TIDMSCRF
RNS Number : 6830K
SME Credit Realisation Fund Limited
23 December 2022
NOT FOR RELEASE, DISTRIBUTION OR PUBLICATION, IN WHOLE OR IN
PART, IN OR INTO THE UNITED STATES OR TO US PERSONS
*****
23 December 2022
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 2022 to
30 September 2022. 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
Fred Hervouet, Chairman
+44 (0) 7781 159007
fred_hervouet@hotmail.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 GG00BLFGSJ40, the
SEDOL code is BLFGSJ4 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, 2020, as amended and the Registered
Collective Investment Scheme Rules 2021 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 PERIODED 30 SEPTEMBER 2022
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 income for the period amounted to GBP6.63
million (30 September 2021: GBP7.21 million).
-- Aggregate dividends of 2.63 pence per Ordinary share declared
for the period ended 30 September 2022 (30 September 2021: 2.63
pence).
-- The Company redeemed a total of 24,201,918 (30 September
2021: 48,460,533) shares for a total amount of GBP25,199,877 (30
September 2021: GBP43,999,877) during the period.
-- Sales were agreed of all remaining loan assets post-balance
sheet date, with net proceeds after directly related selling costs
consistent with the GBP23 million value of the loans held on the
balance sheet as at 30 September 2022.
The information below is presented for the period ended or as at
30 September 2022 unless expressly stated to cover a different
period
Description Performance
NAV per Ordinary Share 118.46p (31 March 2022: 100.62p)
-----------------------------------
Total Net Assets GBP33mil (31 March 2022: GBP52mil)
-----------------------------------
Ordinary Share Price 94.0p (31 March 2022: 90.0p)
-----------------------------------
Market Capitalisation GBP26mil (31 March 2022: GBP47mil)
-----------------------------------
Share Price Discount to NAV at (20.6%) (31 March 2022: (10.6%))
period end
-----------------------------------
Annualised dividend per Ordinary 5.25p (30 September 2021: 5.25p)
Share
-----------------------------------
Earnings per Ordinary Share 21.96p (30 September 2021: 7.48p)
-----------------------------------
Share Price Total Return (inception 42.6% (30 September 2021: 26.54%)
to date)
-----------------------------------
NAV Total Return (inception to 73.2% (30 September 2021: 29.03%)
date)
-----------------------------------
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 half-yearly financial
report and condensed consolidated financial statements for the
period ended 30 September 2022 (the "Half-Yearly Report" or
"interim report") includes the results of Basinghall Lending
Designated Activity Company ("Basinghall"), Tallis Lending
Designated Activity Company ("Tallis") and Queenhithe Lending
Designated Activity Company ("Queenhithe"). The Company,
Basinghall, Tallis and Queenhithe are collectively referred to in
this report as the "Group".
Queenhithe transferred its remaining portfolio of Credit Assets
to Basinghall during the year ended 31 March 2021 and liquidators
were formally appointed and commenced proceedings to wind up the
entity in an orderly manner. Queenhithe was put into liquidation in
December 2020. The proceedings for Queenhithe are still ongoing at
the time of signing of the interim report.
Capital Management
As at 30 September 2022 the total number of shares in issue was
27,548,645 (31 March 2022: 51,750,563 ) excluding nil (31 March
2022: nil) shares held in treasury.
The Group has been conducting a managed wind-down of its
operations since 2019 and is in the process of returning capital
through compulsory redemptions of shares and distributions of
dividends, as the Group's portfolio of Credit Assets amortises.
The Company has compulsory redeemed a total of 24,201,918 (year
to 31 March 2022: 82,414,359) shares for a total amount of
GBP25,199,877 (year to 31 March 2022: GBP76,199,759) throughout the
period. All shares redeemed throughout the period were redeemed at
the prevailing NAV per share at the date of declaration.
Portfolio Sales
As previously announced in the Group's Annual Report and Audited
Consolidated Financial Statements for the year ended 31 March 2022,
the Group has actively been exploring a sale process for the loan
portfolio in light of the rapid run off and its objective to
realise all assets in a prudent manner and make timely returns of
capital to shareholders. Subsequently, the Group has signed
agreements on 2 December 2022 for the US and 9 December 2022
(together the "Sale Date") for the UK and CE to sell all remaining
Credit Assets with an economic cut-off date (see glossary) of 30
September 2022. The transactions were settled on 5 December 2022
and 12 December 2022 respectively net of collections between the
economic cut-off date and the Sale Date. Net of directly associated
selling costs such as legal fees and collection charges, the
proceeds received on the combined portfolio sales are materially
consistent with the GBP23 million value of which the loans are held
at 30 September 2022.
The gross proceeds of the sales were EUR6,065,348, GBP19,307,736
and $4,099,133 for CE, the UK and US respectively or approximately
GBP28.3 million using 30 September 2022 foreign exchange rates.
Anticipated direct deductions for legal costs associated with the
transactions, broker costs and collection charges and legal cost
reimbursement to the servicer related to the sales are GBP4.4
million. This results in a net profit on sales anticipated at
c.GBP0.8 million before considering any potential claims against
warranties and indemnities associated with the sales or the accrual
of running and liquidation costs over the remaining life of the
Group as detailed below.
As is industry practice, the Group as seller has offered certain
warranties and indemnities to the buyers of the loans which will
inhibit the Group's ability to distribute all cash to shareholders
immediately and fully liquidate the Group until such time as the
indemnity period has finished. This period will be 12 months from
the Sale Date and amortisation will commence after six months and
c.GBP5.3 million of cash (made up of GBP3.9m, EUR1.2m and $0.5m)
will be set aside to cover the indemnities from the combined
transactions. To the extent the indemnity provisions are not called
upon, this cash will be returned to shareholders over a period from
six to twelve months from the Sale Date. During this period the
operations of the Group will be simplified and cost base reduced,
with appropriate accruals withheld to cover the reduced but ongoing
running costs and all foreseeable costs for liquidation of the
Group.
Following the completion of the portfolio sales, the Board
intends to then publish a circular setting out details of, and
convening a general meeting to seek shareholder approval for, the
proposals to delist SME Credit Realisation Fund Limited, and the
plan related to liquidation. The proposals are expected to be
published following the next quarterly return of capital in January
2023, which will distribute substantially all of the Group's free
cash, i.e. it will include the net proceeds of the portfolio sales,
less operating expenses, any foreign exchange margin reserve
maintenance requirements, liquidation costs and indemnity
provisions related to the portfolio sales. While the 31 December
2022 NAV is yet to be announced, it is anticipated that the NAV per
share as a result of the sales net of deductions and future cost
accruals will be materially aligned with that of 30 September 2022.
This is considered to be a good outcome for shareholders in the
current economic environment with the gains in the period to 30
September 2022 materially maintained upon crystallisation. If
shareholder approval is forthcoming, the Fund is expected to delist
in Q1 2023 with the timing of liquidation to also be confirmed.
As a result of the sales, the Group will continue to prepare
subsequent reporting on a basis other than going concern, with all
ongoing costs through to final liquidation of the Group accrued
from the Sale Date, including those relating to liquidation. The
liquidation costs, along with ongoing operational costs arising,
will be treated in line with the requirements of IAS
("International Accounting Standards") 37 provisions and based on
reliable estimates.
As at 30 September 2022 the expected sale proceeds and timing of
the transactions could not be determined due to ongoing
negotiations with bidders and as a result the financial results for
the period ended 30 September 2022 do not reflect the impact of the
sales of the loans nor the accrual of ongoing costs through to
liquidation. The estimate of ongoing costs through to liquidation
is underway and cannot currently be fully and reliably estimated as
the plan for delisting and liquidation of the Group continues to be
refined and fully costed. More detail will be announced in the NAV
and return of capital announcement for the quarter ended 31
December 2022. Initial high level expectations are that such costs
will not significantly outweigh the net profits on sales of loans
and the NAV per share will be materially consistent with that of 30
September 2022, however this view is subject to ongoing
assessment.
The sales are considered a non-adjusting post-balance sheet
event.
Further details about how the sales impact the Group's exposure
to risks are reflected within the Principal Risk and Risk
Management section.
CHAIRMAN'S STATEMENT
Dear Shareholder,
I am pleased to write to you to provide an update on the Group's
progress for the period ended 30 September 2022. The Group
continues to conduct a managed wind-down of its activities, with
the objective of returning capital to shareholders promptly, whilst
seeking to maximise returns and I can report that agreements have
been signed in December for the sales of all remaining Credit
Assets of the Group, a significant milestone for the Group. The
Board is very pleased with the outcome from the sales of the
Group's remaining loan pools, which represents a successful end to
our realisation strategy. We are now working on the next stage of
the wind down and aim to present our proposals for liquidation and
delisting to shareholders in short order.
Since our last communication the Group has seen a number of
changes at the Board level. Following the Group's AGM in October,
the resolution to reappoint my predecessor Richard Boléat, as
Chairman of the Board, was not passed by shareholders, and as a
result he resigned as Director of the Company. The Board has
undertaken a process of liaising with shareholders to discuss their
concerns. Additionally, Sachin Patel resigned as a Director
following his departure from Funding Circle. I would like to thank
Richard and Sachin, for their time and commitment to the Group and
wish them all the best in their future endeavours. I have picked up
the reigns of the Chairman's duties and we welcome Anthony Nicol to
the Board in place of Sachin, along with a reshuffle of roles and
responsibilities you will note later in our interim report. We will
of course endeavour to continue to maximise returns to shareholders
in an orderly manner as the Group enters its final stages following
the agreed sales of loans.
Since my predecessor last wrote to you there has continued to be
dislocations to the global supply chain of raw and manufactured
materials and the dramatic impact on the price of hydrocarbons have
conspired to create an inflationary environment. This inflationary
environment has been exacerbated by political turmoil in the UK and
the ill-judged unfunded tax cuts announced and subsequently
reversed, with the outlook for the global economy looking
increasingly pessimistic into next year. These macro conditions,
and central bank monetary policy responses, will inevitably have
consequences on global business as 2022 develops into 2023,
creating a highly uncertain macro-outlook. The speed of change of
impacting factors and range of possible outcomes mean that
forecasting the future outlook for the Group had been exceptionally
challenging. However, despite this uncertainty, the loans held by
the Group have remained largely resilient as seen in the
performance for the period and it is this resilience that has
contributed to a positive outcome from the agreed sales of loans in
December.
