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SWEF Starwood European Real Estate Finance Limited

92.40
-1.60 (-1.70%)
Last Updated: 15:11:47
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Starwood European Real Estate Finance Limited LSE:SWEF London Ordinary Share GG00BRC3R375 ORD NPV
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  -1.60 -1.70% 92.40 92.60 94.60 94.60 92.40 93.00 8,012 15:11:47
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Unit Inv Tr, Closed-end Mgmt 39.02M 29.36M 0.0742 12.75 374.23M

SWEF: Half Yearly Report 30 June 2019 (870861)

10/09/2019 7:00am

UK Regulatory


 
 Starwood European Real Estate Finance Ltd (SWEF) 
SWEF: Half Yearly Report 30 June 2019 
 
10-Sep-2019 / 07:00 GMT/BST 
Dissemination of a Regulatory Announcement that contains inside information 
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
       Starwood European Real Estate Finance Limited 
 
     Interim Financial Report and Unaudited Condensed Consolidated Financial 
       Statements 
 
       for the six-month period from 1 January 2019 to 30 June 2019 
 
       Overview 
 
       Corporate Summary 
 
       PRINCIPAL ACTIVITIES AND INVESTMENT OBJECTIVE 
 
   The investment objective of Starwood European Real Estate Finance Limited 
 (the "Company"), together with its wholly owned subsidiaries Starfin Public 
     Holdco 1 Limited, Starfin Public Holdco 2 Limited, Starfin Lux S.à.r.l, 
  Starfin Lux 3 S.à.r.l and Starfin Lux 4 S.à.r.l (collectively the "Group") 
     is to provide its shareholders with regular dividends and an attractive 
       total return while limiting downside risk, through the origination, 
     execution, acquisition and servicing of a diversified portfolio of real 
estate debt investments (including debt instruments) in the UK and the wider 
 European Union's internal market, focusing on Northern and Southern Europe. 
 Whilst investment opportunities in the secondary market are considered, the 
       Group's main focus is to originate direct primary real estate debt 
       investments. 
 
The Group seeks to limit downside risk by focusing on secured debt with both 
     quality collateral and contractual protection. The typical loan term is 
       between three and seven years. 
 
    The Group aims to be appropriately diversified by geography, real estate 
sector, loan type and counterparty. The Group pursues investments across the 
  commercial real estate debt asset class through senior loans, subordinated 
   loans and mezzanine loans, bridge loans, selected loan-on-loan financings 
       and other debt instruments. 
 
       STRUCTURE 
 
   The Company was incorporated with limited liability in Guernsey under the 
       Companies (Guernsey) Law, 2008, as amended, on 9 November 2012 with 
  registered number 55836, and has been authorised by the Guernsey Financial 
       Services Commission ("GFSC") as a registered closed-ended investment 
   company. The Company's ordinary shares were first admitted to the premium 
   segment of the UK Listing Authority's Official List and to trading on the 
      Main Market of the London Stock Exchange as part of its initial public 
  offering which completed on 17 December 2012. Further issues took place in 
March 2013, April 2013, July 2015, September 2015, August 2016 and May 2019. 
The issued capital during the period comprises the Company's Ordinary Shares 
       denominated in Sterling. 
 
   The Company makes its investments through Starfin Lux S.à.r.l (indirectly 
   wholly-owned via a 100% shareholding in Starfin Public Holdco 1 Limited), 
         Starfin Lux 3 S.à.r.l and Starfin Lux 4 S.à.r.l (both indirectly 
   wholly-owned via a 100% shareholding in Starfin Public Holdco 2 Limited). 
 
   The Investment Manager is Starwood European Finance Partners Limited (the 
   "Investment Manager"), a company incorporated in Guernsey with registered 
number 55819 and regulated by the GFSC. The Investment Manager has appointed 
Starwood Capital Europe Advisers, LLP (the "Investment Adviser"), an English 
     limited liability partnership authorised and regulated by the Financial 
  Conduct Authority, to provide investment advice, pursuant to an Investment 
       Advisory Agreement. 
 
       Chairman's Statement 
 
       Dear Shareholder, 
 
       I am delighted to present the Interim Financial Report and Unaudited 
Condensed Consolidated Financial Statements of Starwood European Real Estate 
 Finance Limited (the "Group") for the period from 1 January 2019 to 30 June 
       2019. 
 
       INVESTMENT MOMENTUM 
 
 The table below summarises the new commitments made and repayments received 
       in the first six months of 2015 to 2019. 
 
                New Repayments & Net Increase in 
        Commitments Amortisation     Commitments 
H1 2015      GBP31.3m     (GBP21.9m)           GBP9.4m 
H1 2016      GBP98.9m     (GBP92.1m)           GBP6.8m 
H1 2017     GBP115.5m     (GBP85.2m)          GBP30.3m 
H1 2018     GBP147.5m     (GBP74.1m)          GBP73.4m 
H1 2019      GBP49.9m     (GBP45.9m)           GBP4.0m 
 
 The net increase in commitments during the first half of 2019, whilst still 
  positive, has been significantly lower than the last two years. The reason 
 for this is seen to be one of timing of transactions rather than an overall 
       reduction in activity for the reasons explained below. 
 
    ? As we have reported in previous years, the first quarter is frequently 
  quiet in the real estate market and we have only tended to see high levels 
  of activity in the first quarter when deals which were in execution during 
   the previous year were then delayed. This year, no deals rolled over from 
       2018 and the first quarter was relatively subdued as a result. 
 
  ? The Group has a number of transactions under review and two transactions 
       in execution which it hopes to close in the third quarter. If both 
transactions close, this would mean that the level of commitments made would 
       be similar to the first half of 2018. 
 
  The Group also received a relatively low amount of repayments in the first 
   half of 2019. However, since the end of the second quarter, the following 
       repayments have been received: 
 
  ? Mixed Use Development, UK - GBP8.8 million amortisation following the sale 
       of one of the properties in line with the business plan. 
 
? Industrial Europe - EUR26.3 million amortisation following the sale of one 
       of the properties. 
 
   ? Hotel, Barcelona, Spain - full repayment of EUR46 million following the 
       sale of the hotel. 
 
   With these repayments factored in, the repayment percentage for the first 
   seven months of the year is approximately 27 per cent of the loan book at 
the beginning of the year. In a normal year, we expect 30-40 per cent of the 
    portfolio to repay on average but some years may be materially higher or 
 lower than the average. It is difficult to accurately predict the repayment 
    intention of borrowers as they execute their business plans, but we will 
 continue to closely monitor this throughout the second half in order to try 
       to minimise any potential cash drag from repayments. 
 
       NAV AND SHARE PRICE PERFORMANCE 
 
The Group's performance has been stable. The Company's shares have generally 
traded at a premium to its Net Asset Value, which averaged 2.6 per cent over 
  the past six months. Over the first half of this financial year, and after 
   the payment of dividends of 3.25 pence per share, the Company's Net Asset 
Value per share has increased modestly from 102.66 pence to 102.82 pence per 
       share. 
 
  Towards the end of the first half, the Company's shares traded for a short 
      period of time at a small discount but, subsequent to that period, the 
 shares returned to trade at a small premium to NAV. The Board will continue 
       to monitor the price rating of the Company's shares to NAV. 
 
       OUTLOOK 
 
 The Investment Adviser has a number of opportunities currently under review 
and the Company will continue to update Shareholders by way of the quarterly 
       fact sheets and investment updates when deals are completed. 
 
     The Company continues to target a dividend at an annualised rate of 6.5 
     pence per Ordinary Share and has declared a dividend of 1.625 pence per 
 Ordinary Share (6.5 pence annualised) for each of the first two quarters of 
       2019. 
 
    The United Kingdom's imminent departure from the European Union, with or 
  without an agreement may represent a potential threat to the UK economy as 
  well as wider Europe. On a cyclical view, national economies across Europe 
 appear to be heading at best towards lower growth and in some cases towards 
recession. The potential impact of Brexit could have a further destabilising 
       effect. 
 
      To some extent the impact of an unsatisfactory UK exit from the EU has 
   already been priced into markets and forecasts, but significant headwinds 
     could arise should there be an unstructured settlement. It is extremely 
       difficult in the circumstances to anticipate the potential impact on 
  markets, so your Board is keeping a particularly watchful eye on the macro 
       position. 
 
       GOING CONCERN 
 
      Under the UK Corporate Governance Code and applicable regulations, the 
Directors are required to satisfy themselves that it is reasonable to assume 
       that the Group is a going concern. 
 
   The Directors have undertaken a rigorous review of the Group's ability to 
continue as a going concern including a review of the ongoing cash flows and 
 the level of cash balances as of the reporting date as well as forecasts of 
 future cash flows. After making enquiries of the Investment Manager and the 
      Administrator and having reassessed the principal risks, the Directors 
 considered it appropriate to adopt the going concern basis of accounting in 
 preparing the Interim Financial Report and Unaudited Condensed Consolidated 
       Financial Statements. 
 
       BOARD COMPOSITION AND DIVERSITY 
 
 The Board previously mentioned in the 2018 annual report that it is mindful 
    of the need to plan for succession and to implement it in a constructive 
       fashion that supports and builds on a cohesive Board. In view of the 
       approaching 9th year anniversary of the Company's IPO, the retirement 
process for the existing Directors continues to be on track and as currently 
envisaged, is anticipated to commence at the AGM of the Company in May 2020. 
 
       The Board will keep this succession plan under review and monitor its 
       progress with a particular focus on ensuring over time that each new 
   Director is equipped with the necessary skills, experience and knowledge. 
The Board believes in the value and importance of diversity in the boardroom 
 and it continues to consider the recommendations of the Davies Report which 
       will be a key factor in its succession planning. 
 
       On behalf of the Board, I would like to close by thanking my fellow 
 Shareholders for their commitment and I look forward to updating you on the 
       Group's progress early next year. 
 
       Stephen Smith 
 
       Chairman 
 
       9 September 2019 
 
       Investment Manager's Report 
 
       CONTINUED INVESTMENT DEPLOYMENT 
 
     As at 30 June 2019, the Group had investments and commitments of GBP478.9 
       million as follows: 
 
                         Sterling equivalent Sterling equivalent 
                                  balance(1)            unfunded 
                                                   commitment(1) 
           Hospitals, UK              GBP25.0m                   - 
  Mixed Use Development,              GBP11.1m               GBP1.2m 
           South East UK 
          Regional Hotel              GBP45.9m                   - 
           Portfolio, UK 
 Credit Linked Notes, UK              GBP21.8m                   - 
             Real Estate 
 Hotel & Residential, UK              GBP39.9m                   - 
        Office, Scotland               GBP4.3m               GBP0.7m 
    Total Sterling Loans             GBP148.0m               GBP1.9m 
      Logistics, Dublin,              GBP13.0m                   - 
                 Ireland 
 Hotel, Barcelona, Spain              GBP41.3m                   - 
   Industrial Portfolio,              GBP37.0m                   - 
     Central and Eastern 
                  Europe 
 Three Shopping Centres,              GBP33.0m               GBP6.7m 
                   Spain 
  Shopping Centre, Spain              GBP15.2m                   - 
  Hotel, Dublin, Ireland              GBP53.8m                   - 
    Residential, Dublin,               GBP2.0m                   - 
                 Ireland 
   Office, Paris, France              GBP14.3m                   - 
            Hotel, Spain              GBP26.2m              GBP22.4m 
  Office & Hotel, Madrid              GBP16.6m               GBP0.9m 
Mixed Portfolio, Central              GBP46.6m                   - 
     and Northern Europe 
        Total Euro Loans             GBP299.0m              GBP30.0m 
         Total Portfolio             GBP447.0m              GBP31.9m 
 
      (1) Euro balances translated to sterling at period-end exchange rates. 
 
