THIS ANNOUNCEMENT, INCLUDING THE APPENDICES AND THE INFORMATION CONTAINED HEREIN, IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA, THE REPUBLIC OF SOUTH AFRICA, JAPAN OR NEW ZEALAND OR INTO ANY OTHER JURISDICTION WHERE TO DO SO WOULD BREACH ANY APPLICABLE LAW OR REGULATION.
THIS ANNOUNCEMENT, INCLUDING THE APPENDICES, IS FOR INFORMATION PURPOSES ONLY AND DOES NOT ITSELF CONSTITUTE AN OFFER FOR SALE OR SUBSCRIPTION OF ANY SECURITIES IN THE COMPANY. THIS ANNOUNCEMENT AND THE APPENDICES DO NOT CONSTITUTE OR CONTAIN ANY INVITATION, SOLICITATION, RECOMMENDATION, OFFER OR ADVICE TO ANY PERSON TO SUBSCRIBE FOR, OTHERWISE ACQUIRE OR DISPOSE OF ANY SECURITIES OF K&C REIT PLC OR INTO ANY OTHER JURISDICTION WHERE TO DO SO WOULD BREACH ANY APPLICABLE LAW OR REGULATION.
THIS ANNOUNCEMENT CONTAINS INFORMATION WHICH, PRIOR TO ITS DISCLOSURE, WAS INSIDE INFORMATION FOR THE PURPOSE OF THE MARKET ABUSE REGULATION
K&C REIT plc
Proposed Placing to Raise £150,000,000
Change of Name
Share Consolidation
Notice of General Meeting
K&C REIT plc (AIM: KCR), the residential real estate investment trust, today announces its intention to raise £150 million by way of an issue of new ordinary shares at 100 pence per share. In addition, the Company is pleased to announce that Duncan Walker, previously Investment Director at Helical Plc, will be appointed as an additional non-executive director of the Company upon Admission. In due course, the Company intends to apply for the admission of its ordinary shares to the premium segment of the Official List of the UK Listing Authority and to trading on the Main Market of the London Stock Exchange.
In conjunction with the Placing, the Company is undertaking a consolidation of its existing share capital on the basis of every 10 Ordinary Shares into 1 New Ordinary Share. The new funds are intended to help support the business in executing larger acquisitions from its pipeline. In conjunction with the Placing, the Company has agreed in principle new debt facilities of up to £100 million to assist with the acquisition of residential property portfolios.
The Company also proposes a name change to KCR Residential REIT plc, conditional upon Shareholder approval, to reflect its diversified UK residential investment strategy.
Highlights:
· Raising £150 million by way of an issue of New Ordinary Shares
· Intention to apply for a Premium Listing in due course
· Identified acquisition property pipeline of over £400 million in the UK residential private rented sector
· Issue Price of 100 pence per New Ordinary Share and share consolidation of 10 to 1Appointment of Duncan Walker, former Investment Director and Board Director at Helical plc, as non-executive director of the Company on Admission
· Change of name to KCR Residential REIT plc.
The Placing is to be conducted by way of a bookbuilding process that will commence immediately following this Announcement in accordance with the terms and conditions set out in Appendix 4 to this Announcement.
Capitalised terms used in this Announcement shall have the meanings given to such terms in Appendix 2 'Definitions' below.
K&C REIT plc was admitted to trading on AIM on 3 July 2015 and on 7 July 2015 acquired Coleherne, the only asset of which is a property in West London, for a consideration of £3.63 million. On 27 May 2016, the Company completed the acquisition of Osprey for a consideration of £1.6 million.
The property contained within Coleherne has been independently valued at £4.2 million, an increase of 16 per cent. on the purchase price and the properties within Osprey, including three additional apartments acquired for £935,000 in July 2017, valued at £4.4 million, an increase of 73 per cent. on the aggregate purchase price.
Having successfully demonstrated the concept of using a REIT structure to acquire residential property at a significant discount to market value, the Company is now seeking to accelerate its strategy and take advantage of opportunities available to acquire larger portfolios of residential property. To this end, the Company is seeking to raise £150 million (before expenses) through the Placing. In conjunction with the Placing, the Company has agreed in principle new debt facilities of up to £100 million for the acquisition of residential property portfolios.
The Net Proceeds, alongside its proposed debt facilities, will be used by the Group to fund the acquisition of portfolios of residential property in the private rented sector in line with the strategy detailed below, to repay all existing debt of £4.075 million plus accrued interest and to provide working capital.
The Board expects to complete its next acquisition, which it is anticipated will come from the existing pipeline of identified opportunities, within three months of Admission.
Dominic White, CEO of K&C REIT, commented:
"To fully capitalise on the investment opportunities that we are seeing across the UK market, the Company is seeking to raise the funds required to scale up. With stable and growing rental incomes generating strong yields, the UK private rented residential market is a highly attractive sector. Continuing our UK residential strategy and using the REIT structure, we have the ability to add value through active asset management to generate growth in capital values and rental yields."
Arden Partners, the Company's nominated adviser and broker, is acting as the Company's sole bookrunner for the Placing.
For further information, please contact:
K&C REIT plc Dominic White, Chief executive |
+44 20 3793 5236 |
Arden Partners plc William Vandyk Steve Douglas Tim Dainton
|
+44 20 7614 5917 |
Yellow Jersey PR Charles Goodwin Abena Affum |
+44 7747 788 221 +44 7555 159 808 |
Expected timetable: 2017
Announcement of the Placing; Bookbuild commences 7.00 a.m. on 24 October
Latest time and date for receipt of completed Forms of Proxy 10.00 a.m. on 22 November
and receipt of electronic proxy appointments
via the CREST system for the General Meeting
General Meeting 10.00 a.m. on 24 November
Admission and commencement of dealings 8.00 a.m. on 27 November
in the New Ordinary Shares on AIM
Each of the times and dates above refer to London time and are subject to change by the Company. Any such change will be notified to Shareholders by an announcement on a Regulatory Information Service. The circular will contain further details of the expected timetable for the Placing, General Meeting and Admission.
THE OPPORTUNITY
UK PRS now comprises 18 per cent. of the housing stock with a market value of £1.3 trillion, having grown significantly over the last 20 years. However, at present only two per cent. of this market is professionally owned and managed with the majority of growth having come from private "buy-to-let" investors.
Various initiatives have been made in recent years to encourage professional investors to acquire PRS assets and the Directors and Proposed Director believe that the UK is currently witnessing the beginning of the institutionalisation of the sector.
The Company's management team has a track record of successfully sourcing, financing, improving, letting and managing properties to create sizeable rented property portfolios with attractive, sustainable and growing cash-flows. The Group aims to take advantage of growth in the private rented sector to build its portfolio, enhancing yield and increasing net asset value through active asset management. The Directors and Proposed Director believe that this will allow the Company to provide Shareholders with an attractive level of dividend income. Based on their analysis of the REIT sector, The Directors and Proposed Director believe there are currently no other REITs prioritising the acquisition of property-holding SPVs in UK PRS.
The Company will target SPVs with unrealised capital gains where REIT status can confer a commercial advantage to the Company. A capital gain which accrues to a REIT in respect of a property that is used for a Qualifying Property Rental Business, including gains already accrued at the point of acquisition of that property, is exempt from corporation tax. Therefore, a REIT can acquire a rental property and on the subsequent disposal of that property, there will not be a liability to corporation tax on any gain realised on that disposal.
Acquisition of SPVs
The Directors and Proposed Director consider that the tax exemption afforded to REITs will enable the Company to achieve a yield on its portfolio that is higher than would be achievable by a non-REIT company or an individual.
The Company has demonstrated that it is able to acquire property assets below market value due in part to the benefits of its REIT status. The resultant lower entry cost not only enhances the initial yield, but also allows for an immediate gain on the NAV of the properties acquired to be recorded when they are added to the Company's balance sheet.
Pipeline
The Directors have identified a number of SPVs that they believe are suitable acquisition targets and are in negotiations in respect of over £400 million of property in aggregate. There is no guarantee that these negotiations will lead to the Company successfully completing any of these acquisitions. The Board will use its extensive industry relationships and network of contacts to identify further investment opportunities. The Board expects to complete the Group's next acquisition within three months following Admission.
Set out below is a summary of the potential acquisitions on which negotiations are currently most advanced.
SPV A Indicative valuation £142 million, anticipated gross yield 6.25 per cent., average size £177,000 SPV A has 17 residential buildings containing 802 units across the Midlands and South East with a further pipeline to develop an additional 7 residential buildings across the Midlands which the Directors believe could provide significant upside potential.
SPV B Indicative valuation £70 million, anticipated gross yield 5.0 per cent., average size £333,000 SPV B property portfolio consists of a mixture of 14 residential and commercial assets containing 210 residential units located in the outer north London. K&C expects to dispose of all commercial assets not forming part residential units post the purchase of the portfolio.
SPV C Indicative valuation £44 million, anticipated gross yield 4.75 per cent., average size £346,000 SPV C property portfolio consists of 127 residential units located in central and east London close to transport hubs.
SPV D Indicative valuation £31 million, anticipated gross yield 6.4 per cent., average size £163,000 SPV D consists of 190 residential units located in Manchester
SPV E Indicative valuation £116 million, anticipated gross yield 5.8 per cent., average size £280,000 SPV E consists of 414 units in the South East.
REIT STRATEGY
The Company will build a portfolio of UK rented residential property, diversified by location, building and tenant across the UK in areas where both capital and rental growth are expected to be strong in the coming years. The focus of acquisitions will be of SPVs holding property assets, although the Company may also make direct property acquisitions. When acquiring SPVs, the Company expects that it will only acquire the entire share capital of those SPVs. To gain access to a wider pool of opportunities over time, the Company may invest in properties under development once they are completed to the required specification. It may also invest in the forward funding of developments but it will not take on development, planning or construction risk.
The Company will not invest in Social Housing.
A small portion of the Company's portfolio may be invested in commercial property where the commercial activity forms an integral part of a residential property asset.
The Board reserves the right to review and potentially change the investing strategy and activities from time to time. Any material change would be subject to the approval of Shareholders in a general meeting.
Acquisitions will be funded utilising the Company's cash resources and access to debt. The level of any borrowing secured against acquisitions will not exceed 50 per cent. loan to value and the long-term average debt level is expected to be less than 40 per cent. loan to value.
