We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for Free to get streaming real-time quotes, interactive charts, live options flow, and more.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Chenavari Capital Solutions Limited | LSE:CCSL | London | Ordinary Share | GG00BMGNHZ00 | RED ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 47.58 | 35.00 | 60.16 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMCCSL
RNS Number : 2627P
Chenavari Capital Solutions Limited
25 May 2018
Chenavari Capital Solutions Limited
(a closed-ended investment company limited by shares incorporated under the laws of
Guernsey with registered number 56977)
Unaudited Interim Financial Statements
For the period from 1 October 2017 to 31 March 2018
Potential investors are "qualified eligible persons" and "Non-United States Persons" within the meaning of the US Commodity Futures Trading Commission Regulation 4.7.
Chenavari Credit Partners LLP (the "Investment Manager") is registered as a commodity pool operator ("CPO") with the Commodity Futures Trading Commission (the "CFTC") and is a member of the National Futures Association ("NFA") in such capacity under the U.S. Commodity Exchange Act, as amended ("CEA"). With respect to Chenavari Capital Solutions Limited, the Investment Manager has claimed an exemption pursuant to CFTC Rule 4.7 for relief from certain disclosure, reporting and recordkeeping requirements applicable to a registered CPO. Such exemption provides that certain disclosures specified in section 4.22 (c) and (d) of the regulation are not in its interim report.
Contents
Commodity Exchange Affirmation Statement
Highlights for the period from 1 October 2017 to 31 March 2018
Corporate Summary
General Information
Chairman's Statement
Investment Manager's Report
Statement of Principal Risks and Uncertainties
Statement of Directors' Responsibilities
Independent Review Report to the Members of Chenavari Capital Solutions Limited
Condensed Unaudited Statement of Comprehensive Income
Condensed Unaudited Statement of Financial Position
Condensed Unaudited Statement of Changes in Equity
Condensed Unaudited Statement of Cash Flows
Condensed Schedule of Investments, at Fair Value
Notes to the Condensed Unaudited Financial Statements
FORWARD-LOOKING STATEMENTS
This interim report includes statements that are, or may be considered, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "plans", "expects", "targets", "aims", "intends", "may", "will", "can", "can achieve", "would" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this interim report, including in the Chairman's Statement. They include statements regarding the intentions, beliefs or expectations of the Company or the Investment Manager concerning, among other things, the investment objectives and investment policies, financing strategies, investment performance, results of operation, financial condition, liquidity prospects, dividend policy and targeted dividend levels of the Company, the development of its financing strategies and the development of the markets in which it, directly and through special purpose vehicles, will invest in and issue securities and other instruments. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. The Company's actual investment performance, results of operations, financial condition, liquidity, dividend policy and dividend payments and the development of its financing strategies may differ materially from the impression created by the forward-looking statements contained in this document. In addition, even if the investment performance, results of operations, financial condition, liquidity, dividend policy and dividend payments of the Company and the development of its financing strategies are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that may cause differences include, but are not limited to: changes in economic conditions generally and in the structured finance and credit markets particularly; fluctuations in interest and currency exchange rates, as well as the degree of success of the Company's hedging strategies in relation to such changes and fluctuations; changes in the liquidity or volatility of the markets for the Company's investments; declines in the value or quality of the collateral supporting many of the Company's investments; legislative and regulatory changes and judicial interpretations; changes in taxation; the Company's continued ability to invest its cash in suitable investments on a timely basis; the availability and cost of capital for future investments; the availability of suitable financing; the continued provision of services by the Investment Manager and the Investment Manager's ability to attract and retain suitably qualified personnel; and competition within the markets relevant to the Company. These forward-looking statements speak only as at the date of this interim report. Subject to its legal and regulatory obligations, the Company expressly disclaims any obligations to update or revise any forward-looking statement (whether attributed to it or any other person) contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based. The Company qualifies all such forward-looking statements by these cautionary statements.
Commodity Exchange Affirmation Statement
Commodity Exchange Affirmation Statement Required by the Commodity Exchange Act, Regulation --4.22(h)
I, Loic Fery, hereby affirm that, to the best of my knowledge and belief, the information contained in this Interim Report and Unaudited Financial Statements of Chenavari Capital Solutions Limited is accurate and complete.
Loic Fery
Chief Executive Officer and representative of the Managing Member of Chenavari Credit Partners LLP, Commodity Pool Operator of Chenavari Capital Solutions Limited
24 May 2018
Highlights for the period from 1 October 2017 to 31 March 2018
-- During the period from 1 October 2017 to 31 March 2018 (the "Period"), the Company produced a net asset value ("NAV") total return of (1.12)% (dividends reinvested).
-- The NAV per Ordinary Share ("Share") declined from 92.91 pence at 31September 2017 to 88.89 pence at 31 March 2018 net of distributions.
-- The Company declared two dividends in respect of the period ended 31 March 2018: 1.25 pence per Share paid on 28 February 2018 for the period ended 31 December 2017 and 1.25 pence per Share to be paid on 31 May 2018 for the period ended 31 March 2018. On 30 November 2017 a dividend of 1.75 pence per Share was paid for the period ended 30 September 2017.
-- The Company's mid-market share price at 31 March 2018 was 81.25 pence (31 March 2017: 90.375 pence), representing a discount to NAV of 8.60 %.
-- The loss of the Company for the Period was GBP0.8 million (31 March 2017: profit GBP2.7 million), or (0.76) pence per Share (31 March 2017: 2.20 pence per Share), taking into account recognition of the following significant items:
o total net loss of GBP0.03 million (31 March 2017: income GBP3.6 million).
o total operating expenses of GBP0.8 million (31 March 2017: GBP0.9 million).
-- From 1 January 2017, the Company entered into a Realisation Period and started to return unencumbered cash balances to Shareholders. During the period, a further return of capital was made in December 2017 in the form of a compulsory redemption of Shares equivalent to 9.9% of the Company's share capital as at the IPO. Subsequent to period end, there was a further return of capital in the form of a compulsory redemption of Shares equivalent to 17.3% of the share capital as at the IPO. Subject to market conditions and the performance of individual assets, it is the Board's current expectation that the portfolio will be substantially realised and over 90% of the projected cash proceeds will be returned to investors by mid 2021.
-- During the Period, the Company repurchased and cancelled 12,908,729 Shares via one Share repurchase and at 31 March 2018 the Company had 104,345,215 Shares in issue.
Corporate Summary
For the Period from 1 October 2017 to 31 March 2018
The Company
Chenavari Capital Solutions Limited (the "Company") is a closed-ended Collective Investment Scheme registered pursuant to The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended (the "Law") and the Registered Collective Investment Scheme Rules 2008 issued by the Guernsey Financial Services Commission (the "Commission").
The IPO of the Company raised gross proceeds of GBP130.3 million and the Company's Shares were admitted to trading on the Specialist Fund Segment of the London Stock Exchange ("SFS") on 7 October 2013.
Investment objective and policy
The investment objective of the Company is to provide Shareholders with an attractive return, while limiting downside risk, through investment in bank capital solutions transactions primarily with UK and European banks.
Investment Period and Realisation Period
Following the extension of the investment period to 31 December 2016 approved by Shareholders at an EGM on 18 December 2015 (the "Investment Period"), the Company continued its ability to invest its cash balances in accordance with its investment policy, to the extent that such cash was not required for working capital purposes or the payment of dividends in accordance with the Company's dividend policy up to and including 31 December 2016, subject to the restrictions applicable to the extension period.
On 13 December 2016 the Company announced its intention to cease making any further investments with immediate effect and that, from 1 January 2017, it would commence a realisation period which would involve the return of unencumbered cash balances to Shareholders (the "Realisation Period"). Three returns of capital were made in April, September and December 2017 in the form of compulsory redemptions of shares equivalent to a total distribution of 19.8% of the share capital as at the IPO. Although subject to change owing to market conditions and the performance of individual assets, it is the Board's current expectation that the portfolio will be substantially realised as a result of investments maturing in accordance with their terms and over 90% of the projected cash proceeds returned to investors by mid 2021. Assets may also be sold or otherwise disposed of as part of the realisation programme.
Target returns and dividend policy
Subject to compliance with the Companies (Guernsey) Law, 2008 (as amended) and the satisfaction of the solvency test, the Company intends to distribute all its income received from investments, net of expenses, by way of dividends on a quarterly basis with dividends declared in October, January, April and July each year and paid in November, February, May and August.
The Company's target NAV total net return to investors is 8-10 % per annum over the life of the Company. From 1 January 2017, returns to Shareholders have been predominantly from the return of unencumbered cash balances described above and as dividend income.
The Investment Manager and Investment Adviser
The Company's Investment Manager is Chenavari Investment Managers (Luxembourg) S.àRL, a non-cellular company incorporated in Luxembourg under registered number B 0143992, and is licenced and regulated by the Commission de Surveillance du Secteur Financier ("CSSF") in Luxembourg to undertake the activities of an Alternative Investment Fund Manager ("AIFM"). The Investment Manager is a wholly owned entity within the Chenavari Group.
The Investment Manager has appointed Chenavari Credit Partners LLP (the "Investment Adviser"), which is also a member of the Chenavari Group, to provide investment advisory services to the Investment Manager. The Investment Adviser is a limited liability partnership incorporated in England and Wales under registered number OC337434 and is regulated and authorised in the UK by the Financial Conduct Authority under registration number 484392, the US Commodities and Futures Trading Commissions (no. 0426351) and registered with the US Securities and Exchange Commission under Investment Adviser registration number 801/72662.
Asset values
At 31 March 2018, the Company's NAV was GBP92.8 million (31 March 2017: GBP115.9 million), with the NAV per Share amounting to 88.89 pence (31 March 2017: 92.97 pence). The Company publishes its NAV on a monthly basis. The NAV is calculated as the Company's assets at fair value less liabilities, measured in accordance with International Financial Reporting Standards ("IFRS").
Duration
The Company has an indefinite life.
Corporate Summary (continued)
For the Period (continued)
Website
The Company's website address is www.chenavaricapitalsolutions.com
Listing Information
The Company's Shares are admitted to trading on the SFS.
