TIDMSCRF

RNS Number : 2276J

SME Credit Realisation Fund Limited

18 December 2020

NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES OR TO US PERSONS

*****

18 December 2020

SME Credit Realisation Fund Limited

(the "Company")

Publication of Half-Yearly Financial Report and Condensed Consolidated Financial Statements

SME Credit Realisation Fund Limited (the "Company") has published its results for the financial period from 1 April 2020 to 30 September 2020. The Half-Yearly Financial Report and Condensed Consolidated Financial Statements are attached to this release and are also available on the Company's website (www.smecreditrealisation.com).

CONTACTS

Richard Boleat, Chairman

+44 (0) 1534 615 656

Richard.Boleat@smecreditrealisation.com

Secretary and Administrator

Sanne Group ( Guernsey ) Limited

+44 (0) 1481 739810

smecreditrealisation@sannegroup.com

Corporate Broker

Numis Securities

Nathan Brown

George Shiel

+44 (0) 207 260 1000

n.brown@numis.com

Investor Relations

IR@smecreditrealisation.com

Website

www.smecreditrealisation.com

The ISIN number of the Ordinary Shares is GG00BMF75J31 , the SEDOL code is BMF75J3 and the TIDM is SCRF.

The LEI number of the Company is 549300ZQIYQVNIZGOW60.

*****

ABOUT SME Credit Realisation Fund Limited

The Company is a registered closed-ended collective investment scheme registered pursuant to the Protection of Investors (Bailiwick of Guernsey ) Law, 1987, as amended and the Registered Collective Investment Scheme Rules 2018 issued by the Guernsey Financial Services Commission ("GFSC").

*****

IMPORTANT NOTICES

This announcement contains "forward-looking" statements, beliefs or opinions. These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond the control of the Company and all of which are based on its directors' current beliefs and expectations about future events. Forward-looking statements are sometimes identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "could", "should", "shall", "risk", "intends", "estimates", "aims", "plans", "predicts", "projects", "continues", "assumes", "positioned" or "anticipates" or the negative thereof, other variations thereon or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events, assumptions or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. They appear in a number of places throughout this announcement and include statements regarding the intentions, beliefs or current expectations of the Board or the Company with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to the Company's business concerning, amongst other things, the financial performance, liquidity, prospects, growth and strategies of the Company. These forward-looking statements and other statements contained in this announcement regarding matters that are not historical facts involve predictions. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Company. Such risks and uncertainties could cause actual results to vary materially from the future results indicated, expressed or implied in such forward-looking statements. The forward-looking statements contained in this announcement speak only as of the date of this announcement. Nothing in this announcement is, or should be relied on as, a promise or representation as to the future. The Company disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in its expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law, the Prospectus Rules, the Listing Rules or the Disclosure Rules and Transparency Rules of the FCA. No statement in this announcement is intended as a forecast or profit estimate.

Neither this announcement nor any copy of it may be made or transmitted into the United States of America (including its territories or possessions, any state of the United States of America and the District of Columbia ) ( the "United States "), or distributed, directly or indirectly, in the United States or to US Persons (as such term is defined in Regulation S under the US Securities Act of 1933, as amended (the "Securities Act"). Neither this announcement nor any copy of it may be taken or transmitted directly or indirectly into Australia , Canada , Japan or South Africa or to any persons in any of those jurisdictions, except in compliance with applicable securities laws. Any failure to comply with this restriction may constitute a violation of United States , Australian, Canadian, Japanese or South African securities laws. The distribution of this announcement in other jurisdictions may be restricted by law and persons into whose possession this announcement comes should inform themselves about, and observe, any such restrictions. This announcement does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for securities in the United States , Australia , Canada , Japan or South Africa or in any jurisdiction to whom or in which such offer or solicitation is unlawful.

SME CREDIT REALISATION FUND LIMITED

HALF-YEARLY FINANCIAL REPORT AND CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the six-month PERIOD ended 30 sEPTEMBER 2020

FORWARD-LOOKING STATEMENTS

This report includes statements that are, or may be considered, "forward-looking statements". The forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative, or other variations or comparable terminology. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

FINANCIAL HIGHLIGHTS

Total comprehensive loss for the period amounted to GBP6.32 million (2019: profit of GBP3.61 million).

-- Aggregate dividends of 2.625 pence per Ordinary share declared for the period ended 30 September 2020 (30 September 2019: 2.626 pence).

-- The Company redeemed a total of 44,551,554 shares for a total amount of GBP38,499,854 during the period.

   --     All of the Group's leverage facilities have now been fully repaid. 

-- In October 2020, Basinghall sold a pool of UK non-performing loans to a third party at a modest premium to carrying value , receiving proceeds of GBP2,203,183.

The information below is presented for the period ended or as at 30 September 2020 unless expressly stated to cover a different period.

 
 Description                             Performance 
 NAV per Ordinary Share                  83.86p 
                                        ------------ 
 Total Net Assets                        GBP179.3mil 
                                        ------------ 
 Ordinary Share Price                    51.25p 
                                        ------------ 
 Market Capitalisation                   GBP110mil 
                                        ------------ 
 Share Price Premium/(Discount) to 
  NAV at period end                      (38.9 %) 
                                        ------------ 
 Annualised dividend per Ordinary 
  Share                                  5.25p 
                                        ------------ 
 Earnings per Ordinary Share             (3.37p) 
                                        ------------ 
 Share Price Total Return (inception 
  to date)                               (31.9 %) 
                                        ------------ 
 NAV Total Return (inception to date)    9.8% 
                                        ------------ 
 

SUMMARY INFORMATION

About the Company

SME Credit Realisation Fund Limited (the "Company" or the "Fund") is a closed-ended investment company incorporated with liability limited by shares in Guernsey under The Companies (Guernsey) Law, 2008 (as amended), on 22 July 2015.

Group Structure

The Company holds a number of its investments in loans through Special Purpose Vehicles ("SPVs"). This interim report for the period ended 30 September 2020 (the "Half-Yearly Report") includes the results of Basinghall Lending Designated Activity Company ("Basinghall"), Tallis Lending Designated Activity Company ("Tallis"), Lambeth Lending Designated Activity Company ("Lambeth"), and Queenhithe Lending Designated Activity Company ("Queenhithe"). The Company, Basinghall, Tallis, Lambeth and Queenhithe are collectively referred to in this report as the "Group".

Capital Management

As at 30 September 2020 the total number of shares in issue was 213,739,800 (31 March 2020: 258,301,354 ) with no shares held in treasury (31 March 2020: 586,243 ) .

The scrip dividend programme has been discontinued by the Company in line with the change in the Company's Investment Objective and Policy as discussed below.

On 21 May 2019, the Company published a circular and notice of an Extraordinary General Meeting ("EGM") which set out details of, and sought shareholder approval for, certain Proposals. The Proposals involved modifying the Company's Investment Objective and Policy to reflect a realisation strategy, for the detailed reasons set out in that circular, and amending its Articles to include a mechanism to enable the Company to redeem shares in the Company compulsorily so as to return cash to shareholders.

On 11 June 2019, the Proposals were approved at the EGM.

The Company is in the process of returning capital via a combination of share buybacks, compulsory redemptions of shares and distribution of dividends, as the Company's portfolio of Credit Assets amortises.

As at 30 September 2020, the Company has repurchased a total of 43,746,667 shares (31 March 2020: 43,736,667) of which nil (31 March 2020: 586,243) remain held in treasury. During the period, a total of 596,243 (31 March 2020: 43,150,424 ) shares held in treasury were cancelled and formally discharged. The directors resolved to suspend the programme of repurchases of its own shares on 2 April 2020 until further notice.

The Company redeemed a total of 44,551,554 (31 March 2020: 32,245,772 ) shares for a total amount of GBP38,499,854 (31 March 2020: GBP30,499,833 ) throughout the period.

CHAIRMAN'S STATEMENT

Dear Shareholder,

I am pleased to write to you to provide an update on the Company's progress for the half-year ended 30 September 2020. The Company continues to conduct a managed wind-down of its activities, with the objective of returning capital to shareholders promptly whilst seeking to maximise returns.

COVID-19 Pandemic

Readers will be well aware of the evolution of the pandemic through the course of the reporting period and to date. Impacts on the Company's portfolio continue to be felt as the non-standard market environment remains in place for many businesses, and appears likely to remain so through the reasonably foreseeable future. However, the combination of continuing governmental and central bank support to businesses in the Company's markets, alongside the very real prospects of a vaccine-driven solution to the business environment impediments over the medium term, provide a more positive outlook than was the case when I last wrote to you in July.

Performance Review and Net Asset Value ("NAV")

This report presents the financial position of the Company as at 30 September 2020.

On 21 October 2020, the Company announced its NAV at 30 September 2020 at GBP179 million (30 June 2020: GBP191 million) and NAV per Share at that date at 83.86 pence (30 June 2020: 80.18 pence. The improvement in NAV per share was driven principally by a better than anticipated credit market environment and the demonstrably resilient performance of the Company's investments, augmented by elevated prepayments arising from businesses refinancing with governmental credit support initiatives.

An analysis of the performance of the Company for the 6 month period to 30 September 2020 (with the 6 month period to 31 March 2020 for comparative purposes) is set out below:

 
 Return Attribution 
--------------------------------------------------------------- 
                                              1 Apr       1 Oct 
                                            2020 to     2019 to 
                                             30 Sep      31 Mar 
                                               2020        2020 
 Gross Income                                 3.95%       4.53% 
 Impairment & FV Adj. (IFRS 9 basis)(1)     (6.39%)     (6.63%) 
 FVTOCI Adjustment(2)                         0.66%           - 
 Servicing Fees                             (0.34%)     (0.38%) 
                                          ---------  ---------- 
                                            (2.12%)     (2.48%) 
 Operating Expenses                         (0.71%)     (0.56%) 
 FX Hedging Costs                             0.11%       0.01% 
 Loan Interest Expense                      (0.03%)     (0.11%) 
 Share Buybacks                               0.00%       0.27% 
                                            (0.14%)     (0.43%) 
 Net NAV Return                             (2.88%)     (3.30%) 
----------------------------------------  ---------  ---------- 
 

( (1) FVTPL Adjustment includes fair value through profit or loss movements on the Fund's interest in the EIB transaction.

(2) FVTOCI Adjustment includes fair value through other comprehensive income movements on the portfolio of Credit Assets held by the Fund, which moved to fair value accounting from 1 April 2020.

Performance Since 30 September 2020

The Board continues to closely monitor data trends within its portfolio. Positive trends identified in my previous report have been sustained, and the recent announcements from pharmaceutical companies of apparently highly effective vaccines have given a significant fillip to financial markets, particularly credit markets. The Company will next report its quarterly NAV mid-January 2021.

Return of Capital

The Company continues to make distributions to shareholders as free cash flow becomes available through interest payments, repayments, prepayments and recoveries. In the 6 month period to 30 September 2020, GBP38.5 million was distributed to shareholders through compulsory share redemptions and GBP5.9 million through dividend payments. After the period end, a further GBP42 million was distributed to shareholders through compulsory share redemptions and GBP2.1 million through dividend payments.

The Company will continue to return capital to investors predominantly by way of compulsory redemption of shares as liquidity arises through loan repayments or by other means. The directors may also seek to apply free cash to on-market share repurchases if such a strategy is deemed to be in the best interests of shareholders as a whole.

Potential Portfolio Sales

The Company has continued to actively explore portfolio sales as a means of accelerating the return of capital to investors. A small pool of UK non-performing loans was sold at a modest premium to carrying value in October 2020, and the Company continues to explore potential disposals where pricing levels are attractive.

Conclusion

The reporting period has, for the Company, been one of great uncertainty, but that uncertainty is starting to be replaced with guarded optimism in markets generally. Our borrowers have in many cases experienced the greatest economic stress in a generation, and the Company, through Funding Circle, has endeavoured to support them through forbearance programs and refinancings, and as such, our borrowers are largely weathering the effects on their businesses successfully, and with fortitude. When taken alongside the recent positive vaccine announcements, it is therefore reasonable to cautiously conclude that the Company's wind-down program will remain on track with decreasing downside risk to NAV per share.

My thanks as always go to the team at Funding Circle, our advisors and service providers, and my board colleagues for their support and wise counsel.

RICHARD BOLÉAT

Chairman of the Board of Directors

18 December 2020

INTERIM REPORT

Incorporation

The Company is a limited liability company registered in Guernsey under The Companies (Guernsey) Law, 2008 (as amended) with registered number 60680.