Performance Review and Net Asset Value ("NAV")
This report presents the financial position of the Group as at
30 September 2022.
You will have noted the announcement made by the Company on 20
October 2022 disclosing the Group's NAV at 30 September 2022 at
GBP33 million (31 March 2022: GBP53 million) and NAV per Share at
that date at 118.46 pence (31 March 2022: 100.62 pence). The
improvement in NAV per Share was driven principally by a better
than anticipated credit market environment compared to expectations
as that arose due to the pandemic and the demonstrably resilient
performance of the Group's investments.
An analysis of the performance of the Group for the 6-month
period to 30 September 2022 (with the 6-month period to 31 March
2022 for comparative purposes) is set out below:
Performance Since 31 March 2022
Return Attribution
1 Apr 2022 1 Oct 2021
to to
30 Sep 2022 31 Mar 2022
Gross Income 3.05% 5.44%
Impairment(3) 14.60% 6.73%
FVTPL Adjustment(1) 0.00% (2.29%)
FVTOCI Adjustment(3) (3.85%) (1.56%)
Gain on sale of NPLs 0.00% 0.00%
Servicing Fees (0.27%) (0.28%)
------------ ------------
13.54% 8.04%
Operating Expenses (1.07%) (0.71%)
FX Hedging Costs(3) 0.24% 0.09%
Share Redemption 7.61% 3.28%
Net NAV Return 20.32% 10.70%
---------------------- ------------ ------------
Notes
(1) FVTPL Adjustment includes fair value movements on the Fund's
interest in the EIB transaction.
(2) FVTOCI Adjustment includes fair value movements on the
portfolio of credit assets held by the Fund, which moved to the
fair value accounting from 1 April 2020.
(3) The return attribution is presented with movements related
to the foreign exchange retranslation of impairment allowance
allocated to the FX hedging costs. The financial statements are
presented on a basis in which this impact is not split
separately.
Return of Capital
The Group's net asset value has reduced from GBP53 million at 31
March 2022 to GBP33 million at 30 September 2022, as the Group
continues to make distributions to shareholders. In the six month
period to 30 September 2022, GBP25 million was distributed to
shareholders through compulsory share redemptions and GBP0.9
million through dividend payments. The balance of the movement
between the two period ends is reconciled by positive performance
which is pleasing given the uncertain environment we have been
operating within.
In light of the sales agreements, the Company will continue to
return capital to shareholders predominantly by way of compulsory
redemption of shares, the majority of which will occur in Q1 2023.
Subsequent distributions will occur as cash becomes available from
funds set aside to back indemnity provisions associated with the
sold loans, which amortise over the next six to twelve months. As
the assets have been sold with no ongoing income to the Group, it
is anticipated there will be no further dividend distributions, in
line with the resolutions approved at our latest AGM.
Portfolio Sales
Given the rapid run off of the loan portfolio, the repayment of
leverage in the structure and in the interests of maximising
returns to shareholders before the running costs become
disproportionate to the NAV and while the loans remained at an
attractive size to potential buyers, the Group actively commenced
the process of a potential disposal of its loan portfolios in whole
where pricing levels were attractive.
As reported to the market, the Group has signed agreements to
sell all the loan portfolios with an economic cut-off date of 30
September 2022 at a price net of anticipated costs and deductions
that is materially aligned with the value of the loans held at 30
September 2022. This is a good outcome for shareholders in the
current economic environment and more news will follow in the
Group's 31 December 2022 NAV and return of capital announcement
regarding the amount and timing of post-sale distributions. It is
expected that a significant compulsory partial redemption will
occur in Q1 2023 with the remaining net asset value returned to
shareholders as the indemnity period associated with the asset
sales amortises. In light of the asset sales and in order to reduce
unnecessary costs and complexity as the Group looks to enter
liquidation, it is expected that the Company will circulate
proposals relating to de-listing by the end of Q1 2023. Further
details regarding the sales and timings can be found in note 16 of
these condensed consolidated financial statements.
The Group will be required to hold back cash equating to the
value of certain indemnities related to the assets which have been
sold which is standard practice in transactions of this nature of
c.GBP5.3 million (made up of GBP3.9m, EUR1.2m and $0.5m). The cash
set aside for these indemnities will be held within the respective
currencies of the assets to which they relate to in order that
unfavourable fluctuations in foreign exchange rates do not erode
the ability of the Group to meet its obligations should the
indemnity provisions be drawn upon. The Group has previously hedged
its exposure to assets held in foreign currency with the use of
forward foreign exchange contracts. With the relatively small
remaining exposure and uncertainty related to the extent to which
claims could potentially be made against the indemnity provisions,
and with the intention of simplifying operations and reducing the
Group's cost base through to liquidation, it is considered that the
cost of hedging the remaining exposure is likely to outweigh the
risk of currency fluctuations which could occur, and the Group
intends to cease its hedging program and policy from the end of
2022. As a result the cash set aside in relation to these
indemnities may be more than is eventually distributed to
shareholders in the event that the purchaser makes a claim against
the indemnities or to the extent that there are unfavourable
movements in foreign exchange rates between the Sale Date and the
eventual distribution of residual cash to shareholders as the
indemnity period unwinds.
Conclusion
As the Group draws towards the end of its life, it is pleasing
to see a positive net asset value outcome supported by the sales of
assets at an agreeable price in the current economic environment.
Credit for this goes to the team at Funding Circle who have worked
hard to achieve a positive outcome for shareholders throughout the
wind-down process. The Board's attention is now focussed on
returning capital to shareholders, simplifying operations and
ultimately liquidating the Group in an orderly and efficient manner
and I will report to you further on this as progress is made.
My thanks go particularly to the Funding Circle team for their
focus and diligence, and I would also like to thank my fellow
directors, both past and present, and our service providers and
advisers for their support and wise counsel throughout the
period.
Yours faithfully
FREDERIC HERVOUET
Chairman of the Board of Directors
22 December 2022
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, 2020, 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 was 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 small and medium sized enterprises
("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 Group
realising all of its investments in accordance with the Investment
Objective. Such realisations will comprise natural amortisation of
the Group's investments in Credit Assets as well as portfolio sales
as discussed within the Business Review section of this interim
report.
As a result of the Company's change in investment objective and
policy, for the purposes of accounting, the Group's business model
changed from "hold to collect" to "hold to collect and sell" during
the financial year ended 31 March 2021. The Group therefore
reclassified the valuation of Credit Assets from amortised cost to
fair value through other comprehensive income ("FVTOCI") from 1
April 2020.
The Group no longer allocates capital to Credit Assets, directly
or indirectly via Leveraged Transactions or SPVs, or undertakes
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 2022, 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
The following analysis of the Group's investments in Credit
Assets are provided as reference.
Region Split
UK Investment % US Investment % CE Investment %
South East 25 Other 38 Germany 56
--- --------------- --- ---------------- ---
London 15 California 16 The Netherlands 43
--- --------------- --- ---------------- ---
North West 13 Texas 10 Spain 1
--- --------------- --- ---------------- ---
North East 12 Florida 8
--- --------------- --- ---------------- ---
Midlands 11 Illinois 6
--- --------------- --- ---------------- ---
South West 7 Michigan 6
--- --------------- --- ---------------- ---
Scotland 6 Ohio 4
--- --------------- --- ---------------- ---
Wales 5 Arizona 4
--- --------------- --- ---------------- ---
East Anglia 4 New York 4
--- --------------- --- ---------------- ---
Northern
Ireland 2 South Carolina 4
--- --------------- --- ---------------- ---
Industry Split
UK Investment % US Investment % CE Investment %
Professional,
Scientific Wholesale
Property and and Technical and retail
construction 22 Services 18 trade 31
--- ------------------------ --- -------------------- ---
Wholesale and
retail 19 Retail Trade 15 Construction 13
--- ------------------------ --- -------------------- ---
Professional,
Scientific
Manufacturing and Technical
and engineering 11 Other 14 Services 12
--- ------------------------ --- -------------------- ---
Accommodation
and Food Transporting
Other 11 Services 10 and Storage 9
--- ------------------------ --- -------------------- ---
Professional Healthcare
and business and Social
support 9 Assistance 9 Other 8
--- ------------------------ --- -------------------- ---
Other Services
(except
IT and Telecommunications 7 Public Administration) 9 Manufacturing 7
--- ------------------------ --- -------------------- ---
Administrative
Leisure and and Support
Hospitality 7 Construction 9 Activities 7
--- ------------------------ --- -------------------- ---
Administrative Accommodation
Transport and and Support and Food
Logistics 5 Activities 7 Services 6
--- ------------------------ --- -------------------- ---
Information
Automotive 5 Manufacturing 5 and Communication 4
--- ------------------------ --- -------------------- ---
Educational Arts, Entertainment
Healthcare 4 Services 4 and Recreation 3
--- ------------------------ --- -------------------- ---
Basinghall, Tallis and Queenhithe were formed solely in
connection with the implementation of the previous investment
policy of the Company. Loans acquired by Basinghall, Tallis and
Queenhithe were funded, in whole or in part, by advances made by
the Company under the note programmes.
The notes issued by Basinghall, Tallis and Queenhithe to the
Company are listed on the Euronext Dublin Stock Exchange.
The assets held by each of Basinghall, Tallis and Queenhithe 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
All of the Group's leverage facilities had been fully repaid as
at 31 March 2022 and the loans that were previously held indirectly
through the Fund's interest in the EIB SPV have been transferred to
the Group's balance sheet at fair value in satisfaction of the
Company's investment in the transaction SPV, (the "EIB
transaction"), and are now consolidated directly.
Results and dividends
The total comprehensive income for the period, determined under
International Financial Reporting Standards ("IFRS"), amounted to
GBP 6.63 million (30 September 2021: GBP7.21 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 Extraordinary General Meeting
("EGM"), the Directors maintained quarterly dividend payments of
1.3125 pence per Ordinary Share on an annualised basis, which may
be partially uncovered by income, however they expect to cease
dividends following the agreed sales of the assets and ceasing of
ongoing income generation in the Group as a result . Dividends
declared during the period are disclosed in note 12.
Business review
On 21 May 2019, the Company published a circular and notice of
an 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.
The interim report includes further information about the
Group's principal activities, financial performance during the
period and indications of likely future developments.