The Company has no constitutional borrowing limits. The REIT Regime imposes an interest cover test whereby profits of the tax-exempt business of a REIT Group must be at least 1.25 times the costs of financing that business. If this condition is not met, the Company will be required to pay corporation tax on an amount of income equivalent to the excess financing costs or 20 per cent. of the tax-exempt business profits if that is less.
The Company intends to join the Official List once it has completed sufficient acquisitions to give it appropriate scale for that market.
PROPERTY STRATEGY
The Company will target acquisitions of existing portfolios of properties with individual unit values averaging below £500,000 on acquisition. The Directors and Proposed Director believe that the greatest shortfall in the supply of housing stock is in the lower to middle price bands, which is also the type of housing experiencing the highest increase in demand. The Company will focus its investment efforts on investment zones centred around the cities contained in the Hometrack UK Cities House Price Index and their commuter towns. This provides a spread of geographic coverage and housing and economic characteristics. The current constituent cities can be found at www.hometrack.com/uk/insight/uk-cities-house-price-index/.
The Board has a depth of experience in property investment, development and finance. The Directors and Proposed Director will utilise their industry relationships and network of contacts to identify and acquire investment opportunities. The Directors and Proposed Director also expect to be able to increase capital and rental values of the assets and to enhance returns by means of judicious asset and property management, as further detailed below.
The Directors and Proposed Director believe that the Company will be able to offer an attractive total return to investors because it will derive returns from the following:
· stable and growing rental income; and
· capital value growth as a result of:
o tax-efficient SPV acquisitions at below market value and tax-free realisations;
o value-adding asset and property management initiatives; and
o growth in capital value of residential properties.
In addition, the Company should benefit from economies of scale compared to smaller landlords.
The Company's strategy is to acquire and hold property, but where properties are disposed it is intended that the proceeds be re-invested into new investment opportunities. However, from time to time, the Company may decide to distribute an amount equal to part of a realised gain to Shareholders by way of a special dividend or other form of distribution.
The Company is targeting a total shareholder return of approximately 10 per cent. per annum, comprising 4.5 per cent. covered dividend yield and 5.5 per cent. capital growth. This is a target only and does not constitute a dividend forecast. There can be no assurance that the target can or will be met and is subject to: (i) the Company's performance; (ii) available cash; (iii) successful implementation of the Investing Policy; and (iv) the Directors and Proposed Director being satisfied that the Company will have sufficient distributable reserves in accordance with the provisions of CA 2006 at the relevant time. For these reasons, this target should not be treated as an indication of the Company's expected or actual future results.
ASSET, PROPERTY AND DEVELOPMENT MANAGEMENT
Asset Management
The Company will continue to strategically and actively manage its portfolio of assets post-acquisition. Residential assets held for investment purposes are often under-managed due to the extent of private ownership in the sector. This competitive weakness provides the Company with the opportunity to add rental and capital value. As part of the acquisition due diligence process an asset management plan, will be prepared for each property.
The objective of each asset management plan will be to maximise the property's long-term investment value, given its location and the prevailing market circumstances. The asset management plan will detail the capital spending required to optimise asset value. It will also consider how to increase rental values, in particular grow net rental income through the minimisation of property running costs, delivery of high occupancy levels, day-to-day property management arrangements and the expected period of ownership and investment returns.
In some circumstances, the Company may choose to work with third party asset managers where this approach can maximise portfolio values.
Where appropriate, the Company will undertake improvements or develop sites to increase value and yield which could include gaining planning consent for change of use and implementing the change, or, using external contractors, refurbishment or extension of a property;
Property Management
The Group will decide whether to outsource time intensive day to day property management activities to independent advisers, or internalise it, on a case by case basis. Property management includes negotiating tenancies, collecting rents and undertaking day-to-day maintenance.
It is a key objective of the Group's strategy that it builds a strong reputation for offering its tenants superior management, building quality and overall service across its portfolio. The Directors and Proposed Director believe that high-quality management is a key differentiator for the Company that will enhance marketability to tenants, thereby underpinning the rental value of its units and the market value of the portfolio.
Development Management
The Company may engage with third party developers on a forward funding or forward commitment basis, removing development and planning risk, to access new build investment opportunities.
The Company does not intend to undertake "ground-up" direct development activity.
THE UK PRIVATE RENTED SECTOR
The Directors and Proposed Director believe that UK institutions have traditionally been wary of the UK PRS for historical and operational reasons.
Throughout the post-war period and until the mid-1990s successive governments have legislated to provide PRS tenants with both security of tenure and controlled rents and then reversed this legislation to make letting attractive again for landlords.
Due to this uncertainty and the drive towards home ownership the proportion of the total housing stock in the PRS steadily declined to just 9 per cent. in 1992 from 20 per cent. in 1971. In the 1990's the introduction of Assured Shorthold Tenancies (ASTs) and other changes encouraged a small number of institutions to invest in PRS. However, most institutions remained sceptical about government interference, continuing to believe that investing in PRS was too difficult for operational reasons.
UK PRS has grown significantly since the 1990's and now comprises 18 per cent. of the housing stock with a value of £1.3 trillion, some 44 per cent. more than the entire commercial property sector in the UK. In the five years to 2015, the percentage of the UK population who were tenants rather than home owners increased by 6.5 per cent. to 36.5 per cent. This corresponds to an increase in private renters of 920,000 to 4.28 million in 2015 and a further increase to 4.53 million in 2016. The majority of this growth has come however from private individuals deciding to become 'buy-to-let' landlords. Landlords that own only a single property hold 40 per cent. of the UK's PRS stock and only 8 per cent. describe themselves as fulltime landlords. It is estimated only two per cent. of PRS is professionally managed.
To increase professionalism in PRS and encourage institutional investors to invest in much needed housing stock, the Government has introduced a number of measures. These include the introduction of Real Estate Investment Trusts in 2007, and numerous tax changes reducing the attractiveness of the sector to non-professional 'buy-to-let' landlords.
The Directors and Proposed Director believe that the UK is currently witnessing the beginning of the institutionalisation of PRS and that this investment sector is well positioned for growth in the coming years.
Demand and supply drivers for UK residential property
The Directors and Proposed Director believe that the Company's value-adding activities described elsewhere will be enhanced by capital and rental value growth in the UK residential market.
In the view of the Directors and Proposed Director, the key drivers for this growth are as follows.
Demand drivers
· The populations of the UK and London are forecast to grow substantially in the medium term. The UK is expected to surpass Germany and France as the largest European country by population by 2070;
· The ONS forecast for the population of the UK as a whole published in October 2015 predicted a total population of around 66 million in 2016-2017, rising to around 70 million in 2026-2027 and around 74 million in 2036-2037. Eurostat, the EU statistics agency, forecast similar rates of increase in June 2017.
· The UK is widely regarded as a secure, liquid, investible property market with a strong legal system;
· The UK, is considered to be relatively safe and an enjoyable place in which to live and work;
· London is one of the world's leading financial and cultural centres;
· There is substantial demand from overseas buyers for residential property in the UK, particularly in the prime areas of London, which are generally considered to include the City of Westminster, Kensington & Chelsea, the City of London and Camden ("Prime Central London").
· The proportion of new build properties in the Greater London area as a whole bought by overseas buyers was 10.5 per cent. in 2014, 13.1 per cent. in 2015 and 17.9 per cent. in 2016. International estate agents indicated that, between April 2014 and April 2016, about 33 per cent. of sales were to international buyers, rising to 50 per cent. in Central London.
· The number of individuals in a household is decreasing due to smaller family sizes and higher divorce rates, increasing the overall need for housing.
Supply drivers
· There is an existing under-supply of residential property;
· UK new build completions were just over 150,000 units in 2015-2016. The UK government is still committed to deliver 1 million new homes in the period 2015-2020 and a further 500,000 by the end of 2022. However, there is a growing consensus that the target to meet existing need, make up the backlog and make a meaningful improvement to affordability should be at least 300,000 homes per year.
· Delivery of new property to the housing market is constrained by lack of land and planning restrictions;
· This shortage of supply is particularly prevalent in the more affluent areas, particularly in London;
· The UK PRS is rapidly maturing as an institutional asset class with an increasing number of professional and institutionally acceptable investment managers.
Taxation drivers
There have been several changes in the taxation of property over that last 4 years, all of which, in the view of the Directors and Proposed Director, are positive for the Company's business model as they are reducing the attractiveness of PRS to 'Buy to Let' non-professional landlords.
· The Annual Tax on Enveloped Dwellings (ATED) was introduced in 2013 and now applies to companies owning properties worth more than £500,000 each. This was introduced to curb the avoidance of paying SDLT by selling shares in a company rather than the property itself. The Company is exempt from ATED as it is a professional landlord.
· SDLT for residential property was reformed in the Chancellor's December 2014 statement, with new rates introduced as from 4 December 2014. The key changes were the abolition of the previous "slab" structure, whereby the rate of duty applied to the whole purchase price rather than being applied progressively to the tranches making up the total, and the introduction of higher rates for the more expensive properties. The highest rate now is 12 per cent. for the tranche in excess of £1.5 million compared with the previous seven per cent. for the whole purchase price for properties sold for in excess of £2 million. In addition to abolishing the "slab" structure, rates were altered for the less expensive properties and, in some cases, were reduced. This means that for properties sold for £937,000 or less, the SDLT payable is the same or lower than under the previous regime.
· The government has also reformed the taxation of landlords, particularly affecting private "buy-to-let" landlords. From 1 April 2016, there is an additional SDLT levy of 3 per cent. on buy-to-let properties (and second homes) a From April 2017, tax relief for finance costs will begin to be restricted to the basic rate of income tax, with the reform being fully in place by April 2020. This will have the effect of reducing after tax income from property investments and HMRC estimate that tax receipts will increase by £665 million pa by 2020-2021.
· From April 2016, the "Wear and Tear Allowance", which allowed landlords to deduct a fixed percentage of rental income from taxable income to replace items such as furnishings and appliances regardless of whether they had done so or not, was replaced with a relief which only allows the actual cost of such expenditure to be deducted. HMRC expects this will provide incentives to landlords to improve tenancy conditions but also expects an increased administrative burden for landlords as well as increased tax receipts in the range £165 to £205 million pa from 2017 onwards.
