Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
2
GROUP METRICS FOR THE YEAR ENDED 30 JUNE 2023
As at 30 June 2023, the investment objective of SLF Realisation Fund Limited (the “Company” and together
with its subsidiaries, the “Group”) is to realise all remaining assets in the portfolio of the Ordinary Share class
and the 2016 C Share class in a prudent manner consistent with the principles of good investment
management and to return cash to shareholders in an orderly manner. The Group’s base currency is Sterling.
(25.80)%
per Ordinary
Share
1
(2.71)%
per 2016 C Share
1
6.94p
per
Ordinary Share
8.28p
per
2016 C Share
(59.65)%
Ordinary Share
1
(25.12)%
2016 C Share
1
NAV total return per share for
the year ended 30 June 2023
NAV per Share as at
30 June 2023
Share price discount to NAV
as at 30 June 2023
£9.97 million
for Ordinary
Shares
£8.61 million for
2016 C
Shares
£21.36 million
for the
Ordinary Share class
£13.89 million
for the 2016 C
Share class
£3.56 million
for the
Ordinary Share class
£3.47 million
for the
2016
C Share class
Market capitalisation as at
30 June 2023
Return of capital to shareholders
during the year ended 30 June
2023
Return of capital to
shareholders after the
reporting year ended 30 June
2023
The comparatives for the other group metrics detailed above are disclosed on page 7.
1
These are alternative performance Measures; refer to pages 98 to 100 for details.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
3
GROUP METRICS FOR THE YEAR ENDED 30 JUNE 2023 (CONTINUED)
The key drivers of the change in Net Asset Value (“NAV”) between 1 July 2022 and 30 June 2023 are
highlighted in the graphs below:
Ordinary Shares
2016 C Share
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
4
Index
Page
Financial Metrics and Performance Summary
5 - 7
Company Overview
8
Chairman’s Statement
9 - 11
Strategic Report
12 - 22
Investment Report
23 - 29
Directors’ Report
30 - 33
- Statement of Directors’ Responsibilities
32 -33
Directors’ Biographies
34
Corporate Governance Report
35 - 42
Audit and Risk Committee Report
43 - 46
Statement of Compliance with the UK Code of Corporate Governance
47
Independent Auditor’s Report
48 - 55
Consolidated Statement of Comprehensive Income
56
Consolidated Statement of Financial Position
57
Consolidated Statement of Changes in Equity
58
Consolidated Statement of Cash Flows
59
Notes to the Financial Statements
60 - 97
Alternative Performance Measures
98 - 100
Company Information
101
List of Acronyms
102
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
5
FINANCIAL METRICS AND PERFORMANCE SUMMARY
Financial Metrics
NAV Total Return
1
The NAV total return measures how the NAV per Ordinary share and 2016 C share has performed over a
period, taking into account both capital distributions and dividends paid to shareholders. The NAV total return
achieved by the Group is detailed in the table below:
Period
Ordinary Shares
2016 C Shares
Year to 30 June 2023
(25.80)%
(2.71)%
3 year
2
(13.13)%
14.83%
Since inception
(31.40)%
(7.59)%
The NAV total return since inception is illustrated in the graph below:
Return of Capital
The investment objective of the Ordinary Shares and the 2016 C Shares is to realise all remaining assets in
a prudent manner consistent with the principles of good investment management and to return cash to
shareholders in an orderly manner. During the year ended 30 June 2023, the Company made a return of
capital on three separate occasions, as detailed below, returning a total of £21,358,540 to Ordinary
shareholders and £13,892,422 to 2016 C shareholders.
Ordinary Share
s
2016 C Shares
Record date
Amount
per Share
Amount returned to
s
hareholders
Amount
per Share
Amount returned to
s
hareholders
25 July 2022
1p
£3,559,75
7
5p
£6,946,211
5 December 2022
1.5p
£5,339,635
1.5p
£2,083,863
19 April 2023
3.5p
£12,459,148
3.5p
£4,862,348
1
Refer to pages 98 to 99 for the calculation of these alternative performance measures.
2
NAV total return over a 3-year period from 1 July 2020 to 30 June 2023.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
6
FINANCIAL METRICS AND PERFORMANCE SUMMARY (CONTINUED)
Financial Metrics (Continued)
Return of Capital (Continued)
Refer to note 14 for full details of the Company’s return of capital.
Post year-end, the Company made one further return of capital to Ordinary shareholders and 2016 C
shareholders. Refer to the Strategic Report and note 18 for further details.
Ongoing Charges
1
The ongoing charges for the year ended 30 June 2023 were 4.12% (30 June 2022: 2.60%).
Dividend History
With the Company in managed wind down, the Board does not intend to declare any further dividends. No
dividends were paid during the years ended 30 June 2023 and 30 June 2022.
Acquisition of Own Ordinary Shares
The Group did not repurchase any Ordinary Shares or 2016 C shares during the years ended 30 June 2023
and 30 June 2022. As at 30 June 2023 and 30 June 2022, no Ordinary Shares or 2016 C Shares were held
in treasury.
1
Refer to pages 99 to 100 for the calculation of this alternative performance measure.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
7
FINANCIAL METRICS AND PERFORMANCE SUMMARY (CONTINUED)
Performance Summary
1
Source: Bloomberg.
Sterling in millions, except per share data and
number of shares in issue
30 June 2023
30 June 2022
Number of
s
hares in
i
ssue
- Ordinary Shares
355,975,669
355,975,669
-
2016 C Shares
138,924,222
138,924,222
NAV
- Ordinary Shares
£24.71
£62.07
- 2016 C Shares
£11.50
£26.10
NAV per share
- Ordinary Shares
6.94p
17.44p
- 2016 C Shares
8.28p
18.79p
NAV total return per share
- Ordinary Shares
(25.80)%
(2.86)%
- 2016 C Shares
(2.71)%
1.81%
Share price
1
- Ordinary Shares
2.80p
6.00p
- 2016 C Shares
6.20p
11.08p
Share price discount
- Ordinary Shares
(59.
65
)%
(65.60)%
- 2016 C Shares
(25.12)%
(41.03)%
Market capitalisation
1
- Ordinary Shares
£9.97
£21.36
- 2016 C Shares
£8.61
£15.39
(Loss)/earnings
per share
- Ordinary Shares
(4.49)p
(0.73)p
-
2016 C Shares
(0.
51
)p
1.02p
Return of Capital during the year
- Ordinary Shares
£21.36
£28.48
- 2016 C Shares
£13.89
£58.35
Comprehensive
(loss)/income
- Ordinary Shares
£(16.00)
£(2.62)
- 2016 C Shares
£(0.71)
£1.42
Investments and other receivables and
prepayments
- Ordinary Shares
£20.35
£55.93
- 2016 C Shares
£5.88
£16.52
Cash and cash equivalents
- Ordinary Shares
£5.67
£7.72
- 2016 C Shares
£6.84
£10.95
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
8
COMPANY OVERVIEW
The investment objective and policy of the Company is set out in the Strategic Report.
Company
SLF Realisation Fund Limited
(formerly known as KKV Secured Loan
Fund Limited and SQN Asset Finance Income Fund Limited)
Incorporated in Guernsey on 28 May 2014.
Change of Name to SLF Realisation Fund Limited registered on 1 December
2021.
Registered Guernsey Closed-ended Collective Investment Scheme.
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 on 14 July
2014 for Ordinary Shares, 9 November 2015 for the first issuance of C
Shares (which were converted into Ordinary Shares on the 25 October 2016)
and 12 December 2016 for the second issuance of C Shares (the “2016 C
Shares”).
Registration number 58519.
Alternative Investment
FundRock Management Company (Guernsey) Limited
Fund Manager
(formerly known as Sanne Fund Management (Guernsey) Limited)
Regulated by the Guernsey Financial Services Commission under the
Protection of Investors (Bailiwick of Guernsey) Law 2020.
Incorporated in Guernsey with registration number 17484.
(the “AIFM”)
Details of other service providers are provided on page 101.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
9
CHAIRMAN’S STATEMENT
Introduction
I am pleased to provide shareholders with my third annual Chairman’s Statement, covering the period from 1
July 2022 to 30 June 2023. It has been another busy year with significant progress being made in achieving
the investment objective of the Company, namely to follow a realisation strategy and return capital to
shareholders.
I am pleased to report that the realisation program for both the Ordinary Share class and the 2016 C Share
class has made excellent progress, with returns of capital having been made during the year of 6p per
Ordinary Share (£21.4 million) and 10p per 2016 C Share (£13.9 million).
In addition, post year-end, we have returned a further 1p per Ordinary Share (£3.6 million) and 2.5p per 2016
C Share (£3.5 million).
In total, as at the date hereof, £90.8 million or 25.5p per share has been returned to Ordinary shareholders
and £100.7 million or 72.5p per share has been returned to 2016 C shareholders since the realisation program
began.
Performance
The NAV total return per Ordinary Share was (25.80)% and the NAV total return per 2016 C Share was (2.71)%
for the year ended 30 June 2023. Other key metrics were:
For the year ended 30 June 2023, the Company has reported a combined loss after tax of £16.7
million, compared to the combined loss after tax of £1.20 million for the year ended 30 June 2022.
The Ordinary Share NAV at 30 June 2023 was £24.71 million (6.94p per Ordinary Share) compared
to £62.07 million (17.44p per Ordinary Share) as at 30 June 2022.
The 2016 C Share NAV at 30 June 2023 was £11.50 million (8.28p per 2016 C Share) compared to
£26.10 million (18.79p per 2016 C Share) as at 30 June 2022.
Shareholder Engagement
The Board have engaged with shareholders over the reporting period, taking feedback and responding to
their recommendations where appropriate. Brett Miller has led this activity and will continue to do so as we
continue to wind down the Company.
Key Developments
A return of capital was announced in July 2022, with 1p per Ordinary Share and 5p per 2016 C Share
being returned to shareholders.
In July 2022, it was announced that Borrower 4 (an AD plant in Scotland) was refinanced and sold
and the Company received £2.7 million, plus the potential of a further £0.2 million deferred
consideration which was subsequently received. The loan had a fair value of £2.8 million as at 30
June 2022.
In October 2022, it was announced that a settlement agreement has been reached regarding
Borrower 5 within the Ordinary Share Class Portfolio, a US Solar Manufacturer which ceased
operating in early 2017 and had not restarted operations since then. The settlement agreement is in
regard of a Parental Guarantee from Shunfeng International Clean Energy Limited (the “Guarantor"),
Borrower 5's Hong Kong listed parent company at the time. Under the settlement agreement, the
Company received $2.55 million and 100 million shares of common stock in the Guarantor. Also
under the settlement agreement, the Company is entitled to receive either $1.8 million in cash or the
equivalent value in Guarantor shares of common stock at the Guarantor's option in October
2023.
The position had a fair value of £1.0 million as at 30 June 2022.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
10
CHAIRMAN’S STATEMENT (CONTINUED)
In October 2022, it was also announced that Borrower 19, a loan held within the Ordinary Share
portfolio, has experienced a negative credit event following the collapse of a business sales process
and the business being placed into administration by its management team. The valuation of
Borrower 19 as at 30 June 2022 was £2.5 million, representing 0.7p pence per Ordinary Share and
this amount has since been written off.
A further return of capital was announced in November 2022, with 1.5p per Ordinary Share and 1.5p
per 2016 C Share being returned to shareholders.
In March 2023, it was announced that Borrower 50 within the C Share Class portfolio, a fridge
recycling plant had refinanced. The position repaid in full at £3.5 million. It had a fair value of £3.8
million as at 30 June 2022, but the Borrower had since advanced £0.7 million in Interest and Principal
repayments post the June 2022 valuation.
Also in March 2023, it was announced that within the Ordinary Share Class portfolio, Borrowers 1
and 2, two anaerobic digestions plants located in Teesside had refinanced. The positions were
restructured and sold. Borrower 1 repaid the fund £6.3 million plus the potential for a further £0.5
million of deferred consideration to be adjusted for the completion balance sheet. Borrower 2 repaid
the fund £3.2 million plus the potential for a further £0.5 million of deferred consideration again to be
adjusted for the completion balance sheet. A further additional consideration is payable should the
plant achieve high output levels under the new owners over the coming 24 months, though this
appears unlikely at present. They had fair values of £10.6 million and £9.1 million respectively as
at 30 June 2022. The reduction in value reflected significant shortcomings uncovered during due
diligence and the failure of the plants to effectively increase output since June 2022.