Between 1 January 2019 to 30 June 2019, the following significant investment 
       activity occurred (included in the table above): 
 
       NEW LOAN: OFFICE, SCOTLAND: 
 
  On 24 April 2019 the Group committed to provide a GBP5 million whole loan on 
        an office in Scotland of which GBP4.3 million has been funded to date. 
 
       NEW LOAN: MIXED PORTFOLIO, CENTRAL AND NORTHERN EUROPE: 
 
On 10 May 2019 the Group committed to participate in the funding of a EUR104 
 million mezzanine loan secured by a diversified portfolio of assets located 
       in the Netherlands, Germany and Finland. Starwood Property Trust, Inc 
  (through a wholly owned subsidiary) is participating in 50 per cent of the 
mezzanine loan amount, with the Group funding the balance amounting to a net 
   commitment of EUR52 million. The portfolio is comprised of 165 assets and 
 provides strong diversification in terms of tenant base, location and asset 
class. The loan has a term of 3 years with two, 1-year extension options and 
   the Group expects to earn an attractive risk-adjusted return in line with 
       its stated investment strategy. 
 
       REPAYMENT: VARDE PARTNERS MIXED PORTFOLIO, UK: 
 
        The remaining balance of GBP1.0 million was repaid at the January 2019 
 interest payment date following completion of the borrower's business plan. 
 
       REPAYMENT: STUDENT ACCOMMODATION, DUBLIN, IRELAND: 
 
 The loan of EUR10.6 million was repaid on 1 March 2019 following successful 
       completion of the borrower's business plan. 
 
       FINAL REPAYMENT: SCHOOL, DUBLIN, IRELAND: 
 
  On 8 May 2019 the Group received full repayment of EUR18.85 million on the 
     loan to an Irish School following completion of the borrower's business 
       plan. 
 
During the period the Group continued to receive unscheduled amortisation on 
       other loans as borrowers continue to execute their business plans, in 
       particular on the following loans: 
 
        ? Mixed Use Development, South East UK - GBP3.1 million 
 
       ? Industrial Portfolio, Central and Eastern Europe - EUR9.4 million 
 
       ? Residential, Dublin, Ireland - EUR7.5 million 
 
        ? Hotel & Residential, UK - GBP1.3 million 
 
        The Group also advanced GBP14.6 million to borrowers to which it has 
       outstanding commitments. 
 
       PORTFOLIO STATISTICS 
 
     As at 30 June 2019, the portfolio was invested in line with the Group's 
    investment policy. The key portfolio statistics are as summarised below. 
 
                                 Number of investments        17 
Percentage of portfolio currently invested in floating     81.8% 
                                            rate loans 
    Invested Loan Portfolio unlevered annualised total      7.2% 
                                             return(1) 
      Invested Loan Portfolio levered annualised total      7.4% 
                                             return(2) 
  Weighted average portfolio LTV - to Group first GBP(3)     23.0% 
   Weighted average portfolio LTV - to Group last GBP(3)     64.7% 
      Average loan term (stated maturity at inception) 4.0 years 
                           Average remaining loan term 2.8 years 
                                       Net Asset Value   GBP424.9m 
        Amount drawn under Revolving Credit Facilities  (GBP45.9m) 
                          (excluding accrued interest) 
             Loans advanced (including accrued income)   GBP428.6m 
 Financial assets held at fair value through profit or    GBP21.9m 
            loss (including associated accrued income) 
                                                  Cash    GBP28.0m 
    Other net assets/ (liabilities) (including hedges)   (GBP7.7m) 
                     Origination Fees - first 6 months     GBP0.4m 
                     Origination Fees - last 12 months     GBP0.8m 
                      Management Fees - first 6 months     GBP1.4m 
                      Management Fees - last 12 months     GBP2.9m 
 
       (1) The unlevered annualised total return is calculated on amounts 
       outstanding at the reporting date, excluding undrawn commitments, and 
  assuming all drawn loans are outstanding for the full contractual term. 14 
 of the loans are floating rate (partially or in whole and some with floors) 
 and returns are based on an assumed profile for future interbank rates, but 
 the actual rate received may be higher or lower. Calculated only on amounts 
 funded at the reporting date and excluding committed amounts (but including 
   commitment fees) and excluding uninvested cash. The calculation is stated 
      after deducting the origination fee payable to the Investment Manager. 
 
  (2) The levered annualised total return is calculated as per the unlevered 
   return but takes into account the amount of net leverage in the Group and 
       the cost of that leverage at current LIBOR/EURIBOR. 
 
(3) LTV to Group last GBP means the percentage which the total loan drawn less 
       any amortisation received to date (when aggregated with any other 
     indebtedness ranking alongside and/or senior to it) bears to the market 
       value determined by the last formal lender valuation received by the 
reporting date. LTV to first Group GBP means the starting point of the loan to 
 value range of the loans drawn (when aggregated with any other indebtedness 
ranking senior to it). For development projects the calculation includes the 
 total facility available and is calculated against the assumed market value 
       on completion of the relevant project. 
 
 Reported returns have fallen from the year end from 7.4 per cent to 7.2 per 
     cent unlevered, and from 8.0 per cent to 7.4 per cent levered. We would 
 expect the levered returns to increase as the loans in execution are funded 
       and further leverage is used for the loan portfolio. 
 
       In addition to this, the simplified way in which the annual return is 
  presented does lead to the returns being an estimate at any point in time. 
       The following items enhance the actual returns achieved: 
 
   ? In the quoted return, we amortise all one-off fees (such as arrangement 
  and exit fees) over the contractual life of the loan which is currently an 
average of four years for the portfolio. However, it has been our experience 
    that loans tend to repay after approximately 2.5 years and as such these 
       fees are actually amortised over a shorter period. 
 
 ? Many loans benefit from prepayment provisions which mean that if they are 
  repaid before the end of the protected period, additional interest or fees 
     become due. As we quote the return based on the contractual life of the 
       loan, these returns cannot be forecast in the return. 
 
     ? The quoted return excludes the impact of any foreign exchange gains / 
 losses on Euro loans. We do not forecast this as the loans are often repaid 
   early and the gain / loss may be different than this once hedge positions 
       are settled. 
 
 The above three upsides to quoted returns are not incorporated in the gross 
      levered yield of 7.4 per cent as they are not guaranteed to occur, are 
difficult to forecast accurately and to incorporate them could overstate the 
     expected return. However, these have and we expect these to continue to 
provide an enhancement to the quoted levels of return going forward although 
   the levels of this enhancement may vary depending on when the loans repay 
     versus contractual maturity, the level of prepayment protection and the 
   shape of the Sterling-Euro forward curve. Over the life of the Company to 
    date, we have experienced, on average, an enhancement of 0.63 percentage 
points from prepayments and one-off fees when loans repay, and we expect the 
       pick up on foreign exchange to be in excess of 1 percentage point. 
 
       Finally, the Group maintains a dividend reserve to ensure that it can 
maintain a stable dividend during periods where modest leverage or cash drag 
can temporarily lower returns due to the timing of new loans and repayments. 
 
      The maturity profile of investments as at 30 June 2019 is shown below. 
 
    Remaining years to contractual Principal value % of invested 
                       maturity(1)        of loans     portfolio 
                      0 to 1 years          GBP50.1m         11.2% 
                      1 to 2 years         GBP116.7m         26.1% 
                      2 to 3 years         GBP111.0m         24.8% 
                      3 to 5 years         GBP144.2m         32.3% 
                     5 to 10 years          GBP25.0m          5.6% 
 
     (1) Excludes any permitted extensions. Note that borrowers may elect to 
       repay loans before contractual maturity. 
 
       The Board considers that the Group is engaged in a single segment of 
     business, being the provision of a diversified portfolio of real estate 
       backed loans. The analysis presented in this report is presented to 
       demonstrate the level of diversification achieved within that single 
 segment. The Board does not believe that the Group's investments constitute 
       separate operating segments. 
 
       HEDGING POLICY 
 
The Group has the majority of its investments currently denominated in Euros 
   (although this can change over time) and is a Sterling denominated group. 
       The Group is therefore subject to the risk that exchange rates move 
  unfavourably and that a) foreign exchange losses on the loan principal are 
  incurred and b) that interest payments received are lower than anticipated 
    when converted back to Sterling and therefore returns are lower than the 
       underwritten returns. 
 
 The Group manages this risk by entering into forward contracts to hedge the 
currency risk. All non-Sterling loan principal is hedged back to Sterling to 
     the maturity date of the loan (unless it was funded using the revolving 
     credit facilities in which case it will have a natural hedge). Interest 
payments are generally hedged for the period for which prepayment protection 
   is in place. However, the risk remains that loans are repaid earlier than 
       anticipated and forward contracts need to be broken early. In these 
  circumstances the forward curve may have moved since the forward contracts 
    were placed which can impact the rate received. In addition, if the loan 
       repays after the prepayment protection, interest after the prepayment 
protected period may be received at a lower rate than anticipated leading to 
  lower returns for that period. Conversely the rate could have improved and 
       returns may increase. 
 
       MARKET SUMMARY AND INVESTMENT OUTLOOK 
 
2019 has seen slower volumes in the commercial real estate market in Europe. 
 According to BNP Real Estate total investment volumes for the first half of 
2019 were EUR101.7billion which is 13 per cent lower than in the same period 
in 2018. The average hides different situations across the different cities. 
  In London, Brexit uncertainties have brought volumes down by more than the 
average at 39 per cent lower than last year with less stock being brought to 
market. Germany's big markets outside of Berlin were down significantly with 
 Munich, Frankfurt and Hamburg down 46 per cent, 34 per cent and 49 per cent 
respectively. Hot markets included Milan, Berlin and Madrid, where investors 
  are anticipating tight markets and strong rental growth potential, were up 
       56 per cent, 104 per cent and 67 per cent respectively. 
 
     Increased expectations of further rate cuts and quantitative easing has 
 driven asset pricing across the board. Investors were already expecting the 
ECB to supply fresh monetary stimulus to help alleviate the ongoing economic 
   stress within the region and the nomination of the International Monetary 
       Fund's Christine Lagarde to be the next ECB president has raised 
  expectations of continued loosening monetary policy. The EUR interest rate 
      curve has significantly flattened so now the 5-year swap is lower than 
3-month EURIBOR at -63 basis points in the middle of August. Government bond 
  yields have continued to push down with all European 2-year sovereign debt 
  now yielding negative returns and with German 10-year bonds having yielded 
    as low as -0.7 per cent in August. Even peripheral European debt such as 
 Portugal and Greece is trading at significantly lower yields than in recent 
     years. Greek 10-year bonds have priced almost as tight as at 2 per cent 
   having been almost 20 per cent in 2016 and Portugal has traded at 0.1 per 
   cent at points during August versus over 4.4 per cent just 18 months ago. 
 