· From October 2017, the Prudential Regulation Authority, an arm of the Bank of England, will require lenders to "portfolio landlords", those with four or more properties, to implement "a specialist underwriting process" in respect of affordability of any new loans. These affordability assessments will include borrowers' tax liabilities, personal income and possible future increases in interest rates. Commentators consider that these measures could reduce the availability of loans to private landlords and increase the rates of interest they have to pay.
As a non-taxable professional landlord entity typically purchasing existing company held property portfolios, the Company is generally not affected by these changes, which may increase the competitiveness of the Company as a purchaser of choice by current owners.
The Directors and Proposed Director consider that key demand drivers that relate more specifically to people moving away from owning homes and into PRS are as follows.
· Falling affordability of property to buy and higher transaction costs (from changes in taxation);
· Mortgage restrictions are increasing the required size of buyers' deposits which are decreasingly affordable;
· There is an increasing trend for people to rent their homes as a lifestyle choice due to the flexibility it provides.
In addition, the Directors and Proposed Directors believe the supply of property to the PRS relies on a number of factors.
· 'Buy to Let' investors. Tax changes targeted at private landlords referred to above reduce the attractiveness of this form of investment, potentially leading to a reduction in supply from this source to the PRS.
· PRS institutional investors backing 'Build to Rent' strategies. This is a new and relatively small part of the supply.
· Housebuilders building to rent. The traditional model for housebuilders continues to be build-to-sell.
· Owner occupiers unable to sell residential property and becoming 'accidental landlords'. This increases when affordability of housing to buy falls. It is a temporary factor.
The Directors and Proposed Director believe that there will be an increasing gap between the demand for PRS property to rent, and its supply, resulting in upward pressure on rents.
Despite recent uncertainties caused by the "Brexit" negotiations and potential consequences for the UK and continental European economies, The Directors and Proposed Director believe that the multiple demand factors and supply limitations identified above will lead to future growth in capital and rental values.
PROPOSED DIRECTOR
The Company is pleased to announce that Duncan Walker, 38, has agreed to join the board as a non-executive director conditional upon Admission. Duncan has significant experience within the property market and most recently was Investment Director and board director at Helical plc. While at Helical plc, Duncan completed property transactions in excess of £1.5bn and oversaw the tripling of the investment portfolio from its 2008 level. He was also Managing Director of Renaissance Villages, a retirement living development and operational business with a gross development value of £350m, completing a buyout of a joint venture partner by Helical plc and a restructure of the business. The Helical portfolio that he managed ranked within the 3rd percentile over 3, 5 and 10 years as measured against IPD. Duncan has traded more than £2.5bn of property over the last 15 years.
Prior to Helical plc, Duncan was European Investment Manager for Edinburgh House Estates, a real estate investor with a wide range of assets across the UK and Europe. He is a graduate of Oxford University and holds a Post Graduate Diploma in Real Estate.
CHANGE OF NAME
In order to emphasise the Company's expanded focus on residential property assets across the UK it is proposed that, conditional upon Shareholder approval, the name of the Company be changed to KCR Residential REIT plc
REGULATORY POSITION OF THE COMPANY
The Company is an AIF for the purposes of the AIFM Directive and as such is required to have an investment manager that is duly authorised by the FCA to undertake that role.
On 4 November 2014, the Company was granted registration by the FCA as a "small registered UK AIFM" pursuant to regulation 10(2) of the AIFM Regulations on the basis that it is a small internally-managed AIF. Accordingly, the Company, whilst it holds this registration, will not be subject in the UK to, inter alia, the marketing restrictions placed on AIFs and AIFMs under the AIFM Regulations.
One of the qualifying criteria for registration as a small registered UK AIFM, for an AIF with leveraged assets (as is the case with the Company), is that the assets under management must be €100 million or less. Following completion of the Placing, on the basis it is subscribed for in full, the assets under management of the Company (including any assets acquired through the use of leverage) will exceed €100 million.
The Company, as its own AIFM, therefore intends, following Admission, to apply to the FCA for a full-scope Part 4A permission under FSMA and the AIFM Regulations so that assets under management of the Company (including any assets acquired through the use of leverage) are permitted to exceed €100 million. However, as the Company cannot anticipate the timing of its obtaining full-scope authorisation following its application, it has engaged G10 Capital Limited to ensure compliance with the requirements of the AIFMD that apply to the Company.
G10 is a UK based investment manager platform that focuses on providing services in particular to private equity and real estate funds and is part of the Lawson Conner group of companies, which provides compliance, risk advisory, software and regulatory consulting services to the financial services industry.
G10 has been appointed, subject to Admission, as alternative investment fund manager pursuant to the AIFM Agreement under which it is responsible for overall portfolio management and compliance with the Company's strategy providing alternative investment fund manager services, ensuring compliance with the requirements of the AIFMD that apply to the Company and undertaking all risk management.
G10 has appointed K&C REIT pursuant to the Appointed Representative Letter as its appointed representative in respect of certain regulated activities under FSMA, including advising on investments. K&C REIT will be appointed by G10 pursuant to the Investment Advisory Agreement to advise it in respect of sourcing investment opportunities which meet the Company's strategy. K&C REIT will also be responsible for managing the underlying real estate assets within the Company's investment portfolio, which activity will not constitute a regulated activity under FSMA. G10 has, and shall maintain, the necessary expertise and resource to supervise the delegated tasks effectively. Upon receiving regulatory approval as an alternative investment fund manager, K&C REIT will become the Investment Manager and the relationship with G10 will cease.
The services of G10, its associates and their respective officers and employees, are not exclusive to the Company. Although G10 has given certain undertakings to the Company regarding other mandates, and has in place a conflicts of interest policy, in fulfilling its responsibilities to the Company, it may be subject to certain conflicts of interest arising from its relations with third parties to whom it also owes duties or in whom it has an interest.
Under AIFMD, the AIFM is required to appoint an independent depositary to which it must entrust the assets of the Company for safekeeping. Kingfisher has been appointed, subject to Admission, as the depositary pursuant to the Depositary Agreement.
For the avoidance of doubt, the implementation of the strategy is not dependent upon leverage being taken on by the Group or full-scope authorisation being obtained.
As a REIT, the New Ordinary Shares will be "excluded securities" under the FCA's rules on non-mainstream pooled investments. Accordingly, the promotion of the New Ordinary Shares will not be subject to the FCA's restriction on the promotion of non-mainstream pooled investments.
SHARE CONSOLIDATION
In connection with the proposed Placing, the Company intends to undertake a consolidation of its existing share capital on the basis of:
For every ten ordinary shares of 1 penny each one new ordinary share of 10 pence
The consolidation is subject to the passing of the resolutions to be proposed at the General Meeting
The milestones that currently apply to the restricted preference shares in the capital of the Company which constitute the existing management incentives will be adjusted by amending the Articles to take account of the Consolidation.
DETAILS OF THE FUNDRAISING AND USE OF PROCEEDS
The Company is targeting a capital raising of £150 million by way of an issue of 150,000,000 New Ordinary Shares at an Issue Price of 100 pence per New Ordinary Share.
The Placing will be conducted by the Company in accordance with the terms and conditions set out in Appendix 4 to this Announcement.
The net proceeds of the Placing, estimated to be £145 million, assuming the Placing is completed in full, will be used to finance the acquisition of a portfolio of UK property assets, to repay the Company's outstanding debt of approximately £4.075 million plus accrued interest, and for working capital purposes.
Dominic White, Chief Executive, and Duncan Walker, proposed Non-executive Director, are each subscribing for 50,000 New Ordinary Shares pursuant to the Placing.
The New Ordinary Shares to be issued under the Placing will rank pari passu in all respects with the Ordinary Shares and each other.
The Company may, at the discretion of the Directors in consultation with Arden, reduce the scale of the Placing subject to a minimum issue of 100,000,000 New Ordinary Shares. In the event that the Placing does not reach the minimum issue the Placing will not proceed.
The Placing is conditional, inter alia, upon
· the passing of the Resolutions at the General Meeting;
· Admission occurring no later than 8.00 a.m. on 8 December 2017 (or such later time and/or date as the Company and Arden may agree); and
· the Placing Agreement not being terminated and becoming unconditional in accordance with its terms.
If these conditions are not met, the Placing will not proceed and an announcement to that effect will be made via a Regulatory Information Service.
In the event that FCA approval for the Company to become an appointed representative of G10 is not received prior to Admission, the Company will, in its absolute discretion, scale back the Placing to ensure its gross assets are below the €100m threshold in order to remain a small registered UK AIFM.
ADMISSION
Application will be made, subject to passing of the Resolutions, for the Enlarged Share Capital, comprising 155,275,182 New Ordinary Shares, assuming the Placing is completed in full, to be admitted to trading on AIM with effect from 27 November 2017.
GENERAL MEETING
In order to issue the Placing Shares, change the name of the Company and consolidate the Ordinary Shares into New Ordinary Shares the Company requires Shareholder consent in general meeting.