A further return of capital was announced in March 2023, with 3.5p per Ordinary Share and 3.5p per
2016 C Share being returned to shareholders.
In May 2023, it was announced that within the 2016 C Share Class portfolio, Borrower 53 had
successfully repaid their facility. The position repaid in full £1.6 million. It had a fair value of £2.5
million as at 30 June 2022, but the borrower had advanced £0.9 million in interest and principal
repayments post the June 2022 valuation.
Post Year End
In July 2023, it was announced that Borrower 22, within the Ord Share Class portfolio, has repaid
£1.8 million, being a full repayment of the facility. The asset had a fair value of £1.8 million as at 30
June 2023 and £2.0 million as at 30 June 2022.
A further return of capital was announced in July 2023 with 1p per Ordinary Share and 2.5p per 2016
C Share being returned to shareholders
The Score So Far
In posing the question: “How is the realisation proceeding?” it is worth recalling the background. With effect
from 31 December 2020, the current Directors constituted a majority of the Board and from that point Brett
Miller had free rein to really work with the Portfolio Manager initially and then subsequently with the
Consultants and the employee on running off the portfolio and returning cash to shareholders. To date, the
results have been marginally quicker and slightly better than expected but there remains more work to be
done on a portfolio that comprises some very difficult assets, a large proportion of which are distressed.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
11
CHAIRMAN’S STATEMENT (CONTINUED)
At 31 December 2020, the share price of the Ordinary Shares was 16.5p bid and the 2016 C Shares was
34.8p bid. Since then, we have returned or announced a return of 25.5p a share in cash to the Ordinary
shareholders and 72.5p a share to the 2016 C shareholders. As of 26 September 2023, the Ordinary Shares
traded at 2.2p bid and the 2016 C Shares at 4.1p bid. That’s approximately an 68% return for the Ordinary
shareholders and an 120% return for the 2016 C shareholders. And there is still more work to do.
We have repeatedly represented to shareholders that we would aim to get back to them as much as possible
of the June 2020 NAV in cash. That NAV was prepared with the benefit of independent valuations for quite a
few names in the portfolio that the Portfolio Manager had determined were difficult to value. The 30 June
2020 NAV was 36.19p per Ordinary Share and 68.17p per 2016 C Share. We have therefore already returned
or will be returning circa 70.5% of the Ordinary NAV and 106.3% of the 2016 C Share NAV. Certainly for the
2016 C Share class that is significantly ahead of expectations at the outset and we remain confident about
being able to return more capital. In respect of the Ordinary Share class, progress has been slower than
expected largely due to the problems with Suniva and the AD plants but we remain optimistic about making
further progress.
Outlook
As can be seen from the paragraph above, the bulk of the realisations for the 2016 C Share class has been
completed and a substantial part of the Ordinary Share class has also been completed.
The Board expects
the wind-down plan for the bulk of what remains will likely take approximately 12 months to exit with a further
tail likely to take approximately a further 12 months. Our goal is to achieve a balance between maximising
value received for assets and making timely returns of capital. Whilst the realisation program has proceeded
extremely well so far and certainly ahead of expectations, we are cognisant of the greater risk that remains
in the balance of the portfolio, as whatever remains in the portfolio has not yet achieved a satisfactory exit.
The Board continues to work on achieving positive outcomes. The task ahead remains great and as always,
we shall keep investors informed of any developments as they occur. We thank investors for their continued
support and we hope to be in a position to report more progress in the coming months.
Brendan Hawthorne
Chairman
29 September 2023
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
12
STRATEGIC REPORT
This Strategic Report is designed to provide information about the Company’s business and results for the
year ended 30 June 2023. It should be read in conjunction with the Chairman’s Statement and the Investment
Report, which give a detailed review of investment activities for the year and an outlook for the future. These
include a review of the business of the Group and its core activities, the principal risks and uncertainties it
faces and results for the year.
Corporate Summary
The Company is a non-cellular company limited by shares, registered in Guernsey under the Companies
(Guernsey) Law 2008 (as amended) with registered number 58519. The registered office of the Company is
BNP Paribas House, St Julian’s Avenue, St Peter Port, Guernsey, GY1 1WA.
The Company is an authorised collective investment scheme in Guernsey, pursuant to the Protection of
Investors (Bailiwick of Guernsey) Law 2020. The Company’s Ordinary Shares and 2016 C Shares are listed
on the premium segment of the Official List of the UK Listing Authority and are admitted to trading on the
Main Market of the London Stock Exchange.
With effect from 1 October 2021, the Company ceased to be a member of the Association of Investment
Companies (the “AIC”) as the Directors decided not to renew the Company’s membership. The Directors
have decided to follow the UK Corporate Governance Code (the “UK Code”).
Significant Events during the Year Ended 30 June 2023
Return of Capital
The table below summaries the amounts returned to shareholders during the year:
Ordinary Share
s
2016 C Shares
Record date
Amount per
Share
Amount returned
to shareholders
Amount per Share
Amount returned
to shareholders
25 July 2022
1p
£3,559,757
5p
£6,946,211
5 December 2022
1.5p
£5,339,635
1.5p
£2,083,863
19 April 2023
3.5p
£12,459,148
3.5p
£4,862,348
Settlement Agreement
Borrower 5 within the Ordinary Share Class portfolio (as outlined in the Investment Report)
On 20 October 2022, the Board announced that a settlement agreement had been reached regarding
Borrower 5 within the Ordinary Share Class Portfolio, a US Solar Manufacturer which ceased operating in
early 2017 and had not restarted operations since then. The settlement agreement was in regard to a parental
guarantee from Shunfeng International Clean Energy Limited (the “Guarantor"), Borrower 5's Hong Kong
listed parent company at the time.
The Guarantor, SQN Asset Servicing, LLC (the “Agent") (on behalf of the other lenders within the syndicate),
and the Company agreed to settle with a cash payment of $3 million. As directed by the Agent, the Company
received $2.6 million (£2.3 million) and the other lenders received $0.45 million. In addition, the Company
received 100 million shares of common stock in the Guarantor, and in one year either $1.8 million in cash or
the equivalent value in Guarantor shares of common stock at the Guarantor's option. The investment had a
fair value of £1.0 million as at 30 June 2022.
Sale of Investments
Borrower 4 within the Ordinary Share Class portfolio (as outlined in the Investment Report)
On 12 July 2022, the Board announced that Borrower 4, an AD plant located in Scotland was restructured
and sold, repaying the fund £2.7 million plus the potential for a further £0.2 million of deferred consideration.
The investment had a fair value of £2.8 million as at 30 June 2022.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
13
STRATEGIC REPORT (CONTINUED)
Significant Events during the Year Ended 30 June 2023
(Continued)
Borrower 19 within the Ordinary Share Class portfolio (as outlined in the Investment Report)
On 21 October 2022, the Board announced that Borrower 19, had experienced a negative credit event
following the collapse of business sales process and the business being placed into administration by the
management team. As a result, the Company was liable for security and maintenance costs and forecast
costs relative to potential sales value resulted in a negative carrying value.
The risks associated with holding and selling the equipment were significant. A deal was agreed with the
administrator to sell the equipment and remove all current and future liabilities from the Company. The
Company has fully exited this position. The investment had a fair value of £2.5 million as at 30 June 2022.
Borrower 50 within the 2016 C Share Class portfolio (as outlined in the Investment Report)
On 14 March 2023, the Board announced that Borrower 50, a fridge recycling plant had refinanced. The
position repaid in full, £3.5 million. It had a fair value of £3.8 million as at 30 June 2022, the borrower advanced
£0.7 million in interest and principal repayments during the year ended 30 June 2023
.
Borrowers 1 and 2 within the Ordinary Share Class portfolio (as outlined in the Investment Report)
On 27 March 2023, the Board announced that Borrowers 1 and 2, two anaerobic digestions plants located in
Teesside had refinanced. The positions were restructured and sold.
Borrower 1 repaid the Company £6.3 million plus the potential for a further £0.5 million of deferred
consideration.
Borrower 2 repaid the fund £3.2 million plus the potential for a further £0.5 million of deferred consideration.
A further additional consideration is payable should the plant achieve high output levels under the new owners
over 24 months from the date of sale, the Board believe this is unlikely to be achieved.
The investments had a fair value of £10.6 million and £9.1 million respectively as at 30 June 2022. The
reduction in value reflected significant shortcomings uncovered during due diligence process and the failure
of the plants to effectively increase output since June 2022.
Borrower 53 within the 2016 C Share Class portfolio (as outlined in the Investment Report)
On 26 May 2023, the Board announced that Borrower 53 had repaid its facility in full, £1.6 million. It had a
carrying value of £2.5 million as at 30 June 2022, the borrower advanced £0.9 million in interest and principal
during the year ended 30 June 2023.
Annual General Meeting (“AGM”) held on 2 December 2022
All resolutions proposed at the AGM were passed.
21.91% of 2016 C shareholders voted against the repurchase of 2016 C Shares. Votes against a resolution
of
20% or more requires the Company to consult with shareholders on the reason and then publish a
response no later than 6 months after the AGM.
Update on votes received against the 2016 C Share Repurchase
On 19 May 2023, the Board announced that in regard to votes against the 2016 C Share repurchase
resolution, they had no current intention to undertake the repurchase of 2016 C Shares (or Ordinary Shares).
The Board seeks the authority to repurchase up to 14.99% of the issued 2016 C Share capital on an annual
basis, in line with market practice, to provide flexibility should the Board believe that share repurchases are
in the best interest of shareholders in the future. The Board will take no further action in this regard.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
14
STRATEGIC REPORT (CONTINUED)
Share Capital and voting rights
The Company’s issued share capital as at 30 June 2023 consisted of 355,975,669 Ordinary Shares and
138,924,222 2016 C Shares of no par value. The share capital of the Company is represented by an unlimited
number of shares of no par value. All shares hold equal voting rights with no restrictions and no shares carry
special rights with regard to the control of the Company. There are no special rights attached to the shares
in the winding up of the Company.
Please refer to note 13 for further information.
Subsidiaries and entities controlled by the Group
The Company’s subsidiaries are detailed in note 1. Brett Miller and David Copperwaite are the Directors of
all the Company’s subsidiaries, except for SQN Asset Finance (Ireland) Designated Activity Company (“SQN
Ireland”), as mentioned on the next page. Information of each Director is shown on page 34.
Effective 1 January 2022, the Company meets the definition of control under IFRS 10 – “Consolidated
Financial Statements” in respect to its investment holding in SQN Ireland. As such, the results for SQN Ireland
have been consolidated with the Group’s Audited Consolidated Financial Statements from this effective date.
The consolidation of SQN Ireland has had a limited impact on the NAV of the Group. The Board of SQN
Ireland are employees of its administrator, Cafico Corporate Services Limited (“Cafico International”).
Refer to note 2.1 for further detail.
Purpose
Ireland incorporated in the Republic of Ireland, and established for the primary purpose of acting as
investment holding companies. The Company’s purpose together with its subsidiaries is to realise all
remaining assets in the portfolio of the Ordinary Shares and the 2016 C Shares in a prudent manner
consistent with the principles of good investment management and to return cash to shareholders in an
Investment Objective and Investment Policy
Each share class has its own investment objective and investment policy, which are identical and are set out
below.
Investment Objective
The investment objective of the Ordinary Shares and the 2016 C Shares is to realise all remaining assets in
the portfolio of both share classes in a prudent manner consistent with the principles of good investment
management and to return cash to shareholders in an orderly manner.
Investment Policy
The Company will pursue the investment objective of the Ordinary Share Class and the 2016 C Share Class
by effecting an orderly realisation of the assets in a manner that seeks to achieve a balance between
maximising the value received from those assets and making timely returns of capital to shareholders. This
process might include sales of individual assets, mainly structured as loans and leases, or running off the
Ordinary Share and 2016 C Share portfolios in accordance with the existing terms of the assets, or a
combination of both.
