21 May 2019 15:13
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS DEFINED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014.
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21 May 2019
Funding Circle SME Income Fund Limited (the "Company") Publication of Circular and Notice of Extraordinary General Meeting The Company announced on 5 April 2019 that, following consultation with Shareholders accounting for over two thirds of the Shareholder register, it acknowledged Shareholders' preference to cease investment in new Credit Assets and commence a process to return capital in an orderly and expeditious fashion with the objective of optimising returns to Shareholders. The Directors are today recommending a managed wind-down of the Company with consequential amendments to the Company's Investment Objective and Policy and to its Articles of Incorporation (the "Articles") to permit the redemption of its Shares.
A Circular has been published and sets out details of, and seeks Shareholder approval for, the Proposals and explains why the Board is recommending that Shareholders vote in favour of the Resolutions to be proposed at the Extraordinary General Meeting to be held at 9:15 a.m. on 11 June 2019. Notice of the Extraordinary General Meeting is set out in the Circular, which may be viewed on the Company's website at https://www.fcincomefund.com/documents/legal-documents.
Introduction
The Board is proposing that the affairs of the Company be wound down and that capital be returned to Shareholders with a view to achieving a balance between: (i) a timely return of cash; and (ii) maximising the realisation value of the Company's investments, having regard to cost efficiency and working capital requirements.
The Proposals involve modifying the Company's Investment Objective and Policy to reflect a realisation strategy and amending the Articles to include a mechanism to enable the Company to redeem Shares in the Company compulsorily so as to return cash to Shareholders. Details of the UK tax consequences of the Proposals are set out in Part II of the Circular.
The proposed modification to the Company's Investment Objective and Policy is considered a material change to the Investment Objective and Policy, which requires the consent of Shareholders in addition to obtaining the approval of the FCA, in accordance with the Listing Rules. The amendments to the Company's Articles to allow Shareholders to realise their investment through Compulsory Redemptions of their Shares also require Shareholder approval, pursuant to the Companies Law. Shareholders are being asked to approve the appointment of Funding Circle Global Partners Limited ("FCGPL"), which is the Company's current corporate services provider, to facilitate the potential portfolio sales on behalf of the Company pursuant to the Managed Wind-Down.
Finally, the Proposals also include a change of name of the Company from "Funding Circle SME Income Fund Limited" to "SME Credit Realisation Fund Limited", to reflect the move away from the Company's current strategy of active investment in Credit Assets originated by the Platforms to a realisation strategy. The proposed change of name is subject to Shareholder approval (and subsequent registration at the Guernsey Registrar of Companies) pursuant to the Companies Law.
The Company's listing and the capacity to trade in its Shares will be maintained for as long as the Directors believe it to be practicable during the Managed Wind-Down period, subject to being able to meet the spread of investment risk requirements of Chapter 15 of the Listing Rules. Accordingly, once a significant proportion of the Company's assets have been realised, the Board will then consider, in the light of the then prevailing market conditions and Shareholders' views, proposing a resolution for a formal voluntary liquidation of the Company, which will require additional Shareholder approval at that time.
Proposed Managed Wind-Down
If the Proposals are approved, the Directors will be able to execute a Managed Wind-Down of the Company, in a prudent manner consistent with the principles of good investment management as required by the Listing Rules. The Board notes that, given the nature of the Credit Assets as relatively short duration amortising loans, there is natural liquidity in the Company's Portfolio as these Credit Assets mature. In order to seek to distribute cash to Shareholders more quickly, the Company may also undertake opportunistic portfolio sales of the Credit Assets. The Board expects the Company's existing IFRS 9 provision on performing loans to gradually unwind as the Portfolio amortises. Following shareholder approval of the Proposals, the Company expects to cease its current strategy of making regular share repurchases and, instead, switch to an approximately quarterly redemption cycle. As and when proceeds from the sales of the Company's assets accumulate, the Directors will have the discretion to return these proceeds to Shareholders pro rata by redeeming such number of Shares as have an aggregate NAV equivalent to the amount proposed to be returned to Shareholders. Following feedback received from the Company's major Shareholders, the Company proposes to maintain quarterly dividend payments of 5.25 pence per Ordinary Share on an annualised basis for at least the period to 31 March 2020 (being the Company's financial year-end) which is expected to be partially uncovered by income (which would have the effect of reducing the amount of capital available for distribution to Shareholders at each Compulsory Redemption and on the eventual liquidation of the Company). The Directors will continue to periodically review the Company's approach to dividend payments in response to Shareholder feedback and the progression of the Managed Wind-Down. It is noted that such dividend payments would be made in addition to distributions made by way of the Compulsory Redemption process (or by means otherwise determined appropriate by the Directors), notwithstanding the proposed share redemption mechanism and the quarterly dividend, the Directors may determine, in their absolute discretion where they consider it to be in the best interests of Shareholders, to return cash from natural amortisation of Credit Assets or sales made pursuant to the Managed Wind-Down to Shareholders by way of special dividend or any other distribution permitted by the Listing Rules and the Companies Law. For UK resident individuals or companies, any distributions made by way of dividend would be treated as income, which attracts a higher rate of tax than distributions that are