SQN Sqn Asset Finance Income Fund Limited

TIDMKKVL

RNS Number : 2422J

KKV Secured Loan Fund Limited

20 August 2021

20 August 2021

KKV Secured Loan Fund Limited

LEI: 2138007S3YRY3IUU4W39

Amendment and Termination of Investment Management Agreement

Smaller Related Party Transaction

The Board of KKV Secured Loan Fund Limited (the "Company") announces that it has reached an agreement with its portfolio manager KKV Investment Management Ltd ("KKVIM") to amend the Investment Management Agreement (the "IMA") between the Company, KKVIM and International Fund Management Limited ("IFM"), the Company's AIFM, and for the IMA to terminate with effect from midnight on 31 December 2021 (the "Agreement").

Since the appointment of KKVIM as portfolio manager in June 2020, the value of the Company's total assets has significantly reduced as a result of capital returns of approximately GBP122.6 million across the two share classes (including the capital return due on 13 September 2021, as recently announced) and asset impairments following KKVIM's detailed review of the portfolio. As KKVIM's management fees are determined by reference to the Company's net asset value ("NAV"), KKVIM has advised the Board that, following the significant reduction in the Company's NAV for the reasons described above, a review of the terms of the IMA is required.

At the same time, following the good progress that has been made with the Company's realisation programme since KKVIM became portfolio manager, the Board had also been giving consideration to the ongoing management of the Company's portfolio as capital is returned to shareholders, with the expectation that the management arrangements would need to change as assets reduce over time. In light of this, and following discussions with KKVIM, the Company and KKVIM have reached a revised agreement for the period to 31 December 2021, while allowing for an orderly transition of the management of the portfolio to the Company as it seeks to complete its realisation programme.

The key terms of the Agreement are set out below:

-- Management fees payable by the Company to KKVIM of: (i) GBP230,000 for the month of July 2021; and (ii) GBP218,500 per month from 1 August 2021 to 31 December 2021;

-- A payment of GBP100,000 in total payable by the Company to KKVIM conditional on the publication of the Company's audited accounts for the financial year ending 30 June 2021 and the continued provision of certain employees' services to the Company to 31 December 2021;

-- The clawback arrangement, as set out in the announcement by the Company on 13 November 2020, being cancelled with effect from 1 July 2021. It had previously been agreed that the amounts payable by KKVIM to the Company under the clawback arrangement would be deducted from the ongoing management fees payable by the Company to KKVIM. The amount outstanding as at 1 July 2021, representing approximately 44.6 per cent. of the total clawback amount, shall be cancelled; and

-- The IMA will terminate with effect from midnight on 31 December 2021. No party has the right to terminate the IMA prior to this date without cause. No fees shall be payable by either party on termination other than those referred to above. In particular, the Company will not be required to make any payment to KKVIM for the termination of the IMA within the first 36 months of KKVIM's appointment (where the IMA currently states that the Company would be required to reimburse KKV for certain costs that the Company would otherwise have incurred in connection with the transfer of the management contract to KKVIM in June 2020).

KKVIM is a related party to the Company pursuant to LR 15.5.4R and the Agreement is a 'smaller related party transaction' within the scope of LR 11.1.10R.

The Board is of the view that the Agreement provides for the ongoing management of the portfolio to 31 December 2021 and allows for an orderly transition of the portfolio to the Company. Brett Miller, director of the Company, has been working closely with the team at KKVIM with respect to asset realisations and ongoing management of the assets and Mr Miller will continue to be directly involved in the managed wind-down of the Company's portfolio following the termination of the IMA. A further announcement regarding the ongoing management of the portfolio will be made in due course. For the avoidance of doubt, IFM will remain as the Company's AIFM.

The Company also announces that the dispute between KKVIM and SQN Capital Management, LLC, as announced on 25 June 2021, has been settled .

The Board is also giving consideration to the adoption of a new incentive plan for the directors, employees and consultants going forward and a further announcement in this regard will be made in due course.

This announcement contains inside information for the purposes of Article 7 of UK version of EU Regulation 596/2014 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

For further information please contact:

 
KKV Secured Loan Fund Limited                      via the Company Secretary 
 Brett Miller 
BNP Paribas Securities Services S.C.A., Guernsey 
 Branch 
 Company Secretary                                 01481 750 853 
Winterflood Securities Limited 
 Neil Langford 
 Chris Mills                                       020 3100 0000 
 

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August 20, 2021 02:00 ET (06:00 GMT)

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