TIDMRECI
RNS Number : 6958G
Real Estate Credit Investments Ltd
27 November 2020
This announcement contains inside information.
Date and time of release: 27 November 2020, 7:00 am
Real Estate Credit Investments Limited (the "Company")
Interim Report for RECI LN (Ordinary Shares)
The Board of Directors of the Company announces the release of
the Company's Condensed Unaudited Interim Report for the six months
ended 30 September 2020.
View the Interim Report:
http://recreditinvest.com/financialstatements.html
For further information, please contact:
Broker: Richard Bootle / Richard Crawley (Liberum Capital) +44
(0)20 3100 2222
Investment Manager: Richard Lang (Cheyne) +44 (0)20 7968
7328
Real Estate Credit
Investments
Limited
Condensed Unaudited Interim Financial Report
For the six months ended 30 September 2020
Real Estate Credit Investments is a specialist investor in
European real estate credit markets with a focus on fundamental
credit and value.
Attractive returns from credit exposure to UK and
Continental European real estate markets
What do we offer
-- Defensive credit exposure to UK and European real estate markets
- Stable dividend delivered consistently since October 2013
-- Granular portfolio with detailed disclosure
- 53 positions
- Top position: 14.7% of half year end NAV (by commitment)
-- Attractive and stable income in a low rate environment
- Consistent portfolio yield of 7%+ offering a significant
buffer to risk-free rates
- A high-yielding portfolio, combined with a short weighted
average life, ensures minimal exposure to yield widening and the
ability to redeploy at higher rates quickly
-- Access to Cheyne's established real estate investment team
and substantial origination pipeline
Highlights
As at 30 September 2020
Total Assets
GBP411.8m
(31 March 2020: GBP441.8m)
NAV per Share
GBP1.48
(31 March 2020: GBP1.47)
Net Assets
GBP338.9m
(31 March 2020: GBP337.2m)
Net Profit
GBP15.5m
Half year ended 30 September 2020
(H1 2019: GBP11.6m)
At A GLANCE
Our investment strategy provides compelling risk-adjusted
returns.
Real Estate Credit Investments ("RECI") is a closed-ended
investment company which originates and invests in real estate debt
secured by commercial or residential properties in Western Europe,
focusing primarily on the United Kingdom, France and Germany.
The Company's aim is to deliver a stable quarterly dividend with
minimal portfolio volatility, across economic and credit cycles,
through a levered exposure to real estate credit investments.
Investments are predominantly in:
Predominantly bilateral senior real estate loans and bonds.
Market Bonds
Listed real estate debt securities such as Commercial Mortgage
Backed Securities (CMBS) bonds.
Investment Portfolio Composition
RECI's investment portfolio, a diversified book of 53 positions
in real estate bonds and loans, was valued at GBP347 million as at
30 September 2020, down from GBP375 million as at 31 March 2020.
The portfolio had a weighted average levered yield of 9.64% and an
average loan-to-value ratio of 62.7% as at 30 September 2020.
Portfolio by Geography (Funded Fair Value)
30 September 2020
============ =================
UK 65.3%
============ =================
France 22.5%
------------ -----------------
Italy 5.7%
============ =================
Portugal 2.6%
------------ -----------------
Germany 1.8%
============ =================
Finland 1.4%
------------ -----------------
Netherlands 0.1%
============ =================
Excludes 0.6% held in bonds backed by assets in multiple
European countries.
Sector Breakdown (funded fair value)
GBP
---------------------- ------
Mixed-Use 77.2m
---------------------- ------
Retail 69.9m
---------------------- ------
Hotel 51.8m
---------------------- ------
Student Accommodation 34.2m
---------------------- ------
Housebuilder 28.7m
---------------------- ------
Healthcare 22.2m
---------------------- ------
Residential 19.2m
---------------------- ------
Serviced Apartments 17.4m
---------------------- ------
Leisure 15.3m
---------------------- ------
Office 5.7m
---------------------- ------
Logistics 3.9m
---------------------- ------
Industrial 1.8m
---------------------- ------
Total 347.3m
---------------------- ------
NAV and Share Price As at 30
September
2020
------------------------ ----------
Net Assets GBP338.9m
------------------------ ----------
Shares Outstanding 229.3m
------------------------ ----------
NAV (per share) GBP1.48
------------------------ ----------
Share Price (per share) GBP1.23
------------------------ ----------
Premium/(Discount) -16.9%
------------------------ ----------
Dividend Yield 9.8%
------------------------ ----------
Market Capitalisation GBP280.9m
------------------------ ----------
Total NAV Return
----------------- -----
YTD / Jan to Sep -5.1%
----------------- -----
1 Year 8.8%
----------------- -----
3 Years 25.2%
----------------- -----
5 Years 49.3%
----------------- -----
YTD = January to September 2020, being Calendar YTD, 1 yr =
2019, 3 yr = 2017-2019,
5 yr = 2015-2019
Chairman's Statement
Delivering a stable quarterly dividend amid uncertain
markets
Bob Cowdell
Chairman
I am writing to you with most of the UK and much of Europe in
national or regional lockdown in response to the Covid-19 pandemic.
Nevertheless, despite a challenging few months for us all, I am
pleased to report that your Company achieved an increased profit
(half year on half year) and maintained the regular payment of its
quarterly 3 pence dividend per share, contributing to an annualised
NAV total return to our Shareholders of 9.5% for the half year.
Your Company's half year commenced with the UK having just
entered an unprecedented first national lockdown and continued to
be overshadowed by the ongoing Covid-19 pandemic and its unfolding
social and economic impacts and consequences. With Cheyne and our
team of advisers, your Board has worked to react to the challenges
faced; keep our investors fully informed; and position RECI to
continue to deliver for our Shareholders through this and future
economic cycles.
In May, the Investment Manager provided a detailed and
comprehensive review of RECI's portfolio to investors. This was
recently repeated and updated on 17 November, as part of our
programme of enhanced investor communication through this uncertain
period. Both your Board and Cheyne are committed to providing
detail and transparency regarding the Company's portfolio and
investment strategy to all investors, allowing them to focus upon
RECI and its merits, notwithstanding the macro market
environment.
Financial Performance
RECI reported total net profit for the half year ended 30
September 2020 of GBP15.5 million on half year end total assets of
GBP411.8 million; a 34% increase from GBP11.6 million for the half
year ended 30 September 2019 on half year end total assets of
GBP394 million.
The NAV as at 30 September 2020 was GBP1.48 per share, compared
with a NAV of GBP1.47 at the end of the last financial year on 31
March 2020 and GBP1.65 per share as at 30 September 2019.
The 30 September 2020 NAV reflects the payment of 6 pence per
share during the half year in respect of the fourth interim
dividend for the year ended 31 March 2020 and the first interim
dividend of the current financial year; returning GBP13.8 million
to Shareholders and providing an annualised NAV total return of
9.5% for the half year.
As at close of trading on 30 September 2020, the Company's
shares stood at a discount of 16.9% to NAV (having traded at an
average discount to NAV of 18.6% during the half year); and at a
discount of 11.5% to the latest reported NAV as at 26 November
2020.
During the half year, the Company funded GBP36.7 million in both
the origination of loans and purchases of new bonds for the
portfolio. RECI also received net cash inflow from its operating
activities (including cash repayments and interest) of GBP59.9
million in this period.
A second interim dividend of 3 pence per share was declared on
26 November 2020.
Half year review
The global spread of Covid-19 saw severe corrections in markets
worldwide during March, which impacted upon RECI's NAV, declining
from GBP1.67 as at 29 February 2020 to GBP1.47 as at the 31 March
2020 year end, driven predominantly by the reporting of unrealised
losses in the Company's bond portfolio (as more fully described in
the May Company Update presentation). Since that original month on
month decline, the NAV has remained stable throughout the half year
to 30 September 2020, notwithstanding the payment of two unchanged
dividends, totalling 6 pence per share, to Shareholders during that
period.
On 15 May 2020, following detailed cash modelling and
forecasting, your Board announced that the Company intended to
continue to pay a stable quarterly dividend and that there would be
no change to the Company's dividend policy for the current
financial year ending 31 March 2021. We also brought forward the
declaration of the fourth interim dividend of 3 pence per share in
respect of the year ended 31 March 2020, to provide certainty for
our Shareholders, at a time when many other companies were
suspending or cutting their dividends.
The first interim dividend of the current financial year was
declared on 6 August 2020 and the second interim dividend was
declared on 26 November 2020, both maintaining a payment of 3 pence
per share.
At the beginning of the half year, RECI moved swiftly to reduce
its gross leverage from 1.27x to 1.15x (1.06x net of cash) by 30
April 2020 and the Company has continued to retain a modest level
of flexible gearing, ending the half year at 1.16x (1.07x net of
cash). The Board and Cheyne will continue to monitor and consider
the appropriate level and mix of gearing going forward.
Inevitably exacerbated by the broader March market correction
and macro concerns, the Board, while not surprised, was
disappointed at the extent of RECI's share price fall in March and
April. There has been a significant price recovery following the
Company Update and dividend declaration and guidance provided on 15
May 2020. As at the close of trading on 26 November, the Company's
shares were priced at GBP1.32 each, a discount of 11.5%, which
would provide a yield of 9.1% on the basis of continuing to pay a
quarterly 3 pence dividend for the rest of the current financial
year.
By aiming to continue to deliver a 3 pence quarterly dividend
and by reinvesting bond and loan repayments received in attractive,
enhanced return opportunities, the Board and its advisers believe
the Company's shares should continue to re-rate and the discount
reduce.
Cash Management
During the half year, your Board was mindful, particularly
following the steep market correction in March, of maintaining
sufficient cash resources to ensure that the Company would be
resiliently positioned, should there be any future negative cash
flow impacts upon the portfolio. RECI also received net cash inflow
from its operating activities (including cash repayments and
interest) of GBP59.9 million during the half year and GBP26.9
million since 30 September 2020. We remain focused on how best to
deploy RECI's available cash resources.