Activities

The Company is registered as a closed-ended collective investment scheme in Guernsey pursuant to The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended. Prior to the amendment of the Company's Investment Objective and Policy, the primary activity of the Company was investment in loans to small and medium sized enterprises in the United Kingdom, the United States and Continental Europe, in order to seek to provide shareholders with a sustainable and attractive level of dividend income. Following the result of the EGM on 11 June 2019, the Company has ceased investment into Credit Assets as the Company's Investment Objective and Policy were updated to facilitate the managed wind-down of the Company .

Defined Terms

Definitions appearing in this Interim Report used are shown at the end of the report. The Company's prospectus, which may be found on the Company's website at www.smecreditrealisation.com contains a more comprehensive list of defined terms.

Strategy and Business Model

The Group was established to provide shareholders with a sustainable and attractive level of dividend income, primarily by way of investment in Credit Assets originated both directly through the platform operated by Funding Circle and indirectly, in each case as detailed in the Company's original investment policy. The Group identified the Funding Circle platform as a leader in the growing direct lending space to SMEs with its established infrastructure, scale of origination volumes and expertise in accurately assessing loan applications.

On 11 June 2019, the Company changed its Investment Objective and Policy to facilitate a managed wind-down of the Company in a prudent manner consistent with the principles of good investment management as required by the Listing Rules.

Investment Objective and Policy

In order to implement the managed wind-down, it was necessary to amend the Company's Investment Objective and Policy to reflect the objective of realising the Company's portfolio, as follows:

"The Company will be managed with the intention of realising all remaining assets in the portfolio in a prudent manner which achieves a balance between maximising the value from the realisation of the Company's investments and making timely returns of capital to shareholders."

The managed wind-down is being affected with a view to the Company realising all of its investments in accordance with the Investment Objective. Such realisations comprise natural amortisation of the Company's investments in Credit Assets as well as potentially opportunistic portfolio sales.

During the prior financial year, the Company ran an auction process as the Board explored a potential sale of a portion of the Company's assets during which it received a high level of interest from potential buyers. The Company continues to engage with potential buyers, however given the ongoing market volatility and uncertainty caused by COVID-19, it is likely any material asset sales shall be delayed, or may not proceed at all.

In October 2020, Basinghall sold a pool of UK non-performing loans to a third party at a modest premium to carrying value, receiving proceeds of GBP2,203,183.

The Directors continue to explore potential portfolio disposals where pricing levels are attractive.

As a result of the Company's change in investment objective and policy, for the purposes of accounting, the Company's business model was deemed to have changed from "hold to collect" to "hold to collect and sell" during the prior financial year. The Company is therefore required to report under fair value accounting for the valuation of Credit Assets from 1 April 2020. This change in methodology is discussed further in note 2 and 14.

The Company will not allocate further capital to Credit Assets, directly or indirectly via leveraged transactions or SPVs, or undertake capital expenditure except where necessary in the reasonable opinion of the Board in order to protect or enhance the value of any existing investments or to facilitate orderly disposals.

As at 30 September 2020, the Company held indirect investments in loans through the following investing companies:

 
 Investing Company   Jurisdiction of Loans 
------------------  ------------------------- 
 Basinghall          United Kingdom 
 Tallis              Germany, the Netherlands 
                      and Spain* 
 EIB SPV             United Kingdom 
 
 

*From January 2017, Tallis discontinued further lending to Spain. The Company retains a small portfolio of loans in Spain.

The following analyses of the Group's investments in Credit Assets are provided as reference.

Loans by geographical region

 
 UK Investment       %    US Investment   %    CE Investment     % 
 South East          26   Other           39   Germany           55 
                    ---  --------------  ---  ----------------  --- 
 London              17   California      15   The Netherlands   45 
                    ---  --------------  ---  ----------------  --- 
 Midlands            13   Florida         10   Spain             0 
                    ---  --------------  ---  ----------------  --- 
 North West          10   Texas           9 
                    ---  --------------  ---  ----------------  --- 
 South West          10   Illinois        7 
                    ---  --------------  ---  ----------------  --- 
 North East          8    New York        6 
                    ---  --------------  ---  ----------------  --- 
 Scotland            5    Michigan        4 
                    ---  --------------  ---  ----------------  --- 
 East Anglia         5    Ohio            4 
                    ---  --------------  ---  ----------------  --- 
 Wales               4    Georgia         3 
                    ---  --------------  ---  ----------------  --- 
 Northern Ireland    2    Colorado        3 
                    ---  --------------  ---  ----------------  --- 
 

Industry split

 
 UK Investment                %    US Investment             %    CE Investment              % 
                                   Professional, 
                                    Scientific and                Wholesale and retail 
 Property and construction    20    Technical Services       17    trade                     33 
                             ---  ------------------------  ---  -------------------------  --- 
                                                                  Professional, Scientific 
 Wholesale and retail         18   Retail Trade              17    and Technical Services    13 
                             ---  ------------------------  ---  -------------------------  --- 
 Professional and                  Healthcare and 
  business support            11    Social Assistance        11   Construction               11 
                             ---  ------------------------  ---  -------------------------  --- 
 Manufacturing and                 Accommodation 
  engineering                 11    and Food Services        11   Manufacturing              8 
                             ---  ------------------------  ---  -------------------------  --- 
                                                                  Administrative 
 IT and Telecommunications    7    Construction              9     and Support Activities    7 
                             ---  ------------------------  ---  -------------------------  --- 
                                   Other Services 
                                    (except Public                Transporting and 
 Leisure and Hospitality      6     Administration)          8     Storage                   6 
                             ---  ------------------------  ---  -------------------------  --- 
                                   Administrative                 Accommodation and 
 Healthcare                   5     and Support Activities   8     Food Services             6 
                             ---  ------------------------  ---  -------------------------  --- 
                                                                  Information and 
 Transport and Logistics      4    Wholesale Trade           3     Communication             4 
                             ---  ------------------------  ---  -------------------------  --- 
 Automotive                   4    Manufacturing             3    Other Service Activities   2 
                             ---  ------------------------  ---  -------------------------  --- 
 Other                        14   Other                     13   Other                      10 
                             ---  ------------------------  ---  -------------------------  --- 
 

Basinghall, Tallis, Lambeth, Queenhithe and the EIB SPV were formed solely in connection with the implementation of the previous investment policy of the Company.

Loans acquired by Basinghall, Tallis and the EIB SPV (subject to the investment policy, any Portfolio Limits and Available Cash) were funded, in whole or in part, by advances made by the Company under the note programmes. The notes issued by Basinghall and Tallis to the Company are listed on the Irish Stock Exchange. Loans acquired by Lambeth and Queenhithe were funded in part by Basinghall.

The assets held by each of Basinghall, Tallis and the EIB SPV are ring-fenced from other entities or SPV'-s and there is no cross-collateralisation between the SPV's in which the Company invests.

Borrowing Limitation

In pursuit of the original investment objective, the Company was able to borrow or use leverage, and also guarantee the borrowings of its Affiliates and Near Affiliates. The aggregate leverage or borrowings of the Company, its Affiliates and any Near Affiliates (including Basinghall, Tallis, Lambeth and/or Queenhithe) and guarantees of such borrowing or leverage by such person(s), was not permitted to exceed (at the time the relevant indebtedness is incurred or guarantee given) 0.5 times the then current NAV.

Following the approval of the resolution to execute a managed wind-down of the Company in its EGM on 11 June 2019, the leverage limit as described above no longer applies to the Company.

All of the Group's leverage facilities have now been fully repaid.

Results and dividends

The total comprehensive loss for the period, determined under International Financial Reporting Standards ("IFRS"), amounted to GBP 6.32 million (30 September 2019: profit of GBP3.61 million). The payment of any dividend by the Company is subject to the satisfaction of a solvency test as required by The Companies (Guernsey) Law, 2008 (as amended). Following the result of the EGM, the Directors expect to maintain quarterly dividend payments of 1.3125 pence per Ordinary Share on an annualised basis, which may be partially uncovered by income . Dividends declared during the period are disclosed in note 13.

Business review

On 21 May 2019, the Company published a circular and notice of EGM which sets out details of, and sought shareholder approval for, certain Proposals. Those Proposals involved modifying the Company's Investment Objective and Policy to reflect a realisation strategy and amending its Articles to include a mechanism to enable the Company to redeem shares in the Company compulsorily so as to return cash to shareholders.

On 11 June 2019, the Proposals were approved at the EGM.

As at 30 September 2020, the Company has purchased a total of 43,746,667 shares (31 March 2020: 43,736,667) of which nil (31 March 2020: 586,243) remain held in treasury. During the period, a total of 596,243 (31 March 2020: 43,150,424 ) shares held in treasury were cancelled and formally discharged.

The directors resolved to suspend the programme of repurchases of its own shares on 2 April 2020 until further notice.

The Company redeemed a total of 44,551,554 shares (year ended 31 March 2020: 32,245,772) for a total amount of GBP38,499,854 (year ended 31 March 2020: GBP30,499,833) during the period.

On 11 April 2020, Lambeth fully repaid the remaining amount owed on its senior loan to Citibank. The remaining portfolio of Credit Assets held were transferred to Basinghall on 17 June 2020 for an amount equal to the principal and interest outstanding at 31 May 2020 being the economic cut-off date for the transaction. Shortly after the period end, liquidators were formally appointed and commenced proceedings to wind up Lambeth in an orderly manner.

On 17 August 2020, Queenhithe fully repaid the remaining amount owed on its loan with Fleetbank. The remaining portfolio of Credit Assets held were transferred to Basinghall on the same date for an amount equal to the principal and interest outstanding at 31 July 2020 being the economic cut-off date for the transaction. The process is underway to put Queenhithe into formal liquidation in the coming months.

The World Health Organisation declared COVID-19 as a global pandemic on 11 March 2020. The Board continues to closely monitor the situation and the impact on the performance of the loan portfolios held by the Group.

The Board receives updates on a monthly basis from Funding Circle on current delinquency and default trends by geographic exposure. The Risk Committee also reviews a comprehensive range of other risks that may be impacted by COVID-19.

During H1 2020, the impact of COVID-19 led to the use of forbearance measures for eligible borrowers, including short term payment plans and payment holidays, to assist creditworthy borrowers whose businesses suffered a short-term liquidity shock as a result of the ongoing pandemic environment. Forbearance measures began to expire towards the end of the period with an encouraging proportion of borrowers returning to making full repayments.

In the UK, as at 30 September 2020, over 90% of non-defaulted borrowers were making full payments, with an additional 6% still on forbearance plans. In the US, over 82% of non-defaulted borrowers were making full payments, with an additional 12% still on forbearance plans. In CE, over 96% of non-defaulted borrowers were making full payments.

Shortly after 30 September 2020, the UK went back into a national lockdown due to a second wave of COVID-19. Similar governmental measures being implemented in both CE and the US following the period end are also a possibility. The full impact of COVID-19 on the Group's UK portfolios is uncertain, however the Directors continue to monitor the delinquency and default data available to them closely.

In October 2020, Basinghall sold a pool of UK non-performing loans to a third party at a modest premium to carrying value, receiving proceeds of GBP2,203,183.

On 21 October 2020, the Company announced that it has declared a quarterly dividend of 1.3125 pence per share payable on 20 November 2020 and will also be returning approximately GBP42m to shareholders by way of a compulsory partial redemption of shares payable on 10 November 2020.

Going concern

The Directors have considered the financial performance of the Group and the impact of market conditions at the financial period end date and subsequently.

Whilst the managed wind-down of the Company continues to progress, there is no definite and final plan in place for the timing of liquidation of the Company's assets and the process of returning capital to shareholders.

The Company will therefore continue to redeem shares, pay dividends and where appropriate execute further share buy-backs. The Company has prepared cashflow forecasts and liquidity analyses reviewing likely scenarios that are stress tested to support further distributions and to monitor the ongoing solvency of the Company. This is reviewed on a regular basis in light of new information received.

The Directors confirm that they have a reasonable expectation that the Company will pay its liabilities as they fall due over the period of the managed wind-down and as the ongoing COVID-19 pandemic progresses. As a result, the Directors continue to present the condensed consolidated financial statements on a going concern basis.

Principal Risk and Risk Management

There are a number of actual and potential risks and uncertainties which could have a material impact on the Group's actual results which may differ materially from expected and historical results, particularly given the implementation of the managed wind-down and the impact of COVID-19.

The Board of Directors has overall responsibility for risk management and internal control within the context of achieving the Company's objectives. The Board agrees the strategy for the Company, approves the Company's risk appetite and monitors the risk profile of the Company. The Company also maintains a risk register to identify, monitor and control risk concentration, which has been updated to reflect the managed wind-down.