The ISIN number of the Shares is GG00BF4J9110 and the SEDOL is BF4J911.
The closing price of the Shares quoted on the SFS at 31 March 2018 was 81.25 pence per Share.
The average closing price of the Shares over the Period to 31 March 2018 was 88.30 pence per Share.
General Information
Hot Features
Premium
Directors Registered Office
Rob King (Non-executive Director and Chairman) Old Bank Chambers
Iain Stokes (Non-executive Director) La Grande Rue
René Mouchotte (Non-executive Director) St Martin's
Guernsey
GY4 6RT
Investment Manager and AIFM Investment Adviser
Chenavari Investment Managers (Luxembourg)
S.àRL. Chenavari Credit Partners LLP
2, Boulevard de la Foire 80 Victoria Street
L-1528 London
Luxembourg SW1E 5JL
Solicitors to the Company (as to United Solicitors to the Company (as
States law) to English law)
Gowling WLG (UK) LLP (formerly
Reed Smith LLP Wragge
The Broadgate Tower Lawrence Graham & Co LLP)
20 Primrose Street 4 More London Riverside
London London
EC2A 2RS SE1 2AU
Advocates to the Company (as
Corporate Broker to Guernsey law)
Fidante Partners Europe Limited, trading
as Fidante Capital Mourant Ozannes
1 Tudor Street 1 Le Marchant Street
London St Peter Port
EC4Y 0AH Guernsey
GY1 4HP
Administrator and Company Secretary Sub-Administrator
Estera Administration (Guernsey) Limited Quintillion Limited
Old Bank Chambers 24-26 City Quay
La Grande Rue Dublin 2
St Martin's Ireland
Guernsey
GY4 6RT
Custodian and Principal Bankers and AIFMD
Article 36 Custodian Auditor
J.P. Morgan Chase Bank NA, Deloitte LLP
Jersey Branch P.O. Box 137
J.P. Morgan House Regency Court
Grenville Street Glategny Esplanade
St Helier St. Peter Port
Jersey Guernsey
JE4 8QH GY1 3HW
Depository and AIFMD Article
Registrar 36 Custodian
Link Asset Services Quintillion Services Limited
Mont Crevelt House 24-26 City Quay
Bulwer Avenue Dublin 2
St Sampson Ireland
Guernsey
GY2 4LH Elavon Financial Services Limited
Block E
Cherrywood Business Park
Loughlinstown
Dublin 18
Ireland
Chairman's Statement
Introduction
I am pleased to present the Company's interim report and financial statements for the period ended 31 March 2018.
Since I last wrote to you there has been a significant change in the shape of the Company and as at the date of this report, I am pleased to confirm that via capital repayments and dividends the Company has returned GBP36.6m to Shareholders. On a less encouraging note, the Company's NAV declined from 90.5 pence per Share as at 30 September to 88.89 pence per Share as at 31 March 2018, although our focus remains to provide positive returns on each disposed asset as part of the capital return process.
Realisation of Investment Portfolio
During the Period GBP12 million was returned to Shareholders on 13 December 2017 and an additional GBP20m was returned to Shareholders on 15 May 2018. The total amount of capital and dividends returned to Shareholders since 30 September 2017 to the date of this report is GBP36.6m. The total amount returned since the initiation of the realisation programme via capital and dividend payments is GBP54.8m.The table below sets out the payments announced and paid since the initiation of the realisation programme.
Calendar quarter Estimated cash Actual cash flow to Shareholders, GBPm
flow to Shareholders,
GBPm
------------------ ----------------------- -------------------------------------------
Compulsory Dividend Total
redemption
------------------ ----------------------- ------------------ ------------- --------
Q1 2017 6.9 0.0 2.6 2.6
------------------ ----------------------- ------------------ ------------- --------
Q2 2017 7.3 5.0 1.5 6.5
------------------ ----------------------- ------------------ ------------- --------
Q3 2017 5.3 7.0 2.1 9.1
------------------ ----------------------- ------------------ ------------- --------
Q4 2017 8.3 12.0 2.0 14.0
------------------ ----------------------- ------------------ ------------- --------
Q1 2018 7.4 0 1.3 1.3
------------------ ----------------------- ------------------ ------------- --------
Q2 2018* 7.0 20.0 1.3 21.3
------------------ ----------------------- ------------------ ------------- --------
Total 42.2 44.0 10.8 54.8
------------------ ----------------------- ------------------ ------------- --------
*Figures for Q2 2018 were paid after the end of the accounting period.
The Board anticipates that further payments of approximately GBP18m will be announced during the second half of 2018 although this may be subject to change owing to variable market conditions and performance of the individual assets. We may therefore not meet these estimated targets.
Performance
The Company's NAV as at the end of 31 March 2018, was 88.89 pence per Share. More details of the portfolio and performance are set out in the Investment Managers Report on page 10 of these interim financial statements.
During the Period, the Company's NAV total return was (1.12)% (dividends reinvested) and was 22% since inception (net of issue costs and with dividends reinvested). The NAV per Share declined from 90.5 pence per Share at 30 September 2017 to 88.89 pence per Share at 31 March 2018, net of distributions.
During the Period, the Share Price decreased from 90.50 pence at the close of business on 30 September 2017 to 81.25 pence at the close of business 31 March 2018. Accordingly, the discount to NAV widened from 2.59% on 30 September 2017 to 8.60% at the end of the Period.
The share price total return for the Period was -7.13%, dividends reinvested. Since launch, the share price total return to 31 March 2018 was 9.71% dividends reinvested.
Chairman's Statement (continued)
Total Expense Ratio
As the size of the Company's total net assets declines there will be a direct impact on the total expense ratio (the "TER"). With this in mind, the Board is focused on controlling the TER, although recognising that it will naturally increase gradually as some fixed costs are required to maintain the current levels of governance and operational administration, despite reducing net assets. Accordingly, the fixed cost base will be kept under review to ensure that the level of infrastructure required continues to be appropriate for the size of the Company.
Dividends
Dividends declared for the Period came to 2.5 pence per Share, with two dividends being declared and paid during the Period: 1.75 pence per Share was paid on 30 November 2017 for the period ended 30 September 2017 and 1.25 pence per Share was paid on 28 February 2018. Following the period end a further dividend of 1.25p was declared and paid on 31 May 2018.
Annual General Meeting
The AGM of the Company was held on 28 March 2018 and I am pleased to report that each of the resolutions were duly passed and would thank you for your continued support.
Outlook
I have been encouraged by the levels of capital returns we have been able to make thus far and we will continue to be proactive with the Investment Advisor to ensure that continued disposals provide the same positive returns to Shareholders. As the Company becomes smaller, the frequency and levels of payments will vary and it is expected that the levels of income available for the payment of dividends will decline as the portfolio becomes more concentrated. The Board has commenced a review of the Company's viability and future operating model and, as noted above, is mindful of the increasing TER. We will keep Shareholders updated accordingly, although it is unlikely that there will be any significant changes prior to the financial year end of the Company.
Rob King
Non-executive Chairman
24 May 2018
Investment Manager's Report
Performance
During the period from 1 October 2017 to 31 March 2018, the Company's NAV performance (dividends reinvested) was (1.12)%.
The month-on-month total return since inception, dividends reinvested, was as follows:
Year YTD Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec ------ ------- ------- ------- ------- ------ ------ ------- ------- ------- ------- ------- ------- ------ 2013 0.74% - - - - - - - - - -0.04% -0.19% 0.98% 2014 5.76% 0.68% 0.56% 0.95% 0.67% 0.67% -0.19% -0.58% 1.37% -0.93% 1.52% 0.28% 0.64% 2015 3.08% -0.10% 1.10% -1.01% 0.70% 0.98% 2.25% 0.19% 0.20% 0.70% 0.83% -0.01% 2.72% 2016 6.27% -1.42% -0.19% 2.41% 0.37% 1.81% 1.09% 0.42% -0.18% 1.85% 0.15% 0.11% 1.10% 2017 6.60% -0.41% 1.22% 2.38% 0.45% 1.37% 0.83% 0.35% -0.04% 0.30% 0.05% 0.29% 0.18% 2018 -1.12% -1.17% -0.69% 0.22%
Since inception, the Company recorded the following dividends:
Period ending Dividend (pence
per Share)
------------------- ----------------
30 September 2014
(2 dividends) 5.25
------------------- ----------------
30 September 2015
(4 dividends) 7.5
------------------- ----------------
30 September 2016
(4 dividends) 7.5
------------------- ----------------
30 September 2017
(4 dividends) 6.75
------------------- ----------------
31 March 2018 (2
dividends) 2.5
------------------- ----------------
From 1 January 2017, the Company entered into a Realisation Period and started to return unencumbered cash balances to Shareholders in the form of shares cancellation.
Return of capital (share Cash returned to Shareholders Shares redeemed as proportion
cancellation) of the share capital at
IPO (1)
April 2017 GBP4,999,957 4.2%
September 2017 GBP6,999,959 5.7%
December 2017 GBP11,999,954 9.9%
May 2018 GBP20,000,000 17.3%
(1) There were 130,000,000 shares in issue at IPO.
It is expected that the portfolio will be substantially realised and 90% of the projected cash proceeds returned to investors by mid 2021.
Investment Manager's Report (continued)
Investment Review
As of 31 March 2018, the Company was 72.97% invested.
The sector allocation as at 31 March 2018 reflected a significant representation of corporate and SME loans.
Percentage
Percentage of NAV Percentage of
of NAV 30 September NAV
Asset class breakdown 31 March 2017 2017 31 March 2018
----------------------- --------------- -------------- ---------------
SME loans 46.40% 46.58% 48.55%
----------------------- --------------- -------------- ---------------
Corporate loans 33.60% 32.59% 21.84%
----------------------- --------------- -------------- ---------------
Mortgages 8.81% 2.84% 3.00%
----------------------- --------------- -------------- ---------------
Cash, collateral
& hedges 11.19% 17.99% 26.61%
----------------------- --------------- -------------- ---------------
Total 100.0% 100.0% 100.0%
----------------------- --------------- -------------- ---------------
Geographically the portfolio diversification changed as the consequence of amortizing positions.
