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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| EF Realisation | LSE:EFR | London | Ordinary Share | GG00BF243Y95 | 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% | 70.50 | 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
TIDMEFR
RNS Number : 5848C
EF Realisation Company Limited
22 January 2018
22 January 2018
FOR IMMEDIATE RELEASE
THE BOARD OF DIRECTORS OF EF REALISATION COMPANY LIMITED ANNOUNCES THE ANNUAL REPORT AND AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE PERIODED 30 SEPTEMBER 2017
strategic REPORT
financial highlights and performance summary
Financial highlights
Scheme of Reconstruction
EF Realisation Company Limited was established as a successor vehicle to Ecofin Water & Power Opportunities plc ("EWPO") to hold the illiquid assets formerly owned by EWPO. Further to the Scheme of Reconstruction which was effective in September 2016, EWPO ceased trading on 21 September 2016. Its two successor companies are EF Realisation Company Limited (the "Company" or "EF Realisation") and Ecofin Global Utilities and Infrastructure Trust plc ("Ecofin Global"). The ordinary shares of the Company and Ecofin Global were admitted to trading on the London Stock Exchange on 26 September 2016.
As at 13 September 2016, the value of the pool of assets attributable to the Company, further to the Scheme of Reconstruction of EWPO, was GBP47,184,416; these comprised assets valued at GBP46,071,195, cash of GBP2,358,000 and a provision of GBP1,244,779. This is the opening value for the Company's equity in the Statement of Changes in Shareholders' Equity. In turn, on 22 September 2016, the Company issued 52,473,633 Ordinary Shares to EWPO shareholders at a price of 89.92p per share for gross proceeds of GBP47,184,416.
The first valuation point for the Company's assets after admission was as at the close of trading on 30 September 2016. During the period from 13 September 2016 to 30 September 2016, the net asset value ("NAV") per share fell from 89.92p to 83.89p as a result of movement in the fair value of investments.
Share ratio of the Scheme of Reconstruction
Pursuant to the Scheme of Reconstruction, EWPO shareholders received one share in the Company for every four EWPO shares held and, for those who did not elect to receive cash in respect of some or all of their holding of EWPO shares, one share in Ecofin Global for every one EWPO share held.
Compulsory Redemption Mechanism
EF Realisation monetised various portfolio assets between February and August 2017 which, in aggregate, comprised approximately 24% of the NAV as at 30 September 2017. The total net proceeds raised were approximately GBP4.36 million, made up of GBP4.26 million in realised proceeds (including GBP0.1 million from a corporate action involving the Company's holding in Energy Future Holdings) and GBP0.1 million of investment income (net of expenses). The Company realised its investment in Menhaden Capital plc in February 2017 which raised GBP1.2 million, equal to 2.3p per Ordinary Share. EF Realisation sold a bond holding in Integradoro de Servicios Petroleros Oro Negro SAPI de CV ("Oro Negro") which raised approximately GBP0.5m, and it received approximately GBP2.5 million from Eastern Australia Irrigation Limited which had sold certain of its water entitlements to the Australian Government and distributed a majority of the proceeds to its shareholders, including EF Realisation. On 4 September 2017, the Company announced its intention to implement the Company's first capital distribution, returning GBP3.0 million to Shareholders of the approximately GBP4.36 million in total net proceeds; the balance of the net proceeds from asset realisations was retained for working capital purposes.
On 18 September 2017, 7,496,024 Ordinary Shares were redeemed at the then prevailing NAV (less redemption expenses) of 40.07p per Ordinary Share. This GBP3.0 million return of capital was implemented pursuant to the Company's compulsory redemption mechanism, such that one in every seven Ordinary Shares was redeemed, for cancellation, on a pro rata basis. Fractions of Ordinary Shares produced by the applicable redemption ratios were not redeemed and so the number of Ordinary Shares redeemed in respect of each Shareholder was rounded down to the nearest whole number of Ordinary Shares.
Market capitalisation
As at 30 September 2017, the market capitalisation of the Company was GBP11,919,066.
Number of Ordinary Shares
Further to a return of capital to Shareholders by means of a compulsory share redemption, the number of Ordinary Shares in issue as at 30 September 2017 was 44,977,609.
Hot Features
Premium
Summary
As at As at As at
30 September 30 September 13 September
2017 2016(1) 2016(2)
Net assets (GBP'000) GBP18,193 GBP44,020 GBP47,184
NAV per Ordinary
Share 40.45p 83.89p 89.92p
Ordinary Share price
(bid price) 26.50p 37.00p
Discount to NAV (based
on published NAV) 34.5% 55.9%
(1) (Net asset value and share price per Ordinary Share is based on the 30 September 2016 valuation point, being the first NAV released after the Ordinary Shares were admitted to trading on the London Stock Exchange.)
(2) (As at 13 September 2016, the value of the pool of assets attributable to the Company, further to the scheme of reconstruction of EWPO, was GBP47,184,416 or 89.92p per share. This is recorded as the proceeds from issuance of Ordinary Shares in the Statement of Changes in Shareholders' Equity. By 30 September 2016, the first available NAV after the issuance and admission of the Company's shares to trading, the value of the Company's assets had decreased to GBP44,019,774 or 83.89p per share. The difference is reflected within Loss before Taxation recorded in the Statement of Comprehensive Income.)
Performance Summary
30 September 13 September 13 September
2016 to 2016 to 2016 to
30 September 30 September 30 September
2017 2017 2016
% change % change % change
NAV per share total
return (51.8)% (55.0)% (6.7)%
Ordinary share price
(bid price) total
return (28.4)%
Ongoing charges
The ongoing charges ratio is calculated according to AIC methodology using the actual costs incurred in the year which are likely to recur in the foreseeable future and which relate to the operation of the Company divided by the average net assets during the period. The ongoing charges ratio for the year ended 30 September 2017 was 1.32%.
Dividend and distribution history
No dividend was declared or paid during the period.
Although it is not expected that the Company will receive any income during the realisation period, to the extent that it does receive any income, the Board intends to distribute it to Shareholders provided the Company has sufficient working capital.
chairman's statement
Dear Shareholders,
EF Realisation Company Limited was incorporated on 28 June 2016 and this is the first annual report for the Company. The Company's shares commenced trading on the London Stock Exchange on 26 September 2016. The Company is a successor company to EWPO and was created to hold, manage and realise in an orderly manner the illiquid assets of EWPO.
EF Realisation seeks to achieve a balance between monetising its assets expeditiously and maximising the proceeds from realising those assets. The Company will make no new investments and will distribute the proceeds of realisations to Shareholders, subject to the Company's working capital requirements. An ordinary resolution to wind up the Company will be put to Shareholders once all the Company's investments have been realised or distributed and in any event no later than the second anniversary of the listing of the Company's shares on the London Stock Exchange, that is, 26 September 2018, unless before then Shareholders approve a special resolution to extend the life of the Company for a further period of one year.
Progress in monetising the assets was made during the year to 30 September 2017. Net proceeds totalling GBP4.36 million were realised, representing approximately 24% of the NAV as at the period end and at values which, in aggregate, exceeded the values for those assets in the Company's opening NAV by 23.9%. As a result of these monetisations, the Company undertook a one-for-seven compulsory share redemption in September 2017 and returned GBP3.0 million to Shareholders.
The Company's NAV per share declined by 51.8% during the year under review. This was wholly attributable to a fall in the share price of Lonestar Resources US Inc. ("Lonestar") which accounted for 70.9% of the Company's net assets at 30 September 2016, the beginning of the period under review. Lonestar is listed in the US on the NASDAQ exchange and its share price fell from US$10.20 at the beginning of the year to US$3.51 on 30 September 2017. All the other investments in EF Realisation are unlisted and valued by the Directors at their estimated realisation values and, with one exception, changes in these valuations have been small. The exception is an upgrade to the valuation of the Company's minority shareholding in Eastern Australia Irrigation Limited following that company's sale of water rights to the Australian Government authorities in August 2017 and the expectations for the amount of proceeds that can now be realised from the sale of its farms.
Lonestar spent much of the past year strengthening its balance sheet and growing in scale, by drilling and proving up its reserves and by low cost complementary and accretive acquisitions. Lonestar now has to deliver on its operational and financial targets for 2018 and, providing these targets are achieved and the oil price environment is supportive, the Directors look forward to an improvement in Lonestar's share price. For each of the Company's other material assets, a strategy is in place to monetise the asset and the Directors expect the Investment Manager's continued efforts will allow the realisation process to be completed by the second anniversary of the Company's listing, that is, by 26 September 2018.
Over the year under review, the bid price of the Company's shares fell by 28.4%. The discount at which the shares traded to the Company's NAV narrowed, therefore, from 55.9% to 34.5%. The Directors attribute the high discount immediately after the Company's shares were listed to the fact that the shares were not purchased by long-term investors but, instead, were issued as part of a reorganisation of EWPO to numerous investors who sold their shares once EF Realisation was listed. The illiquidity of the Company's portfolio and lack of familiarity with the valuation methodologies used in valuing the Company's investments also contributed to the discount. Once the early selling pressure subsided and as Shareholders have grown more familiar with the valuation techniques employed by the Company, the discount has varied since admission between 20% and 39%, which is similar to the range for discounts of shares of investment companies or investment trusts whose main holdings are illiquid.
From the end of the Company's financial year on 30 September 2017 to 17 January 2018, the latest available NAV before the publication of this report, the Company's NAV and share price increased by 20.6% and 47.2%, respectively, reflecting the improvement in Lonestar's share price during that period; the discount as at 17 January 2018 was 20.0%.
The Directors remain committed to fulfilling the Company's realisation strategy and ensuring the proceeds are returned to Shareholders without any unnecessary delay.
Martin Nègre
Chairman
22 January 2018
executive sUMMARY
This Executive Summary is designed to provide information about the Company's business and results for the period ended 30 September 2017. It should be read in conjunction with the Chairman's Statement and the Investment Manager's Report which give a detailed review of the investments, a summary of realisation activities for the period, and an outlook for future realisations.
Corporate summary
The Company was incorporated in Guernsey on 28 June 2016, with registered number 62195, as a non-cellular company with liability limited by shares. The Company has been registered with the Guernsey Financial Services Commission ("GFSC") as a registered closed-ended collective investment scheme pursuant to The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, and the Registered Collective Investment Scheme Rules ("RCIS Rules") 2015.
The Company has a wholly owned subsidiary called EFR Guernsey Holding Limited, which holds an equity investment in Lonestar.
The Company is regulated by the GFSC and is a member of the Association of Investment Companies ("AIC").
The Company's share capital is denominated in Sterling and each Ordinary Share carries equal voting rights.
The Company's Ordinary Shares were admitted to trading on the London Stock Exchange (Specialist Fund Segment) on 26 September 2016. As at 30 September 2017, the Company's issued share capital comprised 44,977,609 Ordinary Shares.
The Company is categorised as an internally managed non-European Union ("EU") alternative investment fund for the purposes of the Alternative Investment Fund Managers Directive. As such, the Board retains overall responsibility for portfolio management and risk management of the Company.
The Company has appointed Ecofin Limited as investment manager (the "Investment Manager") and in such capacity the Investment Manager has, subject to the overall supervision of the Board, responsibility for the management of the Company's investment portfolio and day to day management of the strategy to realise the Company's investments (the "Realisation Strategy"). The Board actively and continuously supervises the Investment Manager in the performance of its function.
Significant events during the period ended 30 September 2017
On 18 September 2017, following various asset realisations, 7,496,024 Ordinary Shares were redeemed and cancelled as part of the Company's compulsory redemption mechanism at a redemption price of 40.07p per Ordinary Share after allowing for the costs of redemption of GBP9,000, returning capital of GBP3.0 million to Shareholders.
Refer to 'Financial Highlights' section for detail of portfolio assets realised during the period and note 11 for detail regarding the redemption mechanism.
Investment objective
The Company's investment objective is to conduct an orderly realisation of the assets of the Company, to be effected in a manner that seeks to achieve a balance between returning cash to Shareholders promptly and maximising the value of the investment portfolio.
Investment policy
The Board and the Investment Manager believe that the portfolio may take in the region of 6 to 9 months from the date of this report to be fully realised. The mechanics and timing of any distributions effected to return capital to Shareholders will be set out in redemption announcement(s) and/or circular(s) to be sent to Shareholders at the relevant time(s).
The Company will not make any new investments save that:
(a) available cash may be used to fund, where necessary, capital calls in relation to existing investments where the Directors believe it is necessary to preserve the value of that investment; and/or
(b) available cash may be invested in liquid cash-equivalent securities, including cash funds, and bank cash deposits, pending its return to Shareholders.
The investment policy involves a continual evaluation of the business prospects of each investment in the portfolio and the disposal options for each asset in order to assess the most appropriate realisation timing and strategy to be pursued in relation to each investment. The Board meets regularly to review progress in implementing the investment objective and the Realisation Strategy and the current position of the holdings in the portfolio.
Further information on the current status of the Realisation Strategy can be found in the Investment Manager's report which is incorporated within this Annual Financial Report.
Key performance indicators ("KPIs")
The Board seeks to achieve a balance between returning cash to Shareholders promptly and maximizing the value of the investment portfolio. In order to achieve this, the Board is in ongoing discussions with the Investment Manager in respect of each investment. In order to measure the success of the Company in meeting its objectives and to evaluate the performance of the Investment Manager, the Directors take into account the following key performance indicators:
Realisations at NAV
The Board monitors the ability of the Company to realise the value of each investment at its estimated recoverable amount, as included in the NAV (as at the latest practical date to the realisation date), whilst placing due consideration on the timing of the realisation of each investment.
Please refer to the Financial Highlights and Performance Summary for realisations of investments during the period.
Total return including distributions
The Board reviews at each regular meeting the performance of the Company's investment portfolio and NAV, as well as the total return, including distributions, earned by Shareholders.
Please refer to the Financial Highlights and Performance Summary for NAV total return analysis and detail of the Company's first capital distribution. Please refer to note 11 for further details regarding the compulsory redemption mechanism.
Principal risks and uncertainties
The Directors, with the assistance of the Investment Manager, have carried out a robust assessment of the principal risks facing the Company. In carrying out this assessment, the Board has also considered the currency uncertainty arising from the UK referendum on leaving the European Union. The principal risks identified are summarised below along with, where appropriate, the steps taken by the Board to monitor and mitigate such risks. The specific financial risks associated with foreign currencies, interest rates, market prices, liquidity and credit - which may or may not be material to the Company - are described in note 8 to the financial statements.
The principal risks faced by the Company can be divided into various areas as follows:
-- Performance, market and liquidity, any of which may affect the Realisation Strategy -- Lonestar specific risk -- Portfolio concentration -- Operational -- Financial
Performance, market and liquidity, any of which may affect the Realisation Strategy
The performance of the Company depends on the decisions taken by the Investment Manager within the parameters and constraints imposed by the Company's investment policy and restrictions. As the Company has investments in securities which are listed on recognised stock exchanges - but which are illiquid - and in unquoted securities, it is regularly exposed to performance, market and liquidity risk and the value of the Company's portfolio can fluctuate, particularly over the short-term, in response to developments in financial markets. Further, the Company's assets may not be realised at their estimated net realisable values, as reflected in the Company's NAV, due to company or market related factors or the illiquid nature of the investments, and it is possible that the Company may not be able to realise some assets at any value or within 6 to 9 months from the date of this Annual Financial Report in accordance with the investment objective. This may lead to volatility in the market price of shares in the Company.
The Directors assess these risk factors, and the implementation and results of the Realisation Strategy, regularly at Board and other meetings with the Investment Manager. The Board examines the sources of investment performance, liquidity and currency exposures. It also monitors liquidity risk on an ongoing basis to ensure that the Company maintains sufficient working capital to meet the Company's ongoing requirements over the expected remaining life of the Company.
As a realisation vehicle with an intended life at inception of two years, the Board adopted a methodology for the calculation of the Company's NAV which was designed to reflect the realisable value of the portfolio, net of taxes and other expenses, were the investments in the portfolio to be realised within the expected life of the Company but in an orderly fashion in the prevailing market. The Board regularly reviews this methodology, which is detailed in the Company's prospectus, and the application of the methodology, to determine with the Investment Manager whether or not any changes should be adopted and to assess the Investment Manager's progress toward realising the assets of the Company at the valuations resulting from applying this methodology.
Lonestar specific risk
Lonestar accounted for 44.6% of the Company's net assets at 30 September 2017 (70.9% of the Company's net assets at 30 September 2016). The Company owned at that time approximately 17.0% of Lonestar's common shares which is a public company whose shares are listed on the NASDAQ Exchange in the US. Lonestar acquires and develops shale reserves in Texas in the United States, sells the oil, gas and gas liquids produced and is exposed to the commodity price, operating, environmental and other risks associated with the oil and gas industry. The Directors monitor closely the investment in Lonestar and two representatives of the Investment Manager are directors of Lonestar. The Directors believe that the risks to the Company from its holding in Lonestar are mitigated by the risk procedures followed by Lonestar, Lonestar's insurance and the fact that Lonestar and its operating subsidiaries are separately incorporated. The Company values Lonestar in its NAV and financial statements at its trailing five-day volume weighted average share price as reported to the NASDAQ Exchange less the estimated costs (taxes and other expenses) that may be associated with the realisation of the investment and adjusted for factors likely to affect the amount that could be realised including the size of the holding relative to observable liquidity. The Board believes that this valuation approach provides the best representation of the realisable value of the Company's investment in Lonestar, taking into consideration the history of activity of the Lonestar shares and their lack of liquidity relative to the size of the Company's holding.