A notice is being sent to Shareholders, convening the General Meeting at 10.00am on 24 November 2017 at the offices of Fladgate LLP, 16 Great Queen Street, London WC2B 5DG for the purposes of considering and, if thought fit, approving the resolutions to:
· consolidate every 10 Ordinary Shares into 1 New Ordinary Share;
· approve the appointment of Duncan Walker as director of the Company;
· authorise the directors to allot further New Ordinary Shares pursuant to section 551 of CA 2006 in respect of:
a. the Placing;
b. up to 51,750,000 New Ordinary Shares (being approximately one-third of the Enlarged Share Capital (assuming full subscription under the Placing); and
c. up to 51,750,000 New Ordinary Shares (being approximately one-third of the Enlarged Share Capital (assuming full subscription under the Placing) if issued pursuant to a rights issue or other pre-emptive issue of shares;
· disapply the statutory pre-emption rights contained in section 561 of CA 2006 in respect of:
a. a rights issue or other pre-emptive issue of shares
b. the Placing
c. up to 7,750,000 New Ordinary Shares (being approximately 5 per cent. of the Enlarged Share Capital, assuming full subscription under the Placing);
· amend the Articles; and
· change the name of the Company to KCR Residential REIT plc
Appendix 1:
AIM Rules Disclosure Regarding Proposed Director
Duncan Walker, 38, is currently a director of the following company:
Capannone Limited
In addition, Duncan has been, within the preceding five years, a director of:
Abbeygate Helical (Winterhill) Limited |
Helical (Enterprise) Limited |
Helical Bar (Great Dover Street) Limited |
Helical (Bow) Limited |
Helical (Quartz) Limited |
Helical Bar Developments (South East) Limited |
Helical Bar (EC3 Developments) Limited |
Helical (Huddersfield) Limited |
Helical (Cowley) Limited |
Helical (Witham) Limited |
Helical (Porchester) Limited |
Helical (Kidlington) Limited |
Helical (Colchester) Limited |
Helical (Artillery) Limited |
Helical (Southampton) Limited |
Helical (Woking) Limited |
Helical Bar (Maple) Limited |
Helical (Doxford) Limited |
Helical (West Drayton) Limited |
Helical (Shepherds) Limited |
Helical (Bramshott Place) Limited |
Helical Bar (Fenchurch Street) Limited |
Baylight Developments Limited |
Helical (Chester) Limited |
14 Fieldgate Street Limited |
Helical Finance (Bar) Limited |
Helical (Jarrow) Limited |
Corby Town Centre Limited |
G2 Estates Limited |
Helical (Halesowen) Limited |
Corby Town Centre Management Limited |
Helical Bar (Falkirk) Limited |
Helical (Northampton) Limited |
Corby TC Limited |
Helical Bar (Cathcart) Limited |
Helical (Durrants) Limited |
Helical (Beacon Road) Limited |
Helical (Shoreditch) Limited |
Helical (Exeter) Limited |
Helical (Stone) Limited |
Helical Bar (Yoker) Limited |
Helical (Liphook) Limited |
Helical (Alfreton) Limited |
Helical Bar Developments Limited |
Helical (Sevenoaks) Limited |
Helical (Great Yarmouth) Limited |
Helical Finance (RBS) Limited |
Helical (Winterhill) Ltd |
Helical (Chart) Limited |
Metropolis Property Limited |
Helical Retirement Homes Limited |
Helical (Six) Limited |
Helical (Broadway) Limited |
Helical Investment Holdings Limited |
Helical (Scarborough) Limited |
Helical Services Limited |
Hb Sawston No.3 Limited |
Helical (Mint) Limited |
Helical (CG) Limited |
Helical (Salford) Limited |
Helical (Gracelands) Limited |
Helical (Telford) Limited |
Abbeygate Helical (Leisure Plaza) Limited |
Helical (Havant) Limited |
Helical (Hedge End) Limited |
Helical (Wellingborough) Limited |
Helical (Dale House) Limited |
Helical (West London) Limited |
Dencora (Docklands) Limited |
Helical (Sun) Limited |
Helical (Corby Investments) Limited |
Helical (Power Road) Limited |
Helical (Brownhills) Limited |
Helical Plc |
Dencora (Fordham) Limited |
Helical (Peterborough) Limited |
Helical (East Kilbride) Limited |
Helical (Glasgow) Limited |
Helical (Stevenage) Limited |
Helical (Basildon) Limited |
Helical (Booth St) Limited |
Helical (Cannock) Limited |
Basildon Nominee Limited |
Renaissance Villages Limited |
Helical (Ellesmere Port) Limited |
Newmarket General Partner Limited |
Bramshott Place Management Limited |
Helical (Hinckley) Limited |
Helical (Sutton-In-Ashfield) Limited |
Durrants Management Limited |
Helical (Portbury) Limited |
Sutton-In-Ashfield Nominee Limited |
Maudslay Park Management Limited |
Helical (Southend) Limited |
Newmarket Nominee Limited |
Millbrook Village Management Limited |
Helical Finance (Av) Limited |
Sutton-In-Ashfield General Partner Limited |
Helical Bar Limited |
Helical (Cobham) Limited |
Helical (Merlin Park) Limited |
Helical Bar (Jersey) Limited |
Helical (Boss 2) Limited |
Helical (Motherwell) Limited |
Helical (Cardiff) Limited |
Helical (Hub) Limited |
Helical (FP) Holdings Limited |
Aycliffe And Peterlee Investment Company Limited |
Helical (LB) Limited |
Helical Bar (Mitre Square) Developments Limited |
Helical (Newmarket) Limited |
Helical (Yate) Limited |
Helical Properties Retail Limited |
The Morgan Apartments Management Company Limited |
Helical (Harrogate) Limited |
Helical Food Retail Limited |
Mill Street Management (Slough) Limited |
Helical (Boss) Limited |
Helical (Southall) Limited |
Helical (Bramshott Place) Limited |
Helical (Churchgate) Limited |
Helical (Stockport) Limited |
|
Helical (Whitechapel) Limited |
Helical (Mill Street) Limited |
|
There is no further information regarding Duncan Walker which requires disclosure pursuant to Schedule 2(g) of the AIM Rules
Appendix 2:
Definitions
The following definitions apply throughout this announcement unless the context requires otherwise:
Admission the admission of the Enlarged Share Capital to trading on AIM
AIF alternative investment fund
AIFM Agreement the management agreement between the Company and G10
AIFMD or AIFM Directive the Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No. 1095/2010; the Commission Delegated Regulation (EU) No 231/2013 of 19 December 2012 supplementing Directive 2011/61/EU of the European Parliament and of the Council with regard to exemptions, general operating conditions, depositaries, leverage, transparency and supervision; the UK AIFM Regulations and any other applicable national implementing measures, including FCA Rules
AIFM Regulations the Alternative Investment Fund Managers Regulations 2013
AIM the AIM market, operated by the London Stock Exchange.
AIM Rules the AIM Rules for Companies (being the rules of the London Stock Exchange which set out the obligations and responsibilities of and in relation to companies whose shares are admitted to AIM, as published and occasionally amended by the London Stock Exchange).
Arden Arden Partners Plc, the Company's nominated adviser and sole broker
Articles the articles of association of the Company adopted by the Company by a special resolution passed at a general meeting of the Company held on 20 February 2017.
Board or Directors the directors of the Company
CA 2006 the Companies Act 2006.
Coleherne K&C (Coleherne) Limited, incorporated in England and Wales with company number 02818584, formerly Silcott Properties Limited and being a wholly owned subsidiary of the Company.
Company or K&C REIT K&C REIT plc, incorporated in England and Wales with registered number 09080097.
Consolidation the proposed consolidation of every 10 Ordinary Shares into 1 New Ordinary Share.
CTA 2009 the UK Corporation Tax Act 2009
CTA 2010 the UK Corporation Tax Act 2010
Depositary Agreement the depositary agreement between the Company, G10 and Kingfisher
Enlarged Share Capital the issued ordinary share capital of the Company on Admission and immediately following completion of the Placing, comprising the New Ordinary Shares arising from the Consolidation and the Placing.
FCA the Financial Conduct Authority of the United Kingdom.
FSMA the Financial Services and Markets Act 2000, as amended.
G10 G10 Capital Limited, a company incorporated in England and Wales with registered number 09224491, the alternative investment fund manager to the Company for the purposes of AIFMD
General Meeting the general meeting of the Company to be held at 10.00 a.m. on 24 November 2017, or any adjournment thereof.
Gross Proceeds the gross proceeds of the Placing.
Group the Company and its subsidiaries and subsidiary undertakings from time to time.
HMRC HM Revenue & Customs.
IPD the Investment Property Databank
Kingfisher Kingfisher Property Partnerships Limited, a company incorporated in England and Wales with registered number 04109242, the depositary to the Company for the purposes of AIFMD.
London Stock Exchange London Stock Exchange plc.
Main Market the London Stock Exchange's main market for listed securities
market value the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.
NAV or Net Asset Value the net asset value of the Company as calculated in accordance with the Company's accounting practices.
Net Proceeds the funds received by the Company under the Placing less any expenses paid or payable in connection with Admission, the Placing.
New Ordinary Shares ordinary shares of 10 pence each in the capital of the Company (which will arise from the Consolidation).
Notice the notice of the General Meeting
Official List the Official List maintained by the UKLA.
Ordinary Shares ordinary shares of 1 penny each in the capital of the Company, of which 52,751,813 are in issue at the date of this announcement.
Osprey K&C (Osprey) Limited, incorporated in England and Wales with company number 01864755, formerly known as The Osprey Management Company Limited and being a wholly owned subsidiary of the Company.
Placing the proposed conditional placing of the Placing Shares by or on behalf of the Company at the Placing Price.
Placing Agreement the placing agreement between the Company, the Directors and the Proposed Director, and Arden
Placing Price 100p per New Ordinary Share.
Placing Shares 150,000,000 New Ordinary Shares which are proposed to be issued pursuant to the Placing.
Premium Listing a Premium Listing on the Official List under Chapter 6 of the Listing Rules.
Private Rented Sector or PRS a classification of United Kingdom housing tenure as described by the Department for Communities and Local Government.
Property Rental Business a business within the meaning of section 205 of the CTA 2009 or an overseas property business within the meaning of section 206 CTA 2009, but, in each case, excluding certain specified types of business (as per section 519(3) of the CTA 2010).
Proposed Director Duncan Walker, proposed non-executive director
Qualifying Property Rental Business a Property Rental Business fulfilling the conditions in section 529 of the CTA 2010.
Registrar Share Registrars Limited of The Courtyard, 17 West Street, Farnham, Surrey GU9 7DR.
REIT Real Estate Investment Trust, being a company or group of companies to which Part 12 of the CTA 2010 applies.
REIT Group a REIT, which is a REIT by virtue of a notice given under section 523 of the CTA 2010.
REIT Regime the UK taxation regime created and provided for by part 12 of the CTA 2010.
Resolutions the resolutions to be proposed at the General Meeting, as set out in the Notice.
Shareholders holders of Ordinary Shares or New Ordinary Shares.
Social Housing homes which are social rented, affordable rented and intermediate housing provided to specified eligible households whose needs are not met by the market.
SPVs special purpose vehicles.
subsidiary has the meaning given to it by section 1159 CA 2006.
APPENDIX 3
Taxation and the REIT Regime
The statements on taxation below are intended to be a general summary of certain tax consequences that may arise in relation to the Company and the other members of the Group. This is not a comprehensive summary of all technical aspects of the taxation of the Company and the other members of the Group and is not intended to constitute legal or tax advice to investors.
Prospective investors should familiarise themselves with, and where appropriate should consult their own professional advisers on, the overall tax consequences of investing in the Company. The statements relate to investors acquiring Ordinary Shares for investment purposes only, and not for the purposes of any trade.