Percentage
Percentage of NAV Percentage
of NAV 30 September of NAV
Geographic breakdown 31 March 2017 2017 31 March 2018
---------------------- --------------- -------------- ---------------
U.K. 20.73% 15.43% 13.57%
---------------------- --------------- -------------- ---------------
Spain 14.32% 15.40% 16.75%
---------------------- --------------- -------------- ---------------
Portugal 12.17% 9.96% 6.75%
---------------------- --------------- -------------- ---------------
Germany 8.69% 8.98% 9.82%
---------------------- --------------- -------------- ---------------
Italy 9.70% 10.42% 11.80%
---------------------- --------------- -------------- ---------------
USA 8.45% 7.54% 3.25%
---------------------- --------------- -------------- ---------------
Switzerland 4.76% 4.86% 5.32%
---------------------- --------------- -------------- ---------------
Netherlands 2.39% 2.27% 1.62%
---------------------- --------------- -------------- ---------------
France 2.32% 2.13% 1.14%
---------------------- --------------- -------------- ---------------
Other Countries 5.28% 5.02% 3.37%
---------------------- --------------- -------------- ---------------
Cash, Accruals,
Collateral, FX
& Hedges 11.19% 17.99% 26.61%
---------------------- --------------- -------------- ---------------
Total 100.0% 100% 100%
---------------------- --------------- -------------- ---------------
As at 31 March 2018, the top five holdings were the following
Underlying Assets Percentage
Sector Country Fair Value (GBP) of NAV
----------------- ------------------- ----------------- -----------
SME Loan Spain 12,829,487 13.83%
----------------- ------------------- ----------------- -----------
Corporate Loans U.K. 11,490,091 12.39%
----------------- ------------------- ----------------- -----------
SME Loans Multi 11,481,952 12.38%
----------------- ------------------- ----------------- -----------
Corporate Loans Multi 8,769,794 9.45%
----------------- ------------------- ----------------- -----------
SME Loans Italy 7,054,334 7.61%
----------------- ------------------- ----------------- -----------
Investment Manager's Report (continued)
The Company's activity continues to centre on portfolio management and management of currency and counterparty risks since it commenced its Realisation Period from 1 January 2017. During the period, two corporate loans risk-sharing transactions issued by the same issuer were called with one realising IRRs (Internal rate of return) at circa 10.3% and the second realising an overall IRR at 9.65% as of April 2018.
Investment Portfolio Outlook
During the Realisation Period, the Company will continue to manage the portfolio and to assess the opportunistic early sale of the more liquid assets to maximise the return of capital to shareholders.
As a significant part of the Company's assets are denominated in Euros or US Dollars, it will also continue to manage the foreign exchange exposure of the portfolio.
The Investment Adviser maintains a Base Case for each investment in the portfolio, depending on its characteristics and underlying collateral. The Base Cases are derived from a combination of: initial cases derived at the time of investment from analysis of the transaction's structure and the underlying portfolio data, regular tracking of the performance of the transaction's underlying collateral pool and market implied factors such as credit spreads or the performance of other similar deals.
As of 31 March 2018, the Investment Adviser's indicative estimates of the internal rates of portfolio return, calculated on the invested capital of the Company, is 9.65% if all investments perform in line with the "Base Case".
Shareholders should note that, due to the diversification of the portfolio's holdings, it is unlikely that all investments would perform in line with the Base case.
Under the Base Case, it is estimated that investment cash flows during 2018 and 2019 will be as detailed below, but there can be no assurances to this effect.
-- Q2 2018 - GBP11.4m -- Q3 2018 - GBP3.6m -- Q4 2018 - GBP3.7m -- Q1 2019 - GBP3.1m
Based on the cash flows used to calculate the Base Case internal rate of return above, it is expected that the current portfolio will be substantially realised (assuming no assets are sold or otherwise disposed of) and over 90% of the projected cash proceeds returned to investors before mid 2021.
Investment Manager's Report (continued)
Investment Portfolio Outlook (continued)
Indicative internal rates of portfolio return are dependent on the underlying Base Case asset assumptions that are made by the Investment Adviser. These include, but are not limited to, predictions of default, prepayment, recovery, amortisation, interest rates, asset spread, portfolio replenishment and issuer optional redemptions. The figures are calculated on invested capital of the Company and do not reflect indications of NAV total return. The figures are based on long-term performance projections of the investment strategy and market conditions at the time of modelling and are therefore subject to change. There is no guarantee that any indicative rates of returns can be achieved. Investors should not place any reliance on such target return in deciding whether to invest in the Company. Sensitivity Tests present a set of hypothetical scenarios that assume changes for one or more market variable in order to assess the effect on the portfolio. The results shown represent estimated gross performance of the portfolio under the market conditions stated and do not reflect any management or performance fees or other expenses.
The Investment Adviser has made assumptions that it deems reasonable and used the best information available to calculate the rate of return case estimates. If a different set of assumptions were used in these calculations, there could be a material difference in the calculated estimates. Please refer to the prospectus dated 23 September 2013 for risk factors (a copy of which is on the website of the Company at www.chenavaricapitalsolutions.com). Hypothetical performance results have many inherent limitations and no representation is being made that any account will or is likely to achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular investment programme.
Chenavari Investment Managers (Luxembourg) S.àRL.
Investment Manager
24 May 2018
Statement of Principal Risks and Uncertainties
Summary
An investment in the Shares is only suitable for institutional investors and professionally advised private investors who understand and are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses (which may equal the whole amount invested) that may result from such an investment. Furthermore, an investment in the Shares should constitute part of a diversified investment portfolio. It should be remembered that the price of securities and the income from them can go down as well as up.
The risks set out below are those which are considered to be the material risks relating to an investment in the Shares but are not the only risks relating to the Shares or the Company. Additional risks and uncertainties of which the Company is presently unaware or that the Company currently believes are immaterial may also adversely affect its business, financial condition, results of operations or the value of the Shares.
The Board have carried out a robust assessment to identify the principal risks that could affect the Company, including those that would threaten its business model, future performance, solvency or liquidity. The Board has adopted a controls based approach to its risk monitoring requiring each of the relevant service providers including the Investment Manager to establish the necessary controls to ensure that all known risks are monitored and controlled in accordance with agreed procedures. The Directors receive periodic updates at their Board meetings on key risks and have adopted their own control review to ensure where, possible, risks are monitored appropriately.
Risk Explanation/Mitigant
--------------------- ----------------------------------------------------------
Collateral risk Investment Instruments issued by Bank counterparties
(default, recovery, and purchased by the Company are linked to the credit
prepayment) performance of the Collateral. This means that defaults
or credit losses in the Collateral may adversely
impact the performance of the Company, the NAV and
the value of the Shares.
The Investment Adviser undertakes a fundamental credit
review entailing the selection and optimisation of
the Collateral underlying a Bank Capital Solutions
Transaction and develops quantitative scenarios using
default rates, loss severities and prepayments applied
to sub-pools within the Collateral. Alongside the
fundamental credit analysis, the structural features
of the transaction are also assessed. This includes
a review of the payment waterfall, the subordination
of the proposed Investment Instrument, the extent
of the reserve fund, the amortisation profile and
extension risk.
Where it is considered desirable, the Company may
enter into hedging transactions designed to protect
against or mitigate the consequences of single reference
obligations defaulting and/or more generalised credit
events.
--------------------- ----------------------------------------------------------
Bank counterparty Bank capital solutions transactions may expose the
risk Company to the Bank Counterparty's credit risk. The
terms of such transactions will generally include
credit rating triggers such that the transaction
is terminated or accelerated, or other credit support
features are activated, if the Bank Counterparty's
credit ratings decline by more than a predetermined
threshold.
The Company may enter into credit hedging arrangements
to ensure that the net exposure to any Bank Counterparty
is no more than 20% of the NAV as at the date that
any relevant credit hedging contract matures or is
adjusted or rolled over.
--------------------- ----------------------------------------------------------
Currency risk The type of securities in which the Company invests,
to the extent not sterling denominated, may be sensitive
to changes in foreign exchange rates.
The Company may implement hedging strategies designed
to protect investments from movements in exchange
rates. Such strategies may include (but are not limited
to) options, forwards, and futures.
--------------------- ----------------------------------------------------------
Statement of Principal Risks and Uncertainties (continued)
Risk (continued) Explanation/Mitigant (continued)
----------------------------- -----------------------------------------------------------
Valuation and classification Investments are valued in accordance with the Company's
of financial assets Valuation Policy, which is compiled with reference
at fair value through to key principles comprising independence, documentation,
profit or loss transparency, consistency and relevance. The Valuation
risk Policy documents the pricing process and timeline,
with particular reference to difficult to value
securities, and sets out escalation procedures.
The Board has established a committee to review
the valuation of illiquid Investment Instruments,
particularly where a valuation is provided by a
single counterparty or where the Investment Adviser's
risk officer recommends a materially different valuation
than that provided by a counterparty. The Company
has also engaged Duff & Phelps, Ltd ("Duff & Phelps"),
as a valuation advisor to provide certain limited
procedures on some Transactions' valuation which
the Investment Adviser identified and requested
Duff & Phelps to perform. For the avoidance of doubt,
notwithstanding the Company's engagement with Duff
& Phelps, the Valuation Committee of the Company
remains ultimately responsible for the determination
of the Fair Value of each Transaction, but may consider
Duff & Phelps' input in making such determinations.
Specifically, as of 30 September 2017, Duff & Phelps
estimated ranges of Fair Value for the Company's
interests in four transactions.
----------------------------- -----------------------------------------------------------
Investment Manager The Company is dependent on the expertise of the
and Investment Investment Manager, the Investment Adviser and their
Adviser risks respective key personnel to evaluate investment
opportunities and to implement the Company's investment
objective and investment policy.
The Board has instructed the Investment Manager
to conduct the Company's investment related activities
in compliance with the applicable law, the Company's
investment objective, investment policy and guidelines
and the Company's contractual obligations.