Portfolio concentration
As at 30 September 2017, the Company's investment portfolio included debt and equity securities in the United States, Australia, United Kingdom and Mexico. The Company is exposed to concentration of geographical risk and may, from time to time, have significant exposure to portfolio companies from certain business sectors, specifically oil and gas and water rights which made up 44.6% and 42.3% of the NAV as at 30 September 2017, respectively. Greater concentration of investments in any one geographical and/or industry sector may result in greater volatility in the value of the Company's investments, and consequently its NAV, and may materially and adversely affect the performance of the Company and returns to Shareholders.
As part of the Realisation Strategy, the number of investments held by the Company is expected to reduce over time and, as a consequence, concentration risk will increase and the aggregate return on the remaining investment portfolio will become increasingly exposed to the performance, favourable or unfavourable, of the remaining individual investments. To a large extent, this is unavoidable in view of the Company's Realisation Strategy.
Operational
In common with most other investment companies, the Company has no executive directors, no executive management and no employees. The Company delegates key operational tasks to third-party service providers which are specialists in their fields: the management of the Company's investment portfolio to the Investment Manager, Ecofin Limited; the preparation and maintenance of the Company's financial statements, the maintenance of its corporate records and the custody of the Company's assets to BNP Paribas Securities Services SCA, Guernsey Branch. The Board reviews the performance of these third-party service providers and their risk control procedures on a regular basis as well as the terms on which they provide services to the Company.
Financial
The specific financial risks associated with foreign currencies are described below, and those associated with interest rates and counterparties - which may or may not be material to the Company - are described in detail in note 8.
Foreign exchange risk is the risk that the values of the Company's assets and liabilities are adversely affected by changes in the values of foreign currencies by reference to the Company's base currency, Sterling. The vast majority (96%) of the Company's net assets are denominated in currencies other than Sterling. Accordingly, fluctuations in exchange rates between Sterling and the relevant local currencies - principally the US dollar and the Australian dollar - and the costs of conversion will directly affect the value of the Company's investments and the ultimate sums realised by Shareholders.
The Board monitors the Company's exposure to foreign currencies on a regular basis. During the period ended 30 September 2017, the Company did not use financial instruments to manage or mitigate the foreign currency exposure. Please refer to note 8.1c for further details.
Environmental and social issues
The Company is a closed-ended investment company and so its own direct environment impact is minimal. The Board notes that the companies in which the Company invests will have a social and environmental impact over which the Company has no control. The Directors, the majority of whom are based in the Channel Islands, have held all of their meetings in Guernsey and therefore the Company's greenhouse gas emissions and environmental footprint are negligible.
Board diversity
The Board has due regard for the benefits of experience and diversity, including gender, in its membership, and strives to meet the right balance of individuals who have the knowledge and skillset to direct the Company. The Board is made up of three male Directors. All have held the position of Director since incorporation. Further information about the Board's policy on diversity is contained within the Directors' and Corporate Governance Report.
The Company has no employees and therefore there is nothing further to report in respect of gender representation within the Company.
Future strategy
The Board believes that the investment policy and strategy adopted by the Company are appropriate for the Company's realisation objectives. The Realisation Strategy remains in place and it is the Board's assessment that the Investment Manager's resources are appropriate to manage properly the Company's investment portfolio.
Break-up basis
Under the AIC Code of Corporate Governance ("AIC Code") and applicable regulations, the Directors are required to determine whether it is reasonable to assume that the Company is a going concern from the date of approval of the financial statements. Given the Board believes that the investments held by the Company may be fully realised in 9 months from the date of approving the financial statements, the Board has adopted the break-up basis in preparing the financial statements. This accords with the methodology utilised in calculating the Company's NAV on a weekly basis. Under this basis of accounting, assets are valued at their estimated net realisable value and provisions are made for estimated future costs to realise the investments and operating costs for the Company through to its eventual liquidation.
Viability Statement
Under the AIC Code, the Directors are required to make a "viability statement" which explains how they have assessed the prospects for the Company, over what period they have done so, and why they consider that period to be appropriate, taking into account the Company's current position and principal risks. In order to make the assessment, the Board has carried out a robust review of the principal risks and uncertainties to which the Company is exposed, and that potentially threaten liquidity and future performance over the realisation period, and has assessed the Company's current position and prospects as detailed in the Chairman's statement and Investment Manager's report.
The Company's prospects are driven by its investment objective, investment policy and Realisation Strategy. The Board's intention is to continue with an orderly realisation of its assets with a view to making significant distributions to Shareholders over the next 6 to 9 months.
The Directors have concluded that a period of less than one year from the date of this statement is an appropriate period over which to assess the prospects of the Company, given the Realisation Strategy. The Directors have also reviewed the working capital requirements as forecast by the Investment Manager for the remaining life of the Company. Taking account of the Company's current position and principal risks, the Board has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of assessment based on its review of cash flow forecasts.
The Strategic Report was approved by the Board of Directors on 22 January 2018 and signed on its behalf by:
Nick Tostevin Robert Sinclair
Director Audit Committee Chairman
BOARD MEMBERS
All Directors are non-executive.
CHAIRMAN
Martin Nègre
Appointed 20 July 2016
Martin was a director of EWPO until September 2016 and he is currently a non-executive director of Ecofin Global Utilities and Infrastructure Trust plc. He was, until June 2001, the chief executive officer of Northumbrian Water plc, then a subsidiary of Suez Lyonnaise des Eaux, and Suez Lyonnaise's chief corporate representative in the UK. Prior to that, he was Suez Lyonnaise's international director in Paris and then its Asia-Pacific president in Hong Kong and Singapore. Before that, he spent 21 years with Alsthom and GEC Alsthom, the Anglo/French engineering company, where he was a senior executive and the chief executive officer of the power generation division.
He is chairman of the Ecofin Vista Long-Short Fund and the Ecofin Global Renewables Infrastructure Fund, funds managed by the Investment Manager, a non-executive director of Northumbrian Water Ltd and of Messrs Hottinger & Cie, Paris.
DIRECTORS
Robert Sinclair (independent) - Chairman of the Audit Committee
Appointed 28 June 2016
Robert is managing director of the Guernsey based company, Artemis Trustees Limited, and a director of a number of investment fund management companies and investment funds associated with Artemis Trustees Limited. Robert is chairman of Schroder Oriental Income Fund Limited, a director of Picton Property Income Limited and chairman of its audit committee, a director of Chariot Oil and Gas Limited and chairman of its audit committee, and a director of Rainbow Rare Earths Limited and chairman of its audit committee.
He is a fellow of the Institute of Chartered Accountants in England & Wales, a member of the Institute of Chartered Accountants of Scotland and a member of the Society of Trust and Estate Practitioners. Robert is resident in Guernsey.
Nicholas (Nick) Tostevin (independent) - Chairman of the Management Engagement Committee
Appointed 28 June 2016
Nick holds the degree of LLB (Hons) (Bachelor of Law). He qualified as a barrister in 1975 and as an advocate of the Royal Court of Guernsey in 1976 and practised as such for 33 years until he retired as the senior partner of a Guernsey law firm. He is a non-executive director of a number of Guernsey-based investment funds and insurance companies.
INVESTMENT MANAGER'S REPORT
Summary and Performance
EF Realisation is one of the two successor vehicles to Ecofin Water & Power Opportunities plc ("EWPO"), a UK investment trust that was reorganised by means of a scheme of reconstruction. EF Realisation was created as a Guernsey company to hold the illiquid and unquoted investments of EWPO and had net assets of approximately GBP44.0 million at the date of its first published NAV on 30 September 2016. The Company's shares were admitted to trading on the London Stock Exchange on 26 September 2016.
The Company's investment objective is the orderly realisation of its assets for the benefit of its Shareholders. As a consequence, it cannot make any new investments and the proceeds of any realisation, subject to the working capital requirements of the Company, will be distributed to Shareholders. In September 2018, a resolution will be put to Shareholders to wind up the Company unless Shareholders have voted before then to extend the life of the Company.
In the year from 30 September 2016 to 30 September 2017, the Company's NAV declined from GBP44.0 million to GBP18.2 million, a fall of 59%. A part of this decline reflects the GBP3.0 million return of capital to Shareholders on 29 September 2017. Allowing for the return of capital, the NAV declined by GBP22.8 million or 52%. This decline was attributable to a fall in the share price of Lonestar Resources US, Inc., the Company's largest investment which, at the time of the first NAV of the Company, accounted for approximately 70.9% of the Company's net assets at 30 September 2016 and by the end of the period under review accounted for 44.6%. The Company incurred operating costs and increased its provision for operating the Company to the end of its expected life at the end of September 2018. Against that, the Company made realised gains of GBP0.74 million and investment income (net expenses) of GBP0.10 million(2) during the period ended 30 September 2017.
EF Realisation has traded at a discount to its NAV since its shares began trading on 26 September 2016. In view of the nature of the Company's investments and the uncertain outlook for their realisation, a discount was to be expected as investment companies which invest in private equity typically trade at steep discounts to their published net asset values. The discount to NAV at which shares in EF Realisation traded started was 55.9% on 30 September 2016 and finished the period on 30 September, 2017 at 34.5%. The discount to NAV was 20.0% as at 17 January, 2018.
Asset Realisations and Return of Capital
During the period, the Company made a number of asset realisations. EF Realisation sold its shares in Menhaden Capital plc ("Menhaden"), its bondholding issued by Integradora de Servicios Petroleros Oro Negro SAPI de CV ("Oro Negro"), and it partially realised its investment in Eastern Australia Irrigation Ltd ("EAI"). The Company also received a sum from a corporate action involving Energy Future Holdings and investment income from WoodFuels which, net of expenses, amounted to GBP0.1 million. The net proceeds, realised gains and income received are set out below. In aggregate, the Company raised total net proceeds of approximately GBP4.36 million (including investment income (net of expenses) of GBP0.1 million). The combined value of these investments in the Company's NAV at 13 September 2016 stood at GBP3.52 million. Including net income associated with these investments and received during the period, the total gain (as a percent of their value on 13 September 2016) was 23.9%.
Total realised
gains and
investment
income
Total (net of
of sale expenses)
Value proceeds as a percent
in NAV Investment and investment of value
as at income income in NAV
13 September Date Realised (net (net as at 13
2016 investment gains of expenses)(2) of expenses)(2) September
Investments GBPmillion realised GBPmillion GBPmillion GBPmillion 2016
Menhaden
shareholding 0.99 02/03/2017 0.21 - 1.20 21.2%
Oro Negro
bond 0.41 12/06/2017 0.10 0.08 0.59 43.9%
EAI partial
share
redemption(1) 2.12 22/08/2017 0.34 - 2.46 16.0%
Other
investments - Various 0.09 0.02 0.11 n/a
-------------- ------------ ----------------- ----------------- ---------------
3.52 0.74 0.10 4.36 23.9%
-------------- ------------ ----------------- ----------------- ---------------
1 The value on 13 September 2016 of the portion of the EAI investment realised on 22 August 2017 is derived from the value that this portion represented of the total investment on 22 August 2017, the date of the partial realisation. As per, note 7, this position has been computed in accordance with IFRS, realising the gain / (loss) on disposal based on sale proceeds less pro-rated share of initial cost of transaction.
2 Investment income (net of expenses) of GBP0.10m relates to GBP177,204 investment income received during the period ended 30 September 2017, net GBP75,191 of legal and professional fees incurred during the period ended 30 September 2017 relating to various transactions on certain assets held at nil vale.
Menhaden is a UK listed investment trust that specialises in clean energy and energy efficiency. Its share price recovered in early 2017, helped by an improvement in its net asset value and a decision to focus more on listed equities. The Company took advantage of an increase in the price and trading liquidity of Menhaden shares and sold its holding of 2 million shares, realising a 21.2% premium over its initial holding value.
Oro Negro is a Mexican oil services company which supplies and operates jack-up rigs under contract to the Mexican State oil company, Petroleos Mexicanos ("Pemex"). Following the downturn in oil prices, Pemex has sought a number of renegotiations of its contracts with Oro Negro and other rig suppliers. Oro Negro bonds have been volatile as these contract negotiations have progressed. After a period of stability in contract negotiations, EF Realisation sold its position in the Oro Negro bond. The proceeds of GBP0.59 million, including investment income (net of expenses), surpassed the initial holding value of the bond by GBP0.18 million or 43.9%. EF Realisation continues to hold a position in the equity of Oro Negro, described below.
Eastern Australia Irrigation Limited ("EAI") is an Australian based company which owns and operates two farms in Queensland, whose main crop is cotton, along with various water extraction rights from the Murray Darling River Basin. During the summer of 2017, Australian Government authorities approached EAI with an offer to acquire some of its water entitlements. EAI was able to negotiate the price for the water entitlements to the highest level ever paid, and in August 2017 it completed the largest ever sale of water entitlements in the Murray Darling River Basin. EF Realisation owns 9.6% of EAI's shares and, along with other holders, supported the sale of the water rights. EAI used the majority of the sale proceeds to return capital to its shareholders, and passed GBP2.5 million to EF Realisation. This represented a gain on that part of the EAI holding of GBP0.34 million or 16.0%. We comment below on the plans to dispose of EAI's farms.
Finally, EF Realisation received proceeds from various assets that are held in the NAV at nil value, specifically the investments in Energy Future Holdings (a competitive generator under bankruptcy proceedings in Texas, USA) and WoodFuels (which operates in the market for the provision of pelletised biomass). In total, these receipts (net of expenses) amounted to GBP0.1 million.
In line with its investment policy, EF Realisation returned GBP3.0 million of the total realisation proceeds to Shareholders through a compulsory share redemption. As a result, every Shareholder received 40.07p per share in return for one in every seven shares held at the close of business on 15 September 2017 (with fractional amounts rounded down) and retained an interest in the remainder of their shareholdings (six of every seven shares held, rounded up). The 40.07p per share reflected the latest available NAV of the Company prior to the compulsory share redemption on 31 August, 2017 less estimated transaction expenses and was above the prevailing share price of 28.5p per share. The return of capital and reduction in shares in issue was effective on 18 September, 2017 and Shareholders received payment on or shortly after 29 September, 2017. In total, the compulsory share redemption returned GBP3.0 million to Shareholders and reduced the number of shares in issue from 52,473,633 to 44,977,609.
Description of Investments and Realisation Plans
At 30 September, 2017, EF Realisation had seven investments which were valued at GBP15.8 million plus GBP2.4 million in net working capital. All the underlying assets within the investment portfolio were in unquoted securities with the exception of its investment in Lonestar which is a company quoted on the US NASDAQ exchange (although EF Realisation holds this interest through an unquoted wholly-owned subsidiary). The Company's subsidiary values Lonestar by using a five-day weighted average of its observable share price adjusted for factors likely to affect the amount that could be realised including the size of the holding relative to observable liquidity and an estimate of the costs that are likely to be incurred in realising the Company's investment. The Company values its other, unquoted investments based on third-party valuations or valuation techniques typically used to value such investments and may also apply a further discount for illiquidity or deduct estimated expenses to realise any investment. EF Realisation also provides for estimated running costs of the Company through to the end of its expected life and estimated liquidation expenses, on the assumption that the Company is put into voluntary liquidation at the end of September 2018.
Lonestar
Lonestar is EF Realisation's largest investment and accounted for 44.6% of the Company's net asset value at 30 September 2017 (70.9% of the Company's net assets at 30 September 2016). Lonestar produces oil and gas from reserves it owns and is developing in the Eagle Ford shale basin in southern Texas. Lonestar has its origins in a private equity investment made by EWPO which was merged in 2012 with a smaller Australian-listed company whose assets were oil and gas reserves in the United States. In 2016, Lonestar's shares were de-listed from the Australian Stock Exchange, the company was re-domiciled as a US company and its shares were listed and began trading on the US NASDAQ exchange from 5 July 2016.
Throughout the period under review, EF Realisation owned, through a wholly-owned subsidiary, 4,174,259 ordinary shares of Lonestar. When EF Realisation's shares were listed on 26 September, 2016, the Company's shareholding in Lonestar represented 52.0% of Lonestar's issued and outstanding ordinary share capital. Over the period to 30 September, 2017, Lonestar issued more equity to strengthen its balance sheet and further its plans to grow and, in accordance with the Company's investment policies which prohibit EF Realisation from making new investments, EF Realisation's shareholding fell from 52.0% to approximately 17.0% of Lonestar's outstanding ordinary share capital as at 30 September, 2017.
Under an agreement with Lonestar, EF Realisation has the right to nominate two directors to Lonestar's board, subject to the approval of Lonestar's shareholders in an annual general meeting, as long as EF Realisation's ownership of Lonestar's ordinary shares is in excess of 15%, and one director if its ownership is less than 15% but greater than 10%. EF Realisation's nominated directors to Lonestar's board of directors are John Murray, chairman of the Investment Manager and Dr Christopher Rowland, head of special situations at the Investment Manager.
From EF Realisation's first NAV on 30 September, 2016 to 30 September, 2017, Lonestar's share price fell by 66% in US dollar terms and by 67% in sterling terms. Over the same period, an equity index of US Small Capitalisation Exploration & Production (E&P) companies fell by 29% in US dollar terms. In general, investors became disenchanted with US E&P companies and no longer willing to support production growth without a clear line-of-sight to these companies becoming cash generative. The underperformance of US E&P shares belied the resilient performance of crude oil prices (the US West Texas Intermediate ("WTI") crude oil price rose by 7% over the year) and investors' greater confidence that OPEC and other major oil producing countries will continue to restrict supply and thereby support future crude oil prices. During this period, smaller US E&P companies with higher levels of indebtedness - such as Lonestar - were amongst the poorest performers.
Notwithstanding a weak share price, Lonestar has made good progress in its twin aims of strengthening its balance sheet and attaining a greater scale in its operations, while continuing to deliver top tier operational performance.
