Publication of Circular

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES OF AMERICA, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF SOUTH AFRICA, ANY MEMBER STATE OF THE EEA OR ANY OTHER JURISDICTION WHERE  TO  DO  SO  WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

23 August 2022

TwentyFour Income Fund Limited (the “Company”)
(a non-cellular company limited by shares incorporated in Guernsey under the Companies (Guernsey) Law 2008, as amended, with registered number 56128 and registered as a Registered Closed-ended Collective Investment Scheme with the Guernsey Financial Services Commission. LEI 549300CCEV00IH2SU369)

Publication of Circular

The Board of Directors of TwentyFour Income Fund Limited (the "Company") announces the publication of a Circular (the “Circular”) relating to the 3-yearly realisation opportunity for Shareholders at a 2 per cent. discount to Net Asset Value per Ordinary Share.

Background

The Company’s Articles provide for a Realisation Opportunity under which Shareholders may elect to realise all or part of their holdings of Ordinary Shares with effect from the 2022 Reorganisation Date and at three yearly intervals thereafter.

Shareholders have the option to either:

1. retain their current investment in the Company; or
2. realise their investment in the Company by making a Realisation Election, which will be satisfied at the Redemption Price, representing a 2 per cent. discount to the NAV per Ordinary Share as at the Electing NAV Determination Date.

The Directors do not intend to make a Realisation Election to realise their Ordinary Shares. 

Action to be taken

ONLY IF Shareholders wish to make a Realisation Election are Shareholders asked to complete a Form of Election.  Shareholders wishing to maintain their shareholding in the Company are not required to take any action.

Illustrative Example

Based on the Ordinary Share price and the current NAV per Ordinary Share as at the close of business on 19 August 2022 (being the latest practicable date prior to the publication of the Circular) (the “Latest Practicable Date”), Shareholders that wish to realise their Shareholding are likely to be able to sell their Shareholding on the stock market at a higher price than is expected to be offered under the 2022 Realisation Opportunity.  Please see below an illustrative example prepared on this basis.

For illustrative purposes only:

• Had the Election NAV Determination Date been the close of business on the Latest Practicable Date, the illustrative realisation price would be 101.12 pence per Ordinary Share (since the Net Asset Value per Ordinary Share as at the Latest Practicable Date was 103.18 pence per Ordinary Share).
• The quoted bid price of an Ordinary Share as at the Latest Practicable Date was 105.00 pence (being the price for which Shareholders could sell their Ordinary Shares on the stock market).

Based on the illustrative example above, a Shareholder electing to realise their Ordinary Shares under the 2022 Realisation Opportunity would receive in cash 101.12 pence per Ordinary Share. In other words, a Shareholder would receive for each Ordinary Share 3.88 pence less than the quoted bid price based on the illustrative Latest Practicable Date statistics.

The figures above are illustrative only and do not represent forecasts. The Net Asset Value per Ordinary Share and quoted bid price of an Ordinary Share may each change materially between the date of the Circular and the actual Election NAV Determination Date (which is expected to be close of business on 18 October 2022) as a result of, inter alia, changes in the value of the Company’s investments and market conditions. Therefore, Shareholders should re-evaluate these figures when considering whether to make an Election.

Company Performance

Since launch the Company has delivered strong performance for Shareholders:

• The NAV total return of the Company from launch to close of business on 19 August 2022, being the latest practicable date prior to the publication of the Circular, was 83.4 per cent., or 6.6 per cent. per annum, which is in line with the Company’s target annual total return of 6 to 9 per cent. per annum.
• The income return to Shareholders has been ahead of the Company’s targets at launch. The IPO Prospectus stated a target dividend of at least 5p per Ordinary Share in respect of the year to 31 March 2014 and at least 6p per Ordinary Share thereafter[1]. The Company met these targets by paying the following dividends:

Year ending	Dividend (pence per Ordinary Share)
31 March 2014	6.38
31 March 2015	6.65
31 March 2016	7.14
31 March 2017	6.99
31 March 2018	7.23
31 March 2019	6.45
31 March 2020	6.40
31 March 2021	6.41
31 March 2022	6.77

• The Ordinary Shares have predominantly traded at a premium or at a small discount to NAV since launch (the Company’s average premium since launch being 2.0 per cent.), reflecting net demand in the market from a broad range of existing and new investors. The premium to NAV was 2.2 per cent. as at close of business on 19 August 2022, being the latest practicable date prior to the publication of the Circular.