treated as capital. Details of the UK tax treatment applicable to income and capital distributions are set out in Part II of the Circular. Shareholders should expect that, under the terms of the Managed Wind-Down, the Board will be committed to distributing as much of the available cash as soon as reasonably practicable (on the approximately quarterly redemption basis described above) having regard to cost efficiency and working capital requirements. Accordingly, in order to minimise the administrative burden, Shareholders are advised that future returns of cash may not necessarily be made as soon as cash becomes available. Alternatively, the Board reserves the right to make an ad hoc return of capital by way of an interim redemption (i.e. outside of the approximately quarterly cycle), where the Board considers that it has substantial amounts of available cash so as to make such interim redemption prudent and in the best interests of Shareholders. Shareholders should also note that, as there is no guarantee of an active or liquid secondary market for the Credit Assets, there can be no certainty of the length of time it may take to complete the Managed Wind-Down. In order to assist the Company in delivering the Managed Wind-Down, the Directors are proposing to appoint the Company's current corporate services provider, FCGPL (or its affiliates) to facilitate such potential portfolio sales in accordance with the revised Investment Objective and Policy. The appointment of FCGPL to facilitate potential portfolio sales is conditional on the passing of Resolution 1 (as defined below). FCGPL will not be entitled to a fee in respect of the performance of these services. Potential conflicts of interest will be managed in accordance with Funding Circle's policies and in accordance with the corporate services agreement dated 26 November 2018 between the Company and FCGPL. The appointment of FCGPL is not exclusive and the Directors are entitled to appoint other advisers to assist in executing portfolio sales. If the Managed Wind-Down is approved at the Extraordinary General Meeting, the Board considers that, due to the limited life of the Company and the risks associated with the Managed Wind-Down, the Shares would no longer be suitable to be made available or otherwise marketed to "retail investors" (as defined in the PRIIPs Regulation). As such, the key information document (as defined in the PRIIPs Regulation) relating to the Shares will be removed from the Company's website immediately following the approval of the Managed Wind-Down. It is expected that, following the removal of the key information document from the Company's website, distributors will cease to make the Shares available for purchase on their respective platforms. An updated target market assessment pertaining to the Shares will be published on the Company's website (www.fcincomefund.com) immediately following the approval of the Managed Wind-Down.
A copy of the circular has been submitted to the National Storage Mechanism and will shortly be available for inspection at http://www.morningstar.co.uk/uk/NSM CONTACTS Richard Boleat, Chairman +44 (0) 1534 615 656 Richard.Boleat@fcincomefund.com
Secretary and Administrator Sanne Group (Guernsey) Limited FundingCircle@sannegroup.com +44 (0) 1481 739810
Media Contact fcifpress@fundingcircle.com
Corporate Broker Numis Securities Nathan Brown George Shiel +44 (0) 207 260 1000 n.brown@numis.com
Investor Relations ir@fcincomefund.com
Website www.fcincomefund.com
The ISIN number of the Ordinary Shares is GG00BYYJCZ96, the SEDOL code is BYYJCZ9 and the TIDM is FCIF. The LEI number of the Company is 549300ZQIYQVNIZGOW60.
***** ABOUT FUNDING CIRCLE SME INCOME FUND The Company is a registered closed-ended collective investment scheme registered pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended and the Registered Collective Investment Scheme Rules 2015 issued by the Guernsey Financial Services Commission (''GFSC'').
The Company's investment objective is to provide shareholders with a sustainable and attractive level of dividend income, primarily by way of investment in Credit Assets as defined in the Company's Prospectus.
***** IMPORTANT NOTICES This announcement contains "forward-looking" statements, beliefs or opinions. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the control of the Company and all of which are based on its directors' current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "projects", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events, assumptions or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the Board or the Company with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business concerning, amongst other things, the financial performance, liquidity, prospects, growth and strategies of the Company. These forward-looking statements and other statements contained in this announcement regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Company. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. The forward-looking statements contained in this announcement speak only as of the date of this announcement. Nothing in this announcement is, or should be relied on as, a promise or representation as to the future. The Company disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in its expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules or the Disclosure Rules and Transparency Rules of the FCA. No statement in this announcement is intended as a forecast or profit estimate.
Neither this announcement nor any copy of it may be made or transmitted into the United States of America (including its territories or possessions, any state of the United States of America and the District of Columbia) (the "United States"), or distributed, directly or indirectly, in the United States or to US Persons (as such term is defined in Regulation S under the US Securities Act of 1933, as amended (the "Securities Act"). Neither this announcement nor any copy of it may be taken or transmitted directly or indirectly into Australia, Canada, Japan or South Africa or to any persons in any of those jurisdictions, except in compliance with applicable securities laws. Any failure to comply with this restriction may constitute a violation of United States, Australian, Canadian, Japanese or South African securities laws. The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions. This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for securities in the United States, Australia, Canada, Japan or South Africa or in any jurisdiction to whom or in which such offer or solicitation is unlawful. |