To strengthen its balance sheet, Lonestar undertook a number of measures. It repurchased 31% of its senior notes at a 47% discount to par value, thereby reducing outstanding debt by $32 million. This was initially funded by the issuance of a second lien note carrying a coupon of 12% but that was subsequently fully repaid. That left Lonestar with $152 million of senior notes due in April 2019. In December 2016, Lonestar raised $79 million of new equity by issuing ordinary shares and then in June 2017 it issued a further $11 million of ordinary shares and $80 million of preferred shares (to help fund acquisitions of oil and gas reserves). Finally, over the year under review, Lonestar increased its borrowing base under its revolver facility from $120 million to $160 million.
Together these measures have materially strengthened Lonestar's balance sheet and reduced net debt from $319.5 million at 30 June, 2016 to $288.1 million at 30 September, 2017. The ratio of debt to EBITDA, which was around 4 times in September 2016, dropped to 3.4 times in Lonestar's results to 30 September, 2017. Moreover, Lonestar's management is forecasting that this ratio will continue to fall and will be between 2.7 times and 2.9 times by the end of 2018. Similarly, Lonestar has a comfortable level of liquidity that it can draw on, should it wish to do so. At 30 September, 2017, Lonestar had cash and undrawn borrowing capacity under its revolver of $51.7 million, up from $31.5 million a year earlier.
Subsequent to the Company's year-end, Lonestar has further strengthened its balance sheet. It issued $250 million of senior notes due in 2023 and used part of the proceeds to repay fully the $152 million of senior notes due in 2019. The remainder of the proceeds was used to pay down Lonestar's revolver, significantly increasing liquidity available to the Company to approximately $100 million.
Lonestar's strengthened balance sheet coincided with stabilisation of the WTI crude oil price around $55 per barrel, and enabled Lonestar to embark on a growth strategy in furtherance of its aim to increase its scale and attract the attention of US institutional investors. Lonestar stepped up its drilling and well completion activities - bringing on-stream 9 net wells in 2017, up from 5 net wells in 2016 - and plans to increase that to around 15 net wells in 2018. Moreover, Lonestar has taken advantage of an asset market that has seen some high quality assets come to the market at attractive valuations by making both transformational and bolt-on acquisitions.
Of particular note, Lonestar announced on 30 May, 2017 that it had entered into definitive agreements to acquire oil and gas properties in the Eagle Ford shale basin for a total purchase price of $116.6 million. The acquisitions were funded primarily by the issue of convertible preference shares and ordinary shares mentioned above, and Lonestar also drew on its revolver. The acquisitions increased Lonestar's Eagle Ford shale holdings by 59% to 57,330 net acres. On a pro forma basis, they increased the company's Q1 2017 net production by 39% to 7,318 barrels of oil equivalent (BOE) per day and its 2016 earnings before interest, taxes, depreciation and amortisation (EBITDA) by 33% to $75.3 million. Also on a pro-forma basis, as at 31 December, 2016 proved reserves increased by 70% to 76.3 million BOE, and the PV-10 of Lonestar's proved reserves (an assessment of the future cash flows, discounted at a rate of 10% per annum, undertaken according to SEC regulated procedures) increased by 68% to $642 million. Proved reserves were acquired at $3.7 per barrel of oil and at a 55% discount to their PV-10 value.
Lonestar is now forecasting oil and gas production in 2018 of between 10,000 and 10,700 BOE per day and EBITDA in 2018 of between $100 and $110 million. This would be an increase of between 61% and 73% in production volumes and an increase of between 68% and 85% in EBITDA above the annualised volume and EBITDA levels of the first nine months of 2017.
Since its NASDAQ listing, Lonestar has consistently traded at a valuation discount to its US peers. We attribute this to a number of factors in addition to uncertainty about the outlook for oil and gas prices which has created an unfavourable backdrop for investors in US E&P companies; namely, concerns about the financial viability of smaller US E&P companies and their ability to access capital markets on favourable terms in the current environment. More specifically for Lonestar, its valuation discount can be attributed to the lack of familiarity amongst US institutional investors about its strategy, the perceived uncertainty about management's ability to deliver on production and EBITDA targets whilst its ratio of net debt to EBITDA continues to improve, and the relative illiquidity of its shares.
Lonestar's shares currently trade at an enterprise value equivalent to approximately 4.7 times forecast 2018 EBITDA, while its peers which operate in the Eagle Ford shale basin or are smaller oil-focussed companies trade at an average of 6.3 times. Lonestar's under-valuation is even more pronounced when calculated on the basis of its proved reserves. On this basis, Lonestar's enterprise value is currently equivalent to $6.6 per barrel of proved reserves while its peers trade at an average value of $13.3 per barrel.
As US institutional investors come to appreciate Lonestar's strategy, its management's ability to deliver on its targets, and the multi-year extension to the maturity of its senior notes, our expectation is that Lonestar will achieve a scale that matters to prospective investors and this will enhance the attractiveness of its shares, especially if this occurs against a backdrop of stable or improving oil prices.
As Lonestar is a US company listed on NASDAQ, it regularly files detailed reports on its operations and financial statements with the US Securities and Exchange Commission (SEC). These annual and quarterly reports as well as investor presentations and other information on the company are available on its website (http://www.lonestarresources.com).
Eastern Australia Irrigation
Eastern Australian Irrigation Limited ("EAI") owns two large farms in Queensland, Australia, whose principal assets include rights to extract water from the Murray-Darling River Basin and associated water storage infrastructure for irrigating the farms, whose main crop is cotton. The Company owns 9.6% of EAI's equity.
EAI was approached by Australian Government authorities to sell part of its water irrigation rights during the summer of 2017. After negotiations, a A$79 million sale of water rights was agreed in August 2017 at the highest price ever paid for water per megalitre from the Murray-Darling River Basin. Proceeds from the sale were used in part to pay down EAI debt, in part for ongoing working capital requirements, and in part to return capital to EAI shareholders, including EF Realisation. As a result, EF Realisation received approximately GBP2.5 million from EAI (which formed part of EF Realisation's return of capital to its Shareholders, described above).
EAI was in the process of selling its farms prior to the sale of water rights. Proceeds received for the sale of water rights were attractive compared to the offers received in the farm sale process so the farm sale process was suspended in order to complete negotiations with the Australian Government authorities over the sale of water rights. EAI has now resumed the farm sale process with the intention of using sale proceeds to repay debt and redeem its shares. Having sold some of the water rights, the effective size of the irrigable land that can be used for cotton farming has been reduced by approximately one-third and it is expected that this, and the decision to sell the farms separately rather than as a package as last summer, will make the farms attractive to a broader range of potential buyers. Cotton prices are supported by low crop harvests in cotton growing regions outside Australia and, at the time of writing, local rainfall on EAI's farms has prevented a return of drought conditions. However, until binding bids are received for the farms, the timing for EF Realisation to redeem or sell its shareholding in EAI and the proceeds from such a redemption or sale are uncertain.
EF Realisation carries its remaining investment in EAI at a conservative estimate of the proceeds that would be received assuming EAI's farms are sold and its shares are redeemed. In particular, the implied valuation of the farms is less than the value of the farms used to secure EAI's loan from the Commonwealth Bank of Australia, a valuation point that has been a floor for proceeds in farm sales.
TRF/Prescott Valley
EF Realisation has a majority interest in 2,724 acre-feet of water entitlements in the Prescott Valley region of Arizona, near Phoenix, in the United States, however restrictions in the operating agreements limit EF Realisation's control and influence over management of the asset. An independent expert makes an annual valuation of these water entitlements on the basis of estimated future cash flows discounted at the estimated cost of capital given the perceived risk profile (a "DCF" valuation). EF Realisation uses a third party NAV as a basis for valuing its investment in this asset but it applies a further discount to reflect the illiquidity of the investment and the expenses that might be incurred by EF Realisation to dispose of the investment.
Property developers in the Prescott Valley region must demonstrate that they have access to 100 years of future water supply before they can be granted permission to develop land. The water entitlements owned by EF Realisation would enable developers to demonstrate a future water supply and 2,724 acre-feet of water entitlements would be sufficient to allow for the development of approximately 10,000 homes.
Development activity in the Prescott Valley region came to a near standstill after the global financial crisis, significantly reducing the demand for water entitlements, and there was a barren period during which no sales of water entitlements occurred. As a measure of the downturn in building activity, the number of new single dwelling housing permits granted fell to less than 50 per year in 2009-2011, having exceeded 1,000 permits per year in 2004-2005. Fortunately, property development activity has now picked up and is running at approximately 500 permits per year, which is stimulating interest from property developers for water entitlements. Several sales of water entitlements are in the early stages of negotiation and, while there is no guarantee that any sale can be concluded at an attractive price, there are signs that a significant sale of water entitlements might be able to be achieved in the first half of 2018 which would then enable some cash to be distributed to EF Realisation. However, the scale of water entitlements in this investment is so large that disposals of all the water entitlements is likely to take many years. As a result, EF Realisation is exploring a secondary market sale of this investment.
Other Investments
EF Realisation holds shares in Oro Negro (having disposed of its bond interest, as described above), interests in the debt and equity of Energy Future Holdings Limited ("EFH"), the holding company for the leveraged buyout, in 2007, of the Texas-based utility TXU Energy which filed for bankruptcy in 2014, and a shareholding in Bluewater Bio Holdings Limited, a UK water treatment company. In addition, the Company is party to an introductory fee arrangement with an established US wood pellet producer. EF Realisation carries all of these investments in its NAV at nil value.
In our expectation, the shares in Oro Negro and the introductory fee arrangement with an established US wood pellet producer are the only assets which have potential to be of material value. However, Oro Negro needs to undertake a restructuring of its bonds so it and certain of its subsidiaries have been put into bankruptcy proceedings in order to provide a period of stability during which an orderly financial restructuring can be negotiated. There is no clear timetable for Oro Negro to complete its financial restructuring and, until then, the value of the Oro Negro shares held by EF Realisation is difficult to determine or realise. The introductory fee arrangement with an established US wood pellet producer is conditional on that group entering into export sales contracts with certain non-US parties and, while contract negotiations are ongoing, there can be no guarantee that any such contracts will be concluded in any specific timeframe.
Outlook
EF Realisation has made a start on disposing of its assets and has realised GBP4.36 million (including investment income (net of expenses)) for assets that were carried in its opening NAV at GBP3.52 million. The Company has returned GBP3.0 million of this sum to Shareholders. The Company continues actively to look for buyers of its assets in order to realise their carrying values and to maximise the cash returned to Shareholders. In so doing, the Company would hope to close the discount between the Company's NAV and its share price.
For certain of the more significant assets, the environment for selling the Company's investments is encouraging. Lonestar has a clear plan that its management is focused on delivering - involving hitting production and EBITDA targets for 2018 while improving debt ratios - and the recent stability in the oil price around higher levels than seen last summer has created a more positive backdrop for the sector than has been seen since oil prices dropped at the end of 2014. In our opinion, there is scope for a significant increase in the Company's NAV if Lonestar's management executes its business plan and Lonestar's shares close the valuation discount to its peers. Eastern Australia Irrigation Limited's process of selling its farms is well underway and indications are of greater activity in the Prescott Valley property market such that the TRF investment may see some of its underlying water entitlements sold. All of this bodes well for EF Realisation continuing to realise its investments and return cash to Shareholders.
Investment Manager
22 January 2018
DIRECTORS' AND CORPORATE GOVERNANCE REPORT
The Directors present the Annual Financial Report of the Company for the period ended 30 September 2017. The results for the period are set out in these accounts.
Principal activity
The principal activity of the Company is to effect an orderly realisation of the assets of the Company in accordance with the Investment Policy, as detailed in the Executive Summary.
Disclosure of information to the auditor
The Directors who held office at the date of approval of this Directors' Report confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditors are unaware and that they have taken the steps that they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
Directors' interests
Information for each Director is detailed in the 'Board Members' section and details of Directors' remuneration and interests in shares can be found detailed in the Directors' Remuneration Report.
Financial risk management objectives and policies
The Board is responsible for the Company's system of risk management and internal control and meets regularly to assess the effectiveness of such controls in managing and mitigating risk.
The key financial risks that the Directors believe the Company is exposed to are market risk and liquidity risk. Please refer to note 8 for financial risk management disclosure and policies and procedures in place to monitor and mitigate these risks.
The Administrator and Investment Manager have established internal control frameworks to provide reasonable but not absolute assurance on the effectiveness of the internal controls operated on behalf of their clients. The effectiveness of these controls is assessed by their respective compliance and risk departments on an on-going basis and by periodic review by external parties. The Administrator's compliance team present an assessment of their review to the Board in line with the compliance monitoring program on a quarterly basis.
The Board has reviewed the effectiveness of the Company's system of risk management and internal control for the period ended 30 September 2017 and to the date of approval of this Annual Financial Report.
Fair, balanced and understandable
In assessing the overall fairness, balance and understandability of the Annual Financial Report, the Board has performed a comprehensive review to ensure consistency and overall balance.
Borrowing limits
The Company does not have any external borrowings and has no intention to incur external borrowings, although the Directors may, if they feel it is in the best interests of the Company, borrow funds for working capital purposes.
Greenhouse gas emissions
Please refer to "Environmental and social issues" section for disclosure regarding greenhouse gas emissions.
Acquisition of own shares
On 12 September 2017, the Company obtained general authority to purchase in the market up to 14.99% of the Ordinary Shares in issue. This authority expires on 7 March 2018, the date of the Company's next AGM. During the period ended 30 September 2017, the Company did not purchase any shares in the market.
The Directors will seek a renewal of this authority from Shareholders at the Company's AGM on 7 March 2018.
Shareholders' interests
As at 30 September 2017, the Company had been notified, in accordance with Chapter 5 of the Disclosure Guidance and Transparency Rules (which covers the acquisition and disposal of major shareholdings and voting rights), that the following Shareholders had an interest of greater than 5% in the Company's issued stated capital.
Percentage
of total
voting rights
(%)
Weiss Asset Management 20.31%
Asset Value Investors (including
British Empire Trust) 8.50%
1607 Capital Partners LLC 6.81%
Dexia Credit Local de France
SA 6.08%
Janus Henderson Investors 5.06%
Between 30 September 2017 and 22 January 2018, the following additional notifications were received:
Percentage
of total
voting rights
(%)
J.H. Lane Holdings GP, LLC 15.40%
Weiss Asset Management 11.22%
1607 Capital Partners LLC 0.00%
Independent Auditor
Ernst & Young LLP have indicated their willingness to continue in office as auditor and a resolution proposing their re-appointment and to authorise the Directors to determine their remuneration will be proposed at the forthcoming AGM.
Events after the Reporting Date
The Directors are not aware of any developments that might have a significant effect on the operations of the Company subsequent to the period end not already disclosed in this report or note 16 of the attached financial statements.
Corporate Governance Statement
a) Corporate Governance Codes
The Disclosure Guidance and Transparency Rules ("DTR") of the UK Listing Authority, require listed companies to disclose how they have applied the principles and complied with the provisions of the UK Corporate Governance Code ("UK Code") as issued by the Financial Reporting Council ("FRC").
The AIC Code provides specific corporate governance guidelines to investment companies. The Board considers that reporting against the principles and recommendations of the AIC Code and by reference to the AIC Guide (which incorporates the UK Code) will enable Shareholders to make a comprehensive assessment of the Company's governance principles. As the Company has elected to apply the AIC Code, the Company has indirectly voluntarily opted to apply specific provisions of the UK Code.
Corporate Governance Codes
The FRC has confirmed that AIC member companies which report against the AIC Code and who follow the AIC Guide will be meeting obligations in relation to the UK Code, paragraph 9.8.6 of the Listing Rules and associated disclosure requirements of the DTR.
The Company has delegated to third parties certain administrative and other functions, thus not all of the provisions of the AIC Code are directly applicable to the Company. The Company has no employees.
Copies of the AIC Code, the AIC Guide and the UK Code can be found on the respective organisations' websites, www.theaic.co.uk and www.frc.org.uk, respectively.
b) Statement of compliance
The AIC Code comprises 21 principles and the Directors believe that during the period under review they have complied with all the recommendations of the AIC Code and the relevant provisions of the UK Code insofar as they apply to the Company's business except as set out below.
-- The Chairman should be independent; -- The Board should have a policy on tenure; and -- The Board should establish separate Remuneration and Nomination Committees.
In addition to his role as Chairman of the Company, Martin Nègre is also a member of the board of directors of other funds managed by the Investment Manager and therefore he does not qualify as an independent director for the purposes of the AIC Code. However, the Board believes that Mr Nègre brings considerable experience, expertise and knowledge of the investment portfolio to the Board, which will be significant in assessing, inter alia, the most appropriate Realisation Strategy to be pursued in relation to each investment. Mr Nègre will not sit on the Audit Committee or the Management Engagement Committee. Furthermore, the Board does not consider any advantages in nominating a senior independent director as it believes that Robert Sinclair, in his capacity as Chairman of the Audit Committee, acts as an appropriate channel of communication for Shareholders in the event that a Shareholder's contact with the Chairman of the Company fails to satisfactorily resolve a concern.
In view of the expected two year life span of the Company, the Board does not believe that a policy on tenure would be appropriate.
The Company has not established separate Remuneration and Nomination Committees as the Board considers its size to be such that these would be unnecessarily burdensome. Relevant matters, such as the remuneration of Directors of the Company, are considered by the Board.
For the reasons set out in the AIC Guide, and as explained in the UK Code, the Board agrees these provisions are not relevant to the Company:
-- The role of the Chief Executive; -- Executive Directors' remuneration; -- The need for an internal audit function;
Specifically, the Company is an externally managed investment company with all of the Company's day-to-day management and administrative functions being outsourced to third parties. The Company has no Chief Executive, no executive directors, and no internal operations. The Company has not, therefore, reported further in respect of these provisions.