Market Context

The Directors and the Portfolio Manager believe that UK and European ABS continue to offer attractive, risk-adjusted returns. 

Financial market conditions in recent months have been characterised by slowing economic conditions and recessionary fears, driven primarily by high levels of inflation which have been exacerbated by the ongoing Russian invasion of Ukraine, that has additionally added much higher levels of volatility to markets. This has led to Central Banks raising interest rates far more quickly than was expected earlier in the year, in an attempt to control the demand side of the inflation equation, and expectations are for further rises going forward.

In conventional markets, the expectation would normally be for credit spreads to contract in a rising interest rate environment.  However, the uncertainty of the war in Ukraine and its effect on global supply chains (particularly for energy and food) together with the pace of interest rate rises, have led to expectations of a recession which have caused credit spreads to widen across the board rather than tighten. In mid-July 2022, credit spreads reached peak levels seen only in spikes following the Brexit vote and Covid outbreak since the Global Financial Crisis, although they have subsequently recovered from the wider levels.

This market environment leaves risk assets in a position that is rarely seen; with higher credit spreads and higher benchmark rates which the Portfolio Manager believes will rise further. This therefore presents an opportunity for the Company to lock-in greater returns on current investments than would have ordinarily been expected, particularly given the floating rate nature of the investments in which the Company invests. This can already be evidenced by a 1.3% improvement in the Company’s purchase yield in the year to the end of July 2022 to 9.4%, as incremental yield has been added to the portfolio over and above the 1% rise in base rates over the same timeframe.  This is expected to be further boosted by the subsequent 0.5% base rate increase in early August.

As at the end of July 2022, the portfolio had a current mark-to-market yield of 13.0%.  This yield is calculated assuming that the underlying benchmark rate (Sonia) remains constant at the prevailing level; and at that time did not therefore include the subsequent 0.50% base rate rise that was announced in early August.  This yield calculation methodology has been generally employed for floating rate portfolios over the last decade, given the low interest rate environment and the expectation that the benchmark rate would remain low over the expected investment life of the portfolio and has historically been a good indicator of the likely future returns.  However, Sonia is highly correlated to the base rate, and with the expectation for further base rate increases, a forward yield to maturity can also be calculated using the forward Sonia curve over the life of the Company’s investments, in order to provide a better indication of expected future returns.  The forward yield to maturity, calculated at the same date, was 14.9%, reflecting the expectation of further base rate rises, and therefore greater returns for the Company’s floating rate investments.

Fundamental performance in the Company's portfolio remains strong, buoyed by the low interest rate environment experienced through the pandemic, and the subsequent reopening of the labour market, leading to wage and housing market growth. The Portfolio Manager believes that any impact of a recession is expected to be minimal on the Company’s assets, especially given the compensatory higher returns from investment opportunities at wider spreads as well as higher interest rates.

The Portfolio Manager sees current market conditions as an excellent opportunity to continue to add value for Shareholders at attractive yields.

