Secured Income publishes wind down proposals – The board of Secured Income Fund has published a circular to shareholders in relation to recommended proposals for a managed wind-down of the company. Cash will be freed up from the portfolio over time.
The board has reiterated its previous advice that a managed wind down could take two-to-four years, and possibly longer. They plan to scrap the discount-triggered continuation votes going forward.
Distributions of cash freed up from the portfolio will be made as dividends, even though the board acknowledges that this has tax implications for UK shareholders. They say alternative measures would be slower and less cost-effective for the company. [This could be a serious problem for UK investors who don’t hold the fund through a tax-efficient wrapper such as a SIPP or an ISA, if this applies to you, we suggest that you consider your position and perhaps seek advice.]
The manager (now KKV) will get a fee of 0.75% for the first 12 months and 0.5% thereafter. They will also get a performance fee – 0.6% of monies returned within 12 months provided that this represents 99% of the opening NAV reducing by 0.1% for every percentage point less than 99% – in other words nothing if less than 93%. In the second 12 months they can still earn a fee on a similar basis except that the fee percentages will be reduced by a third – so 0.4% if you return 99%. They also get 10% of any money returned in excess of the NAV in the first 12 months, falling to 5% in the second 12 months.
[This fee structure looks fairly complicated but means that, if the manager can sell the whole portfolio quickly and for an amount close to NAV, they get rewarded. If they can get more than NAV then they do pretty well.]
There’s a meeting on 17 September to approve these proposals.
SSIF : Secured Income publishes wind down proposals