The Company complies with the corporate governance statement requirements pursuant to the DTRs by virtue of the information included in the Corporate Governance section of the Annual Financial Report.
c) The Board
Directors
The Board currently consists of three non-executive directors, all of whom were appointed on 28 June 2016 with the exception of Martin Nègre who was appointed on the 20 July 2016. The Directors are:
-- Martin Nègre (Non-executive Chairman) -- Robert Sinclair (Independent non-executive Director) -- Nick Tostevin (Independent non-executive Director)
Please refer to 'Board Members' section for biographies of each Director which demonstrate their professional knowledge and breadth of investment, accounting, banking, legal and professional experience.
The Board is chaired by Martin Nègre who is responsible for the leadership of the Board and ensuring its effectiveness in all aspects of its role.
Directors' Duties and Responsibilities
The Board has overall responsibility for the Company's activities, including the review of investment activity and performance. The Board meets on a regular basis to review progress on implementing the Realisation Strategy and the current holdings in the investment portfolio.
The Board is responsible for the safeguarding of the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Investment Manager, together with the Company Secretary, also ensures that all Directors receive, in a timely manner, all relevant management, regulatory and financial information relating to the Company. Directors unable to attend a Board meeting are provided with the Board papers and can discuss issues arising in the meeting with the Chairman or another Director.
Individual Directors may, at the expense of the Company, seek independent professional advice on any matter that concerns them in the furtherance of their duties.
Board and Committees
The Board has established two committees, the Audit Committee and the Management Engagement Committee. Each committee operates within clearly defined terms of reference and duties. The terms of reference for each Committee have been approved by the Board and are available on the Company's website. The Board considers that it is not necessary to establish a separate Remuneration or Nomination Committee and matters as to the remuneration of the Directors of the Company will be considered by the Board.
Audit Committee
The Board has delegated certain responsibilities and functions to the Audit Committee which consists of Robert Sinclair (Audit Committee Chairman) and Nick Tostevin. The Audit Committee meets at least twice a year. The members of the Audit Committee consider that they collectively have the requisite skills and experience to fulfil the responsibilities of the Audit Committee.
The report on the role and activities of this Committee and its relationship with the external auditors is set out in the Audit Committee Report.
Management Engagement Committee
The Company's Management Engagement Committee comprises Nick Tostevin (Management Engagement Committee Chairman) and Robert Sinclair. The Management Engagement Committee meets at least once a year and its main function is to review and make recommendations on any proposed amendment to the Investment Management Agreement and keep under review the performance of the Investment Manager and all other service providers. In September 2017, the Management Engagement Committee formally reviewed the performance of the Investment Manager and other key service providers to the Company. During this review, no material weaknesses were identified. Overall the Management Engagement Committee confirmed its satisfaction with the services and advice received.
Attendance at meetings of the Board and its committees for the period ended 30 September 2017
Inaugural Quarterly Ad-hoc Audit Management
Board Board Board Committee Engagement
and Committee Meetings Meetings Meetings Committee
Meetings
------------------- --------------- ---------- ---------- ----------- ------------
Number of
meetings 2 3 8 3 1
------------------- --------------- ---------- ---------- ----------- ------------
Martin Nègre 1 3 6 3(*) 1(*)
------------------- --------------- ---------- ---------- ----------- ------------
Robert Sinclair 2 3 7 3 1
------------------- --------------- ---------- ---------- ----------- ------------
Nick Tostevin 2 3 8 3 1
------------------- --------------- ---------- ---------- ----------- ------------
(*) attended with permission from the Audit Committee and Management Engagement Committee but did not vote in the meeting.
The Committees report to the Board, as part of a separate agenda item, on the activity of the Committees and matters of particular relevance to the Board in the conduct of their work.
Directors' retirement and rotation
The AIC Guide states that all non-executive Directors should be submitted for election by Shareholders at the first AGM after their appointment and to re-election thereafter at intervals of no more than three years. Non-executive directors serving more than nine years should be subject to annual re-election. Nomination for re-election should not be assumed but be based on disclosed procedures and continued satisfactory performance. The Articles of Association state that at each AGM of the Company, all Directors shall retire from office and may offer himself for election or re-election by the members. All Directors will stand for reappointment at the forthcoming AGM to be held on 7 March 2018.
The Board considers that there is a balance of skills and experience on the Board and each of the Directors contributes effectively.
Board independence, composition and tenure
The Directors, apart from Martin Nègre, are considered to be independent. Martin Nègre is also a member of the board of other funds managed by the Investment Manager and is therefore not regarded as independent.
There are no factors which compromise the Chairman's or other Directors' independence, other than stated above, and the Board believes that they all contribute to the affairs of the Company in an appropriate manner. The Company Secretary, BNP Paribas Securities Services S.C.A., Guernsey Branch through its representative, acts as Secretary to the Board and Committees and in doing so it: assists the Chairman in ensuring that all Directors have full and timely access to all relevant documentation; organised the induction of the new Directors; and is responsible for ensuring that the correct procedures are followed and advises the Board on corporate governance matters.
The Board is made up of three male Directors. The Board supports the recommendations of the Davies Report (available at www.gov.uk) and believes in and values the importance of diversity, including gender, to the effective functioning of the Board. The Board, however, does not consider it appropriate or in the interests of the Company and its Shareholders to set prescriptive targets for gender or other diversity on the Board.
In view of the limited expected lifespan of the Company, the Board does not consider that length of service necessarily compromises the independence or effectiveness of a Director and, accordingly, does not have a formal policy requiring that Directors stand down after a fixed period.
The Company is committed to ensuring that any vacancies arising are filled by the most qualified candidates who have complementary skills or who possess the skills and experience which fill any gaps in the Board's knowledge or experience. The Board considers that, due to its size, it would be unnecessarily burdensome to establish a separate Nomination or Remuneration Committee. The Board as a whole nominates candidates for the Board and, subject to there being no conflicts of interest, all Directors are entitled to vote on candidates for the appointment of any new Directors.
Directors' remuneration and annual evaluation of the Board and that of its Audit Committee, Management Engagement Committee and individual Directors
An annual evaluation of the Chairman and each individual Director, Audit Committee, Management Engagement Committee and Directors is undertaken considering the balance of skills, experience, independence and knowledge, its diversity, including gender, how the Board works together as a unit, and other factors relevant to its effectiveness. This was conducted by way of an internal review by individual questionnaire. The Directors also met without the Chairman present in order to review the Chairman's performance. It was concluded that each member's performance was satisfactory and the Board and Committees have a good balance of skills and experience with each Director making significant contributions in their roles and the Chairman continuing to display effective leadership.
Details of the remuneration arrangements for the Board and Audit Committee can be found in the Directors' Remuneration Report and in note 5 of the financial statements. Note that Mr Nègre is also the sole director of EFR Guernsey Holding Limited, which is the Company's wholly owned subsidiary, holding Lonestar shares, for which he receives no remuneration.
Directors' professional development
When the Directors were appointed to the Board, they were provided with all relevant information regarding the Company and their duties and responsibilities as a Director. They also spent time with representatives of the Investment Manager in order to learn more about their processes and procedures. No Directors (other than those appointed at inception or shortly thereafter) were appointed during the period.
Directors and newly appointed Directors, if applicable, are expected to take responsibility for identifying their training needs and to take steps to ensure that they are adequately informed about the Company and their responsibilities.
The Board is confident that its members have the knowledge, ability and experience to perform the functions required of a director of the Company.
d) Board meetings and relationship with the Investment Manager
Relationship with the Investment Manager
The Board has delegated various duties to external parties including the management of the investment portfolio, the custodial services (including the safeguarding of assets), the registration services and the day-to-day company secretarial, administration and accounting services. Each of these contracts was entered into after full and proper consideration by the Board of the quality and cost of services offered, including the control systems in operation in so far as they relate to the affairs of the Company.
The Board receives and considers reports regularly from the Investment Manager, with ad hoc reports and information supplied to the Board as required. The Investment Manager has systems in place to monitor cash flow and the liquidity of the Company. The Investment Manager and the Administrator also ensure that all Directors receive, in a timely manner, all relevant management, regulatory and financial information. Representatives of the Investment Manager and Administrator attend each Board meetings as required, enabling the Directors to probe further on matters of concern.
The Directors have access to the advice and services of the corporate Company Secretary through its appointed representative who is responsible to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with. The Board, the Investment Manager and the Administrator operate in a supportive, co-operative and open environment and the Board actively and continuously supervises both the Investment Manager and Administrator in the performance of their respective functions.
Primary focus
The Board meets regularly and a representative of the Investment Manager is in attendance at all times to review the performance of the Company's investments.
The Chairman, with assistance from the Investment Manager, is responsible for ensuring that relevant financial information, including investment portfolio analysis and financial plans, including budgets and forecasts, are available to the Board and discussed at Board meetings. The Chairman encourages open debate to foster a supportive and co-operative approach for all participants.
The Board applies its primary focus on the following:
- investment performance, and adherence to the investment objectives and the Realisation Strategy;
- financial risk management and review of operating cash flows, including cash flow forecasts and budgets of the Company; and
- management of the key risks to which the Company is exposed as set out in the Strategic Report.
At each regular meeting the Board reviews key investment and financial data, share price and NAV performance, Shareholder communication strategies and any relevant industry issues.
Overall strategy
The Board meets regularly to discuss all matters relevant to the Realisation Strategy of the Company.
Considering the Company's investment objectives and policy, the Board believes that the overall Realisation Strategy of the Company remains appropriate.
Monitoring and evaluation of performance of and contractual arrangements with service providers
The Management Engagement Committee is responsible for reviewing on a regular basis the performance of the Investment Manager and the Company's other third party service providers, their anti-bribery and corruption policies to ensure that they comply with the Bribery Act 2010 and the Prevention of Corruption (Bailiwick of Guernsey) Law, 2003. The Management Engagement Committee must also ensure these providers' continued competitiveness and effectiveness and that performance is satisfactory and in accordance with the terms and conditions of their respective appointments.
As part of the Committee's evaluation, it will also review on an annual basis the contractual arrangements with the Investment Manager and other major service suppliers.
During their review, no material weaknesses were identified and the Management Engagement Committee confirmed its satisfaction with the services and advice received.
The Directors have adopted a procedure whereby they are required to report any potential acts of bribery and corruption in respect of the Company to BNP Paribas Securities Services S.C.A., Guernsey Branch as the designated manager for Guernsey Financial Services Commission purposes.
e) Shareholder communications
Shareholder profile and communication
Shareholder relations and communications are a high priority for the Board.
The Company's Investment Manager meets with Shareholders and relays information and views to the Board regularly. Where appropriate, the Chairman and other Directors are available for discussion about governance and strategy with major Shareholders, and the Chairman ensures communication of Shareholders' views to the Board. The Board also receives feedback on the views of Shareholders from its Financial Adviser, and Shareholders are welcome to contact the Directors. Shareholders wishing to communicate with the Chairman, or any Director, may do so by writing to the Company, for the attention of the Company Secretary, at the Registered Office.
The Investment Manager prepares portfolio updates for release to the markets; these are prepared on an ad hoc basis, as and when there is material information or news to provide about portfolio developments and the Realisation Strategy. Another method of communication with Shareholders is through the Half-Year and Annual Financial Reports which aim to give Shareholders a clear and transparent understanding of the Company's objectives, Realisation Strategy and results. This information is supplemented by the publication of the weekly NAVs of the Company's Ordinary Shares on the London Stock Exchange Regulatory Information Service.
The Investment Manager's website - www.ecofin.co.uk - is regularly updated with investor information and provides further information about the Company, including the Company's Financial Reports and announcements. The maintenance and integrity of the relevant section of this website is the responsibility of the Directors. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Uncertainty regarding legal requirements is compounded as information published on the internet is accessible in many countries with different legal requirements relating to the preparation and dissemination of financial statements.
The Board believes that the AGM provides an appropriate forum for investors to communicate with the Board, and encourages participation. The AGM will be attended by at least the Chairman of the Audit Committee. There is an opportunity for individual Shareholders to question the Directors at the AGM. It is the intention of the Board that the Notice of the AGM and related papers will be sent to Shareholders at least 20 working days before that meeting.
The Directors welcome the views of all Shareholders and place considerable importance upon them.
Other communications
All substantive communications regarding any major corporate issues are discussed by the Board taking into account representations from the Investment Manager, the auditor, legal advisers, Financial Adviser and the Company Secretary.
Alternative Investment Fund Manager Directive ("AIFMD")
The Company (which is a non-EU Alternative Investment Fund ("AIF") for the purposes of the AIFMD and related regimes in EEA member states) is a self-managed fund and therefore acts as the Alternative Investment Fund Manager ("AIFM") of the Company.
In 2016, the Company registered with the Guernsey Financial Services Commission, being the Company's competent regulatory authority, as a non-EU AIF, and the AIFM has registered with the UK Financial Conduct Authority, under their relevant national private placement regime ("NPPRs"). As the Company is non-EU domiciled, no depositary has been appointed in line with the AIFM Directive, however BNP Paribas Securities Services S.C.A., Guernsey Branch has been appointed to act as custodian.
Information relating to the current risk profile of the Company and the risk management systems employed by the Company to manage those risks, as required under paragraph 4(c) of Article 23 of the AIFMD, are set out in note 8 - Financial Risk Management. Please refer to the 'Executive Summary' for the Board's assessment of the principal risks and uncertainties facing the Company.
AIFM remuneration
The total fees paid to the Board by the Company are disclosed within the Directors' Remuneration Report and disclosed in note 5.
Article 22(2)(e) and 22(2)(f) of the AIFM Directive is not deemed applicable as the AIFM has no staff. No other remuneration costs have been incurred with the exception of those costs incurred by the Board as referenced above.
This Directors' and Corporate Governance Report was approved by the Board of Directors on 22 January 2018 and signed on its behalf by:
Nick Tostevin Robert Sinclair
Director Audit Committee Chairman
REPORT OF THE AUDIT COMMITTEE
Report of the Audit Committee
The Board has appointed an Audit Committee which operates within clearly defined Terms of Reference.
The Audit Committee consists of Robert Sinclair (Audit Committee Chairman) and Nick Tostevin. The Audit Committee's members have recent and relevant industry and financial experience, and the Audit Committee Chairman is a Fellow of the Institute of Chartered Accountants in England and Wales, a member of the Institute of Chartered Accountants of Scotland and a member of the Society of Trust and Estate Practitioners. Biographical information pertaining to the members of the Audit Committee can be found in the section of this Annual Financial Report entitled "Board Members".
Role of the Audit Committee
The main role and responsibilities of the Audit Committee are to protect the interests of the Company's Shareholders regarding the integrity of the Half-Yearly Financial Report and the Annual Financial Report of the Company. It also manages the Company's relationship with the external Auditor.
The Audit Committee's main functions are:
- to consider and make recommendations to the Board in relation to the appointment, re-appointment and removal of the external Auditors and to negotiate their remuneration and terms of engagement on audit and non-audit work;
- to meet regularly with the external Auditor in order to review their proposed audit programme of work and the subsequent Audit Report and to assess the effectiveness of the audit process and the level of fees paid in respect of audit and non-audit work;
- to annually assess the external Auditor's independence, objectivity, effectiveness, resources and expertise;
- to review and monitor the fairness and balance of the financial statements of the Company including its half-year financial statements and annual financial reports to Shareholders; and
- to advise the Board on whether the Committee believes the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's performance, position, business model and strategy.
Internal controls
The Board is ultimately responsible for establishing and maintaining the Company's system of internal financial and operating control and for maintaining and reviewing its effectiveness. The Company's business risk assessment continues to be the core element of its risk management process and it establishes the Company's system of internal financial and reporting control. The business risk assessment is prepared and maintained by the Board, with input from the Administrator and Investment Manager, which initially identifies the risks facing the Company and then collectively assesses the likelihood of each risk, the impact of those risks and the strength of the controls operating over each risk. The system of internal financial and operating control is designed to manage rather than to eliminate the risk of failure to achieve business objectives and by their nature can only provide reasonable and not absolute assurance against misstatement and loss.
These controls aim to ensure that assets of the Company are safeguarded, proper accounting records are maintained and the financial information for publication is reliable. The Board confirms that there is an ongoing process for identifying, evaluating and managing the principal risks faced by the Company.
This process has been in place for the period under review and up to the date of approval of this Annual Financial Report and financial statements, and it is reviewed by the Board in accordance with the 'Internal Controls: Guidance on Risk Management, Internal Control and Related Financial and Business Reporting'.
The Board has delegated the day to day responsibilities for the management of the Company's investment portfolio, the provision of custody services and administration, registrar and corporate secretarial functions including the independent calculation of the Company's NAV and the production of the Annual Financial Report and financial statements which are independently audited. Formal contractual agreements have been put in place between the Company and providers of these services.
The Company delegates its day to day administrative operations to third-party providers which are monitored by the Audit Committee and which report on their policies and procedures to the Board. Accordingly, the Audit Committee believes an internal audit function is not required. As the Company does not have any employees it does not have a "whistle blowing" policy in place, but its third party service providers do.
The Directors have reviewed the BNP Paribas Securities Services ISAE 3402 report on Fund Administration and Middle Office Outsourcing (a description of controls in operation, their design and operating effectiveness) for the year to 30 September 2017, and are pleased to note that no significant issues were identified.
The Company's risk exposure and the effectiveness of its risk management and internal control systems are reviewed by the Audit Committee annually by the Board. The Board believes that the Company has adequate and effective systems in place to identify, mitigate and manage the risks to which it is exposed.