The Company has established a risk matrix, consisting of the principal and emerging risks and the controls in place to mitigate those risks. The risk matrix provides a basis for the Audit Committee and the Board to regularly monitor the effective operation of the controls and to update the matrix when new risks are identified. The Board's responsibility for conducting a robust risk assessment are embedded in the Company's risk matrix and stress testing which helps position the Company to ensure compliance with The Association of Investment Companies Code of Corporate Governance's ("the AIC Code") requirements.

The Board continues to monitor the Company's systems of risk management and internal control and will continue to receive updates from the Company's external service providers to ensure that the principal risks and challenges faced by the Group are fully understood and managed appropriately. The Board did not identify any significant weaknesses during the period and up to the date of this Interim Report.

An overview of the principal risks and uncertainties that the Board considers to be currently faced by the Company are provided below, together with the mitigating actions being taken. The Directors have also linked the key performance indicators to the risks where relevant. Risks arising from the Group's use of financial instruments are set out in note 14 of the condensed consolidated financial statements.

 
               Principal risk                       Mitigation and update of           Company's financial 
                                                         risk assessment                   KPI affected 
                                                                                             by risk 
 COVID-19 
  The COVID-19 pandemic has had                  The directors continue               Total distributions 
  a significant economic impact                  to monitor delinquency               to the shareholders. 
  across the world. As at 30 September           and default levels on each 
  2020, the pandemic has caused                  of the separate loan portfolios      Credit losses 
  an increase in delinquencies                   closely, as well as the 
  across the Group's portfolio                   impact of government initiatives 
  during the period. However, it                 and forbearance measures 
  is still uncertain how performance             implemented by Funding 
  will be affected in the mid to                 Circle. 
  long term as forbearance measures 
  continue to expire after the                                                        Total distributions 
  period end and government initiatives                                               to the shareholders. 
  continue to be implemented. 
                                                 The directors have limited           Credit losses 
  Default risk                                   options available to them 
  Borrowers' ability to comply                   that will minimise the 
  with their payment obligations                 impact of the risk as the 
  in respect of loans may deteriorate            measures and initiatives 
  due to adverse changes in economic             being put in place are 
  and political factors, including               outside of their control. 
  the COVID-19 pandemic discussed 
  above.                                         Economic uncertainties 
                                                 or developments as well 
  Actual defaults may be greater                 as unemployment may impact 
  than indicated by historical                   upon default rates. 
  data and the timing of defaults                                                     Total distributions 
  may vary significantly from historical                                              to the shareholders. 
  observations. 
                                                                                      NAV total return 
  Future wind-down risk 
  Below are the key risks associated 
  with the managed wind-down of 
  the Company, beyond those inherent             The Board will continue 
  in the holding of amortising                   to monitor the impact of 
  Credit Assets. Further details                 the COVID-19 pandemic and 
  are available within the Circular              changes in the valuation 
  published on 21 May 2019:                      of the different loan portfolios 
                                                 before considering pursuing          Total distributions 
  The Company has conducted a price              further price discovery              to the shareholders. 
  discovery process for the purpose              processes and opportunistic 
  of determining whether it is                   portfolio sales. The Board 
  in the interests of the Company                will actively monitor and 
  and shareholders as a whole to                 control the preparation 
  dispose of certain portions of                 and price discovery process 
  the Company's loan portfolios,                 to seek to ensure that               . 
  "en bloc". The Company's price                 it is operationally and 
  discovery process has not resulted             economically optimised. 
  in a material consummated transaction 
  or transactions. Following the 
  COVID-19 pandemic, any price                   The Board will actively 
  discovery process undertaken                   seek to "right size" the 
  again in the future is likely                  Company's overhead base 
  to be impacted by the pandemic                 as net asset value reduces, 
  and its effects on the perceived               through renegotiation with 
  value of the Company's loan portfolios.        counterparties and potential 
                                                 restructuring of the Group 
  As the managed wind-down proceeds,             to minimise unnecessary 
  and capital is returned to shareholders,       fixed and variable costs. 
  the Company's fixed and variable 
  costs, some of which are not 
  capable of material mitigation 
  due to the publicly listed status 
  of the Company, are likely to 
  rise as a proportion of the Company's 
  net asset value, prior to dissolution 
  of the Company. 
                                              -----------------------------------  -------------------------- 
 
 
 
   The Company deploys surplus liquidity         The Board will actively              Share price 
   arising from portfolio amortisation           seek to manage the use               volatility. 
   and, potentially, portfolio sales,            of various capital return 
   by way of capital return to shareholders.     techniques so as to seek 
   This capital return may take                  to fairly balance the differing 
   the form of dividends, share                  outcomes of those techniques. 
   buybacks and compulsory redemptions 
   of shares or any combination 
   of these techniques. The balance 
   of techniques used may result 
   in greater or lesser share price                                                   Total distributions 
   volatility and varied tax treatments          The Board will seek to               to the shareholders 
   for investors.                                maintain and enhance banking 
                                                 counterparty relationships 
   As the size of the Company's                  to seek to retain access 
   non-UK portfolios decrease through            to institutional pricing.            Share price 
   amortisation (in the absence                                                       volatility 
   of portfolio sales), the Company's            The Board will review any            and total distributions 
   ability to deploy foreign currency            adjustment required to               to shareholders. 
   hedges at appropriate cost may                the values of the Group's 
   be impaired.                                  assets and liabilities 
                                                 when the basis of accounting 
   As the Company moves through                  changed to non-going concern. 
   the winddown process, accounting 
   standards will require the Company 
   to prepare its accounts on a 
   basis other than going concern 
   in the future. 
 

As part of the process of evaluating principal risks, the Board also identifies emerging risks and how they impact on the Group's managed wind down process. The likelihood of occurrence of each risk and the extent of financial effect to the Group are considered when the Board makes economic decisions. Along with the update on the principal risks to take into account the impact of the COVID-19 pandemic to the Group, the Board identified the following as emerging and other key operational risks:

Changes in the tax regulation in jurisdictions where the Group operates could have an impact on the treatment of income generated from loans held in subsidiaries

The Company holds assets indirectly through subsidiaries established in Ireland.

There is currently no indication that this will become a principal risk to the Group but the Board will continue to monitor. Refer to note 11 for further information on taxation payable by Basinghall due to a change in tax regulation.

The Company has no employees and is reliant on the performance of third party service providers

The Company's investment administration functions have been outsourced to external service providers. Any failure by any external service provider to carry out its obligations could have a materially detrimental impact on the effective operation, reporting and monitoring of the Company's financial position. This may have an effect on the Company's ability to meet its investment objective successfully. The Board receives and reviews reports from its principal external service providers. The Board may request a report on the operational effectiveness of controls in place at the service providers as part of the annual quality review performed by the Board on the services provided by the external service providers. The results of the Board's review are reported to the Audit Committee.

Cybersecurity breaches

The Company is reliant on the functionality of Funding Circle's software and IT infrastructure to facilitate the process of servicing the Company's remaining credit assets. The Company is also reliant on the functionality of the IT infrastructure of its other service providers. These systems may be prone to operational, information security and related risks resulting from failures of, or breaches in, cybersecurity.

Along with other holders of risk assets generally, the Group is exposed to a range of macroeconomic, geopolitical and regulatory factors which could, in certain circumstances either individually or in combination have a negative effect on carrying values, portfolio returns, delinquencies and operating costs. These factors are kept under review by the Board and relevant Board committees as appropriate.

Directors

The Directors who held office during the financial period end and up to the date of approval of this report were:

 
                       Date of appointment 
--------------------  -------------------- 
 Frederic Hervouet               12 August 
                                      2015 
 Jonathan Bridel                 19 August 
                                      2015 
 Richard Boléat             19 August 
                                      2015 
 Richard Burwood                 12 August 
                                      2015 
 Sachin Patel                  18 May 2017 
 

Tom Parachini, Global Head of Legal and Regulatory at Funding Circle Ltd is appointed as an Alternate Director for Sachin Patel.

Directors' shares and interests

A list of all Directors who served during the period and up to the date of this report and their biographies are included at the end of the report.

The appointment and replacement of Directors is governed by the Company's Articles of Incorporation, The Companies (Guernsey) Law 2008 (as amended) and related legislation. The Articles of Incorporation themselves may be amended by special resolution of the Shareholders.

As at 30 September 2020, the Directors held the following Ordinary shares of the Company:

 
                                         Number of shares 
                               30 September       31 March 
                                       2020           2020 
---------------------  --------------------  ------------- 
 Frederic Hervouet                  7 8,760         95,176 
 Jonathan Bridel                    2 6,069          4,448 
 Richard Boléat                2 1,591          4,448 
 Richard Burwood                    3 9,482          4,448 
 Sachin Patel                             -              - 
                                   1 65,902        108,520 
---------------------  --------------------  ------------- 
 

During the period, no Director had a material interest in a contract to which the Company was a party (other than his own letter of appointment). Mr. Patel is an employee of Funding Circle Ltd.

Related party transactions

The related parties of the Group, the transactions with those parties during the period and the outstanding balances as at 30 September 2020 are disclosed in Note 15 to the condensed consolidated financial statements.

Company Secretary

The Company Secretary is Sanne Group (Guernsey) Limited of De Catapan House, Grange Road, St Peter Port, Guernsey GY1 2QG.

On behalf of the Board

RICHARD BOLÉAT

Chairman of the Board of Directors

STATEMENT OF DIRECTORS' RESPONSIBILITIES

IN RESPECT OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

To the best of their knowledge and belief, the Directors confirm that:

-- the Condensed Consolidated Financial Statements have been prepared in accordance with IAS 34, "Interim Financial Reporting"; and

-- the Half-Yearly Financial Report, comprising the Financial Highlights, the Summary Information, the Chairman's Statement, and the Interim Report, meets the requirements of an interim management report and includes a fair review of the information required by DTR 4.2.4R;

o DTR 4.2.7R of the UK Disclosure Guidelines and Transparency Rules, being an indication of important events that have occurred during the first six months and their impact on the Condensed Consolidated Financial Statements, and a description of the principal risks and uncertainties for the remaining six months of the year; and

o DTR 4.2.8R of the UK Disclosure Guidelines and Transparency Rules, being related party transactions that have taken place in the first six months and that have materially affected the financial position or performance of the Group during the period, and any material changes in the related party transactions disclosed in the last Annual Report.

The maintenance and integrity of the Group and Company's website is the responsibility of the Directors. The work carried out by the independent auditor does not involve consideration of these matters and accordingly, the auditor accepts no responsibility for any changes that may have occurred to the condensed consolidated financial statements since they were initially presented on the website. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

   Richard Boléat                         Jonathan Bridel 
   Chairman                                  Chairman of the Audit Committee 

INDEPENT REVIEW REPORT TO SME CREDIT REALISATION FUND LIMITED

Report on the Condensed Consolidated Financial Statements

_________________________________________________________________________

Our conclusion

We have reviewed SME Credit Realisation Fund Limited's Condensed Consolidated Financial Statements (the "interim financial statements") in the Half-Yearly Financial Report of SME Credit Realisation Fund Limited for the 6-month period ended 30 September 2020. Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

_________________________________________________________________________

What we have reviewed

The interim financial statements comprise:

   --     the Condensed Consolidated Statement of Financial Position as at 30 September 2020; 
   --     the Condensed Consolidated   Statement of Comprehensive Income for the period then ended; 
   --     the Condensed Consolidated   Statement of Cash Flows for the period then ended; 

-- the Condensed Consolidated Statement of Changes in Shareholders' Equity for the period then ended; and

   --     the explanatory notes to the interim financial statements. 

The interim financial statements included in the Half-Yearly Financial Report have been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2 to the interim financial statements, the financial reporting framework that has been applied in the preparation of the full annual financial statements of the Company is The Companies (Guernsey) Law, 2008 and International Financial Reporting Standards (IFRSs).

_________________________________________________________________________

Responsibilities for the interim financial statements and the review

_________________________________________________________________________

Our responsibilities and those of the directors

The Half-Yearly Financial Report, including the interim financial statements, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Half-Yearly Financial Report in accordance with International Accounting Standard 34, 'Interim Financial Reporting' and the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority.

Our responsibility is to express a conclusion on the interim financial statements in the Half-Yearly Financial Report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

____________________________________________________________________________

What a review of interim financial statements involves

We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the International Auditing and Assurance Standards Board. A review of interim financial information consists of making enquiries, 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 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.