The Management Engagement Committee carried out
its annual review of the performance and capabilities
of the Investment Manager on 16 November 2017 and
has confirmed the continued appointment of the Investment
Manager is deemed to be in the interest of Shareholders.
There can be no assurance that the Investment Manager's
past performance will be any guide to future performance
or results.
----------------------------- -----------------------------------------------------------
Tax, legal and Changes in the Company's tax status or tax treatment
regulatory risks may adversely affect the Company, and if the Company
becomes subject to the UK offshore fund rules there
may be adverse tax consequences for certain UK resident
Shareholders.
The Company expects that US taxpayers generally
would be subject to adverse US tax consequences
in respect of their investment in the Shares under
US tax rules applicable to passive foreign investment
companies ("PFIC"). Accordingly, the acquisition
of Shares may not be a suitable investment for U.S.
Holders (other than U.S. Holders that are tax-exempt
organisations). U.S. Holders should consult their
tax advisers regarding the application of the PFIC
rules to an investment in Shares.
----------------------------- -----------------------------------------------------------
Statement of Principal Risks and Uncertainties (continued)
Risk (continued) Explanation/Mitigant (continued)
------------------ -------------------------------------------------------------
Tax, legal and On 23 November 2015 Guernsey issued regulations
regulatory risks to implement the Common Reporting Standard ("CRS")
(continued) under Guernsey's domestic law. The regulations follow
on from the commitment made on 29 October 2014 by
Guernsey, along with the other Crown Dependencies
and a number of other jurisdictions, to start exchanging
information under the CRS in respect of accounts
maintained by financial institutions in Guernsey
by 2017 at the earliest. The regulations will take
effect from 1 December 2015 and will require Reporting
Financial Institutions in Guernsey to apply from
1 January 2016 prescribed due diligence procedures
to all financial accounts maintained by them in
order to identify and report, where appropriate,
certain information to Guernsey's income tax office
("ITO"), which in turn will transmit that information
the following year to the tax offices of relevant
jurisdictions. The requirements of CRS are closely
aligned to requirements under the FATCA Model 1
Intergovernmental agreement.
Changes in the Basel III standards or other changes
in the regulation of bank capital adequacy may make
bank capital solutions transactions unattractive
for Bank Counterparties or reduce the rates of return
available, both of which may adversely affect the
Company.
The AIFMD seeks to regulate AIFMs established in
the EU and prohibits such managers from managing
any AIF or marketing shares in such funds to investors
in the EU unless the AIFM has been authorised.
The Company, as a Guernsey-registered closed ended
fund which is not currently actively marketed in
the EEA, is not directly impacted by the AIFMD (save
for certain consequential effects arising from its
appointment of an EU domiciled AIFM, such as the
requirement to appoint a depositary). The Board
acknowledges that if active marketing is undertaken
in the EEA the private placement regime requirements
for the relevant jurisdiction would need to be met.
The Board and its advisers have also implemented
policies and risk based controls to monitor both
the investment and operational risks that impact
the Company to facilitate compliance with AIFMD.
The Board is cognisant of the European Union's ongoing
discussions regarding, inter alia, passporting arrangements
for AIFs and ESMA's recommendations as regards to
so called "third countries", i.e. non-EU member
states. The Board and its advisers monitor developments
to ensure continued compliance and to ensure that
any potential opportunities are not missed.
The Administrator, Sub-Administrator, Broker and
Investment Manager provide regular updates to the
Board on compliance with the prospectus and changes
in regulation.
------------------ -------------------------------------------------------------
Operational risks The Company is exposed to the risk arising from
any failures of systems and controls in the operations
of the Investment Manager, AIFM, Administrator,
the Sub-Administrator and the Custodian. The Board
and its Audit Committee regularly review reports
from its Outsourced Service Providers on their internal
controls.
------------------ -------------------------------------------------------------
Statement of Directors' Responsibilities
We confirm to the best of our knowledge that:
-- these Condensed Unaudited Interim Financial Statements have been prepared in accordance with International Accounting Standard 34.
-- the interim management report (comprising the Chairman's Statement and Investment Manager's Report) meets the requirements of an interim management report, and includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the period from 1 October 2017 to 31 March 2018 and their impact on the Unaudited Interim Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place during the period from 1 October 2017 to 31 March 2018 and that have materially affected the financial position or performance of the entity during that period.
This responsibility statement was approved by the Board of Directors on 24 May 2018 and is signed on its behalf by:
Non-Executive Director: Non-Executive Director:
Date: 24 May 2018 Date: 24 May 2018
Independent Review Report to the Members of Chenavari Capital Solutions Limited
We have been engaged by the company to review the condensed set of financial statements in the interim financial report for the six months ended 31 March 2018 which comprises the Condensed Statement of Comprehensive Income, the Condensed Statement of Financial Position, the Condensed Statement of Changes in Equity, the Condensed Statement of Cash Flows and related notes 1 to 21. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The interim financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six months ended 31 March 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
St Peter Port, Guernsey
24 May 2018
Condensed Unaudited Statement of Comprehensive Income
For the period ended 31 March 2018
1 October 1 October
2017 to 2016 to
31 March 2018 31 March 2017
Note GBP GBP
Income
Interest income 6,612 6,953
Net (loss)/gain on financial assets
and financial liabilities held at fair
value through profit or loss 11 (41,496) 3,634,903
Total net (loss)/income (34,884) 3,641,856
--------------- ---------------
Expenses
Management fee 4 496,718 603,454
Administration fee 5(b) 26,000 26,000
Sub-administration fee 5(c) 31,724 40,761
Custodian fees 5(d) 15,750 15,750
Corporate broking fee 5(a) 37,500 37,681
Directors' fees 57,500 57,500
Legal fee 10,000 15,351
Audit fee 14 41,000 41,000
Other operating expenses 54,450 52,201
Total operating expenses 770,642 889,698
--------------- ---------------
Financing costs
Interest expense 22,722 10,981
(Loss)/profit for the period (828,248) 2,741,177
=============== ===============
Earnings per Share
Basic and diluted 8 (0.76)p 2.20p
All amounts relate to continuing operations. There were no items recognised as other comprehensive income that have not already been recognised in loss/ profit for the period. As such, this represents total comprehensive income for the period.
All items in the above statement derive from continuing operations.
The condensed schedule of investments and the notes to the financial statements are an integral part of the financial statements.
Condensed Unaudited Statement of Financial Position
As at 31 March 2018
30 March 30 September
2018 2017
Note GBP GBP
Assets
Financial assets at fair value through
profit or loss 10 68,099,620 91,580,241
Due from broker 12 3,242,623 1,758,075
Other receivables and prepayments 13 40,009 16,382
Cash and cash equivalents 6,2 22,010,998 16,321,866
Total assets 93,393,250 109,676,564
-------------- -------------
Equity
Share capital and share premium 15 103,591,662 115,591,616
Retained deficit (10,834,138) (6,649,631)
Total equity 92,757,524 108,941,985
-------------- -------------
Current liabilities
Financial liabilities at fair value
through profit or loss 2,10 409,916 370,704
Due to broker 12 - 28,921
Accrued expenses 14 225,810 334,954
Total liabilities 635,726 734,579
-------------- -------------
Total equity and liabilities 93,393,250 109,676,564
-------------- -------------
Shares outstanding 15 104,345,215 117,253,944
NAV per Share 9 88.89p 92.91p
The financial statements on pages 19 to 22 were approved by the Board of Directors and authorised for issue on 24 May 2018.
Non-Executive Director: Non-Executive Director:
Date: 24 May 2018 Date: 24 May 2018
The condensed schedule of investments and the notes to the financial statements are an integral part of the financial statements.
Condensed Unaudited Statement of Changes in Equity
For the period ended 31 March 2018
Share capital
Retained and share
earnings premium Total
Note GBP GBP GBP
At 30 September 2017 (6,649,631) 115,591,616 108,941,985
Loss for the period (828,248) - (828,248)
Shares redeemed during the period 15 - (11,999,954) (11,999,954)
Distributions to equity shareholders 17 (3,356,259) - (3,356,259)
At 31 March 2018 (10,834,138) 103,591,662 92,757,524
============= ============== =============
For the period ended 31 March 2017
Share capital
Retained and share
earnings premium Total
Note GBP GBP GBP
At 30 September 2016 (4,871,013) 127,694,000 122,822,987
Profit for the period 2,741,177 - 2,741,177
Shares redeemed during the period 15 - (5,102,426) (5,102,426)
Distributions to equity shareholders 17 (4,558,380) - (4,558,380)
At 31 March 2017 (6,688,216) 122,591,574 115,903,358
============ ============== ============
The condensed schedule of investments and the notes to the financial statements are an integral part of the financial statements.
Condensed Unaudited Statement of Cash Flows
For the period ended 31 March 2018
1 October 1 October
2017 to 2016 to
31 March 2018 31 March 2017
GBP GBP
Cash flows from operating activities
(Loss)/profit for the period (828,248) 2,741,177
Adjustments for non-cash items and
working capital:
Purchase of investments (12,829,487) (598,144)
Disposal and pay downs of investments 25,888,605 776,978
Unrealised net loss on financial assets
and derivatives at fair value 10,460,715 2,896,937
Increase in amounts due from brokers (1,484,548) (2,627,860)
(Increase)/decrease in other receivables
and prepayments (23,627) 46,554
Decrease in amounts due to brokers (28,921) (566,576)
Increase in partial compulsory redemption
of shares payable - 4,999,956
Decrease in accrued expenses (109,144) (4,856)
Net cash inflow from operating activities 21,045,345 7,664,166
--------------- ---------------
Cash flows from financing activities
Redemption of redeemable participating
shares (11,999,954) (5,102,426)
Distributions to equity Shareholders (3,356,259) (4,558,380)
Net cash outflow from financing activities (15,356,213) (9,660,806)
--------------- ---------------
Net increase/(decrease) in cash and
cash equivalents 5,689,132 (1,996,640)
Cash and cash equivalents at beginning
of the period 16,321,866 11,538,313
Cash and cash equivalents at end of
the period 22,010,998 9,541,673
--------------- ---------------
Notes to the Condensed Unaudited Financial Statements
1. General information
Background information on the Company's activities can be found in the Company's prospectus dated 23 September 2013 and please also refer to the year end 2017 Financial Statements, both of which are available on our website address www.chenavaricapitalsolutions.com.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below.