The November Company Update presentation described Cheyne's view
of the attractive opportunities for RECI, which should benefit from
the current dislocation in real estate markets. This is confirmed
by the attractive terms of recent investments and the pipeline of
further opportunities, providing enhanced returns, identified by
them. Your Board and Cheyne are encouraged by the opportunities
available to strengthen further the portfolio; continue to deliver
an attractive and sustainable dividend to investors seeking a
reliable income; and, over time, grow the NAV of the Company.
The Company has its next continuation vote at the AGM to be
convened in September 2021; and your Board remains mindful of the
need to consider all options and balance both the short and
long-term implications, when considering how and when to deploy our
cash in the interests of all our Shareholders.
Operational Challenges
The first national lockdown imposed swift and demanding
operational challenges upon all businesses and their employees. I
must express the Board's appreciation for the professionalism and
commitment shown by our team at Cheyne and all our advisers, who
worked tirelessly to respond to great market uncertainty and to
keep our Shareholders promptly and fully informed during the hectic
months of Spring and continue to do so. Having returned to national
lockdown on 5 November 2020, the Board continues to monitor closely
the operational effectiveness of the Company and all our advisers
and service providers.
Outlook
The World continues to respond to the effects of the spread of
Covid-19 and, while the recent positive news of the potential
efficacy of new vaccines is very welcome, one has to be cautious in
expressing a view on the broader economic "outlook" as we all
wrestle with unprecedented challenges. However, while acknowledging
that our portfolio is not immune from wider market impacts, it is
worthwhile to focus on that which we and our Investment Manager can
exercise control over, namely: expert origination capability;
highly disciplined investment selection; modest levels of flexible
gearing; maintaining the payment of an attractive and consistent
dividend; and positioning the portfolio to enhance NAV.
These factors combine to confirm that the RECI portfolio is
defensively positioned and the Cheyne origination team are ready to
take advantage of potential market volatility and selectively
invest in opportunities in the UK and Europe, so that RECI can
continue to deliver attractive returns for our Shareholders.
Bob Cowdell
Chairman
26 November 2020
financial highlights and kpi s
Key Performance Indicators
30 Sep 31 Mar
2020 2020
--------------------------- -------- --------
Balance Sheet
--------------------------- -------- --------
Net Asset Value ("NAV") GBP1.48 GBP1.47
per share
--------------------------- -------- --------
Share price GBP1.23 GBP1.16
--------------------------- -------- --------
Discount (16.90)% (21.40)%
--------------------------- -------- --------
Average (discount)/premium
in period/year* (18.60)% 0.16%
--------------------------- -------- --------
Leverage (% of NAV)** 21.30% 24.20%
--------------------------- -------- --------
* Average (discount)/premium is the average of the difference in
the share price and the NAV per share divided by NAV per share.
** Leverage is the financing divided by the net assets.
30 Sep 30 Sep
2020 2019
---------------------------- ------ ------
Profit and Loss (6 months
ended)
---------------------------- ------ ------
Earnings per share 6.8p 6.3p
---------------------------- ------ ------
Dividends per share
declared for the period 6.0p 6.0p
---------------------------- ------ ------
NAV total return (including 9.52
dividends) annualised % 7.30%
---------------------------- ------ ------
Financial Highlights
30 Sep 31 Mar
2020 2020
---------------------------- ---------- ----------
Balance Sheet
---------------------------- ---------- ----------
Fair value of bilateral GBP276.9m GBP287.3m
loans and bonds*
---------------------------- ---------- ----------
Fair value of market GBP70.4m GBP87.9m
bonds*
---------------------------- ---------- ----------
Financing** GBP(71.1)m GBP(97.0)m
---------------------------- ---------- ----------
Cash, cash equivalents GBP48.4m GBP52.0m
and cash
held by brokers
---------------------------- ---------- ----------
Other assets and liabilities GBP14.3m GBP7.0m
---------------------------- ---------- ----------
Net assets GBP338.9m GBP337.2m
---------------------------- ---------- ----------
* The Company's two reportable segments changed during the year
ended 31 March 2020 to reflect the separate management of the two
portfolios by the Investment Manager. Please refer to Note 14 of
the condensed unaudited interim financial statements for further
detail.
** Financing comprised of short-term repo financing.
30 Sep 30 Sep
2020 2019
----------------------------- --------- ---------
Profit and Loss (6 months
ended)
----------------------------- --------- ---------
Operating income GBP19.7m GBP15.1m
----------------------------- --------- ---------
Finance costs GBP(1.2)m GBP(0.8)m
----------------------------- --------- ---------
Operating expenses GBP(3.0)m GBP(2.7)m
----------------------------- --------- ---------
Net profit GBP15.5m GBP11.6m
----------------------------- --------- ---------
Weighted average yield
of bilateral loan and
bond portfolio (unlevered)* 9.50% 9.60%
----------------------------- --------- ---------
Weighted average yield
of market bond portfolio
(unlevered)** 6.70% 6.00%
----------------------------- --------- ---------
* The effective yield of the loans is the accounting yield based
on the funded loan balances, which includes interest and fees. Some
loans also enjoy equity upside participation, which is only
recognised following evidenced high probability of receipt, which
can result in material incremental gains in excess of the
accounting yield. The yield is based on Cheyne Capital's pricing
assumptions and actual returns may differ materially from those
expressed or implied herein.
** The weighted average effective yield is based on Cheyne
Capital's pricing assumptions and actual returns may differ
materially from those expressed or implied herein.
Further Information
Monthly fact sheets as well as quarterly update presentations
are available on the Company's website: www.recreditinvest.com
Investment Manager's Report
Managing a resilient, well diversified European real estate debt
portfolio, through changing market
conditions
Ravi Stickney
Portfolio Manager
Market Commentary
RECI's positioning in a fast-changing world
The onset of the Covid-19 pandemic brought with it substantial
uncertainty, both for the trajectory of the virus itself and also
for its consequences on economies, financial institutions and
individuals. At the end of June 2020, there still remained
substantial uncertainty over the end-game for the pandemic and how
individuals, institutions and assets will be impacted in the long
run. Governments responded with an unprecedented deployment of
fiscal and monetary stimulus to ameliorate the worst of the crisis
on populations and corporations.
In response to that uncertainty, RECI moved quickly to defend
its credits and to materially strengthen its balance sheet. It did
this by working with every sponsor to help them in addressing the
pressures on their assets, whilst de-risking its own investments.
It also set about materially reducing its balance sheet leverage as
well as shoring up its cash reserves.
Today, we see the first indications of a possible pathway
towards the resolution of the virus itself, via a combination of
improved testing and also the encouraging efficacy results from
three vaccine candidates. While the end to this global pandemic
will necessarily be a long way off, the visibility on paths to that
end provides a welcome reduction in uncertainty, which promotes the
ability of institutions, investors and asset owners to make
decisions with increasing confidence.
For the real estate asset class, the virus has had a significant
negative impact on the operational performance and valuations of
some asset classes whilst benefiting others.
As uncertainty gradually diminishes, what is going to become
much more important is the long-term (potentially irreversible)
trends that are now becoming evident in the need for, and use of,
real assets. The more sophisticated investors are going to see that
opportunity and embrace those trends and reposition, redevelop or
build assets that will address the permanent shift in asset
use.
RECI's bilateral borrowers are, by and large, sophisticated and
well capitalised. In the first half of 2020, they worked
constructively with the Company in addressing the immediate
challenges they faced. What we see now is a growing deployment of
sponsor capital towards investments that capture those long-term
trends. We note the rapid escalation in significant capital
deployment on development, redevelopment and repositioning plays in
European real estate.
That growing investment demand is, however, unmet in a European
context by the provision of debt capital. This is unique to the
European real estate debt markets which are characterised by poorly
capitalised banks, onerous regulatory regimes and high barriers of
entry for new entrants or foreign funds.
All of the above, along with RECI's balance sheet strength and
access to Cheyne Capital's wider real estate business, now
positions RECI to deploy its capital towards working with the
sponsor community in creating these much needed assets for the
future. With the lack of competing sources of capital, RECI is able
to do so whilst maintaining a low risk profile (with deployment
heavily skewed to lower LTV senior loans) and being rewarded with a
material increase in its yield.
In this manner, RECI is now able to move to building a book of
investments to further its core aim of providing its investors with
stable long-term dividends together with capital preservation.
In an investment world that will continue to be defined by very
low rates of return (across virtually all fixed income assets), we
believe that RECI's share price will recover and the higher returns
combined with a defensive risk profile it offers, are unique.
Lastly, we are mindful of the discount to RECI's NAV that has
appeared during this crisis. We are confident that, with the
demonstration of the stable superior yield RECI offers, along with
the greater transparency provided to investors, the share price
will recover and the gap to NAV will close as markets move to find
a safe and reliable income-producing home for their unprecedented
levels of liquidity.
Portfolio Construction and Investment Approach
RECI's investment focus is on UK and European real estate credit
comprising loans (mainly senior loans) and bonds. Since the 2016
Brexit vote, RECI has benefited from pivoting its investment
strategy away from mezzanine (and subordinate) loans towards lower
risk senior loans and bonds and that has continued in the current
market environment. This repositioning reflected the fact that
global volatility and uncertainty were likely to persist and
economic cycles were likely to be increasingly short.
As the Company has grown, it has also continued to move its
origination away from the mid-market borrowers towards larger, well
capitalised and experienced borrower counterparties. These pivots
positioned the Company's investment book well coming into the
present crisis.