As is the case with any investment, there can be no guarantee that the tax position or proposed tax position prevailing at the time an investment in the Company is made will endure indefinitely. The tax consequences for each investor of investing in the Company may depend upon the investor's own tax position and upon the relevant laws of any jurisdiction to which the investor is subject.
The Group is a REIT Group for the purposes of Part 12 of the Corporation Tax Act 2010.
The special rules which apply to the taxation of a company which enters the REIT Regime are summarised below.
A REIT does not suffer UK corporation tax on the profits (income and capital gains) from its Qualifying Property Rental Business, provided that certain conditions are satisfied. Instead, distributions in respect of the Qualifying Property Rental Business will be treated for UK tax purposes as UK property income in the hands of shareholders. These are referred to as Property Income Dividends ("PIDs").
However, UK corporation tax remains payable in the normal way in respect of income and gains from a REIT's Residual Business. Dividends relating to the Residual Business are treated for UK tax purposes as normal dividends. Any normal dividend paid by the Company is referred to in this Part VI as a "Non-PID Dividend".
The tax treatment of a dividend paid by the Company in the first accounting period after it achieves REIT status would depend on whether it is deemed to be paid out of profits that arose before or after the REIT Group became a REIT. In addition, where on an on-going basis after the REIT Group enters the REIT Regime the Company makes distributions to Shareholders in excess of the amount required to satisfy the "distribution condition" for each accounting period (see further below), distributions to Shareholders are likely to consist of a mixture of PID and Non-PID Dividends as calculated in accordance with specific attribution rules. The Company will provide Shareholders with a certificate setting out how much, if any, of their dividends is a PID and how much is a Non-PID dividend.
Qualification as a REIT
Subject to meeting a number of conditions, a company may become a REIT by serving notice on HMRC that it is a REIT from a date specified in that notice. Any property rental business the Company or any other member of the REIT Group has been to that date carrying on is deemed to cease at the point of entry to the REIT Regime and accordingly, the property rental business carried on by the Company and each relevant member of the REIT Group subsequently is deemed to be a new business, established and commenced at the date of entry into the REIT Regime. At the point of entry into the REIT Regime the accounting period of the Company and each other member of the REIT Group is deemed to end for tax purposes and another accounting period will begin.
In order to qualify as a REIT, the Company must satisfy certain conditions throughout each accounting period in which it is to be treated as a REIT. A non-exhaustive summary of the material conditions is set out below.
A. Company conditions
A company must be solely resident in the UK for tax purposes, it must not be an open-ended investment company and its ordinary shares must be admitted to trading on a recognised stock exchange, such as the London Stock Exchange, and either listed on the exchange or traded on it. A company must also not be a "close company" for UK tax purposes, which generally means it must not be controlled (through the holding of in excess of 50 per cent. of share capital/voting rights etc) by five or fewer persons or, broadly, must have more than 35 per cent. of shares listed and in public hands. There is an exception however for this condition for the first three years following entry into the REIT Regime. For the purposes of this close company test the holdings of certain types of institutional investors are not taken into account.
B. Share capital restrictions
There must only be one class of ordinary share in issue and the only other shares a company may issue are non-voting restricted preference shares.
C. Restrictions on types of borrowing
The company must not be party to any loan in respect of which the lender is entitled to interest which exceeds a reasonable commercial return on the consideration lent or where the interest depends to any extent on the results of the company's business or on the value of any of its assets.
On-going conditions for maintaining REIT status
In addition to satisfying the above conditions on entry into the REIT Regime, the REIT Group would be required to satisfy the conditions summarised below on an on-going basis during each accounting period in order to maintain REIT status:
(i) The Qualifying Property Rental Business must throughout each accounting period involve at least three properties and have no one property representing more than 40 per cent. of the total value of all the properties involved in the business.
(ii) The Company is required to distribute to shareholders (subject to the availability of sufficient distributable reserves) 100 per cent. of the income profits arising in each accounting period which are derived from distributions of profits or gains of the Qualifying Property Rental Business of another UK REIT and at least 90 per cent. of the income profits arising from the REIT Group's Qualifying Property Rental Business derived from other sources in each accounting period (broadly, calculated using normal tax rules and disregarding non-UK source profits of a non-UK member of the REIT or of a non-UK member of a UK REIT from which the REIT receives such a distribution). Such distributions will be in the form of a PID and must generally be made on or before the filing date for the tax return for the accounting period.
(iii) The income profits arising to the Qualifying Property Rental Business must represent at least 75 per cent. of the total profits for the accounting period. Such profits are calculated in accordance with International Accounting Standards, before deduction of tax and excluding, broadly, gains and losses on the disposal of property and revaluation of properties, and certain exceptional items.
(iv) At the beginning of the accounting period the gross fair value of the assets in the Qualifying Property Rental Business (including cash held on deposit and shares in another UK REIT) must represent at least 75 per cent. of the total fair value of assets held. However, a breach should not occur in the first accounting period upon entry into the REIT Regime, provided that the test is met at the end of the first accounting period.
Effects of becoming a REIT
A. Tax exemption
A REIT does not suffer UK corporation tax on the profits (income and capital gains) derived from its Qualifying Property Rental Business. UK corporation tax will still apply in the normal way in respect of any income and gains of any Residual Business.
B. The 10 per cent. rule
A REIT may become subject to an additional tax charge if it pays a distribution to corporate shareholders that hold at least 10 per cent. of share capital or voting rights and/or are entitled to at least 10 per cent. of distributions. This tax charge will not be incurred if the REIT has taken reasonable steps to avoid making distributions to such a shareholder in line with HMRC guidance.
C. Distributions - obligations to withhold tax
Subject to certain exceptions, a REIT is required to withhold income tax at source at the basic rate (currently 20 per cent.) from PIDs. A REIT must also provide shareholders with a certificate setting out the amount of tax withheld. Tax is not required to be deducted when distributions are paid to certain types of shareholder including UK corporate and UK tax-exempt bodies (such as SIPPs and ISAs). Where distributions are made to shareholders resident in a country with a double taxation treaty with the UK, tax should be withheld and the shareholder may seek a refund of the tax where the treaty withholding tax rate is lower.
D. Interest cover ratio
A tax charge will arise if, in respect of any accounting period, the ratio of the income profits (before capital allowances) to the financing costs incurred in respect of the Qualifying Property Rental Business is less than 1.25. The amount (if any) by which the financing costs exceeds the amount of those costs which would cause that ratio to equal 1.25 is chargeable to corporation tax up to a maximum of 20 per cent. of the income profits of the Qualifying Property Rental Business.
Exit from the REIT Regime
After joining the REIT Regime, a REIT can give notice to HMRC that it wishes to leave the REIT Regime at any time.
It is important to note that following satisfaction of the REIT conditions by the Company and the REIT Group, the Company will not be able to guarantee continued compliance with all the conditions and the REIT Regime may cease to apply in certain circumstances. Broadly, HMRC may require the Company and the other members of the REIT Group to exit the REIT Regime if:
a) any breach of the conditions relating to the Qualifying Property Rental Business, or an attempt to avoid tax, is considered sufficiently serious;
b) a certain number of minor or inadvertent breaches, by the Company or members of the REIT Group, of the conditions occur in a specified period; or
c) HMRC has issued two or more notices, to the Company or members of the REIT Group, in relation to the avoidance of tax within a 10-year period of the first notice having been given.
Appendix 4
Terms and Conditions of the Placing
(IMPORTANT INFORMATION FOR PLACEES ONLY CONCERNING THE PLACING)
THIS ANNOUNCEMENT IS NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY IN OR INTO THE UNITED STATES, AUSTRALIA, CANADA, THE REPUBLIC OF SOUTH AFRICA OR JAPAN OR ANY OTHER JURISDICTION IN OR INTO WHICH SUCH RELEASE, PUBLICATION OR DISTRIBUTION WOULD BE UNLAWFUL.
MEMBERS OF THE PUBLIC ARE NOT ELIGIBLE TO TAKE PART IN THE PLACING. THIS ANNOUNCEMENT AND THE TERMS AND CONDITIONS SET OUT AND REFERRED TO HEREIN ARE DIRECTED ONLY AT PERSONS SELECTED BY ARDEN PARTNERS PLC ("ARDEN") WHO ARE (A) PERSONS IN MEMBER STATES OF THE EUROPEAN ECONOMIC AREA WHO ARE "QUALIFIED INVESTORS", AS DEFINED IN ARTICLE 2.1(E) OF DIRECTIVE 2003/71/EC AS AMENDED FROM TIME TO TIME AND INCLUDES ANY RELEVANT IMPLEMENTING DIRECTIVE MEASURE IN ANY MEMBER STATE (THE "PROSPECTUS DIRECTIVE") AND (B) IF IN THE UNITED KINGDOM, PERSONS WHO (I) HAVE PROFESSIONAL EXPERIENCE IN MATTERS RELATING TO INVESTMENTS WHO FALL WITHIN THE DEFINITION OF "INVESTMENT PROFESSIONALS" IN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 AS AMENDED (THE "FPO") OR FALL WITHIN THE DEFINITION OF "HIGH NET WORTH COMPANIES, UNINCORPORATED ASSOCIATIONS ETC" IN ARTICLE 49(2)(A) TO (D) OF THE FPO AND (II) ARE "QUALIFIED INVESTORS" AS DEFINED IN SECTION 86 OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 ("FSMA") OR (C) PERSONS TO WHOM IT MAY OTHERWISE LAWFULLY BE COMMUNICATED (ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "RELEVANT PERSONS"). THIS ANNOUNCEMENT AND THE TERMS AND CONDITIONS SET OUT HEREIN MUST NOT BE ACTED ON OR RELIED ON BY PERSONS WHO ARE NOT RELEVANT PERSONS.
This Announcement does not constitute an offer to sell or issue or a solicitation of an offer to buy or subscribe for Placing Shares in any jurisdiction including, without limitation, the United States, Canada, Australia, the Republic of South Africa or Japan or any other jurisdiction where the extension or availability of the Placing would breach applicable law (a "Restricted Jurisdiction"). This Announcement and the information contained herein are not for publication or distribution, directly or indirectly, to persons in a Restricted Jurisdiction unless permitted pursuant to an exemption under the relevant local law or regulation in any such jurisdiction. No action has been taken by K&C REIT plc or Arden or any of their affiliates or agents that would permit an offer of the Placing Shares or possession or distribution of this Announcement or any other publicity material relating to such Placing Shares in any jurisdiction where action for that purpose is required. Persons receiving this Announcement are required to inform themselves about and to observe any such restrictions.