Expected Timetable

2022 Realisation Opportunity
Record Date	6:00 p.m. on 25 August 2022
Election Submission Deadline, being the latest time and date for receipt of the Forms of Election and TTE Instructions in CREST from Shareholders	1:00 p.m. on 14 October 2022
Number of Elected Shares announced	7:00 a.m. on 18 October 2022
Election NAV Determination Date	18 October 2022
2022 Reorganisation Date	21 October 2022
Redemption Price and number of Realisation Shares announced	21 October 2022
Admission of any Ordinary Shares that are redesignated as Realisation Shares pursuant to the Realisation to the Official List and dealings in the Realisation Shares on the London Stock Exchange’s Main Market commence	25 October 2022
Election Settlement Date: cheques despatched and payments through CREST made and CREST accounts settled	week commencing 24 October 2022
Balancing share certificates despatched	week commencing 31 October 2022

Notes:

1.  References to times above are to London time unless otherwise specified.

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

Unless otherwise defined, capitalised words and phrases used in this announcement shall have the meaning given in the Circular.

For further information, please contact:

Numis Securities Limited:
Hugh Jonathan [phone]
Matt Goss

TwentyFour Income Fund Limited:
John Magrath  [phone]
Alistair Wilson

IMPORTANT INFORMATION

Nothing in this announcement shall form the basis of or constitute any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any shares or any other securities 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 therefor.

Nothing contained herein constitutes or should be construed as: (i) investment, tax, financial, accounting or legal advice; (ii) a representation that any investment or strategy is suitable or appropriate to individual circumstances; or (iii) a personal recommendation.  Investors should consult their own legal, business, tax and other advisers in evaluating any investment opportunity.

Numis Securities Limited (“Numis”), which is authorised and regulated in the United Kingdom by the Financial Conduct Authority (“FCA”), is not acting as adviser to any recipient of this announcement, nor will it be responsible to any recipient of this announcement for providing the protections afforded to its clients or for providing advice in connection with this announcement or any of the matters referred to herein.

This announcement does not constitute an offer or solicitation to acquire or sell any securities of the Company. This announcement is not for distribution in or into the United States or to any US Person, Australia, Canada, Japan, New Zealand, the Republic of South Africa, any European Economic Area state or any other jurisdiction in which its distribution may be unlawful. A “US Person” is any person who is not a “Non-United States Person” as defined in US Commodity Futures Trading Commission Rule 4.7. This announcement is not an offer of securities for sale in the United States or elsewhere. The securities of the Company have not been and will not be registered under the United States Securities Act of 1933, as amended (the “Securities Act”), and may not be offered or sold in the United States unless registered under the Securities Act or pursuant to an exemption from such registration. The Company has not been and will not be registered under the US Investment Company Act of 1940, as amended, and investors are not entitled to the benefits of that Act. There has not been and there will be no public offering of the Company's securities in the United States.

Information to Distributors

Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended (“MiFID II”); (b) Articles 9 and 10 of the Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; (c) local implementing measures; and/or (d) (where applicable to UK investors or UK firms) the relevant provisions of the UK MiFID Laws (including the FCA’s Product Intervention and Governance Sourcebook (PROD) (together the “MiFID II Product Governance Requirements”)), and disclaiming all and any liability, whether arising in tort, contract or otherwise, which any “manufacturer” (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with respect thereto, the Shares have been subject to a product approval process, which has determined that such Shares are: (i) compatible with an end target market of professionally advised retail investors who do not need a guaranteed income or capital protection, who (in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II or the UK MiFID Laws (as applicable) and who do not need a guaranteed income or capital protection; and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II or the UK MiFID Laws, as applicable (the “Target Market Assessment”).

Any person subsequently offering, selling or recommending the securities (a "distributor") should take into consideration the manufacturer’s target market assessment; however, a distributor subject to the UK MiFID Laws or MiFID II (as applicable) is responsible for undertaking its own target market assessment in respect of the Shares (by either adopting or refining the manufacturer’s Target Market Assessment) and determining appropriate distribution channels.

[1]   This is a target only and not a profit forecast. There can be no assurance that these targets will continue to be met or that the Company will make any further distributions at all. This target return should not be taken as an indication of the Company’s expected or actual current or future results. The Company’s actual return will depend upon a number of factors, including the number of Ordinary Shares which the Company issues and the number of Ordinary Shares in respect of which Realisation Elections are made and the Company’s total expense ratio.