Portfolio by Geography (Funded
Fair Value)
-----------------------------------
30 Sep 31 Mar
2020* 2020*
---------------- -------- -------
UK 65.3% 68.9%
---------------- -------- -------
France 22.5% 20.2%
---------------- -------- -------
Italy 5.7% 4.9%
---------------- -------- -------
Portugal 2.6% 2.2%
---------------- -------- -------
Germany 1.8% 1.5%
---------------- -------- -------
Finland 1.4% 1.5%
---------------- -------- -------
Netherlands 0.1% 0.1%
---------------- -------- -------
* Excludes 0.6% (31 March 2020: 0.7%) held in bonds backed by
assets in multiple European countries.
RECI's balance sheet leverage and liquidity have been managed to
position it well for periods of stress. As at 31 October 2020, the
Company's leverage was just 20% of NAV or 1.20x (7% of NAV or 1.07x
on a net look through basis).
Top 10 Positions(1) (by commitment)
-------------------------------------------------------------------------------------------------------------------
Description Commitment LTV Investment Asset Type Manager Commentary
Strategy
--------------------------------- ---------- --- ----------- ----------- ---------------------------------
Income producing prime
Paris prime residential/retail central Paris retail and
1 building GBP49.6m 67% Senior Loan Core residential (for rent)
--------------------------------- ---------- --- ----------- ----------- ---------------------------------
Income producing granular
UK portfolio (mainly residential
UK mixed use portfolio, for rent and sale, offices,
2 predominantly office/residential GBP38.0m 58% Senior Loan Core+ light industrial)
--------------------------------- ---------- --- ----------- ----------- ---------------------------------
PC reached on time in
June 2020 with ongoing
partial repayments from
London mixed use sales income. Full repayment
development, predominantly anticipated ahead of maturity
3 office/residential GBP34.8m 45% Senior Loan Development date
--------------------------------- ---------- --- ----------- ----------- ---------------------------------
Serviced apartment Development in progress.
development Expected completion in
4 in Lisbon GBP34.6m 63% Senior Loan Development early 2022
--------------------------------- ---------- --- ----------- ----------- ---------------------------------
Office development Refurbishment and extension
in Saint Ouen, of a freehold
5 Paris GBP29.3m 58% Senior Loan Development office building
--------------------------------- ---------- --- ----------- ----------- ---------------------------------
Substantially complete
London mixed use (delivery scheduled for
development, predominantly December 2020), partially
6 residential/office GBP27.2m 58% Senior Loan Development pre-let
--------------------------------- ---------- --- ----------- ----------- ---------------------------------
Development in progress.
Expected completion in
7 Cambridge Aparthotel GBP25.4m 64% Senior Loan Development early 2022
--------------------------------- ---------- --- ----------- ----------- ---------------------------------
Stable, income producing
8 UK Care Homes GBP23.2m 65% Senior Loan Core UK care homes
--------------------------------- ---------- --- ----------- ----------- ---------------------------------
Stable income producing
Mezzanine UK student accommodation
9 UK Student Housing GBP22.4m 73% Loan Core assets
--------------------------------- ---------- --- ----------- ----------- ---------------------------------
Development completed,
Commercial accommodation
London Office to is fully let. Residential
10 Residential GBP20.0m 78% Senior Loan Development pre-sales at 20%
--------------------------------- ---------- --- ----------- ----------- ---------------------------------
(1) Based on total commitment of bonds and loans
Maintaining Dividend Stability
A second interim dividend of 3 pence per Share was declared on
26 November 2020. This represents a dividend yield of 9.1% on the
share price of 26 November 2020.
It remains the Company's intention to maintain a stable
quarterly dividend-paying capability through economic cycles.
Portfolio Composition as at Financial Half Year End (30
September 2020)
RECI's investment portfolio, a diversified book of 53 positions
in real estate bonds and loans, was valued at GBP347.3 million as
at 30 September 2020. The portfolio had a weighted average levered
yield of 9.64% and an average loan-to-value of 62.7% as at 30
September 2020.
Bilateral Loan and Bond Portfolio
The drawn fair value of the self-originated bilateral loan and
bond portfolio, excluding accrued interest, decreased slightly from
GBP287.3 million as at 31 March 2020 to GBP276.9 million as at 30
September 2020. The average loan portfolio LTV exposure as at 30
September 2020 was 65.6%. The portfolio continues to provide
attractive risk-adjusted returns with a weighted average unlevered
yield of 9.5% per annum, before any back end fees, profit share or
equity element contributions are taken into account.
Bilateral Loan and Bond Portfolio
Summary
as at 30 September 2020
-----------------------------------------
Number of bilateral loans
and bonds 26
---------------------------------- -----
Drawn value (GBP millions) 276.9
---------------------------------- -----
Undrawn loan and bond commitments
(GBP millions) 131.3
---------------------------------- -----
Weighted average yield of
portfolio 9.5%
---------------------------------- -----
Weighted average yield of
portfolio (levered) 11.0%
---------------------------------- -----
Weighted average LTV of portfolio 65.6%
---------------------------------- -----
Weighted average life of
portfolio (years) 1.6
---------------------------------- -----
Market Bond Portfolio
As at 30 September 2020, the market bond portfolio of 27 bonds
(excluding the self-originated bonds) was valued at GBP70.4
million.
The market bond portfolio has the potential for strong defensive
returns:
-- The portfolio is characterised by a relatively short duration
(4.1 years) and high coupon, which is defensive to interest rate
rise and provides resilience in turbulent markets.
-- The weighted average unlevered yield of the market bond
portfolio as at 30 September 2020 was 6.7%, and the weighted
average levered yield of the market bond portfolio as at 30
September 2020 was 13.8%.
Market Bond Portfolio Summary
as at 30 September 2020
-----------------------------------------
Number of market bonds 27
---------------------------------- -----
Fair value (GBP millions) 70.4
---------------------------------- -----
Weighted average yield of
portfolio 6.7 %
---------------------------------- -----
Weighted average yield of
portfolio (levered) 13.8%
---------------------------------- -----
Weighted average LTV of portfolio 51.4%
---------------------------------- -----
Weighted average life of
portfolio (years) 4.1
---------------------------------- -----
Leverage
In tandem with decreasing its leverage, RECI has maintained its
strong financing relationships throughout 2020. Financing rates
rose in the initial months post the first Covid-19 impact as
liquidity tightened. While rates remain higher than pre-Covid,
there has been a trend decrease in recent months as ample liquidity
comes into financial markets via monetary easing. We expect the
weighted average cost of financing to be lower in the second half
of RECI's financial year. Cheyne have already extended the term of
these financings spread over Q1 2020. As at 30 September 2020,
RECI's gross leverage was just 21% of NAV (against a maximum of
40%).
Cheyne Capital Management (UK) LLP
26 November 2020
Directors' Responsibility Statement
We confirm that to the best of our knowledge:
(a) the condensed unaudited interim financial statements has
been prepared in accordance with IAS 34 "Interim Financial
Reporting";
(b) the interim management report (contained in the Chairman's
Statement and Investment Manager's Report) includes a fair review
of the information required by DTR 4.2.7R (indication of important
events during the first six months and a description of principal
risks and uncertainties for the remaining six months of the year);
and
(c) the interim management report (contained in the Chairman's
Statement and Investment Manager's Report) includes a fair review
of the information required by DTR 4.2.8R (disclosure of related
party transactions and changes therein).
Principal Risks and Uncertainties
The principal risks and uncertainties faced at the time of the
last annual report remain valid for the purposes of the interim
management report. The detailed explanation of the principal risks
and uncertainties can be found in the Strategic Report section
under the Risk Management section of the 31 March 2020 annual
report.
By order of the Board
Bob Cowdell Susie Farnon
Director Director
26 November 2020
Financial Statements
Independent
Review Report
We have been engaged by Real Estate Credit Investments Ltd (the
"Company") to review the condensed set of financial statements in
the Condensed Interim Financial Report for the six months ended 30
September 2020 which comprises the Condensed Unaudited Statement of
Comprehensive Income, the Condensed Unaudited Statement of
Financial Position, the Condensed Unaudited Statement of Changes in
Equity and Condensed Unaudited Statement of Cash Flows and related
notes 1 to 20. We have read the other information contained in the
Condensed Interim Financial Report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial
statements.
Directors' Responsibilities
The Condensed Interim Financial Report is the responsibility of,
and has been approved by, the Directors. The Directors are
responsible for preparing the Condensed Interim Financial Report in
accordance with the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with IFRSs as adopted by the
European Union. The condensed set of financial statements included
in this Condensed Interim Financial Report has been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the Condensed Interim
Financial Report based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the Condensed Interim Financial Report for the six months ended
30 September 2020 is not prepared, in all material respects, in
accordance with International Accounting Standard 34 as adopted by
the European Union and the Disclosure Guidance and Transparency
Rules of the United Kingdom's Financial Conduct Authority.
Use of our report
This report is made solely to the Company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the Company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Recognised Auditor
Guernsey, Channel Islands
26 November 2020
Condensed Unaudited Statement
of Comprehensive Income
For the six months ended 30 September 2020
30 Sep 2020 30 Sep 2019
Note GBP GBP
---------------------------------------------- ---- ------------ ------------
Interest income 5 13,502,199 12,455,820
---------------------------------------------- ---- ------------ ------------
Net gains on financial assets and liabilities
at fair value through profit or loss 3 6,090,446 2,625,485
---------------------------------------------- ---- ------------ ------------
Other income 134,025 -
---------------------------------------------- ---- ------------ ------------
Operating income 19,726,670 15,081,305
---------------------------------------------- ---- ------------ ------------
Operating expenses 4 (3,039,897) (2,752,368)
---------------------------------------------- ---- ------------ ------------
Profit before finance costs 16,686,773 12,328,937
---------------------------------------------- ---- ------------ ------------
Finance costs 5 (1,186,773) (763,080)
---------------------------------------------- ---- ------------ ------------
Net profit 15,500,000 11,565,857
---------------------------------------------- ---- ------------ ------------
Other comprehensive income - -
---------------------------------------------- ---- ------------ ------------
Total comprehensive income 15,500,000 11,565,857
---------------------------------------------- ---- ------------ ------------
Earnings per Ordinary Share
---------------------------------------------- ---- ------------ ------------
Basic and diluted 10 6.8p 6.3p
---------------------------------------------- ---- ------------ ------------
Weighted average Ordinary Shares outstanding Number Number
---------------------------------------------- ---- ------------ ------------
Basic and diluted 10 229,332,478 184,581,786
---------------------------------------------- ---- ------------ ------------
All items in the above statement are derived from continuing
operations.