The Company redeemed a total of 24,201,918 shares (31 March
2022: 82,414,359) for a total amount of GBP25,199,877 throughout
the period (31 March 2022: GBP76,199,759).
On 17 August 2020, Queenhithe fully repaid the remaining amount
owed on its loan with Fleetbank. The remaining portfolio of Credit
Assets held within Queenhithe 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. In December 2020, liquidators were formally appointed
and commenced proceedings to wind up Queenhithe in an orderly
manner. The proceedings are still ongoing as at the date of signing
of these condensed consolidated financial statements.
The Group signed agreements to sell all remaining Credit Assets
with an economic cut-off date of 30 September 2022. The
transactions were settled in December 2022 net of ongoing
collections the Group had received up until the settlement date for
proceeds materially consistent with the GBP23 million carrying
value at 30 September 2022. As all the remaining loan assets were
sold there is no ongoing income into the Group beyond the economic
cut-off date except the net proceeds from the sale.
The gross proceeds of the sales were EUR6,065,348, GBP19,307,736
and $4,099,133 for CE, the UK and US respectively or approximately
GBP28.3 million using 30 September 2022 foreign exchange rates.
Anticipated direct deductions for legal costs associated with the
transactions, broker costs and collection charges and legal cost
reimbursement to the servicer related to the sales are GBP4.4
million. This results in an anticipated net profit on sales of
c.GBP0.8 million before considering any potential claims against
warranties and indemnities associated with the sales or the accrual
of running and liquidation costs over the remaining life of the
Group.
From 2020, the impact of the COVID-19 pandemic 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.
Borrowers that went on forbearance measures implemented by
Funding Circle have demonstrated resilient performance since coming
off their plan. The directors have seen a large proportion of
borrowers returning to making full contractual repayments which has
assisted in the stronger than expected performance by each of the
portfolios in the latter stages of the period. While forbearance
measures may still be offered when required, as businesses go back
to normal operations there has been minimal need for the use of new
forbearance measures.
The ongoing military operation in Ukraine, the related sanctions
targeted against Russia and certain Russian nationals and the
consequential impacts on European energy supply volumes and pricing
is already impacting both the European and global economies. The
Group does not have any direct exposure to Ukraine, Russia, or
Belarus. However, the impact on the general economic situation and
exacerbation of other macroeconomic impacts such as rising
inflation in particular, could impact certain assumptions and
estimates. The Board remain vigilant in monitoring the
macroeconomic environment and will adjust our business and risk
strategy as required.
The Board continued to closely monitor the impact of COVID-19
and the risk resulting from the inflationary environment, with the
outlook for the global economy looking increasingly pessimistic
into next year. These macro conditions, and central bank monetary
policy responses, will inevitably have consequences to global
economic market, creating a highly uncertain macro-outlook. The
Board continues to receive updates on a regular 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, emerging and current
economic risks. Such risks experienced by the Group as outlined
above have been somewhat mitigated going forward through the
announced sales of assets by the Group.
Going concern
The Directors are continuing with the managed wind-down of the
Group's operations.
The Directors considered the state of the wind-down and the
average remaining contractual term of the loan portfolio in the
Group's Annual Report and Audited Consolidated Financial Statements
for the year ended 31 March 2022 and determined that the use of the
going concern basis was no longer appropriate.
As such, these condensed consolidated financial statements have
been prepared on a basis other than going concern, under which the
assets are measured at their net realisable value, which continues
to be their fair value.
There were no adjustments made to the carrying values of the
assets and liabilities of the Group in the current year as a result
of this change in basis of preparation. The Directors consider the
carrying values to be a reasonable approximate of their net
realisable values. The subsequent sales of all remaining Credit
Assets, after associated costs and deductions, was materially
aligned to the combined fair values of the Credit Assets.
As a result of the sales, the Group will continue to prepare
subsequent reporting on a basis other than going concern, with all
ongoing costs through to final liquidation of the Group and its
subsidiaries accrued from the Sale Date, including those relating
to liquidation. The liquidation costs, along with on-going
operational costs arising, will be treated in line with the
requirements of IAS 37 provisions and based on reliable estimates.
As at 30 September 2022 the expected sales proceeds and timing of
the transactions could not be determined due to ongoing
negotiations with bidders and as a result the financial results for
the period ended 30 September 2022 do not reflect the impact of the
sales of the loans nor the accrual of ongoing costs through to
liquidation.
The Directors confirm that they have a reasonable expectation
that the Company will continue to be able to pay its liabilities as
they fall due over the period of the managed wind-down. Following
the sales of all remaining Credit Assets, the net proceeds, after
indemnity considerations and provision for all ongoing costs
through to liquidation, will continue to be distributed to
shareholders by compulsory redemption.
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 ongoing managed
wind-down of the Group, the impact of COVID-19 and the economic and
inflationary pressures that have been exacerbated by the recent
events in Ukraine. It should be noted that some of these risks
remained factors that were considered up to and as part of the
asset sales and in some cases have been subsequently mitigated as a
result of the sales.
The Board of Directors have overall responsibility for risk
management and internal control within the context of achieving the
Group'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 maintains 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
is 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 Group's systems of risk
management and internal control and will continue to receive
updates from the Group'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 Group are provided
below, together with the mitigating actions being taken. The
Directors have also linked the alternative performance measures to
the risks where relevant. Risks arising from the Group's use of
financial instruments are set out in note 13 of the condensed
consolidated financial statements.
The Board is mindful of the importance of the Task Force on
Climate-Related Financial Disclosures ("TCFD") both to the
developing corporate reporting world and to many of our
shareholders for who environmental concerns are an increasing
priority. The Group's structure as a fund, results in a limited
direct footprint, with many activities provided by service
providers under the supervision of the Board, while the Group's
activities in investing in SMEs may cause an indirect carbon
footprint. The Group is entering the latter stages of its managed
wind-down strategy and with shareholder approval, the Board expects
to de-list the Company in Q1 2023 and liquidate it at an
appropriate time. Therefore, it is anticipated that the Company and
its subsidiaries will have a very limited lifespan. The priority of
the Board within this timeframe is maximising the cash return to
shareholders in an orderly fashion, and as such the impacts of
climate change are not anticipated to be material to the financial
statements, estimates or judgments due to the size and timescale of
the ongoing operations of the Group. It is possible that the
Company may de-list and enter a liquidation process before the 31
March 2023 and therefore may not be required to publish Audited
Consolidated Financial Statements and the related TCFD disclosures.
The Group has therefore not invested in complying with the upcoming
requirements and recommendations related to TCFD, will not include
climate-related financial disclosures consistent with the TCFD
recommendations and recommended disclosures as climate related
risks and opportunities and will not disclose any scope of
greenhouse gas emissions. The impacts of climate change are
considered to be immaterial to the Group within the context of its
remaining life and ongoing simplified operations through to final
liquidation.
Principal risk Mitigation and update Group's financial Alternative
of risk assessment Performance Measures
("APM") affected by risk
COVID-19 and emerging
risks The Directors continued Total distributions to
While the ongoing direct to monitor delinquency the shareholders.
impacts of the COVID-19 and default levels on
pandemic have receded each of the separate Credit losses
over this financial period, loan portfolios closely,
new risks have emerged as well as the impact
including inflation, of government initiatives
particularly of energy and forbearance measures
prices supply chain disruption, implemented by Funding
and political instability. Circle.
There remains uncertainty
around the performance In light of the agreements
of the Group's portfolio to sell the assets in
but better than expected December 2022 the exposure
performance during and to COVID-19 and the impact
after the peak of the it could have on credit
pandemic and through losses is considered
more recent events have to have diminished.
lifted lifetime performance
expectations relative
to previous expectations.
The ability of SME borrowers
to satisfy their loan
repayment obligations,
and therefore the performance
of the Group, will continue Total distributions to
to be affected by emerging the shareholders.
economic stress along
with potential resurgence Credit losses
of COVID-19, as well
as fiscal and monetary The directors have limited
response, about which options available to
uncertainty remains. them that will minimise
the impact of the risk
Default risk as the measures and initiatives
Borrowers' ability to being put in place are
comply with their payment outside of their control.
obligations in respect
of loans may deteriorate
due to adverse changes Economic uncertainties
in economic and political or developments, as well
factors, including the as unemployment may impact
COVID-19 pandemic discussed upon default rates. The
above. Board continues to monitor Total distributions to
default rates closely the shareholders.
Actual defaults may be on a monthly basis in
different than indicated line with developments NAV total return
by historical data and with the pandemic and
the timing of defaults measures and initiatives
may vary significantly being implemented.
from historical observations.
The agreements to sell
the Credit Assets in
December 2022 is considered
to have removed the ongoing
Wind-down risk direct risk of losses
Below are the key risks resulting from the macro-economic
associated with the managed environment and risk
wind-down of the Group, of associated credit
beyond those inherent losses. The price realised
in the holding of amortising is considered commensurate
Credit Assets: with the applicable risk.
Total distributions to
The macro risk in jurisdictions the shareholders.
where the Group operates
continues to evolve with
inflationary pressures,
supply chain issues and
rising interest rates
which have been exacerbated
by the developments in
Ukraine. The Board considers
this as a key risk in
the orderly wind down Following the agreements
of the Group. The market to sell the remaining
volatility it creates loans in the portfolio,
may lead to increased at a price, after the
probability of disorderly deduction of selling
pricing of assets or costs and legal fees Total distributions to
higher than acceptable and ongoing costs through the shareholders.
default on loans. to liquidation, that
is expected be to materially
aligned to the fair value
Price discovery process of the assets, it is
associated with potential considered that a value
"en bloc" sales of credit has been achieved commensurate
assets are likely to with the potential future
be affected by such factors. risks to which the portfolio
was exposed, which is
considered a good outcome
for shareholders in light
of the macro-economic Share price volatility
climate. and total distributions
to shareholders.