As part of the realisation process, the Group may also exchange existing debt instruments for equity or other
securities where, in the opinion of the Board, the Group is unlikely to be able to otherwise realise such debt
instruments or will only be able to realise them at a material discount to the outstanding principal balance of
that debt instrument.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
15
STRATEGIC REPORT (CONTINUED)
Investment Objective and Investment Policy (Continued)
Investment Policy (Continued)
The Company, on behalf of the Ordinary Share Class or the 2016 C Share Class, will cease to make any new
investments or to undertake capital expenditure except where, in the opinion of the Board:
the investment is a follow-on investment made in connection with an existing asset held by the
Ordinary Share Class or the 2016 C Share Class in order to comply with the Group's pre-existing
obligations; or
failure to make the follow-on investment may result in a breach of contract or applicable law or
regulation by the Group; or
the investment is considered necessary by the Board to protect or enhance the value of any existing
investments of the Ordinary Share Class or the 2016 C Share Class to facilitate orderly disposals of
assets held by the Ordinary Share Class or the 2016 C Share Class.
Any cash received by the Company as part of the realisation process prior to its distribution to shareholders
will be held by the Company, on behalf of the Ordinary Share Class or the 2016 C Share Class, as cash on
deposit and/or as cash equivalents.
The Company does not intend to undertake any new borrowings on behalf of the Ordinary Share Class or the
2016 C Share Class, although the Company may borrow where, in the opinion of the Board, an investment
is considered necessary to protect or enhance the value of an existing investment and the Company does
not have the available equity capital to fund the investment. Any such borrowings are expected to be short-
term and would be repaid following the realisation of assets.
Any material change to the Investment objective and investment policy for the Ordinary Share Class or the
2016 C Share Class would require Ordinary Shareholder or 2016 C Shareholder approval in accordance with
the Listing Rules.
Significant Events after the Reporting Period
Return of Capital
On 20 July 2023, the Company announced the tenth return of capital which was paid to shareholders on 21
August 2023. This return of capital was effected by way of an issue and immediate redemption and
cancellation of 355,975,669 B Shares and 138,924,222 D Shares on 11 August 2023.
The table below summaries the amounts returned to shareholders:
Ordinary Shares
2016 C Shares
Record date
Amount per
Share
Amount returned
to shareholders
Amount per Share
Amount returned
to shareholders
10 August 2023
1p
£3,559,757
2.5p
£3,473,106
Asset Realisations
Borrower 22 within the Ordinary Share Class portfolio (as outlined in the Investment Report)
On 19 July 2023, the Board announced that Borrower 22 repaid £1.8 million, being a full repayment of the
facility. The investment had a fair value of £1.8 million as at 30 June 2023 and £2.0 million as at 30 June
2022.
Deferred consideration received and paid
Borrowers 1 and 2 within the Ordinary Share Class portfolio (as outlined in the Investment Report)
On 10 August 2023, deferred consideration in the sum of £328,222 was paid in regard to borrower 1 and
£785,326 was received in regard and to borrower 2.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
16
STRATEGIC REPORT (CONTINUED)
Financial risk management objectives and policies
The Board is responsible for the Company’s system of risk management and internal control and meets
regularly in the form of periodic Board meetings to receive reports from the Audit and Risk Committee and to
consider the effectiveness of such controls in managing and mitigating risk. The Audit and Risk Committee
considers the detail of the Risk Management Framework, and the risk reporting from the AIFM who has day-
to-day responsibility for the management of risk.
The Board confirms that it has reviewed the effectiveness of the Company’s system of risk management and
internal control for the year ended 30 June 2023, and to the date of approval of these Audited Consolidated
Financial Statements. The Board has taken into consideration the Financial Reporting Council (“FRC”)’s,
“Guidance on Risk Management, Internal Control and Related Financial and Business Reporting” to ensure
that the Company’s system of risk management and internal control is designed and operated effectively, in
line with best practice guidance provided by the FRC.
Principal Risks and Uncertainties
The Principal Risks facing the Company are as set out below.
Refer to note 17 for reference to financial risk
management disclosures, which explains in further detail the below risk exposures and the policies and
procedures in place to monitor and mitigate these risks.
The approach of the Audit and Risk Committee to the identification and management of risk is set out in more
detail in the Audit and Risk Committee Report. The Committee has, with the assistance of the AIFM and the
Administrator, established an internal control framework to provide reasonable but not absolute assurance
on the effectiveness of the internal controls operated on behalf of the Company by the service providers as
the management and administrative functions are outsourced to third parties. The Risk Framework is kept
under review.
When considering the total return of the Group, the Board takes account of the risk which has been taken to
achieve that return. The Board looks at numerous risk factors, an overview of which is set out below:
Principal
Risk
Description
Mitigating Factors
Counterparty
/Asset risk
The Company’s
performance is subject
to risks primarily
inherent to asset
financing; in particular,
the quality of the assets
underpinning the
transaction and the risk
of default by the
counterparties. This
may affect the
Company’s ability to
operate profitably.
No new investments have been made in the year.
Ongoing monitoring programmes are in place which allows the
Board, with the assistance of the Consultants and the
Company’s employee, to identify and address risks at an early
stage.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
17
STRATEGIC REPORT (CONTINUED)
Principal Risks and Uncertainties (Continued)
Principal
Risk
Description
Mitigating Factors
Valuation
Risk
Reliability of asset valuations is
considered a key risk.
Given the sector of investment, valuations
of
the
counterparties’
underlying
businesses,
and
assets
over
which
security exists, are calculated and rely
upon assumptions, using inputs such as
cash flows, discounts, security, profitability
and going concern assumptions.
The fair value of investments and any fair value
adjustments are assessed and agreed by the AIFM and
Board. The Board also engages the Consultants, who have
experience in the sector and are familiar with the valuation
process, to prepare the valuation of the investments held
in the portfolio. The Board can also engage professional
valuers if required.
Key
reporting
information
is
structured
within
the
transactions, to ensure that all necessary borrower data
can be accessed where required.
The Group’s investments are classified at fair value through
profit or loss. Refer to note 2.3 and note 9 for detail of key
estimates and assumptions applied by the Company when
considering valuation of investments held as at 30 June
2023.
Currency
Risk
The Company is invested in a global
portfolio and investments will not always
be in the base currency of the Company.
As a result, such investments will carry
currency risk, if the non-base currency
investments are not hedged.
The Board notes the potential for the volatility of Sterling,
which would require unencumbered cash to be used to
meet margin calls on a currency hedge and have
determined currency hedging is not in the best interest of
shareholders at this time. FX exposure is detailed in the
Investment Report and shareholders can make their own
hedging arrangement if they want to.
This is closely monitored by the Company and if deemed
appropriate,
the
hedging
transactions
will
be
re-
established.
Liquidity
risk
The Company’s investments are not
publicly traded or freely marketable. As a
result, there is likely to be a limited or no
secondary market to transact in.
Therefore, investments may be difficult to
value or sell, with a risk of any achievable
sale being at a value that is lower than the
current valuation of such assets.
With the Company being wound down, all remaining assets
in the portfolio are being disposed of in a prudent manner
consistent
with
the
principles
of
good
investment
management.
The Company seeks to maximise the values it receives
when realising or seeking repayment of investments.
Geopolitical
risk
The Company provides asset finance to
counterparties in several jurisdictions
exposing the Company to potential
economic, social, legal and political risks,
such as the Ukraine conflict. The Group
therefore faces significant risks as a result
of a financial crisis.
The Company was invested in a diversified portfolio across
a
wide
range
of
industry
sectors,
however
this
diversification has decreased as the Company is wound
down.
Significant events causing market volatility are closely
monitored, as are the impacts/potential impacts on the
positions and counterparties the Company is invested in.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
18
STRATEGIC REPORT (CONTINUED)
Principal Risks and Uncertainties (Continued)
Principal
Risk
Description
Mitigating Factors
Geopolitical
risk
(continued)
Ukraine Conflict
The Russian invasion of Ukraine has added to the
geopolitical and macro-economic uncertainties faced
by the Company. The invasion itself and resulting
international sanctions on Russia have caused
substantial economic disruption and had a negative
impact on the global economy. The conflict has
spurred further rises in already elevated oil, gas and
food prices that continue to drive inflation.
The Company has no direct exposure to Ukraine or
Russia and any impact on the Company’s cash flow is
not expected to be material.
Operational
risk
The Company is ultimately responsible for all
of its operations.
As at 30 June 2023, the Company has one
employee and for other services it enters into
contracts with its service providers, including
the Consultants, Administrator and AIFM, to
ensure
operational
performance
and
regulatory requirements are met.
The Company conducts thorough due diligence and
interviews each service provider prior to appointment.
Ongoing monitoring of service providers is carried out
through the regular reports service providers supply,
which include ongoing updates on all operational and
regulatory matters.
The
Management
Engagement
Committee
periodically
reviews
all
service
providers,
the
employee and the Consultants, aside from the auditor,
which is reviewed by the Audit and Risk Committee
.
Performance
risk
The performance of the Company is largely
determined by the success of the Board in
meeting or exceeding performance objectives
and
the
expectations
of
investors,
in
accordance with the objectives set out in the
Investment Policy.
The Board receives regular NAV information and cash
flows.
Regular announcements are provided to investors to
appraise them of company performance.
Emerging Risks
Principal risks, including emerging risks, are mitigated and managed by the Board through continual review,
policy setting and reviews of the Company’s risk matrix by the Audit and Risk Committee to ensure that
procedures are in place with the intention of minimising the impact of the above mentioned risks where
possible. The Board relies on periodic reports provided by the AIFM, Administrator, employee and
Consultants regarding risks that the Company faces. When required, experts will be employed to gather
information, including legal advisers and third-party valuation specialists.
The Board notes that rising interest rates as a result of the increased rate of inflation has led to a challenging
macro-economic environment. This is making it more difficult for borrowers to refinance as finance is not
readily available or not available at attractive interest rates.
The Company has not identified any other emerging risks as at 30 June 2023.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
19
STRATEGIC REPORT (CONTINUED)
Going Concern
As the Company is in managed wind down, the Audited Consolidated Financial Statements for the year ended
30 June 2023 have been prepared on a basis other than going concern. Refer to note 2.1 (b) for further
information.
Viability Statement
At least once a year the Directors are required to carry out a robust assessment of the principal and emerging
risks and make a statement which explains how they have assessed the prospects of the Company, over
what period they have done so and why they consider that period to be appropriate, taking into account the
Company’s current position and principal and emerging risks. The principal and emerging risks faced by the
Company are described on pages 16 to 18.
As detailed above, the Company is preparing the Audited Consolidated Financial Statements using a basis
other than going concern as the Company is in managed wind down. Accordingly, the Directors have not
assessed the longer-term viability of the Company other than for the managed wind down of the Company.
The Board expects the bulk of the portfolio to be realised within 12 months of the date of the approval of these
Audited Consolidated Financial Statements, although there will be a portion of the portfolio that will take longer
to realise, which would be subject to negotiations with the respective borrowers. Refer to the Investment
Report for further details on the realisation of the Company’s investments.
Life of the Company
The Company has an indefinite life, however as outlined above the Company is in managed wind-down.
Section 172(1) Statement
Although the Company is domiciled in Guernsey, the Board adheres to the UK Corporate Governance Code
and acknowledges its duty to comply with section 172(1) of the UK Companies Act 2006 to act in a way that
promotes the success of the Company for the benefit of its members as a whole, having regard to (amongst
other things and to the extent applicable):
a)
consequences of any decision in the long-term;
b)
the interests of the Company’s employees;
c)
need to foster business relationships with suppliers, customers and others;
d)
impact on community and environment;
e)
maintaining reputation for high standards of business conduct; and
f)
acting fairly as between members of the Company.
The Board considers this duty to be inherent within the culture the Company and a part of its decision-making
process.
The Company’s culture is one of openness, transparency and inclusivity. Respect for the opinions of its
diverse stakeholder’s features foremost, as does its desire to implement its operations in a sustainable way.
The principal decisions section on page 21 outlines decisions taken during the year, which the Board believe,
have been taken to meet the Company’s investment objective and policy. The Board considers the factors
outlined under section 172 and the wider interests of stakeholders as a whole in all decisions it takes on
behalf of the Company.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
20
STRATEGIC REPORT (CONTINUED)
Section 172(1) Statement (Continued)
Information on how the Board has engaged with its stakeholders is outlined below.