 With low asset yields we have seen increased formation of lower priced debt 
 funds and direct investing by insurance companies and pension funds in more 
  vanilla senior commercial real estate debt as an alternative for sovereign 
  and corporate bonds. Insurance companies such as Axa and Allianz have been 
 expanding their senior commercial real estate lending strategies and we are 
   seeing some new players with similar mandates emerging. We have also seen 
     good pricing on the two recent CMBS issuances with Morgan Stanley's Eos 
(European Loan Conduit No. 35) pricing at a blended 137 bps over EURIBOR for 
 a 58.7 per cent Note to Value ("NTV") and Goldman and CA-CIB's cold storage 
       securitisation pricing at 184 bps over LIBOR for a 65.2 per cent NTV. 
 
For other types of alternate lenders there have been a mixed bag of results. 
       Lendy, a peer to peer lender making small property loans was put into 
 administration in May after issues on its loan book including a reported 66 
     per cent of loans past due as of late 2018. Funding Circle, which makes 
 small business loans, recently reported the tougher lending criteria it was 
      imposing would halve its expected revenue growth for 2019. The FCA has 
   increased regulation in the space with investors no longer be able to put 
  more than 10 per cent of their investable assets into peer to peer lending 
 and another part of the new rules is the introduction of an appropriateness 
    test for investors that considers a client's knowledge and experience of 
peer to peer lending. In better news, Lendinvest which provides a variety of 
    property finance has successfully completed its first securitisation. We 
have also seen varied fortunes for the challenger banks. Oaknorth appears to 
    be doing well having grown its total loan book 160 per cent in a year to 
      GBP2.2 billion and with new commercial development loans as large as GBP60 
million reported. Meanwhile fellow challenger bank Metro has had issues with 
       its loan book having announced it had been miscategorising the 
   risk-weightings for a large number of its loans when working out how much 
    capital it needed to protect against losses, which has led to reports of 
weakened investor and customer confidence and to a new capital raise in May. 
 
  On the UK residential side, London peaked in 2014 and according to Savills 
      as a whole the prime central London market has fallen 19.4 per cent in 
  sterling terms between June 2014 and the end of the first quarter of 2019. 
     The second quarter saw a return to positive house price appreciation in 
      London with the Nationwide reporting a 0.6 per cent quarter on quarter 
     growth. Across the UK market as a whole, the RICs residential survey is 
     reporting a more stable picture. In July the survey reported the second 
  consecutive month of increased new buyer enquiries, however, sales volumes 
are down slightly in July, having been up slightly in June. For the parts of 
       the market that attract high proportions of international buyers the 
  continued devaluation of sterling means that foreign buyers denominated in 
    USD, EUR and RMB currencies are viewing the all-in discount from peak as 
       especially attractive in their domestic currency. 
 
 As we have commented in recent factsheets, the market for UK retail debt is 
 yet to settle. The refinancing of the GBP750 million Westfield Stratford CMBS 
    has gone well given the quality of the asset and a low LTV and high debt 
       yield. The new bonds were issued in July and priced at Gilts+100bps. 
According to Debtwire the market may be tested again soon with Intu reported 
to be looking at a refinancing of GBP1 billion of debt secured by the Trafford 
 Centre and a potential CMBS of a GBP150 million Deutsche bank loan secured by 
 the intu Derby shopping centre. It will be an interesting test of sentiment 
  to the sector to follow the progress of the refinancing of these very high 
       profile assets over the coming months. 
 
   The UK continues to suffer from Brexit uncertainties with a clear message 
   from Boris Johnson around his intention to come out of Europe on the 31st 
      October 2019 with or without a deal which raises the probability of an 
    intentional or unintentional no deal Brexit. This outcome would no doubt 
 create increased challenges and uncertainties around many aspects of the UK 
market including real estate and real estate debt. In a down market for real 
     estate, real estate credit will benefit from the equity cushion between 
       starting values of the underlying collateral and the lending basis. 
       Uncertainties or shocks may also create openings for the Company to 
       opportunistically make new investments on a good risk / return basis. 
 
       RELATED PARTY TRANSACTIONS 
 
   Related party disclosures are given in note 13 to the Unaudited Condensed 
       Consolidated Financial Statements. 
 
       FORWARD LOOKING STATEMENTS 
 
 Certain statements in this interim report are forward-looking. Although the 
     Group believes that the expectations reflected in these forward-looking 
 statements are reasonable, it can give no assurance that these expectations 
 will prove to have been correct. Because these statements involve risks and 
 uncertainties, actual results may differ materially from those expressed or 
       implied by these forward-looking statements. 
 
 The Group undertakes no obligation to update any forward-looking statements 
       whether as a result of new information, future events or otherwise. 
 
       Starwood European Finance Partners Limited 
 
       Investment Manager 
 
       9 September 2019 
 
       Principal Risks 
 
PRINCIPAL RISKS FOR THE REMAINING SIX MONTHS OF THE YEAR TO 31 DECEMBER 2019 
 
The Directors note the introduction of the 2018 UK Corporate Governance Code 
       (the "2018 Code") which applies to the Group for its financial year 
beginning 1 January 2019. As part of the 2018 Code, the Board is required to 
    consider the Group's impact on environmental, social and governance (the 
  "ESG") factors. The Board will report on its compliance with the 2018 Code 
       in the 2019 Annual Report. 
 
       The principal risks assessed by the Board relating to the Group were 
disclosed in the Annual Report and Audited Consolidated Financial Statements 
   for the period to 31 December 2018. The Board and Investment Manager have 
      reassessed the principal risks and do not consider these risks to have 
   changed. Therefore, the following are the principal risks assessed by the 
 Board and the Investment Manager as relating to the Group for the remaining 
       six months of the year to 31 December 2019: 
 
  ? The Group's targeted returns are based on estimates and assumptions that 
   are inherently subject to significant business and economic uncertainties 
    and contingencies, and the actual rate of return may be materially lower 
   than the targeted returns. In addition, the pace of investment has in the 
     past and may in the future be slower than expected, or principal may be 
 repaid earlier than anticipated, causing the return on affected investments 
       to be less than expected. In addition, if repayments are not promptly 
 re-invested this may result in cash drag which may lower portfolio returns. 
 As a result, the level of dividends to be paid by the Company may fluctuate 
       and there is no guarantee that any such dividends will be paid. As a 
       consequence, the shares may trade at a discount to NAV per share and 
       Shareholders may be unable to realise their investments through the 
       secondary market at NAV per share; 
 
 ? The Group is subject to the risk that the loan income and income from the 
      cash and cash equivalents will fluctuate due to movements in interbank 
       rates; 
 
    ? The Group has the majority of its investments currently denominated in 
  Euros and is subject to the risk that the exchange rates move unfavourably 
  and that a) foreign exchange losses on the loan principal are incurred and 
b) that interest payments received are lower than anticipated when converted 
      back to Sterling and therefore returns are lower than the underwritten 
  returns. All non-Sterling loan principal is hedged back to Sterling to the 
     maturity date of the loan (except where drawn in Euros on the revolving 
   credit facilities). Interest payments are hedged for the period for which 
 prepayment protection is in place. However, the risk remains that loans are 
     repaid earlier than anticipated and forward contracts need to be broken 
    early. In these circumstances the forward curve may have moved since the 
       forward contracts were placed which can impact the rate received. In 
addition, if the loan repays after the prepayment protection, interest after 
       the prepayment protected period may be received at a lower rate than 
   anticipated leading to lower returns for that period. Conversely the rate 
      could have improved, and returns may increase. As a consequence of the 
    hedging strategy employed as outlined above, the Group is subject to the 
risk that it will need to post cash collateral against the mark to market on 
   foreign exchange hedges which could lead to liquidity issues or leave the 
       Group unable to hedge new non-Sterling investments; 
 
  ? The Group's investments are comprised principally of debt investments in 
  the UK, and the wider European Union's internal market and it is therefore 
       exposed to economic movements and changes in these markets. Any 
deterioration in the global, UK or European economy could have a significant 
 adverse effect on the activities of the Group and may result in significant 
       loan defaults or impairments. In the event of a default the Group is 
generally entitled to enforce security, but the process may be expensive and 
 lengthy, and the outcome is dependent on sufficient capital being available 
 to meet the borrower's obligations. Some of the investments made would rank 
      behind senior debt tranches for repayment in the event that a borrower 
 defaults, with the consequence of greater risk of partial or total loss. In 
       addition, repayment of loans could be subject to the available of 
  refinancing options, including the availability of senior and subordinated 
       debt and is also subject to the underlying value of the real estate 
       collateral at the date of maturity; 
 
  ? The United Kingdom's imminent departure from the European Union, with or 
    without an agreement, represents a potential threat to the UK economy as 
  well as wider Europe. On a cyclical view, national economies across Europe 
 appear to be heading at best towards lower growth and in some cases towards 
recession. The potential impact of Brexit could have a further destabilising 
e?ect. To some extent the potential impact of an unsatisfactory UK exit from 
  the EU has already been priced into markets and forecasts, but significant 
       headwinds could arise should there be an unstructured settlement; and 
 
       ? The Group is subject to the risk that a borrower could be unable or 
   unwilling to meet a commitment that it has entered into with the Group as 
       outlined above. As a consequence of this, the Group could breach the 
       covenants of its revolving credit facilities and fall into default. 
 
       Governance 
 
       Board of Directors 
 
       STEPHEN SMITH | Non-executive Chairman - Chairman of the Board 
 
Stephen is Chairman of the The PRS REIT which currently trades on the SFS of 
the London Stock Exchange. He is also Chairman of AEW UK Long Lease REIT plc 
which trades on the Main Market of the London Stock Exchange. Previously, he 
  was the Chief Investment Officer of British Land Company PLC, the FTSE 100 
       real estate investment trust from January 2010 to March 2013 with 
     responsibility for the group's property and investment strategy. He was 
formerly Global Head of Asset Management and Transactions at AXA Real Estate 
 Investment Managers, where he was responsible for the asset management of a 
       portfolio of more than EUR40 billion on behalf of life funds, listed 
property vehicles, unit linked and closed end funds. Prior to joining AXA in 
1999 he was Managing Director at Sun Life Properties for five years. Stephen 
       is a UK resident. 
 
  JONATHAN BRIDEL | Non-executive Director - Management Engagement Committee 
       Chairman 
 
    Jonathan is currently a non-executive Chairman or director of listed and 
      unlisted companies comprised mainly of investment funds and investment 
   managers. These include The Renewables Infrastructure Group Limited (FTSE 
250), Sequoia Economic Infrastructure Income Fund Limited (FTSE 250) and SME 
    Credit Realisation Fund Limited (formerly Funding Circle SME Income Fund 
  Limited) which are listed on the main market of the London Stock Exchange, 
  DP Aircraft I Limited and Fair Oaks Income Fund Limited. He was previously 
      Managing Director of Royal Bank of Canada's investment business in the 
 Channel Islands. Prior to this, after working at Price Waterhouse Corporate 
    Finance in London, Jonathan served in senior management positions in the 
       British Isles and Australia in banking, specialising in credit and in 
       private businesses as Chief Financial Officer. Graduating from the 
  University of Durham with a degree of Master of Business Administration in 
    1988, Jonathan also holds qualifications from the Institute of Chartered 
       Accountants in England and Wales where he is a Fellow, the Chartered 
   Institute of Marketing and the Australian Institute of Company Directors. 
 Jonathan is a Chartered Marketer and a member of the Chartered Institute of 
Marketing, a Chartered Director and Fellow of the Institute of Directors and 
a Chartered Fellow of the Chartered Institute for Securities and Investment. 
       Jonathan is a resident of Guernsey. 
 