2.1 Basis of preparation
The Annual Financial Statements of the Company are prepared in accordance with IFRS as adopted by the European Union, the Disclosure and Transparency Rules of the Financial Conduct Authority and applicable legal and regulatory requirements of the Law. The condensed set of financial statements have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting as adopted by the European Union".
The same accounting policies, presentation and methods of computation are followed in the condensed set of financial statements as applied in the Company's latest set of audited financial statements, a copy of which can be found on our website at www.chenavaricapitalsolutions.com.
2.2 Going concern
The Directors believe that it is appropriate to adopt the going concern basis in preparing the Financial Statements. In reaching their view and, as explained in the Corporate Summary on page 5, following the commencement of the Company's Realisation Period on 1 January 2017, it is the Board's current expectation that the portfolio will be substantially realised by mid 2021. The Directors have further considered the Company's holding in cash and cash equivalents and the distribution features of the Company's income generating investments, meaning the Company has adequate financial resources to meet its liabilities as they fall due over a period of at least twelve months from the date of approval of the financial statements.
3. Critical accounting judgements and key sources of estimation uncertainty
The preparation of the Company's Financial Statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities and the accompanying disclosures. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.
3.1 Key sources of estimation uncertainty
Fair value of financial instruments
The assets held by the Company are mostly valued through a combination of dedicated price feeds from recognised valuation vendors and the application of relevant broker quotations where the broker is a recognised market maker in the respective position and where there are not readily available, internal valuations are used.
A documented valuation policy determines the hierarchy of prices to be applied to the fair value. Prices are sourced from third party broker or dealer quotes for the relevant security. Where no third party price is available, or where the Investment Manager determines that the third party quote is not an accurate representation of the fair value, the Investment Manager will determine the valuation based on the valuation policy. This may include the use of a comparable arm's length transaction, reference to other securities that are substantially the same, discounted cash flow analysis and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity-specific inputs.
Note 7 outlines the Level 3 classifications and the analysis of the impacts of Level 3 investments on the performance of the Company.
Notes to the Condensed Unaudited Financial Statements (continued)
3. Critical accounting judgements and key sources of estimation uncertainty (continued) 3.2 Critical judgements in applying accounting policies
Functional currency
The Company transacts and holds investments and cash balances in multiple currencies. The Board of Directors considers GBP (GBP) as the currency that most fairly represents the economic effect of the underlying transactions, events and conditions. The performance of the Company is measured and reported to the investors in GBP.
Valuation and classification of investments
The Board of Directors consider the valuation of investments and the classification of these investments in the fair value hierarchy as the critical judgements. The fair value of investments is described in 3.1 above and the judgements associated with the disclosures in the fair value hierarchy are described in note 7.
4. Related Parties
(a) Directors' Remuneration & Expenses
The Directors of the Company are remunerated for their services at such a rate as the Directors determine. The fee for Mr. Mouchotte is GBP37,500. The fee for Mr. Stokes as Chairman of the Audit Committee is GBP40,000 per annum. The fee for Mr. King as Chairman is GBP40,000 per annum.
During the period ended 31 March 2018, Directors fees of GBP57,500 (for the period ended 31 March 2017: GBP57,500) were charged to the Company, of which GBPnil (30 September 2017: GBPnil) remained payable at the end of the period.
(b) Shares held by related parties
At 31 March 2018, the Directors held the following Shares in the Company: Mr King 27,022, Mr Stokes 36,029 and Mr Mouchotte 4,505.
As at 31 March 2018 neither the Investment Manager nor partners and employees of the Investment Manager or the Investment Advisor held any of the Issued Share Capital. Chenavari Investment Managers Holdings, which is the holding Company of the Investment Manager and the Investment Advisor held 1,050,032 shares of the Company.
In addition, as of 31 March 2018, a fund managed by the Investment Manager held 20,968,570 shares of the Company.
(c) Investment Manager and AIFM
The Company receives investment management services from the Investment Manager, a limited company (Société à Responsabilité Limitée de Droit Luxembourgeois) incorporated in Luxembourg. Under the terms of the investment management agreement dated 23 September 2013 as novated on 22 July 2014 the Investment Manager receives in return a fee of one-twelfth of 1% on the NAV, payable monthly in arrears. The Investment Manager has appointed the Investment Adviser, to provide investment advisory services to the Investment Manager. The Investment Manager is responsible for paying the Investment Adviser. The Investment Management Agreement is terminable by either the Investment Manager or the Company giving to the other not less than 12 months' written notice, such notice not to be served before the fourth anniversary of Admission.
Total management fees for the period amounted to GBP496,718 for Chenavari Investment Managers (Luxembourg) S.àRL (for the period ended 31 March 2017: GBP603,454) with GBP77,125 (30 September 2017: GBP188,612) in outstanding accrued fees at the period end.
The Investment Manager is also entitled to receive from the Company a performance fee equal to 20% of realised returns (i.e. dividends and capital repayments/returns) to Shareholders, subject to a hurdle of 7.5% per annum with a catch up. The catch-up operates such that a performance fee shall not become payable until the Company has distributed to Shareholders an amount equal to the Gross Issue Proceeds as increased by a hurdle rate of 7.5% per annum (the "Hurdle"). Thereafter, amounts available for distribution in excess of the Hurdle shall be distributed by the Company as to 50% to Shareholders and paid as to 50% to the Investment Manager until the Investment Manager has received 20% of all amounts in excess of the Gross Issue Proceeds. Thereafter, all further amounts available for distribution by the Company shall be distributed as to 80% to Shareholders and paid as to 20% by way of payment of the performance fee to the Investment Manager.
As of 31 March 2018, no performance fee was accrued according to those principles.
Notes to the Condensed Unaudited Financial Statements (continued)
4. Related Parties (continued) (c) Investment Manager and AIFM (continued)
The Company has funded investments with a value of GBP37,861,152 via Convertible Preferred Equity Certificates and/or occasionally beneficiary shares issued by legally segregated compartments of AREO S.àRL ("Areo"), a company incorporated in Luxembourg under the Securitization Law of 2004. Areo is owned by the Chenavari group and Chenavari funds and is managed by a Board of Directors composed of a majority of independent directors that consider investment opportunities sourced by the Investment Adviser. The Company is currently invested in six compartments of Areo, which it fair values in accordance with IFRS 13 as set out in the Company's accounting policies. The Investment Manager and Investment Adviser receive no fees from Areo in relation to these transactions.
5. Material Agreements
(a) Corporate broker
Fidante Partners Europe Limited, trading as Fidante Capital, receives a retainer for their corporate broking services of GBP75,000 per annum, payable semi-annually in arrears.
(b) Administration fee
Estera Administration (Guernsey) Limited (formerly Morgan Sharpe Administration Limited) (the "Administrator") serves as the Company's administrator and secretary. The Administrator is entitled to a fee of GBP52,000 per annum. All fees are payable quarterly in advance. Administration fees for the period amounted to GBP26,000 (period ended 31 March 2017: GBP26,000).
(c) Sub-administration fee
The Administrator has appointed Quintillion Limited (the "Sub-Administrator") as the Company's sub-administrator.
The Sub-Administrator is entitled to receive an annual asset-based fee from the Company of up to 0.085% per annum of NAV, excluding certain expenses. Sub-administration fees for the period amounted to GBP31,724 (period ended 31 March 2017: GBP40,761) of which GBP9,734 (30 September 2017: GBP5,946) remained payable at the end of the period.
(d) Custodian fee
JPMorgan Chase Bank N.A has been appointed to act as custodian to the Company and to provide custodial, settlement and other associated services to the Company. Under the provisions of the custodian agreement dated 5 September 2013 the Custodian is entitled to a safekeeping and administration fee on each transaction calculated using a basis point fee charge based on the country of settlement and the value of the assets together with various other payment/wire charges on outgoing payments, subject to an aggregate minimum fee of GBP31,500 per annum.
(e) Depository fee
Elavon Financial Services Limited has been appointed to act as depository to the Company. The Depository is entitled to 0.05% per annum of NAV. Depository fees for the period amounted to GBP2,484 (period ended 31 March 2017: GBP3,017) of which GBP779 (30 September 2017: GBP453) remained payable at the end of the period.
(f) Investment Manager
Contractual arrangements relating to the Investment Manager are detailed in note 4.
6. Financial risk management
The responsibility for financial risk management lies with the Board of the Company but it has delegated the day to day monitoring of this to the Investment Manager.
The Investment Adviser will be responsible for sourcing potential investments. Recommended investments will be presented to the Investment Manager for its approval. The Investment Manager will not be required to, and generally will not, submit decisions concerning the discretionary or ongoing management of the Company's assets for the approval of the Board, except where such approval relates to an application of the investment guidelines or a conflict of interest. Any investment recommended by the Investment Adviser which the Investment Manager rejects will however, be promptly notified to the Board.
Notes to the Condensed Unaudited Financial Statements (continued)
6. Financial risk management (continued)
6.1 Credit risk
The main concentration of credit risk to which the Company is exposed arises from the Company's investments in Regulatory Capital Transactions.
The Company mitigates its credit risk on Regulatory Capital transactions through extensive due diligence before investment.
To the extent that the Portfolio is exposed to underlying concentrations in any one geographical region, borrower sector or credit or asset type, an economic downturn relating generally to such geographical region, borrower type or credit or asset type may result in an increase in underlying defaults or prepayments within a short time period. This could reduce the Company's income (and thus the ability to pay dividends to Shareholders), the NAV and the value of the Shares. The Portfolio is expected to carry leveraged exposure and an increase in credit losses with respect to any or all Collateral could reduce the Company's income (and thus the ability to pay dividends to Shareholders), the NAV and the value of the Shares.