Stakeholder engagement
Stakeholder
How the Board engages
Shareholders
The Board recognises that it is important to maintain appropriate contact with all
shareholders to understand their issues and concerns. There is a programme of
contact with major shareholders and other shareholders are able to contact any
Director through the Company Secretary.
During the year, the Board engaged with its shareholders by:
1) publishing announcements;
2)
publishing half-yearly and annual reports and accounts;
3)
making themselves available to meet major shareholders as requested;
4)
obtaining shareholder feedback directly or via the Corporate Broker; and
5)
making themselves available to be contacted by shareholders.
Shareholders receive relevant information allowing them to make informed
decisions about their investments. The Board receives the views of shareholders
allowing it to consider these views throughout its deliberations.
During the year, considerable engagement with a wide range of shareholders took
place regarding the managed wind down of the Company in respect of both share
classes. No issues were raised by shareholders during the year and feedback on
the realisation programme has been positive.
Third party service
providers
The Board is reliant on third party service providers to help the Company operate
in a compliant and efficient manner.
During the year, the Board engaged with its service providers by:
1)
receiving detailed written and verbal reports at board meetings; and
2)
regular communication with representatives via telephone and email to
discuss ad hoc matters.
Undertaking an annual review via the Management Engagement Committee and
providing feedback, where appropriate, regarding service levels to service
providers.
External Auditor
The Board engages with the external auditor to ensure that the annual audit
process operates effectively, efficiently and predictably.
The Audit Committee meets with the auditor formally on a biannual basis and more
frequently where required. The auditor provides valuable feedback on the
Company and those of its service providers that have a delegated responsibility for
areas of accounting and internal control.
As noted further below and in the Audit and Risk Committee Report, the Audit and
Risk Committee has engaged extensively with Deloitte LLP to understand their
approach and requirements.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
21
STRATEGIC REPORT (CONTINUED)
Section 172(1) Statement (Continued)
Stakeholder engagement (Continued)
Stakeholder
How the Board engages
The wider
community and the
environment
The Board fully supports the growing importance placed on Environmental, Social
and Corporate Governance (“ESG”) factors when delivering against the
Company’s objectives. The Company has made significant investment in assets
such as AD plants, which should have a positive impact on the environment. The
Board and the AIFM, in managing the Company’s assets, are mindful of social,
ethical and environmental issues of companies within the Group’s portfolio,
acknowledging that companies failing to manage these issues adequately run a
long-term risk to the sustainability of their businesses. Given that the Company is
in wind down, the Company will not be making new investments but will continue
to follow good practice on ESG issues where applicable.
Principal decisions
Principal decision
Stakeholder considerations / interests
Realisation of investments
As part of the managed wind down of the Company, the Board continues
to realise investments in a manner that achieves a balance between
maximising the value received from investments and making timely
returns of capital to shareholders.
Return of Capital
During the year ended 30 June 2023, the Company made a return of
capital on three separate occasions, returning a total of £21,358,540 to
Ordinary shareholders and £13,892,422 to 2016 C shareholders.
Refer to note 14 for full details of the Company’s return of capital during
the year ended 30 June 2023 and note 18 for the return of capital
subsequent to the year ended 30 June 2023.
Employee engagement
As at 30 June 2023, the Company has one employee (30 June 2022: one employee), who provides
operational support to the Company. The Board believe in operating a supportive, co-operative and open
environment and the employee can raise any queries or concerns with them.
Business relationships
The Board considers its business relationships with stakeholders to be important and is proactive in fostering
these relationships. For details on the nature of these relationships and how the Company fosters
relationships with its stakeholders, refer to the stakeholder engagement section on pages 20 to 21. The Board
also considers the impact principal decisions have on its stakeholders, which is detailed in the principal
decisions section above.
Culture of the Company
The Board recognises that its tone and culture is important and will greatly impact its interactions with
shareholders and service providers. The importance of sound ethical values and behaviours is crucial to the
ability of the Company to achieve its corporate objectives successfully.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
22
STRATEGIC REPORT (CONTINUED)
Culture of the Company (Continued)
The Board individually and collectively seeks to act with diligence, honesty and integrity. It encourages its
members to express differences of perspective and to challenge but always in a respectful, open, cooperative
and collegiate fashion. The Board encourages diversity of thought and approach and chooses its members
with this approach in mind. The Corporate Governance principles that the Board has adopted are designed
to ensure that the Company delivers value to its shareholders and treats all shareholders equally. All
shareholders are encouraged to have an open dialogue with the Board.
The Board has adopted a code for Director dealings and a procedure for matters reserved for the Board and
matters delegated to service providers to ensure an appropriate and effective framework for implementation
and oversight. The Board intends to review its internal culture and that of its service providers on a regular
basis.
Environmental and social issues
The Company is a closed-ended investment company, which has one employee, and therefore its own direct
environmental impact is minimal. As the Company is a close ended investment company, the Group is
currently exempt from the requirement to report against the recommendations of the Task Force for Climate
Related Disclosures. The Board notes that the companies in which the Group invests will have a social and
environmental impact over which it has no control. As the Company is in managed wind down, the business
model is to actively realise assets in line with the investment policy and not make any new investments,
however the Board continue to follow good practice on ESG issues where applicable. The Board considers
that the impact of climate change does not give rise to a material impact on the Group’s Audited Consolidated
Financial Statements.
The Board holds all its meetings in Guernsey and, whilst Directors and service providers may travel to
Guernsey for quarterly meetings, the Group’s direct greenhouse gas emissions and environmental footprint
is believed to be negligible. However, many of the companies and projects in which the Group invests have
a very positive environmental footprint. The AD plants the Group finances use waste of many types to produce
sustainable fertilisers and electricity or gas, which are provided to the respective National Grids. Additionally,
our support for other renewable energy sources likewise provide alternative energy sources to fossil and/or
nuclear fuels. In these ways, the Board is pleased that the Group plays a positive part in the environmental
arena.
Future strategy
The Board seeks to achieve the objectives set out in the investment objective and policy, to deliver a
realisation strategy and return capital to shareholders whilst also protecting capital values.
The Board expects the bulk of the portfolio to be realised within 12 months of the date of the approval of these
Audited Consolidated Financial Statements, although there will be a portion of the portfolio that will take longer
to realise .
This Strategic Report was approved by the Board of Directors on 29 September 2023 and signed on its behalf
by:
Brendan Hawthorne
David Copperwaite
Chairman
Director
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
23
INVESTMENTS REPORT
Overview
Realisations continued throughout the year at a strong pace with negotiations in place as described further
below. The key disposals were the non-farm scale AD plants located in Scotland and Teesside. The remaining
positions were either in the process of being refinanced or have limited ability or desire to do so, as is
described below.
The Company’s efforts to optimise the return of capital to shareholders resulted in £35.3 million being returned
to shareholders during the year. All distributions were paid as capital returns, as opposed to dividends, which
were suspended in March 2020. No foreign exchange (“FX”) hedging has been undertaken during the
reporting period with non-GBP balances converted into GBP at the soonest opportunity.
With few exposures left, future redemptions will be very credit specific. The outcomes for these credits in
many cases is highly uncertain and therefore a very wide dispersion of likely returns exists.
We highlight Borrower 19, which transitioned from an asset to a liability as the lessee entered insolvency with
no restructuring found. The Company is typically the owner of equipment that is broadly immovable, with little
alternative use, but subject to environmental and health and safety legislation. In this case the assets
contained radioactive sources, which required very specialist security, handling and disposal.
The FX exposures in the portfolio as at 30 June 2023 were:
FX Exposures
(in millions)
Fair value
Ordinary Share
Original Currency
GBP
GBP
6.4
6.4
EUR
12.9
11.1
USD
0.4
0.3
HKG
2.0
0.2
2016 C Share
Original Currency
GBP
GBP
3.0
3.0
EUR
5.9
5.1
Market backdrop
Economic and political uncertainty, rising interest rates and inflation provides a headwind for most businesses.
Interest rates rose significantly during the financial year. This increase means that the fixed rates charged by
the company are now much closer to bank rates.
Inflation remains a concern for most borrowers, as they seek to pass cost pressures through to customers.
The Ordinary Share Class and 2016 C Share Class Portfolios
As the portfolio is in wind down, all borrowers are asked to repay debt where possible and the Company
seeks to refinance such debt or facilitate sale of other investments. The Company returns capital to
shareholders via capital repayments.
Dividends
No dividends were distributed during the reporting period. However, it should be noted that the Company was
able to continue capital distributions to shareholders as loans were refinanced or matured. In the year, £21.4
million was returned to Ordinary shareholders and £13.9 million returned to 2016 C shareholders.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
24
INVESTMENT REPORT (CONTINUED)
Ordinary Share Class
Borrower
FV at 30
Jun 23
£m
FV at 30
June 22
£m
Change
in FV
£m
Asset
Type
Asset Class
Currency
Grade
Borrower 1
-
*
10.6
(
10.
6
)
*
Finance
Lease
Anaerobic
Digestion
GBP
10: Loss
Borrower 2
0.8*
9.1
(8.3)*
Finance
Lease
Anaerobic
Digestion
GBP
10: Loss
Borrower 4
Closed
2.8
(2.8)
Finance
Lease
Anaerobic
Digestion
GBP
10: Loss
Borrower 5
0.3
1.0
(0.7)
Term
Loan
Manufacturing
USD
10: Loss
Borrower 6
1
1
.
1
17.
3
(6.
2
)
Term
Loan
Manufacturing
EUR
8: Extremely
high risk
Borrower 19
Closed
2.5
(2.5)
Finance
Lease
Manufacturing
GBP
10: Loss
Borrower 20
0.
2
1.4
(
1.
2
)
Revolving
Loan
Wholesale
Portfolios
GBP
10: Loss
Borrower 21
-
-
-
Term
Loan
Medical
USD
10: Loss
Borrower 22
1.
8
2.0
(0.
2
)
Finance
Lease
Anaerobic
Digestion
GBP
5: Acceptable
risk
Borrower 23
0.7
1.3
(0.6)
Finance
Lease
Anaerobic
Digestion
GBP
10: Loss
Borrower 24
1.
0
2.0
(
1
.
0
)
Finance
Lease
Anaerobic
Digestion
GBP
5: Acceptable
risk
Borrower 26
0.7
0.9
(0.2)
Finance
Lease
Wind Turbines
GBP
7: High risk
Borrower 61
1
.
2
3.0
(
1
.
8
)
Deferred
Payment
CHP
GBP
10
:
Loss
Total
1
7
.
8
53.
9
(3
6
.
1
)
*
Borrower’s 1 and 2 were both restructured and sold during the year, net deferred consideration remained
outstanding as at 30 June 2023.
Equity Holdings and other Investments
Borrower*
FV at 30 June
2023
£m
FV at 30 June
2022
£m
Change in
FV
£m
Investment Type
Asset Class
Currency
Borrower 38
-
-
-
Equity
Medical
USD
Borrower 39
Closed
0.5
(0.5)
Equity
Helicopters
USD
Borrower 62
-
-
-
Equity
Technology
GBP
Borrower
63
0.2
n/a
0.2
Equity
Electronic
Utilities
HKG
Total
0.2
0.5
(
0.
3)
* Used Borrower terminology to be consistent throughout report, however these are Equity assets.
Credit Assumptions - AD Assets
All AD assets are now either disposed of or in a refinance process. There are also some residual claims which
are described in more detail below.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
25
INVESTMENT REPORT (CONTINUED)
Position
FV Discount
Rate
Risk Grade
Security Type
Borrower 1
7.75%
10
AD Asset
Deferred consideration remained outstanding.
The completion accounts amount of £328,222 was paid on 10 August 2023.
The performance element is due May 2025. Given recent performance this appears unlikely to be
material.
Borrower 2
7.75%
10
AD Asset
Deferred consideration remained outstanding.
The completion accounts amount of £785,326 was received on 10 August 2023.
The performance element is due May 2025. Given recent performance this appears unlikely to be
material.
Borrower 22
8.0
-
9.0%
5
AD Asset
Secured against 0.5MW farm scale AD plant in Northern Ireland.
Performing AD asset with over 12 months of stable energy output.
The Company’s position was successfully refinanced in July 2023 resulting in a full exit.
Borrower 23
8.5%
-
9.5%
10
AD Asset
Secured against 0.5MW farm scale AD plant in Northern Ireland.
The facility is in default (risk grade 10).
The company holds a 50% share.
