TIDMSSIF
RNS Number : 6512W
Secured Income Fund PLC
20 August 2020
Secured Income Fund plc
(LSE: SSIF) (the "Company" or "SSIF")
Publication of Circular and notice of General Meeting in
connection with proposed managed wind-down
Further to the announcement on 14 July 2020, the Board of
Secured Income Fund plc (the "Company"), has today published a
circular to shareholders (the "Circular") in relation to
recommended proposals for a managed wind-down of the Company and
related matters.
The Circular includes notice of a general meeting which will be
held at the offices of Dickson Minto W.S., 17 Charlotte Square,
Edinburgh EH2 4DF at 3.00 p.m. on 17 September 2020 (the "General
Meeting"). Resolutions will be put to the Company's shareholders to
seek their approval of the Proposals at the General Meeting.
Introduction
The Company's current investment objective is to provide
Shareholders with attractive risk adjusted returns, principally in
the form of regular, sustainable dividends, through investment
predominantly in a range of secured loans and other secured
loan-based instruments originated through a variety of channels and
diversified by way of asset class, geography and duration. As at 30
June 2020, the Company's unaudited estimated NAV (cum income) was
GBP45,532,414.
On 19 June 2020, the Company held a continuation vote (the "June
2020 Continuation Vote") which, in line with the Directors'
recommendation, did not pass. This vote was required under the
Articles as the Company did not have a Net Asset Value of at least
GBP250 million as at 31 December 2019. As this vote did not pass,
the Directors are required under the Articles to convene a further
general meeting of the Company to be held within 90 days of the
date of the failed vote to consider a special resolution to approve
the voluntary winding up or other reconstruction of the
Company.
The purpose of the Circular is therefore to set out details of
the Board's recommended proposals in relation to the future of the
Company and to convene a general meeting as required under the
Articles. In particular, the Circular sets out details of, and
seeks Shareholders' approval of, the proposals relating to:
1. the Managed Wind-Down of the Company and associated
amendments to the Company's Investment Policy and Investment
Objective; and
2. the amendment of the Articles to remove the discount continuation vote provision,
(together, the "Proposals").
Background to and reasons for the Proposals
As announced on 13 July 2020, the Board has concluded its
strategic review and having consulted with Shareholders
representing a significant proportion of the Ordinary Shares and
having considered the various strategic options open to the Company
with a view to maximising Shareholder value, the Board determined
that the Company should be put into Managed Wind-Down, with cash
returned to Shareholders in a timely and efficient manner.
In order to do this, the Company is seeking Shareholder approval
to replace the Investment Objective and Investment Policy with the
New Investment Policy set out in Part 2 of the Circular and to
approve the Managed Wind-Down in accordance with the continuation
vote provisions of the Articles. If approved, the Board will
endeavour to realise all of the Company's investments in a manner
that achieves a balance between maximising the net value received
from those investments and making timely returns to
Shareholders.
Shareholders should note that, if the Company enters a Managed
Wind-Down of its Portfolio, the Company is unlikely to be able to
realise the full value of its Portfolio and return the proceeds to
Shareholders for at least a period of between two and four years,
and possibly longer, given the illiquid nature of the Company's
investments.
The weighted average maturity of the Company's loan book is 2.89
years, with the longest maturity being 5.65 years. The Company
cannot demand early repayment of these loans (except in the event
of a borrower default) and has to await the repayment of the loans
in accordance with their terms. Further, the Board is aware that
one of the effects of the Coronavirus pandemic will be that many
borrowers seek to extend the maturities, or amortisation periods,
on their loans and/or request additional facilities as borrowers
respond to the impact of the pandemic on their operations. The
Company will need to consider providing such facilities, even
during a Managed Wind-Down, to preserve the value of loans already
advanced. Accordingly, there can be no certainty as to the value or
timing of the returns Shareholders will receive as a result of any
Managed Wind-Down process or other form of reconstruction.
The Board is also seeking Shareholder approval to amend the
Articles to remove the discount continuation vote provision.
Overview of the Managed Wind-Down and proposed change to the
Company's Investment Objective and Investment Policy
Mechanics for returning cash to Shareholders
The Board has carefully considered the potential mechanics for
returning cash to Shareholders and the Company's ability to do so.
The Board believes it is in the best interests of Shareholders as a
whole to make distributions to Shareholders without a significant
delay following realisations of a material part of the Portfolio
(whether in a single transaction or through multiple, smaller
transactions concluded on similar timing). In the Board's view,
making distributions by way of a declaration of dividends has the
benefit of being faster, providing a more regular return (as
opposed to simply waiting to return all available amounts on a
liquidation) and being more cost effective to administer than other
mechanisms, such as a tender offer or B share scheme, although the
Board notes that returning investment principal by way of a
declaration of dividends may not be the most tax efficient method
of returning monies to investors who are UK tax resident
individuals. However, the Board may consider making tender offers
for Shares in the future although Shareholders should have no
expectation that this will be the case.