       JOHN WHITTLE | Non-executive Director - Audit Committee Chairman 
 
   John is a Fellow of the Institute of Chartered Accountants in England and 
 Wales and holds the Institute of Directors Diploma in Company Direction. He 
    is a non-executive Director of International Public Partnerships Limited 
  (FTSE 250), India Capital Growth Fund Limited (listed on main market LSE), 
   Globalworth Real Estate Investments Limited, GLI Finance Ltd and Aberdeen 
  Frontier Markets Investment Company Limited (all listed on AIM), Chenavari 
    Toro Income Fund Limited (listed on SFS), and also acts as non-executive 
      Director to several other Guernsey investment funds. He was previously 
       Finance Director of Close Fund Services, a large independent fund 
    administrator, where he successfully initiated a restructuring of client 
financial reporting services and was a key member of the business transition 
team. Prior to moving to Guernsey he was at PriceWaterhouse in London before 
      embarking on a career in business services, predominantly telecoms. He 
      co-led the business turnaround of Talkland International (which became 
  Vodafone Retail) and was directly responsible for the strategic shift into 
      retail distribution and its subsequent implementation; he subsequently 
     worked on the private equity acquisition of Ora Telecom. John is also a 
       resident of Guernsey. 
 
       Statement of Directors' Responsibilities 
 
     To the best of their knowledge, the Directors of Starwood European Real 
       Estate Finance Limited confirm that: 
 
      1. The Unaudited Condensed Consolidated Financial Statements have been 
prepared in accordance with IAS 34, "Interim Financial Reporting" as adopted 
       by the European Union as required by DTR 4.2.4 R; and 
 
 2. The Interim Financial Report, comprising of the Chairman's Statement and 
       the Investment Manager's Report, meets the requirements of an interim 
    management report and includes a fair review of information required by: 
 
       (i) DTR 4.2.7R of the UK Disclosure and Transparency Rules, being an 
      indication of important events that have occurred during the first six 
   months and their impact on the Unaudited Condensed Consolidated Financial 
  Statements, and a description of the principal risks and uncertainties for 
       the remaining six months of the year; and 
 
  (ii) DTR 4.2.8R of the UK Disclosure and Transparency Rules, being related 
   party transactions that have taken place in the first six months and that 
       have materially affected the financial position or performance of the 
   Company during that period, and any material changes in the related party 
       transactions disclosed in the last Annual Report. 
 
       By order of the Board 
 
       For Starwood European Real Estate Finance Limited 
 
   Stephen Smith     John Whittle 
        Chairman         Director 
9 September 2019 9 September 2019 
 
       Financial Statements 
 
  Independent Review Report to Starwood European Real Estate Finance Limited 
 
       OUR CONCLUSION 
 
  We have reviewed the accompanying condensed consolidated interim financial 
information of Starwood European Real Estate Finance Limited (the "Company") 
and its subsidiaries (together the "Group") as of 30 June 2019. Based on our 
review, nothing has come to our attention that causes us to believe that the 
    accompanying condensed consolidated interim financial information is not 
       prepared, in all material respects, in accordance with International 
    Accounting Standard 34, 'Interim Financial Reporting', as adopted by the 
European Union and the Disclosure Guidance and Transparency Rules sourcebook 
       of the United Kingdom's Financial Conduct Authority. 
 
       WHAT WE HAVE REVIEWED 
 
       The accompanying condensed consolidated interim financial information 
       comprise: 
 
? The unaudited condensed consolidated statement of financial position as of 
       30 June 2019; 
 
? the unaudited condensed consolidated statement of comprehensive income for 
       the six-month period then ended; 
 
   ? the unaudited condensed consolidated statement of changes in equity for 
       the six-month period then ended; 
 
      ? the unaudited condensed consolidated statement of cash flows for the 
       six-month period then ended; and 
 
    ? the notes, comprising a summary of significant accounting policies and 
       other explanatory information. 
 
  The condensed consolidated interim financial information has been prepared 
 in accordance with International Accounting Standard 34, 'Interim Financial 
Reporting', as adopted by the European Union and the Disclosure Guidance and 
     Transparency Rules sourcebook of the United Kingdom's Financial Conduct 
       Authority. 
 
       OUR RESPONSIBILITIES AND THOSE OF THE DIRECTORS 
 
  The Directors are responsible for the preparation and presentation of this 
 condensed consolidated interim financial information in accordance with the 
       Disclosure Guidance and Transparency Rules sourcebook of the United 
       Kingdom's Financial Conduct Authority. 
 
Our responsibility is to express a conclusion on this condensed consolidated 
   interim financial information based on our review. This report, including 
      the conclusion, has been prepared for and only for the Company for the 
    purpose of complying with the Disclosure Guidance and Transparency Rules 
   sourcebook of the United Kingdom's Financial Conduct Authority and for no 
       other purpose. We do not, in giving this conclusion, accept or assume 
    responsibility for any other purpose or to any other person to whom this 
 report is shown or into whose hands it may come save where expressly agreed 
       by our prior consent in writing. 
 
       SCOPE OF REVIEW 
 
 We conducted our review in accordance with International Standard on Review 
 Engagements 2410, 'Review of interim financial information performed by the 
 independent auditor of the entity' issued by the International Auditing and 
       Assurance Standards Board. A review of interim financial information 
consists of making inquiries, primarily of persons responsible for financial 
and accounting matters, and applying analytical and other review procedures. 
 
       A review is substantially less in scope than an audit conducted in 
   accordance with International Standards on Auditing and consequently does 
       not enable us to obtain assurance that we would become aware of all 
significant matters that might be identified in an audit. Accordingly, we do 
       not express an audit opinion. 
 
We have read the other information contained in the Interim Financial Report 
    and Unaudited Condensed Consolidated Financial Statements and considered 
  whether it contains any apparent misstatements or material inconsistencies 
       with the information in the interim financial statements. 
 
       PricewaterhouseCoopers CI LLP 
 
       Chartered Accountants, 
 
       Guernsey, Channel Islands 
 
       9 September 2019 
 
      (a) The maintenance and integrity of the Starwood European Real Estate 
    Finance Limited website 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 website. 
 
  (b) Legislation in Guernsey governing the preparation and dissemination of 
    financial statements may differ from legislation in other jurisdictions. 
 
       Unaudited Condensed Consolidated Statement of Comprehensive Income 
 
       for the period ended 30 June 2019 
 
                  Notes     1 January     1 January    1 January 
                              2019 to       2018 to      2018 to 
                         30 June 2019  30 June 2018  31 December 
                                    GBP             GBP         2018 
                                                               GBP 
                          (unaudited)   (unaudited)    (audited) 
           Income 
Income from loans     5    13,687,862    14,363,129   30,137,174 
         advanced 
   Net changes in    11     1,164,657       850,117    2,018,771 
    fair value of 
 financial assets 
    at fair value 
through profit or 
             loss 
 Income from cash                   1        21,204       21,205 
         and cash 
      equivalents 
 
Total income from          14,852,520    15,234,450   32,177,150 
      investments 
 
         Expenses 
       Investment    13     1,476,340     1,415,286    2,858,556 
  management fees 
  Credit facility             544,084       489,960    1,074,308 
         interest 
  Credit facility             196,689       240,143      439,950 
  amortisation of 
             fees 
  Credit facility             229,821       232,228      470,700 
  commitment fees 
   Administration             169,147       179,047      356,409 
             fees 
        Audit and             125,156       160,034      249,500 
   non-audit fees 
   Other expenses              77,393       114,384      287,663 
        Legal and             127,005        88,895      196,806 
professional fees 
  Directors' fees    13        70,167        71,541      141,821 
     and expenses 
Broker's fees and                 167        50,749       75,749 
         expenses 
      Agency fees              10,936         5,446       16,506 
      Net foreign         (1,003,676)       676,718    (234,453) 
 exchange (gains) 
         / losses 
 
  Total operating           2,023,229     3,724,431    5,933,515 
         expenses 
 
 Operating profit          12,829,291    11,510,019   26,243,635 
 for the period / 
  year before tax 
         Taxation    12        23,939         1,901       68,068 
 Operating profit          12,805,352    11,508,118   26,175,567 
 for the period / 
             year 
            Other 
    comprehensive 
           income 
 
Items that may be 
  reclassified to 
   profit or loss 
         Exchange             (3,142)        54,644       54,740 
   differences on 
   translation of 
          foreign 
       operations 
 
            Other             (3,142)        54,644       54,740 
    comprehensive 
   income for the 
    period / year 
            Total          12,802,210    11,562,762   26,230,307 
    comprehensive 
   income for the 
    period / year 
 Weighted average     3   384,938,735   375,019,398  375,019,398 
 number of shares 
         in issue 
Basic and diluted     3          3.33          3.07         6.98 
     earnings per 
   Ordinary Share 
          (pence) 
 
       Unaudited Condensed Consolidated Statement of Financial Position 
 
       as at 30 June 2019 
 
                  Notes       As at        As at          As at 
                            30 June 30 June 2018    31 December 
                               2019            GBP           2018 
                                  GBP                           GBP 
                        (unaudited)  (unaudited)      (audited) 
           Assets 
    Cash and cash     4  27,959,950    8,730,655     28,248,515 
      equivalents 
Other receivables            12,198       13,411         28,935 
  and prepayments 
Credit facilities     8   1,015,582    1,224,205      1,212,271 
 capitalised cost 
 Financial assets     6  21,879,086   21,878,430     21,886,335 
    at fair value 
through profit or 
             loss 
   Loans advanced     5 428,636,053  412,109,232    413,444,410 
 
     Total assets       479,502,869  443,955,933    464,820,466 
 
      Liabilities 
        Financial     6   7,216,743    6,010,773      8,781,432 
   liabilities at 
       fair value 
through profit or 
             loss 
Credit facilities     8  46,012,226   54,098,366     68,977,214 
  Trade and other     7   1,391,059    1,332,626      2,068,238 
         payables 
Total liabilities        54,620,028   61,441,765     79,826,884 
       Net assets       424,882,841  382,514,168    384,993,582 
 
      Capital and 
         reserves 
    Share capital       411,205,161  371,929,982    371,929,982 
Retained earnings        13,623,598   10,527,058     13,006,376 
      Translation            54,082       57,128         57,224 
         reserves 
 
     Total equity       424,882,841  382,514,168    384,993,582 
 
        Number of       413,219,398  375,019,398    375,019,398 
  Ordinary Shares 
         in issue 
  Net asset value            102.82       102.00         102.66 
     per Ordinary 
    Share (pence) 
 
   These Unaudited Condensed Consolidated Financial Statements were approved 
 and authorised for issue by the Board of Directors on 9 September 2019, and 
       signed on its behalf by: 
 
Stephen Smith John Whittle 
     Chairman     Director 
 
       Unaudited Condensed Consolidated Statement of Changes in Equity 
 
       for the period ended 30 June 2019 
 
  Period ended       Share     Retained Translation        Total 
  30 June 2019     capital     earnings     reserve 
                         GBP            GBP           GBP 
 