A refinancing exercise is currently underway, expected to close in December.
Borrower 24
8.0
-
9.0%
5
AD Asset
Secured against a 0.5MW AD plant in Northern Ireland.
The company holds a 50% share.
A refinancing exercise is currently underway, expected to close in December.
Borrower 61
20%
10
AD Asset
This exposure is the deferred consideration from closing out an AD asset in the Republic of Ireland.
The assets secured against have seen a deterioration in value as the Northern Ireland market moves
away from government subsidies towards direct injection to the gas grid driven in part by higher gas
values.
An exit is being negotiated to finalise the position in quarter 3.
Non-AD Assets
Position
FV Discount
Rate
Risk Grade
Security Type
Borrower 5 and 63
20%
10
High Risk
Former Solar Manufacturer.
The Company may be liable for potential further expenses for removal
of equipment.
Parental guarantee legal case settled in 2022, deferred consideration expected in late 2023.
The Borrower is removing the equipment as it is planning to restart operations with new machinery,
and the existing equipment is of negative value after removal costs.
Highly uncertain cash flows with limited value assigned.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
26
INVESTMENT REPORT (CONTINUED)
Position
FV Discount
Rate
Risk Grade
Security Type
Borrower 5 and 63 (Continued)
20%
10
High Risk
As part of the settlement of the parental guarantee case, the Company received 100 million shares
in the Guarantor’s stock. Whilst the stock is listed on the Hong Kong stock market, the shares appear
to be highly illiquid with little evidence of meaningful trading activity, there are no institutional
shareholders, and the share price is in sustained decline.
The Guarantor has been going through a very protracted period of restructuring and negotiations with
its creditors and appears to be balance sheet insolvent, however, it is still trading. The Guarantor’s
latest annual financial report and accounts for the year to December 2022, were qualified by the
auditors “
because of the material uncertainty relating to the going concern basis…. we have not been
able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these
consolidated financial statements.”
Additional shares or cash at the option of the Guarantor are also due in October 2023.
Borrower 6
20
%
8
Fixed Asset
Security includes glass manufacturing equipment based in France.
In quarter 4 2021, the management team informed the Company that due to transformational project
issues and raw material price inflation the Borrower was forecasting a cash flow squeeze throughout
FY22 and into FY23. The company’s key creditors, which includes the Company, agreed to support
the company by restructuring their respective positions.
The Company agreed to restructure the repayment profile and extend the maturity of the facility from
mid-2023 to mid-2024. Since the restructure the agreed payment schedule has been met.
The Borrower is still exposed to inflationary pressures, but the management team have been
managing these and the business is currently performing in line with their forecast budget.
However, there remains high uncertainty in relation to the Borrower’s ability to pay the final bullet
payment in mid-2024. The Borrower’s ability to repay is dependent on them finding alternative
finance. With continued inflationary pressures and consumer confidence headwinds finding attractive
alternative finance could be challenging.
In FY 2023 the Company was successful in taking steps to simplify the transaction.
Borrower 20
20%
10
Realisable
Secured against a wholesale portfolio of working capital SME loans.
The portfolio is in run off as the sponsor entered administration. The company is currently working
with the administrator to collect the loans outstanding.
A two-year agreement was made for servicing the portfolio, with more aggressive action being taken
against the underlying pool.
Material amortisation has occurred so far.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
27
INVESTMENT REPORT (CONTINUED)
Position
FV Discount
Rate
Risk Grade
Security Type
Borrower 21 & 38
20%
10
High Risk
Non-specialist hospital equipment, with uncertain value.
Hospital closed on 30 June 2022. Attempts to sell the hospital had failed, and the owner could no
longer finance ongoing losses.
In June 2023, owners informed us that a potential sale, which included the purchase of the
Company’s assets, had fallen through.
A sale of the equipment will likely result in negligible or negative return, after selling costs.
Borrower 26
20%
7
Fixed Asset
Two wind energy assets with two leases.
Both leases are now performing as to schedule.
During the year, the Borrower chose not to refinance on terms offered by the Company, and continues
to pay both leases, which are performing with no arrears.
Cash flows assumed from the initial schedule.
Borrower 62
20%
10
High Risk
Equity position from sale of hotel technology provider facilities.
No recent cash flow or balance sheet has been provided, therefore unable to assume any cash flows.
Closed Transactions
Facility
Fair Value
Jun
202
2
Description
Borrower 4
£2,846k
The Company sold the equipment for an upfront consideration of £2,671k
in July 2022. £200k deferred consideration received in April 2023.
Borrower 19
£2,447k
In the first half of 2023 the lessee fell into administration. As a result, the
Company was liable for security and maintenance cost. Forecast costs
relative to potential sales value (as advised by sales agent) resulted in a
negative carrying value (£266k).
Additionally, the risks associated with holding and selling the equipment
were significant. A deal was agreed with the administrator to sell the
equipment and remove all current and future liabilities from the Company.
The Company is now fully exited this position.
Borrower 22
£1,959k
The Company’s position was successfully refinanced in July 2023
resulting in a full exit.
Borrower 39
£500k
The contract was turned into a deferred payment schedule, which
completed in full in in July 2022. The Company has fully exited this
position.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
28
INVESTMENT REPORT (CONTINUED)
2016 C Share Class
Borrower
FV on 30
Jun
e
2
3
£m
FV on 30
June
22
£m
Change
in
FV
£m
Asset Type
Asset Class
Currency
Grade
Borrower 44
0.8
2.3
(1.5)
Revolving Loan
Wholesale
GBP
10: Loss
Borrower 45
0.5
0.9
(0.4)
Finance Lease
Manufacturing
EUR
10: Loss
Borrower 46
4.6
5.3
(0.7)
Term Loan
Aviation
EUR
10: Loss
Borrower 50
Closed
3.8
(3.8)
Finance Lease
Waste
Processing
GBP
5: Acceptable risk
Borrower 52
2.2
3.0
(0.8)
Finance Lease
Waste
Processing
GBP
5: Acceptable risk
Borrower 53
Closed
2.5
(2.5)
Term Loan
Construction
GBP
5: Acceptable risk
Borrower 59
Closed
0.1
(0.1)
Finance Lease
Marine
GBP
6: Borderline risk
Total
8.1
17.9
(9.8)
Position
FV Discount
Rate
Risk Grade
Security Type
Borrower 44
20%
10
Realisable
Secured against a wholesale portfolio of working capital SME loans.
The portfolio is in run off as the sponsor entered administration. The company is currently working
with the administrator to collect the loans outstanding.
A two-year agreement was made for servicing the portfolio, with more aggressive action being taken
against the underlying pool.
Material amortisation has occurred so far.
Borrower 45
20%
10
High Risk
Secured against car engine manufacturing equipment. Currently in liquidation.
Protracted Insolvency process has prevented sale to date.
In June 23 the liquidation of the equipment started, with sales taking place and proceeds being
returned to the Company from early July.
The process is likely to take several months but is expected to complete before the end of 2023.
Borrower 46
10%
10
Realisable
Exposure secured against a modern AW169 Helicopter via a German mortgage.
The Owner/Borrower secured a long-term lease contract for the helicopter and has agreed indicative
terms with a new lender to refinance the Company’s facility.
The refinance is expected to complete in quarter 4 of 2023. Given the increase in interest rates and
the credit quality of Owner/Borrower the new lender is only prepared to lend a certain quantum, which
will mean the Company will take a haircut on its position.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
29
INVESTMENT REPORT (CONTINUED)
Borrower 52
13.76%
5
Fixed Asset
Secured against a performing waste recycling plant.
Refinancing options were presented and discussed with management, but with the movement
interest rates and the relatively short time until this facility matures (mid-2025), management did not
want to pursue alternative finance given the amount of work and cost involved.
Management have indicated they will keep and service the facility to maturity.
The borrower has faced moderate cashflow difficulties in the past, however they are currently making
payments in line with the current schedule.
Facilities Closed
Facility
Fair Value
June 202
2
Description
Borrower 50
£3,762k
Facility secured against a fridge recycling plant located in
Gateshead. Borrower successfully refinanced and repaid the
Company’s facility in full.
Borrower 53
£2,512k
Facility secured against seven junior participations in public-
private partnership contracts. Borrower successfully repaid
the Company’s facility in full.
Borrower 59
£113k
Facility matured and repaid fully.
Outlook
At the time of writing, the economic climate appears weak combined with high inflation and interest rates. We
will therefore keep the facilities under regular review.
Brett Miller
Director
29 September 2023
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
30
DIRECTORS’ REPORT
The Directors present the Annual Report and Audited Consolidated Financial Statements of the Group for the
year ended 30 June 2023.
Statement as to Disclosure of Information to the Auditor
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are
each aware, there is no relevant audit information of which the Company’s auditors are unaware and that
they have taken the steps that they ought to have taken as Directors to make themselves aware of any
relevant audit information and to establish that the Company’s auditors are aware of that information.
Fair, Balanced and Understandable
In assessing the overall fairness, balance and understandability of the Annual Report and Audited
Consolidated Financial Statements, the Board has performed a comprehensive review to ensure consistency
and overall balance.
Board of Directors
The Directors of the Company as at the year-end and up to the date of this report were:
Brendan Hawthorne (Chairman)
Brett Miller
David Copperwaite
The biographical details of the Directors in office at the year-end are provided on page 34.
Directors’ Interests
The Directors of the Company as at the year-end and up to the date of approval of this report held the following
interests in the Company’s share capital:
Director
Number of Ordinary Shares
Number of 2016 C Shares
Brendan Hawthorne
-
-
Brett Miller
2,000,000
400,000
David Copperwaite
1,000,000
-
Notifications of Shareholdings
In accordance with Chapter 5 of the Disclosure Guidance and Transparency Rules (which covers the
acquisition and disposal of major shareholdings and voting rights), the following shareholders that had an
interest of greater than 5% in the Company’s issued share capital as at 30 June 2023:
Percentage of total
voting rights
Res Privata
6.30%
Rath Dhu
5.48%
The Company received the following notification during the period 1 July 2023 to 29 September 2023:
Percentage of total
voting rights
Res Privata
10.58%
Rathbones Investment Management Ltd
5.67%
Ordinary Share and 2016 C Share Buybacks
At the class meetings held on 2 December 2022, the Directors were granted authority to repurchase
53,360,753 Ordinary Shares and 20,824,741 2016 C Shares (being equal to 14.99% of the number of
Ordinary Shares and 2016 C Shares in issue) for cancellation. This authority will expire upon the date of the
next AGM unless previously renewed, varied or revoked by the Company in a general meeting.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
31
DIRECTORS’ REPORT (CONTINUED)
Ordinary Share and 2016 C Share Buybacks (Continued)
The Directors intend to seek annual renewal of this authority from the shareholders. Pursuant to this authority,
and subject to the Companies (Guernsey) Law, 2008, as amended (“Companies Law”) and the discretion of
the Directors, the Company may purchase Ordinary Shares and 2016 C Shares in the market if they believe
it to be in shareholders’ interests. No Ordinary Shares or 2016 C Shares were repurchased by the Company
during the year ended 30 June 2023.
Indemnities
To the extent permitted by Companies Law, the Company’s Articles provide an indemnity for the Directors
against any liability except such (if any) as they shall incur by or through their own breach of trust, breach of
duty or negligence.
During the year ended 30 June 2023 and up to the date of this Annual Report, the Group has maintained
insurance cover for its Directors under a Directors and Officers’ liability insurance policy.
2022 AGM
The AGM was held in Guernsey on 2 December 2022. The notice for the AGM set out the ordinary resolutions
to be proposed at the meeting. Separate resolutions were proposed for each substantive issue.
Voting on all resolutions at the AGM was by poll. The proxy votes cast, including details of votes withheld
were disclosed to those in attendance at the meeting and the results were published on the website and
announced via the RNS on 2 December 2022. All resolutions were passed.
The Directors welcome communication with all shareholders and can be contacted in writing at the
Company’s registered office, which can be found on page 101.
One-Off Bonus and Incentive Plan
Bonus payments
At the AGM held on 29 November 2021, shareholders approved a one-off cash bonus of £280,000 to the
Directors, payable in such proportions as the Directors determined to recognise their achievements to 30
June 2021 in achieving the aims of the Company’s investment objective of a managed wind down.