No more than 20% of the NAV, calculated at the time of investment, will be exposed to any one Bank Counterparty. Such exposure will be calculated on a net basis, taking into account effective credit hedging arrangements entered into by the Company in relation to the relevant Bank Counterparty. This limit shall increase to 25% net exposure to any one Bank Counterparty where, in the Board's opinion, the relevant Investment Instrument is expected to amortise such that, within one year of investment, the expected capital balance outstanding is less than 20% of NAV, calculated at the time of investment.
Where credit hedging arrangements are used in order to comply with these limits, the hedges will be maintained such that the net exposure to the Bank Counterparty is no more than 20% of the NAV as at the date that any relevant credit hedging contract matures or is adjusted or rolled over.
For the avoidance of doubt, cash pending investment or held on deposit under the terms of an Investment Instrument may be held without limit with a financial institution with short term credit ratings of A-2 (Standard & Poor's) or P-2 (Moody's) or better.
The Company manages the portfolio with appropriate diversification in terms of sectors and geographical breakdowns.
As at 31 March 2018 and 30 September 2017, the breakdown of the NAV per asset class and geography was as follows:
30 September
Asset class breakdown 31 March 2018 2017
% NAV % NAV
Mortgages 3.00% 2.84%
Corporate loans 21.84% 32.59%
SME loans 48.56% 46.58%
Cash, Hedges and Accruals 26.60% 17.99%
-------------- -------------
Total 100.00% 100.00%
============== =============
Notes to the Condensed Unaudited Financial Statements (continued)
6. Financial risk management (continued)
6.1 Credit risk (continued)
30 September
Geographic breakdown 31 March 2018 2017
% NAV % NAV
U.K. 13.57% 15.43%
France 1.14% 2.13%
Germany 9.82% 8.98%
Italy 11.79% 10.42%
Netherlands 1.62% 2.27%
Portugal 6.75% 9.96%
Spain 16.75% 15.40%
Switzerland 5.32% 4.86%
USA 3.25% 7.54%
Others 3.39% 5.02%
Cash, Hedges and Accruals 26.60% 17.99%
-------------- -------------
Total 100.00% 100.00%
============== =============
The Company is also exposed to counterparty credit risk on forwards, cash and cash equivalents, amounts due from brokers and other receivable balances, as shown in the following table:
Bank of America Citigroup JP Morgan* Total
S&P Rating A-2 A-2 A-2
GBP GBP GBP GBP
31 March 2018
Cash and cash equivalents - (497) 22,011,495 22,010,998
Due from broker 2,788,248 446,136 8,239 3,242,623
CDSs (217,279) - - (217,279)
Forward FX contracts (90,382) (83,120) - (173,502)
Total counterparty exposure 2,480,587 362,519 22,019,734 24,862,840
--------------------------- -------------------- -------------- --------------
Net asset exposure % 2.67% 0.39% 23.74% 26.80%
30 September 2017
Cash and cash equivalents - - 16,321,866 16,321,866
Due from broker 1,407,714 340,296 10,065 1,758,075
CDSs (163,416) (207,288) - (370,704)
Forward FX contracts 2,230,536 - - 2,230,536
Total counterparty exposure 3,474,834 133,008 16,331,931 19,939,773
--------------------------- -------------------- -------------- --------------
Net asset exposure % 3.19% 0.12% 14.99% 18.30%
* JP Morgan cash and cash equivalents represents cash held in a custodian account.
Offsetting Financial Assets and Financial Liabilities
The Company enters into transactions with a number of counterparties whereby the resulting financial instrument is subject to an enforceable master netting arrangement or similar agreement, such as an International Swaps and Derivatives Association ("ISDA") Master Agreement (a "Master Netting Agreement"). Such Master Netting Agreements may allow for net settlement of certain open contracts where the Company and the respective counterparty both elect to settle on a net basis. In the absence of such an election, contracts will be settled on a gross basis. All Master Netting Agreements allow for net settlement at the option of the non-defaulting party in an event of default, such as failure to make payment when due or bankruptcy.
Notes to the Condensed Unaudited Financial Statements (continued)
6. Financial risk management (continued) 6.1 Credit risk (continued)
Offsetting Financial Assets and Financial Liabilities (continued)
The Company receives and provides cash collateral in respect of derivative transactions subject to the standard industry terms of ISDA's Credit Support Annex.
None of the financial assets and financial liabilities are offset in the Statement of Financial Position, as the Master Netting Agreements create a right of set-off of recognized amounts that is enforceable only following an event of default, insolvency or bankruptcy of the Company or counterparties. In addition, the Company and its counterparties do not intend to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
6.2 Foreign currency risk
Foreign currency risk is the risk of gain or loss resulting from exposure to movements on exchange rates on investments priced in currencies other than the base currency of the Company. The Company does not actively take risk in foreign currency, but incurs it as a normal course of business and employs a series of economic hedges to minimise these risks.
The currency exposure as at 31 March 2018 is as follows:
NAV impact
31 March for a +/-10%
Other net 2018 Total 31 March 2018 FX rate
Currency Investments FX Hedges Cash assets exposure Total exposure move
---------- ------------ -------------- -------- ---------- ------------ ---------------- --------------
GBP GBP GBP GBP GBP % %
---------- ------------ -------------- -------- ---------- ------------ ---------------- --------------
CHF 3,704,994 (3,734,788) 21,937 - (7,857) (0.01%) 0.00%
---------- ------------ -------------- -------- ---------- ------------ ---------------- --------------
EUR 43,869,042 (44,826,652) 529,879 10,520 (417,211) (0.45%) (0.05%)
---------- ------------ -------------- -------- ---------- ------------ ---------------- --------------
USD 8,769,794 (8,753,297) 184,977 18,946 220,420 0.24% 0.02%
---------- ------------ -------------- -------- ---------- ------------ ---------------- --------------
56,343,830 (57,314,737) 736,793 29,466 (204,648) (0.22%) (0.03)%
---------- ------------ -------------- -------- ---------- ------------ ---------------- --------------
The currency exposure as at 30 September 2017 is as follows:
NAV impact
30 September 30 September for a +/-10%
Other net 2017 Total 2017 Total FX rate
Currency Investments FX Hedges Cash assets exposure exposure move
---------- ------------ -------------- ---------- ---------- ------------- ------------- --------------
GBP GBP GBP GBP GBP % %
---------- ------------ -------------- ---------- ---------- ------------- ------------- --------------
CHF 3,856,434 (3,932,102) 134,577 - 58,909 0.05% 0.01%
---------- ------------ -------------- ---------- ---------- ------------- ------------- --------------
EUR 49,242,171 (52,253,851) 2,814,514 (16,562) (213,728) (0.20%) 0.00%
---------- ------------ -------------- ---------- ---------- ------------- ------------- --------------
USD 21,455,118 (23,793,059) 2,613,784 (21,057) 254,786 0.23% 0.02%
---------- ------------ -------------- ---------- ---------- ------------- ------------- --------------
74,553,723 (79,979,012) 5,562,875 (37,619) 99,967 0.08% 0.03%
---------- ------------ -------------- ---------- ---------- ------------- ------------- --------------
6.3 Interest rate risk
Interest rate risk is the risk of gain or loss resulting from exposure to movements on interest rates. The Company only holds floating rate financial instruments which have little exposure to fair value interest rate risk as, when the short term interest rates increase, the interest on a floating rate note will increase. The value of asset backed securities may be affected by interest rate movements, i.e. if interest rates increased/ decreased this would have a positive/ negative impact on NAV. Interest receivable on bank deposits or payable on bank overdraft positions will be affected by fluctuations on interest rates; however the underlying cash positions will not be affected.
The Company's continuing position in relation to interest rate risk is monitored by the Investment Manager.
Floating
Fixed rate rate Non-interest
interest interest Bearing
GBP GBP GBP
31 March 2018
Financial assets at fair value through
profit or loss 27,103,529 40,976,957 19,135
Due from broker - 3,242,623 -
Other receivables and prepayments - - 40,009
Cash and cash equivalents - 22,010,998 -
Financial liabilities at fair value
through profit or loss - (173,503) (236,413)
Accrued expenses - - (225,810)
------------ ------------ -------------
27,103,529 66,057,075 (403,079)
------------ ------------ -------------
Notes to the Condensed Unaudited Financial Statements (continued)
6. Financial risk management (continued)
6.3 Interest rate risk (continued)
Floating
Fixed rate rate Non-interest
interest interest Bearing
GBP GBP GBP
30 September 2017
Financial assets at fair value through
profit or loss 17,781,857 71,567,848 2,230,536
Due from broker - 1,758,075 -
Other receivables and prepayments - - 16,382
Cash and cash equivalents - 16,321,866 -
Financial liabilities at fair value
through profit or loss - (370,704) -
Due to broker - - (28,921)
Accrued expenses - - (334,954)
------------------------- -------------------- ------------------
17,781,857 89,277,085 1,883,043
------------------------- -------------------- ------------------
6.4 Liquidity risk
A proportion of the Company's statement of financial position is made up of assets and liabilities which may not be realisable as cash on demand. As a result an exposure to liquidity risk exists. This risk is mitigated by the closed-ended nature of the Company and the reinvestment Period and distribution features.
The table below analyses the Company's liabilities into relevant maturity groups based on the remaining period at the statement of financial position date to the contractual maturity date.
Less than Greater
3 months than 3 months Total
GBP GBP GBP
31 March 2018
Financial liabilities at fair value
through profit or loss ( 236,413) (173,503) (409,916)
Accrued expenses (185,566) (40,244) (225,810)
-----------
(421,979) (213,747) (635,726)
----------- --------------- -----------
30 September 2017
Financial liabilities at fair value
through profit or loss - (370,704) (370,704)
Due to broker (28,921) - (28,921)
Accrued expenses (300,154) (34,800) (334,954)
----------
(329,075) (405,504) (734,579)
---------- ---------- ----------
The Company is all equity funded and has been established as a Registered Closed-ended Collective Investment Scheme. Other than in the circumstances and subject to the conditions set out in Part I of the prospectus, Shareholders will have no right to have their Shares redeemed or repurchased by the Company at any time. Shareholders wishing to realise their investment in the Company will normally therefore be required to dispose of their Shares through the secondary market.