                                                          equity 
 
                                                               GBP 
               (unaudited)  (unaudited) (unaudited)  (unaudited) 
  Balance at 1 371,929,982   13,006,376      57,224  384,993,582 
  January 2019 
Issue of share  40,014,500            -           -   40,014,500 
       capital 
Cost of issues   (739,321)            -           -    (739,321) 
Dividends paid           - (12,188,130)           - (12,188,130) 
     Operating           -   12,805,352           -   12,805,352 
profit for the 
        period 
         Other 
 comprehensive 
       income: 
         Other           -            -     (3,142)      (3,142) 
 comprehensive 
income for the 
        period 
 
 Balance at 30 411,205,161   13,623,598      54,082  424,882,841 
     June 2019 
 
  Period ended       Share     Retained Translation        Total 
  30 June 2018     capital     earnings     reserve       equity 
                         GBP            GBP           GBP            GBP 
               (unaudited)  (unaudited) (unaudited)  (unaudited) 
  Balance at 1 371,929,982   11,207,070       2,484  383,139,536 
  January 2018 
Dividends paid           - (12,188,130)           - (12,188,130) 
     Operating           -   11,508,118           -   11,508,118 
    profit and 
         total 
 comprehensive 
        income 
         Other 
 comprehensive 
       income: 
         Other           -            -      54,644       54,644 
 comprehensive 
income for the 
        period 
 
 Balance at 30 371,929,982   10,527,058      57,128  382,514,168 
     June 2018 
 
 Year ended 31       Share     Retained Translation        Total 
 December 2018     capital     earnings     reserve       equity 
                         GBP            GBP           GBP            GBP 
                 (audited)    (audited)   (audited)    (audited) 
  Balance at 1 371,929,982   11,207,070       2,484  383,139,536 
  January 2018 
Dividends paid           - (24,376,261)           - (24,376,261) 
     Operating           -   26,175,567           -   26,175,567 
profit for the 
          year 
         Other 
 comprehensive 
       income: 
         Other           -            -      54,740       54,740 
 comprehensive 
income for the 
          year 
 
 Balance at 31 371,929,982   13,006,376      57,224  384,993,582 
 December 2018 
 
       Unaudited Condensed Consolidated Statement of Cash Flows 
 
       for the period ended 30 June 2019 
 
                  1 January 2019   1 January 2018     1 January 
                              to               to       2018 to 
                    30 June 2019     30 June 2018   31 December 
                                                           2018 
                               GBP                GBP             GBP 
                     (unaudited)      (unaudited)     (audited) 
       Operating 
     activities: 
Operating profit      12,805,352       11,508,118    26,175,567 
for the period / 
            year 
 
     Adjustments 
     Income from    (13,687,862)     (14,363,129)  (30,137,174) 
  loans advanced 
  Net changes in     (1,164,657)        (850,117)   (2,018,771) 
   fair value of 
financial assets 
   at fair value 
  through profit 
         or loss 
  Income on cash             (1)         (21,204)      (21,205) 
        and cash 
     equivalents 
      Decrease /          16,737         (12,787)     (152,366) 
   (increase) in 
 prepayments and 
 receivables and 
     capitalised 
           costs 
     Decrease in          58,459           68,638        50,302 
 trade and other 
        payables 
  Net unrealised     (1,564,689)        (715,495)     2,055,164 
(gains) / losses 
      on foreign 
        exchange 
     derivatives 
     Net foreign       1,229,975          402,449   (4,750,126) 
 exchange losses 
       / (gains) 
  Other non-cash        (81,044)                -             - 
           items 
 Credit facility         544,084          489,960     1,074,308 
        interest 
 Credit facility         196,689          240,143       439,950 
 amortisation of 
            fees 
 Credit facility         229,821          232,228       470,700 
 commitment fees 
 Corporate taxes        (45,624)                -       (4,217) 
            paid 
                     (1,462,760)      (3,021,196)   (6,817,868) 
 
 Loans advanced1    (62,553,702)    (114,786,936) (172,359,770) 
 Loan repayments      45,895,750       74,091,183   137,158,115 
and amortisation 
Arrangement fees               -          347,490       347,490 
   received (not 
   withheld from 
       proceeds) 
Origination fees       (683,328)      (1,382,544)   (1,509,923) 
           paid2 
       Interest,      13,998,212       13,420,672    29,398,155 
  commitment and 
 exit fee income 
      from loans 
        advanced 
        Interest       1,171,906        1,084,507     2,245,256 
     received on 
   Credit Linked 
           Notes 
 
Net cash outflow     (3,633,922)     (30,246,824)  (11,538,545) 
  from operating 
      activities 
 
 Cash flows from 
       investing 
      activities 
 Interest income               1           21,204        21,205 
   from cash and 
cash equivalents 
 
 Net cash inflow               1           21,204        21,205 
  from investing 
      activities 
 Cash flows from 
       financing 
      activities 
     Share issue      40,014,500                -             - 
        proceeds 
        received 
   Cost of share       (739,321)                -             - 
          issues 
 Credit facility               -        (420,567)     (420,567) 
arrangement fees 
    and expenses 
            paid 
  Proceeds under      37,075,890       64,862,862   129,546,670 
 credit facility 
Repayments under    (60,213,500)     (24,278,000)  (75,603,281) 
 credit facility 
 Credit facility       (566,047)        (372,806)     (924,480) 
   interest paid 
 Credit facility       (216,232)        (259,914)     (494,779) 
 commitment fees 
            paid 
  Dividends paid    (12,188,130)     (12,188,130)  (24,376,261) 
 
 Net cash inflow       3,167,160       27,343,445    27,727,302 
  from financing 
      activities 
 
Net (decrease) /       (466,761)      (2,882,175)    16,209,962 
increase in cash 
        and cash 
     equivalents 
   Cash and cash      28,248,515       11,750,356    11,750,356 
  equivalents at 
the start of the 
   period / year 
     Net foreign         178,196        (137,526)       288,197 
exchange gains / 
(losses) on cash 
        and cash 
     equivalents 
 
   Cash and cash      27,959,950        8,730,655    28,248,515 
  equivalents at 
  the end of the 
   period / year 
 
1 Net of arrangement fees of GBP335,994 (30 June 2018: GBP1,771,375; 31 December 
        2018: GBP2,396,173) withheld. 
 
       2 Including CLNs origination fees of GBPnil (30 June 2018: GBP288,150; 31 
        December 2018: GBP288,150). 
 
       Notes to the Unaudited Condensed Consolidated Financial Statements 
 
       for the period ended 30 June 2019 
 
       1. GENERAL INFORMATION 
 
   The Company is a close-ended investment company incorporated in Guernsey. 
      The Unaudited Condensed Consolidated Financial Statements comprise the 
   Financial Statements of the Company, Starfin Public Holdco 1 Limited (the 
  "Holdco 1"), Starfin Public Holdco 2 Limited (the "Holdco 2"), Starfin Lux 
      S.à.r.l ("Luxco"), Starfin Lux 3 S.à.r.l ("Luxco 3") and Starfin Lux 4 
        S.à.r.l ("Luxco 4") (together the "Group") as at 30 June 2019. 
 
       2. BASIS OF PREPARATION AND PRINCIPAL ACCOUNTING POLICIES 
 
   The Company has prepared these Unaudited Condensed Consolidated Financial 
       Statements on a going concern basis in accordance with International 
    Accounting Standard 34, "Interim Financial Reporting", as adopted by the 
European Union and the Disclosure Guidance and Transparency Rules sourcebook 
 of the United Kingdom's Financial Conduct Authority. This Interim Financial 
  Report does not comprise statutory Financial Statements within the meaning 
    of the Companies (Guernsey) Law, 2008, and should be read in conjunction 
   with the Consolidated Financial Statements of the Group as at and for the 
    year ended 31 December 2018, which have been prepared in accordance with 
      International Financial Reporting Standards as adopted by the European 
    Union. The statutory Financial Statements for the year ended 31 December 
  2018 were approved by the Board of Directors on 25 March 2019. The opinion 
    of the Auditor on those Financial Statements was unqualified and did not 
  contain an emphasis of matter. This Interim Financial Report and Unaudited 
    Condensed Consolidated Financial Statements for the period ended 30 June 
       2019 has been reviewed by the Auditor but not audited. 
 
       There are a number of new and amended accounting standards and 
       interpretations that became applicable for annual reporting periods 
       commencing on or after 1 January 2019. 
 
       These amendments have not had a significant impact on these Unaudited 
    Condensed Consolidated Financial Statements and therefore the additional 
       disclosures associated with first time adoption have not been made. 
 
The preparation of the Unaudited Condensed Consolidated Financial Statements 
      requires management to make judgements, estimates and assumptions that 
   affect the application of accounting policies and the reported amounts of 
 assets and liabilities, income and expenses. Actual results may differ from 
       these estimates. 
 
   In preparing these Unaudited Condensed Consolidated Financial Statements, 
       the significant judgements made by management in applying the Group's 
  accounting policies and the key sources of estimation uncertainty were the 
  same as those that applied to the Annual Consolidated Financial Statements 
       for the year ended 31 December 2018. 
 
       3. EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE 
 
       The calculation of basic earnings per Ordinary Share is based on the 
  operating profit of GBP12,805,352 (30 June 2018: GBP11,508,118 and 31 December 
 2018: GBP26,175,567) and on the weighted average number of Ordinary Shares in 
      issue at 30 June 2019 of 384,938,735 (30 June 2018: 375,019,398 and 31 
       December 2018: 375,019,398). 
 
 The calculation of NAV per Ordinary Share is based on a NAV of GBP424,882,841 
     (30 June 2018: GBP382,514,168 and 31 December 2018: GBP384,993,582) and the 
actual number of Ordinary Shares in issue at 30 June 2019 of 413,219,398 (30 
       June 2018: 375,019,398 and 31 December 2018: 375,019,398). 
 
       4. CASH AND CASH EQUIVALENTS 
 
       Cash and cash equivalents comprise the following: 
 
             30 June 2019 30 June 2018 31 December 2018 
                        GBP            GBP                GBP 
Cash at bank   27,959,950    8,730,655       28,248,515 
               27,959,950    8,730,655       28,248,515 
 
  Cash and cash equivalents comprises cash and short-term deposits held with 
    various banking institutions with original maturities of three months or 
    less. The carrying amount of these assets approximates their fair value. 
 