We have read the other information contained in the Half-Yearly Financial Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

PricewaterhouseCoopers CI LLP

Chartered Accountants

Guernsey, Channel Islands

18 December 2020

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE SIX-MONTH PERIODED 30 SEPTEMBER 2020

 
                                                                   (Unaudited)           (Unaudited) 
                                                                  1 April 2020          1 April 2019 
                                                               to 30 September       to 30 September 
                                                                          2020                  2019 
                                                 Notes                     GBP                   GBP 
----------------------------------------  ---  --------  ---------------------  -------------------- 
 Operating income 
 Interest income on loans advanced                 3                 9,073,630            16,659,332 
 Net realised and unrealised gain 
  on foreign exchange                                                        -               912,489 
 Bank interest income                                                   12,028                40,875 
---------------------------------------------  --------  ---------------------  -------------------- 
 Total operating income                                              9,085,658            17,612,696 
---------------------------------------------  --------  ---------------------  -------------------- 
 Operating expenditure 
 Impairment of loans                               3                13,364,498            10,355,873 
 Net realised and unrealised loss                                    1,085,544                     - 
  on foreign exchange 
 Net loss on financial asset at 
  fair value through profit or loss                4                         -               120,107 
 Loan servicing fees                              15                   792,640             1,453,665 
 Loan interest expense                             9                    63,600               731,813 
 Commitment fee                                    9                   187,500               337,500 
 Company administration and secretarial 
  fees                                                                 190,141               210,335 
 Audit, audit-related and non-audit 
  related fees                                                         118,965               149,917 
 Corporate broker services                                              25,000               147,173 
 Corporate services fees                          15                   105,582               149,019 
 Legal and professional fees                                           254,343               126,973 
 Directors' remuneration and expenses                                   87,447                89,539 
 Regulatory fees                                                         6,545                 9,709 
 Other operating expenses                                              297,302               119,514 
---------------------------------------------  --------  ---------------------  -------------------- 
 Total operating expenditure                                        16,579,107            14,001,137 
 
 Operating (loss) / profit for the 
  period before taxation                                           (7,493,449)             3,611,559 
---------------------------------------------  --------  ---------------------  -------------------- 
 Taxation for the period                          11                 (348,117)                     - 
---------------------------------------------  --------  ---------------------  -------------------- 
 Operating (loss) / income after 
  taxation for the period                                          (7,841,566)             3,611,559 
---------------------------------------------  --------  ---------------------  -------------------- 
 Other comprehensive income: 
  Items that may be reclassified to profit or loss 
  Gain on movement in fair value of loans advanced 3 1,525,785 - 
 Total comprehensive (loss) / income 
  for the period                                                   (6,315,781)             3,611,559 
 Earnings per share 
--------------------------------------------------  ---  --------  ----------------  --------------- 
 Basic                                               12                 (3.37p)                1.17p 
--------------------------------------------------  ---  --------  ----------------  --------------- 
 Diluted                                             12                 (3.37p)                1.17p 
--------------------------------------------------  ---  --------  ----------------  --------------- 
 Weighted average number of shares 
  outstanding 
 Basic                                               12               232,346,512        308,851,445 
 Diluted                                             12               232,346,512        308,851,445 
 
 

Other comprehensive income

The other comprehensive income recognised above relates to the unrealised gain on the movement in fair valuation of the Group's portfolio of loans advanced.

There were no other items of other comprehensive income in the current or prior period.

The Notes below form part of these condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 SEPTEMBER 2020

 
 
                                                     (Unaudited)        (Audited) 
                                                    30 September    31 March 2020 
                                                            2020 
                                           Notes             GBP              GBP 
----------------------------------------  ------  --------------  --------------- 
 ASSETS 
 Cash and cash equivalents                   6        52,209,665       46,602,238 
 Other receivables and prepayments                        14,404           48,533 
 Loans advanced                              3       128,197,082      200,094,130 
 TOTAL ASSETS                                        180,421,151      246,744,901 
----------------------------------------  ------  --------------  --------------- 
 
   EQUITY AND LIABILITIES 
 Capital and reserves 
 Share capital                              10       224,513,012      263,017,723 
 Retained deficit                                   (45,260,859)     (33,007,021) 
----------------------------------------  ------  --------------  --------------- 
 TOTAL SHAREHOLDERS' EQUITY                          179,252,153      230,010,702 
----------------------------------------  ------  --------------  --------------- 
 
 LIABILITIES 
 Liability fair value of currency 
  derivatives                                7           158,218        3,400,699 
 Loans payable                               9                 -       11,531,076 
 Accrued expenses and other liabilities      8         1,010,780        1,802,424 
----------------------------------------  ------  --------------  --------------- 
 TOTAL LIABILITIES                                     1,168,998       16,734,199 
----------------------------------------  ------  --------------  --------------- 
 
   TOTAL EQUITY AND LIABILITIES                      180,421,151      246,744,901 
----------------------------------------  ------  --------------  --------------- 
 
 
 NAV per share                                            83.86p           89.05p 
----------------------------------------  ------  --------------  --------------- 
 

The condensed consolidated financial statements were approved and authorised for issue by the Board of Directors on 18 December 2020 and were signed on its behalf by:

   Richard Boléat                          Jonathan Bridel 
   Chairman                                  Chairman of the Audit Committee 

The Notes below form part of these condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE SIX-MONTH PERIODED 30 SEPTEMBER 2020

 
 
                                                         Other Reserves       Retained 
                                          Share capital                        deficit          Total 
                                 Notes              GBP             GBP            GBP            GBP 
-----------------------------  --------  --------------  --------------  -------------  ------------- 
 Balance at 1 April 2020                    263,017,723               -   (33,007,021)    230,010,702 
 Redemption of ordinary 
  shares                          10       (38,499,854)               -              -   (38,499,854) 
 Share repurchases                10            (4,857)               -              -        (4,857) 
 Dividends declared               13                  -               -    (5,938,057)    (5,938,057) 
 Operating loss after 
  taxation for the period                             -               -    (7,841,566)    (7,841,566) 
 Other comprehensive 
  income                                              -       1,525,785              -      1,525,785 
 Balance at 30 September 
  2020 (unaudited)                          224,513,012       1,525,785   (46,786,644)    179,252,153 
-----------------------------  --------  --------------  --------------  -------------  ------------- 
 Balance at 1 April 
  2019                                      320,944,247               -   (12,596,119)    308,348,128 
 Share repurchases           10            (21,822,290)               -              -   (21,822,290) 
 Dividends declared          13                       -               -    (8,150,378)    (8,150,378) 
 Total comprehensive 
  income for the period                               -               -      3,611,559      3,611,559 
 Balance at 30 September 
  2019 (unaudited)                          299,121,957               -   (17,134,938)    281,987,019 
-------------------------  -------  -------------------  --------------  -------------  ------------- 
 
 

The Notes below form part of these condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE SIX-MONTH PERIODED 30 SEPTEMBER 2020

 
 
                                                                  (Unaudited)     (Unaudited) 
                                                                 1 April 2020    1 April 2019 
                                                                           to              to 
                                                                 30 September    30 September 
                                                                         2020            2019 
                                                   Notes                  GBP                 GBP 
------------------------------------------------  ------  -------------------  ------------------ 
 Operating activities 
 Total comprehensive (loss)/income 
  for the period                                                  (6,315,781)           3,611,559 
 Adjustments for: 
 Foreign exchange loss/(gain)                                       1,660,721         (6,770,315) 
 Interest income on loans advanced                                (9,073,630)        (16,659,332) 
 Impairment of loans                                 3             13,364,498          10,355,873 
 Net loss on financial asset at fair 
  value through profit or loss or loss               4                      -             120,107 
 Net gain on loans advanced at fair 
  value through other comprehensive 
  income                                                          (1,525,785)                   - 
 Fair value movement of currency derivatives         7            (3,242,481)           (364,350) 
------------------------------------------------  ------  -------------------  ------------------ 
 Operating cash flows before movements 
  in working capital                                              (5,132,458)         (9,706,458) 
 Loans advanced                                                             -         (9,145,982) 
 Principal and interest collections 
  on loans advanced                                  3             68,109,328          89,116,743 
 Principal and interest collections 
  on financial asset at fair value 
  through profit or loss                             4                      -           5,777,707 
 Decrease / (increase) in other receivables 
  and prepayments                                                      34,129         (2,218,556) 
 Decrease in accrued expenses and 
  other liabilities                                                 (791,644)            (11,272) 
 Net cash generated from operating 
  activities                                                       62,219,355          73,812,182 
------------------------------------------------  ------  -------------------  ------------------ 
 Financing activities 
 Loans issued                                                               -           2,636,618 
 Loan repayments                                     9           (11,531,076)        (35,017,165) 
 Dividends paid                                     13            (5,938,057)         (8,150,378) 
 Repurchase of Shares                                                 (4,857)        (21,822,290) 
 Redemption of Shares                               10           (38,499,854)                   - 
------------------------------------------------  ------  -------------------  ------------------ 
 Net cash used in financing activities                           (55,973,844)        (62,353,215) 
------------------------------------------------  ------  -------------------  ------------------ 
 Net increase in cash and cash equivalents                          6,245,511          11,458,967 
 Cash and cash equivalents at the 
  beginning of the period                                          46,602,238          29,408,480 
 Foreign exchange (loss)/gain on cash 
  and cash equivalents                                              (638,084)             114,763 
 Cash and cash equivalents at the 
  end of the period                                                52,209,665          40,982,210 
------------------------------------------------  ------  -------------------  ------------------ 
 
 

The Notes below form part of these condensed consolidated financial statements.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX-MONTH PERIODED 30 SEPTEMBER 2020

1. GENERAL INFORMATION

The Company is a closed-ended limited liability company registered under The Companies (Guernsey) Law, 2008 (as amended) with registered number 60680. The Company is a registered collective investment scheme in Guernsey and admitted to trading on the London Stock Exchange's Main Market and listed on the UKLA's premium segment. The Company's home member state for the purposes of the EU Transparency Directive is the United Kingdom. As such, the Company is subject to regulation and supervision by the Financial Conduct Authority, being the financial markets supervisor in the United Kingdom. The registered office of the Company is De Catapan House, Grange Road, St Peter Port, Guernsey GY1 2QG.

The Company was established to provide shareholders with sustainable and attractive levels of dividend income, primarily by way of investment in loans originated both directly through the Platforms operated by Funding Circle and indirectly, in each case as detailed in the investment policy. The Company identified Funding Circle as a leader in the growing Platform lending space with its established infrastructure, scale of origination volumes and expertise in accurately assessing loan applications.

On 21 May 2019, the Company published a circular and notice of extraordinary general meeting ("EGM") which sets out details of, and sought shareholder approval for, certain Proposals. The Proposals involved modifying the Company's Investment Objective and Policy to reflect a realisation strategy and amending its Articles to include a mechanism to enable the Company to redeem shares in the Company compulsorily so as to return cash to shareholders.

On 11 June 2019, the Proposals were approved at the EGM as discussed in detail in the most recent Annual Report. The Company publishes net asset value statements on its website at www.smecreditrealisation.com .

2. Basis of preparation

The Company has prepared these Condensed Consolidated Financial Statements on a going concern basis in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom Financial Conduct Authority and prepared in accordance with International Financial Reporting Standard ('IFRS') IAS 34 'Interim Financial Reporting'. This Half-Yearly Report does not comprise statutory financial statements within the meaning of The Companies (Guernsey) Law, 2008 (as amended) and should be read in conjunction with the audited Consolidated Financial Statements of the Group for the year ended 31 March 2020, which have been prepared in accordance with IFRS. The statutory financial statements for the year ended 31 March 2020 were approved by the Board of Directors on 28 July 2020. The opinion of the auditor on those financial statements was unqualified. Other than the policy described below relating to fair value through other comprehensive income, the accounting policies adopted in these condensed consolidated financial statements are unchanged since 31 March 2020. The Company does not have seasonal or cyclical interim business operations.

This Half-Yearly Report for the period ended 30 September 2020 has been reviewed by the auditor but not audited. PwC have been performing the audit of the Company's year end financial statements for five financial years, starting with the period ended 31 March 2016.

Reclassification of loans advanced from financial asset at amortised cost to financial asset at fair value through other comprehensive income

For financial assets, reclassification is required between fair value through other comprehensive income ("FVTOCI") and amortised cost, if and only if the entity's business model objective for its financial assets changes so its previous model assessment would no longer apply.

