribe for or purchase any shares referred to in this announcement except on the basis of information in the Prospectus to be published by the Company in connection with the admission of the New Ordinary Shares in the capital of the Company to the premium segment of the Official List of the Financial Conduct Authority and to trading on the London Stock Exchange's Main Market for listed securities. Copies of the Prospectus will be available from the Company's registered office, and made available for viewing at the National Storage Mechanism at http://www.hemscott.com/nsm.do.

The merits or suitability of any securities must be independently determined by the recipient on the basis of its own investigation and evaluation of the proposed Company. Any such determination should involve, among other things, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of the securities.

This announcement does not constitute and may not be construed as an offer to sell, or an invitation to purchase, investments of any description, nor as a recommendation regarding the possible offering or the provision of investment advice by any party. No information in this announcement should be construed as providing financial, investment or other professional advice and each prospective investor should consult its own legal, business, tax and other advisers in evaluating the investment opportunity. No reliance may be placed for any purposes whatsoever on this announcement (including, without limitation, any illustrative modelling information contained herein), or its completeness.

Nothing in this announcement constitutes investment advice and any recommendations that may be contained herein have not been based upon a consideration of the investment objectives, financial situation or particular needs of any specific recipient.

All investments are subject to risk, including the loss of the principal amount invested. Past performance is no guarantee of future returns. Potential investors should be aware that any investment in the Company is speculative, involves a high degree of risk, and could result in the loss of all or substantially all of their investment. Results can be positively or negatively affected by market conditions beyond the control of the Company or any other person.

This announcement does not constitute or form part of, and should not be construed as, any offer or invitation or inducement for sale, transfer or subscription of, or any solicitation of any offer or invitation to buy or subscribe for or to underwrite, any share in the Company or to engage in investment activity (as defined by the Financial Services and Markets Act 2000) in any jurisdiction nor shall it, or any part of it, or the fact of its distribution form the basis of, or be relied on in connection with, any contract or investment decision whatsoever, in any jurisdiction. This announcement does not constitute a recommendation regarding any securities.

This announcement is only addressed to or directed at persons in the United Kingdom who: (i) have professional experience in matters relating to investments and fall within the definition of "investment professionals" in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order"); or (ii) high net worth companies, unincorporated associations and partnerships and trustees of high value trusts as described in Article 49(2) of the Order; or (iii) are other persons to whom it may otherwise lawfully be communicated (all such persons referred to in (i), (ii) and (iii) together being "Relevant Persons"). Any investment or investment activity to which this announcement relates is available only to and will only be engaged in with the persons referred to in (i), (ii) and (iii).

Neither this announcement nor any part or copy of it may be taken or transmitted into the United States, Australia, Canada, South Africa or Japan, or distributed, in whole or in part, directly or indirectly, to any US Persons or in or into the United States, Australia, Canada, South Africa, Japan or any other jurisdiction where, or to any other person to whom, to do so would constitute a violation of applicable law. Any failure to comply with this restriction may constitute a violation of applicable law. This announcement does not constitute or form a part of any offer to sell or issue, or a solicitation of any offer to purchase or otherwise acquire, securities by any US Persons or in the United States or in any other jurisdiction. Persons into whose possession this announcement comes should observe all relevant restrictions.

The Company has not been and will not be registered under the US Investment Company Act and as such investors are not and will not be entitled to the benefits of the US Investment Company Act. The Ordinary Shares have not been and will not be registered under the US Securities Act, or with any securities regulatory authority of any state or other jurisdiction of the United States, and may not be offered, sold, resold, pledged, taken up, exercised, renounced, delivered, distributed or transferred, directly or indirectly, into or within the United States or to, or for the account or benefit of, US Persons, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States and in a manner which would not result in the Company being required to register as an "investment company" under the US Investment Company Act. In connection with the Placing Programme, subject to certain exceptions, offers and sales of Ordinary Shares will be made only outside the United States in "offshore transactions" to non-US Persons pursuant to Regulation S under the US Securities Act. There has been and will be no public offering of the Ordinary Shares in the United States.

Neither the US Securities and Exchange Commission, nor any securities regulatory authority of any state or other jurisdiction of the United States, has approved or disapproved of the securities of the Company or passed upon or endorsed the merits of any offering of such securities.

Prospective investors should take note that any securities may not be acquired by (i) investors using assets of (A) an "employee benefit plan" as defined in Section 3(3) of US Employee Retirement Income Security Act of 1974, as amended ("ERISA") that is subject to Title I of ERISA; (B) a "plan" as defined in Section 4975 of the US Tax Code, including an individual retirement account or other arrangement that is subject to Section 4975 of the US Tax Code; or (C) an entity which is deemed to hold the assets of any of the foregoing types of plans, accounts or arrangements that is subject to Title I of ERISA or Section 4975 of the US Tax Code or (ii) a governmental, church, non-US or other employee benefit plan that is subject to any federal, state, local or non-US law that is substantially similar to the provisions of Title I of ERISA or Section 4975 of the US Tax Code.

Liberum is authorised and regulated in the United Kingdom by the Financial Conduct Authority. Liberum is acting for the Company and no one else in connection with the Placing Programme and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Liberum or for affording advice in relation to any transaction or arrangement referred to in this announcement. This announcement does not constitute any form of financial opinion or recommendation on the part of Liberum or any of its affiliates and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

Forward-looking statements

This announcement may contain forward-looking statements regarding the financial condition, results of operations, cash flows, dividends, financing plans, business strategies, operating efficiencies, budgets, capital and other expenditures, competitive positions, growth opportunities, plans and objectives of management and other matters relating to the Company. Statements in this announcement that are not statements of historical facts are hereby identified as forward-looking statements. In some instances, forward-looking statements can be identified by the use of forward-looking terminology, including terms such as "projects", "forecasts", "anticipates", "expects", "believes", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology.

By their nature, forward-looking statements involve risk and uncertainty as they relate to future events and circumstances. Forward-looking statements are not guarantees of future performance, and the actual results, performance or achievements of the Company, and development of the markets and the industries in which it operates or is likely to operate, may differ materially from those-described in, or suggested by, any forward-looking statements contained in this announcement. In addition, even if actual results, performance, achievements or developments are consistent with any forward-looking statements contained in this announcement in a given period, those results, performance, achievements or developments may not be indicative of results, performance, achievements or developments in subsequent periods. A number of factors could cause results, performance, achievements and developments to differ materially from those expressed or implied by any forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, changes in regulation and currency fluctuations.

Any forward-looking statements in this announcement reflect the Company's current view with respect to future events, speak only as of their date and are subject to change without notice. Save as required by applicable law or regulation, the Company and the other parties named in this announcement expressly disclaim any obligation or undertaking to update, review or revise any forward-looking statement contained in this announcement whether as a result of new information, future developments or otherwise.