       5. LOANS ADVANCED 
 
                            30 June 30 June 2018    31 December 
                               2019                        2018 
                                  GBP            GBP              GBP 
                     UK 
         Regional Hotel  46,690,942   46,747,493     46,752,485 
          Portfolio, UK 
 Hotel and Residential,  39,863,705            ?     34,532,132 
                     UK 
          Hospitals, UK  25,341,644   25,351,156     25,346,479 
  Industrial Portfolio,           ?   19,070,180              - 
                     UK 
 Mixed Use Development,  12,282,913   12,932,216     14,927,500 
          South East UK 
   Varde Partners Mixed           -    3,058,045        981,502 
          Portfolio, UK 
       Office, Scotland   4,305,664            ?              - 
                Ireland 
 Hotel, Dublin, Ireland  54,173,151   53,372,166     54,458,838 
         School, Dublin           -   16,967,038     17,319,861 
      Logistics, Dublin  13,035,099   12,970,152     13,168,789 
 Student Accommodation,           -    9,402,404      9,667,282 
                 Dublin 
 Residential Portfolio,           -    6,869,245              - 
                 Dublin 
    Residential, Dublin   2,147,252    4,029,496      6,931,790 
                  Spain 
       Hotel, Barcelona  41,483,446   40,887,310     41,697,630 
Three Shopping Centres,  32,602,374   31,045,447     31,527,080 
                  Spain 
           Hotel, Spain  25,604,236   24,210,649     23,394,315 
      Office and Hotel,  16,624,145            -     16,712,680 
                 Madrid 
 Shopping Centre, Spain  15,374,244   11,162,015     15,357,522 
                 France 
          Office, Paris  14,512,426   23,232,265     14,653,866 
  Industrial Portfolio,           -   13,146,683              - 
                  Paris 
         Rest of Europe 
       Mixed Portfolio,  47,194,411            -              - 
   Central and Northern 
                 Europe 
  Industrial Portfolio,  37,400,401   57,655,272     46,014,659 
Central and East Europe 
                        428,636,053  412,109,232    413,444,410 
 
       No element of loans advanced are past due or impaired. For further 
   information and the associated risks see the Investment Manager's Report. 
 
      The table below reconciles the movement of the carrying value of loans 
       advanced in the period / year: 
 
                       30 June 2019 30 June 2018     31 December 
                                                            2018 
                                  GBP            GBP               GBP 
 Loans advanced at the  413,444,410  369,955,983     369,955,983 
 start of the period / 
                  year 
        Loans advanced   62,495,181  116,558,311     175,161,798 
          Loans repaid (45,895,750) (74,091,183)   (137,158,115) 
      Arrangement fees    (335,994)  (1,771,375)     (2,396,173) 
                earned 
Commitment fees earned    (327,239)    (135,670)       (575,559) 
      Exit fees earned    (602,557)  (1,071,217)     (2,730,382) 
 Origination fees paid      373,953    1,106,714       1,543,468 
    Effective interest   13,687,862   14,363,129      30,137,174 
         income earned 
     Interest payments (13,055,677) (12,213,785)    (26,092,214) 
    received / accrued 
      Foreign exchange  (1,148,136)    (591,675)       5,598,430 
      (losses) / gains 
 Loans advanced at the  428,636,053  412,109,232     413,444,410 
   end of the period / 
                  year 
 
Loans advanced at fair  439,874,981  425,785,582     426,379,370 
                 value 
 
  For further information on the fair value of loans advanced, refer to note 
       11. 
 
  6. FINANCIAL ASSETS AND FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT 
       OR LOSS 
 
     Financial assets at fair value through profit or loss comprise currency 
   forward contracts which represent contractual obligations to purchase one 
currency and sell another currency on a future date at a specified price and 
 financial instruments designated at fair value through profit or loss which 
  are debt securities that are managed by the Group and their performance is 
       evaluated on a fair value basis. 
 
  The underlying instruments of currency forwards become favourable (assets) 
       or unfavourable (liabilities) as a result of fluctuations of foreign 
       exchange rates relative to their terms. The aggregate contractual or 
    notional amount of derivative financial instruments, the extent to which 
     instruments are favourable or unfavourable, and thus the aggregate fair 
       values of derivative financial assets and liabilities, can fluctuate 
       significantly from time to time. The foreign exchange derivatives are 
   subject to offsetting, enforceable master netting agreements for per each 
       counterparty. 
 
    The fair value of financial assets and liabilities at fair value through 
       profit or loss are set out below: 
 
                      Notional             Fair values     Total 
                      contract 
                       amount1 
    30 June 2019                   Assets  Liabilities 
                             GBP          GBP            GBP         GBP 
  Investments at 
      fair value 
  through profit 
         or loss 
   Credit Linked           N/A 21,879,086            - 21,879,08 
  Notes, UK Real                                               6 
          Estate 
           Total             - 21,879,086            - 21,879,08 
                                                               6 
Foreign exchange 
     derivatives 
        Currency 
       forwards: 
 Lloyds Bank plc   296,802,700    351,983  (7,552,757) (7,200,77 
                                                              4) 
   Goldman Sachs       953,750          -     (15,969)  (15,969) 
           Total   297,756,450    351,983  (7,568,726) (7,216,74 
                                                              3) 
 
                      Notional             Fair values     Total 
                      contract 
                       amount1 
    30 June 2018                   Assets  Liabilities 
                             GBP          GBP            GBP         GBP 
  Investments at 
      fair value 
  through profit 
         or loss 
   Credit Linked           N/A 21,878,430            - 21,878,43 
  Notes, UK Real                                               0 
          Estate 
           Total             - 21,878,430            - 21,878,43 
                                                               0 
Foreign exchange 
     derivatives 
        Currency 
       forwards: 
 Lloyds Bank plc   265,658,802     67,297  (6,061,845) (5,994,54 
                                                              8) 
   Goldman Sachs       940,988          -     (16,225)  (16,225) 
           Total   266,599,790     67,297  (6,078,070) (6,010,77 
                                                              3) 
 
                      Notional             Fair values     Total 
                      contract 
                       amount1 
 
                                                               GBP 
31 December 2018                   Assets  Liabilities 
                             GBP          GBP            GBP 
  Investments at 
      fair value 
  through profit 
         or loss 
   Credit Linked           N/A 21,886,335            - 21,886,33 
  Notes, UK Real                                               5 
          Estate 
           Total             - 21,886,335            - 21,886,33 
                                                               5 
Foreign exchange 
     derivatives 
        Currency 
       forwards: 
 Lloyds Bank plc   263,815,899     50,055  (8,803,266) (8,753,21 
                                                              1) 
   Goldman Sachs       959,174          -     (28,221)  (28,221) 
           Total   264,775,073     50,055  (8,831,487) (8,781,43 
                                                              2) 
 
       1 Euro amounts are translated at the period / year end exchange rate 
 
       7. TRADE AND OTHER PAYABLES 
 
                         30 June 2019 30 June 2018   31 December 
                                                            2018 
                                    GBP            GBP             GBP 
   Investment management      767,529      712,064       723,652 
            fees payable 
         Refinancing and      231,605      300,166       239,081 
      restructuring fees 
                 payable 
      Audit fees payable      156,779      180,729        95,943 
 Commitment fees payable       95,162       79,293        82,900 
     Administration fees       85,816       60,374        74,360 
                 payable 
           Tax provision       41,429            -        64,401 
        Prepaid interest       12,739            -             - 
                received 
        Accrued expenses            -            -        60,196 
  Legal and professional            -            -        12,475 
            fees payable 
    Loan amounts payable            -            -       405,855 
Origination fees payable            -            -       309,375 
                            1,391,059    1,332,626     2,068,238 
 
       8. CREDIT FACILITIES 
 
     The Group utilises revolving credit facilities (EUR and GBP). Under its 
investment policy, the Group is limited to borrowing an amount equivalent to 
     a maximum of 30 per cent of its NAV at the time of drawdown, of which a 
    maximum of 20 per cent can be longer term borrowings. In calculating the 
     Group's borrowings for this purpose, any liabilities incurred under the 
       Group's foreign exchange hedging arrangements shall be disregarded. 
 
  As at 30 June 2019 an amount of GBP45,878,046 (30 June 2018: GBP53,972,800 and 
  31 December 2018: GBP68,818,554) was drawn and interest of GBP134,180 (30 June 
         2018: GBP125,566 and 31 December 2018: GBP158,660) was payable. 
 
 The revolving credit facilities capitalised costs are directly attributable 
       costs incurred in relation to the establishment of the credit loan 
       facilities. 
 
   The changes in liabilities arising from financing activities are shown in 
       the table below. 
 
                       30 June 2019 30 June 2018     31 December 
                                                            2018 
                                  GBP            GBP               GBP 
     Borrowings at the   68,977,214   13,338,329      13,338,329 
   start of the period 
                 /year 
   Proceeds during the   37,075,890   65,295,600     129,979,408 
           period/year 
  Repayment during the (60,213,500) (24,278,000)    (75,603,281) 
           period/year 
      Arrangement fees            -      432,738         432,738 
               payable 
      Arrangement fees            -    (432,738)       (432,738) 
              retained 
      Interest expense      544,084      489,960       1,074,308 
    recognised for the 
           period/year 
  Interest paid during    (566,047)    (372,806)       (924,480) 
       the period/year 
  Foreign exchange and      194,585    (374,717)       1,112,930 
 translation movements 
 Borrowings at the end   46,012,226   54,098,366      68,977,214 
    of the period/year 
 
       9. DIVIDS 
 
 Dividends will be declared by the Directors and paid in compliance with the 
 solvency test prescribed by Guernsey law. Under Guernsey law, companies can 
      pay dividends in excess of accounting profit provided they satisfy the 
solvency test prescribed by the Companies (Guernsey) Law, 2008. The solvency 
    test considers whether a company is able to pay its debts when they fall 
       due, and whether the value of a company's assets is greater than its 
   liabilities. The Company passed the solvency test for each dividend paid. 
 
 Subject to market conditions, the financial position of the Company and the 
       investment outlook, it is the Directors' intention to continue to pay 
    quarterly dividends to Shareholders (for more information see Chairman's 
       Statement). 
 
The Company paid the following dividends in respect of the period to 30 June 
       2019: 
 
                 Dividend rate per     Net dividend     Payment 
                     Share (pence)         paid (GBP)        date 
   Period to: 
31 March 2019                1.625        6,094,065 24 May 2019 
 
After the end of the period, the Directors declared a dividend in respect of 
  the financial period ended 30 June 2019 of 1.625 pence per share which was 
    paid on 30 August 2019 to Shareholders on the register on 2 August 2019. 
 
       The Company paid the following dividends in respect of the year to 31 
       December 2018: 
 
                 Dividend rate per Net dividend     Payment date 
                     Share (pence)     paid (GBP) 
      Period to: 
   31 March 2018             1.625    6,094,065      17 May 2018 
    30 June 2018             1.625    6,094,065   31 August 2018 
    30 September             1.625    6,094,065 16 November 2018 
            2018 
31 December 2018             1.625    6,094,065 22 February 2019 
 
       10. RISK MANAGEMENT POLICIES AND PROCEDURES 
 
       The Group through its investment in whole loans, subordinated loans, 
       mezzanine loans, bridge loans, loan-on-loan financings and other debt 
    instruments is exposed to a variety of financial risks, including market 
      risk (including currency risk and interest rate risk), credit risk and 
liquidity risk. The Group's overall risk management programme focuses on the 
       unpredictability of financial markets and seeks to minimise potential 
       adverse effects on the Group's financial performance. 
 
      The Directors monitor and measure the overall risk bearing capacity in 
       relation to the aggregate risk exposure across all risk types and 
       activities. Even though the risks detailed in the Annual Report and 
       Financial Statements for the year ended 31 December 2018 still remain 
 appropriate, further information regarding these risk policies are outlined 
       below: 
 
       (i) Market risk 
 
     Market risk includes market price risk, currency risk and interest rate 
  risk. If a borrower defaults on a loan and the real estate market enters a 
       downturn it could materially and adversely affect the value of the 
collateral over which loans are secured. However, this risk is considered by 
the Board to constitute credit risk as it relates to the borrower defaulting 
on the loan and not directly to any movements in the real estate market. The 
  Group's exposure to market price risk arises from Credit Linked Notes held 
 by the Group and classified as assets at fair value through profit or loss. 
   The Investment Manager regularly monitors the fair value of Credit Linked 
 Notes and no specific hedging activities are undertaken in relation to this 
       investment. 
 