£140,000 of the bonus was paid to the Directors in the year ended 30 June 2022, with a payable of £140,000
as at 30 June 2022. £140,000 was paid to the Directors in the year ended 30 June 2023 as a further £30
million had been returned to shareholders.
Incentive plan
Shareholders at the AGM held on 29 November 2021, approved an incentive plan (the “Incentive Plan”).
The structure of the Incentive Plan is for a bonus pool to be created for the Board (excluding David
Copperwaite as the independent Director), employees and consultants of the Company (both present and
future) comprising cash equivalent to 1.4% of the aggregate funds distributed to shareholders since 1 July
2021 for a period up to 31 December 2023, following which the amount shall fall to 1.0% of aggregate funds
distributed to shareholders for the period from 1 January 2024 to 30 June 2024 and will thereafter reduce by
a further 0.2% every 3 months (the "Bonus Pool"). The precise allocation of the Bonus Pool will be at the
discretion of the Board, subject to the approval of David Copperwaite as the independent Director. The Board
will not distribute more than 50% of the Bonus Pool until the net assets of the Company fall below £20 million
and no part of the Bonus Pool will be paid out until a minimum of £80 million has been returned to shareholders
cumulatively since 1 July 2021. The Bonus Pool has been capped at £2.3 million.
As at 30 June 2023, the incentive fee provision was £1,959,222 (30 June 2022: £2,266,001).
Borrowing
The Group does not have any external borrowings (30 June 2022: none).
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
32
DIRECTORS’ REPORT (CONTINUED)
Events after the Reporting Period
Refer to page 15 of the Strategic Report and note 18 for further details on events after the reporting period.
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report and Audited Consolidated Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law,
they have elected to prepare the financial statements in accordance with International Financial Reporting
Standards as adopted by the European Union and applicable law.
The financial statements are required by law to give a true and fair view of the state of affairs of the Company
and of its profit or loss for that period.
In preparing these Audited Consolidated Financial Statements, the Directors are required to:
select suitable accounting policies and apply them consistently;
make judgements and estimates that are reasonable, relevant and reliable;
state whether applicable accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
assess the Company’s ability to continue as a going concern, disclosing, as applicable, matters
related to going concern; and
use the going concern basis of accounting unless they either intend to liquidate the Company or to
cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain
the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group
and enable them to ensure that its Audited Consolidated Financial Statements comply with the Companies
(Guernsey) Law, 2008. They are responsible for such internal control as they determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard
the assets of the Group and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information
included on the website and for the preparation and dissemination of the Audited Consolidated Financial
Statements. Legislation in Guernsey governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the Annual Report and Audited Consolidated
Financial Statements
We confirm that to the best of our knowledge:
the Audited Consolidated Financial Statements, prepared in accordance with International Financial
Reporting Standards (“IFRS”) as adopted by the European Union, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group; and
the Directors’ Report
includes a fair review of the development and performance of the business and the
position of the issuer, together with a description of the principal risks and uncertainties that they face.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
33
DIRECTORS’ REPORT (CONTINUED)
Statement of Directors’ Responsibilities (Continued)
We consider the Annual Report and Audited Consolidated Financial Statements, taken as a whole, are fair,
balanced and understandable and provides the information necessary for shareholders to assess the Group’s
position and performance, business model and strategy.
By order of the Board
Brendan Hawthorne
David Copperwaite
Chairman
Director
29 September 2023
29 September 2023
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
34
DIRECTORS’ BIOGRAPHIES
David Copperwaite (Non-Executive Director)
David Copperwaite, a resident of Guernsey, is on the board of directors of a number of investment funds
operated by various financial groups. These investment funds include multi-functional investment, venture
capital, direct lending, distressed and non-performing debt together with substantial private equity investment
entities, involving financial service companies, insurance broking, banking and real estate development.
Mr Copperwaite has over 50 years' experience in the financial services sector working for Standard Bank
between 1965 and 1973 followed by Lloyds Bank International Limited between 1973 and 1997. In that time,
Mr Copperwaite held a number of positions including Principal Manager (Sterling European Region) between
1988 and 1997. In that role he was responsible for all international private banking operations in Guernsey,
Jersey, Gibraltar and London (Mayfair) and these covered the areas of banking, investment funds (open-
ended, split capital and closed), cash and money management, secured and unsecured lending, offshore
trusts and company management. Mr Copperwaite is a former Chairman of The International Bankers
Association.
Brendan Hawthorne (Non-Executive Chairman)
Mr Hawthorne is an experienced non-executive director and chairman with significant work-out experience in
the listed and private equity environments. He has been involved in the running off and realisation of
numerous listed funds across a wide range of asset classes. He has more than 25 years’ experience as an
asset recovery specialist and is frequently invited to join or chair boards where a form of orderly wind down
is indicated.
Brett Miller (Director)
Brett presently serves as a director of the following publicly listed companies: Manchester and London
Investment Trust plc and Secured Income Fund plc. He is also a director of a number of unlisted and/or
private companies.
Brett has wide ranging closed end fund and investment trust/investment company experience both as an
investor and in managing or serving on boards of closed ended funds. He has been involved (as executive
and non-executive director) in the management and in some cases, the running off and realisation, of
numerous LSE and AIM listed closed end funds across a wide range of asset classes including (but not limited
to) HWSI Realisation Fund Limited, The Local Shopping REIT plc, China Growth Opportunities Fund,
Loudwater Trust plc, Rapid Realisations Fund Limited, Ranger Direct Lending Fund plc, and EIH plc. He has
considerable expertise in restructuring and re-aligning management incentives and aligning shareholder and
managerial interests for both ongoing and realisation situations.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
35
CORPORATE GOVERNANCE REPORT
Introduction
The Board is committed to high standards of corporate governance and has put in place a framework for
corporate governance, which it believes, is appropriate for an investment company.
Compliance with Corporate Governance Codes
With effect from 1 October 2021, the Company ceased to be a member of the AIC and the Directors decided
to follow the UK Code.
The Guernsey Financial Services Commission has confirmed that companies that report against the UK Code
are deemed to meet the Guernsey Code of Corporate Governance (the “Guernsey Code”). The UK Code is
available from the FRC website (
www.frc.co.uk
).
Throughout the year ended 30 June 2023, the Company has complied with the recommendations of the UK
Code and by default the Guernsey Code, except to the extent highlighted below:
Appointment of a Senior Independent Director (provision 12).
Chairman is also the chairman of the Audit and Risk Committee (provision 24).
Going concern basis for accounting (provision 30).
Provision 12: No Senior Independent Director has been appointed. The Board does not therefore maintain a
document setting out the responsibilities of the Senior Independent Director. All Directors have different
qualities and areas of expertise on which they lead, and concerns can be conveyed to the Chairman, or
another Director if shareholders do not wish to raise concerns with the Chairman.
Provision 24: The Chairman is also Chairman of the Audit and Risk Committee. In view of the Company being
in managed wind down, the Board consider this appropriate given the Board’s size and Mr Hawthorne’s
significant financial expertise and independence from executive management of the Company.
Provision 30: These Audited Consolidated Financial Statements have been prepared on a basis other than
going concern as the Company is in managed wind down.
The Group complies with the corporate governance statement requirements pursuant to the UK FCA
Disclosure and Transparency Rules by virtue of the information included in the Corporate Governance section
of the Annual Report.
The Board believes that this Annual Report and Audited Consolidated Financial Statements presents a fair,
balanced and understandable assessment of the Group’s position and prospects, and provides the
information necessary for shareholders to assess the Group’s performance, business model, strategy,
principal risks and uncertainties.
Board Independence, Composition and Diversity
Brett Miller was appointed as a Director on 16 September 2020. David Copperwaite was appointed as a
Director on 31 December 2020. Brendan Hawthorne was appointed as Chairman of the Board on 24 February
2021. The biographical details of the Directors are listed on page 34 and demonstrate a breadth of investment,
accounting, banking and professional experience.
Brendan Hawthorne and David Copperwaite are considered independent. Brett Miller is not considered
independent by virtue of his role in managing the portfolio and disposal of the assets of the fund in the wind
down period.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
36
CORPORATE GOVERNANCE REPORT (CONTINUED)
Board Independence, Composition and Diversity (Continued)
Given the Company has entered the wind-up phase in its life cycle, the Directors consider that there are no
factors, as set out in Provision 10 of the UK Code, which compromise the Chairman’s or the other Non-
Executive Director’s independence and that all Directors contribute to the affairs of the Company in an
adequate manner. The Board reviews the independence of all Directors periodically.
The Board values the importance of diversity to the effective functioning of the Board.
The Board notes the diversity targets prescribed by Listing Rule 9.8.6R (9)(a), to have at least 40% female
representation on its Board and a target of one Board member from a minority ethnic background. The Board
does not meet these requirements, but notes the Company is in a managed wind down and does not believe
that changes to the Board are in the best interest of the Company during the wind down phase.
Directors’ Duties and Responsibilities
The Directors have adopted a set of reserved powers, which establish the key purpose of the Board and
detail its major duties. These duties cover the following areas of responsibility:
statutory obligations and public disclosure;
approval of key investment and disposal decisions;
strategic matters and financial reporting;
Board composition and accountability to shareholders;
risk assessment and management, including reporting, compliance, monitoring, governance and
control; and
other matters having material effects on the Group.
These reserved powers of the Board have been adopted by the Directors to demonstrate clearly the
importance with which the Board takes its fiduciary responsibilities and as an ongoing means of measuring
and monitoring the effectiveness of its actions.
The Board meets at least four times each year, monitors the Group’s share price and NAV, and regularly
considers ways in which to enhance the return of capital to investors during the winding up of the Group.
The
Board is responsible for the safeguarding of the assets of the Group and taking reasonable steps for the
prevention and detection of fraud and other irregularities. The Company Secretary also ensure that all
Directors receive, in a timely manner, all relevant management, regulatory and financial information relating
to the Group. Directors unable to attend a Board meeting are provided with the Board papers and can discuss
issues arising in the meeting with the Chairman or another Director.
Individual Directors may, at the expense of the Group, seek independent professional advice on any matters
that concerns them in the furtherance of their duties.
Board and Committees
The Board has established three committees:
the Audit and Risk Committee;
the Management Engagement Committee, and
the Remuneration and Nomination Committee.
The responsibilities of these Committees are described below. Each Committee reports to and is subject to
the oversight of the Board. Terms of reference for each Committee have been approved by the Board and
are available in full on the Company’s website.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
37
CORPORATE GOVERNANCE REPORT (CONTINUED)
Board and Committees (Continued)
Board
Responsibilities:
Statutory obligations and public disclosure.
Approval of key investment decisions.
Strategic matters and financial reporting.
Board composition and accountability to shareholders.
Risk assessment and management, including reporting,
compliance, monitoring, governance and control.
Responsible for consolidated financial statements.
Other matters having material effects on the Group.
Audit and Risk Committee
Management Engagement Committee
Delegated Responsibilities:
Review the consolidated financial statements,
including review of the accounting policies and
methods utilised.
Review the effectiveness and internal control
policies and procedures over financial reporting
and identification, assessment and reporting of
risk.
Make recommendations to the Board in relation
to appointment, re-appointment and removal of
external auditors, approving remuneration and
terms of engagement of external auditors and
assess the effectiveness of the audit process.
To monitor risk management and internal
control
systems
on
an
ongoing
basis,
performing a review of their effectiveness, and
recommending actions to remedy any failings or
weaknesses identified.
Delegated Responsibilities:
Review on a regular basis the performance of
the Group’s key advisers and major service
suppliers (other than the external auditor) to
ensure that performance is satisfactory and in
accordance with the terms and conditions of
the respective appointments.
Remuneration and Nomination Committee
Delegated Responsibilities:
Review the structure, size and composition of
the Board.
Give full consideration to succession planning
Identify suitable Board candidates to fill Board
vacancies.
Undertake performance evaluations of the
Board and the Chairman.
Determine the framework and policy for the
level of remuneration of the Chairman and
Directors
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
38
CORPORATE GOVERNANCE REPORT (CONTINUED)
Board and Committees (Continued)
Due to the size and nature of the Company, as at 30 June 2023, all Directors have been appointed to all
Committees.