The Board intends to move to making quarterly dividend payments
(as opposed to monthly dividend payments) for the time being but
will keep this under review. It may become more appropriate in
future as the size of the Company declines to instead make payments
by way of ad-hoc special dividends, when appropriate, during the
course of the Managed Wind-Down process so that the Company is able
to return available cash to Shareholders as soon as reasonably
practicable after cash becomes available in the Portfolio. The
Company will also look to structure its dividend payments to
maintain investment trust status for so long as it remains
listed.
Amendments to the Investment Objective and Investment Policy
The Proposals involve amending the Company's Investment
Objective and Investment Policy to reflect a realisation strategy
and the Company's ceasing to make any new investments except in
very limited circumstances. The proposed amendments to the
Company's Investment Objective and Investment Policy are considered
a material change. Although the Company is admitted to trading on
the Specialist Fund Segment of the London Stock Exchange and is
therefore not required to comply with the FCA's Listing Rules, the
Company has indicated it will voluntarily comply with Listing Rule
15.4.8(2). Accordingly, given the proposed amendments are
considered to be material, the consent of Shareholders to the
proposed amendments to the Investment Objective and Investment
Policy are being sought.
The Directors believe that being prescriptive as regards the
timeframe for realising the Company's investments could prove
detrimental to the value achieved on realisation. Therefore, it is
the Board's view that the strategy for the realisation of the
Company's investments will need to be flexible and may need to be
altered to reflect changes in the circumstances of a particular
investment or in the prevailing market conditions. In seeking to
realise the Company's investments in an orderly manner, the
Directors will aim to achieve a balance between maximising their
net value and progressively returning cash to Shareholders. In so
doing, the Board will take account of the continued costs of
operating the Company. The capacity to trade in the Ordinary Shares
will be maintained for as long as the Directors believe it to be
practicable and cost-effective during the Managed Wind-Down
period.
Once all, or substantially all, of the Company's investments
have been realised, the Company will, at an appropriate time, seek
Shareholders' approval for it to be placed into members' voluntary
liquidation.
Part 2 of the Circular sets out the New Investment Policy in
full.
Shareholder approval under the Articles
As stated above, as the June 2020 Continuation Vote did not
pass, the Directors are required under the Articles to convene a
general meeting of the Company to be held within 90 days of the
date of such vote to consider a special resolution to approve the
voluntary winding up or other reconstruction of the Company. The
Directors are therefore seeking Shareholder approval for the
Managed Wind-Down proposals in accordance with Article 190.3 of the
Articles.
Revised Management Fee Arrangements and Term
The Board has agreed the following amendments to the Investment
Management Agreement between the Company and KKV.
1. A reduction in the base management fee payable to KKV by the
Company. The current base fee payable to KKV under the Investment
Management Agreement is one per cent. per annum of the Net Asset
Value of the Company. The base fee payable to KKV under the
Investment Management Agreement will reduce:
a. for the 12 month period following the Amendment Date (being
the date of the General Meeting), to 0.75 per cent. per annum of
the Company's Net Asset Value; and
b. thereafter, to 0.55 per cent. per annum of the Company's Net Asset Value.
2. The introduction of a performance fee. The performance fee
will be calculated using the most recent NAV prior to the Company
failing the June 2020 Continuation Vote (being the NAV as at 31 May
2020) as the benchmark (the "Benchmark NAV"). If 99 per cent. of
the Benchmark NAV is returned (or takes the form of cash available
for return) to Shareholders by way of dividend, share buy backs or
other methods of return of capital (such sums being "Funds
Returned") within 12 months from the Amendment Date then a
performance fee of 0.6 per cent. of the Funds Returned would be
payable to KKV. The relevant percentage (0.6 per cent.) will be
reduced by 0.1 per cent. for every one per cent. less than 99 per
cent. of Benchmark NAV that is returned to Shareholders. For
example, if only 98 per cent. of the Benchmark NAV is returned to
Shareholders within 12 months from the Amendment Date, then the
performance fee would amount to 0.5 per cent. of the Funds Returned
and so on. Should the time taken to realise the Portfolio exceed 12
months from the Amendment Date, then for the period from the first
to second anniversary of the Amendment Date, the relevant
percentage at which a performance fee is calculated will reduce by
33 per cent. (so that, for example, if 99 per cent. of Benchmark
NAV is returned to shareholders by month 17, the performance fee
would be 0.4 per cent. (two thirds of 0.6 per cent.) of the Funds
Returned). If a performance fee is paid in respect of the 12 months
following the Amendment Date, then a performance fee will only be
payable in the following year in respect of any additional Funds
Returned during that second year.