 The Investment Manager moderates market risk through a careful selection of 
       loans within specified limits. The Group's overall market position is 
       monitored by the Investment Manager and is reviewed by the Board of 
       Directors on an ongoing basis. 
 
       a) Currency risk 
 
The Group, via the subsidiaries, operates across Europe and invests in loans 
that are denominated in currencies other than the functional currency of the 
   Company. Consequently, the Group is exposed to risks arising from foreign 
   exchange rate fluctuations in respect of these loans and other assets and 
      liabilities which relate to currency flows from revenues and expenses. 
 Exposure to foreign currency risk is hedged and monitored by the Investment 
       Manager on an ongoing basis and is reported to the Board accordingly. 
 
       b) Interest rate risk 
 
  Interest rate risk is the risk that the value of financial instruments and 
       related income from loans advanced and cash and cash equivalents will 
       fluctuate due to changes in market interest rates. 
 
The majority of the Group's financial assets are loans advanced at amortised 
   cost, credit linked notes, receivables and cash and cash equivalents. The 
       Group's investments have some exposure to interest rate risk which is 
       limited to interest earned on cash deposits, credit linked notes and 
       floating interbank rate exposure for investments designated as loans 
   advanced. Loans advanced have been structured to include a combination of 
  fixed and floating interest rates to reduce the overall impact of interest 
  rate movements. Further protection is provided by including interbank rate 
     floors and preventing interest rates from falling below certain levels. 
 
       (ii) Credit risk 
 
Credit risk is the risk that a counterparty will be unable to pay amounts in 
   full when due. The Group's main credit risk exposure is in the investment 
portfolio, shown as loans advanced at amortised cost and credit linked notes 
 designated at fair value through profit or loss, where the Group invests in 
      whole loans and also subordinated and mezzanine debt which rank behind 
 senior debt for repayment in the event that a borrower defaults. There is a 
  spread concentration of risk as at 30 June 2019 due to several loans being 
     advanced since inception. There is also credit risk in respect of other 
       financial assets as a portion of the Group's assets are cash and cash 
       equivalents or accrued interest. The banks used to hold cash and cash 
    equivalents have been diversified to spread the credit risk to which the 
 Group is exposed. The Group also has credit risk exposure in its derivative 
 financial instruments which is diversified between hedge providers in order 
       to spread credit risk to which the Group is exposed. 
 
    With respect to the credit linked notes designated at fair value through 
 profit or loss, the Group holds junior notes linked to the performance of a 
  portfolio of high-quality UK real estate loans owned by a major commercial 
 bank. The transaction is structured as a synthetic securitisation with risk 
     transfer from the bank to the Group achieved via the purchase of credit 
  protection by the bank on the most junior tranches. The credit risk to the 
    Group is the risk that one of the underlying borrowers defaults on their 
loan and the Group is required to make a payment under the credit protection 
      agreement. Despite the different way in which the transaction has been 
structured the Group considers the risks to be fundamentally the same as any 
other junior loan in the portfolio and monitors and manages this risk in the 
       same way as the other loans advanced by the Group. 
 
   The total exposure to credit risk arises from default of the counterparty 
     and the carrying amounts of financial assets best represent the maximum 
credit risk exposure at the end of the reporting period. As at 30 June 2019, 
        the maximum credit risk exposure was GBP478,475,089 (30 June 2018: 
         GBP442,718,317 and 31 December 2018: GBP463,579,260). 
 
The Investment Manager has adopted procedures to reduce credit risk exposure 
     by conducting credit analysis of the counterparties, their business and 
 reputation which is monitored on an ongoing basis. After the advancing of a 
      loan a dedicated debt asset manager employed by the Investment Adviser 
    monitors ongoing credit risk and reports to the Investment Manager, with 
       quarterly updates also provided to the Board. The debt asset manager 
  routinely stresses and analyses the profile of the Group's underlying risk 
in terms of exposure to significant tenants, performance of asset management 
  teams and property managers against specific milestones that are typically 
  agreed at the time of the original loan underwriting, forecasting headroom 
    against covenants, reviewing market data and forecast economic trends to 
benchmark borrower performance and to assist in identifying potential future 
stress points. Periodic physical inspections of assets that form part of the 
Group's security are also completed in addition to monitoring the identified 
       capital expenditure requirements against actual borrower investment. 
 
 The Group measures credit risk and expected credit losses using probability 
       of default, exposure at default and loss given default. The Directors 
       consider both historical analysis and forward looking information in 
 determining any expected credit loss. The Directors consider the loss given 
   default to be close to zero as all loans are the subject of very detailed 
    underwriting, including the testing of resilience to aggressive downside 
  scenarios with respect to the loan specifics, the market and general macro 
changes. In addition to this, all loans have very robust covenants in place, 
       strong security packages and significant loan-to-value headroom. As a 
    result, no loss allowance has been recognised based on 12-month expected 
   credit losses as any such impairment would be wholly insignificant to the 
Group. All loans advanced are in Stage 1 as there has not been a significant 
     change in counterparty credit risk since 31 December 2018 or inception. 
 
       (iii) Liquidity risk 
 
Liquidity risk is the risk that the Group will not have sufficient resources 
       available to meet its liabilities as they fall due. The Group's loans 
advanced are illiquid and may be difficult or impossible to realise for cash 
       at short notice. 
 
  The Group manages its liquidity risk through short term and long-term cash 
   flow forecasts to ensure it is able to meet its obligations. In addition, 
 the Company is permitted to borrow up to 30 per cent of NAV and has entered 
into revolving credit facilities totalling GBP114,000,000 of which GBP46,012,226 
       (including accrued interest) was drawn on 30 June 2019 (30 June 2018: 
         GBP54,098,366 and 31 December 2018: GBP68,977,214). 
 
 As at 30 June 2019, the Group had GBP27,959,950 (30 June 2018: GBP8,730,655 and 
    31 December 2018: GBP28,248,515) available in cash and GBP1,391,059 (30 June 
      2018: GBP1,332,626 and 31 December 2018: GBP2,068,238) trade payables. The 
Directors considered this to be sufficient cash available, together with the 
undrawn facilities on the credit facilities, to meet the Group's liabilities 
       and unfunded commitments. 
 
       11. FAIR VALUE MEASUREMENT 
 
    IFRS 13 requires the Company to classify fair value measurements using a 
   fair value hierarchy that reflects the significance of the inputs used in 
 making the measurements. The fair value hierarchy has the following levels: 
 
    (i) Quoted prices (unadjusted) in active markets for identical assets or 
       liabilities (level 1); 
 
       (ii) Inputs other than quoted prices included within level 1 that are 
 observable for the asset or liability, either directly (that is, as prices) 
 or indirectly (that is, derived from prices including interest rates, yield 
  curves, volatilities, prepayment rates, credit risks and default rates) or 
       other market corroborated inputs (level 2); and 
 
    (iii) Inputs for the asset or liability that are not based on observable 
       market data (that is, unobservable inputs) (level 3). 
 
    The following table analyses within the fair value hierarchy the Group's 
       financial assets and liabilities (by class) measured at fair value: 
 
      30 June 2019                  Level 1  Level  Level Total 
                                                 2      3 
                                          GBP      GBP      GBP     GBP 
            Assets 
  Financial assets                        -      - 21,879 21,87 
     at fair value                                   ,086 9,086 
 through profit or 
              loss 
             Total                        -      - 21,879 21,87 
                                                     ,086 9,086 
       Liabilities 
        Derivative                        - (7,216      - (7,21 
       liabilities                           ,743)        6,743 
                                                              ) 
             Total                        - (7,216      - (7,21 
                                             ,743)        6,743 
                                                              ) 
 
                      30 June 2018  Level 1  Level  Level Total 
                                                 2      3 
                                          GBP      GBP      GBP     GBP 
                            Assets 
    Financial assets at fair value        -      - 21,878 21,87 
            through profit or loss                   ,430 8,430 
                             Total        -      - 21,878 21,87 
                                                     ,430 8,430 
                       Liabilities 
            Derivative liabilities        - (6,010      - (6,01 
                                             ,773)        0,773 
                                                              ) 
                             Total        - (6,010      - (6,01 
                                             ,773)        0,773 
                                                              ) 
 
     31 December 2018 Level 1     Level 2    Level 3       Total 
                            GBP           GBP          GBP           GBP 
               Assets 
  Financial assets at       -           - 21,886,335  21,886,335 
   fair value through 
       profit or loss 
                Total       -           - 21,886,335  21,886,335 
          Liabilities 
           Derivative       - (8,781,432)          - (8,781,432) 
          liabilities 
                Total       - (8,781,432)          - (8,781,432) 
 
    There have been no transfers between levels for the period ended 30 June 
         2019 (30 June 2018: GBPnil and 31 December 2018: GBPnil). 
 
       Investments classified within Level 3 consist of Credit Linked Notes 
("CLNs"). The fair value of the CLNs is determined by the Investment Adviser 
      using a discounted cash flow valuation model. The main inputs into the 
       valuation model for the CLNs are discount rates, market risk factors, 
       probabilities of default, expected credit loss levels and cash flow 
   forecasts. The Investment Adviser also considers the original transaction 
  price and recent transactions of comparable instruments (where available), 
   the credit quality on the underlying reference portfolios and adjusts the 
       valuation model as deemed necessary. 
 
       The Directors are responsible for considering the methodology and 
assumptions used by the Investment Adviser and for approving the fair values 
       reported at the financial period end. 
 
       The movement in level 3 instruments are presented in the table below. 
 
                             30 June 30 June 2018   31 December 
                                2019                       2018 
                                   GBP            GBP             GBP 
 Balance at the start of  21,886,335   22,112,820    22,112,820 
       the period / year 
               Disposals           -            -             - 
            Acquisitions           -            -             - 
  Cash interest received (1,171,906)  (1,084,507)   (2,245,256) 
    Net gains / (losses)   1,164,657      850,117     2,018,771 
 recognised in profit or 
                 loss(1) 
   Balance at the end of  21,879,086   21,878,430    21,886,335 
       the period / year 
   Changes in unrealised           -            -             - 
     gains or losses for 
  Level 3 assets held at 
    period/ year end and 
   included in other net 
changes in fair value of 
financial assets at fair 
 value through profit or 
                    loss 
 
    1 The net gains for the period ended 30 June 2019 comprise of GBP1,164,657 
interest income on CLNs (30 June 2018: GBP1,138,267 of interest income on CLNs 
        net of GBP288,150 origination fees and 31 December 2018: GBP2,306,921 of 
       interest income on CLNs net of GBP288,150 origination fees subsequently 
       expensed). 
 