The Board continues to
actively seek to "right
size" the Group's overhead
base as net asset value
reduces, through renegotiation
As the managed wind-down with counterparties and
proceeds, and capital potential restructuring
is returned to shareholders, of the Group to minimise
the Group's fixed and unnecessary costs. In
variable costs, some light of the asset sales,
of which are not capable de-listing the Company Total distributions to
of material mitigation may assist in mitigating shareholders.
due to the publicly listed the cost base through
status of the Company, to liquidation and the
are likely to rise as simplification of operations
a proportion of the Group's
net asset value, prior
to dissolution of the The Board seeks to manage
Group. the use of various capital
return techniques so
as to seek to fairly
balance the differing
The Group deploys surplus outcomes to those techniques
liquidity arising from
portfolio amortisation Following the announced
and portfolio sales, asset sales in December
by way of capital return 2022, it is expected
to shareholders. This that dividends will cease
capital return may take in light of there being
the form of dividends, no further income-generating
share buybacks and compulsory assets within the Group
redemptions of shares and cash will be returned
or any combination of to shareholders through
these techniques. The capital redemptions.
balance of techniques
used may result in greater The Board seeks to maintain
or lesser share price and enhance banking counterparty
volatility and varied relationships to seek
tax treatments for shareholders. to retain access to institutional
pricing.
As the size of the Group's In light of the asset
non-UK portfolios decrease sales announced in December
through amortisation 2022, after converting Share price volatility
(in the absence of portfolio the majority of the net and total distributions
sales), the Group's ability proceeds to sterling to shareholders.
to deploy foreign currency it is expected that the
hedges at an appropriate Group's exposure to foreign
cost may be impaired. currency will have greatly
diminished. Cash will
be set aside in the currency
of the respective assets
that were sold for the
purposes of supporting
the amortising indemnities
that have been agreed
with the purchaser of
the loans. The cash relating Total distributions to
to these indemnities shareholders.
will be maintained in
local currency as maintaining
in GBP could lead to
insufficient cash to
cover the indemnities
were they to be fully
claimed against in the
event of unfavourable
movements in foreign
exchange. Due to uncertainty
related to the extent
or timing of any claims
against the indemnities
and in order to maintain
sufficient local currency
cash should the indemnities
As the Group moves through be claimed against, it
the wind-down process, is considered to not Total distributions to
accounting standards be cost effective to shareholders.
require the Group to hedge these exposures.
prepare its accounts
on a basis other than
going concern. The condensed consolidated
financial statements
have been prepared on
a basis other than going
concern since the Group's
Annual Report and Audited
Consolidated Financial
Statements for the year
ended 31 March 2022.
While the majority of In light of the asset
the net proceeds from sales at a price materially
the sales and the remaining aligned to the fair value
NAV of the Group is expected of the assets, the volatility
to be distributed in in share price as a result
Q1 2023, the timing and of preparing on a basis
extent of future distributions other than going concern
may be uncertain. The is partly mitigated.
Group will set aside
cash related to indemnities
provided to the purchasers The provision of indemnities
of the loans of c.GBP5.3 is standard in asset
million. To the extent sale transactions of
these indemnities are this nature and provides
claimed against, the the purchaser with assurances
remaining cash distributable which in turn have contributed
to shareholders after to a positive purchase
the indemnity period price on the assets.
has expired may be lower The Board have negotiated
than that initially set indemnities at a level
aside. This cash is additionally so as to provide sufficient
to be held in the currency cover to support a good
of the associated loans, outcome in the purchase
and may be exposed to price while balancing
foreign exchange gains the intention to liquidate
and losses. the Group and return
cash to shareholders
To the extent foreign within a reasonable time
exchange rates move unfavourably frame. The indemnity
this may reduce the amount provisions are therefore
of cash available to on an amortising basis
distribute to shareholders. up to 12 months from
Following the sales, the Sale Date.
the Group will accrue
an estimate for all ongoing
expected costs through
to the final liquidation While the extent to which
of the Company and its these indemnities may
subsidiaries, and to be claimed upon is unknown,
the extent these costs the team at Funding Circle
are greater than estimated have assisted the Board
this may reduce the cash and the purchaser with
available to shareholders advanced due diligence
as the indemnity period in order to minimise
amortises. the risk of claims on
the indemnities offered.
The Board has made prudent
estimates of the ongoing
costs through to final
liquidation, and will
seek to minimise the
ongoing cost base where
possible, while balancing
the necessary costs of
the administrative and
legal requirements of
an orderly liquidation
process of the Group.
------------------------------------ ------------------------------
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 alleviating impact of
the COVID-19 pandemic and the on-going circumstances between
Ukraine and Russia to the Group. There were other key operational
risks disclosed in the Group's Annual Report and Audited
Consolidated Financial Statements which remain applicable.
Directors
The Directors who held office during the financial period end
and up to the date of approval of this report were:
Date of Date of resignation
appointment
-------------------- ------------- --------------------
Frederic Hervouet 12 August
2015
Jonathan Bridel 19 August
2015
Richard Boléat 19 August 19 October
2015 2022
Richard Burwood 12 August
2015
Sachin Patel 6 September
18 May 2017 2022
Anthony Nicol 19 October
2022
Sachin Patel resigned as director on 6 September 2022. Anthony
Nicol was appointed as a Director of the Company effective from 19
October 2022. Tom Parachini, Global Head of Legal and Regulatory at
Funding Circle, was previously appointed as Alternate Director for
Sachin Patel and subsequently has resigned following Sachin Patel's
resignation.
As at the Annual General Meeting ("AGM") held on 19 October 2022
insufficient votes were received in order to re-elect Richard
Boléat as a Director. As a result, he has stepped down as Chairman
of the Board of Directors and Frederic Hervouet was appointed as
Chairman.
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 2022, the Directors held the following
Ordinary shares of the Company:
Number of shares
30 September 31 March
2022 2022
--------------------- -------------------- -------------
Frederic Hervouet 18,900 35,504
Jonathan Bridel 13,461 25,286
Richard Boléat 2,785 5,231
Richard Burwood 7,144 13,409
42,290 79,430
--------------------- -------------------- -------------
During the period, no Director had a material interest in a
contract to which the Group was a party (other than his own letter
of appointment). Sachin Patel, Anthony Nicol and Tom Parachini were
employees of Funding Circle Limited.
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 2022 are disclosed in note 14 to the condensed
consolidated financial statements.
Company Secretary
The Company Secretary is Sanne Group (Guernsey) Limited of 1
Royal Plaza, Royal Avenue, St Peter Port, Guernsey GY1 2HL.
On behalf of the Board
Fredric Hervouet
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
Financial Conduct Authority's ("FCA") Disclosure Guidance and
Transparency Rules ("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 Group's Annual Report and Audited Consolidated
Financial Statements for the year ended 31 March 2022.
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 condensed consolidated financial statements may
differ from legislation in other jurisdictions.
Frederic Hervouet Jonathan Bridel
Chairman of the Board of Directors Chairman of the Audit Committee
Independent 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 and Condensed
Consolidated Financial Statements of SME Credit Realisation Fund
Limited for the 6-month period ended 30 September 2022. 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 2022;
-- the condensed consolidated statement of comprehensive income for the period then ended;
-- the condensed consolidated statement of cashflows 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 and Condensed Consolidated Financial Statements
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.
____________________________________________________________________________________________________
Responsibilities for the interim financial statements and the
review
____________________________________________________________________________________________________
Our responsibilities and those of the directors
The Half-Yearly Financial Report and Condensed Consolidated
Financial Statements, 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 and Condensed Consolidated Financial Statements 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 and
Condensed Consolidated Financial Statements 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 Condensed Consolidated Financial Statements
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
22 December 2022
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX-MONTH PERIODED 30 SEPTEMBER 2022
(Unaudited) (Unaudited)
1 April 2022 1 April 2021
to 30 September to 30 September
2022 2021
Notes GBP GBP
---------------------------------------- --- -------- ------------------ ------------------
Operating income
Interest income on loans advanced 3 1,589,511 3,742,785
Net gain on change in fair value
of financial asset at fair value
through profit or loss 4 - 1,810,145
Net realised and unrealised gain
on foreign exchange 13 4,279,891 682,628
Bank interest income 5,345 2,431
--------------------------------------------- -------- ------------------ ------------------
Total operating income 5,874,747 6,237,989
--------------------------------------------- -------- ------------------ ------------------
Operating expenditure
Reversal of impairment of loans 3 (2,822,032) (2,284,115)
Loan servicing fees 14 141,215 371,826
Company administration and secretarial
fees 93,909 105,570
Audit, audit-related and non-audit
related fees 8 143,469 99,346
Corporate broker services 17,500 17,500
Corporate services fees 14 23,484 54,608
Legal fees 75,978 30,559
Directors' remuneration and expenses 14 80,313 80,425
Professional services fee - portfolio
valuation 21,780 30,765
Regulatory fees 14,246 14,624
Other operating expenses 83,768 117,011
--------------------------------------------- -------- ------------------ ------------------
Net operating (income) (2,126,370) (1,361,881)
Operating income before taxation
for the period 8,001,117 7,599,870
Taxation for the period 10 (500) -
------------------------------------------------- ---- ------------------ ------------------
Operating income after taxation for
the period 8,000,617 7,599,870
------------------------------------------------- ---- ------------------ ------------------
Other comprehensive income:
Items that may be reclassified to
profit or loss
(Loss) on movement in fair value
of loans advanced 3 (1,374,490) (393,030)
------------------------------------------------- ---- ------------------ ------------------
Total comprehensive income for the
period 6,626,127 7,206,840
------------------------------------------------- ---- ------------------ ------------------
Basic and diluted earnings per share 11 21.96p 7.48p
------------------------------------------------- ---- ------------------ ------------------
Basic and diluted weighted average
number of shares outstanding 11 36,437,370 101,603,194
Other comprehensive income
The other comprehensive income recognised above relates to the
unrealised loss on the movement in fair valuation of the Group's
portfolio of loans advanced.