Persons (including, without limitation, nominees and trustees) who have a contractual or other legal obligation to forward a copy of this Announcement should seek appropriate advice before taking any action.
Arden is authorised and regulated in the United Kingdom by the FCA and is acting exclusively for the Company and no one else in connection with the Placing and Admission and will not regard any other person (whether or not a recipient of this announcement) as a client in relation to the Placing or Admission, and will not be responsible to anyone other than the Company for providing the protections afforded to its respective clients or for affording advice in relation to the Placing, Admission or any other matters referred to in this announcement.
By participating in the Placing, each person who is invited to and who chooses to participate in the Placing (a "Placee") by making or accepting an oral and/or written legally binding offer to subscribe for Placing Shares is deemed to have read and understood this Announcement in its entirety (including this Appendix) and to be providing the representations, warranties, undertakings, agreements and acknowledgements contained herein.
EACH PLACEE SHOULD CONSULT WITH ITS OWN ADVISERS AS TO LEGAL, REGULATORY, TAX, BUSINESS AND RELATED ASPECTS OF A SUBSCRIPTION FOR PLACING SHARES.
A circular explaining the background to and reasons for the Placing (the "Circular") and containing the Notice of General Meeting is expected to be posted to shareholders on or before 31 October 2017. A copy of the Circular and the Notice of General Meeting will thereafter be made available on the Company's website: www.kandc-reit.co.uk
Details of the Placing Agreement and the New Ordinary Shares
Arden is acting as broker for the purposes of the Placing and has entered into the Placing Offer Agreement with the Company under which it has agreed to use its reasonable endeavours to procure Placees to subscribe for New Ordinary Shares in the Placing on the terms and subject to the conditions set out therein. Arden is acting as the agent of the Company and for no one else in connection with the Placing.
The Placing comprises a placing of up to 150,000,000 New Ordinary Shares (the "Placing Shares") The Placing is not being underwritten.
Participation in the Placing is only available to persons who are invited to participate in it by Arden.
Placing Shares are available under the Placing at a price of 100 pence per New Ordinary Share. The Placing 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.
Each Placee which confirms its agreement to Arden to subscribe for Placing Shares under the Placing will be bound by these terms and conditions and will be deemed to have accepted them.
The Company and/or Arden may require any Placee to agree to such further terms and/or conditions and/or give such additional warranties and/or representations as they (in their absolute discretion) see(s) fit. The commitment to acquire Placing Shares under the Placing will be agreed orally with Arden as agent for the Company and further evidenced
Application for Admission
Application will be made to the London Stock Exchange for the Placing Shares to be admitted to AIM. Subject to the satisfaction of the Conditions, it is expected that Admission will take place and dealings in the Placing Shares will commence on AIM on 27 November 2017.
Bookbuild
Commencing today, Arden, as agent of the Company will be conducting a bookbuilding process (the "Bookbuilding Process") to determine demand for participation in the Placing by Placees. This Appendix gives details of the terms and conditions of, and the mechanics of participation in, the Placing.
Participation in, and principal terms of, the Bookbuilding Process
Participation in the Placing is by invitation only and will only be available to persons who are Relevant Persons and who may lawfully be, and are, invited to participate by Arden. Arden and their affiliates are entitled to participate as Placees in the Bookbuilding Process.
The book for the Placing will open with immediate effect. The Bookbuilding Process is expected to close not later than 3.00 p.m. (London) on 22 November 2017, but may be closed at such earlier or later time as Arden in its absolute discretion, determines. A further announcement will be made following the close of the Bookbuilding Process detailing the results of the Bookbuilding Process and the despatch of the Circular.
A bid in the Bookbuilding Process may only be made on the terms and conditions in this Announcement and will be legally binding on the Placee on behalf of which it is made and, except with Arden's consent, will not be capable of variation or revocation after the close of the Bookbuilding Process.
A Placee who wishes to participate in the Bookbuilding Process should communicate its bid by telephone to its usual sales contact at Arden. Arden will contact and confirm orally to successful Placees following the close of the Bookbuilding Process the size of their respective allocations and a trade confirmation will be despatched as soon as possible thereafter. Arden's oral confirmation of the size of allocations and each Placee's oral commitments to accept the same will constitute an irrevocable legally binding agreement in favour of the Company pursuant to which each such Placee will be required to accept the number of Placing Shares allocated to the Placee at the Issue Price and otherwise on the terms and subject to the conditions set out herein and in accordance with the Company's articles of association. Each Placee's allocation and commitment will be evidenced by a trade confirmation issued to such Placee by Arden. The terms of this Appendix will be deemed incorporated in that trade confirmation.
Arden reserves the right to scale back the number of Placing Shares to be subscribed by any Placee in the event that the Placing is oversubscribed. Arden also reserves the right not to accept offers to subscribe for Placing Shares or to accept such offers in part rather than in whole. The acceptance and, if applicable, scaling back of offers shall be at the absolute discretion of Arden.
Following the oral confirmation referred to above, each Placee will have an immediate, separate, irrevocable and binding obligation, owed to Arden to pay to Arden (or as Arden may direct) in cleared funds an amount equal to the product of the Issue Price and the number of Placing Shares allocated to such Placee.
To the fullest extent permissible by law, none of the Company, Arden, any of their affiliates nor any person acting on their behalf shall have any liability to Placees (or to any other person whether acting on behalf of a Placee or otherwise). In particular, neither the Company, Arden, nor any of their affiliates or any person acting on their behalf shall have any liability (including, to the extent legally permissible, any fiduciary duties), in respect of the conduct of the Bookbuilding Process or of such alternative method of effecting the Placing as Arden, in consultation with the Company may in its sole discretion determine.
All obligations of Arden under the Placing will be subject to fulfilment of the Conditions.
Conditions of the Placing
The Placing has not been underwritten and is conditional, inter alia, upon:
(a) the passing of certain Resolutions at the General Meeting or any adjournment thereof;
(b) the minimum gross proceeds being committed under the Placing;
(c) the Placing Agreement becoming unconditional in all respects (other than Admission) and not having been terminated in accordance with its terms; and
(d) Admission occurring by not later than 8:00 a.m. 8 December 2017 (or such later time and/or date as the Company and Arden may agree.)
In the event that the Company, in consultation with Arden, wishes to reduce the Minimum Gross Proceeds amount, the Company will be required to notify investors via an RIS announcement.
If the conditions to which the Placing is subject are not satisfied or, if applicable, waived the Placing will not proceed, the Placing will lapse and each Placee's rights and obligations hereunder shall cease and determine at such time and no claim may be made by a Placee in respect thereof. Neither the Company, Arden, nor any of their affiliates shall have any liability to any Placee (or to any other person whether acting on behalf of a Placee or otherwise) in respect of any decision as to whether or not to waive or to extend the time and/or date for the satisfaction of any condition to which the Placing is subject.
By participating in the Placing, each Placee agrees that its rights and obligations hereunder terminate only in the circumstances described below under "Right to terminate". To the fullest extent permitted by law, each Placee acknowledges and agrees that it will not be entitled to exercise any remedy of rescission at any time. This does not affect any other rights the Placee may have.
Right to terminate
The Placing Agreement contains certain warranties and indemnities from the Company in favour of Arden. Arden may, in its absolute discretion terminate the Placing Agreement in certain circumstances, if, inter alia, the Company fails to comply with its obligations under the Placing Agreement; if there is a material adverse change in business, financial or trading position or prospects of the Company; or if there is a change in the financial, political, economic or market conditions, which in its reasonable opinion, acting in good faith, make it impractical or inadvisable to proceed with the Placing.
By participating in the Placing, each Placee agrees with Arden that the exercise by Arden of any right of termination or other discretion under these terms and conditions shall be within the absolute discretion of Arden and that Arden need not make any reference to the Placees in this regard and that, to the fullest extent permitted by law, Arden, any of its affiliates nor any person acting on their behalf or any of them shall have any liability whatsoever to the Placees in connection with any such exercise or failure to so exercise.
No Prospectus
No offering document or prospectus has been or will be prepared in relation to the Placing and no such prospectus is required (in accordance with the Prospectus Directive) to be published or submitted to be approved by the FCA and Placees' commitments will be made solely on the basis of the information contained in this Announcement and any information previously published by or on behalf of the Company by notification to a Regulatory Information Service.
Each Placee, by accepting a participation in the Placing, confirms to Arden that it has neither received nor relied on any information, representation, warranty or statement made by or on behalf of Arden (other than the amount of the relevant Placing participation in the oral confirmation given to Placees and the trade confirmation referred to below), any Affiliate, any persons acting on its behalf or the Company and none of Arden, its respective affiliates, nor any persons acting on their behalf will be liable for the decision of any Placee to participate in the Placing based on any other information, representation, warranty or statement which the Placee may have obtained or received (regardless of whether or not such information, representation, warranty or statement was given or made by or on behalf of any such persons). By participating in the Placing, each Placee acknowledges to and agrees with the Company and Arden that, except in relation to the information contained in this Announcement, it has relied on its own investigation of the business, financial or other position of the Company in deciding whether to participate in the Placing. Nothing in this paragraph shall exclude the liability of any person for fraudulent misrepresentation.
Registration and settlement
Settlement of transactions in the Placing Shares following Admission will take place within the CREST system, using the DVP mechanism, subject to certain exceptions. Arden reserves the right to require settlement for and delivery of the Placing Shares to Placees by such other means as they deem necessary, if delivery or settlement is not possible or practicable within the CREST system within the timetable set out in this Announcement or would not be consistent with the regulatory requirements in the Placee's jurisdiction.
Each Placee allocated Placing Shares in the Placing will be sent a trade confirmation stating the number of Placing Shares allocated to it, the Issue Price, the aggregate amount owed by such Placee to the Company and settlement instructions. Placees should settle against the CREST ID for Arden shown below. Subject to satisfaction or waiver of the conditions to which the Placing is subject, it is expected that such trade confirmation will be despatched on the expected trade date shown below. Each Placee agrees that it will do all things necessary to ensure that delivery and payment is completed in accordance with either the standing CREST or certificated settlement instructions which it has in place with Arden.