  The following table summarises within the fair value hierarchy the Group's 
assets and liabilities (by class) not measured at fair value at 30 June 2019 
       but for which fair value is disclosed: 
 
                Level 1    Level 2   Level 3     Total     Total 
                                                  fair  carrying 
                                                values    amount 
                      GBP          GBP         GBP         GBP         GBP 
         Assets 
  Cash and cash       - 27,959,950         - 27,959,95 27,959,95 
    equivalents                                      0         0 
          Other       -     12,198         -    12,198    12,198 
receivables and 
    prepayments 
 Loans advanced       -          - 439,874,9 439,874,9 428,636,0 
                                          81        81        53 
          Total       - 27,972,148 439,874,9 467,847,1 456,608,2 
                                          81        29        01 
 
    Liabilities 
Trade and other       -  1,391,059         - 1,391,059 1,391,059 
       payables 
         Credit       - 46,012,226         - 46,012,22 46,012,22 
     facilities                                      6         6 
          Total       - 47,403,285         - 47,403,28 47,403,28 
                                                     5         5 
 
  The following table summarises within the fair value hierarchy the Group's 
assets and liabilities (by class) not measured at fair value at 30 June 2018 
       but for which fair value is disclosed: 
 
                Level 1    Level 2   Level 3     Total     Total 
                                                  fair  carrying 
                                                values    amount 
                      GBP          GBP         GBP         GBP         GBP 
         Assets 
  Cash and cash       -  8,730,655         - 8,730,655 8,730,655 
    equivalents 
          Other       -     13,411         -    13,411    13,411 
receivables and 
    prepayments 
 Loans advanced       -          - 425,785,5 425,785,5 412,109,2 
                                          82        82        32 
          Total       -  8,744,066 425,785,5 434,529,6 420,853,2 
                                          82        48        98 
 
    Liabilities 
Trade and other       -  1,332,626         - 1,332,626 1,332,626 
       payables 
         Credit       - 54,098,366         - 54,098,36 54,098,36 
     facilities                                      6         6 
          Total       - 55,430,992         - 55,430,99 55,430,99 
                                                     2         2 
 
  The following table summarises within the fair value hierarchy the Group's 
 assets and liabilities (by class) not measured at fair value at 31 December 
       2018 but for which fair value is disclosed: 
 
                Level 1    Level 2   Level 3               Total 
                                             Total      carrying 
                                             fair         amount 
                                             values 
                      GBP          GBP         GBP         GBP         GBP 
         Assets 
  Cash and cash       - 28,248,515         - 28,248,51 28,248,51 
    equivalents                                      5         5 
          Other       -     28,935         -    28,935    28,935 
receivables and 
    prepayments 
 Loans advanced       -          - 426,379,3 426,379,3 413,444,4 
                                          70        70        10 
          Total       - 28,277,450 426,379,3 454,656,8 441,721,8 
                                          70        20        60 
 
    Liabilities 
Trade and other       -  2,068,238         - 2,068,238 2,068,238 
       payables 
         Credit       - 68,977,214         - 68,977,21 68,977,21 
     facilities                                      4         4 
          Total       - 71,045,452         - 71,045,45 71,045,45 
                                                     2         2 
 
     The carrying values of the assets and liabilities included in the above 
     table are considered to approximate their fair values, except for loans 
       advanced. The fair value of loans advanced has been determined by 
 discounting the expected cash flows using a discounted cash flow model. For 
   the avoidance of doubt, the Group carries its loans advanced at amortised 
       cost in the Financial Statements. 
 
 Cash and cash equivalents include cash at hand and fixed deposits held with 
banks. Other receivables and prepayments include the contractual amounts and 
 obligations due to the Group and consideration for advance payments made by 
     the Group. Credit facilities and trade and other payables represent the 
       contractual amounts and obligations due by the Group for contractual 
       payments. 
 
       12. TAXATION 
 
   The Company is exempt from Guernsey taxation under the Income Tax (Exempt 
Bodies) (Guernsey) Ordinance 1989 for which it pays an annual fee of GBP1,200. 
      The Luxembourg indirect subsidiaries of the Company are subject to the 
       applicable tax regulations in Luxembourg. 
 
 The Luxco had no operating gains on ordinary activities before taxation and 
 is therefore subject to the Luxembourg minimum corporate income taxation at 
 EUR4,815 (2018: EUR3,810). The Luxco 3 and Luxco 4 are subject to Corporate 
    Income Tax and Municipal Business Tax based on a margin calculated on an 
    arm's- length principle. The effective tax rate in Luxembourg during the 
       reporting period was 26.01% (2018: 26.01%). 
 
       13. RELATED PARTY TRANSACTIONS 
 
Parties are considered to be related if one party has the ability to control 
   the other party or exercise significant influence over the other party in 
       making financial or operational decisions. 
 
  The tables below summarise the outstanding balances and transactions which 
       occurred with related parties 
 
                 Outstanding at   Outstanding at  Outstanding at 
                             30               30              31 
                      June 2019        June 2018   December 2018 
                              GBP                GBP               GBP 
     Investment 
        Manager 
     Investment         767,529          712,064         723,652 
management fees 
        payable 
    Origination               -                -         309,375 
   fees payable 
       Expenses               -                -          60,196 
 
                            For the       For the   For the year 
                       period ended  period ended          ended 
                       30 June 2019  30 June 2018    31 December 
                                                            2018 
                                  GBP             GBP              GBP 
  Directors' fees and 
        expenses paid 
        Stephen Smith        25,000        25,000         50,000 
         John Whittle        22,500        22,500         45,000 
      Jonathan Bridel        21,250        21,250         42,500 
        Expenses paid         1,417         2,791          4,321 
 
   Investment Manager 
Investment management     1,476,340     1,415,286      2,858,556 
          fees earned 
     Origination fees       373,953     1,106,714      1,543,468 
             Expenses        91,912        49,717        175,531 
 
    The tables below summarise the dividends paid to and number of Company's 
       shares held by related parties. 
 
                 Dividends paid  Dividends paid   Dividends paid 
                            for             for              for 
                     the period      the period   the year ended 
                          ended           ended 
                   30 June 2019    30 June 2018 31 December 2018 
                              GBP               GBP                GBP 
       Starwood         297,050         297,050          594,100 
 Property Trust 
           Inc. 
    SCG Starfin          74,262          74,262          148,525 
    Investor LP 
  Stephen Smith           2,565           2,565            5,130 
   John Whittle             386             386              771 
Jonathan Bridel             386             386              771 
 
                           As at           As at          As at 
                    30 June 2019    30 June 2018    31 December 
                                                           2018 
                       Number of       Number of      Number of 
                          shares          shares         shares 
Starwood Property      9,140,000       9,140,000      9,140,000 
       Trust Inc. 
      SCG Starfin      2,285,000       2,285,000      2,285,000 
      Investor LP 
    Stephen Smith         78,929          78,929         78,929 
     John Whittle         11,866          11,866         11,866 
  Jonathan Bridel         11,866          11,866         11,866 
 
       Other 
 
   The Group continues to participate in a number of loans in which Starwood 
    Property Trust, Inc. ("STWD") acted as a co-lender, as summarised in the 
       table below. 
 
       Loan 
 
       Mixed Use Development, South East UK 
 
       Hotel and Residential, UK 
 
       Credit Linked Notes, UK Real Estate 
 
       Hotel, Spain 
 
       Mixed Portfolio, Central and Northern Europe 
 
       14. EVENTS AFTER THE REPORTING PERIOD 
 
    The following significant cash amounts have been funded since the period 
       end, up to the date of publication of this report: 
 
                              Local Currency 
Three Shopping Centres, Spain   EUR1,048,878 
 
The following significant loan amortisation (both scheduled and unscheduled) 
    has been received since the period end, up to the date of publication of 
       this report: 
 
                                                 Local Currency 
Industrial Portfolio, Central and Eastern Europe  EUR26,282,936 
            Mixed Use Development, South East UK     GBP8,789,620 
 
The following new commitments have been made since the period end, up to the 
       date of publication of this report: 
 
                        Local Currency 
Office Building, London    GBP12,450,000 
 
The following loans have been repaid in full since the period end, up to the 
       date of publication of this report: 
 
                 Local Currency 
Hotel, Barcelona  EUR46,000,000 
 
  Subsequently to reporting date, the Group repaid EUR6 million under Morgan 
  Stanley credit facility and EUR17 million under Lloyds credit facility. At 
 the date of publication of this report the amount drawn under each facility 
       are: 
 
        Lloyds Facility: EURnil million 
Morgan Stanley Facility:  EUR28 million 
 
 On 24 July 2019 the Company declared a dividend of 1.625 pence per Ordinary 
       share payable to shareholders on the register on 2 August 2019. 
 
       Further Information 
 
       Corporate Information 
 
       Directors 
 
       Stephen Smith (Non-executive Chairman) 
 
       Jonathan Bridel (Non-executive Director) 
 
       John Whittle (Non-executive Director) 
 
       (all care of the registered office) 
 
       Investment Manager 
       Starwood European Finance 
       Partners Limited 
       1 Royal Plaza 
       Royal Avenue 
       St Peter Port 
       Guernsey 
       GY1 2HL 
 
       Solicitors to the Company 
       (as to English law and U.S. securities law) 
 
       Norton Rose LLP 
 
       3 More London Riverside 
       London 
 
       SE1 2AQ 
       United Kingdom 
 
       Registrar 
 
       Computershare Investor Services (Guernsey) Limited 
 
       3rd Floor 
       Natwest House 
       Le Truchot 
 
       St Peter Port 
       Guernsey 
       GY1 1WD 
 
       Sole Broker 
 
       Stifel Nicolaus Europe Limited trading as Stifel 
 
       150 Cheapside 
       London 
 
       EC2V 6ET 
       United Kingdom 
 
       Administrator, Designated Manager and Company Secretary 
 
       Apex Fund and Corporate Services 
 
       (Guernsey) (formerly Ipes (Guernsey) Limited) 
 
       1 Royal Plaza 
 
       Royal Avenue 
 
       St Peter Port 
 
       Guernsey 
 
       GY1 2HL 
 
       Registered Office 
 
       1 Royal Plaza 
 
       Royal Avenue 
 
       St Peter Port 
 
       Guernsey 
 
       GY1 2HL 
 
Investment Adviser 
 
       Starwood Capital Europe Advisers, LLP 
       2nd Floor 
 
       One Eagle Place 
       St. James's 
       London 
 
       SW1Y 6AF 
       United Kingdom 
 
       Advocates to the Company (as to Guernsey law) 
 
       Carey Olsen 
 
       PO Box 98 
 
       Carey House, Les Banques St Peter Port 
 
       Guernsey 
 
       GY1 4HP 
 
       Independent Auditor 
 
       PricewaterhouseCoopers CI LLP 
 
       Royal Bank Place 
 
       1 Glategny Esplanade 
 
       St Peter Port 
 
       Guernsey 
 
       GY1 4ND 
 
       Principal Bankers 
 
       Barclays Private Clients International Limited 
 
       PO Box 41 
 
       Le Marchant House 
 
       St Peter Port 
 
       Guernsey 
 
       GY1 3BE 
 
       Website: 
 
       www.starwoodeuropeanfinance.com 
 
ISIN:          GG00B79WC100 
Category Code: IR 
TIDM:          SWEF 
LEI Code:      5493004YMVUQ9Z7JGZ50 
Sequence No.:  19488 
EQS News ID:   870861 
 
End of Announcement EQS News Service 
 
 

(END) Dow Jones Newswires

September 10, 2019 02:00 ET (06:00 GMT)

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