In the period ended 30 September 2017, the Audit Committee met on three occasions and the members' attendance record can be found in the Corporate Governance Statement.
Significant risks in relation to the financial statements
The Audit Committee views the valuation of the Company's investments as a significant risk. The Company's investment portfolio consists of holdings in unquoted investments, which are valued using different valuation techniques to arrive at the estimated realisable value, and a listed investment, which is valued based on a five-day volume weighted average of its observable share price adjusted for factors likely to affect the amount that could be realised including the size of the holding relative to observable liquidity and an estimate of the costs that are likely to be incurred in realising the Company's investment.
Valuation is therefore considered a significant risk and is monitored by the Board, the Audit Committee and the Investment Manager. The Audit Committee receives and reviews reports on the processes for the valuation of investments. Following discussion with the Investment Manager, the Audit Committee was able to gain assurances as to the appropriateness and robustness of the judgements made and methodologies applied and that an appropriate accounting treatment has been adopted in accordance with IFRS 13.
External audit process
The Company's external Auditor, Ernst & Young LLP (the "Auditor"), was appointed on the 23 June 2016.
The Audit Committee met with the Auditor prior to the commencement of the audit and agreed an audit plan that would adopt a risk based approach. The Audit Committee and the Auditor agreed that a significant portion of the Audit effort would include an examination of the procedures in place at the Administrator and at the Investment Manager in respect of the valuation of the Company investments and the underlying portfolio assets, respectively.
Upon completion of the audit, the Audit Committee discussed with the Auditor the effectiveness of the audit and considered the Auditor's independence from the Company since their appointment and throughout the audit process.
For the period ended 30 September 2017, the Audit Committee was satisfied that there had been appropriate focus and challenge on the significant and other key areas of audit risk, and assessed the quality of the audit process to be good.
During the period ended 30 September 2017, in addition to the audit of the Company's Annual Financial Report, the auditor provided non-audit services in respect of the review of the Company's Half-Yearly Financial Report for the period ended 31 March 2017. No other non-audit services were provided during the period ended 30 September 2017.
The Audit Committee has discussed the report provided by the Auditors and the Audit Committee is satisfied as to the independence of the Auditor.
The Committee has reviewed Ernst & Young's independence policies and procedures and considers that they are fit for purpose.
The fees for the audit services were GBP45,000 (period-end audit) and fees for non-audit services were GBP15,000 for review of the Company's Half-Yearly Report for the period ended 31 March 2017.
Appointment and independence
The Committee considers the reappointment of the external auditor, including the rotation of the audit engagement partner, annually. The external auditor is required to rotate the audit engagement partner responsible for the Company audit every five years. The current lead audit engagement partner has been in place for one year.
The Committee reviews the objectivity and effectiveness of the audit process on an annual basis and considers whether the Company should put the audit engagement out to tender. Having considered the need to tender the position for the current year, the Committee has provided the Board with its recommendation to the Shareholders on the reappointment of Ernst & Young LLP as external auditor for the year ending 30 September 2018, in part because it is the Committee's belief that the investments held by the Company may be fully realised by this date.
Accordingly, a resolution proposing the reappointment of Ernst & Young LLP as the Company's Auditor will be put to the Shareholders at the AGM. There are no contractual obligations restricting the Committee's choice of external auditor and we do not indemnify our external auditor.
The Committee continues to consider the audit tendering provisions outlined in the revised UK Code.
For and on behalf of the Audit Committee
Robert Sinclair
Audit Committee Chairman
22 January 2018
Directors' Statement of Responsibilities
The Directors are responsible for preparing the Annual Financial Report and financial statements in accordance with applicable Guernsey law and International Financial Reporting Standards as adopted by the EU ("IFRS's").
Guernsey law requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit or loss for the period. They are also responsible for ensuring that the Annual Financial Report, financial statements, and Company comply with the provisions of the Disclosure Guidance and Transparency Rules of the UK Listing Authority which, with regard to corporate governance, require the Company to disclose how it has applied the principles, and complied with the provisions of the corporate governance code applicable to the Company.
In preparing those financial statements, the Directors are required to:
-- select suitable accounting policies and apply them consistently; -- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business;
-- confirm that there is no relevant audit information of which the Company's Auditor is unaware; and
-- confirm that they have taken all reasonable steps which they ought to have taken as Directors to make themselves aware of any relevant audit information and to establish that the Company's Auditor is aware of that information.
The Directors are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008, as amended ("Companies Law") and IFRS. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors confirm to the best of their knowledge that:
-- the financial statements, which have been prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial position and loss of the Company;
-- the Strategic Report and the Investment Manager's Report include a fair review of the information required by DTR 4.1.8 (indication of important events up to 30 September 2017 and a description of principal risks and uncertainties);
-- the Strategic Report and the Investment Manager's Report include a fair review of the information required by DTR 4.1.9 and 4.1.10 (analysis of the development and performance of the Company and position at period end aided by the use of key performance indicators; and where appropriate information relating to environmental factors);
-- the Strategic Report, the Investment Manager's Report and the notes to the financial statements include a fair review of the information required by DTR 4.1.11 (disclosure of important events that have occurred post period end; future developments; financial risk management objectives and policies and the Company's exposure to price, credit, liquidly and cash flow risk); and
-- the Annual Financial Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for Shareholders to assess the Company's performance, position, business model and strategy.
Approved and signed on behalf of the Board,
Nick Tostevin Robert Sinclair
Director Audit Committee Chairman
22 January 2018
DIRECTORS' REMUNERATION REPORT
Annual Remuneration Statement
This report has been prepared to the relevant rules of the Listing Rules of the Financial Conduct Authority and the AIC Code and describes how the Board has applied the principles relating to Directors' remuneration.
An ordinary resolution to ratify this report will be proposed at the AGM on 7 March 2018.
Changes to the Board
There were no changes to the Board during the period ended 30 September 2017. In accordance with best practice under the AIC Code and the Articles, all Directors will stand for reappointment at the forthcoming AGM to be held on 7 March 2018.
Table of Directors Remuneration
Component Directors Annual Purpose of reward
Rate (GBP)
----------- ------------------ ------------ ---------------------
Annual Martin Nègre GBP22,500 For commitments
fee Robert Sinclair GBP22,500 as non-executive
Nick Tostevin GBP22,500 Directors
----------- ------------------ ------------ ---------------------
Additional Martin Nègre GBP5,000 For additional
fee (Chairman of the responsibilities
Board) GBP2,500 and time commitment
Robert Sinclair
(Chairman of the
Audit Committee)
----------- ------------------ ------------ ---------------------
Expenses Ad hoc Reimbursement of
expenses paid
----------- ------------------ ------------ ---------------------
During the period ended 30 September 2017, the Company incurred Director fees of GBP76,183, of which GBP18,750 was payable at period end.
No other remuneration or compensation was paid or is payable by the Company during the period to any of the Directors. There has been no change to the Company's remuneration policy as detailed below.
The Company has no employees. Accordingly, there are no differences in policy on the remuneration of Directors and the remuneration of employees.
No Director is entitled to receive any remuneration which is performance-related.
Remuneration policy
The determination of the Directors' fees is a matter for the Board. The Board considers the remuneration policy annually to ensure that it remains appropriately positioned. Members of the Committee review the fees paid to the boards of directors of similar companies. No Director is to be involved in decisions relating to his or her own remuneration.
The Company's policy is for the Directors to be remunerated in the form of fees, payable quarterly in arrears. No Director has any entitlement to a pension, and the Company has not awarded any share options or long-term performance incentives to any of the Directors.
Directors are authorised to claim reasonable expenses from the Company in relation to the performance of their duties.
The Company's policy is that the fees payable to the Directors should reflect the time spent by the Board on the Company's affairs and the responsibilities borne by the Directors and should be sufficient to enable high calibre candidates to be recruited. The policy is for the Chairman of the Board and Chairman of the Audit Committee to be paid a higher fee than the other Directors in recognition of their more onerous roles and more time spent. The Board may amend the level of remuneration paid within the limits of the Company's Articles of Association.
The Company's Articles of Incorporation limits the aggregate fees payable to the Board of Directors to a total of GBP200,000 per annum.
Service contracts and policy on payment of loss of office
Directors are appointed with the expectation that they are initially appointed until the following AGM when it is required that they be re-elected by Shareholders. All Directors have served since incorporation of the Company on 28 June 2016, with the exception of Martin Nègre who was appointed on the 20 July 2016.
Directors have agreed letters of appointment with the Company. No Director has a service contract with the Company and Directors' appointments may be terminated at any time by one month's written notice with no compensation payable at termination upon leaving office for whatever reason. Directors' appointments are reviewed during the annual board evaluation, which took place in December 2017.
In accordance with best practice and the AIC Code, all Directors will stand for reappointment at the forthcoming AGM to be held on 7 March 2018. The names and biographies of the Directors holding office at the date of this report are listed in the 'Board Members' section.
Copies of the Directors' letters of appointment are available for inspection by Shareholders at the Company's Registered Office, and will be available at the AGM. The dates of their letters of appointments are shown below.
Dates of letters of appointment
Director Date of letter
of appointment
-------------- ----------------
Martin 20 July 2016
Nègre
-------------- ----------------
Robert 28 June 2016
Sinclair
-------------- ----------------
Nick Tostevin 28 June 2016
-------------- ----------------
Directors' interests
As at the date of approval of the financial statements, Directors held the following number of Ordinary Shares in the Company:
Director Ordinary Shares
held
--------------- ----------------
Martin
Nègre 232,716
--------------- ----------------
Robert Nil
Sinclair
--------------- ----------------
Nick Tostevin Nil
--------------- ----------------
Statement of consideration of Shareholder views
An ordinary resolution to ratify the Directors' remuneration report will be proposed at the AGM on 7 March 2018.
Robert Sinclair
Audit Committee Chairman
22 January 2018
independent AUDITOR'S report to THE MEMBERS OF EF REALISATION COMPANY LIMITED
Opinion
We have audited the financial statements of EF Realisation Company Limited (the 'Company') for the period ended 30 September 2017, which comprise the Statement of Comprehensive Income, the Statement of Financial Position, the Statement of Changes in Shareholders' Equity, the Statement of Cash Flows and the related notes 1 to 17, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union ('IFRS'). The financial statements have been prepared on the break-up basis.
-- In our opinion, the financial statements:
-- give a true and fair view of the state of the Company's affairs as at 30 September 2017 and of its loss for the period then ended;
-- have been properly prepared in accordance with IFRS; and
-- have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ('ISAs (UK)') and applicable law. Our responsibilities under those standards are further described in the "Auditor's responsibilities for the audit of the financial statements" section of our report below. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the annual report, in relation to which the ISAs(UK) require us to report to you whether we have anything material to add or draw attention to:
-- the disclosures in the annual report that describe the principal risks and explain how they are being managed or mitigated;
-- the directors' confirmation in the annual report that they have carried out a robust assessment of the principal risks facing the entity, including those that would threaten its business model, future performance, solvency or liquidity;
-- the directors' statement in the annual report and in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the entity's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
-- whether the directors' statement in relation to going concern required under the Listing Rules is materially inconsistent with our knowledge obtained in the audit; or
-- the directors' explanation set out in the annual report as to how they have assessed the prospects of the entity, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the entity will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
Overview of our audit approach
Key audit
matters * Valuation of investments (at fair value and applying
the break up basis of accounting).
------------ ------------------------------------------------------------
Audit scope
* We performed an audit of the complete financial
information of the Company for the period ended 30
September 2017.
------------ ------------------------------------------------------------
Materiality
* Overall Company materiality of GBP364,000 which
represents approximately 2% of total equity.
------------ ------------------------------------------------------------
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk Our response to the risk Key observations
communicated
to the
Audit
Committee
------------------------- ------------------------------------------------------------- -----------------
Valuation of We confirmed
investments (at * We documented our understanding of the Company's that there
fair value and processes, methodologies and policies for valuing were no
applying the investments and performed walkthrough tests to matters
break up basis confirm our understanding thereof; identified
of accounting) during
(2017: Investments our audit
GBP15.8 million) * We assessed whether the methodologies used by work on
Refer to the management to value the investments were in the valuation
Audit Committee accordance with methods usually used by market of investments
Report; Accounting participants for these types of assets and whether that we
policies; and they were in accordance with IFRS and International wanted
Note 7 of the Private Equity and Venture Capital Association to bring
Financial Statements (IPEVCA) guidelines; to the
Risk that the attention fair value of of the investments might * We agreed the proposed values in the investment audit be misstated valuation report provided by the Investment Manager committee. due to application to those presented in the financial statements; of inappropriate methodologies or inputs to * We used our knowledge of the market, including the valuations information from independent databases of and/or inappropriate transactions in comparable investments, and judgmental factors information provided by management about recently due to the lack concluded transactions and current offers to assess of observable and corroborate the discount factors used by market data. management; This includes the risk that costs to sell * We agreed the significant inputs used by management, and other adjustments particularly recent public market transaction data to reflect the and net asset values of holdings in investment funds, break up basis to independently sourced information; of accounting are not appropriately and accurately * We assessed whether management's assumptions about reflected in costs of realisation and other factors affecting the the carrying carrying amount as a result of applying the break up amounts of investments. basis of accounting were appropriate and properly The valuation calculated; is subjective, with a high level of judgement * We assessed whether management had properly taken and estimation account of the tax effects of disposing of linked to the investments; and determination of the values with limited * We tested the mathematical accuracy of management's market information calculations. available. Valuation of investments is the key driver of the Company's net asset value and total return. Incorrect valuation could have a significant impact on the net asset value of the Company and therefore the return generated for shareholders. ------------------------- ------------------------------------------------------------- -----------------
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope. Taken together, this enables us to form an opinion on the financial statements.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in forming our audit opinion.
Materiality
Materiality is the magnitude of omissions or misstatements that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the Company to be GBP364,000, which is approximately 2% of total equity. We believe that total equity provides us with an appropriate basis for audit materiality as it is a key published performance measure and is a key metric used by management in assessing and reporting on overall performance.
Performance materiality
Performance materiality is the application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the Company's overall control environment, our judgement was that performance materiality was 75% of our planning materiality, namely GBP273,000. We have set performance materiality at this percentage because we have considered the likelihood of misstatements to be low. We have considered both quantitative and qualitative factors when determining the expected level of detected misstatements and setting the performance materiality at this level.
Reporting threshold
The reporting threshold is an amount below which identified misstatements are considered as being clearly trivial.
We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of GBP18,000, which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the annual report and the 'Useful Information for Shareholders' and 'Company Information' sections, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of the other information, we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:
-- Fair, balanced and understandable - the statement given; or the explanation as to why the annual report does not include a statement; by the directors that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
-- Audit committee reporting - the section describing the work of the audit committee does not appropriately address matters communicated by us to the audit committee / the explanation as to why the annual report does not include a section describing the work of the audit committee is materially inconsistent with our knowledge obtained in the audit; or
-- Directors' statement of compliance with the UK Corporate Governance Code - the parts of the directors' statement relating to the Company's compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:
-- proper accounting records have not been kept by the company; or
-- the financial statements are not in agreement with the company's accounting records and returns; or
-- we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Company or the parent company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
This report is made solely to the company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's 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 and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Michael Bane
for and on behalf of Ernst & Young LLP
Guernsey, Channel Islands
22 January 2018
Notes:
1. The maintenance and integrity of the section of Ecofin Limited's website dedicated to EF Realisation Company Limited is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the web site.
2. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
STATEMENT OF COMPREHENSIVE INCOME
For the period from 28 June 2016 (incorporation) to 30 September 2017
For the
period
from
28 June
2016 to
30 September
2017
Notes GBP
---------------------------------------------------------------------------------------------------------- ------ --------------
Income
Investment income 177,204
Foreign exchange gain 4,483
Reversal of provision
relating to future funding
commitment 10 732,092
----------------------------------------------------------------------------------------------------------- ------ --------------
913,779
---------------------------------------------------------------------------------------------------------- ------ --------------
Expenses
Net loss on financial
assets designated at fair
value through profit or
loss (26,002,114)
Operating expenses 4 (584,214)
Provision 10 (279,630)
------------------------------------------------------------------------------------------------------------ ------ --------------
(26,865,958)
---------------------------------------------------------------------------------------------------------- ------ --------------
Loss before taxation (25,952,179)
------------------------------------------------------------------------------------------------------------ ------ --------------
Taxation -
---------------------------------------------------------------------------------------------------------- ------ --------------
Loss after taxation and
total comprehensive loss (25,952,179)
----------------------------------------------------------------------------------------------------------- ------ --------------
Basic and diluted loss per
Ordinary Share (from inception) 12 (0.6187)
------------------------------------------------------------------------------------------------------------ ------ --------------
Basic and diluted loss
per Ordinary Share (from
first NAV) 12 (0.5032)
----------------------------------------------------------------------------------------------------------- ------ --------------
The Company has no items of other comprehensive income or loss, and therefore the loss for the period is also the total comprehensive loss.
All items in the above statement are prepared on a break-up basis. No operations were acquired or discontinued during the period.