Audit and Risk Committee
Brendan Hawthorne is Chairman of the Audit and Risk Committee. Mr Hawthorne is a chartered accountant
and the Board is satisfied that he has recent and relevant financial experience, as required under the UK
Code. The qualifications of the members of the Audit and Risk Committee are outlined in the Directors’
Biographies section. The duties of the Audit and Risk Committee in discharging its responsibilities are outlined
in the chart on page 37. The report on the role and activities of the Audit and Risk Committee and its
relationship with the external auditors is contained in the Audit and Risk Committee Report.
Management Engagement Committee
Brett Miller is Chairman of the Management Engagement Committee. The duties of the Management
Engagement Committee in discharging its responsibilities are outlined in the chart on page 37.
The Management Engagement Committee carries out its review of the Group’s key advisers and service
providers through consideration of a number of objective and subjective criteria and through a review of the
terms and conditions of their appointments with the aim of evaluating performance, identifying any
weaknesses and ensuring value for money for the Company’s shareholders.
The Management Engagement Committee reviewed the performance of its key service providers on 18 May
2023. During this review, no material weaknesses were identified. Overall, the Management Engagement
Committee confirmed its satisfaction with the services and advice received.
Remuneration and Nomination Committee
David Copperwaite is Chairman of the Remuneration and Nomination Committee. The duties of the
Remuneration and Nomination Committee in discharging its responsibilities are outlined in the chart on page
37.
The Remuneration and Nomination Committee undertakes an annual internal evaluation of the Board and its
committees. The performance of each Director is considered as part of a formal review by the Remuneration
and Nomination Committee. The Remuneration and Nomination Committee may also meet without the
Chairman of the Board present in order to review his performance.
Performance Evaluation
The performance of the Board and the Directors was reviewed by the Remuneration and Nomination
Committee on 18 May 2023.
The Committee discussed various areas, including the process and style of meetings, investment matters,
strategy, governance and shareholder value. It was concluded that the Board have a good and
complementary range of skills, competency and that Board meetings were effective, and all relevant topics
were fully discussed. The Directors confirm that they have devoted sufficient time, as considered necessary,
to the matters of the Company. All Directors felt well prepared and able to participate fully at Board meetings
and had a good understanding of the investments and markets in which the Company operates.
As a result of the performance evaluation, the Committee was able to recommend to the Board each Director
for re-election to the Board at the forthcoming AGM.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
39
CORPORATE GOVERNANCE REPORT (CONTINUED)
Directors’ Remuneration Report
The following report meets the relevant Listing Rules of the FCA and the UK Code and describes how the
Board has applied the principles relating to Directors’ remuneration.
Annual Report on Remuneration
The Group paid the following fees to the Directors for the year ended 30 June 2023:
Director
£
Brett Miller
87,500
David Copperwaite
117,500
Brendan Hawthorne
90,000
Total Director fees
295,000
E
xtra services
provided by the
Directors
Brett Miller
–
consultancy fees
300,000
Total
amount
paid to Directors including extra services
59
5
,000
Brett Miller is entitled to a fee of £70,000 per annum, he also received an additional £5,000 per annum as
Chairman of the Management Engagement Committee and £12,500 per annum as a Director of the
Company’s five Guernsey subsidiaries. He also received a consultancy fee of £25,000 per month, payable
monthly in arrears, for his additional duties assigned by the Board.
David Copperwaite is entitled to a fee of £70,000 per annum, he also received an additional £5,000 per annum
as Chairman of the Remuneration and Nomination Committee, £12,500 per annum as a Director of the
Company’s five Guernsey subsidiaries and £30,000 per annum, as the independent Director in regard to the
Incentive Plan. David Copperwaite will not be eligible to benefit from the Incentive Plan, refer to note 3 for
further information.
Brendan Hawthorne is entitled to a fee of £80,000 per annum as Chairman of the Board and an additional
£10,000 per annum as Chairman of the Audit and Risk Committee.
The Company’s Articles limit the aggregation of fees payable to the Directors to a total of £300,000 per
annum. Extra services, which includes bonuses, are not included in the definition of fees as per the
Company’s Articles.
Bonus payments
A £140,000 bonus had been accrued as at 30 June 2022 and was paid to the Directors in the year ended 30
June 2023. Refer to the Directors’ Report for details on bonus payments.
Other than as shown above, no other remuneration or compensation was paid or payable by the Company
during the year to any of the Directors.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
40
CORPORATE GOVERNANCE REPORT (CONTINUED)
Directors’ Appointment, Retirement and Policy on Payment of Loss of Office
The Articles of the Company require that all Directors submit themselves for election by shareholders at the
first opportunity following their appointment. The Directors have elected to stand for re-election on a yearly
basis, so will all retire at each AGM and be eligible for reappointment.
Any Director may resign in writing to the Board at any time. Directors are not entitled to payment for loss of
office.
No Director has a service contract with the Company. Directors have agreed letters of appointment with the
Company, copies of which are available for review by shareholders at the registered office and will be
available at the AGM. The dates of their letters of appointment and where applicable the date of their
resignation, are shown below:
Director
Date Appointed
Date Resigned
Brett Miller
16 September 2020
-
David Copperwaite
31 December 2020
-
Brendan Hawthorne
24 February 2021
-
Tenure of Non-Executive Directors
The Board has adopted a policy on tenure that is considered appropriate for an investment company.
The Board’s tenure and succession policy seeks to ensure that the Board is well balanced and will be
refreshed from time to time by the appointment of new Directors with the skills and experience necessary to
replace those lost by Directors’ retirements and meet future requirements. Directors must be able to
demonstrate their commitment and fiduciary responsibility to the Company. The Board seeks to encompass
relevant past and current experience of various areas relevant to the Company’s business.
The current composition of the Board reflects the wind down nature of the business and the skills that are
needed to manage that ongoing process.
Conflict of Interests
The Directors have a duty to avoid situations where they have, or could have, a direct or indirect interest that
conflicts, or possibly could conflict, with the Company’s interests. Only Directors who have no material interest
in the matter being considered will be able to participate in the Board approval process. Directors are required
to disclose all actual and potential conflicts of interest to the Chairman in advance of any proposed external
appointment.
In deciding whether to approve an individual Director’s participation, the other Directors will act in a way they
consider to be in good faith in assessing the materiality of the conflict in accordance with the Company’s
Articles of Incorporation.
The Board believes that its procedures regarding conflicts of interest have operated effectively. The Board
also confirms that its procedure for the approval of conflicts of interest, if any, has been followed by the
Directors. None of the Directors had a material interest in any contract, which is significant to the Group’s
business. Directors’ holdings in the Company’s shares can be found within the Directors’ Report.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
41
CORPORATE GOVERNANCE REPORT (CONTINUED)
Induction/Information and Professional Development
Directors are provided, on a regular basis, with key information on the Company’s policies, regulatory
requirements and its internal controls. Regulatory and legislative changes affecting Directors’ responsibilities
are advised to the Board as they arise along with changes to best practice from, amongst others, the
Company Secretary and Deloitte. Advisers to the Group also prepare reports for the Board from time to time
on relevant topics and issues.
The Directors attend relevant seminars and events to allow them to continually refresh their skills and
knowledge and keep up with changes within the investment management industry.
When a new Director is appointed to the Board, they are provided with all relevant information regarding the
Group and their duties and responsibilities as a Director.
Attendance at scheduled meetings of the Board and its committees for the year ended 30 June 2023
Quarterly
Board
Audit &
Risk
Committee
Remuneration
& Nomination
Committee
Management
Engagement
Committee
Number of
meetings during
the year
4
2
1
1
Brett Miller
4/4
2/2
1/1
1/1
David Copperwaite
4/4
2/2
1/1
1/1
Brendan Hawthorne
4/4
2/2
1/1
1/1
In addition to these meetings, there were 3 ad-hoc board and committee meetings held during the year
covering various Group matters.
Relationship with the AIFM, Company Secretary, Administrator, Consultants and the Employee
The Board has delegated various duties to external parties, the custodial services (including the safeguarding
of assets), the registration services and the day-to-day company secretarial, administration and accounting
services. Each of these contracts were entered into after full and proper consideration by the Board of the
quality and cost of services offered, including the control systems in operation in so far as they relate to the
affairs of the Group.
The Board receives and considers reports regularly from the AIFM, with ad hoc reports and information
supplied to the Board as required. The Board meets with the AIFM on an ad-hoc basis to discuss and approve
investment decisions as necessary.
The Administrator and AIFM ensure that all Directors receive, in a timely manner, all relevant management,
regulatory and financial information. Representatives of the Administrator and the AIFM attend each Board
meeting as required, enabling the Directors to probe further on matters of concern. The Directors have access
to the advice and service of the Company Secretary who is responsible to the Board for ensuring that Board
procedures are followed and that applicable rules and regulations are complied with. The Board, the AIFM,
the Consultants, the employee and the Administrator operate in a supportive, co-operative and open
environment.
AIFMD
The Company is classed as an externally managed Alternative Investment Fund under the Alternative
Investment Fund Managers Directive (“AIFMD”).
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
42
CORPORATE GOVERNANCE REPORT (CONTINUED)
AIFM
The AIFM is responsible for managing the Company’s investments and the risks it faces in accordance with
AIFMD, subject to the overall scrutiny of the Board. FundRock has circa US$9 billion of assets under
management with experience across all major asset classes, including credit, and provides services to
multiple investment trust and investment company clients listed on the main market of the London Stock
Exchange. The AIFM, is responsible to the Company for risk management and portfolio management and
has delegated the provision of portfolio management services to the Board.
AIFM Remuneration
For the year ended 30 June 2023, fees due to the AIFM amounted to £97,365 (30 June 2022: £85,393).
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
43
AUDIT AND RISK COMMITTEE REPORT
As at 30 June 2023, the Audit and Risk Committee comprised all of the Directors, each of whom has recent
and relevant financial experience. Brendan Hawthorne is the Chairman of the Audit and Risk Committee and
is a chartered accountant.
Committee Meetings
In the year ended 30 June 2023, the Audit and Risk Committee convened formally on two occasions. The
members’ attendance record can be found on page 41.
Only members of the Audit and Risk Committee have the right to attend Audit and Risk Committee meetings.
Representatives of the AIFM and the Administrator are invited to attend Audit and Risk Committee meetings
on a regular basis and other non-members, including the Consultants and the Company’s employee, may be
invited to attend all or part of the meeting as and when appropriate and necessary. The auditor is also invited
whenever it is appropriate. The Audit and Risk Committee is also able to meet separately with the auditor
without the others being present.
Main Activities
The Audit and Risk Committee assists the Board in carrying out its overall responsibility in relation to financial
reporting requirements, risk management and the assessment of internal financial and operating controls. It
also manages the Group’s relationship with the auditor. Meetings of the Committee generally take place prior
to a Company Board meeting. The Audit and Risk Committee reports to the Board as part of a separate
agenda item, on the activity of the Audit and Risk Committee and matters of particular relevance to the Board
in the conduct of their work.
The Audit and Risk Committee reviews and monitors reports on the internal control and risk management
systems on which the Company is reliant.
Financial Reporting
The primary role of the Audit and Risk Committee in relation to financial reporting is to review in conjunction
with the AIFM and the Administrator, together with any required input from the Consultants and the
Company’s employee, the appropriateness of the Annual Report and Audited Consolidated Financial
Statements and the Interim Report and Consolidated Financial Statements concentrating on, amongst other
matters:
the quality and acceptability of accounting policies and practices;
the clarity of the disclosures and compliance with financial reporting standards and relevant financial
and governance reporting requirements;
material areas in which significant judgements have been applied or there has been discussion with
the auditor;
in relation to the UK Corporate Governance Code, whether the Annual Report and Audited
Consolidated Financial Statements, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Group’s performance, business
model and strategy; and
any correspondence from regulators in relation to the quality of the Group’s financial reporting.
To aid its review, the Audit and Risk Committee seeks the appropriate input from the AIFM and the
Administrator, together with any required input from the Consultants and the Company’s employee, and also
reports from the auditor.
These Audited Consolidated Financial Statements have been prepared on a basis other than going concern
as the Company is in managed wind down.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
44
AUDIT AND RISK COMMITTEE REPORT (CONTINUED)
Significant Risks
For the year ended 30 June 2023, the following significant issues were considered by the Audit and Risk
Committee:
(i) Revenue Recognition
The risk that revenue (classified as ‘income’ in the Audited Consolidated Financial Statements and primarily
comprising interest income or finance charges receivable under loans, leases and hire purchase agreements)
may be materially misstated.