The Company will deliver the Placing Shares to a CREST account operated by Arden and Arden will enter its delivery (DEL) instruction into the CREST system. Arden will hold the Placing Shares delivered to this account as nominee for the Placees. The input to CREST by a Placee of a matching or acceptance instruction will then allow delivery of the relevant Placing Shares to that Placee against payment.
The expected timetable for settlement will be as follows:
Trade Date: |
24 November 2017 |
Settlement Date: |
27 November 2017 |
ISIN Code: |
GB00BYWK1Q82 |
SEDOL: |
BYWK1Q8 |
Deadline for input instruction into CREST: |
3.00p.m. on 24 November 2017 |
CREST ID for Arden: |
DAQAQ |
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It is expected that settlement will take place on the Settlement Date shown above on a DVP basis in accordance with the instructions set out in the trade confirmation unless otherwise notified by Arden.
Interest is chargeable daily on payments not received from Placees on the due date in accordance with the arrangements set out above at the rate of two percentage points above the base rate of Barclays Bank plc.
Each Placee is deemed to agree that if it does not comply with these obligations, the Company may sell any or all of the Placing Shares allocated to the Placee on such Placee's behalf and retain from the proceeds, for the Company's own account and profit, an amount equal to the aggregate amount owed by the Placee plus any interest due. The Placee will, however, remain liable for any shortfall below the aggregate amount owed by such Placee and it may be required to bear any stamp duty or stamp duty reserve tax (together with any interest or penalties) which may arise upon the sale of such Placing Shares on such Placee's behalf.
If Placing Shares are to be delivered to a custodian or settlement agent, the Placee should ensure that the trade confirmation is copied and delivered immediately to the relevant person within that organisation.
Insofar as Placing Shares are registered in the Placee's name or that of its nominee or in the name of any person for whom the Placee is contracting as agent or that of a nominee for such person, such Placing Shares will, subject as provided below, be so registered free from any liability to PTM levy, stamp duty or stamp duty reserve tax. If there are any circumstances in which any other stamp duty or stamp duty reserve tax is payable in respect of the issue of the Placing Shares, neither the Company nor Arden shall be responsible for the payment thereof. Placees will not be entitled to receive any fee or commission in connection with the Placing.
Representations, warranties and terms
By agreeing to subscribe for Placing Shares, each Placee which enters into a commitment to subscribe for Placing Shares will (for itself and any person(s) procured by it to subscribe for Placing Shares and any nominee(s) for any such person(s)) be deemed to represent, warrant and acknowledge to each of the Company, AIFM, the Registrar and Arden that:
1) in agreeing to subscribe for Placing Shares under the Placing it is relying solely on this announcement and any supplementary announcement issued by the Company and not on any other information given, or representation or statement made at any time, by any person concerning the Company or the Placing. It agrees that none of the Company, the AIFM, Arden or the Registrar, nor any of their respective officers, agents, or employees, will have any liability for any other information or representation. It irrevocably and unconditionally waives any right it may have in respect of any other information or representation;
2) if the laws of any territory or jurisdiction outside the United Kingdom are applicable to its agreement to subscribe for Placing Shares under the Placing it warrants that it has complied with all such laws, obtained all governmental and other consents which may be required complied with all requisite formalities and paid any issue, transfer or other taxes due in connection with its application in any territory and that it has not taken any action or omitted to take any action which will result in the Company, the AIFM, Arden or the Registrar or an of their respective officers, agents or employees acting in breach of the regulatory or legal requirements, directly or indirectly, of any territory or jurisdiction outside the United Kingdom in connection with the Placing;
3) it has carefully read and understands this announcement in its entirety and acknowledges that it is acquiring Placing Shares on the terms and subject to the conditions set out in this Appendix and the Articles as in force at the date of Admission of the Placing Shares;
4) it has not relied on Arden or any person affiliated with Arden in connection with any investigation of the accuracy of any information contained in this announcement;
5) the content of this announcement is exclusively the responsibility of the Company, the Directors and the Proposed Director and neither Arden nor any person acting on its behalf nor any of its affiliates are responsible for or shall have any liability for any information, representation or statement contained in this announcement or any information published by or on behalf of the Company and will not be liable for any decision by a Placee to participate in the Placing based on any information, representation or statement contained in this announcement or otherwise;
6) it acknowledges that no person is authorised in connection with the Placing to give any information or make any representation other than as contained in this announcement and, if given or made, any information or representation must not be relied upon as having been authorised by the Company, the AIFM, or Arden;
7) it is not applying as, nor is it applying as nominee or agent for, a person who is or may be liable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at any of the increased rates referred to in section 67, 70, 93 or 96 of the Finance Act 1986 (depositary receipts and clearance services);
8) if it is within the United Kingdom, it is a person who falls within Articles 49(2)(a) to (d) or 19(5) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 or it is a person to whom the Placing Shares may otherwise lawfully be offered under such Order and/or is a person who is a "professional client" or an "eligible counterparty" within the meaning of Chapter 3 of the FCA's Conduct of Business Sourcebook or, if it is receiving the offer in circumstances under which the laws or regulations of a jurisdiction other than the United Kingdom would apply, it is a person to whom the Placing Shares may be lawfully offered under that other jurisdiction's laws and regulations;
9) if it is a resident in the EEA (other than the United Kingdom):
(a) it is a qualified investor within the meaning of the law in the relevant Member State implementing Article 2(1)(e)(i), (ii) or (iii) of the Prospectus Directive 2003/71/EC; and
(b) if that relevant Member State has implemented the AIFMD, that it is a person to whom the New Ordinary Shares may lawfully be marketed under the AIFMD or under the applicable implementing legislation (if any) of that relevant Member State;
10) in the case of any Placing Shares acquired by a Placee as a financial intermediary within the EEA (other than the United Kingdom) as that term is used in Article 3(2) of the Prospectus Directive:
(a) the Placing Shares acquired by it in the Placing have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any relevant Member State other than qualified investors, as that term is defined in the Prospectus Directive 2010/73/EU, or in circumstances in which the prior consent of Arden has been given to the offer or resale; or
(b) where Placing Shares have been acquired by it on behalf of persons in any relevant Member State other than qualified investors, the offer of those Placing Shares to it is not treated under the Prospectus Directive as having been made to such persons;
11) it does not have a registered address in, and is not a citizen, resident or national of, any jurisdiction in which it is unlawful to make or accept an offer of the Placing Shares and it is not acting on a nondiscretionary basis for any such person;
12) if it is outside the United Kingdom, neither this announcement nor any other offering, marketing or other material in connection with the Placing constitutes an invitation, offer or promotion to, or arrangement with, it or any person whom it is procuring to subscribe for Placing Shares pursuant to the Placing unless, in the relevant territory, such offer, invitation or other course of conduct could lawfully be made to it or such person and such documents or material could lawfully be provided to it or such person and Placing Shares could lawfully be distributed to and subscribed and held by it or such person without compliance with any unfulfilled approval, registration or other regulatory or legal requirements;
13) if the Placee is a natural person, such Placee is not under the age of majority (18 years of age in the United Kingdom) on the date of such Placee's agreement to subscribe for Placing Shares under the Placing and will not be any such person on the date any such agreement to subscribe under the Placing is accepted;
14) it has not, directly or indirectly, distributed, forwarded, transferred or otherwise transmitted this announcement or any other offering materials concerning the Placing or the Placing Shares to any persons within the United States or to any US Persons, nor will it do any of the foregoing;
15) it represents, acknowledges and agrees to the representations, warranties and agreements as set out under the heading "United States purchase and transfer restrictions", below;
16) it acknowledges that neither Arden nor any of its affiliates, nor any person acting on its behalf is making any recommendations to it, advising it regarding the suitability of any transactions it may enter into in connection with the Placing or providing any advice in relation to the Placing and participation in the Placing is on the basis that it is not and will not be a client of Arden and that Arden do not have any duties or responsibilities to it for providing the protections afforded to their clients or for providing advice in relation to the Placing nor in respect of any representations, warranties, undertakings or indemnities otherwise required to be given by the Placee in connection with the Placee's application under the Placing;
17) it acknowledges that where it is subscribing for Placing Shares for one or more managed, discretionary or advisory accounts, it is authorised in writing for each such account:
(a) to subscribe for the Placing Shares for each such account;
(b) to make on each such account's behalf the representations, warranties and agreements set out in this announcement; and
(c) to receive on behalf of each such account any documentation relating to the Placing in the form provided by the Company or Arden; and it agrees that the provisions of this paragraph shall survive any resale of the Placing Shares by or on behalf of any such account;
18) it irrevocably appoints any director of the Company and any director of Arden to be its agent and on its behalf (without any obligation or duty to do so), to sign, execute and deliver any documents and do all acts, matters and things as may be necessary for, or incidental to, its subscription for all or any of the Placing Shares for which it has given a commitment under the Placing, in the event of its own failure to do so;
19) it accepts that if the Placing does not proceed or the conditions to the Placing Agreement are not satisfied or the Placing Shares for which valid applications are received and accepted are not admitted to trading on AIM for any reason whatsoever then neither Arden nor the Company, nor persons controlling, controlled by or under common control with any of them nor any of their respective employees, agents, officers, members, stockholders, partners or representatives, shall have any liability whatsoever to it or any other person;
20) in connection with its participation in the Placing it has observed all relevant legislation and regulations;
21) it acknowledges that Arden and the Company are entitled to exercise any of their rights under the Placing Agreement or any other right in their absolute discretion without any liability whatsoever to it;
22) the representations, undertakings and warranties contained in this announcement are irrevocable. It acknowledges that Arden and the Company and their respective affiliates will rely upon the truth and accuracy of the foregoing representations and warranties and it agrees that if any of the representations or warranties made or deemed to have been made by its subscription of the Placing Shares are no longer accurate, it shall promptly notify Arden and the Company;
23) where it or any person acting on behalf of it is dealing with Arden, any money held in an account with Arden on behalf of it and/or any person acting on behalf of it will not be treated as client money within the meaning of the relevant rules and regulations of the FCA which therefore will not require Arden to segregate such money, as that money will be held by Arden under a banking relationship and not as trustee;
24) any of its clients, whether or not identified to Arden, will remain its sole responsibility and will not become clients of Arden for the purposes of the rules of the FCA or for the purposes of any other statutory or regulatory provision;
25) it accepts that the allocation of Placing Shares shall be determined by Arden, as agent for the Company, in its absolute discretion (in consultation with the Company to the extent required by the FCA's Conduct of Business Sourcebook) and that Arden may scale down any commitments for this purpose on such basis as it may (in consultation with the Company) determine;
26) time shall be of the essence as regards its obligations to settle payment for the Placing Shares and to comply with its other obligations under the Placing;
27) its commitment to acquire Placing Shares will be agreed orally with Arden, as agent for the Company, and that a Contract Note or Placing Confirmation will be issued by Arden as soon as possible thereafter. That oral confirmation will constitute an irrevocable, legally binding commitment upon that person (who at that point will become a Placee) in favour of the Company and Arden to subscribe for the number of Placing Shares allocated to it at the Placing Price on the terms and conditions set out in this Appendix and, as applicable, in the Contract Note or Placing Confirmation. Except with the consent of Arden, such oral commitment will not be capable of variation or revocation after the time at which it is made; and
28) its allocation of Placing Shares under the Placing will be evidenced by the Contract Note or Placing Confirmation, as applicable, confirming:
(a) the number of Placing Shares that such Placee has agreed to subscribe for;
(b) the aggregate amount that such Placee will be required to pay for such Placing Shares; and
(c) settlement instructions to pay Arden as agent for the Company.