If reclassification is appropriate, it must be done prospectively from the reclassification date which is defined as the first day of the first reporting period following the change in business model. An entity does not restate any previously recognised gains, losses, or interest.

The Group's loans advanced have been reclassified and now fall within this category due to the change in business model during the prior financial year. This is the first reporting period showing the loans advanced at fair value through other comprehensive income.

 
                                     31 March 2020   Reclassification       1 April 
                                                                          2020 2020 
                                               GBP                GBP           GBP 
 Loans advanced held at amortised 
  cost                                 200,094,130      (200,094,130)             - 
 Loans advanced held at fair 
  FVTOCI                                         -        200,094,130   200,094,130 
 
 

Classification and measurement

Financial assets that are held for collection of contractual cash flows and for selling the assets, where the assets' cash flows represent solely payments of principal and interest, and that are not designated at fair value through profit or loss, are measured at fair value through other comprehensive income. Movements in the carrying amount are taken through other comprehensive income, except for the recognition of impairment gains or losses, interest revenue and foreign exchange gains and losses on the instrument's amortised cost which continue to be recognised in profit or loss.

The fair value of the loans advanced has been estimated by discounting expected future cash flows from the loans advanced using a discount rate determined by the Directors based on appropriate market comparatives and conditions. Refer to note 14 for further information.

Disposal

On disposal of any financial asset measured at FVTOCI, any related balance within the FVTOCI reserve is reclassified to other gains/(losses) within profit or loss.

In the Directors' opinion, all other non-mandatory new accounting requirements are either not yet permitted to be adopted, or would have no material effect on the reported performance, financial position or disclosures of the Group and consequently have neither been adopted nor listed.

3. LOANS ADVANCED

 
                                                                             (Unaudited)            (Audited) 
                                                                            30 September             31 March 
                                                                                    2020                 2020 
                                                                               At FVTOCI    At amortised cost 
                                                                                     GBP                  GBP 
-------------------------------------------------------------------  ---  --------------  ------------------- 
 Balance at the beginning of the period/year                                 200,094,130          340,222,868 
 Advanced                                                                              -            8,838,632 
 Interest income                                                               9,073,630           28,861,837 
 Principal and interest collections                                         (68,109,328)        (160,603,434) 
 Impairment allowance for the period/year                                   (13,364,498)         (22,454,031) 
 Foreign exchange (losses)/gains                                             (1,022,637)            5,228,258 
 Gain on movement in fair value through other comprehensive income             1,525,785                    - 
-------------------------------------------------------------------  ---  --------------  ------------------- 
 Balance at the end of the period/year                                       128,197,082          200,094,130 
------------------------------------------------------------------------  --------------  ------------------- 
 

The Group predominantly made unsecured loans in previous periods and prior to the modification of the Company's investment policy during the prior year. As at 30 September 2020, the carrying value of loans secured by charges over properties is GBP371,588 (31 March 2020: GBP647,606).

Each loan has a contractual payment date for principal and interest. The Group considers a loan as past due when the borrower's repayment has not been received for at least 30 days from the scheduled payment date. A loan is classified as defaulted when the borrower's repayment is late by 91 or more days, except for those loans which are under forbearance measures which are classified as defaulted when repayment is late by 180 or more days.

The following table shows the movement in impairment allowance during the period:

 
                                                         (Unaudited)     (Audited) 
                                                        30 September      31 March 
                                                                2020          2020 
                                                                 GBP           GBP 
----------------------------------------------------  --------------  ------------ 
 Impairment allowance at beginning of the 
  period/year - previously reported                       59,019,908    36,565,877 
 Impairment allowance for the period/year 
  - additional allowance based on IFRS 9 model            13,364,498    22,454,031 
 Impairment allowance at the end of the period/year       72,384,406    59,019,908 
----------------------------------------------------  --------------  ------------ 
 

As a result of the COVID-19 global pandemic, impairment allowance has increased for the period due to an increased number of delinquencies across the Group's portfolio of loans advanced. Impairment losses increased by GBP13,364,498 during the period to 30 September 2020 (30 September 2019: GBP10,355,873).

The table below shows an analysis of the principal and interest of the loans along with the amount recognised as an impairment allowance analysed by the stages described within IFRS 9:

 
                                                                   (Unaudited) 
                                                                 30 September 2020 
                                                           --------------------------- 
                                                                Principal   Impairment 
                                                             and interest    allowance 
---------------------------------------------------   ---  --------------  ----------- 
 Stage 1 - no change in credit risk from inception             99,416,912    4,313,910 
 Stage 2 - significant increase in credit risk 
  but not yet defaulted                                        38,464,769   14,300,977 
 Stage 3 - defaulted                                           61,174,022   53,769,519 
                                                              199,055,703   72,384,406 
  -------------------------------------------------------  --------------  ----------- 
 
 
                                                                  (Audited) 
                                                       31 March 2020 
                                   ---------------------------------------------------- 
                                                                 Principal   Impairment 
                                                              and interest    allowance 
------------------  ----------  --------------------  --------------------  ----------- 
 Stage 1 - no change in credit risk from inception             184,087,094    7,570,445 
 Stage 2 - significant increase in credit risk but 
  not yet defaulted                                             19,635,038    4,828,723 
 Stage 3 - defaulted                                            55,391,906   46,620,740 
                                                               259,114,038   59,019,908 
  ----------------------------                                ------------  ----------- 
 
 

Loans in stage 2 have been separated into two groups for the purposes of calculating expected credit losses, the first group includes impairment relating to loans which are late, have recently returned to making full repayments but have not yet caught up on arrears, and loans which are on forbearance measures. The second group includes loans which are late and have not been making any recent repayments.

In October 2020, Basinghall sold a pool of UK non-performing loans to a third party at a modest premium to carrying value, receiving proceeds of GBP2,203,183.

Structured Finance Transactions

In June 2016, the Group entered into a structured finance transaction with the European Investment Bank (the "EIB transaction"). The transaction involved the Company participating in the financing of an Irish domiciled special purpose vehicle ("EIB SPV"). The Company invested GBP25 million into the junior Class B Note issued by the EIB SPV whilst the European Investment Bank ("EIB") committed GBP100 million in a senior loan to the EIB SPV. This transaction went into amortisation in June 2018. The EIB SPV and its financial results are not consolidated into the Group.

In August 2018, the Group entered into a transaction to provide lending to a special purpose vehicle, Queenhithe, which made loans to UK small businesses. The Group, through Basinghall, provided an initial funding of approximately GBP9.2 million through subscription into the Class B note issued by Queenhithe. Queenhithe has been accounted for in these consolidated financial statements as a subsidiary consolidated into the results of the Group.

In November 2018, the transaction was updated whereby the Department for Business, Energy and Industrial Strategy ("BEIS") - the British Business Bank's ("BBB") sole shareholder - agreed to provide up to GBP150 million of funding via a senior floating rate loan to Queenhithe.

Following the result of the EGM on 11 June 2019, the Group has ceased any further investment through Queenhithe.

The transactions entered into by the Group in respect of the structured financing arrangements for Lambeth are discussed in note 9.

4. FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS

 
                                                         (Unaudited)    (Audited) 
                                                        30 September     31 March 
                                                                2020         2020 
                                                                 GBP          GBP 
-------------------------------------------  ---  ---  -------------  ----------- 
 Balance at the beginning of the period/year                       -   12,349,178 
 Principal and interest collections                                -  (6,153,897) 
 Net loss on the change in fair value 
  of financial asset at fair value 
  through profit or loss during the 
  period/year                                                      -  (6,195,281) 
------------------------------------------------  ---  -------------  ----------- 
 Balance at the end of the period/year                             -            - 
-----------------------------------------------------  -------------  ----------- 
 

The Group's financial asset at fair value through profit or loss relates to the investment in the EIB transaction.

In October 2019, one of the financial covenants in respect of the EIB transaction was breached resulting in a switch from principal proceeds being distributed pari passu between the EIB and the Company to being fully allocated to the EIB until such time as the loan with the EIB has been fully repaid or the breach is no longer continuing. Principal and interest collections in the transaction are currently being applied to repay the loan with the EIB.

It has been estimated that the Company will not receive any future cashflows from its investment into the EIB transaction which resulted in the full write down of the Company's interest in the prior financial year causing the net loss on change in fair value during the period of GBPnil (30 September 2019: GBP120,107) and a fair value of GBPnil (31 March 2020: GBPnil) as at 30 September 2020.

The calculation of the fair value is discussed in note 14.

5. SEGMENTAL REPORTING

The Group operates in the UK, US, Germany, Spain and the Netherlands. For financial reporting purposes, Germany, Spain and the Netherlands combine to make up the Continental Europe operating segment.

The measurement basis used for evaluating the performance of each segment is consistent with the policies used for the Group as a whole. Assets, liabilities, profits and losses for each reportable segment are recognised and measured using the same accounting policies as the Group.

Except for the EIB transaction, all of the Group's investments are loans to SMEs. Each individual SME loan does not generate income that exceeds 10% of the Group's total income.

The structured finance transaction and the corresponding income have been reported under the 'UK' segment below. All items of income and expenses not directly attributable to specific reportable segments have been included in 'Other income and expenses' column.

Segment performance for the period ended 30 September 2020 - (unaudited)

 
                                       UK            US            CE    Other income   Consolidated 
                                                                         and expenses 
                                      GBP           GBP           GBP             GBP            GBP 
--------------------------  -------------  ------------  ------------  --------------  ------------- 
 Total revenue                  5,307,044     1,863,476     1,903,105          12,028      9,085,653 
 Impairment of loans         (10,656,833)   (1,171,094)   (1,536,571)               -   (13,364,498) 
 Net gain/(loss) on 
  the change in fair 
  value of loans advanced       3,435,451   (1,049,861)     (859,805)               -      1,525,785 
 (Loss)/profit after 
  taxation                    (3,761,850)   (1,119,015)   (1,446,944)          12,028    (6,315,781) 
 

Segment assets and liabilities as at 30 September 2020 - (unaudited)

 
 
                               UK           US           CE       Other assets   Consolidated 
                                                               and liabilities 
                              GBP          GBP          GBP                GBP            GBP 
----------------  ---------------  -----------  -----------  -----------------  ------------- 
 Assets               127,738,156   23,205,323   29,463,268             14,404    180,421,151 
 Liabilities            (611,253)    (247,423)    (310,322)                  -    (1,168,998) 
 
 

Segmental performance for the period ended 30 September 2019 - (unaudited)

 
                                  UK            US            CE    Other income   Consolidated 
                                                                    and expenses 
                                 GBP           GBP           GBP             GBP            GBP 
----------------------  ------------  ------------  ------------  --------------  ------------- 
 Total revenue             9,282,678     4,068,099     3,229,323         912,489     17,492,589 
 Impairment of loans     (4,922,023)   (3,765,605)   (1,668,245)               -   (10,355,873) 
 Profit/(loss) before 
  taxation                 1,530,496      (51,325)     1,219,899         912,489      3,611,559 
 

Segment assets and liabilities as at 31 March 2020 - (audited)

 
                          UK            US            CE       Other assets   Consolidated 
                                                            and liabilities 
                         GBP           GBP           GBP                GBP            GBP 
-------------  -------------  ------------  ------------  -----------------  ------------- 
 Assets          167,316,544    39,452,582    39,927,242             48,533    246,744,901 
 Liabilities    (13,077,759)   (1,885,154)   (1,771,286)                  -   (16,734,199) 
 

6. cash and cash equivalents

 
                                            (Unaudited)    (Audited) 
                                           30 September     31 March 
                                                   2020         2020 
                                                    GBP          GBP 
---------------------------------------  --------------  ----------- 
 Cash at bank                                 7,917,634   17,233,099 
 Cash equivalents                            44,292,031   29,369,139 
 Balance at the end of the period/year       52,209,665   46,602,238 
---------------------------------------  --------------  ----------- 
 

Cash equivalents are term deposits held with different banks with maturities between overnight and 90 days.

7. Derivatives

Foreign exchange swaps are held to hedge the currency exposure generated by US dollar assets and Euro assets held by the Group (see note 14). The hedges have been put in place taking into account the fact that derivative positions, such as simple foreign exchange swaps, could cause the Group to require cash to fund margin calls on those positions. The Group negotiated the terms of the contracts with each counterparty such that no collateral is required on the initial transaction and in instances of temporary negative fair value positions.