The accompanying notes form an integral part of the condensed
unaudited interim financial statements.
Condensed Unaudited Statement
of Financial Position
As at 30 September 2020
30 Sep 2020 31 Mar 2019
Note GBP GBP
---------------------------------------------- ----- ------------ ------------
Assets
---------------------------------------------- ----- ------------ ------------
Non-current assets
---------------------------------------------- ----- ------------ ------------
Financial assets at fair value through profit
or loss 12,14 347,282,921 375,160,577
---------------------------------------------- ----- ------------ ------------
347,282,921 375,160,577
---------------------------------------------- ----- ------------ ------------
Current assets
---------------------------------------------- ----- ------------ ------------
Cash and cash equivalents 46,078,333 27,019,773
---------------------------------------------- ----- ------------ ------------
Cash collateral at broker 15 2,279,376 24,956,945
---------------------------------------------- ----- ------------ ------------
Other assets 6 16,140,852 14,641,472
---------------------------------------------- ----- ------------ ------------
64,498,561 66,618,190
---------------------------------------------- ----- ------------ ------------
Total assets 411,781,482 441,778,767
---------------------------------------------- ----- ------------ ------------
Equity and liabilities
---------------------------------------------- ----- ------------ ------------
Equity
---------------------------------------------- ----- ------------ ------------
Reserves 338,897,249 337,157,197
---------------------------------------------- ----- ------------ ------------
338,897,249 337,157,197
---------------------------------------------- ----- ------------ ------------
Current liabilities
---------------------------------------------- ----- ------------ ------------
Financing agreements 8 71,106,150 96,966,878
---------------------------------------------- ----- ------------ ------------
Derivative financial liabilities 13 430,218 6,176,905
---------------------------------------------- ----- ------------ ------------
Other liabilities 7 1,347,865 1,477,787
---------------------------------------------- ----- ------------ ------------
Total liabilities 72,884,233 104,621,570
---------------------------------------------- ----- ------------ ------------
Total equity and liabilities 411,781,482 441,778,767
---------------------------------------------- ----- ------------ ------------
Ordinary Shares outstanding 11 229,332,478 229,332,478
---------------------------------------------- ----- ------------ ------------
Net asset value per Ordinary Share GBP1.48 GBP1.47
---------------------------------------------- ----- ------------ ------------
The accompanying notes form an integral part of the condensed
unaudited interim financial statements.
Signed on behalf of the Board of Directors by:
Bob Cowdell Susie Farnon
Director Director
26 November 2020
Condensed Unaudited Statement
of Changes in Equity
For the six months ended 30 September 2020
Note GBP
------------------------------------------- ---- -------------
Balance as at 31 March 2020 337,157,197
------------------------------------------- ---- -------------
Total comprehensive income 15,500,000
------------------------------------------- ---- -------------
Ordinary Share dividends 9 (13,759,948)
------------------------------------------- ---- -------------
Balance as at 30 September 2020 338,897,249
------------------------------------------- ---- -------------
For the six months ended 30 September 2019
------------------------------------------- ---- -------------
Balance as at 31 March 2019 253,198,289
------------------------------------------- ---- -------------
Total comprehensive income 11,565,857
------------------------------------------- ---- -------------
Issue of Ordinary Shares of the Company 11 76,595,506
------------------------------------------- ---- -------------
Ordinary Share dividends 9 (11,952,218)
------------------------------------------- ---- -------------
Balance as at 30 September 2019 329,407,434
------------------------------------------- ---- -------------
The accompanying notes form an integral part of the condensed
unaudited interim financial statements.
Condensed Unaudited Statement
of Cash Flows
For the six months ended 30 September 2020
30 Sep 2020 30 Sep 2019
GBP GBP
------------------------------------------------------- ------------ ------------
Profit before finance costs 16,686,773 12,328,937
------------------------------------------------------- ------------ ------------
Sales/(purchases) of financial assets 36,670,863 (26,914,071)
------------------------------------------------------- ------------ ------------
Purchases of derivative financial liabilities (8,033,683) -
------------------------------------------------------- ------------ ------------
Movement in realised and unrealised gains on financial
assets (8,793,207) (4,632,952)
------------------------------------------------------- ------------ ------------
Movement in derivative financial liabilities 2,286,996 (2,205,307)
------------------------------------------------------- ------------ ------------
Operating cash flows before movement in working
capital 38,817,742 (21,423,393)
------------------------------------------------------- ------------ ------------
(Increase)/decrease in other assets (1,499,380) 1,558,931
------------------------------------------------------- ------------ ------------
(Decrease)/increase in other liabilities (129,922) 513,541
------------------------------------------------------- ------------ ------------
Movement in cash collateral at/due to broker 22,677,569 2,766,387
------------------------------------------------------- ------------ ------------
Movement in working capital 21,048,267 4,838,859
------------------------------------------------------- ------------ ------------
Net cash flow from/(used in) operating activities 59,866,009 (16,584,534)
------------------------------------------------------- ------------ ------------
Financing activities
------------------------------------------------------- ------------ ------------
Ordinary Shares issued - 76,595,506
------------------------------------------------------- ------------ ------------
Distributions paid to Ordinary Shareholders (13,759,948) (11,952,218)
------------------------------------------------------- ------------ ------------
Net repayments under financing agreement & the
related finance charges (27,047,501) (39,948,516)
------------------------------------------------------- ------------ ------------
Net cash (outflow)/inflow from financing activities (40,807,449) 24,694,772
------------------------------------------------------- ------------ ------------
Net increase in cash and cash equivalents 19,058,560 8,110,238
------------------------------------------------------- ------------ ------------
Cash and cash equivalents at the start of the period 27,019,773 38,644,984
------------------------------------------------------- ------------ ------------
Cash and cash equivalents at the end of the period 46,078,333 46,755,222
------------------------------------------------------- ------------ ------------
The accompanying notes form an integral part of the condensed
unaudited interim financial statements.
Notes to the Condensed Unaudited Interim Financial
Statements
For the six months ended 30 September 2020
1. General Information
Real Estate Credit Investments Limited ("RECI" or the "Company")
was incorporated in Guernsey, Channel Islands on 6 September 2005
with registered number 43634. The Company commenced its operations
on 8 December 2005.
The Company invests in real estate debt secured by commercial or
residential properties in the United Kingdom and Western Europe,
focusing primarily on those countries where it sees the changing
dynamics in the real estate debt market offering a sustainable deal
flow for the foreseeable future. The Company has adopted a
long-term strategic approach to investing and focuses on
identifying value in real estate debt. In making these investments
the Company uses the expertise and knowledge of its Alternative
Investment Fund Manager ("AIFM"), Cheyne Capital Management (UK)
LLP ("Cheyne" or the "Investment Manager").
The ordinary shares ("Ordinary Shares") are currently listed on
the premium segment of the Official List of the UK Listing
Authority and trade on the Main Market of the London Stock
Exchange. Ordinary Shares offer investors a levered exposure to a
portfolio of Real Estate Credit Investments and aim to pay a
quarterly dividend.
The Company's investment management activities are managed by
the Investment Manager, who is also the AIFM.
The Company has entered into an Investment Management Agreement
(the "Investment Management Agreement") under which the Investment
Manager manages its day-to-day investment operations, subject to
the supervision of the Company's Board of Directors. The Company is
an Alternative Investment Fund ("AIF") within the meaning of the
Alternative Investment Fund Manager Directive ("AIFMD") and
accordingly the Investment Manager has been appointed as AIFM of
the Company, which has no employees of its own. For its services,
the Investment Manager receives a monthly management fee, expense
reimbursements and accrues a performance fee (see Note 16). The
Company has no ownership interest in the Investment Manager.
Citco Fund Services (Guernsey) Limited is the Administrator and
provides all administration services to the Company in this
capacity. The Bank of New York Mellon (International) Limited is
the Depositary and undertakes the custody of assets. Aztec
Financial Services (Guernsey) Limited is the Company Secretary.
2. Significant Accounting Policies
Statement of Compliance
The condensed unaudited interim financial statements for the
period ended 30 September 2020 have been prepared in accordance
with International Accounting Standard ("IAS") 34 Interim Financial
Reporting ("IAS 34") as issued by the International Accounting
Standards Board ("IASB"). With the exception of those described
below, the same accounting policies, presentation and methods of
computation have been followed in these condensed unaudited interim
financial statements as were applied in the preparation of the
Company's audited financial statements for the year ended 31 March
2020.
The condensed unaudited interim financial statements do not
contain all the information and disclosures required in a full set
of annual financial statements and should be read in conjunction
with the audited financial statements of the Company for the year
ended 31 March 2020, which were prepared in accordance with
International Financial Reporting Standards ("IFRS") as issued by
the IASB.
The comparative information for the year ended 31 March 2020
does not constitute Statutory Accounts as defined by Guernsey Law.
A copy of the Statutory Accounts for that year has been delivered
to the Shareholders and is available on the Company's website:
www.recreditinvest.com
The operations of the Company are not subject to seasonal
fluctuations.