The Notes below form part of these condensed consolidated
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2022
(Unaudited) (Audited)
30 September 31 March 2022
2022
Notes GBP GBP
---------------------------------------- ------ --------------- ----------------
ASSETS
Cash and cash equivalents 6 10,319,709 15,183,371
Other receivables and prepayments 44,797 23,550
Loans advanced 3 23,061,751 37,403,665
TOTAL ASSETS 33,426,257 52,610,586
---------------------------------------- ------ --------------- ----------------
EQUITY AND LIABILITIES
Capital and reserves
Share capital 9 56,113,512 81,313,389
Retained deficit (22,365,534) (29,500,141)
Other reserves (1,114,976) 259,514
---------------------------------------- ------ --------------- ----------------
TOTAL SHAREHOLDERS' EQUITY 32,633,002 52,072,762
---------------------------------------- ------ --------------- ----------------
LIABILITIES
Fair value of currency derivatives 7 277,290 191,363
Accrued expenses and other liabilities 8 515,965 346,461
---------------------------------------- ------ --------------- ----------------
TOTAL LIABILITIES 793,255 537,824
---------------------------------------- ------ --------------- ----------------
TOTAL EQUITY AND LIABILITIES 33,426,257 52,610,586
---------------------------------------- ------ --------------- ----------------
NAV per share outstanding 118.46p 100.62p
---------------------------------------- ------ --------------- ----------------
The condensed consolidated financial statements were approved
and authorised for issue by the Board of Directors on 22 December
2022 and were signed on its behalf by:
Frederic Hervouet 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 PERIODED 30 SEPTEMBER 2022
Share Other Retained Total
Capital Reserves deficit
Notes GBP GBP GBP GBP
------------------------------ ----- ----------------- ------------ ----------------- ---------------
Balance at 1 April 2021
(audited) 157,513,148 2,507,892 (40,782,264) 119,238,776
Redemption of ordinary shares 9 (43,999,877) - - (43,999,877)
Dividends declared 12 - - (2,509,182) (2,509,182)
Operating income after
taxation
for the period - - 7,599,870 7,599,870
Other comprehensive loss for
the period - (393,030) - (393,030)
Balance at 30 September 2021
(unaudited) 113,513,271 2,114,862 (35,691,576) 79,936,557
------------------------------ ----- ----------------- ------------ ----------------- ---------------
Share Other Retained
capital Reserves deficit Total
Notes GBP GBP GBP GBP
----------------------------- ------ ----------------- ------------ ----------------- -----------------
Balance at 1 April 2022
(audited) 81,313,389 259,514 (29,500,141) 52,072,762
Redemption of ordinary
shares 9 (25,199,877) - - (25,199,877)
Dividends declared 12 - - (866,010) (866,010)
Operating income after
taxation
for the period - - 8,000,617 8,000,617
Other comprehensive loss for
the period - (1,374,490) - (1,374,490)
Balance at 30 September 2022 32,633,
(unaudited) 56,113,512 (1,114,976) (22,365,534) 002
----------------------------- ------ ----------------- ---------------- ------------- -----------------
The Notes below form part of these condensed consolidated
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIODED 30 SEPTEMBER 2022
(Unaudited) (Unaudited)
1 April 2022 1 April 2021
to to
30 September 30 September
2022 2021
Notes GBP GBP
--------------------------------------------- ------ --------------- -------------------
Operating activities
Operating income before taxation
for the period 8,001,117 7,599,870
Adjustments for:
Net realised and unrealised gain
on foreign exchange (4,279,891) (340,010)
Interest income on loans advanced (1,589,511) (3,742,785)
Reversal of impairment of loans 3 (2,822,032) (2,284,115)
Net gain on change in fair value
of financial asset at fair value
through profit or loss 4 - (1,810,145)
Fair value movement of currency derivatives 13 85,927 965,820
Operating cash flows before movements
in working capital (604,390) 388,635
Principal and interest collections
on loans advanced 3 22,441,972 34,027,192
(Increase)/decrease in other receivables
and prepayments (21,247) 1,654
Increase/(decrease) in accrued expenses
and other liabilities 169,504 (80,244)
Taxation paid (500) -
Net cash generated from operating
activities 21,985,339 34,337,237
--------------------------------------------- ------ --------------- -------------------
Financing activities
Dividends paid 12 (866,010) (2,509,182)
Redemption of shares 9 (25,199,877) (43,999,877)
--------------------------------------------- ------ --------------- -------------------
Net cash used in financing activities (26,065,887) (46,509,059)
--------------------------------------------- ------ --------------- -------------------
Net increase in cash and cash equivalents (4,080,548) (12,171,822)
Cash and cash equivalents at the
beginning of the period 15,183,371 30,784,718
Foreign exchange loss on cash and
cash equivalents (783,114) (661,651)
Cash and cash equivalents at the
end of the period 10,319,709 17,951,245
--------------------------------------------- ------ --------------- -------------------
The Notes below form part of these condensed consolidated
financial statements.
1. GENERAL INFORMATION
The Company is a closed-ended limited liability company
incorporated under The Companies (Guernsey) Law, 2008 (as amended)
with registered number 60680. The Company is a registered
closed-ended investment scheme in Guernsey and admitted to trading
on the London Stock Exchange's Main Market and listed on the United
Kingdom Listing Authority ("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 1 Royal Plaza, Royal Avenue, St
Peter Port, Guernsey GY1 2HL.
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 Annual Report and Audited Consolidated
Financial Statements for the year ended 31 March 2020.
The Company publishes net asset value statements on its website
at www.smecreditrealisation.com
2. Basis of preparation
a) Statement of Compliance
The condensed consolidated financial statements, which give a
true and fair view, have been prepared in accordance with
International Accounting Standards ("IAS") 34 'Interim Financial
Reporting' as promulgated by the International Accounting Standards
Board. This Half-Yearly Report does not comprise statutory
consolidated 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 2022, which have been
prepared in accordance with International Financial Reporting
Standards ("IFRS'). The statutory consolidated financial statements
for the year ended 31 March 2022 were approved by the Board of
Directors on 26 July 2022. The opinion of the auditor on those
consolidated financial statements was unqualified. The accounting
policies adopted in these condensed consolidated financial
statements are unchanged since 31 March 2022. Changes to underlying
assumptions relating to estimates are detailed in note 3. The Group
does not have seasonal or cyclical interim business operations.
This Half-Yearly Report for the period ended 30 September 2022
has been reviewed by the auditor but not audited. PwC have been
performing the audit of the Group's year-end financial statements
for five financial years, starting with the period ended 31 March
2016.
Assets and liabilities of the Group have been presented in the
Condensed Consolidated Statement of Financial Position in their
order of liquidity as permitted by International Accounting
Standard 1, Presentation of Financial Statements.
Attention is drawn to the sales of loans that was completed in
December 2022, which is after the balance sheet date, as further
detailed within note 16 and is significant to the Group's ongoing
operations.
New accounting standards, amendments to existing accounting
standards and/or interpretations of existing Accounting Standards
(separately or together, "New Accounting Requirements") adopted in
the current period
In the Directors' opinion, all 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.
b) Going concern
The Directors have considered the state of the wind-down and
progress made in relation to the planned disposal of the loan
portfolio and determined that the use of the going concern basis in
preparing the condensed consolidated financial statements of the
Group is not appropriate as at 30 September 2022. As such, the
condensed consolidated financial statements have been prepared on a
basis other than going concern, under which the assets are measured
at their net realisable value.
The Group signed agreements in December 2022 to sell all the
Credit Assets with an economic cut-off date of 30 September 2022.
The transactions were settled as at the Sale Date, net of ongoing
collections the Group had received up until the settlement date. As
all the remaining loan assets were sold there is no ongoing income
into the Group beyond the economic cut-off date except the net
proceeds from the sales. As a result, the Group will continue to
prepare subsequent reporting on a basis other than going concern,
with all ongoing costs through to final liquidation of the Group
accrued from the Sale Date. As of the Sale Date the Board will seek
to commence liquidation proceedings at an appropriate time
thereafter. The liquidation costs, along with on-going operational
costs arising, will be treated in line with the requirements of IAS
37 provisions, based on reliable estimates.
There were no adjustments made to the carrying values of the
assets and liabilities of the Group in the current period and the
Directors consider the carrying values in the condensed
consolidated statement of financial position at the date of these
condensed consolidated financial statements are deemed to be
realisable values, based on fair value.
c) Use of estimates and judgements
The preparation of financial statements in accordance with IFRS
requires the Board to make judgements, estimates and assumptions
that affect the application of policies and the reported amounts of
assets and liabilities and income and expenses. The estimates and
associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ
from these estimates. The estimates and underlying assumptions are
reviewed on a quarterly basis by the Board. Revisions to accounting
estimates are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both
current and future periods.
In preparing these condensed consolidated financial statements,
the significant judgements, estimates and assumptions made by
management in applying the Group's accounting policies and the key
sources of estimation uncertainty were the same as those that
applied to the Audited Consolidated Financial Statements for the
year ended 31 March 2022 except for the change in assumptions as
detailed in note 3.
In relation to estimates, attention is drawn to note 16 whereby
additional certainty related to such estimates has been obtained
after the 30 September 2022 balance sheet date but which was not
known or adjusted for as at the balance sheet date.
3. LOANS ADVANCED
(Unaudited) (Audited)
30 September 31 March
2022 2022
GBP GBP
---------------------------------------- --- --------------- -------------
Balance at the beginning of the
period/year 37,403,665 83,355,445
Additions from settlement of the
EIB transaction* (see note 4) __ 5,824,315
Interest income 1,589,511 6,398,665
Principal and interest collections (22,441,972) (64,543,722)
Impairment release for the period/year 2,822,032 7,342,224
Foreign exchange gains 5,063,005 1,275,116
Loss on movement in fair value
through other comprehensive income (1,374,490) (2,248,378)
Balance at the end of the period/year 23,061,751 37,403,665
--------------------------------------------- --------------- -------------
*Loans consolidated within the EIB transaction are made up of
GBP22,808,956 principal and GBP16,984,641 expected credit losses as
at 31 March 2022.
The Group predominantly made unsecured loans in previous periods
and prior to the modification of the Company's investment policy
during the year ended 31 March 2020.
Information about the gain recognised on the movement of the
loans at FVTOCI and information about the methods and assumptions
used in determining the fair value is provided in note 13.
Each loan has a contractual payment date for principal and
interest. The Group classifies loans that are 91 or more days late
as credit impaired or defaulted for which lifetime expected loss is
taken as an impairment charge.
The following table shows the movement in impairment allowance
during the period.
(Unaudited) (Audited)
30 September 31 March
2022 2022
GBP GBP
---------------------------------------------------- --------------- -----------
Impairment allowance at beginning of the
period/year - previously reported 70,847,166 61,204,749
Impairment allowance for the period/year (2,822,032) (7,342,224)
Additions from loans consolidated following
settlement of EIB transaction* __ 16,984,641
Impairment allowance at the end of the period/year 68,025,134 70,847,166
---------------------------------------------------- --------------- -----------
*Loans consolidated within the EIB transaction are made up of
GBP22,808,956 principal and GBP16,984,641 expected credit losses as
at 31 March 2022. The initial recognition of the Expected Credit
Losses ("ECL") from the loans received as settlement of the EIB
transaction of GBP16,984,641 did not impact the consolidated
statement of comprehensive income.