The notes form an integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION
As at 30 September 2017
30 September
2017
Notes GBP
----------------------------------- ------ -------------
Current assets
Financial assets designated
at fair value through profit
or loss 7 15,802,184
Cash and cash equivalents 3,293,971
Other receivables and prepayments 6 21,685
Total current assets 19,117,840
----------------------------------- ------ -------------
Total assets 19,117,840
----------------------------------- ------ -------------
Current liabilities
Other payables 9 (132,825)
Provision 10 (792,317)
----------------------------------- ------ -------------
Total current liabilities (925,142)
----------------------------------- ------ -------------
Total liabilities (925,142)
----------------------------------- ------ -------------
Net assets 18,192,698
----------------------------------- ------ -------------
Capital and reserves
Share capital 11 40,420,947
Retained deficit (22,228,249)
----------------------------------- ------ -------------
Equity Shareholders' funds 18,192,698
----------------------------------- ------ -------------
Net asset value per share 13 0.4045
----------------------------------- ------ -------------
The financial statements were approved and authorised for issue by the Board of Directors on 22 January 2018 and signed on its behalf by:
Nick Tostevin Robert Sinclair
Director Audit Committee Chairman
The notes form an integral part of these financial statements.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the period from 28 June 2016 (incorporation) to 30 September 2017
Share Retained
capital deficit Total
Note GBP GBP GBP
------------------------------ ----- ------------ ------------- -------------
Opening equity Shareholders' - - -
funds at 28 June 2016(1)
------------------------------ ----- ------------ ------------- -------------
Total comprehensive
loss for the period - (25,952,179) (25,952,179)
Transactions with owners,
recorded directly to
equity
Proceeds from issuance
of Ordinary Shares 11 47,184,416 - 47,184,416
Ordinary Share issue
costs 11 (26,885) - (26,885)
Redemption of Ordinary
Shares 11 (6,736,584) 3,732,930 (3,003,654)
Ordinary Share redemption
costs 11 - (9,000) (9,000)
------------------------------ ----- ------------ ------------- -------------
Closing equity Shareholders'
funds at 30 September
2017 40,420,947 (22,228,249) 18,192,698
------------------------------ ----- ------------ ------------- -------------
(1) (The Company was incorporated on the 28 June 2016. Ordinary Shares were issued on the 26 September 2016.)
As at 13 September 2016, the value of the pool of assets attributable to the Company, further to the Scheme of Reconstruction of EWPO, was GBP47,184,416. In turn, on 22 September 2016, the Company issued 52,473,633 Ordinary Shares to EWPO shareholders at a price of 89.92p per share for gross proceeds of GBP47,184,416. The Company's Ordinary Shares were admitted to trading on the London Stock Exchange on 26 September 2016.
The first valuation point for the Company's assets after admission was as at the close of trading on 30 September 2016. During the period from 13 September 2016 to 30 September 2016, the NAV per share fell from 89.92p to 83.89p as a result of movement in the fair value of investments.
On 18 September 2017, 7,496,024 Ordinary Shares were redeemed at a price of 40.07p per Ordinary Share (after allowing for costs of redemption of GBP9,000). This GBP3.0 million return of capital, equivalent to 5.7p per Ordinary Share, was implemented pursuant to the Company's compulsory redemption mechanism, such that one in every seven Ordinary Shares was redeemed, for cancellation, on a pro rata basis. As at 30 September 2017, the Company had 44,977,609 Ordinary Shares in issue.
The notes form an integral part of these financial statements.
STATEMENT OF CASH FLOWS
For the period from 28 June 2016 (incorporation) to 30 September 2017
For the
period
from
28 June
2016 to
30 September
2017
Notes GBP
------------------------------------------------------------- ------ --------------
Cash inflow from operating
activities
Loss before taxation (25,952,179)
Adjustments to reconcile
profit before tax to net
cash flows from operating
activities:
* Realised gain on financial assets designated at fair
value through profit or loss 7 (350,459)
* Unrealised loss on financial assets designated at
fair value through profit or loss 7 26,352,573
* Net gain on foreign exchange translation (4,483)
* Ordinary Share redemption costs payable 11 (9,000)
* Investment income (177,204)
Proceeds from sale of financial
assets designated at fair
value through profit or loss 7 4,266,897
Investment income received 177,204
Changes in working capital
Increase in other receivables
and prepayments 6 (21,685)
Increase in other payables 9 132,825
Decrease in provision (452,462)
------------------------------------------------------------- ------ --------------
Net cash from operating activities 3,962,027
------------------------------------------------------------- ------ --------------
Cash used in financing activities
Proceeds from Scheme of Reconstruction 2,358,000
Ordinary Share issue costs
paid 11 (26,885)
Ordinary Shares redeemed 11 (3,003,654)
Net cash used in financing
activities (672,539)
------------------------------------------------------------- ------ --------------
Net increase in cash and
cash equivalents in the period 3,289,488
------------------------------------------------------------- ------ --------------
Cash and cash equivalents -
at the beginning of the period
------------------------------------------------------------- ------ --------------
Effect of exchange rate fluctuations
on cash and cash equivalents 4,483
Cash and cash equivalents
at the end of the period 3,293,971
------------------------------------------------------------- ------ --------------
Supplemental disclosure of
non-cash flow information
Transfer of assets from Scheme
of Reconstruction (46,071,195)
Issue of Ordinary Shares
in specie 11 47,184,416
Provision 1,244,779
------------------------------------------------------------- ------ --------------
Cash proceeds from Scheme
of Reconstruction 2,358,000
------------------------------------------------------------- ------ --------------
The notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. General information
The Company was incorporated with limited liability in Guernsey under the Companies Law on 28 June 2016 with registered number 62195.
The Company is a closed-ended investment company registered with the Guernsey Financial Services Commission under the Registered Collective Investment Schemes Rules 2015 and the Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended. The Company is not authorised or regulated as a collective investment scheme by the Financial Conduct Authority.
The Company's Ordinary Shares were admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange on 26 September 2016.
The Company's registered address is BNP Paribas House, St Julian's Avenue, St Peter Port, Guernsey, GY1 1WA.
2. Accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied throughout the period presented.
2.1. Basis of preparation
(a) Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS") which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and interpretations issued by the International Financial Reporting Standards Interpretations Committee ("IFRIC") as approved by the International Accounting Standards Committee ("IASC") which remain in effect. The financial statements give a true and fair view of the Company's affairs and comply with the requirements of the Companies Law.
The financial statements have been prepared under a break-up basis. The Directors deem it appropriate to adopt a break-up basis in preparing the financial statements given the fact they believe that the investments held by the Company may be fully realised and the Company put into liquidation in the next 9 months from the date of approving the financial statements in line with the Company's Realisation Strategy. Please refer to note 11 for detail regarding the compulsory redemption mechanism and liquidation resolution.
As a result of the application of the break-up basis, the fair value of each investment has been adjusted as necessary to reflect any taxes and costs of disposal that would fall due were the investment to be disposed of as soon as possible but in an orderly manner (the recoverable amount). In addition, future foreseeable working capital requirements and costs expected to be paid on ultimate wind-up of the Company have been accounted for as part of a provision. Refer to note 10 for further detail.
(b) Basis of measurement
These financial statements have been prepared on a historical cost basis adjusted to take account of the revaluation of financial assets designated at fair value through profit or loss.
(c) Functional and presentation currency
The Company's functional currency is Sterling, which is the currency of the primary economic environment in which its shares trade. The financial statements are presented in Sterling.
(d) Critical accounting estimates and assumptions
The preparation of the financial statements in conformity with IFRS requires the Company to make estimates and assumptions that affect items reported in the Statement of Financial Position and Statement of Comprehensive Income and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these estimates are based on management's best knowledge of current facts, circumstances and, to some extent, future events and actions, the Company's actual results may ultimately differ from those estimates, possibly significantly.
Fair value of financial assets designated at fair value through profit or loss
Investments in unquoted companies are not actively traded, hence valuations are more uncertain than those of more widely traded securities. Unquoted investments are valued by using valuation techniques approved by the Directors and based on International Private Equity and Venture Capital ("IPEV") valuation guidelines and IFRS 13 - Fair Value Measurement ("IFRS 13"). Valuation techniques applied in determining the fair value of financial assets designated at fair value through profit or loss are subject to significant estimates and assumptions. Note 2.3 includes details of the valuation process and valuation techniques applied where an active market does not exist and note 7 includes sensitivity analysis of level 3 holdings as at 30 September 2017.
Provision
Given the Board believes that the investments held by the Company may be fully realised in 9 months from the date of approving the financial statements, the Board has adopted the break-up basis in preparing the financial statements.
Under this basis of accounting, the Company has recognised a provision. Note 2.8 outlines the judgements made by the Board having liaised with the Investment Manager in determining the provision.
(e) Critical accounting judgements
As explained in note 2.1(a) the Directors have used their judgement to determine that the Company's financial statements should be prepared on a break-up basis.
The other critical accounting judgement relates to the application of the investment entity exception in IFRS10 - Consolidated Financial Statements ("IFRS 10"). The Board has considered whether the Company is an investment Entity as defined in IFRS 10.
The Company is deemed to meet the definition of an Investment Entity because it satisfies the following conditions which are the main criteria for an Investment Entity:
i) The Company has obtained funds for the purpose of providing investors with investment management services;
ii) The Company's business purpose, which has been communicated directly to investors, is managing investments solely for returns from capital appreciation, investment income, or both; and
iii) The performance of investments is measured and evaluated on a fair value basis.
The Board has also considered the typical characteristics of an investment entity per IFRS 10 in assessing whether it meets the definition of an Investment Entity. These include:
-- having exposure to more than one investment; -- having multiple investors; -- the majority of investors are not related parties; and -- having ownership interests in the form of equity.
As the Company satisfies the criteria for an Investment Entity and has the typical characteristics of an Investment Entity, the Board considers that the Company is an Investment Entity. Accordingly the Company's subsidiary, EFR Guernsey Holding Limited, has not been consolidated but has been fair valued and accounted for at fair value through profit or loss.
Notes 7 and 8 provide further disclosures relating to the Company's interest in EFR Guernsey Holding Limited.
(f) New standards, amendments and interpretations
New standards, amendments and interpretations to existing standards that become effective in future accounting periods and have not been adopted by the Company;
Effective
for annual
International Financial Reporting Standards periods beginning
(IFRS) on or after
----------------------------------------------------------- -------------------
1 January
* IFRS 9 - Financial Instruments ("IFRS 9") 2018
1 January
* IFRS 15 - Revenue from Contracts with Customers 2018
("IFRS 15")
1 January
* Amendment to IAS 7 - Statement of Cash Flows - 2017
amendments as a result of the Disclosure initiative
("IAS 7")
IFRS 9 replaces IAS 39 - Financial Instruments: Recognition and Measurement
IFRS 9 introduces a new approach to the classification of financial assets which is driven by the business model in which the asset is held and their cash flow characteristics. A new business model was introduced which does allow certain financial assets to be categorised as "fair value through other comprehensive income" in certain circumstances. IFRS 9 carries forward the derecognition requirements of financial assets and liabilities from IAS 39.
The Company classifies its investments at fair value through profit or loss so the Board does not anticipate a significant impact on implementation; in any case, the Board believes that the Company will be wound up before the end of the first accounting period during which this standard is effective.
IFRS 15 - Revenue from Contracts with Customers
The new IFRS 15 standard requires entities to recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Directors believe that the application of IFRS 15 will not be applicable as the Company does not have any revenue as defined by IFRS 15.
Amendment to IAS 7 - Statement of Cash Flows - amendments as a result of the Disclosure initiative
IAS 7 introduces an additional disclosure that will enable users of financial statements to evaluate changes in liabilities arising from financing activities. This amendment is subject to endorsement by the EU.
The Directors believe that the application of the amendment to IAS 7 will not impact the financial statements.
2.2 Foreign currency translations
Foreign exchange gains and losses resulting from the settlement of transactions in foreign currencies and from the translation of monetary assets and liabilities at period-end exchange rates to Sterling are recognised in the Statement of Comprehensive Income as foreign exchange gains/losses.
Non-monetary items such as financial assets designated at fair value through profit or loss measured at fair value in a foreign currency, are translated using exchange rates at the Statement of Financial Position date when the fair value was determined. Effects of exchange rate changes on non-monetary items measured at fair value on a foreign currency are recorded as part of the fair value gain or loss.
2.3 Financial instruments
Financial assets
a) Classification
The Company classifies its investments as financial assets designated at fair value through profit or loss. These financial instruments are held for investment purposes. Financial assets also include cash and cash equivalents and other receivables which are measured at amortised cost using the effective interest rate method.
Financial assets designated at fair value through profit or loss
Financial assets designated at fair value through profit or loss are financial instruments whose performance is evaluated on a fair value basis in accordance with the Company's documented valuation methodology and investment strategy. The Company's policy requires the Investment Manager and the Board to evaluate the information about these financial assets on a fair value basis together with other related financial information.
b) Recognition, measurement and derecognition
Purchases and sales of investments are recognised on the trade date which is the date on which the Company commits to purchase or sell the investment. Financial assets designated at fair value through profit or loss are measured initially at fair value. Transaction costs are expensed as incurred and movements in fair value are recorded in the Statement of Comprehensive Income. Subsequent to initial recognition, all financial assets designated at fair value through profit or loss are measured at fair value adjusted to reflect costs of disposal because the Company's financial statements are prepared on a break-up basis. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership.
c) Fair value estimation
In accordance with IFRS 13 and IPEV guidelines, fair value is the amount deemed to be the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As the Company is a realisation vehicle with an intended life of two years from admission of its shares to trading, fair value of investments is adjusted to be the realisable value of the investments, net of taxes and other costs of disposal, were the investments in the portfolio to be realised as soon as possible but in an orderly fashion in the current market.
The Company's asset valuation methodology, which was outlined in the Company's Prospectus and is explained below, was designed to be consistent with the break-up basis of accounting that would be adopted for the preparation of the Company's financial statements. Fair value is measured by the Directors in accordance with the NAV methodology adopted by the Board which, in turn, reflects IFRS 13 and the IPEV guidelines published in December 2015, as appropriate for a Company with a limited life.
The valuation methodology adopted by the Board:
-- Uses the most widely recognised form of valuation applied by market participants as a basis for the valuation of each asset (quoted active market trading prices for listed investments, NAV valuations for funds, or payments on liquidation);
-- Adjusts this valuation to account for illiquidity or volatility considerations (the Company's investment in Lonestar, for example, is valued on a per share basis using the trailing five-day volume weighted average traded share price adjusted for factors likely to affect the amount that could be realised including the size of the holding relative to observable liquidity which the Board believes is a more reasonable estimate of the value under the break-up basis); and
-- Deducts estimated taxes and other material expenses that would fall due in managing each investment or on a disposal to derive a net realisable value measure for each investment.
d) Valuation process
The Directors are in ongoing communications with the Investment Manager to discuss valuation methodologies and techniques applied in assessing fair value. The Directors analyse the investment portfolio in terms of fair value hierarchy and consider the impact of general market and credit conditions and/or events which may impact the valuation of the investment portfolio.
For listed investments, fair value is based on recent bid prices adjusted as necessary to reflect any taxes and other material expenses estimated to fall due were the investment to be disposed of as soon as possible but in an orderly manner, in line with the break-up basis of accounting.
The Investment Manager is responsible for carrying out the fair market valuation of the unlisted investments of the Company and these are presented to the Directors for their approval and adoption. The valuation principles used in such methodology are based on IFRS 13 and IPEV guidelines and the following valuation methodologies:
i. investments in funds are valued at their net asset value, adjusted as necessary to reflect the fair value of the underlying investments held and any taxes and other expenses estimated to fall due were the investment to be disposed of as soon as possible but in an orderly manner;
ii. investments in bonds are valued at prices quoted by the brokers; and
iii. where a value is indicated by a material arm's length transaction with a third party in the shares of an investment or a comparable investment, this value may be considered representative of fair value adjusted as necessary to reflect any taxes and other expenses estimated to fall due were the investment to be disposed of as soon as possible but in an orderly manner.
However, if the Board considers that the basis of valuation is inappropriate for any particular reason, or generally, it may adopt such other valuation procedures as it considers reasonable in the circumstances.
Financial liabilities
Financial liabilities include trade payables and other payables which are held at amortised cost using the effective interest rate method. Financial liabilities are recognised initially at fair value, net of transaction costs incurred and are subsequently carried at amortised cost using the effective interest rate method. Financial liabilities are derecognised when the obligation specified in the contract is discharged, cancelled or expires.
2.4 Investment income, interest income and expenses
Interest income and expenses are recognised in the Statement of Comprehensive Income on an accruals basis using the effective interest rate method.
2.5 Operating expenses
Operating expenses are recognised on an accruals basis and are recognised in the Statement of Comprehensive Income.
2.6 Cash and cash equivalents
Cash includes cash at bank and cash equivalents are short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and are subject to an insignificant risk of change in value aside from movement in foreign exchange rates.
2.7 Segmental reporting
In accordance with IFRS 8 - "Operating Segments", the Board as a whole has been determined as constituting "the chief operating decision maker" of the Company. The Directors are of the opinion that the Company is engaged in one segment of business, being the investment business.
2.8 Provision
As the Company's financial statements are prepared on a break-up basis, the Board, in liaison with the Investment Manager, has recognised a provision. This provision was included in the pool of assets attributable to the Company, further to the Scheme of Reconstruction of EWPO, and included amounts to cover estimated liquidation costs (which will be incurred on wind-up of the Company) and the working capital requirements of the Company for a forward-looking period. These operational costs include Directors' fees, fees for third party service providers, professional fees, and other sundry operational expenses incurred as part of the ongoing activities of the Company.
Initially, the forward-looking period was for six months. During the year under review, the forward-looking period was extended to cover the expected remaining life of the Company and therefore the amount included in the provision for working capital requirements was increased to cover all estimated operational costs expected to be incurred until 26 September 2018. This provision is based on underlying agreements, historical financial information from the Company to date, and quotes from third party service providers. Refer to note 10 for further detail.
2.9 Share capital
Ordinary Shares are classified as equity in accordance with IAS 32 - "Financial Instruments: Presentation" as these instruments include no contractual obligation to deliver cash and the redemption mechanism is not mandatory. Costs directly attributable to the issue of new Ordinary Shares are shown in equity as a deduction from the proceeds.