Fair value of currency derivatives

 
                                        (Unaudited)     (Audited) 
                                         Fair value    Fair value 
                                       30 September      31 March 
                                               2020          2020 
                                                GBP           GBP 
-----------------------------------  --------------  ------------ 
 Valuation of currency derivatives        (158,218)   (3,400,699) 
                                          (158,218)   (3,400,699) 
-----------------------------------  --------------  ------------ 
 
 
            (Unaudited)     (Audited) 
             Fair value    Fair value 
           30 September      31 March 
                   2020          2020 
                    GBP           GBP 
-------  --------------  ------------ 
 Euro            23,022        47,402 
 USD             57,405       127,088 
 GBP          (238,645)   (3,575,189) 
 Total        (158,218)   (3,400,699) 
-------  --------------  ------------ 
 

8. ACCRUED EXPENSES and other LIABILITIES

 
                                              (Unaudited)   (Audited) 
                                             30 September    31 March 
                                                     2020        2020 
                                                      GBP         GBP 
------------------------------------  ---  --------------  ---------- 
 Service fees payable                             109,105     158,864 
 Audit fees payable                               245,687     254,745 
 Legal and advisory fees payable                   80,462      19,166 
 Loan interest payable (see note 9)                     -       8,124 
 Taxation payable                                 348,117       1,000 
 Directors fee payable                             11,895           - 
 Other liabilities                                215,514     201,843 
 Amount payable to the EIB SPV                          -   1,158,682 
-----------------------------------------  --------------  ---------- 
                                                1,010,780   1,802,424 
 ----------------------------------------  --------------  ---------- 
 

9. loanS payable

 
                                                         (Unaudited)    (Audited) 
                                                        30 September     31 March 
                                                                2020         2020 
                                                                GBP           GBP 
------------------------------------------------  -----------------  ------------ 
 Balance at the beginning of the period/year             11,531,076    73,651,620 
 Drawdown                                                         -     2,636,619 
 Repayment                                             (11,531,076)  (64,757,163) 
 Balance at the end of the period/year                            -    11,531,076 
------------------------------------------------  -----------------  ------------ 
 
 

In January 2018, the Group entered into the Citibank transaction to provide lending to a special purpose vehicle, Lambeth, which made loans to UK small businesses. Under the terms of the Senior Facility Agreement, Citibank provided GBP50 million into the transaction, by entering into a senior floating rate loan.

In July 2018, the Citibank transaction was amended whereby the senior loan from Citibank was increased to GBP66 million with a corresponding net increase to the Group's lending to Lambeth. As a result, Basinghall increased its investments into Lambeth to keep the proportional exposure between Citibank and Basinghall. The additional investment by Basinghall to Lambeth was settled by transferring a portfolio of loans during that period.

The loan from Citibank was fully repaid by Lambeth on 11 April 2020. Total interest expense on this loan during the period was GBP638 (30 September 2019: GBP529,167).

In August 2018, the Group entered into a transaction to provide lending to Queenhithe. The Group provided initial funding of approximately GBP9.2 million through subscription into the Class B note issued by Queenhithe. In November 2018, the transaction was updated whereby the Department for Business, Energy and Industrial Strategy ("BEIS") - the British Business Bank's ("BBB") sole shareholder - agreed to provide up to GBP150 million of funding via a senior floating rate loan to Queenhithe. The facility came with a 12-year legal maturity. As at 30 September 2020, Queenhithe has drawn GBP 20,378,043 (31 March 2020: GBP20,378,043) from the facility.

Pursuant to the original loan agreement with BBB and the relevant agreement supplement signed in November 2018, the total commitment fee incurred for the period was GBP187,500 (30 September 2019: GBP337,500) with GBPnil (31 March 2020: GBP93,750) outstanding as at 30 September 2020.

On 17 August 2020, Queenhithe fully repaid the remaining amount owed on its loan with Fleetbank. The remaining portfolio of Credit Assets held were transferred to Basinghall on the same date for an amount equal to the principal and interest outstanding at 31 July 2020 being the economic cut-off date for the transaction. The process is underway in order to put Queenhithe into formal liquidation in the coming months.

The loan from BBB had a floating interest rate plus a margin. Total interest expense on this loan during the period was GBP62,962 (30 September 2019: GBP202,646) with GBPnil (31 March 2020: GBP6,964) outstanding as at 30 September 2020.

10. Share capital

 
 Issued and fully paid              Number of      Shares issued   Issue costs     Net Shares 
                                     shares               amount                       amount 
 Ordinary shares                                             GBP           GBP            GBP 
--------------------  -----------  -------------  --------------  ------------  ------------- 
 At 31 March 2020 - (audited)        258,301,354     268,762,623   (5,744,900)    263,017,723 
 Share repurchases                      (10,000)         (4,857)             -        (4,857) 
 Redemption of ordinary 
  shares                            (44,551,554)    (38,499,854)             -   (38,499,854) 
---------------------------------  -------------  --------------  ------------  ------------- 
 At 30 September 2020 
  - (unaudited)                      213,739,800     230,257,912   (5,744,900)    224,513,012 
---------------------------------  -------------  --------------  ------------  ------------- 
 
 
 
 Issued and fully paid                                                 Number of         Shares   Issue costs     Net Shares 
                                                                          shares         issued                       amount 
                                                                                         amount 
 Ordinary                                                                                   GBP           GBP            GBP 
 shares 
------------  --------  --------------------------------------------------------  -------------  ------------  ------------- 
 At 31 March 2019 - 
  (audited)                                                          323,044,293    326,689,147   (5,744,900)    320,944,247 
 Share repurchases                                                  (25,594,750)   (21,822,290)             -   (21,822,290) 
----------------------  --------------------------------------------------------  -------------  ------------  ------------- 
 At 30 September 2019 
  - (unaudited)                                                      297,449,543    304,866,857   (5,744,900)    299,121,957 
----------------------  --------------------------------------------------------  -------------  ------------  ------------- 
 
 

As at 30 September 2020, the Company has purchased a total of 43,746,667 shares (31 March 2020: 43,736,667) of which nil (31 March 2020: 586,243) remain held in treasury. During the period, a total of 596,243 (31 March 2020: 43,150,424) shares held in treasury were cancelled and formally discharged.

Following the COVID-19 pandemic and the uncertainty around its impact, the directors resolved to suspend the programme of repurchases of its own shares on 2 April 2020 until further notice.

The Company redeemed a total of 44,551,554 (31 March 2020: 32,245,772) shares for a total amount of GBP 38,499,854 (31 March 2020: GBP30,499,833) during the period.

Rights attaching to the Ordinary share class

All shareholders have the same voting rights in respect of the share capital of the Company. Every member who is present in person or by a duly authorised representative or proxy shall have one vote on a show of hands and on a poll every member present shall have one vote for each share of which he is the holder, proxy or representative. All shareholders are entitled to receive notice of the Annual General Meeting and any other General meetings.

Each Ordinary share will rank in full for all dividends and distributions declared after their issue and otherwise pari passu in all respects with each existing Ordinary share and will have the same rights (including voting and dividend rights and rights on a return of capital) and restrictions as each existing Ordinary share.

11. TAXATION

 
                                                              (Unaudited)     (Unaudited) 
                                                             30 September    30 September 
                                                                     2020            2019 
                                                                      GBP             GBP 
---------------------------------------------  ---  ---------------------  -------------- 
 Operating loss before taxation                               (7,493,449)       3,611,559 
--------------------------------------------------  ---------------------  -------------- 
 Tax at the standard Guernsey income                                    -               - 
  tax rate of 0% 
 Effects of tax rates in other jurisdictions                    (348,117)               - 
 Taxation expense                                               (348,117)               - 
--------------------------------------------------  ---------------------  -------------- 
 

The Group may be subject to taxation under the tax rules of the jurisdictions in which it invests. During the period, Basinghall, Tallis, Lambeth and Queenhithe which are consolidated into the Group's results were subject to a corporation tax rate of 25% in Ireland.

From 1 January 2020 new tax rules were applicable under the legislative changes made to the Irish Finance Act 2019. These rules included changes to the anti-hybrid and anti-avoidance rules in section 110 TCA of the legislation.

Basinghall paid class B profit participating note interest to SCRF in February 2020 totaling GBP1,392,467, which is considered disallowable for tax purposes in Ireland following the legislative changes discussed above and so a 25% tax charge will be levied totaling GBP348,117. This charge relates to the prior financial year ended 31 March 2020 and is accrued in the current period due to the timing of the completion of the impact assessment. The Group has been advised that changes made to its structural arrangements have caused the relevant entity to fall outside the scope of the legislative changes discussed above with effect from 1 April 2020.

12. Earnings per share ("EPS")

The calculation of the basic and diluted EPS is based on the following information:

 
                                              (Unaudited)     (Unaudited) 
                                             30 September    30 September 
                                                     2020            2019 
                                                      GBP             GBP 
------------------------------------  ---  --------------  -------------- 
 Total comprehensive (loss)/income            (6,315,781)       3,611,559 
 Adjustment for the effect of other 
  comprehensive income                        (1,525,785) 
-----------------------------------------  --------------  -------------- 
 (Loss)/profit for the purposes of 
  basic and diluted EPS                       (7,841,566)       3,611,559 
 Weighted average number of shares 
  for the purposes of EPS: 
 Basic and diluted                            232,346,512     308,851,445 
 Basic and diluted EPS                            (3.37p)           1.17p 
-----------------------------------------  --------------  -------------- 
 

13. Dividends

The following table shows a summary of dividends declared during the period, and previous period, in relation to Ordinary shares.

 
 30 September         Date declared         Ex-dividend     Per share       Total        Number of 
  2020                                             date                              shares issued 
                                                                                                as 
                                                                Pence         GBP   scrip dividend 
------------------  ---------------  ------  ----------  ------------  ----------  --------------- 
 Ordinary shares 
 Interim dividend      9 April 2020       23 April 2020        1.3125   3,132,722                - 
 Interim dividend      21 July 2020        30 July 2020        1.3125   2,805,335                - 
 Total                                                          2.625   5,938,057                - 
-------------------------------------------------------  ----  ------  ----------  --------------- 
 
 
 
 30 September         Date declared          Ex-dividend      Per share       Total        Number of 
  2019                                              date                               shares issued 
                                                                                                  as 
                                                                  Pence         GBP   scrip dividend 
------------------  ---------------  --------  ---------  -------------  ----------  --------------- 
 Ordinary shares 
 Interim dividend     25 April 2019          02 May 2019          1.313   4,143,549                - 
 Interim dividend      22 July 2019       01 August 2019          1.313   4,006,829                - 
 Total                                                            2.626   8,150,378                - 
--------------------------------------------------------  -----  ------  ----------  --------------- 
 
 

The Company's scrip offering programme has been discontinued from 31 March 2019.

14. FINANCIAL RISK MANAGEMENT

Financial risk management and financial instruments

The Group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

The condensed consolidated financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's Annual Report and financial statements as at 31 March 2020.

There have been no changes in the risk management or in any risk management policies since the prior year end.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. Compared to the prior year end, there has been no material change in how the Board of Directors manages liquidity risk.

Fair value measurement

The Group classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

-- Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities. Investments, whose values are based on quoted market prices in active markets and are therefore classified within Level 1, include active listed equities. The quoted price for these instruments is not adjusted;

-- Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Financial instruments 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. 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; and

-- Level 3 - inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes "observable" requires significant judgement by the Group. The Group considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary and provided by independent sources that are actively involved in the relevant market.

The Group's financial instruments measured at fair value as at 30 September 2020 are its currency derivatives, the investment in the EIB transaction and its loans advanced.

The fair value of the currency derivatives held by State Street and Northern Trust were estimated by Record Currency Management Limited based on the GBP-USD forward exchange rate, the GBP-EUR forward exchange rate, the GBP-USD spot rate and the GBP-EUR spot rate as at 30 September 2020.

In estimating the fair value of the EIB transaction, the Directors believe that no further amounts will be available to be paid in the future and that the estimated fair value was GBPnil as at 30 September 2020 (31 March 2020: GBPnil).

As a result of the Company's managed wind-down and change in business model, the Company is required to report under fair value accounting for the valuation of Credit Assets from 1 April 2020.

The Company has appointed a third-party valuation expert to provide quarterly valuations of its Credit Assets. The fair value of the Credit Assets has been estimated by discounting expected future cash flows from the loans advanced using a discount rate determined by the Directors based on appropriate market comparatives and conditions. The fair value of the Group's Credit Assets as at 30 September was GBP128,197,082 (31 March 2020: GBP200,094,130). The most relevant unobservable input to the fair valuation was the discount rate, which has been summarised below based on the geography of each of the Groups portfolios:

 
 30 September   30 September   30 September   31 March   31 March 2020   31 March 2020 
         2020           2020           2020       2020 
           UK             US             CE         UK              US              CE 
-------------  -------------  -------------  ---------  --------------  -------------- 
       7.890%         8.759%         7.360%    13.878%         14.191%         13.625% 
 

The Board of Directors believe that the fair value of the currency derivatives falls within Level 2 in the fair value hierarchy described above. The fair value of the loans advanced and the EIB transaction falls within Level 3 in the fair value hierarchy due to the unobservable inputs used in the valuation which include discount rate and timing and amounts of cash flows.