During the year ended 31 March 2022 the loans forming the EIB
transaction were transferred to the Group in consolidation of the
Group's interest in the structure which was settled as a result.
The assets were transferred at an initial fair value of
GBP5,824,315. Refer to the Group's Annual Report and Audited
Consolidated Financial Statements for the year ended 31 March 2022
for further detail surrounding the EIB transaction.
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 2022
----------------------------
Principal Impairment
and interest allowance
-------------------- ---------- ------------------------ -------------- ------------
Stage 1 - 1 to 30 days late and no missed payments 15,454,792 571,860
Stage 2 - 31+ days late/missed a payment in
last 6 months 2,926,906 113,436
Stage 3 - Legally defaulted & 90+ days late 73,214,769 67,339,838
---------------------------------------------------------- -------------- ------------
91,596,467 68,025,134
---------------------------------------------------------- -------------- ------------
Stage 3 includes loans that have fallen 91 or more days late as
a result of forbearance measures introduced in April 2020 as a
response to COVID-19, which have not been contractually
defaulted.
Since the year ended 31 March 2022, the assumptions utilised in
the ECL model have been refreshed to take account of lower levels
of defaults and higher levels or repayment and recovery observed
than previously expected. The forecast probability of default has
been impacted by an update in particular to the expected timing and
quantum of defaults. Previously, a shorter but sharper peak in
default stress was expected over 2022 normalising in 2023,
reflecting a lagged impact of Covid-19, inflationary pressures and
supply chain disruption exacerbated by the events in the Ukraine.
Following stronger than expected performance and taking into
account latest macro-economic expectations, the default stress is
now expected to occur later and increase more gradually peaking by
2024, however also lasting longer than previous assumptions. The
impact of this change in assumptions occurring later and increasing
more gradually on a swiftly amortising book with a short weighted
average life is a reduction in the impairment allowance, in
particular of stage 1 and stage 2 loans where the default stress is
applied to a smaller forecast outstanding balance, and so the level
of expected defaults is lower.
As detailed in note 16, agreements were signed in December 2022
following the balance sheet date to sell the loans for net proceeds
after selling costs and deductions consistent with the fair value
of GBP23 million at 30 September 2022.
The table below shows an analysis of the principal and interest
of the loans along with the amount recognised as an impairment
allowance as at 31 March 2022:
(Audited)
31 March 2022
----------------------------
Principal Impairment
and interest allowance
-------------------- ---------- ------------------------ -------------- ------------
Stage 1 - 1 to 30 days late and no missed payments 27,732,405 2,704,168
Stage 2 - 31+ days late/missed a payment in
last 6 months 6,945,481 767,111
Stage 3 - Legally defaulted & 90+ days late 72,685,086 67,375,887
---------------------------------------------------------- -------------- ------------
107,362,972 70,847,166
---------------------------------------------------------- -------------- ------------
4. FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS
(Unaudited) (Audited)
30 September 31 March
2022 2022
GBP GBP
------------------------------------------- --- --- --------------- -----------
Balance at the beginning of the period/year __ 5,141,217
Interest collections __ (1,691,666)
Net gain on the change in fair value
of financial asset at fair value
through profit or loss during the
period/year* __ 2,251,764
Cash left in Finch vehicle for liquidation __ 123,000
Non-cash repayment __ (5,824,315)
------------------------------------------------ ------------------- -----------
Balance at the end of the period/year __ __
----------------------------------------------------- ------------- -----------
*Presented gross of interest distributions of class B note of
GBP1,691,666.
During the year ended 31 March 2022 the loans forming the EIB
transaction were transferred to the Group in consolidation of the
Group's interest in the structure which was settled as a result.
The assets were transferred at an initial fair value of
GBP5,824,315. Refer to the Group's Annual Report and Audited
Consolidated Financial Statements for the year ended 31 March 2022
for further detail surrounding the EIB transaction.
In the period ended 30 September 2021, as a result of the
continued resilient performance seen on the portfolio of loans held
by the EIB SPV with lower defaults and higher recoveries than
previously forecast, a fair value gain of GBP1,810,145 was
recognised in the condensed consolidated statement of comprehensive
income for the period.
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 2022 -
(unaudited)
UK US CE Other income Consolidated
and expenses
GBP GBP GBP GBP GBP
--------------------- ---------- ------------ ---------- -------------- -------------
Total revenue 978,647 3,901,695 989,060 5,345 5,874,747
Impairment of loans 4,701,416 (2,330,276) 450,892 - 2,822,032
Total comprehensive
income 3,866,943 1,225,011 1,528,828 5,345 6,626,127
Segment assets and liabilities as at 30 September 2022 -
(unaudited)
UK US CE Other assets Consolidated
and liabilities
GBP GBP GBP GBP GBP
---------------- ---------------- ---------- ---------- ----------------- -------------
Assets 17,681,283 9,549,016 6,195,958 - 33,426,257
Liabilities (114,676) (597,824) (80,755) - (793,255)
Segmental performance for the period ended 30 September 2021 -
(unaudited)
UK US CE Other income Consolidated
and expenses
GBP GBP GBP GBP GBP
-------------------------- ------------ -------- ---------- -------------- -------------
Total revenue 2,145,674 590,025 1,007,084 2,431 3,745,214
Impairment of loans 2,508,008 363,774 (587,667) - 2,284,115
Net gain/(loss) on
the change in fair
value of loans advanced 1,810,145 - - - 1,810,145
Total comprehensive
income 5,416,277 687,402 1,100,730 2,431 7,206,840
Segment assets and liabilities as at 31 March 2022 -
(audited)
UK US CE Other assets Consolidated
and liabilities
GBP GBP GBP GBP GBP
------------- ----------- ----------- ---------- ----------------- -------------
Assets 29,204,092 14,506,658 8,899,836 - 52,610,586
Liabilities (95,659) (364,252) (77,913) - (537,824)
6. cash and cash equivalents
(Unaudited) (Audited)
30 September 31 March
2022 2022
GBP GBP
--------------------------------------- --------------- -----------
Cash at bank 3,982,451 11,490,415
Cash equivalents 6,337,258 3,692,956
Balance at the end of the period/year 10,319,709 15,183,371
--------------------------------------- --------------- -----------
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 13). 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.
Valuation of currency derivatives
(Unaudited) (Audited)
Fair value Fair value
30 September 31 March
2022 2022
GBP GBP
-------------------------------------------- --------------- -------------
Fair value of currency derivatives (277,290) (191,363)
-------------------------------------------- --------------- -------------
(277,290) (191,363)
-------------------------------------------- --------------- -------------
(Unaudited) (Audited)
Fair value Fair value
30 September 31 March
2022 2022
GBP GBP
-------------------------------------------- --------------- -------------
Euro 7,128 4,960
USD 13,713 9,607
GBP (298,131) (205,930)
Total (277,290) (191,363)
-------------------------------------------- --------------- -------------
8. ACCRUED EXPENSES and other LIABILITIES
(Unaudited) (Audited)
30 September 31 March
2022 2022
GBP GBP
----------------------------- --- --------------- -----------
Service fees payable 33,805 83,050
Audit fees payable* 328,413 183,971
Legal fees payable 86,209 13,817
Administration fees payable 309 31,303
Taxation payable - 500
Other liabilities 67,229 33,820
515,965 346,461
--------------------------------- --------------- -----------
*Audit fees payable at 30 September 2022 reflect balances
outstanding in relation to the audit of the Group and the statutory
financial statements of the subsidiaries for the year ended 31
March 2022 in addition to the accrual of fees up to 30 September
2022.
9. 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 2022 - (audited) 51,750,563 87,058,289 (5,744,900) 81,313,389
Redemption of ordinary
shares (24,201,918) (25,199,877) - (25,199,877)
--------------------------------- ------------- -------------- ------------ -------------
At 30 September 2022
- (unaudited) 27,548,645 61,858,412 (5,744,900) 56,113,512
--------------------------------- ------------- -------------- ------------ -------------
Issued and fully paid Number of Shares issued Issue costs Net Shares
shares amount amount
Ordinary shares GBP GBP GBP
-------------------- ----------- --------------------- -------------- ------------ -------------
At 31 March 2021 - (audited) 134,164,922 163,258,048 (5,744,900) 157,513,148
Redemption of ordinary
shares (48,460,533) (43,999,877) - (43,999,877)
--------------------------------- --------------------- -------------- ------------ -------------
At 30 September 2021
- (unaudited) 85,704,389 119,258,171 (5,744,900) 113,513,271
--------------------------------- --------------------- -------------- ------------ -------------
As at 30 September 2022, the Company has purchased a lifetime
cumulative total of 43,746,667 shares (31 March 2022: 43,746,667
shares) which were subsequently cancelled and of which nil (31
March 2022: nil) have been held in treasury. No shares held in
treasury were cancelled and formally discharged in the past 6
months, or the year preceding.
The Company has compulsorily redeemed a total of 24,201,918 (31
March 2022: 82,414,359) shares for a total amount of GBP25,199,877
(31 March 2021: GBP76,199,759) throughout the period. All shares
redeemed throughout the period were redeemed at the prevailing NAV
per share at the date of declaration.
As at the date of the condensed consolidated statement of
financial position, there was 27,548,645 ordinary shares in issue
with a nominal value of 100p each. The excess of the Net Share
Amount of GBP28,566,867 is recognised as share premium.
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.
10. TAXATION
(Unaudited) (Audited)
30 September 31 March
2022 2022
GBP GBP
--------------------------------------------- --- --------------- -----------
Operating i ncome before taxation 8,001,117 7,599,870
-------------------------------------------------- --------------- -----------
Tax at the standard Guernsey income - -
tax rate of 0%
Effects of tax rates in other jurisdictions (500) (500)
Taxation expense (500) (500)
-------------------------------------------------- --------------- -----------
The Group may be subject to taxation under the tax rules of the
jurisdictions in which it invests. During the period, Basinghall,
Tallis 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 2020. These
rules
included changes to the anti-hybrid and anti-avoidance rules in
section 110 TCA of the legislation.