New Standards, Amendments and Interpretations Issued and
Effective for the Financial Year Beginning 1 April 2020
Amendments to IFRS 3 - Definition of a Business
In October 2018, the IASB issued amendments to the definition of
a business in IFRS 3 Business Combinations. The amendments are
intended to assist entities to determine whether a transaction
should be accounted for as a business combination or as an asset
acquisition. The amendments: clarify the minimum requirements for a
business; remove the assessment of whether market participants are
capable of replacing any missing elements; add guidance to help
entities assess whether an acquired process is substantive; narrow
the definitions of a business and of outputs; and introduce an
optional fair value concentration test. The amendments to IFRS 3
are effective for annual reporting periods beginning on or after 1
January 2020. Amendments to IFRS 3 have no material impact on the
financial statements as the Company has not entered into business
combinations.
Amendments to References to Conceptual Framework in IFRS
Standard
Together with the revised Conceptual Framework for Financial
Reporting, which became effective upon publication on 29 March
2018, the IASB has also issued Amendments to References to the
Conceptual Framework in IFRS Standards. The document contains
amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS 8, IAS
34, IAS 37, IAS 38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22 and
SIC-32. Not all amendments, however, update those pronouncements
with regard to references to and quotes from the framework so that
they refer to the revised Conceptual Framework. Some pronouncements
are only updated to indicate which version of the Framework they
are referencing to (the IASC Framework adopted by the IASB in 2001,
the IASB Framework of 2010, or the new revised Framework of 2018)
or to indicate that definitions in the Standard have not been
updated with the new definitions developed in the revised
Conceptual Framework. The amendments, where they actually are
updates, are effective for annual periods beginning on or after 1
January 2020. The amendments has no material impact on the
financial statements of the Company.
New Standards, Amendments and Interpretations Issued but not
Effective for the Financial Year Beginning 1 April 2020 and not
Early Adopted
Effective for periods beginning
Title on or after
--------------------------------------------------- -------------------------------
IFRS 17 Insurance Contracts 1 January 2023
--------------------------------------------------- -------------------------------
Amendments to IAS 1 - Classification of Liabilities 1 January 2023
as Current or Non-current
--------------------------------------------------- -------------------------------
IFRS 17 Insurance Contracts has no material impact on the
financial statements as the Company does not have
insurance contracts.
Amendments to IAS 1 affect only the presentation of liabilities
in the Statement of Financial Position and not the amount or timing
of recognition of any asset, liability income or expenses, or the
information that the Company disclose about those items.
Basis of Preparation
The condensed unaudited interim financial statements of the
Company are prepared under IFRS on the historical cost or amortised
cost basis except for financial assets and liabilities classified
at fair value through profit or loss which have been measured at
fair value.
The functional and presentation currency of the Company is GBP
(GBP), which the Board considers best represents the economic
environment in which the Company operates.
Going Concern
The Directors believe it is appropriate to adopt the going
concern basis in preparing the condensed unaudited interim
financial statements as, after due consideration, they consider
that the Company has adequate resources to continue in operational
existence for a period of at least twelve months from the date of
signing the condensed unaudited interim financial statements.
The Investment Manager performed an evaluation of each of its
positions in light of the likely long-term impact of the Covid-19
crisis on operating models and valuations, and performed a granular
analysis of the future liquidity profile of the Company.
A detailed cash flow profile of each investment was completed,
incorporating the probability of likely delays to repayments
(and additional cash needs).
Taking account of the updated forecasting, the Directors
consider that the cash resources available as at 30 September
2020
of GBP46.1 million (31 March 2020: GBP27.0 million), together
with the cash collateral at broker of GBP2.3 million (31 March
2020:
GBP25.0 million), the liquidity of the market bond portfolio and
the financing available through activities such as repurchase
agreements as described in Note 8, are sufficient to cover normal
operational costs and current liabilities, including the proposed
dividend, and the expected funding of loan commitments as they fall
due for a period of at least twelve months from the date of signing
the condensed unaudited interim financial statements. The Directors
note that a key assumption adopted in the going concern analysis is
that leverage through repurchase agreements is not withdrawn.
Between 30 September 2020 and 31 October 2020, there have also been
GBP24.2 million further repayments, and net debt (leverage minus
cash) as at 31 October 2020 was 6.8%. The Directors consider this
to have strengthened the resilience of the Company to future market
uncertainty.
Since the onset of the Covid-19 crisis and the resultant market
turbulence, the Company moved to take the following measures:
-- An evaluation of each of its positions in light of the likely
long-term impact of the crisis on operating models and valuations
and hence recovery prospects for the individual positions. The
output of this analysis was to write down the value of just two of
its mezzanine positions. These impairments are not realised losses,
but provisions for potential losses recognised today.
-- Engaged positively with every one of its borrower
counterparts to put in place mitigation and de-risking strategies
for the
long term.
-- Improved the resilience and flexibility of the Company by
increasing its cash balances and reducing its net leverage.
-- Performed a granular analysis of the future liquidity profile
of the Company. A detailed cash flow profile of each investment
was completed, incorporating the probability of likely delays to
repayments (and additional cash needs).
As disclosed in Note 17, as at 30 September 2020, the Company
had committed GBP472.5 million into loans of which GBP276.9 million
had been funded. The Investment Manager models these expected
commitments, and is only obliged to fund if the borrowers meet
specific business plan milestones, and remains comfortable that it
has sufficient liquidity over the expected funding timeframes.
Notwithstanding the Directors' belief that this assumption
remains justifiable, the Directors have also determined a number of
mitigations to address a scenario where all outstanding repurchase
agreements are required to be settled as they fall due. Whilst
there would be a number of competing strategic factors to consider
before implementation of such options, the Directors assert that
these are credible and can generate sufficient liquidity to enable
the Company to meet its obligations as they fall due. Such
strategies include further sales of assets within the bond
portfolio, cessation or delay of any future dividends and obtaining
longer-term, non-recourse financing.
In consideration of this additional stressed scenario and
mitigations identified, the Directors consider that the Company has
adequate resources to continue in operational existence for a
period of at least twelve months from the date of signing the
condensed unaudited interim financial statements.
In line with its Articles of Association, the Company will put
forward a resolution for its continuation at the next annual
meeting (likely to be scheduled for September 2021). The Directors
have no reason to believe that the continuation vote will not be
passed by Shareholders. If any continuation resolution is not
passed, the Directors are required to put proposals for the
reconstruction or reorganisation of the Company to the Shareholders
for their approval within six months of the date of the
continuation resolution. The Directors are therefore satisfied that
it is appropriate to adopt the going concern basis of accounting in
preparing these interim financial statements.
3. Net Gains on Financial Assets and Liabilities at Fair Value
through Profit or Loss
30 Sep 2020 30 Sep 2019
GBP GBP
------------------------------------------------- ----------- -----------
Net gains/(losses)
------------------------------------------------- ----------- -----------
Net gains on market bonds 3,232,705 1,742,874
------------------------------------------------- ----------- -----------
Net gains on self-originated bonds 4,588,115 1,575,114
------------------------------------------------- ----------- -----------
Net gains on self-originated loans 972,387 1,314,964
------------------------------------------------- ----------- -----------
Net losses on foreign exchange instruments and
other foreign currency transactions (2,702,761) (2,007,467)
------------------------------------------------- ----------- -----------
Net gains on financial assets and liabilities at
fair value through profit or loss 6,090,446 2,625,485
------------------------------------------------- ----------- -----------
4. Operating Expenses
30 Sep 2020 30 Sep 2019
Note GBP GBP
---------------------------------------------------- ------ ----------- -----------
Investment management, administration, depositary
and performance fees
---------------------------------------------------- ------ ----------- -----------
Investment management fee 16 2,131,045 1,930,838
---------------------------------------------------- ------ ----------- -----------
Administration fee 16 122,560 117,313
---------------------------------------------------- ------ ----------- -----------
Depositary fee 16 42,111 35,152
---------------------------------------------------- ------ ----------- -----------
Performance fee 16 - 186,831
---------------------------------------------------- ------ ----------- -----------
2,295,716 2,270,134
---------------------------------------------------- ------ ----------- -----------
Other operating expenses
---------------------------------------------------- ------ ----------- -----------
Legal fees (including portfolio transaction related
costs) 307,143 114,157
---------------------------------------------------- ------ ----------- -----------
Directors' fees 95,000 90,000
---------------------------------------------------- ------ ----------- -----------
Corporate secretary fees 40,648 42,730
---------------------------------------------------- ------ ----------- -----------
Fees to auditor for non-audit services 34,000 28,840
---------------------------------------------------- ------ ----------- -----------
Audit fees 34,000 26,160
---------------------------------------------------- ------ ----------- -----------
Research fees 24,746 15,321
---------------------------------------------------- ------ ----------- -----------
Other expenses 208,644 165,026
---------------------------------------------------- ------ ----------- -----------
744,181 482,234
---------------------------------------------------- ------ ----------- -----------
Total operating expenses 3,039,897 2,752,368
---------------------------------------------------- ------ ----------- -----------
5. Interest Income and Finance Costs
The following table details interest income and finance costs
from financial assets and liabilities for the period:
30 Sep 2020 30 Sep 2019
GBP GBP
------------------------------------------------- ----------- -----------
Interest income
------------------------------------------------- ----------- -----------
Real Estate Credit Investments - market bonds 1,376,742 2,065,730
------------------------------------------------- ----------- -----------
Real Estate Credit Investments - self-originated
bonds 3,415,464 2,976,901
------------------------------------------------- ----------- -----------
Real Estate Credit Investments - self-originated
loans 8,706,257 7,353,770
------------------------------------------------- ----------- -----------
Cash and cash equivalents and other receivables 3,736 59,419
------------------------------------------------- ----------- -----------
Total interest income 13,502,199 12,455,820
------------------------------------------------- ----------- -----------
Finance costs
------------------------------------------------- ----------- -----------
Net cost of financing agreements (1,186,773) (763,080)
------------------------------------------------- ----------- -----------
Total finance costs (1,186,773) (763,080)
------------------------------------------------- ----------- -----------
6. Other Assets
30 Sep 2020 31 Mar 2020
GBP GBP
----------------------------------------- ----------- -----------
Market bond interest receivable 1,054,081 495,409
----------------------------------------- ----------- -----------
Self-originated bond interest receivable 495,713 2,010,495
----------------------------------------- ----------- -----------
Self-originated loan income receivable 14,577,967 12,112,059
----------------------------------------- ----------- -----------
Other receivables and prepaid expenses 13,091 23,509
----------------------------------------- ----------- -----------
16,140,852 14,641,472
----------------------------------------- ----------- -----------
7. Other Liabilities
30 Sep 2020 31 Mar 2020
GBP GBP
---------------------------------- ----------- -----------
Investment management fee payable 382,367 363,935
---------------------------------- ----------- -----------
Interest payable 88,332 241,432
---------------------------------- ----------- -----------
Administration fee payable 21,850 22,272
---------------------------------- ----------- -----------
Depositary fee payable 13,352 15,628
---------------------------------- ----------- -----------
Other expense accruals 841,964 834,520
---------------------------------- ----------- -----------
1,347,865 1,477,787
---------------------------------- ----------- -----------
8. Financing Agreements
The Company enters into repurchase agreements with several banks
to provide leverage. This financing is collateralised against
certain of the Company's market bond and bilateral bond portfolio
assets with a fair value totalling GBP104.7 million (31 March 2020:
GBP108.1 million) and a weighted average cost of 3.23% (31 March
2020: 1.80%) per annum. The average period to maturity of the
repurchase arrangements is 2 months (31 March 2020: 2 months).