3. Taxation
The Company has applied for and been granted exemption from liability to income tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 as amended by the Director of Income Tax in Guernsey for the current period. Exemption must be applied for annually and will be granted, subject to the payment of an annual fee, which is currently fixed at GBP1,200 per applicant, provided the Company qualifies under the applicable legislation for exemption. It is the intention of the Directors to conduct the affairs of the Company so as to ensure that it continues to qualify for exempt company status for the purposes of Guernsey taxation.
4. Operating expenses
For the
period
from
28 June
2016 to
30 September
2017
GBP
Legal and professional
fees 124,547
Administration fees 104,871
Directors' fees 76,183
Company secretariat fees 52,938
Audit fees 45,000
Non-audit fees - interim
review services 15,000
Registrar fees 23,493
Broker fees 25,308
Sundry expenses 83,779
Custody fees 10,207
Printing fees 20,483
Transaction fees 2,405
Total operating expenses 584,214
----------------------------- --------------
Investment Manager fee
On 22 August 2016, the Company signed an Investment Management Agreement with the Investment Manager. Under the Investment Management Agreement the Investment Manager has, subject to the overall supervision of the Board, responsibility for the day to day management of the Company's Realisation Strategy. The Investment Manager also has responsibility for advising the Company in relation to the strategic management of the Company's investment portfolio and monitoring the Company's funding requirements.
The Investment Manager is not entitled to any annual base management fee but is eligible to receive a performance fee of 15% of all Company distributable proceeds over the Performance Fee Initial Value (as defined below), subject to a compounding 10% hurdle (the "Performance Fee"). The Performance Fee is subject to a cap of 4% of the Company distributable proceeds (as detailed below) and will only be payable to the Investment Manager once Shareholders have received cash distributions of an amount equal to the Performance Fee Initial Value plus the hurdle.
The Performance Fee Initial Value will be the aggregate of the initial value of each asset (excluding Texas Energy Future Holdings Investments, the WoodFuels Investment and Bluewater Bio Holdings Limited (the "Nil Value Assets" at the time of EWPO's reconstruction) calculated as the higher of: (i) the original cost price to EWPO; or (ii) the holding value as at 26 September 2016 (the aggregate of all such valuations being the performance fee initial value). The Company distributable proceeds equals the amount distributed or available for distribution to Shareholders and any performance fee payable to the Investment Manager. The Investment Manager is not entitled to a Performance Fee in respect of the Nil Value Assets.
No fees were paid or payable to the Investment Manager during the period.
Administration fee
On 22 August 2016, the Company signed an agreement with BNP Paribas Securities Services S.C.A., Guernsey Branch, (the "Administrator") to provide fund administrative and company secretarial services to the Company. Under the administration agreement, the Administrator is entitled to a minimum annual fixed fee for fund administration services and company secretarial services. These fees are paid monthly in arrears. Ad hoc other administration services are chargeable on a time cost basis, and the Company reimburses the Administrator for any out of pocket expenses. Administration and company secretarial service fees payable as at 30 September 2017 were GBP17,523 and GBP6,949, respectively.
Broker fee
On 22 September 2016, the Company signed a Financial Advisory Agreement with Winterflood Securities Limited (the "Financial Adviser"), to provide corporate brokering and financial adviser services to the Company. Under the agreement, the Financial Adviser is entitled to a fee payable by the Company of GBP25,000 per annum payable half-yearly in arrears. Broker fees payable as at 30 September 2017 were GBP12,500.
Custody fee
On 22 August 2016, the Company signed a Global Custody Agreement between the Company and the Administrator, whereby the Company appointed the Administrator to carry out custodian services. In its role as custodian, the Administrator is entitled to a minimum fixed fee payable monthly by the Company in arrears, and to transaction fees. Custody fees payable as at 30 September 2017 were GBP1,666.
5. Directors' fees and interests
The Directors of the Company are remunerated for their services with a fee of GBP22,500 each per annum. The Chairman of the Company and Chairman of the Audit Committee receive an additional GBP5,000 and GBP2,500, respectively, for their services. Directors' fees payable as at 30 September 2017 were GBP18,750.
As at the date of approval of these financial statements, Martin Nègre held 232,716 Ordinary Shares in the Company. No other Director holds shares in the Company.
No pension contributions were payable in respect of any of the Directors.
6. Other receivables and prepayments
30 September
2017
GBP
Intercompany balances - EFR Guernsey
Holding Limited 16,931
Prepayments 4,754
Total other receivables
and prepayments 21,685
----------------------------------------- -------------
The intercompany balance was provided to fund administration and company secretarial operating expenses, paid on behalf of EFR Guernsey Holding Limited, by the Company, for the period from 22 August 2016 to 30 September 2017. The Directors believe that these balances are fully recoverable.
7. Financial assets designated at fair value through profit or loss
30 September
2017
GBP
Financial assets designated
at fair value through
profit or loss 15,802,184
-------------------------------- -------------
The investments of the Company were transferred from EWPO pursuant to the Scheme of Reconstruction in accordance with the EF Realisation Transfer Agreement. As at 30 September 2017, the Company held 100% of the issued share capital of EFR Guernsey Holding Limited (referred to as the "EFR Guernsey equity interest") and a portfolio of one debt security and equity investments in companies. The fair value of the EFR Guernsey equity interest is based primarily on the share price of Lonestar.
Fair value hierarchy
IFRS 13 requires an analysis of investments valued at fair value based on the reliability and significance of information used to measure their fair value. The Company categorises its financial assets according to the following fair value hierarchy detailed in IFRS 13, that reflects the significance of the inputs used in determining their fair values:
Level 1: Investments valued using quoted market prices, unadjusted, in active markets for identical assets are included in Level 1. As at 30 September the Company held no Level 1 investments.
Level 2: Investments that are valued using observable inputs, i.e. quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs, are classified as Level 2. Level 2 investments include the Company's investment, via EFR Guernsey Holding Limited, in Lonestar.
Level 3: Investments classified as Level 3 have unobservable inputs and these include the Company's unquoted investments (equity, equity-related and debt instruments of unquoted companies). Level 3 investments include Bluewater Bio Holdings Ltd (held at nil value), Eastern Australia Irrigation Ltd, Energy Future Holdings (equity and bond; held at nil value), Oro Negro (equity; held at nil value), TRF Feeder Fund (Cayman) LP, TRF LLC and the WoodFuels investment (held at nil value). These types of securities are generally subject to higher valuation uncertainties and liquidity risks than securities listed or traded on a regulated market.
Level 3 fair values are determined by the Directors using valuation methodologies in accordance with the IPEV Guidelines and as detailed in note 2.3. Significant inputs include investment cost, the value of the most recent capital raising, and the adjusted net asset value of funds. Carrying values are reviewed and assessed regularly by the Board, in conjunction with the Investment Manager, and approved in the Audit Committee meetings.
30 September
Level Level Level 2017
1 2 3 Total
GBP GBP GBP GBP
Debt instruments - - - -
Equity instruments - 8,113,517 7,688,667 15,802,184
------------------------ ------- ---------- ---------- -------------
Total financial
assets designated
at fair value through
profit or loss - 8,113,517 7,688,667 15,802,184
------------------------ ------- ---------- ---------- -------------
Financial assets designated at fair value through profit or loss reconciliation
The following table shows a reconciliation of all movements in the fair value of financial assets categorised within Level 1 to 3 between the beginning and the end of the reporting period.
30 September
Level Level Level 2017
1 2 3 Total
GBP GBP GBP GBP
---------------------------- ---------- ------------- ------------ -------------
Opening valuation - - - -
---------------------------- ---------- ------------- ------------ -------------
Movements in the period:
Transfers during the
period from EWPO Scheme
of Reconstruction 409,861 35,520,648 10,140,686 46,071,195
Sales - proceeds during
the period (514,646) (1,200,000) (2,552,251) (4,266,897)
Realised gain on financial
assets designated
at fair value through
profit or loss 104,785 210,000 35,674 350,459
Unrealised gain /
(loss) on financial
assets designated
at fair value through
profit or loss - (26,417,131) 64,558 (26,352,573)
Closing valuation - 8,113,517 7,688,667 15,802,184
Total unrealised gains
/ (loss) on financial
assets for the period
ended 30 September
2017 - (26,417,131) 64,558 (26,352,573)
---------------------------- ---------- ------------- ------------ -------------
During the period ended 30 September 2017, there were no reclassifications between levels of the fair value hierarchy.
Sensitivity of Level 3 holdings to unobservable inputs
At 30 September 2017, the Company's Level 3 investments accounted for 42.3% of its net assets. Investments accounting for a majority of these Level 3 assets were in funds managed by a third-party manager which values the funds at an independent expert's estimate of fair value. The Directors value these investments at net asset value, adjusted as necessary to recognise the illiquidity of the investments and any expected costs associated with their sale. Direct investments in the equity, equity-related or fixed-income securities of unquoted companies accounted for a minority of these Level 3 assets at 30 September 2017. The Directors valued these investments according to the valuation methodology.
The Directors may consider adjustments to these valuations. The range of possible adjustments could be large, depending on the circumstances. The Directors would consider the recommendation of the Investment Manager. The valuation methodologies applied for the Level 3 assets are based on independent experts' and Directors' assessments of fair value, indicative bids for the investments, and last transactions in the equity or comparable equity. The unobservable inputs used are discounts applied for illiquidity which range from 0% to 100%. For the purposes of sensitivity analysis, a 25 percentage point adjustment in the discount for the Level 3 assets could be considered reasonable. A 25 percentage point adjustment in the discount for the Level 3 assets would result in a movement, up or down, in the Company's net assets of 10.6%.
Please refer to note 2.3 for detail regarding valuation methodologies used.
EFR Guernsey Holding Limited equity interest
The Company holds a 100% equity interest in EFR Guernsey Holding Limited, a company incorporated in Guernsey on the 21 June 2016, which holds an equity investment in Lonestar. Ordinary shares in EFR Guernsey Holding Limited have no par value and are redeemable. The Board does not expect income from EFR Guernsey Holding Limited to exceed significantly the anticipated annual running costs of EFR Guernsey Holding Limited and therefore does not expect that EFR Guernsey Holding Limited will pay significant, or any, dividends although it reserves the right to do so.
On 22 December 2016, Lonestar raised $79 million by issuing new ordinary shares. EF Realisation did not participate in this equity issue and as a result its interest in Lonestar's ordinary shares was diluted from 52.0% to 19.1%.
On 30 May 2017, Lonestar announced that it had entered into definitive agreements with unaffiliated parties to acquire oil and gas properties in the Eagle Ford shale play in Texas, USA. The financing of this transaction diluted the Company's interest in Lonestar from 19.1% to 17.0%, reducing the Company's influence over Lonestar's strategic, operating and financial policies.
As at 30 September 2017, the Directors determined that as the Company had a less than 20% economic interest in Lonestar and controlled only two of Lonestar's nine member board, it did not have significant influence over Lonestar's strategic, operating and financial policies.
As at 30 September 2017, EFR Guernsey Holding Limited held 4,174,259 shares in Lonestar. Lonestar operates in the United States and constitutes 44.6% of the Company's net assets (included as a Level 2 asset in the table below).
The Lonestar investment is valued in the Company's NAV and financial statements at its trailing five-day volume weighted average share price as reported to the NASDAQ Exchange, adjusted as necessary for any expected costs associated with its sale and adjusted for factors likely to affect the amount that could be realised including the size of the holding relative to observable liquidity.
8. Financial risk management
The Board sets out its investment objectives and policies in the Strategic Report. The Board and the Company's Investment Manager consider and review the principal risks inherent in managing the Company's assets and these are detailed below.
The Company's activities expose it to a variety of financial risks: market risk (including price risk, interest rate risk and foreign exchange risk), credit risk and liquidity risk.
8.1a Price risk
The Company's investment portfolio is subject to fluctuations, volatility and the vagaries of market prices. As at 30 September 2017, the Company's investments consisted of a portfolio of equity investments and debt securities in companies which operate in the United States, Australia, the UK and Mexico. As the Company has an investment in in a security which is listed on recognised stock exchange - but which is illiquid - and in unquoted securities, it is regularly exposed to market risk and the value of the Company's portfolio can fluctuate, particularly over the short-term, in response to developments in financial markets.
The performance of the EFR Guernsey Holding Limited equity interest is substantially driven by the market price of Lonestar. Lonestar is a public company whose shares are listed on the NASDAQ Exchange in the US. Lonestar acquires and develops shale reserves in Texas in the United States, sells the oil, gas and gas liquids produced and is exposed to the commodity price, operating, environmental and other risks associated with the oil and gas industry. The Company values Lonestar in its NAV and financial statements at its trailing 5-day volume weighted average share price as reported to the NASDAQ Exchange less the estimated costs (taxes and other expenses) that may be associated with the realisation of the investment and adjusted for factors likely to affect the amount that could be realised including the size of the holding relative to observable liquidity. The Board believes that this valuation approach provides the best representation of the realisable value of Lonestar, taking into consideration the history of activity of the Lonestar shares and their illiquidity.
Investments that are not traded in an active market, as detailed in note 7, are subject to significant judgements, estimates or assumptions when determining their fair value. The valuation provided at period end is only an estimate of value and is not a precise measure of realisable value. Ultimate realisation of the market value of an asset depends to a great extent on economic and other conditions beyond the control of the Company, and valuations do not necessarily represent the price at which an investment can be sold or that the assets comprising the investment portfolio are saleable readily or otherwise. As a result the estimated fair values may differ from the values that would have been realised had a ready market existed and the difference could be material.
Any significant event which affects a specific industry sector in which the investment portfolio has a significant holding could materially and adversely affect the performance of the Company. The Board and Investment Manager actively monitor market prices and performance of investments throughout the financial period and meet regularly in order to consider the Realisation Strategy. Please refer to the Investment Manager report for further detail regarding the Company's investment portfolio.
8.1b Interest rate risk
Interest rate risk is the risk that the fair value of financial instruments and related income from these financial instruments and cash and cash equivalents will fluctuate due to changes in market interest rates. The Company is only exposed to interest rate risk through the fair value of investment in a fixed interest security and cash and cash equivalents. Any reasonable change in interest rates will have an immaterial impact and therefore no sensitivity analysis has been provided.
8.1c Foreign currency risk
Foreign currency risk is the risk that the values of the Company's assets and liabilities are adversely affected by changes in the values of foreign currencies by reference to the Company's functional currency. The value of the Company's assets and the total return earned by the Company's Shareholders can be significantly affected by foreign exchange movements as most of the Company's assets are denominated in currencies other than Sterling, the Company's functional currency.
The Investment Manager monitors the Company's exposure to foreign currencies and reports to the Board on a regular basis. The Investment Manager measures the risk to the Company of the foreign currency exposure by considering the effect on the Company's NAV of a movement in the exchange rate to which the Company's assets, liabilities, income and expenses are exposed.
Although the Company does not pursue a policy of hedging currency exposure on its investments, it may do so from time to time, depending on market conditions. The Company may enter into currency hedging transactions for the purposes of efficient portfolio management, including matching the currency of expected liabilities. During the period ended 30 September 2017, the Company did not use financial instruments to manage or mitigate the foreign currency exposure.
The following table sets out the Company's total foreign currency exposure and the net exposure to foreign currencies of the Company assets and liabilities as at 30 September 2017:
Currency exposure 2017
Total net
assets
attributable
to ordinary
Shareholders
GBP
------------------- --------------
United States
Dollar 14,319,810
---------------------- --------------
Australian
Dollar 3,055,773
---------------------- --------------
The following analysis demonstrates the impact of a 10% movement in the exchange rate of Sterling against the United States Dollar and Australian Dollar on the net assets attributable to ordinary Shareholders, with all other variables held constant.
Effect on
net assets
attributable
Change in exchange to ordinary
rate Shareholders
30 September 2017 Increase/(decrease) Increase/(decrease)
GBP
----------------------- --------------------- --------------------
Sterling versus (1,431,981)
United States Dollar 10% / (10%)(1) / 1,431,981
------------------------ --------------------- --------------------
Sterling versus (305,577)
Australian Dollar 10% / (10%)(1) / 305,577
------------------------ --------------------- --------------------
(1) 10% has been assessed at 30 September 2017 as a reasonably possible movement in currency rate sensitivity over the period. It is not intended to illustrate a remote, worst case or stress test scenario.
As at 30 September 2017, the Company was exposed to foreign currency risk exposure on its investment position in EFR Guernsey Holding Limited equity interest holding. EFR Guernsey Holding Limited does not use financial instruments to manage or mitigate foreign currency exposure.
8.2 Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Board, with input from the Investment Manager, monitors the credit quality of all counterparties on a periodic basis to mitigate credit risk. The Company's credit risk exposure as at the Statement of Financial Position date was GBP3,293,971, represented by cash and cash equivalents. As at 30 September 2017, there were no items past due or impaired.
The financial assets designated at fair value through profit or loss are held by BNP Paribas Securities Services S.C.A, Guernsey Branch, the Company's Administrator and custodian, in a segregated account. In the event of bankruptcy or insolvency of the Administrator, the Company's rights with respect to the securities held by the custodian may be delayed or limited. All cash is placed with BNP Paribas Securities Services S.C.A, a wholly owned subsidiary of BNP Paribas Securities Services S.A. which is publicly traded and a constituent of the S&P 500 Index with a long term credit rating of Aa3 from Standard & Poor's.
8.3 Liquidity risk
Liquidity risk is the risk that the Company will not be able to settle its liabilities as they fall due. The Company may encounter difficulties in realising assets in accordance with the Realisation Strategy or otherwise raising funds to meet financial commitments as and when these fall due for payment. The liquidity profile of the Company's investment portfolio is such that Shareholders may have to wait a considerable time before receiving all of their distributions pursuant to the Realisation Strategy.