During the year ended 31 March 2022, the interest limitation
rule ("ILR") as contemplated by Article 4 of the Anti-Tax Avoidance
Directive which was adopted as Council Directive (EU) 2016/1164 on
12 July 2016 was introduced in Ireland by the Finance Act 2021. The
ILR will apply to Irish taxable entities with respect to accounting
periods commencing on or after 1 January 2022. As of 30 September
2022 the ILR has not impacted Basinghall or Tallis negatively as
each entity earns only income which is expected to be treated as
interest equivalent income for Irish tax purposes, together with
future potential income.
11. Earnings per share ("EPS")
The calculation of the basic and diluted EPS is based on the
following information:
(Unaudited) (Unaudited)
30 September 30 September
2022 2021
GBP GBP
----------------------------------- --- --------------- ---------------
Profit for the purposes of EPS 8,000,617 7,599,870
Weighted average number of shares 36,437,370 101,603,194
Basic and diluted EPS 21.96p 7.48p
---------------------------------------- --------------- ---------------
12. 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
2022 date
Pence GBP
------------------ ---------------- ------ ---------- ------------- -----------
Ordinary shares
Interim dividend 20 April 2022 28 April 2022 1.3125 504,436
Interim dividend 18 July 2022 28 July 2022 1.3125 361,574
Total 2.625 866,010
-------------------------------------------------------- ----- ------ -----------
30 September Date declared Ex-dividend Per share Total
2021 date
Pence GBP
------------------ --------------- ------- ---------- -------------- ----------
Ordinary shares
Interim dividend 21 April 2021 29 April 2021 1.3125 1,384,312
Interim dividend 20 July 2021 29 July 2021 1.3125 1,124,870
Total 2,625 2,509,182
-------------------------------------------------------- ------ ------ ----------
13. 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 Audited Consolidated
Financial Statements as at 31 March 2022.
There have been no changes in the risk management in any risk
management policies since the year end 31 March 2022.
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
year ended 31 March 2022, there have been no material changes on
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 2022 are its currency derivatives measured at fair
value through profit and loss and its loans advanced measured at
fair value through other comprehensive income. During the year
ended 31 March 2022 the Group also had an investment in the EIB
transaction measured at fair value through profit or loss which was
settled before the end of the year. 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 2022.
The Group 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 2022 was GBP23,061,750 (31 March 2022:
GBP37,403,665). 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 Group's portfolios:
30 September 30 September 30 September 31 March 31 March 31 March
2022 2022 2022 2022 2022 2022
(unaudited) (unaudited) (unaudited) (audited) (audited) (audited)
UK US CE UK US CE
Discount
rate 12.71% 13.22% 11.85% 9.07% 8.29% 7.55%
Fair value GBP14,900,416 GBP2,581,948 GBP5,579,387 GBP25,205,229 GBP4,209,292 GBP7,989,144
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 Credit Assets
falls within Level 3 in the fair value hierarchy due to the
unobservable inputs used in the valuation which include discount
rate, timing and amounts of cash flows and performance of the
underlying loan portfolios. Refer to notes 3, 4 and 7 for the
movement on these financial instruments during the period.
Attention is drawn to note 16 where the assets were sold in
December 2022 for net proceeds after selling costs and deductions
materially consistent with the total combined fair value as at 30
September 2022.
The following table presents the fair value of the Group's
assets and liabilities not measured at fair value as at 30
September 2022 but for which fair value is disclosed:
30 September 2022 - (unaudited)
----------------------------------------------
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
----------------------------------- ----------- ---------- -------- -----------
Cash and cash equivalents 10,319,709 - - 10,319,709
Other receivables and prepayments - 44,797 - 44,797
Accrued expenses and other
liabilities - (515,965) - (515,965)
10,319,709 (471,168) - 9,848,541
----------------------------------- ----------- ---------- -------- -----------
31 March 2022 - (audited)
------------------------------------------------
Level 1 Level Level 3 Total
2
GBP GBP GBP GBP
----------------------------------- ----------- ---------- -------- -----------
Cash and cash equivalents 15,183,371 - - 15,183,371
Other receivables and prepayments - 23,550 - 23,550
Accrued expenses and other
liabilities - (346,461) - (346,461)
15,183,371 (322,911) - 14,860,460
----------------------------------- ----------- ---------- -------- -----------
The Board of Directors believe that the carrying values for cash
and cash equivalents, other receivables and prepayments, 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 condensed consolidated statement of financial position due to
their short-term nature.
There were no transfers between levels during the period or
prior year.
Currency risk
Currency risk is the risk that the value of the Group's net
assets will fluctuate due to changes in foreign exchange rates.
Aside from GBP, the Group has invested in loans denominated in US
Dollars and Euro and may invest in loans denominated in other
currencies. Accordingly, the value of such assets may be affected
favourably or unfavourably by fluctuations in currency rates. The
Board of Directors monitors the fluctuations in foreign currency
exchange rates and uses forward foreign exchange swaps to seek to
hedge the currency exposure of the Group arising from US Dollar and
Euro denominated investments.
The net foreign exchange gain charged to the Condensed
Consolidated Statement of Comprehensive Income during the period
was GBP4,279,891 (30 September 2021: 682,628). The details of the
net foreign exchange gain or loss are shown below.
30 September 30 September
2022 2021
GBP GBP
-------------------------------------------- ------------- ------------
Unrealised foreign currency gains/(losses) 4,824,210 959,703
Realised gains on currency derivatives - 688,745
Realised losses on currency derivatives (458,392) -
Fair value movement on currency
derivatives (85,927) (965,820)
---------------------------------------------- ------------- ------------
4,279,891 682,628
-------------------------------------------- ------------- ------------
Capital risk management
The Board's policy is to reflect a realisation strategy in line
with the investment objective and policy, 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 Group's investments and making timely returns of
capital to shareholders. 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 return of capital to
shareholders is managed in line with the Company's investment
objective and managed wind-down process.
The Company continued to return capital through compulsory
redemptions of shares and distributions of dividends, as the
Group's portfolio of Credit Assets amortises. Following the sales
of the loans detailed in note 16, it is expected dividends will
cease and capital will be returned as efficiently as possible to
shareholders as indemnities associated with the sales amortise.
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. All of the Group's leverage facilities
have now been fully repaid.
14. Related party disclosure
The Directors, who are the key management personnel of the
Group, are remunerated per annum as follows:
30 September 31 March
2022 2022
GBP GBP
-------------------------- ------------- --------
Chairman 47,500 50,000
Audit Committee Chairman 40,000 40,000
Risk Committee Chairman 30,000 40,000
Other Directors 30,000 30,000
147,500 160,000
-------------------------- ------------- --------
Sachin Patel resigned as director on 6 September 2022. Anthony
Nicol was appointed as a Director of the Company effective from 19
October 2022. Tom Parachini, Global Head of Legal and Regulatory at
Funding Circle, was previously appointed as Alternate Director for
Sachin Patel and subsequently has resigned following Sachin Patel's
resignation.
During the AGM held on 19 October 2022, insufficient votes were
received in order to re-elect Richard Boléat as a Director. As a
result, he has stepped down as Chairman and a Director, resigning
from the Board of Directors and Frederic Hervouet was appointed as
Chairman.
During Sachin Patel's tenure, Mr Patel was not entitled to fees
as a prior director of the Company. Anthony Nicol is not entitled
to fees as a director of the Company.
During the AGM, the Directors have agreed to hold Directors'
fees consistent with the previous years notwithstanding the
additional responsibilities that came with the changes to the chair
of the various committees of the Board.
Mr Boléat's annual fees for the role of Chairman will only
encompass 3 quarters served on the Board of Directors including a
period of notice.
The Directors held the following number of shares as at 30
September 2022 and 31 March 2022:
(unaudited) (audited)
As at 30 September As at 31 March 2022
2022
------------------------ ------------------------
Number % of total Number % of total
of shares shares in of shares shares in
issue issue
--------------------- ----------- ----------- ----------- -----------
Richard Boléat 2,785 0.0101% 5,231 0.0101%
Jonathan Bridel 13,461 0.0489% 25,286 0.0489%
Richard Burwood 7,144 0.0259% 13,409 0.0259%
Frederic Hervouet 18,900 0.0686% 35,504 0.0686%
Sachin Patel - - - -
Anthony Nicol - - - -
42,290 0.1535% 79,430 0.1535%
--------------------- ----------- ----------- ----------- -----------
Movement in the number of shares held by each of the directors
during the year relates to the redemptions paid by the Company.
The Group had no employees during the period or the prior
period.
The Directors delegate certain functions to other parties. In
particular, the Directors 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 year and amounts
payable to each of Funding Circle UK, FCGPL, Funding Circle US and
Funding Circle CE are disclosed below.
Expense Payable Expense Payable
during the as at 30 during the as at 31
period September period ended March 2022
ended 2022 30 September
30 September 2021
2022
(unaudited) (unaudited) (unaudited) (audited)
Transaction GBP GBP GBP GBP
---------------- -------------------- -------------- ------------ -------------- ------------
Funding Circle
UK Servicing fee 75,458 19,546 179,101 36,211
Corporate services
FCGPL fee 23,484 - 54,608 -
FCGPL Reimbursement - -
of expenses 12,647 -
Funding Circle
US Servicing fee 27,040 3,508 100,015 6,165
Funding Circle
CE Servicing fee 38,717 10,751 92,710 40,674
---------------- -------------------- -------------- ------------ -------------- ------------
Each of the Funding Circle entities acting as servicer is
entitled to additional fees of up to 40 per cent of collections
received on defaulted assets under each of the relevant Services
Agreement in reimbursement of costs incurred in respect of
collection charges and external legal fees. Such fees were incurred
in relation to the sales outlined in note 16 and form part of the
direct selling costs and deductions in arriving at the net proceeds
from the sales.
15. 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
2022 2022
GBP GBP
Basinghall Investing
Lending in Credit Subscription
Designated Assets originated of notes
Activity Company Ireland in the UK issued 13,831,881 29,245,042
Investing
in Credit
Assets originated
Tallis Lending in Germany, Subscription
Designated the Netherlands of notes
Activity Company Ireland and Spain issued 5,031,005 9,266,553
Queenhithe Ireland Invested Subscription - -
Lending Designated in Credit of notes
Activity Company* Assets originating issued (through
in the UK Basinghall)
18,862,886 38,511,595
------------------------------------------------------------------------------- ----------------- -------------
* Queenhithe Lending Designated Activity Company is, at the date
of these condensed consolidated financial statements, still
undergoing liquidation.