This short-term financing is shown as a current liability in the
Condensed Unaudited Statement of Financial Position whereas the
collateralised assets are shown as non-current. The movement in
financing agreement and the related finance charges amounting to
GBP27.0 million (31 March 2020: GBP4.6 million) is shown as a
financing activity in the Condensed Unaudited Statement of Cash
Flows.
9. Dividends
30 Sep 2020 30 Sep 2019
GBP GBP
---------------------------------------------------- ----------- -----------
Ordinary Share Dividends
---------------------------------------------------- ----------- -----------
Fourth interim dividend for the year ending 31
March 2020/31 March 2019 6,879,974 5,976,109
---------------------------------------------------- ----------- -----------
First interim dividend for the year ending 31 March
2021/31 March 2020 6,879,974 5,976,109
---------------------------------------------------- ----------- -----------
Dividends paid to Ordinary Shareholders in the
period 13,759,948 11,952,218
---------------------------------------------------- ----------- -----------
The total dividends paid during the financial period ended 30
September 2020 amounted to 6 pence per Ordinary Share
(30 September 2019: 6 pence per Ordinary Share).
Under Guernsey law, companies can pay dividends provided they
satisfy the solvency test prescribed under The Companies (Guernsey)
Law, 2008 which considers whether a company is able to pay its
debts when they become due and whether the value of a company's
assets is greater than its liabilities.
The Directors considered that the Company satisfied the solvency
test for each dividend payment during the periods ended
30 September 2020 and 30 September 2019.
10. Earnings per Ordinary Share
The calculation of the basic and diluted earnings per Ordinary
Share is based on the following data:
30 Sep 2020 30 Sep 2019
GBP GBP
--------------------------------------------------- ----------- -----------
Net earnings attributable to Ordinary Shares (GBP) 15,500,000 11,565,857
--------------------------------------------------- ----------- -----------
Weighted average number of Ordinary Shares for
the purposes
of basic and diluted earnings per Ordinary Share 229,332,478 184,581,786
--------------------------------------------------- ----------- -----------
Earnings per Ordinary Share
--------------------------------------------------- ----------- -----------
Basic and diluted (pence) 6.8 6.3
--------------------------------------------------- ----------- -----------
11. Share Capital
The issued share capital of the Company consists of Ordinary
Shares and its capital as at the period end is represented by the
net proceeds from the issuance of Ordinary Shares and profits
retained up to that date. The Company does not have any externally
imposed capital requirements. As at 30 September 2020, the Company
had capital of GBP338.9 million (31 March 2020: GBP337.2
million).
30 Sep 2020 31 Mar 2020
Number of Number of
Authorised Share Capital Shares Shares
---------------------------------------------- ----------- -----------
Ordinary Shares of no par value each Unlimited Unlimited
---------------------------------------------- ----------- -----------
30 Sep 2020 31 Mar 2020
Number of Number of
Ordinary Shares issued and fully paid Shares Shares
---------------------------------------------- ----------- -----------
Balance at the start of the period/year 229,332,478 153,321,282
---------------------------------------------- ----------- -----------
Ordinary Shares issued during the period/year - 76,011,196
---------------------------------------------- ----------- -----------
Balance at end of the period/year 229,332,478 229,332,478
---------------------------------------------- ----------- -----------
On 21 February 2020, the Company launched a third placing
programme for the issue of up to 150 million new Ordinary Shares,
which was approved by Shareholders at an extraordinary general
meeting held on 10 March 2020. No Ordinary Shares have been issued
to date.
The Company manages its capital to ensure that it will be able
to continue as a going concern while maximising the return to
Shareholders. The Company's overall strategy was outlined in the
Prospectus which was published on 21 February 2020 to launch the
third placing programme. The capital structure of the Company
consists of the equity of the Company as disclosed
in the Condensed Unaudited Statement of Changes in Equity
12. Valuation of Financial Instruments
IFRS 13 Fair Value Measurement requires disclosures surrounding
the level in the fair value hierarchy in which fair value
measurement inputs are categorised for assets and liabilities
measured in the Condensed Unaudited Statement of Financial
Position. The determination of the fair value for financial assets
and financial liabilities for which there is no observable market
price requires the use of valuation techniques. For financial
instruments that trade infrequently and have little price
transparency, fair value is less objective.
The Company categorises investments using the following
hierarchy as defined by IFRS 13:
-- Level 1 - Quoted market prices in an active market for an identical instrument.
-- Level 2 - Valuation techniques based on observable inputs.
This category includes instruments valued using: quoted market
prices in active markets for similar instruments; quoted prices for
similar instruments in markets that are considered less than
active; or other valuation techniques where all significant inputs
are directly or indirectly observable from market data.
-- Level 3 - Valuation techniques using significant unobservable
inputs. This category includes all instruments where the valuation
technique includes inputs not based on observable data and the
unobservable inputs could have a significant impact on the
instrument's valuation. This category includes instruments that are
valued based on quoted prices for similar instruments where
significant unobservable adjustments or assumptions are required to
reflect differences between
the instruments.
The following tables analyse the fair value hierarchy of the
Company's financial assets and liabilities measured at fair value
at the period/year end date:
Level 1 Level 2 Level 3 Total
As at 30 September 2020 GBP GBP GBP GBP
------------------------------------------------- ------- ------------ ----------- ------------
Non-current assets
------------------------------------------------- ------- ------------ ----------- ------------
Real Estate Credit Investments - market
bonds - 70,249,976 140,997 70,390,973
------------------------------------------------- ------- ------------ ----------- ------------
Real Estate Credit Investments - self-originated
bonds - 109,024,216 - 109,024,216
------------------------------------------------- ------- ------------ ----------- ------------
Real Estate Credit Investments - self-originated
loans - - 167,867,732 167,867,732
------------------------------------------------- ------- ------------ ----------- ------------
Current liabilities
------------------------------------------------- ------- ------------ ----------- ------------
Real Estate Credit Investments - repurchase
agreements - (71,106,150) - (71,106,150)
------------------------------------------------- ------- ------------ ----------- ------------
Forward foreign exchange contracts - (430,218) - (430,218)
------------------------------------------------- ------- ------------ ----------- ------------
- 107,737,824 168,008,729 275,746,553
------------------------------------------------- ------- ------------ ----------- ------------
Level 1 Level 2 Level 3 Total
As at 31 March 2020 GBP GBP GBP GBP
------------------------------------------------- ------- ------------ ----------- ------------
Non-current assets
------------------------------------------------- ------- ------------ ----------- ------------
Real Estate Credit Investments - market
bonds - 87,690,906 214,253 87,905,159
------------------------------------------------- ------- ------------ ----------- ------------
Real Estate Credit Investments - self-originated
bonds - 149,653,980 - 149,653,980
------------------------------------------------- ------- ------------ ----------- ------------
Real Estate Credit Investments - self-originated
loans - - 137,601,438 137,601,438
------------------------------------------------- ------- ------------ ----------- ------------
Current liabilities
------------------------------------------------- ------- ------------ ----------- ------------
Real Estate Credit Investments - repurchase
agreements - (96,966,878) - (96,966,878)
------------------------------------------------- ------- ------------ ----------- ------------
Forward foreign exchange contracts - (6,176,905) - (6,176,905)
------------------------------------------------- ------- ------------ ----------- ------------
- 134,201,103 137,815,691 272,016,794
------------------------------------------------- ------- ------------ ----------- ------------
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined
based on the lowest level input that is significant to the fair
value measurement in its entirety.
The fair value of forward contracts is the difference between
the contracts price and reported market prices of the underlying
contract variables. These are included in Level 2 of the fair value
hierarchy.
The fair values of investments that trade in markets that are
not considered to be active but are valued based on quoted market
prices, dealer quotations or alternative pricing sources supported
by observable inputs are classified within Level 2. These include
investment-grade corporate bonds ("Real Estate Credit
Instruments"), repurchase agreements and over-the-counter
derivatives.