Liquidity risk is monitored on an ongoing basis by the Board and Investment Manager so as to ensure that the Company maintains sufficient working capital in cash or near cash form so as to be able to meet the Company's ongoing requirements to pay accounts payable and accrued expenses. In addition, the Company's liquidity management policy involves projecting cash flows and considering the level of liquid assets necessary to meet these over the expected lifespan of the Company.
The table below shows the due dates of other payables as at 30 September 2017:
Maturity analysis of financial liabilities
Less than 3 to 12 More than
3 months months 1 year Total
GBP GBP GBP GBP
Financial liabilities
Other payables (132,825) - - (132,825)
Total financial
liabilities (132,825) - - (132,825)
----------------------- ---------- -------- ---------- ----------
In accordance with Article 23(4)(a) and (b) of the AIFMD Directive, the Board in its capacity as the AIFM has assessed that the financial assets designated at fair value through profit or loss held by the Company are not subject to any special liquidity arrangements and that the AIF has no new arrangements in place for managing liquidity, other than liquidity policies outlined above.
Capital risk management
The Board defines capital as financial resources available to the Company. The Company's capital as at 30 September 2017 comprises its share capital and retained deficit at a total of GBP18,192,698. The Company's objectives when managing capital are to:
- safeguard the Company's ability to fulfil its investment objective; - provide returns for Shareholders; and - maintain sufficient working capital.
The Board monitors the capital adequacy of the Company on an ongoing basis and the Company's objectives regarding capital management have been met. The Company has no imposed capital requirements.
Given the Company had raised approximately GBP4.36 million, made up of GBP4.26 million in realised proceeds (including GBP0.1 million from a corporate action involving the Company's holding in Energy Future Holdings) from the realisation of various portfolio assets and GBP0.1 million investment income (net of expenses), the Board determined that GBP3.0m of the proceeds would be returned to Shareholders on or shortly after the 29 September 2017 via a compulsory share redemption, as it deemed this to be the most efficient method of returning capital to Shareholders.
9. Other payables
30 September
2017
GBP
Audit fees 45,000
Printing fees 20,278
Directors' fees 18,750
Administration fees 17,523
Broker fees 12,500
Company Secretariat
fees 6,949
Sundry other payables 5,735
Registrar fees 4,424
Custody fees 1,666
Total other payables 132,825
-------------------------- -------------
10. Provision
The Company's net assets at 30 September 2016 included a provision of GBP1,244,779, further to EWPO's Scheme of Reconstruction; this provision has not, therefore, been recognised in the Statement of Comprehensive Income. This provision was made up of GBP732,092 in relation to a future funding commitment and GBP512,687 in relation to forward looking operating costs. During the year, the future funding commitment provision of GBP732,092 in relation to one investment was reversed due to changes in conditions. In addition the provision for forward looking costs increased by GBP279,630, from GBP512,687 to GBP792,317 as the forward looking period was extended from 6 months to the expected remaining life of the Company. These changes were recognised in the Statement of Comprehensive Income during the period ended 30 September 2017.
The provision as at 30 September 2017, may differ from the actual amount incurred on ultimate wind-up of the Company.
11. Share capital
Authorised
The authorised share capital of the Company is represented by an unlimited number of redeemable Ordinary Shares at no par value.
Allotted, called up and fully-paid
Ordinary Shares Number of Share
shares capital
GBP
---------------------------- --- -------------- -------------
Total issued share capital
as at 28 June 2016 - -
---------------------------- --- -------------- -------------
Ordinary Shares issued
during the period 52,473,634 47,184,416
Ordinary Share issue costs - (26,885)
Ordinary Shares redeemed
during the period (7,496,025) (6,736,584)
Total issued share capital
as at 30 September 2017 44,977,609 40,420,947
---------------------------------- ------------- -------------
Ordinary Shares
On incorporation, the Company issued one Ordinary Share at a price of GBP1 to Ecofin Limited. On 22 September 2016, the Company, pursuant to the Scheme of Reconstruction under section 110 of the Insolvency Act 1986 (as amended) of EWPO, issued a further 52,473,633 Ordinary Shares at a price of GBP0.8992 per Ordinary Share, raising gross proceeds of GBP47,184,416 (net proceeds of GBP47,157,531). The newly issued 52,473,633 Ordinary Shares were admitted to trading on the Specialist Fund Segment of the Main Market of the London Stock Exchange with effect from 26 September 2016. The costs and expenses of the initial placing of Ordinary Shares attributable to the Company pursuant to the Scheme of Reconstruction were paid for by EWPO, with the exception of listing fees of GBP26,885 which were paid for by the Company. On 23 September 2016, the Company redeemed the one Ordinary Share that was issued to Ecofin Limited for a consideration of GBP1.
On 15 September 2017, 7,496,024 Ordinary Shares were redeemed at a price of 40.07p per Ordinary Share (after allowing for costs of redemption of GBP9,000). This GBP3.0 million return of capital, equivalent to 5.7p per Ordinary Share, was implemented pursuant to the Company's compulsory redemption mechanism, such that one in every seven Ordinary Shares was redeemed, for cancellation, on a pro rata basis. As at 30 September 2017, the Company had 44,977,609 Ordinary Shares in issue.
Each holder of Ordinary Shares has equal rights and is entitled to attend and vote at all general meetings that are held by the Company. Each holder is also entitled to receive payment of a dividend should the Company declare such a dividend payment. Any dividends payable by the Company will be distributed to the holders of the Company's Ordinary Shares, and on the winding-up of the Company or other return of capital (other than by way of a repurchase or redemption of shares in accordance with the provisions of the amended and restated Articles of Incorporation (the "Articles") and the Companies Law), the Company's surplus assets, after payment of all creditors, will be distributed among the holders of the Ordinary Shares.
Although it is not expected that the Company will receive any income during the realisation period, to the extent that it does receive income, the Board intends to distribute to Shareholders all of the income received by the Company, net of reasonable expenses, during the realisation period (subject to compliance with the Companies Law). The Board intends to consider with its advisers the most efficient method of returning capital to Shareholders during the realisation period as the Company investment portfolio is realised, including the compulsory redemption mechanism as detailed below.
No dividends have been declared or paid during the period.
Compulsory redemption mechanism
The Board may operate the compulsory redemption mechanism set out below as the Company's investments are realised, however it will seek to adopt the most efficient method of returning capital to Shareholders at the time which may include a tender offer and/or other capital return schemes.
The Articles provide that the Company may make compulsory redemptions of Ordinary Shares, with the timing and size of such redemptions being determined at the sole discretion of the Directors, reflecting the available cash at the relevant time, subject to any retention made for working capital. Shares will be redeemed from all Shareholders pro rata to their existing holdings of Ordinary Shares on the relevant record date for any given redemption being a date chosen at the Directors' absolute discretion, as determined by the Directors to be in the best interests of Shareholders as a whole (the "Redemption Date").
When the Directors exercise their discretion to redeem compulsorily a given percentage of the Ordinary Shares in issue, the Directors will make a redemption announcement in advance of the relevant Redemption Date. The redemption announcement will include the following details:
-- the aggregate amount to be distributed to Shareholders; -- the Redemption Date;
-- the percentage of the Ordinary Shares to be redeemed (pro rata as between Shareholders on the redemption record date being the close of business on the relevant Redemption Date or as otherwise set out in the relevant redemption announcement (the "Redemption Record Date"));
-- the Redemption Price per Ordinary Share (being the price per Ordinary Share at which Ordinary Shares will be redeemed on a particular Redemption Date as determined by the Directors (the "Redemption Price")); and
-- any additional information that the Board deems necessary in connection with the redemption.
Redemptions of Ordinary Shares will become effective on each Redemption Date. In determining the timing of any Redemption Date, the Directors will take into account the amount of cash available for payment of redemption proceeds and the costs associated with such redemption and the working capital requirements of the Company. The Ordinary Shares redeemed will be the relevant percentage (being a percentage of the shares to be redeemed by the Company on a given Redemption Date as determined by the Directors in their ultimate discretion), of the Ordinary Shares registered in the names of Shareholders on the Redemption Record Date. Shareholders will receive the Redemption Price per Ordinary Share in respect of each of their Ordinary Shares redeemed compulsorily.
Please refer to 'Financial Highlights' section for details of implementation of the Company's first compulsory redemption mechanism.
Liquidation resolution
Subject to any extension of the period of time granted by special resolution of the Company (described below), the Directors shall convene a general meeting as soon as reasonably practicable after the realisation of all of the realisable investments held by the Company as decided by the Board in their discretion, and in any event no later than the second anniversary of Admission (or such later date as determined in accordance with the Articles). At such general meeting, the Directors shall propose an ordinary resolution that the Company should be voluntarily wound up (the Liquidation Resolution).
Every Shareholder present in person or by proxy voting in favour of the Liquidation Resolution shall have such number of votes as are required for the Liquidation Resolution to be duly passed.
With effect from the passing of the Liquidation Resolution, a liquidator will be appointed and the Company shall cease to carry on business except in so far as may be expedient for the beneficial winding up the Company. At any time prior to the general meeting at which the Liquidation Resolution is to be proposed, the Company may by special resolution extend the deadline for proposing such liquidation period for a period of one year and thereafter may extend such deadline for additional periods of one year in each case by a further special resolution.
12. Basic and diluted loss per Ordinary Share
For the
period
from
28 June
2016 to
30 September
2017
GBP
Total comprehensive loss
for the period (25,952,179)
Weighted average number of
Ordinary Shares during the
period 41,946,334
Basic and diluted loss per
Ordinary Share (0.6187)
The weighted average number of Ordinary Shares during the period is calculated on the basis that one Ordinary Share was in issue during the period from incorporation to 21 September 2016, 52,473,634 Ordinary Shares were in issue on the 22 September 2016, and 52,473,633 Ordinary Shares were in issue during the period from 23 September 2016 to 18 September 2017 and 44,977,609 Ordinary Shares were in issue during the period 18 September 2017 to 30 September 2017.
Using the weighted average number of Ordinary Shares in issue for the period 30 September 2016, being the first NAV date, to 30 September 2017 (51,572,472), the basic and diluted loss per Ordinary Share for the period was GBP(0.5032).
13. Net asset value per share
30 September
2017
GBP
Net asset
value 18,192,698
Number of Ordinary
Shares at period end 44,977,609
Net asset value per
Ordinary Share 0.4045
14. Related party disclosure
The Investment Manager is deemed a related party. Please refer to note 5 for further detail. No investment manager performance fee was payable as at 30 September 2017.
The Directors, who are related parties, are entitled to remuneration for their services. Please refer to note 5 for further detail. Martin Nègre was a director of EWPO until September 2016 and is currently a non-executive director of funds managed by the Investment Manager. Please refer to 'Board Members' section for further details.
For Director fees payable as at 30 September 2017, please refer to note 9.
EFR Guernsey Holding Limited is deemed a related party. As at 30 September 2017, EFR Guernsey Holding Limited owed GBP16,931 to the Company.
15. Reconciliation of NAV to published NAV
30 September
2017
NAV per
share
GBP
Published NAV 0.3936
------------------------------------------------- -------------
Reversal of provision relating to future
funding commitment and fair value adjustment 0.0109
NAV attributable
to Shareholders 0.4045
------------------------------------------------- -------------
16. Material events after the reporting date
There were no events which occurred subsequent to the period end until the date of approval of the financial statements which would have a material impact on the financial statements of the Company as at 30 September 2017, except as set out below:
During the period 30 September 2017 to 17 January 2018, the NAV per share rose from 40.45p to 48.77p as a result of an increase in the fair value of Lonestar and despite adverse movements in foreign currency translation.
17. Controlling party
In the Directors' opinion, the Company has no ultimate controlling party.
USEFUL INFORMATION FOR SHAREHOLDERS
Alternative performance measures disclosure
In accordance with ESMA Guidelines on Alternative Performance Measures ("APMs") the Board has considered what APMs are included in the Annual Financial Report and financial statements which require further clarification. An APM is defined as a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. APMs included in the financial statements, which are unaudited and outside the scope of IFRS, are deemed to be as follows:
NAV total return
The NAV total return measures how the NAV per share has performed over a period of time, taking into account both capital returns and dividends paid to shareholders. The Company quotes NAV total return as a percentage change from the period from 13 September to 30 September 2016, being the period from Scheme of Reconstruction of EWPO and first valuation point; 13 September 2016 to 30 September 2017, being the period from Scheme of Reconstruction of EWPO and period end date; and 30 September 2016 to 30 September 2017, being the period from first NAV point to period end date.
No dividends were paid to Shareholders during the period from 13 September to 30 September 2017. Please refer to 'Financial Highlights and Performance Summary' section for NAV total return percentages over periods referred to above.
NAV to market price discount
The NAV per share is the value of all the company's assets, less any liabilities it has, divided by the number of Ordinary Shares. However, because the Company shares are traded on the London Stock Exchange's Specialist Fund Segment, the share price may be higher or lower than the NAV. The difference is known as a discount or premium. The Company's discount to NAV is calculated by expressing the difference between the period end Ordinary Share price (bid price) and the period end NAV per share as a percentage of the NAV per share.
At 30 September 2017, EF Realisation's Ordinary Shares traded at 26.50p. The shares traded at 34.5% discount to the NAV per share of 40.45p.
Ongoing charges
The ongoing charges ratio for the year ended 30 September 2017 was 1.32%. The AIC's methodology for calculating an ongoing charges ratio uses the annualised ongoing charges (GBP394,974) divided by the average NAV during the period (GBP29,981,041).
Calculating ongoing charges
The ongoing charges are based on actual costs incurred in the year excluding any non-recurring fees in accordance with the AIC methodology. Expense items have been excluded in the calculation of the ongoing charges figure when they are not deemed to meet the following AIC definition:
"Ongoing charges are those expenses of a type which are likely to recur in the foreseeable future, whether charged to capital or revenue, and which relate to the operation of the investment company as a collective fund, excluding the costs of acquisition/disposal of investments, financing charges and gains/losses arising on investments. Ongoing charges are based on costs incurred in the year as being the best estimate of future costs."
Please refer below for ongoing charges reconciliation:
GBP
Total operating expenses for the
year: 584,214
-------------------------------------------- ----------
Expenses excluded from the calculation
of ongoing charges figures, in accordance
with the definition set out above:
Legal and professional fees (122,447)
Sundry expenses (64,388)
Transaction fees (2,405)
Total ongoing charges for the year 394,974
-------------------------------------------- ----------
Calculating an average NAV
The AIC's methodology for calculating average NAV for the purposes of the ongoing charges figure is to use the average of NAV at each NAV calculation date. On this basis, the average NAV figure has been calculated using the monthly NAVs over the year ended 30 September 2017.
Company information
Legal advisers to the
Board members Company
Martin Nègre (Chairman) (as to Guernsey law)
Robert Sinclair (Chairman Carey Olsen
of the Audit Committee) P.O. Box 98
Nick Tostevin (Chairman Carey House
of the Management Engagement Les Banques
Committee) St Peter Port
Guernsey
All Directors were appointed GY1 4BZ
on the 28 June 2016
with the exception of
Martin Nègre who
was appointed on the
20 July 2016.
Registered Office Custodian
BNP Paribas Securities
BNP Paribas House Services S.C.A., Guernsey
St Julian's Avenue Branch
BNP Paribas House
St Julian's Avenue
St Peter Port St Peter Port
Guernsey Guernsey
GY1 1WA GY1 1WA
Registrar Independent Auditor
Link Market Services Ernst & Young LLP
(Guernsey) Limited (formerly Royal Chambers
Capita Registrars (Guernsey) St Julian's Avenue
Limited) St Peter Port
Mont Crevelt House Guernsey
Bulwer Avenue GY1 4AF
St. Sampson
Guernsey
GY2 4LH
Administrator and Company
Secretary Investment Manager
BNP Paribas Securities
Services S.C.A., Guernsey Ecofin Limited
Branch Burdett House
BNP Paribas House 15 Buckingham Street
St Julian's Avenue London
St Peter Port WC2N 6DU
Guernsey
GY1 1WA
BNP Paribas Securities Ecofin Limited is regulated
Services S.C.A. Guernsey by the Financial Conduct
Branch is regulated Authority and the Securities
by the Guernsey Financial and Exchange Commission.
Services Commission.
Financial Adviser UK Transfer Agent
Link Asset Services
Winterflood Securities (formerly Capita Registrars
Limited Limited (trading as
The Atrium Building Capita Asset Services)
Cannon Bridge House The Registry
25 Dowgate Hill 34 Beckenham Road
London Beckenham
EC4R 2GA Kent
BR3 4TU
Legal advisers to the
Company
(as to English law)
Norton Rose Fulbright
LLP
3 More London Riverside
London
SE1 2AQ
Enquiries:
BNP Paribas Securities Services S.C.A., Guernsey Branch 01481 750822
Company Secretary
Sarah Hendry
A copy of the Company's Annual Report and Audited Consolidated Financial Statements will be posted to the shareholders of the Company. Copies are also available from the Company Secretary, BNP Paribas Securities Services S.C.A., Guernsey Branch at BNP Paribas House, St Julian's Avenue, St Peter Port, Guernsey, GY1 1WA, or on the Investment Manager's website www.ecofin.co.uk.
Neither the contents of the relevant sections of the Investment Manager's website nor the contents of any website accessible from hyperlinks on the Investment Manager's website (or any other website) is incorporated into, or forms part of, this announcement.
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACSFKBDKOBKDADB
(END) Dow Jones Newswires
January 22, 2018 12:09 ET (17:09 GMT)
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