The acknowledgements, agreements, undertakings, representations and warranties referred to above are given to the Company and Arden and, where relevant, each of their affiliates and any person acting on their behalf and are irrevocable.
The terms of this Appendix will be deemed to be incorporated into that Contract Note or Placing Confirmation. The Company reserves the right to reject all or part of any offer to subscribe for Placing Shares for any reason. The Company also reserves the right to sell fewer than all of the Placing Shares offered by this announcement or to sell to any purchaser fewer than all of the Placing Shares a Placee has offered to subscribe for.
Money Laundering
Each Placee acknowledges and agrees that:
1) its application is only made on the basis that it accepts full responsibility for any requirement to verify the identity of its clients and other persons in respect of whom it has applied. In addition, it warrants that it is a person:
(a) subject to the Money Laundering Regulations 2007 in force in the United Kingdom; or
(b) subject to the Money Laundering Directive (2005/60/EC of the European Parliament and of the EC Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing) (the "Money Laundering Directive"); or
(c) acting in the course of a business in relation to which an overseas regulatory authority exercises regulatory functions and is based or incorporated in, or formed under the law of, a country in which there are in force provisions at least equivalent to those required by the Money Laundering Directive; and
2) due to anti-money laundering requirements, Arden and the Company may require proof of identity and verification of the source of the payment before the application can be processed and that, in the event of delay or failure by the applicant to produce any information required for verification purposes, Arden and the Company may refuse to accept the application and the subscription moneys relating thereto. It holds harmless and will indemnify Arden and the Company against any liability, loss or cost ensuing due to the failure to process such application, if such information as has been required has not been provided by it.
The Data Protection Act
Each Placee acknowledges and agrees that, pursuant to The Data Protection Act 1998 (the "DP Act") the Company and/or the Registrar and/or the AIFM, may hold personal data (as defined in the DP Act) relating to past and present Shareholders. Personal data may be retained on record for a period exceeding six years after it is no longer used. The Registrar will only process such information for the purposes set out below (collectively, the "Purposes"), being to:
a) process its personal data (including sensitive personal data as defined in the DP Act) to the extent and in such manner as is necessary for the performance of their obligations under their respective service contracts, including as required by or in connection with its holding of New Ordinary Shares, including processing personal data in connection with credit and money laundering checks on it;
b) communicate with it as necessary in connection with its affairs and generally in connection with its holding of New Ordinary Shares;
c) provide personal data to such third parties as the Registrar may consider necessary in connection with its affairs and generally in connection with its holding of New Ordinary Shares or as the DP Act may require, including to third parties outside the European Economic Area;
d) without limitation, provide such personal data to their affiliates, the Company or the AIFM and their respective associates for processing, notwithstanding that any such party may be outside the European Economic Area; and
e) process its personal data for the Registrar's internal administration.
By becoming registered as a holder of New Ordinary Shares a person becomes a data subject (as defined in the DP Act) and is deemed to have consented to the processing by the Company, the Registrar or the AIFM of any personal data relating to them in the manner described above. In providing the Registrar with information, it hereby represents and warrants to the Registrar that it has obtained the consent of any data subject to the Registrar, and their respective affiliates and group companies, holding and using their personal data for the Purposes (including the explicit consent of the data subjects for the processing of any sensitive personal data for the Purposes set out above in this paragraph 6).
United States Purchase and Transfer Restrictions
By participating in the Placing, each Placee acknowledges and agrees that it will (for itself and any person(s) procured by it to subscribe for Placing Shares and any nominee(s) for any such person(s)) be further deemed to represent and warrant to each of the Company, the AIFM, the Registrar and Arden that:
1) it is either:
(a) not a US Person, is not located within the United States, is acquiring the Placing Shares in an offshore transaction meeting the requirements of Regulation S and is not acquiring the Placing Shares for the account or benefit or a US Person; or
(b) a US Person to whom Placing Shares may be offered 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 in the United States;
2) it acknowledges that the Placing 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 or sold in the United States or to, or for the account or benefit of, US Persons except in a transaction exempt from, or not subject to, the registration requirements of the US Securities Act and in compliance with all applicable state securities laws and under circumstances that would not require the Company to register under the US Investment Company Act;
3) it acknowledges that the Company has not and will not be registered under the US Investment Company Act;
4) if in the future the Placee decides to offer, sell, transfer, assign or otherwise dispose of its Placing Shares, it will do so only in compliance with an exemption from the registration requirements of the US Securities Act and under circumstances which will not require the Company to register under the US Investment Company Act. It acknowledges that any sale, transfer, assignment, pledge or other disposal made other than in compliance with such laws;
5) it is purchasing the Placing Shares for its own account or for one or more investment accounts for which it is acting as a fiduciary or agent, in each case for investment only, and not with a view to or for sale or other transfer in connection with any distribution of the Placing Shares in any manner that would violate the US Securities Act, the US Investment Company Act or any other applicable securities laws;
6) it acknowledges that the Company reserves the right to make inquiries of any holder of the New Ordinary Shares or interests therein at any time as to such person's status under US federal securities laws;
7) it is entitled to acquire the New Ordinary Shares under the laws of all relevant jurisdictions which apply to it, it has fully observed all such laws and obtained all governmental and other consents which may be required thereunder and complied with all necessary formalities and it has paid all issue, transfer or other taxes due in connection with its acceptance in any jurisdiction of the Placing Shares and that it has not taken any action, or omitted to take any action, which may result in the Company, the AIFM, the Registrar, Arden or their respective members, directors, officers, agents, employees and advisers being in breach of the laws of any jurisdiction in connection with the Placing or its acceptance of participation in the Placing;
8) it has received, carefully read and understands this announcement, and has not, directly or indirectly, distributed, forwarded, transferred or otherwise transmitted this announcement or any other presentation or offering materials concerning the Placing Shares to within the United States or to any US Persons, nor will it do any of the foregoing; and
9) if it is acquiring any Placing Shares as a fiduciary or agent for one or more accounts, the Placee has sole investment discretion with respect to each such account and full power and authority to make such foregoing representations, warranties, acknowledgements and agreements on behalf of each such account.
The Company, the AIFM, the Registrar, Arden and their respective members, directors, officers, agents, employees, advisers and others will rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgments and agreements.
If any of the representations, warranties, acknowledgments or agreements made by the Placee are no longer accurate or have not been complied with, the Placee will immediately notify the Company and Arden.
Supply and Disclosure of Information
If Arden, the Registrar or the Company or any of their agents request any information about a Placee's agreement to subscribe for Placing Shares under the Placing, such Placee must promptly disclose it to them.
Non-United Kingdom Investors
If the Placee is outside the United Kingdom, neither this announcement nor any other offering, marketing or other material in connection with the Placing constitutes an invitation, offer or promotion to, or arrangement with, it or any person whom it is procuring to subscribe for Placing Shares pursuant to the Placing unless, in the relevant territory, such offer, invitation or other course of conduct could lawfully be made to it or such person and such documents or materials could lawfully be provided to it or such person and Placing Shares could lawfully be distributed to and subscribed and held by it or such person without compliance with any unfulfilled approval, registration or other regulatory or legal requirements.
None of the Placing Shares has been or will be registered under the laws of the United States, Canada, Australia, the Republic of South Africa or Japan. Accordingly, the Placing Shares may not be offered, sold, issued or delivered, directly or indirectly, within any of the United States, Canada, Australia, the Republic of South Africa or Japan or to any US Person or to any national, resident or citizen of Canada, Australia, the Republic of South Africa or Japan unless an exemption from any registration requirement is available.
Miscellaneous
The rights and remedies of the Company, the AIFM, Arden and the Registrar under these terms and conditions are in addition to any rights and remedies which would otherwise be available to each of them and the exercise or partial exercise of one will not prevent the exercise of others.
On application, if a Placee is a discretionary fund manager, that Placee may be asked to disclose in writing or orally the jurisdiction in which its funds are managed or owned. All documents provided in connection with the Placing will be sent at the Placee's risk. They may be returned by post to such Placee at the address notified by such Placee.
Each Placee agrees to be bound by the Articles once the Placing Shares, which the Placee has agreed to subscribe for pursuant to the Placing, have been acquired by the Placee. The contract to subscribe for Placing Shares under the Placing and the appointments and authorities mentioned in this announcement and all disputes and claims arising out of or in connection with its subject matter or formation (including non-contractual disputes or claims) will be governed by, and construed in accordance with, the laws of England and Wales. For the exclusive benefit of the Company, the AIFM, Arden and the Registrar, each Placee irrevocably submits to the jurisdiction of the courts of England and Wales and waives any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum. This does not prevent an action being taken against the Placee in any other jurisdiction.
In the case of a joint agreement to subscribe for Placing Shares under the Placing, references to a "Placee" in these terms and conditions are to each of the Placees who are a party to that joint agreement and their liability is joint and several.
Arden and the Company expressly reserve the right to modify the Placing (including, without limitation, the timetable and settlement) at any time before allocations are determined. The Placing is subject to the satisfaction of the conditions contained in the Placing Agreement and the Placing Agreement not having been terminated.