The following table presents the fair value of the Group's assets and liabilities not measured at fair value as at 30 September 2020 but for which fair value is disclosed:

 
                                              30 September 2020 - (unaudited) 
                                     ------------------------------------------------- 
                                         Level 1       Level 2   Level 3         Total 
                                             GBP           GBP       GBP           GBP 
-----------------------------------  -----------  ------------  --------  ------------ 
 Cash and cash equivalents            52,209,665             -         -    52,209,665 
 Other receivables and prepayments             -        14,404         -        14,404 
 Accrued expenses and other 
 liabilities                                   -   (1,010,780)         -   (1,010,780) 
                                      52,209,665     (996,376)         -    51,213,289 
-----------------------------------  -----------  ------------  --------  ------------ 
 
 
                                                     31 March 2020 - (audited) 
                                     --------------------------------------------------------- 
                                         Level 1       Level 2        Level 3          Total 
                                             GBP           GBP            GBP            GBP 
-----------------------------------  -----------  ------------  -------------  ------------- 
 Loans advanced                                -             -    169,800,037    169,800,037 
 Cash and cash equivalents            46,602,238             -              -     46,602,238 
 Other receivables and prepayments             -        48,533              -         48,533 
 Loans payable                                 -             -   (11,531,076)   (11,531,076) 
 Accrued expenses and other 
 liabilities                                   -   (1,802,424)              -    (1,802,424) 
                                      46,602,238   (1,753,891)    158,268,961    203,117,308 
-----------------------------------  -----------  ------------  -------------  ------------- 
 

The Board of Directors believe that the carrying values for cash and cash equivalents, other receivables and prepayments, loans payable and accrued expenses and other liabilities approximate their fair values.

In the case of cash and cash equivalents, other receivables and prepayments, and accrued expenses and other liabilities the amount estimated to be realised in cash are equal to their value shown in the Consolidated Statement of Financial Position due to their short-term nature.

There were no transfers between levels during the period or the prior year.

The managed wind-down of the Company is being operated with a view to the Company realising all of its investments in accordance with the Investment Objective. Such realisations will comprise natural amortisation of the Company's investments in Credit Assets as well as potentially opportunistic portfolio sales.

During the prior financial year, the Company ran an auction process as the Board explored a potential sale of a portion of the Company's assets during which it received a high level of interest from potential buyers. The Company continues to engage with potential buyers, however given the recent market volatility and uncertainty caused by COVID-19, it is likely the asset sales shall be delayed, or may not proceed at all. The Directors continue to explore potential portfolio disposals where pricing levels are attractive.

Capital risk management

The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the Group. The Group's capital is represented by Ordinary share capital and retained earnings. The capital of the Group is managed in accordance with its investment policy, in pursuit of its investment objectives.

The Group is not subject to externally imposed capital requirements. However, certain calculations on the employment of leverage are required under the AIFMD. This directive requires more information to be reported if the Group's leverage exceeds three times its net asset value. As at 30 September 2020, the Group used leverage through the EIB only following the repayment of the Queenhithe and Citibank transactions but did not exceed the threshold within the directive and therefore did result in a change of the reporting requirements as prescribed by AIFMD.

15. Related party disclosure

The Directors, who are the key management personnel of the Group, are remunerated per annum as follows:

 
                                   GBP 
--------------------------    -------- 
 Chairman                       50,000 
 Audit Committee Chairman       40,000 
 Risk Committee Chairman        40,000 
 Other Directors                50,000 
                               180,000 
  --------------------------  -------- 
 

Sachin Patel has waived his fees as a director of the Company.

Richard Burwood is/was also a director of Basinghall, Tallis, Lambeth and Queenhithe and is entitled to receive GBP5,000 (31 March 2020: GBP5,000) per annum as Director's fees from each of the companies. Richard Burwood resigned as a director of Basinghall and Tallis on 13 July 2020.

The Directors held the following number of shares as at 30 September 2020 and 31 March 2020:

 
                             (unaudited)               (audited) 
                          As at 30 September       As at 31 March 2020 
                                 2020 
                       -----------------------  ----------------------- 
                        Number of   % of total   Number of   % of total 
                           shares    shares in      shares    shares in 
                                         issue                    issue 
---------------------  ----------  -----------  ----------  ----------- 
 Richard Boléat       21,591       0.0101       4,448       0.0015 
 Jonathan Bridel           26,069       0.0122       4,448       0.0015 
 Richard Burwood           39,482       0.0185       4,448       0.0015 
 Frederic Hervouet         78,760       0.0368      95,176       0.0327 
 Sachin Patel                   -            -           -            - 
                          165,902       0.0776     108,520       0.0372 
---------------------  ----------  -----------  ----------  ----------- 
 

During the period, each of the directors except for Sachin Patel purchased a number of shares which contributed to the movement in the number of shares held by each of the directors as well as mandatory redemptions paid by the Company.

The Group had no employees during the period or the prior year.

The Directors delegate certain functions to other parties. In particular, the Directors have appointed Funding Circle UK , Funding Circle US and Funding Circle CE to originate and service the Group's investments in loans and FCGPL to provide corporate services. Notwithstanding these delegations, the Directors have responsibility for exercising overall control and supervision of the services provided by the Funding Circle entities, for risk management of the Group and otherwise for the Group's management and operations.

The transaction amounts incurred during the period and amounts payable to each of Funding Circle UK, Funding Circle Global Partners Limited ("FCGPL"), Funding Circle US and Funding Circle CE are disclosed below.

 
                                     Expense   Payable as                              Expense                 Payable 
                                  during the        at 30                           during the                as at 31 
                                      period    September                         period ended              March 2020 
                                       ended         2020                         30 September 
                                          30                                              2019 
                                   September 
                                        2020 
                   Transaction           GBP          GBP                                  GBP                     GBP 
-------------  ---------------  ------------  -----------  -----------------------------------  ---------------------- 
 Funding 
  Circle 
  UK             Servicing fee       415,584       56,641                              799,185                  56,860 
                     Corporate 
                      services 
 FCGPL                     fee       105,582            -                              149,019                       - 
                 Reimbursement 
 FCGPL             of expenses        12,647            -                               19,015                   1,549 
 Funding 
  Circle 
  US             Servicing fee       193,416       26,102                              357,435                  36,748 
 Funding 
  Circle 
  CE             Servicing fee       183,640       26,362                              297,045                  35,579 
 
 
 

16. INVESTMENT IN SUBSIDIARIES

The Company accounts for its interest in the following entities as subsidiaries, in accordance with the definition of subsidiaries and control set out in IFRS 10:

 
                              Country           Principal       Transactions        (unaudited)              (audited) 
                     of incorporation            activity                           Outstanding            Outstanding 
                                                                                      amount as              amount as 
                                                                                at 30 September            at 31 March 
                                                                                           2020                   2020 
                                                                                            GBP                    GBP 
 Basinghall                                      Invested 
  Lending                                       in Credit 
  Designated                                       Assets       Subscription 
  Activity                                     originated           of notes 
  Company                     Ireland           in the UK             issued             86,224,627        127,017,192 
                                                 Invested 
                                                in Credit 
                                                   Assets 
 Tallis Lending                                originated 
  Designated                                  in Germany,       Subscription 
  Activity                                the Netherlands           of notes 
  Company                     Ireland          and Spain*             issued             29,716,585         39,421,897 
 Lambeth Lending                                                    Residual 
  Designated                                                        interest 
  Activity                                     In process      accrued prior 
  Company                     Ireland      of liquidation     to liquidation                 53,749         66,216,309 
 Queenhithe 
  Lending                                                           Residual 
  Designated                                                        interest 
  Activity                                     In process      accrued prior 
  Company                     Ireland      of liquidation     to liquidation                 65,682         31,720,795 
                                                                                        116,060,643        264,376,193 
   -------------------------------------------------------------------------  ---------------------  ----------------- 
 
 

17. Subsequent events

In October 2020, Basinghall sold a pool of UK non-performing loans to a third party at a modest premium to carrying value, receiving proceeds of GBP2,203,183.

Shortly after 30 September 2020, the UK went back into a national lockdown due to a second wave of COVID-19. Similar governmental measures being implemented in both CE and the US following the period end are also a possibility. The full impact of COVID-19 on the Group's portfolios is uncertain, however the Directors continue to monitor the delinquency and default data available to them closely.

On 21 October 2020, the Company announced that it has declared a quarterly dividend of 1.3125 pence per share payable on 20 November 2020 and will also be returning approximately GBP42m to shareholders by way of a compulsory partial redemption of shares payable on 10 November 2020.

In the opinion of the Directors, there are no other material subsequent events that require adjustment to the balances as at the period end or disclosure in the financial statements.

BOARD OF DIRECTORS

Richard Boléat

Chairman, Remuneration and Nominations Committee Chairman, Non-executive Director

Richard Boléat was born in Jersey in 1963. He is a Fellow of the Institute of Chartered Accountants in England & Wales, having trained with Coopers & Lybrand in Jersey and the United Kingdom. After qualifying in 1986, he subsequently worked in the Middle East, Africa and the UK for a number of commercial and financial services groups before returning to Jersey in 1991. He was formerly a Principal of Channel House Financial Services Group from 1996 until its acquisition by Capita Group plc ("Capita") in September 2005. Mr Boléat led Capita's financial services client practice in Jersey until September 2007, when he left to establish Governance Partners, L.P., an independent corporate governance practice. He currently acts as Chairman of CVC Credit Partners European Opportunities Limited and Audit Committee Chairman of M&G Credit Income Investment Trust plc, and also serves on the boards of a number of other substantial collective investment and investment management entities established in Jersey, the Cayman Islands and Luxembourg. He is regulated in his personal capacity by the Jersey Financial Services Commission.

Jonathan Bridel

Audit Committee Chairman, Non-executive Director

Mr Bridel is currently a non-executive Chairman or director of various listed and unlisted investment funds and private equity investment managers. Listings include Starwood European Real Estate Finance Limited (until 31 December 2020), The Renewables Infrastructure Group Limited and Sequoia Economic Infrastructure Income Fund Limited which are listed on the premium segment of the London Stock Exchange. He is also Chairman of DP Aircraft 1 Limited and a director of Fair Oaks Income Fund Limited. He was until 2011 Managing Director of Royal Bank of Canada's investment businesses in Guernsey and Jersey. This role had a strong focus on corporate governance, oversight, regulatory and technical matters and risk management. He is a Chartered Accountant and has specialised in Corporate Finance and Credit. After qualifying as a Chartered Accountant in 1987, Mr Bridel worked with Price Waterhouse Corporate Finance in London and subsequently served in a number of senior management positions in Australia and Guernsey in corporate and offshore banking and specialised in credit. This included heading up an SME Lending business for a major bank in South Australia. He was also chief financial officer of two private multi-national businesses, one of which raised private equity. He holds qualifications from the Institute of Chartered Accountants in England and Wales where he is a Fellow, the Chartered Institute of Marketing and the Australian Institute of Company Directors. He graduated with an MBA from Durham University in 1988. Mr Bridel is a Chartered Marketer and a member of the Chartered Institute of Marketing, a Chartered Director and a Fellow of the Institute of Directors and is a Chartered Fellow of the Chartered Institute for Securities and Investment.

Richard Burwood

Management Engagement Committee Chairman, Non-executive Director

Mr Burwood is a resident of Guernsey with 25 years' experience in banking and investment management. During 18 years with Citibank London Mr Burwood spent 4 years as a Treasury Dealer and 11 years as a Fixed Income portfolio manager covering banks & finance investments, corporate bonds and asset backed securities.

Mr Burwood moved to Guernsey in 2010, initially working as a portfolio manager for EFG Financial Products (Guernsey) Ltd managing the treasury department's ALCO Fixed Income portfolio. From 2011 to 2013 Mr Burwood worked as the Business and Investment manager for the Guernsey branch of Man Investments (CH) AG. This role involved overseeing all aspects of the business including operations and management of proprietary investments.