6.5 Price risk
Market price risk arises mainly from uncertainty about future prices of financial instruments and credit ratings of debt issuers in which the Company invests. Market price risk represents the potential loss the Company may suffer through price movements on its investments.
The Company is exposed to market price risk arising from the investments in equity securities, debt and derivatives.
The Investment Manager manages the Company's price risk and monitors its overall market positions on a daily basis in accordance with the Company's investment objective and policies. The Company's overall market positions are monitored on a quarterly basis by the Board of Directors.
As at 31 March 2018, a 5% movement in prices (with all other variables held constant) would have resulted in a change to the total net assets of GBP3,384,485 (30 September 2017: GBP4,560,477).
Notes to the Condensed Unaudited Financial Statements (continued)
7. Fair value of financial instruments
The fair values of financial assets and liabilities traded in active markets (such as publicly traded derivatives and trading securities) are based on quoted market prices at the close of trading on the period end date. The Company has adopted IFRS 13, 'Fair value measurement' and this standard requires the Company to price its financial assets and liabilities using the price in the bid-ask spread that is most representative of fair value for both financial assets and financial liabilities. If a significant movement in fair value occurs subsequent to the close of trading up to midnight on the period end date, valuation techniques will be applied to determine the fair value. No such event occurred. An active market is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
For financial assets and liabilities not traded in active markets the fair value is determined by using various methods including internal models, alternative price sources including a combination of dedicated price feeds from recognised valuation vendors and the application of relevant broker quotations where the broker is a recognised dealer in the respective position. Where broker quotes are not available, investment valuations are based on the Investment Adviser's internal models.
The hierarchy is broken down into three levels based on the observability of inputs as follows:
Level 1: Quoted price (unadjusted) in an active market for an identical instrument.
Level 2: Valuation techniques based on observable inputs, either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques for which all significant inputs are directly or indirectly observable from market data.
Level 3: Valuation techniques using significant unobservable inputs. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.
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 Company. The Company 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.
Notes to the Condensed Unaudited Financial Statements (continued)
7. Fair value of financial instruments (continued)
The following tables show the Company's assets and liabilities based on the hierarchy set out in IFRS 13:
As at 31 March 2018
Quoted prices
in active
markets Significant Significant
for identical other observable unobservable
assets inputs inputs
Assets (Level 1) (Level 2) (Level 3) Total
GBP GBP GBP GBP
Financial assets held for
trading
Debt securities (by instrument
currency)
Asset backed securities - - 68,080,485 68,080,485
OTC Derivatives
Forward FX contracts - 19,135 - 19,135
-------------------------------- ------------------ -------------- -----------
Total assets - 19,135 68,080,485 68,099,620
--------------- ------------------ -------------- -----------
Liabilities
Financial liabilities held
for trading
OTC Derivatives
CDSs - (173,503) - (173,503)
Forward FX contracts - (236,413) - (236,413)
-------------------------------- ------------------ -------------- -----------
Total liabilities - (409,916) - (409,916)
---------------- ------------------ -------------- -----------
As at 30 September 2017
Quoted prices
in active
markets Significant Significant
for identical other observable unobservable
assets inputs inputs
Assets (Level 1) (Level 2) (Level 3) Total
GBP GBP GBP GBP
Financial assets held for
trading
Debt securities (by instrument
currency)
Europe: Asset backed
securities - - 53,469,309 53,469,309
UK: Asset backed
securities - - 14,425,278 14,425,278
US: Asset backed
securities - - 21,455,118 21,455,118
OTC Derivatives
Forward FX contracts - 2,230,536 - 2,230,536
-------------------------------- ------------------ -------------- -----------
Total assets - 2,230,536 89,349,705 91,580,241
--------------- ------------------ -------------- -----------
Liabilities
Financial liabilities held
for trading
OTC Derivatives
CDSs - (370,704) - (370,704)
-------------------------------- ------------------ -------------- -----------
Total liabilities - (370,704) - (370,704)
---------------- ------------------ -------------- -----------
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. These include corporate bonds, asset backed bonds, certain non-sovereign obligations and over-the-counter derivatives. As Level 3 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.
Investments classified within Level 3 have significant unobservable inputs, as they trade infrequently.
Notes to the Condensed Unaudited Financial Statements (continued)
7. Fair value of financial instruments (continued)
There has been no transfer from Level 3 to Level 2 (30 September 2017: no transfer from Level 3 to Level 2) during the period. Ten Level 3 investments (30 September 2017: Eleven) were held at period end. There has been no transfer from Level 2 to Level 3 (30 September 2017: one transfer from Level 2 to Level 3).
30/09/2017 31/03/2018
Transfer
from/to
Product Trade Fair Unrealised Level Fair
type Transaction date value Realised & FX Purchases Sales Redemption 2 value
BS CLO 4 26/11/2013 10,855,815 - (4,596,098) - - - - 6,259,716
BS CLO 5 30/04/2014 8,855,632 1,491,932 (1,774,719) - - (8,572,845) - -
NPL 8 07/10/2014 13,918,681 3,112,631 (3,678,528) - (523,297) - - 12,829,487
NPL 9 24/09/2015 2,724,626 - (13,737) - - - - 2,710,888
BS CLO 11 19/12/2014 7,192,168 - (137,066) - - - - 7,055,102
BS CLO 12 26/06/2015 3,723,821 - (18,421) - - - - 3,705,399
RMBS 13 18/02/2015 367,241 - (294,179) - - - - 73,062
BS CLO 15 11/05/2016 14,058,036 - (132,515) - - (18,925) - 3,704,994
BS CLO 16 26/05/2016 3,856,434 - 284,187 - - - - 11,481,952
BS CLO 17 15/07/2016 11,197,765 - (2,567,945) - - - - 11,490,091
BS CLO 18 23/05/2014 12,599,486 596,303 (452,648) - - (3,973,346) - 8,769,794
----------- ---------- -------------- ----------- ------------- ------------- --------- -----------
89,349,705 5,200,866 (13,381,669)) 12,829,487 (13,352,784) (12,565,116) - 68,080,485
----------- ---------- -------------- ----------- ------------- ------------- --------- -----------
30/09/2016 30/09/2017
Transfer
from/to
Product Trade Fair Unrealised Level Fair
type Transaction date value Realised & FX Purchases Sales Redemption 2 value
BS CLO 4 26/11/2013 16,350,901 - (5,495,086) - - - - 10,855,815
BS CLO 5 30/04/2014 11,360,912 565,408 (702,832) - - (2,367,856) - 8,855,632
NPL 8 07/10/2014 15,443,842 161,545 (108,285) - (1,578,421) - - 13,918,681
NPL 9 24/09/2015 3,105,762 - (381,136) - - - - 2,724,626
BS CLO 11 19/12/2014 7,167,868 - 24,300 - - - - 7,192,168
BS CLO 12 26/06/2015 3,875,639 - (151,818) - - - - 3,723,821
RMBS 13 18/02/2015 926,774 63,761 (386,499) - (236,795) - - 367,241
BS CLO 15 11/05/2016 13,421,618 - 636,418 - - - - 14,058,036
BS CLO 16 26/05/2016 4,008,443 (28,179) (123,830) - - - - 3,856,434
BS CLO 17 15/07/2016 11,357,316 (259,509) 99,957 - - - 11,197,765
BS CLO 18 23/05/2014 - - (894,607) - - - 13,494,093 12,599,486
----------- ------------ ---------------- ---------- --------------- -------------- ----------- --------------
87,019,075 503,026 (7,483,418) - (1,815,216) (2,367,856) 13,494,093 89,349,705
----------- ------------ ---------------- ---------- --------------- -------------- ----------- --------------
Product type Description
ARB CDO Arbitrage CDO
ARB CLO Arbitrage CLO
BS CLO Balance Sheet CLO
RMBS Residential mortgage-backed security
NPL Non-performing loan
As of 31 March 2018, ten (30 September 2017: eleven) investments were categorised within Level 3 of the fair value hierarchy, representing 73.40% (30 September 2017: 82.02%) of the NAV.
In order to measure Level 3 assets sensitivities, the Company is using the sensitivity scenario prepared by the Investment Adviser. Those scenario are testing all main parameters simultaneously and do not represent levels at which a transaction who occur on those investments in normal conditions. Typical parameters tested are default rates, recovery rates and prepayment rates. An increase in default rates would result in a decrease to the NAV. An increase in recovery rates and prepayments would result in an increase to the NAV.
Notes to the Condensed Unaudited Financial Statements (continued)
7. Fair value of financial instruments (continued)
The intensity of test varies across the portfolio and differ according to asset class, sector, vintage and country.
Transaction 4
The main sensitivity of the transaction is to the occurrence of defaults and recovery rates in the underlying reference pool.
In the Investment Adviser's sensitivity scenario the impact to the Company's NAV is (0.74)% (30 September 2017: 3.09%).
Transaction 8
The main sensitivity of the transaction is to the collection level on the pool of loans.
In the Investment Adviser's sensitivity scenario the impact to the Company's NAV is (1.97)% (30 September 2017: 0.90 %).
Transaction 9
The main sensitivity of the transaction is to the collection level on the pool of loans.
In the Investment Adviser's sensitivity scenario the impact to the Company's NAV is (0.42)% (30 September 2017: 0.18%).
Transaction 11
The main sensitivity of the transaction is to the occurrence of defaults and recovery rates in the underlying reference pool.
In the Investment Adviser's sensitivity scenario the impact to the Company's NAV is (0.20)% (30 September 2017: 0.12%).
Transaction 12
The main sensitivity of the transaction is to the occurrence of defaults and recovery rates in the underlying reference pool.
In the Investment Adviser's sensitivity scenario the impact to the Company's NAV is (0.13)% (30 September 2017: 0.09%).
Transaction 15
The main sensitivity of the transaction is to the occurrence of defaults in the underlying reference pool and extension risk.
In the Investment Adviser's sensitivity scenario the impact to the Company's NAV is (0.11)% (30 September 2017: 0.08%).
Transaction 16
The main sensitivity of the transaction is to the occurrence of defaults and recovery rates in the underlying reference pool.
In the Investment Adviser's sensitivity scenario the impact to the Company's NAV is (1.29)% (30 September 2017: 0.60%).