3. The introduction of an outperformance fee. Under the terms of
the amended Investment Management Agreement, KKV will be entitled
to an 'outperformance fee' equal to 10 per cent. of all Funds
Returned to Shareholders in excess of the Benchmark NAV within the
12 month period from the Amendment Date, such sum reducing to five
per cent. in respect of Funds Returned within 12 to 24 months
following the Amendment Date.
4. Effective from the first anniversary of the Amendment Date,
there will be a reduction in the notice period applicable to
termination of the Investment Management Agreement by either party
from 12 months to 4 months.
Amendment to the Articles of Association
The Articles contain provisions which require the Board to put a
continuation resolution to Shareholders in circumstances where the
Ordinary Shares have been trading at a daily discount to Net Asset
Value of greater than ten per cent. for a period of three
consecutive months.
It is proposed that current Article 190.2 is removed in its
entirety. The Board believes that removing this provision will
avoid unnecessary cost being incurred by the Company while the
Managed Wind-Down is being implemented. It is probable that should
the Company enter a Managed Wind-Down, the Ordinary Shares will
trade at a sustained discount such that the continuation vote
trigger under the Articles may be triggered at regular intervals
during the Managed Wind-Down period. If Shareholders vote in favour
of the adoption of the New Investment Policy (which will
effectively culminate in the discontinuation of the Company) there
is little justification to hold periodic continuation votes. The
Board believes the adoption of the New Investment Policy
effectively renders Article 190.2 redundant and therefore the Board
proposes that it is removed from the Articles of Association.
Benefits of the Proposals
The Directors believe, having taken into account the views of a
number of Shareholders, that the Proposals are in the best
interests of Shareholders as a whole and should yield the following
principal benefits:
-- implementing a managed and orderly disposal of investments
should maximise the value to be realised on the sale of the
Company's assets and, therefore, returns to Shareholders; and
-- the Proposals will allow cash to be returned to Shareholders
in a cost-effective and timely manner (by way of such mechanisms as
the Directors consider, in their discretion, are in the best
interests of Shareholders as a whole from time to time).
Resolutions
The Proposals are subject to the approval of Shareholders, and
the Notice of General Meeting at which Resolutions to approve the
Proposals will be considered is set out in the Circular.
Resolution 1, which will be proposed as an ordinary resolution,
seeks authority to adopt the New Investment Policy.
Resolution 2, which will be proposed as a special resolution,
seeks the approval of Shareholders, in accordance with Article
190.3 of the Articles of Association, for the Managed Wind-Down to
be implemented.
Resolution 3, which will be proposed as a special resolution,
seeks authority to amend the Articles of Association.
General Meeting
The General Meeting has been convened for 3.00 p.m. on 17
September 2020 to be held at the offices of Dickson Minto W.S., 17
Charlotte Square, Edinburgh EH2 4DF. In the light of the
Coronavirus pandemic and associated Government guidance, including
the rules on physical distancing and limitations on public
gatherings, Shareholders are strongly discouraged from attending
the General Meeting and indeed entry will be refused if the law
and/or Government guidance so requires. The Company will make
arrangements to ensure that the minimum number of Shareholders
required to form a quorum will attend the General Meeting in order
that the meeting may proceed. The Board considers these revised
arrangements to be in the best interests of Shareholders in the
current circumstances.
The Board strongly encourages all Shareholders to exercise their
votes in respect of the General Meeting in advance by completing
and returning the Form of Proxy enclosed with the Circular. In
addition, CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment service may do so
for the General Meeting by using the procedures described in the
CREST Manual (available via www.euroclear.com/CREST ). This should
ensure that your votes are registered in the event that physical
attendance at the General Meeting is not possible or
restricted.
A copy of the Circular has been submitted to the Financial
Conduct Authority and will be available for inspection at the
National Storage Mechanism which is located at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism and on the
Company's website at www.kkvim.com/secured-income-fund .
Terms used in this announcement shall have the same meaning as
those used in the Circular.
For further information please contact:
Directors
David Stevenson (Chair) tel: 07973873785
Susan Gaynor Coley tel: 07977 130673
Brett Miller tel: 07770447338
KKV Investment Management Ltd tel: +44 20 7429
Catherine Halford Riera 2200
Nicola Bird
finnCap Ltd. tel: +44 20 7220
Corporate Finance: 0500
William Marle / Giles Rolls
Sales:
Mark Whitfeld
Note: The content of the Company's web-pages and the content of
any website or pages which may be accessed through hyperlinks on
the Company's web-pages, other than the content of the document
referred to above, is neither incorporated into nor forms part of
the above announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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