16. Subsequent events
On 20 October 2022, the Company declared a quarterly dividend of
1.3125 pence per share payable on 25 November 2022. The Company
also returned approximately GBP9.1m on 11 November 2022 by way of a
compulsory redemption of shares.
As previously announced in the Group's Annual Report and Audited
Consolidated Financial Statements for the year ended 31 March 2022,
the Group has actively been exploring a sale process for the loan
portfolio in light of the rapid run off and its objective to
realise all assets in a prudent manner and make timely returns of
capital to shareholders. Subsequently, the Group has signed
agreements on 2 December 2022 for the US and 9 December 2022
(together the "Sale Date") for the UK and CE to sell all remaining
Credit Assets with an economic cut-off date of 30 September 2022.
The transactions were settled on 5 December 2022 and 12 December
2022 respectively net of collections between the economic cut-off
date and the Sale Date. Net of directly associated selling costs
such as legal fees and collection charges, the proceeds received on
the combined portfolio sales are materially consistent with the
GBP23 million value of which the loans are held at 30 September
2022.
The gross proceeds of the sales were EUR6,065,348, GBP19,307,736
and $4,099,133 for CE, the UK and US respectively or approximately
GBP28.3 million using 30 September 2022 foreign exchange rates.
Anticipated direct deductions for legal costs associated with the
transactions, broker costs and collection charges and legal cost
reimbursement to the servicer related to the sales are GBP4.4
million. This results in an anticipated net profit on sales of
c.GBP0.8 million before considering any potential claims against
warranties and indemnities associated with the sales or the accrual
of running and liquidation costs over the remaining life of the
Group as detailed below.
As is industry practice, the Group as seller has offered certain
warranties and indemnities to the buyers of the loans which will
inhibit the Group's ability to distribute all cash to shareholders
immediately and fully liquidate the Group until such time as the
indemnity period has finished. This period will be twelve months
from the Sale Date and amortisation will commence after six months
and c.GBP5.3 million of cash (made up of GBP3.9m, EUR1.2m and
$0.5m) will be set aside to cover the indemnities from the combined
transactions. To the extent the indemnity provisions are not called
upon, this cash will be returned to shareholders over a period from
six to twelve months from the Sale Date. During this period the
operations of the Group will be simplified and cost base reduced,
with appropriate accruals withheld to cover the reduced but ongoing
running costs and all foreseeable costs for liquidation of the
Group.
Following the completion of the portfolio sales, the Board
intends to then publish a circular setting out details of, and
convening a general meeting to seek shareholder approval for, the
proposals to delist SME Credit Realisation Fund Limited, and the
plan related to liquidation. The proposals are expected to be
published following the next quarterly return of capital in January
2023, which will distribute substantially all of the Group's free
cash, i.e. it will include the net proceeds of the portfolio sales,
less operating expenses, any foreign exchange margin reserve
maintenance requirements, liquidation costs and indemnity
provisions related to the portfolio sales. While the 31 December
2022 NAV is yet to be announced, it is anticipated that the NAV per
share as a result of the sales net of deductions and future cost
accruals will be materially aligned with that of 30 September 2022.
This is considered to be a good outcome for shareholders in the
current economic environment with the gains in the period to 30
September 2022 materially maintained upon crystallisation. If
shareholder approval is forthcoming, the Fund is expected to delist
in Q1 2023 with the timing of liquidation to also be confirmed.
As a result of the sales, the Group will continue to prepare
subsequent reporting on a basis other than going concern, with all
ongoing costs through to final liquidation of the Group accrued
from the Sale Date, including those relating to liquidation. The
liquidation costs, along with on-going operational costs arising,
will be treated in line with the requirements of IAS 37 provisions
and based on reliable estimates. As at 30 September 2022 the
expected sales proceeds and timing of the transactions could not be
determined due to ongoing negotiations with bidders and as a result
the financial results for the period ended 30 September 2022 do not
reflect the impact of the sales of the loans nor the accrual of
ongoing costs through to liquidation. The estimate of ongoing costs
through to liquidation is underway and cannot currently be fully
and reliably estimated as the plan for delisting and liquidation of
the Group continues to be refined and fully costed and more detail
will be announced in the NAV and return of capital announcement for
the quarter ended 31 December 2022. Initial high level
expectations are that such costs will not significantly outweigh
the net profit on sales of loans and the NAV per share will be
materially consistent with that of 30 September 2022, however this
view is subject to ongoing assessment. The sales are considered a
non-adjusting post-balance sheet event.
BOARD OF DIRECTORS
Frederic Hervouet
Chairman, Non-executive Director
Fred Hervouet is a resident of Guernsey and has dual nationality
with both British and French citizenship. He has more than 25 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, and 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 Special Fund Market of the
London Stock Exchange and also Chairman of Boussard and Gavaudan
Holdings Limited and a director of Crystal Amber Fund Limited. He
is also a director of the General Partners of a number of Guernsey
based Private Equity Funds (Terra Firma, Lakestar, Telstra
Ventures, LCH Partners, Hedosophia).
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
Association of Investment Companies.
Jonathan Bridel
Audit Committee and Risk Committee Chairman, Non-executive
Director
Mr Bridel is currently a non-executive Chairman or director of
listed investment funds. These include Fair Oaks Income Fund
Limited and DP Aircraft 1 Limited where he is Chairman. 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 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, Remuneration and
Nominations Committee Chairman, Non-executive Director
Mr Burwood is a resident of Guernsey with 30 years' experience
in banking and investment management. During his 18 years with
Citibank London, Mr Burwood spent 11 years as a fixed income
portfolio manager spanning both banks/finance investments and Asset
Backed Securities.
Mr Burwood has lived in Guernsey since 2010, initially working
as a portfolio manager for EFG Financial Products, managing the
treasury department's ALCO Fixed Income portfolio. From 2011 to
2013, Mr Burwood worked as the Business and Investment Manager for
Man Investments, Guernsey.
In January 2013, Mr Burwood joined the board of TwentyFour
Income Fund, a London listed closed-ended fund which targets less
liquid, higher yielding asset backed securities. In January 2014,
Mr Burwood joined the board of RoundShield, a Guernsey private
equity fund, focused on European small to mid-cap real estate
opportunities. In August 2015, he became a Board Member of Funding
Circle SME Income Fund, now SME Credit Realisation Fund Limited,
the Company. Mr Burwood also serves on the boards of Habrok, a
Cayman-registered hedge fund specialising in Indian equities, and
EFG International Finance, a structured note issuance vehicle based
in Guernsey.
Anthony Nicol
Non-executive Director
Anthony Nicol is Funding Circle's Group Finance Director.
Previously Mr Nicol was the Group financial controller at IG Group
plc, a listed financial services trading platform, and before that
spent over 15 years at PwC, latterly as an Assurance Director
auditing and advising listed and private businesses in a number of
sectors. Mr Nicol is an FCA of the ICAEW and holds a BSc
(Mathematics) from Bristol University.
Richard Boléat
Prior 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. He also serves on the
board of Third Point Investors Limited, and a number of other
substantial private market 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
Sachin Patel
Prior Non-executive Director
Sachin Patel was the Chief Capital Officer at Funding Circle,
lead the Global Capital Markets group and was 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 prior role at Funding Circle Ltd, Sachin was not an
independent Director. Notwithstanding this, Sachin undertook 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 satisfied themselves
that procedures were in place to address potential conflicts of
interest. Sachin was not entitled to any fee for the services
provided and to be provided in relation to his prior
directorship.
AGENTS AND ADVISORS
SME Credit Realisation
Fund Limited
Company registration
number: 60680 (Guernsey,
Channel Islands)
Registered office Portfolio Administrator
1 Royal Plaza* Funding Circle Ltd
Royal Avenue 71 Queen Victoria Street
St Peter Port London EC4V 4AY
Guernsey GY1 2HL United Kingdom
Channel Islands
E-mail: ir@smecreditrealisation.com
Website: smecreditrealisation.com
Company Secretary and Corporate broker and
Administrator Bookrunner and Sponsor
Sanne Group (Guernsey) Numis Securities Limited
Limited The London Stock Exchange
1 Royal Plaza* Building
Royal Avenue 10 Paternoster Square
St Peter Port London EC4M 7LT
Guernsey GY1 2HL United Kingdom
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
Legal advisors as to Registrar
English Law Link Market Services
Herbert Smith Freehills (Guernsey) Limited
LLP (London) Mont Crevelt House
Exchange House, Primrose Bulwer Avenue
Street, St Sampson
London EC2A, 2EG Guernsey GY2 4LH
United Kingdom Channel Islands
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
*Prior to 23 November 2022, the address was De Catapan
House, Grange Road, St Peter Port
Guernsey GY1 2QG.
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. Details of the
methodology including key inputs are disclosed
in note 3 (b).
----------------------------------------------------------
"Dividend Per Ordinary A measure of performance showing dividend either
Share" declared or paid for each share issued and outstanding
in the Company
----------------------------------------------------------
"Economic-cut-off Regarding the sale of loan portfolios detailed
date" in note 16, the date after which beneficial ownership
is deemed to have transferred to the new owner.
As is common practice in such transactions, the
Sale Date occurs after the economic cut-off date
to allow parties time to review the data, provide
bids and to complete due diligence before signing
legally binding contracts.
----------------------------------------------------------
"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 and Funding Circle Deutschland
CE" GmbH
----------------------------------------------------------
"Funding Circle Funding Circle Nederlands B.V.
Netherlands"
----------------------------------------------------------
"Funding Circle Funding Circle Espa a SLU
Spain"
----------------------------------------------------------
"FCGPL" Funding Circle Global Partners Limited
----------------------------------------------------------
"Funding Circle Funding Circle Limited
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 2020 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.
----------------------------------------------------------
"Sale Date" Date at which contracts related to loan sales are
signed and considered legally binding with regards
to the loan position as at the economic cut-off
date. Cash flows and interest relating to loans,
that occur after the economic cut-off date up to
the Sale Date belong to the purchaser and are settled
net of the gross purchase price.
----------------------------------------------------------
"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 2021.
----------------------------------------------------------
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END
IR BRBDDXDDDGDD
(END) Dow Jones Newswires
December 23, 2022 02:00 ET (07:00 GMT)
Sme Credit Realisation (LSE:SCRF)
Gráfica de Acción Histórica
De Abr 2024 a May 2024
Sme Credit Realisation (LSE:SCRF)
Gráfica de Acción Histórica
De May 2023 a May 2024