Transaction 17
The main sensitivity of the transaction is to the occurrence of defaults and recovery rates in the underlying reference pool.
In the Investment Adviser's sensitivity scenario the impact to the Company's NAV is (0.41)% (30 September 2017: 0.20%).
Notes to the Condensed Unaudited Financial Statements (continued)
8. Earnings per Share - Basic & Diluted
The earnings per Share - Basic and Diluted of (0.76)p (six months to 31 March 2017: 2.20p) has been calculated based on the weighted average number of Shares of 108,695,671 (2017: 130,242,000) and a net loss of GBP828,248 (six months to 31 March 2017: net gain of GBP2,741,177).
There were no dilutive elements to Shares issued or repurchased during the Period.
9. NAV per Share
The NAV per Share of 88.89p (30 September 2017: 92.91p) is determined by dividing the net assets of the Company attributed to the Shares of GBP 92,757,524 (30 September 2017: GBP108,941,985) by the number of Shares in issue at 31 March 2018 of 104,345,215 (30 September 2017: 117,253,944).
10. Financial assets and financial liabilities at fair value through profit or loss
30 September
31 March 2018 2017
GBP GBP
Financial assets at fair value through
profit or loss :
Held for trading:
- Debt securities 56,590,394 75,291,669
- Asset backed securities 11,490,091 14,058,036
- Forwards FX contracts 19,135 2,230,536
-------------- -------------
Total financial assets at fair value
through profit or loss 68,099,620 91,580,241
-------------- -------------
Financial liabilities at fair value through
profit or loss :
Held for trading:
- CDS (173,503) (370,704)
- Forwards FX contracts (236,413) -
-------------- -------------
Total financial liabilities at fair value
through profit or loss (409,916) (370,704)
-------------- -------------
11. Net (loss)/gain on financial assets and financial liabilities at fair value through profit or loss, foreign exchange and forward contracts
31 March 2018 31 March 2017
GBP GBP
Net (loss)/gain on financial assets
and liabilities at fair value through
profit or loss held for trading
- CDS 51,463 (1,393,643)
- Debt securities 792,194 961,818
- Asset backed securities (1,988,895) 4,262,191
Net (loss/)gain on financial assets
and liabilities at fair value through
profit or loss held for trading (1,145,238) 3,830,366
-------------- --------------
Net (loss)/gain on foreign exchange
and forward contracts
Realised (loss)/gain on forward contracts 4,323,924 (1,794,159)
Unrealised (loss)/gain on forward contracts (2,447,815) 2,021,151
Realised loss on foreign exchange (969,303) (320,929)
Unrealised (loss)/gain on foreign exchange 196,936 (101,526)
Net (loss)/gain on foreign exchange
and forward contracts 1,103,742 (195,463)
-------------- --------------
Net (loss)/gain on financial assets
and liabilities at fair value through
profit or loss, foreign exchange and
forward contracts (41,496) 3,634,903
-------------- --------------
Notes to the Condensed Unaudited Financial Statements (continued)
12. Due from and to brokers
30 September
31 March 2018 2017
Due from GBP GBP
Collateral and funding cash 3,234,385 1,748,010
Receivables for securities sold 8,238 10,065
3,242,623 1,758,075
-------------- -------------
Due to
Payable for securities purchased - 28,921
- 28,921
---- -------
Collateral and funding cash is held in respect of the credit default contracts as detailed in note 6.1
13. Other receivables and prepayments
30 September
31 March 2018 2017
GBP GBP
Prepayments 30,763 13,838
Interest receivable 9,246 2,544
40,009 16,382
-------------- -------------
14. Accrued expenses
30 September
31 March 2018 2017
GBP GBP
Management fee 77,125 188,612
Audit fee 40,244 34,800
Corporate brokering fee 37,500 37,500
Administration fee 26,000 -
Sub-administration fee 9,734 5,946
Legal fee 5,145 7,383
Custodian fees 2,575 2,704
Other fees 27,487 58,009
225,810 334,954
-------------- -------------
15. Share capital
The authorised share capital of the Company consists of an unlimited number of unclassified shares of no par value. The unclassified shares may be issued as, (a) Shares in such currencies as the Directors may determine; (b) C Shares in such currencies as the Directors may determine; and (c) such other classes of shares in such currencies as the Directors may determine in accordance with the Articles and the Law. Shares will be redeemable at the option of the Company and not Shareholders.
The rights attaching to the Shares are the same as those presented in the Company's latest audited annual financial statements, a copy of which can be found on our website at www.chenavaricapitalsolutions.com
During the period, the Company announced two compulsory partial redemption payments in November 2017 and April 2018. The amount of the redemption payments totalled GBP32m. For more information please refer to Notes 19 and 20.
Capital Management
The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern to provide returns to Shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. To maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to Shareholders, return capital to shareholders, issue new shares or sell assets.
Notes to the Condensed Unaudited Financial Statements (continued)
16. Segmental reporting
The Board is responsible for reviewing the Company's entire portfolio and considers the business to have a single operating segment. The Board's asset allocation decisions are based on a single, integrated investment strategy being investments in bank capital solutions transactions and the Company's performance is evaluated on an overall basis.
The Company invests in a diversified portfolio of bank capital solutions transactions. The fair value of the major financial instruments held by the Company and the equivalent percentages of the total value of the Company, are reported in the Schedule of Investments.
Revenue earned is reported separately on the face of the Statement of Comprehensive Income as investment income being interest income received from bank capital solutions transactions.
17. Dividend policy
Subject to compliance with the Companies (Guernsey) Law, 2008 (as amended) and the satisfaction of the solvency test, the Company intends to distribute all its income received from investments, net of expenses, by way of dividends on a quarterly basis with dividends declared in October, January, April and July each year and paid in November, February, May and August.
The Company declared two dividends in respect of the period ended 31 March 2018: 1.25 pence per Share paid on 28 February 2018 for the period ended 31 December 2017 and 1.25 pence per Share to be paid on 31 May 2018 for the period ended 31 March 2018. On 30 November 2017, a dividend of 1.75 pence per Share was paid for the period ended 30 September 2017.
Under the Companies (Guernsey) Law, 2008 (as amended), companies can pay dividends in excess of accounting profit provided they satisfy the solvency test prescribed by the Companies Law. The solvency test considers whether a company is able to pay its debts when they fall due, and whether the value of a company's assets is greater than its liabilities.
18. Derivative financial instruments
The Company holds the following derivative instruments:
CDS
These are derivative contracts referencing an underlying credit exposure, which can either be a single credit issuer or a portfolio of credit issuers. The Company pays or receives an interest flow in return for the counterparty accepting or selling all or part of the risk of default or failure to pay of a reference entity on which the swap is written. Where the Company has bought protection the maximum potential payout is the value of the interest flows the Company is contracted to pay until the maturity of the contract.
Forward foreign currency contracts
Forward foreign currency contracts entered into by the Company represent a firm commitment to buy or sell an underlying currency at a specified value and point in time based upon an agreed or contracted quantity. The realised/unrealised gain or loss is equal to the difference between the value of the contract at trade date and the value of the contract at settlement date/year-end date, and is included in the Statement of Comprehensive Income.
Notes to the Condensed Unaudited Financial Statements (continued)
18. Derivative financial instruments (continued)
Forward foreign currency contracts (continued)
The following table shows the Company's derivative position as at 31 March 2018:
Financial assets Financial
at fair value liabilities Notional Maturity
at fair value amount
GBP GBP GBP
20 September
CDS buy protection - (54,438) 3,945,150 2020
CDS buy protection - (6,539) 2,191,750 20 June 2021
20 December
CDS buy protection - (72,020) 14,816,230 2019
CDS buy protection - (40,505) 7,890,300 20 June 2020
FX contracts
CHF sell 19,135 - (3,753,923) 15 June 2018
EUR sell - (207,772) (44,618,880) 15 June 2018
GBP buy - - 57,097,459 15 June 2018
USD sell (28,641) (8,724,656) 15 June 2018
19,135 (409,915) 28,843,430
------------------- --------------- --------------
The following table shows the Company's derivative position as at 30 September 2017:
Financial assets Financial
at fair value liabilities Notional Maturity
at fair value amount
GBP GBP GBP
20 September
CDS buy protection - (63,202) 3,965,400 2020
CDS buy protection - (25,925) 2,203,000 20 June 2021
20 December
CDS buy protection - (181,954) 14,892,280 2019
CDS buy protection - (99,623) 7,930,800 20 June 2020
FX contracts
25 October
CHF sell 103,762 - (4,035,864) 2017
25 October
EUR sell 1,450,975 - (53,704,826) 2017
GBP buy 25 October
- - 82,209,548 2017
25 October
USD sell 675,799 - (24,468,858) 2017
2,230,536 (370,704) 28,991,480
------------------- --------------- --------------
19. Significant events during the period
During the Period the Company bought back and cancelled 12,908,729 Shares at a price of 92.96 pence per Share.
On 15 November 2017, the Company announced its third compulsory partial redemption payment to be paid to Shareholders on the record date 30 November 2017. The amount of the redemption payment was GBP12 million, which was payable to Shareholders in respect of the redemption of approximately 1,100 Shares for every 10,000 Shares held, at a rate of 92.96 pence per Share redeemed.
20. Subsequent events
On 16 April 2018, the Company announced its fourth compulsory partial redemption payment to be paid to Shareholders on the record date 30 April 2018. The amount of the redemption payment was GBP20 milllion, which was payable to Shareholders in respect of the redemption of approximately 2,156 Shares for every 10,000 Shares held, at a rate of 88.89 pence per Share redeemed.
On 20 April 2018, the Company announced a dividend of 1.25 pence per Share for the period to 31 March 2018 to be paid on 31 May 2018.
21. Approval of the financial statements
The financial statements were approved for issue to Shareholders by the Directors on 24 May 2018.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR SEMFWLFASEEI
(END) Dow Jones Newswires
May 25, 2018 02:00 ET (06:00 GMT)
1 Year Chenavari Capital Soluti... Chart |
1 Month Chenavari Capital Soluti... Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