Mr Burwood serves as Non-Executive Director on the boards of the Roundshield Fund, Guernsey (a European asset backed special opportunities fund providing finance to small and mid-cap businesses) since January 2014 and TwentyFour Income Fund (a UK and European asset backed investments) since January 2013.

Frederic Hervouet

Risk Committee Chairman, Non-executive Director

Fred Hervouet (45) is a resident of Guernsey and has dual nationality with both British and French citizenship. He has more than 20 years of experience in Hedge Funds and Capital Markets roles.

Until end of 2013, Fred was Managing Director and Head of Commodity Derivatives Asia for BNP Paribas including Trading, Structuring and Sales. Prior to BNP Paribas, he also worked for two multi-billion, multi- strategy hedge funds including Quantitative strategies (CTAs), Convertible Arbitrage, Event Driven, Fixed Income Relative Value, Equity & Commodity Long-short, Global Macro, Emerging Markets Debt Fund. In the last 20 years, Fred has worked in different aspects of the Financial Markets and Asset Management Industry. His experience includes Derivatives Markets, Structured Finance, Structured Products and Hedge Funds, Trading and Risk Management.

Fred has worked in Singapore, Switzerland, United Kingdom and France. Most recently, Mr Hervouet was a member of BNP Paribas Commodity Group Executive Committee and BNP Paribas Credit Executive Committees on Structured Finance projects (structured debt and Trade Finance).

Fred now acts as a full time dedicated Non-executive Director of a number of listed and non-listed companies. He is the Chairman of Chenavari Toro Income Fund listed on the SFM of the LSE and a director of Crystal Amber Fund Limited. He is also a GP on a number of Guernsey Private Equity Funds (Terra Firma, Lakestar, Telstra Ventures, LCH Partners).

Fred graduated from the University of Paris Dauphine, France achieving a Masters (DESS 203) in Financial Markets, Commodity Markets and Risk Management and an MSc in Applied Mathematics and International Finance.

Fred has provided investment and risk management services to corporations and institutions worldwide and worked with CEOs, CFOs and Head of Investment Divisions. Appearances on financial programs include CNBC, Bloomberg and other networks. He is a member of various financial services interest Groups including the UK Institute of Directors, the UK Association of Investment Companies, the Guernsey Chamber of Commerce and of the Guernsey Investment Fund Association ("GIFA").

Sachin Patel

Non-executive Director

Sachin Patel is the Chief Capital Officer at Funding Circle, leads the Global Capital Markets group and is responsible for investor strategy. Previously, Sachin was Vice President in the cross-asset structured products and solutions businesses at Barclays Capital and, prior to this, at J.P. Morgan, advising a wide variety of investors including insurance companies, pension funds, discretionary asset managers and private banks.

By virtue of Sachin's role at Funding Circle Ltd, Sachin is not an independent Director. Notwithstanding this, Sachin has undertaken in his service contract with the Company to communicate to the Board any actual or potential conflict of interest arising out of his position as a Director and the other Directors have satisfied themselves that procedures are in place to address potential conflicts of interest.

Sachin is not entitled to any fee for the services provided and to be provided in relation to his directorship, although the Company shall, during the course of his appointment, reimburse all properly incurred out-of-pocket expenses incurred in the execution of his duties as a Director.

AGENTS AND ADVISORS

 
 
   SME Credit Realisation 
   Fund Limited 
   Company registration 
   number: 60680 (Guernsey, 
   Channel Islands) 
 Registered office                        Portfolio Administrator 
  De Catapan House                         Funding Circle Ltd 
  Grange Road                              71 Queen Victoria Street 
  St Peter Port                            London EC4V 4AY 
  Guernsey GY1 2QG                         United Kingdom 
  Channel Islands 
  E-mail: ir@smecreditrealisation.com 
  Website: smecreditrealisation.com 
                                          Corporate broker and Bookrunner 
   Company Secretary and                   and Sponsor 
   Administrator                           Numis Securities Limited 
   Sanne Group (Guernsey)                  The London Stock Exchange 
   Limited                                 Building 
   De Catapan House                        10 Paternoster Square 
   Grange Road                             London EC4M 7LT 
   St Peter Port                           United Kingdom 
   Guernsey GY1 2QG 
   Channel Islands 
 Legal advisors as to                     UK Transfer Agent and 
  Guernsey Law                             Receiving Agent 
  Mourant Ozannes                          Link Market Services 
  1 Le Marchant Street                     Limited 
  St Peter Port                            The Registry 
  Guernsey GY1 4HP                         34 Beckenham Road 
  Channel Islands                          Beckenham 
                                           Kent BR3 4TU 
                                           United Kingdom 
                                          Registrar 
   Legal advisors as to                    Link Market Services (Guernsey) 
   English Law                             Limited 
   Herbert Smith Freehills                 Mont Crevelt House 
   LLP (London)                            Bulwer Avenue 
   Exchange House, Primrose                St Sampson 
   Street,                                 Guernsey GY2 4LH 
   London EC2A, 2EG                        Channel Islands 
   United Kingdom 
 
 
 
 
 
 Legal advisors as to        Independent Auditor 
  Irish Law                   PricewaterhouseCoopers 
  Matheson                    CI LLP 
  70 Sir John Rogerson's      Royal Bank Place 
  Quay                        1 Glategny Esplanade 
  Dublin 2                    St Peter Port 
  Ireland                     Guernsey GY1 4ND 
                              Channel Islands 
 
 

GLOSSARY

Definitions and explanations of methodologies used are shown below. The Company's prospectus contains a more comprehensive list of defined terms.

 
 "Administrator"            Sanne Group (Guernsey) Limited 
 "Affiliates"               With respect to any specified person means: 
                             (a) any person that directly or indirectly controls, 
                             is directly or indirectly controlled by or is directly 
                             or indirectly under common control with such specified 
                             person; 
                             (b) any person that serves as a director or officer 
                             (or in any similar capacity) of such specified 
                             person; 
                             (c) any person with respect to which such specified 
                             person serves as a general partner or trustee (or 
                             in any similar capacity). 
                             For the purposes of this definition, "control" 
                             (including "controlling", "controlled by" and 
                             "under common control with") means the possession, 
                             direct or indirect, of the power to direct or cause 
                             the direction of the management and policies of 
                             a person, whether through the ownership of voting 
                             securities, by contract or otherwise. 
                           ---------------------------------------------------------- 
 "AGM"                      Annual General Meeting 
                           ---------------------------------------------------------- 
 "AIC Code"                 The AIC Code of Corporate Governance 
                           ---------------------------------------------------------- 
 "AIC"                      The Association of Investment Companies, of which 
                             the Company is a member 
                           ---------------------------------------------------------- 
 AIFM"                      Alternative Investment Fund Manager, appointed 
                             in accordance with the AIFMD 
                           ---------------------------------------------------------- 
 "AIFMD"                    The Alternative Investment Fund Managers Directive 
                           ---------------------------------------------------------- 
 "Available Cash"           Cash determined by the Board as being available 
                             for use by the Company in accordance with the Investment 
                             Objective, and, in respect of Basinghall and Tallis, 
                             cash determined by the Board of each of Basinghall 
                             and Tallis Board (having regard to the terms of 
                             the Origination Agreement and the Note) for use 
                             by Basinghall and Tallis and excluding (without 
                             limitation) amounts held as reserves or pending 
                             distribution 
                           ---------------------------------------------------------- 
 "CE"                       Continental Europe 
                           ---------------------------------------------------------- 
 "Company Secretary"        Sanne Group (Guernsey) Limited 
                           ---------------------------------------------------------- 
 "Credit Assets"            Loans or debt or credit instruments of any type 
                             originated through any of the Platforms 
                           ---------------------------------------------------------- 
 "Credit Losses"            A measure of performance showing the decrease in 
                             carrying value of Credit Assets as a result of 
                             actual or possible default events. 
                           ---------------------------------------------------------- 
 "Dividend Per Share"       A measure of performance showing dividend either 
                             declared or paid for each share issued and outstanding 
                             in the Company 
                           ---------------------------------------------------------- 
 "EGM"                      The Extraordinary General Meeting on 11 June 2019 
                           ---------------------------------------------------------- 
 "Funding Circle"           FCGPL, Funding Circle UK, Funding Circle US, Funding 
                             Circle CE or either of their respective Affiliates 
                             (as defined in the Prospectus of the Company), 
                             or any or all of them as the context may require 
                           ---------------------------------------------------------- 
 "Funding Circle            Funding Circle CE GmbH, Funding Circle Deutschland 
  CE"                        GmbH, Funding Circle Nederlands B.V. and Funding 
                             Circle Espa a SLU 
                           ---------------------------------------------------------- 
 "FCGPL"                    Funding Circle Global Partners Limited 
                           ---------------------------------------------------------- 
 "Funding Circle            Funding Circle Ltd 
  UK" 
                           ---------------------------------------------------------- 
 "Funding Circle            FC Platform, LLC 
  US" 
                           ---------------------------------------------------------- 
 "NAV Total Return"         A measure of performance showing how the NAV per 
                             share has performed over a period of time. This 
                             is calculated by comparing the NAV per share at 
                             the beginning of a period to the NAV per share 
                             at the end of a period removing the effect of capital 
                             returns and dividend payments. 
                           ---------------------------------------------------------- 
 "Near Affiliates"          The relevant Irish subsidiary of the Company and 
                             any other SPV or entity which, not being an Affiliate 
                             of the Company, has been or will be formed in connection 
                             with the Company's direct or indirect investment 
                             in Credit Assets and which (save in respect of 
                             any nominal amounts of equity capital) is or will 
                             be financed solely by the Company or any Affiliate 
                             of the Company 
                           ---------------------------------------------------------- 
 "Note" or "Profit          Notes issued by Basinghall Lending Designated Activity 
  Participating Note"        Company and Tallis Lending Designated Activity 
                             Company under their separate note programmes 
                           ---------------------------------------------------------- 
 "Origination Agreements"   The German Origination Agreement, the Dutch Origination 
                             Agreement, the Spanish Origination Agreement, the 
                             UK Origination Agreement, the US Origination Agreement, 
                             and the CE Origination Agreements 
                           ---------------------------------------------------------- 
 "Platforms"                The platforms operated in the UK, US and CE by 
                             Funding Circle, together with any similar or equivalent 
                             platform established or operated by Funding Circle 
                             in any jurisdiction. 
 "Proposals"                The proposals contained in the circular issued 
                             on 21 May 2019 which were subsequently approved 
                             at the EGM on 11 June 2019. 
 
                             These included the proposals to (1) modify the 
                             Company's Investment Objective and Policy to reflect 
                             a realisation strategy; (2) amend its Articles 
                             of Incorporation (the "Articles") to include a 
                             mechanism to enable the Company to redeem shares 
                             in the Company compulsorily so as to return cash 
                             to shareholders; (3) appoint Funding Circle Global 
                             Partners Limited ("FCGPL") to facilitate potential 
                             portfolio sales on behalf of the Company and to 
                             (4) change the name of the Company into SME Credit 
                             Realisation Fund Limited ("SCRF") consistent to 
                             the proposed modification of the Company's Investment 
                             Objective and Policy. 
 "Prospectus"               The prospectus issued on the initial IPO on 30 
                             November 2015 and subsequently revised in February 
                             2017 and in August 2018 
                           ---------------------------------------------------------- 
 "PwC"                      PricewaterhouseCoopers CI LLP, PricewaterhouseCoopers 
                             Ireland 
                           ---------------------------------------------------------- 
 "PwC CI"                   PricewaterhouseCoopers CI LLP 
                           ---------------------------------------------------------- 
 "PwC Ireland"              PricewaterhouseCoopers Ireland 
                           ---------------------------------------------------------- 
 "PwC UK"                   PricewaterhouseCoopers LLP 
                           ---------------------------------------------------------- 
 "Share Price Premium       A measure of performance showing difference between 
  or Discount to NAV"        the Group's NAV per share and the prevailing share 
                             price. 
                           ---------------------------------------------------------- 
 "Share Price Total         A measure of performance showing how the share 
  Return"                    price has performed over a period of time. This 
                             is calculated by comparing the change in NAV per 
                             share (after removing the effect of capital returns 
                             and dividend payments) over a period to the share 
                             price of the Company. 
                           ---------------------------------------------------------- 
 "Share Redemption"         A mechanism to enable the Company to redeem shares 
                             compulsorily so as to return cash to Shareholders 
                             as disclosed in the EGM circular published on 21 
                             May 2020. 
                           ---------------------------------------------------------- 
 

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END

IR BRBDDDXBDGGI

(END) Dow Jones Newswires

December 18, 2020 12:36 ET (17:36 GMT)