As Level 2 investments include positions that are not traded in
active markets and/or are subject to transfer restrictions,
valuations may be adjusted to reflect illiquidity and/or
non-transferability, which are generally based on available market
information. In cases where material discounts are applied, the
positions will be valued as Level 3.
The Company makes loans into structures to gain exposure to real
estate secured debt in the UK and Western Europe.
These loans are not traded in an active market and there are no
independent quotes available for these loans. Such holdings
are classified as Level 3 investments. The fair value of these
loans are linked directly to the value of the real estate loans,
the underlying structures invests in, which are determined based on
modelled expected cash flows (drawdown principal and interest
repayments, and maturity dates) with effective yields ranging from
5.1% to 24.0% (31 March 2020: 4.9% to 24.0%) (the unobservable
input).
Fair value of the real estate loans is adjusted for changes in
the credit quality of both the borrower and the underlying property
collateral, and changes in the market rate on similar instruments.
On origination of the loan, the Investment Manager performs due
diligence on the borrower and related security/property. This
includes obtaining a valuation of the underlying property (to
assess loan-to-value of the investment). In most instances, the
terms of the loan require periodic revaluation of the underlying
property to check against loan-to-value covenants. All the fees
associated with the investments (arrangement fees, exit fees, etc.)
are paid directly to the Company and not paid to the Manager.
The majority of the Company's investments in loans are made
through a Luxembourg based entity, Stornoway Finance SARL,
via loan note instruments. As and when market information, such
as market prices from recognised financial data providers becomes
available, the Company will assess the impact on its portfolio of
loans and whether there should be any transfers between levels in
the fair value hierarchy.
As at 30 September 2020, the Investment Manager was not aware of
any significant movement in the market rates, any indications of
impairment, significant credit events or significant negative
performance of the underlying property structures that have not
already been taken into account when determining the fair value of
the loans and bonds. Whilst no defaults in the underlying
investment are expected, a 1% or 2% decrease in the discount rate
would decrease the fair value by GBP6.5 million or GBP13.0 million
(31 March 2020: GBP6.9 million or GBP13.8 million), respectively
and increase net profit by an equal amount; an equal change in the
opposite direction would decrease the equity of the loan and bond
portfolio within the Company and decrease net profit by an equal
amount.
Level 3 Reconciliation
The following table shows a reconciliation of all movements in
the fair value of financial instruments categorised within Level 3
between the beginning and the end of the financial period/year:
Level 3 Level 3
30 Sep 31 Mar
2020 2020
GBP GBP
----------------------------------------------------------- ------------ ------------
Financial assets at fair value through profit or loss
----------------------------------------------------------- ------------ ------------
Opening balance 137,815,691 139,383,640
----------------------------------------------------------- ------------ ------------
Total gains/(losses) recognised in the Condensed Unaudited
Statement of Comprehensive Income for the period/year 900,127 (14,147,498)
----------------------------------------------------------- ------------ ------------
Purchases 50,147,214 72,177,884
----------------------------------------------------------- ------------ ------------
Sales (47,611,956) (59,870,537)
----------------------------------------------------------- ------------ ------------
Transfer into Level 3* 26,757,653 272,202
----------------------------------------------------------- ------------ ------------
Closing balance 168,008,729 137,815,691
----------------------------------------------------------- ------------ ------------
Unrealised gain/(loss) on investments classified as
Level 3 at period/year end 467,456 (15,421,280)
----------------------------------------------------------- ------------ ------------
*Following a review of the levels for some of the bonds and loans,
they have been moved from Level 2 to Level 3.
13. Derivative Contracts
The Company has credit exposure in relation to its derivative
contracts. The Company invested in derivative contracts with the
Bank of New York Mellon with the following credit quality according
to Standard and Poor's:
30 Sep 2020 31 Mar 2020
Rating GBP GBP
------------------------------------------------ ----------- -----------
The Bank of New York Mellon - AA- (Derivatives) (430,218) (6,176,905)
------------------------------------------------ ----------- -----------
Transactions involving derivative instruments are usually with
counterparties with whom the Company has signed master netting
agreements. Master netting agreements provide for the net
settlement of contracts with the same counterparty in the event of
default. The impact of the master netting agreements is to reduce
credit risk from the amounts shown as derivative financial assets
on the Condensed Unaudited Statement of Financial Position. The
credit risk associated with derivative financial assets subject to
a master netting arrangement is eliminated only to the extent that
financial liabilities due to the same counterparty will be settled
after the assets are realised.
The exposure to credit risk reduced by master netting
arrangements may change significantly within a short period of time
as a result of transactions subject to the arrangement. The
corresponding assets and liabilities have not been offset on the
Condensed Unaudited Statement of Financial Position.
Below are the derivative liabilities by counterparty as at 30
September 2020 and 31 March 2020.
Forward Foreign Exchange Contracts
The following forward foreign exchange contracts were open as at
30 September 2020:
Unrealised
Settlement Buy Buy Sell Sell Loss
Counterparty Date Currency Amount Currency Amount GBP
--------------------- ------------ ---------- ---------- --------- ------------ ----------
The Bank of New York 20 November
Mellon 2020 GBP 80,105,418 EUR (88,700,000) (430,218)
--------------------- ------------ ---------- ---------- --------- ------------ ----------
Unrealised loss on forward foreign exchange contracts (430,218)
------------------------------------------------------------------------------------ ----------
The following forward foreign exchange contracts were open as at
31 March 2020:
Unrealised
Settlement Buy Buy Sell Sell Loss
Counterparty Date Currency Amount Currency Amount GBP
--------------------- ------------ ---------- ----------- --------- ------------- -----------
The Bank of New York
Mellon 19 May 2020 GBP 101,991,786 EUR (122,200,000) (6,176,905)
--------------------- ------------ ---------- ----------- --------- ------------- -----------
Unrealised loss on forward foreign exchange contracts (6,176,905)
-------------------------------------------------------------------------------------- -----------
14. Segmental Reporting
The Company has adopted IFRS 8 Operating Segments. The standard
requires a "management approach", under which segment information
is presented on the same basis as that used for internal reporting
purposes.
Whilst the Investment Manager may make the investment decisions
on a day-to-day basis regarding the allocation of funds to
different investments, any changes to the investment strategy or
major allocation decisions have to be approved by the Board, even
though they may be proposed by the Investment Manager. The Board
retains full responsibility as to the major allocation decisions
made on an ongoing basis and is therefore considered the "Chief
Operating Decision Maker" under IFRS 8.
The Company invests in Real Estate Credit Investments. The Real
Estate Credit Investments may take different forms but will be
likely to be: (i) secured real estate loans; and (ii) debentures or
any other form of debt instrument, securitised tranches of secured
real estate related debt securities, for example, RMBS and CMBS
(together "MBS"). The real estate debt strategy focuses on secured
residential and commercial debt in the UK and Western Europe,
seeking to exploit opportunities in publicly traded securities and
real estate loans.
The Company has two reportable segments, being the Market Bond
Portfolio and the self-originated Bilateral Loan and Bond
Portfolio.
For each of the segments, the Board of Directors reviews
internal management reports prepared by the Investment Manager on a
quarterly basis. The Investment Manager has managed each of the
Market Bond Portfolio and the Bilateral Loan and Bond Portfolio
separately; thus two reportable segments are displayed in the
condensed unaudited interim financial statements.
14. Segmental Reporting (Continued)
Information regarding the results of each reportable segment is
included below. Performance is measured based on segment
profit/(loss), as included in the internal management reports that
are reviewed by the Board of Directors. Segment profit/(loss) is
used to measure performance as management believes that such
information is the most relevant in evaluating the results.
Market Bond Bilateral Total
Portfolio Loan and GBP
GBP Bond Portfolio
GBP
-------------------------------------- ----------- --------------- -----------
For the six months ended 30 September
2020:
-------------------------------------- ----------- --------------- -----------
Reportable segment profit 4,609,447 17,685,959 22,295,406
-------------------------------------- ----------- --------------- -----------
For the six months ended 30 September
2019:
-------------------------------------- ----------- --------------- -----------
Reportable segment profit 3,808,605 13,280,167 17,088,772
-------------------------------------- ----------- --------------- -----------
As at 30 September 2020:
-------------------------------------- ----------- --------------- -----------
Total assets - - 411,781,482
-------------------------------------- ----------- --------------- -----------
Non-segmental assets - - 48,370,800
-------------------------------------- ----------- --------------- -----------
Reportable segment assets 71,445,054 291,965,628 363,410,682
-------------------------------------- ----------- --------------- -----------
As at 31 March 2020:
-------------------------------------- ----------- --------------- -----------
Total assets - - 441,778,767
-------------------------------------- ----------- --------------- -----------
Non-segmental assets - - 52,000,227
-------------------------------------- ----------- --------------- -----------
Reportable segment assets 88,400,568 301,377,972 389,778,540
-------------------------------------- ----------- --------------- -----------
Information regarding the basis of geographical segments is
presented in the Investment Manager's Report and is based on the
countries of the underlying collateral.
All segment revenues are from external sources. There are no
inter-segment transactions between the reportable segments during
the period. Certain income and expenditure is not considered part
of the performance of either segment. This includes gains/(losses)
on net foreign exchange and derivative instruments, expenses and
interest on borrowings.
The following table provides a reconciliation between net
reportable income and operating profits.
30 Sep 2020 30 Sep 2019
GBP GBP
----------------------------------------------- ----------- -----------
Reportable segment profit 22,295,406 17,088,772
----------------------------------------------- ----------- -----------
Net losses on foreign exchange instruments and
other foreign currency transactions (2,702,761) (2,007,467)
----------------------------------------------- ----------- -----------
Other income 134,025 -
----------------------------------------------- ----------- -----------
19,726,670 15,081,305
----------------------------------------------- ----------- -----------
Operating expenses (3,039,897) (2,752,368)
----------------------------------------------- ----------- -----------
Finance costs (1,186,773) (763,080)
----------------------------------------------- ----------- -----------
Net profit 15,500,000 11,565,857
----------------------------------------------- ----------- -----------
Certain assets and liabilities are not considered to be
attributable to either segment, these include other receivables and
prepayments, cash and cash equivalents and derivative financial
assets.
The following table provides a reconciliation between net total
segment assets and total assets.
30 Sep 2020 31 Mar 2020
GBP GBP
-------------------------- ----------- -----------
Reportable segment assets 363,410,682 389,778,540
-------------------------- ----------- -----------
Cash and cash equivalents 46,078,333 27,019,773
-------------------------- ----------- -----------
Cash collateral at broker 2,279,376 24,956,945
-------------------------- ----------- -----------
Other assets 13,091 23,509
-------------------------- ----------- -----------
411,781,482 441,778,767
-------------------------- ----------- -----------
The following is a summary of the movements in the Company's
investments analysed by the loan and bond portfolios for the period
ended 30 September 2020:
Bilateral
Market Bond Loan and
Portfolio Bond Portfolio Total
GBP GBP GBP
----------------------------------------------- ------------ --------------- -------------
As at 30 September 2020:
----------------------------------------------- ------------ --------------- -------------
Financial assets at fair value through profit
or loss
----------------------------------------------- ------------ --------------- -------------
Opening fair value 87,905,159 287,255,418 375,160,577
----------------------------------------------- ------------ --------------- -------------
Purchases 25,378,402 128,535,613 153,914,015
----------------------------------------------- ------------ --------------- -------------
Repayments/sales proceeds (46,125,300) (144,459,578) (190,584,878)
----------------------------------------------- ------------ --------------- -------------
Realised (loss)/gain on sales (4,160,317) 1,326,459 (2,833,858)
----------------------------------------------- ------------ --------------- -------------
Net movement in unrealised gain on investments
at fair value through profit or loss 7,393,029 4,234,036 11,627,065
----------------------------------------------- ------------ --------------- -------------
Closing fair value 70,390,973 276,891,948 347,282,921
----------------------------------------------- ------------ --------------- -------------
The following is a summary of the movements in the Company's
investments analysed by the loan and bond portfolios for the year
ended 31 March 2020:
Bilateral
Market Bond Loan and
Portfolio Bond Portfolio Total
GBP GBP GBP
----------------------------------------------- ------------ --------------- -------------
As at 31 March 2020:
----------------------------------------------- ------------ --------------- -------------
Financial assets at fair value through profit
or loss
----------------------------------------------- ------------ --------------- -------------
Opening fair value 92,473,719 209,976,793 302,450,512
----------------------------------------------- ------------ --------------- -------------
Purchases 51,485,476 232,287,095 283,772,571
----------------------------------------------- ------------ --------------- -------------
Repayments/sales proceeds (44,373,875) (132,378,633) (176,752,508)
----------------------------------------------- ------------ --------------- -------------
Realised (loss)/gain on sales (1,889,465) 902,341 (987,124)
----------------------------------------------- ------------ --------------- -------------
Net movement in unrealised loss on investments
at fair value through profit or loss (9,790,696) (23,532,178) (33,322,874)
----------------------------------------------- ------------ --------------- -------------
Closing fair value 87,905,159 287,255,418 375,160,577
----------------------------------------------- ------------ --------------- -------------
15. Cash Collateral
The Company manages some of its financial risks through the use
of financial derivative instruments which are subject to collateral
requirements. As at 30 September 2020, a total of GBP2.3 million
(31 March 2020: GBP25.0 million) was due from various financial
institutions under the terms of the relevant arrangements. The cash
held by brokers is restricted and is shown as Cash collateral at
broker on the Condensed Unaudited Statement of Financial
Position.
16. Material Agreements and Related Party Transactions
Loan Investments
The Company has made, and will continue to make, certain loan
investments through a Luxembourg based entity, Stornoway Finance
SARL, via Loan Note Instruments. This entity has separate
compartments for each loan deal which effectively ringfences each
loan deal. Other funds managed by the Investment Manager may invest
pari passu in these compartments.
Investment Manager
The Company is party to an Investment Management Agreement with
the Investment Manager, dated 22 February 2017, pursuant to which
the Company has appointed the Investment Manager to manage its
assets on a day-to-day basis in accordance with its investment
objectives and policies, subject to the overall supervision and
direction of the Board of Directors.
The Company pays the Investment Manager a management fee and a
performance fee.
Management Fee
Under the terms of the Investment Management Agreement, the
Investment Manager is entitled to receive from the Company an
annual management fee of 1.25% on an adjusted NAV, being the NAV of
the Ordinary Shares.
During the period ended 30 September 2020, the management fee
totalled GBP2.1 million (30 September 2019: GBP1.9 million),
of which GBP0.4 million (31 March 2020: GBP0.4 million) was
outstanding at the period end.
Performance Fee
Under the terms of the Investment Management Agreement, the
Investment Manager is entitled to receive from the Company
a performance fee calculated as ((A-B) x 20% x C) where:
A = the Adjusted Performance NAV per Ordinary Share, as defined
in the Prospectus.
B = the NAV per Ordinary Share as at the first business day of
the Performance Period increased by a simple annual rate of return
of 7% over the Performance Period or, if no performance fee was
payable in the previous Performance Period, the NAV per Ordinary
Share on the first business day of the Performance Period
immediately following the last Performance Period in which a
performance fee was paid (the "Starting Date") increased by a
simple annual rate of return of 7% over the period since the
Starting Date ("Hurdle Assets").
C = the time weighted average number of Ordinary Shares in issue
in the period since the Starting Date.
On 1 October 2017, the Company entered a new Performance Period
which is expected to run until the end date of the quarter in which
the second continuation resolution, to be proposed at the AGM to be
held in September 2021, is passed.
With the commencement of a new Performance Period, the NAV on
which the Hurdle Assets will be determined in accordance with the
above formula was reset to the NAV per Ordinary Share on 2 October
2017 (being the Starting Date of the new Performance Period).
During the period ended 30 September 2020, the performance fee
totalled GBPNil (30 September 2019: GBP0.2 million) and the related
aggregate performance fee payable at the period end date amounted
to GBPNil (31 March 2020: GBPNil).
Administration Fee
Under the terms of the Administration Agreement, the
Administrator is entitled to receive from the Company a monthly
administration fee based on the prior month gross assets of the
Company adjusted for current month subscriptions and redemptions of
the Company at the relevant basis points per annum rate, subject
always to a minimum monthly fee GBP10,000.
During the period ended 30 September 2020, the administration
fee totalled GBP122,560 (30 September 2019: GBP117,313), of which
GBP21,850 (31 March 2020: GBP22,272) was outstanding at the period
end.
Depositary Fee
Under the terms of the Depositary Agreement, the Depositary is
entitled to receive from the Company an annual depositary fee of
0.02% (31 March 2020: 0.02%) of the NAV of the Company. During the
period ended 30 September 2020, the depositary fee totalled
GBP42,111 (30 September 2019: GBP35,152). The Company owed
GBP13,352 to the Depositary at the period end date (31 March 2020:
GBP15,628).
17. Contingencies and Commitments
As at 30 September 2020, the Company had committed GBP472.5
million into loans of which GBP276.9 million had been funded
(31 March 2020: GBP222.6 million commitment of which GBP161.2
million was funded).
18. Subsequent Events
The Directors declared a second interim dividend of 3 pence per
Ordinary Share on 26 November 2020.
There have been no other significant events affecting the
Company since the period end date that require amendment to or
disclosure in the condensed unaudited interim financial
statements.
19. Foreign Exchange Rates Applied to Combined Totals Used in
the Preparation of the Condensed Unaudited Interim Financial
Statements
The following foreign exchange rates relative to the GBP were
used as at the period/year end date:
Currency 30 Sep 2020 31 Mar 2020
GBP GBP
--------- ----------- -----------
EUR 1.10 1.13
--------- ----------- -----------
USD 1.29 1.24
--------- ----------- -----------
20. Approval of the Condensed Unaudited Interim Financial
Statements
The condensed unaudited interim financial statements of the
Company were approved by the Directors on 26 November 2020.
Directors and Advisers
Directors
Bob Cowdell (Chairman)
Susie Farnon
John Hallam
Graham Harrison
Secretary of the Company
Aztec Financial Services (Guernsey) Limited
PO Box 656
East Wing
Trafalgar Court
Les Banques, St. Peter Port
Guernsey, GY1 3PP
Corporate Broker
Liberum Capital Limited
Ropemaker Place, Level 12
25 Ropemaker Street
London, EC2Y 9LY
Registrar
Link Market Services (Guernsey) Limited
Mount Crevelt House
Bulwer Avenue
St. Sampson
Guernsey, GY2 4LH
Depositary
The Bank of New York Mellon (International) Limited
One Canada Square
London, E14 5AL
Registered Office
PO Box 656
East Wing
Trafalgar Court
Les Banques, St. Peter Port
Guernsey, GY1 3PP
Alternative Investment Fund Manager
Cheyne Capital Management (UK) LLP
Stornoway House
13 Cleveland Row
London, SW1A 1DH
Independent Auditor
Deloitte LLP
Regency Court
Glategny Esplanade
St. Peter Port
Guernsey, GY1 3HW
UK Transfer Agent
Link Market Services
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU
Administrator
Citco Fund Services (Guernsey) Limited
Arnold House
St. Julian's Avenue
St. Peter Port
Guernsey, GY1 3RD
Sub-Administrator
Citco Fund Services (Ireland) Limited
Custom House Plaza, Block 6
International Financial Services Centre
Ireland, Dublin 1
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