The Committee has reviewed and is satisfied that a robust transaction reporting system is in place between
the AIFM and Administrator to ensure that transactions and the revenue received are reflected correctly.
(ii) Investment Portfolio
The investment portfolio primarily comprises loans, hire purchase contracts and finance leases.
As the Company is in managed wind down, the business model is to actively realise assets in line with the
investment policy. The measurement basis of the portfolio is fair value.
The valuation of the debt portfolio reflects the fair value together with the expected future cash flows after
being discounted back to the reporting date using the market yield to maturity as a discount rate, which
represents the required rate of return for a similar instrument.
Where a valuation model is utilised, such a model relies upon on a number of inputs, such as underlying
assumptions and estimates, and inherent within any such matter of judgement is the risk that the eventual
outcome will differ from that contained within these Audited Consolidated Financial Statements.
The Audit and Risk Committee reviews the valuation of the investments and the NAV of the Group on a
regular basis.
(iii)
Fraud Risk
The risk of fraud due to management override of controls.
The Audit and Risk Committee also reviews the reports from the Administrator on the system of checks in
place to combat fraud.
Risk Management and Internal Controls
The Board is responsible for ensuring that suitable systems of risk management and internal control are
implemented by third-party service providers and have carried out a robust assessment as outlined below.
The Directors have reviewed the BNP Paribas S.A. ISAE 3402 report (report on the description of controls
placed in operation, their design and operating effectiveness for the period from 1 April 2022 to 31 March
2023) on Fund Administration and are pleased to note that no significant issues were identified.
The Company continues to review and develop a comprehensive risk management framework, with
implementation outsourced to the AIFM, with a risk register that is reviewed and updated as necessary by
the Board and Audit and Risk Committee. The Audit and Risk Committee considers the risks facing the Group
and the controls and other measures in place to mitigate the impact of those risks.
The work of the Audit and Risk Committee is primarily driven by the Company’s assessment of the principal
risks and uncertainties as set out in the Strategic Report and in note 17, the reports received from the AIFM,
and the Company’s risk evaluation process.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
45
AUDIT AND RISK COMMITTEE REPORT (CONTINUED)
Risk Framework and Systems of Internal Control
The Board recognises the importance of identifying, actively monitoring and, where possible, mitigating the
financial and non-financial risks facing the business. Whilst responsibility for risk management rests with the
Board, the management of risk is embedded as part of the everyday business and culture of the Company
and its principal advisers.
The Board has considered the need for an internal audit function but because of the internal controls systems
in place at the key service providers and the independent controls process performed, it has decided instead
to place reliance on those controls and assurance processes
.
Risk Identification
The Board, Audit, and Risk Committee identify risks with input from the AIFM and the Administrator. The
Board also receives detailed quarterly asset management reports highlighting performance and potential risk
issues on an investment-by-investment basis.
Risk Assessment
Each identified risk is assessed in terms of probability of occurrence, potential impact on financial
performance and movements in the relative significance of each risk from period to period.
Action Plans to Mitigate Risk
Where new risks are identified or existing risks increase in terms of likelihood or impact, the Audit and Risk
Committee assists the Group in developing, where possible, an action plan to mitigate the risk and put in
place enhanced monitoring and reporting.
Re-assessment and Reporting of Risk
Such risk mitigation plans are reassessed by the Audit and Risk Committee with the relevant key service
providers where applicable and reported to the Board on a quarterly basis. The direct communication between
the Group and the AIFM is regarded as a key element in the effective management of risk (and performance)
at the underlying investment level.
Emerging Risks
Refer to the Emerging Risks section on page 18 for details on emerging risks.
External
Audit
The effectiveness of the external audit process is dependent on appropriate audit risk identification at the
start of the audit cycle. The Audit and Risk Committee received a detailed audit plan from the auditor
identifying its assessment of the significant audit risks. For the year ended 30 June 2023, the significant audit
risks identified are shown on page 44. The significant risks were tracked through the year, the Audit and Risk
Committee challenged the work performed by the auditor to test management override of controls, and in
addition the audit work undertaken in respect of valuations of the investment portfolio.
The Audit and Risk Committee assesses the effectiveness of the audit process in addressing these matters
through the reporting received from the Auditor in relation to the year-end. In addition, the Audit and Risk
Committee seeks feedback from the AIFM and the Administrator on the effectiveness of the audit process.
For the year ended 30 June 2023, the Audit and Risk Committee was satisfied that there had been appropriate
focus, challenge on the significant and other key areas of audit risk and assessed the quality of the audit
process to be good.
Re-appointment and Independence
In its assessment of the independence of the auditor, the Audit and Risk Committee receives details of any
relationships between the Group and the auditor that may have a bearing on their independence and receives
confirmation that they are independent of the Group.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
46
AUDIT AND RISK COMMITTEE REPORT (CONTINUED)
Re-appointment and Independence (Continued)
Deloitte LLP was re-appointed as the external auditor of the Company at the AGM held on 2 December 2022.
The Audit and Risk Committee considers the reappointment of the auditor, including the rotation of the audit
engagement partner, and assesses their independence on an annual basis. The auditor is required to
consider rotation of the engagement partner responsible for the audit every five years. This is the fourth
year
that the current audit engagement partner, David Becker, has overseen the audit of the Company.
Audit Tender
The Audit and Risk Committee reviews the objectivity and effectiveness of the audit process on an annual
basis and considers the audit tendering provisions of the UK Code in determining whether the Company
should put the audit engagement out to tender. There are no contractual obligations restricting the
Committee’s choice of external auditor and the external auditor is not indemnified by the Group.
Non-Audit Services
To safeguard the objectivity and independence of the auditor from becoming compromised, the Committee
has a formal policy governing the engagement of the auditor to provide non-audit services. The auditor and
the Directors have agreed that all non-audit services require the pre-approval of the Audit and Risk Committee
prior to commencing any work. The auditor will only be appointed to provide non-audit services if it is in the
best interests of the Company without compromising the related independence requirements. Fees for non-
audit services will be tabled annually so that the Audit and Risk Committee can consider the impact on the
auditor’s objectivity.
Deloitte LLP is remunerated as follows for their services rendered during the years ended 30 June 2023 and
30 June 2022:
30 June 2023
30 June 202
2
£
£
Audit of the Group’s Consolidated Financial Statements
135,000
126,790
Total audit fee
1
35
,
000
1
26
,
79
0
No non-audit services were provided by Deloitte LLP during the years ended 30 June 2023 and 30 June 2022.
Brendan Hawthorne
Chairman of the Audit and Risk Committee
29 September 2023
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
47
Statement of Compliance with the UK Code of Corporate Governance
The Directors place a large degree of importance on ensuring that high standards of corporate governance
are maintained and have therefore chosen to comply with the provisions of the UK Code.
The Board has considered the principles and provisions of the UK Code.
The Board considers that reporting against the principles and provisions of the UK Code provides information
that is more relevant to stakeholders. The UK Code is available on the FRC website
www.frc.org.uk
.
The Company has complied with all the principles and provisions of the UK Code during the year ended 30
June 2023 except as set out below, further details can be found in the Corporate Governance Report on page
35:
Appointment of a Senior Independent Director (provision 12).
The Chairman is also chairman of the Audit and Risk Committee (provision 24).
Going concern basis for accounting (provision 30).
Set out below is where stakeholders can find further information within the Annual Report about how the
Company has complied with the various principles and provisions of the UK Code.
1. Board Leadership and
Company
Purpose
Purpose as at 30 June 2023
On page 14
Future strategy
On page 22
Culture of the Company
On page 21 to 22
Stakeholder Engagement
Section 172 statement on pages 20 and 21
2. Division of responsibilities
Director Independence
On page 35 to 36
Board meetings
Board and Committee Meetings with Director
Attendance on
page
41
Management Engagement Committee
On
p
age
38
3. Composition, Succession and Evaluation
Remuneration and Nomination Committee
On page 38
Director re-election
On page 40
Board evaluation
On page 38
4. Audit, Risk and Internal Control
Audit and Risk Committee
On page 38
Principal and emerging risks
On pages 16 to 18
Risk management and internal control systems
On page 44 to 45
Going concern statement
On page 19
Viability statement
On page 19
5. Remuneration
Directors’ Remuneration Report on page 39
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
48
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SLF REALISATION
FUND LIMITED
Report on the audit of the financial statements
1.
Opinion
In our opinion the financial statements of SLF Realisation Fund Limited (the ‘company’) and its subsidiaries (the ‘group’):
give a true and fair view of the state of the group’s affairs as at 30 June 2023 and of the group’s loss for the year
then ended;
have been properly prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by
the European Union; and
have been prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.
We have audited the financial statements which comprise:
the consolidated statement of comprehensive income;
the consolidated statement of financial position;
the consolidated statement of changes in equity;
the consolidated statement of cash flows; and
the related notes 1 to 19.
The financial reporting framework that has been applied in their preparation is applicable law and IFRSs as adopted by
the European Union.
2.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to
listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these
requirements. We confirm that we have not provided any non-audit services prohibited by the FRC’s Ethical Standard
to the group or the company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3.
Emphasis of matter – Consolidated financial statements prepared other than
on a going concern basis
We draw attention to note 2.1 (b) in the consolidated financial statements, which indicates that the financial statements
have been prepared on a basis other than that of a going concern. Our opinion is not modified in respect of this matter.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
49
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SLF REALISATION
FUND LIMITED (CONTINUED)
4.
Summary of our audit approach
Key audit matters
The key audit matter that we identified in the current year was:
Valuation of the debt portfolio
Materiality
The materiality that we used for the group financial statements
in the current year was £724,000 which was determined on the
basis of 2% of the net asset value.
Scoping
Audit work to respond to the risks of material misstatement was
performed directly by the group audit engagement team.
Significant changes in our approach
There have been no significant changes in our approach from
the prior year.
5.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
5.1.
Valuation of the debt portfolio
Key audit matter
description
The group’s principal business was to make debt investments, directly or indirectly, in
business-essential, revenue-producing (or cost saving) equipment and other physical assets.
The group is currently in a managed wind-down with the objective of realising the remaining
investments.
As at 30 June 2023, the aggregate value of the debt portfolio amounted to £26.0 million
(2022: £72.1 million) representing 67% of total assets (2022: 80%). The decrease in the
balance is mainly due to the disposal of investments and fair value losses during the year.
The debt portfolio is measured at fair value post the change in the company’s business model
which was approved on 16 July 2020 by the 2016 C shareholders and on 4 December 2020
by the ordinary shareholders.
Management applied a discounted cash flow approach in determining the fair value of the
debt portfolio by forecasting future cash flows expected to be generated from each
investment discounted back to the reporting date using a discount rate reflective of the
market yield of a similar investment.
As part of our risk assessment, we identified the calculation of fair values for individual loans
requires management to make significant estimates, in particular, the determination of
estimated future cash flows.
This includes the timing of collection, the valuation of underlying
collateral including costs of realisation, as well as market yields to maturity; all estimates that
are particularly uncertain given the volatile market conditions due to the Ukraine conflict,
rising interest rates and the high inflation environment.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
50
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SLF REALISATION
FUND LIMITED (CONTINUED)
Key audit matter
description
We pinpointed the key audit matter to the valuation and accuracy of forecast cash flows
within the loans valuations as these represent the most sensitive input to the valuations. This
includes assumptions relating to the quantum, timing and the cost to collect these cash flows.
There is the risk that any material movement on the future cash flows could have a significant
impact on the fair value assumptions applied. Judgements over each investment’s exit
strategy and any discount applied to cash flows, which impact fair value estimates could
significantly affect key performance indicators.
This matter is explained further in the audit and risk committee report at page 43. Note 2.1
(f) and note 2.3 set out the associated accounting policy and disclosure in respect of critical
judgements and key sources of estimation uncertainty, note 9 set out the composition of the
debt portfolio, with note 17 setting out details of the associated risk factors, including credit
risk and price risk.
How the scope of our
audit responded to the
key audit matter
We have:
•
Obtained an understanding of the relevant controls related to the debt portfolio
valuation process;
•
Assessed the group’s accounting policy with IFRS requirements and obtained an
understanding of the fair value methodology used by management;
•
Challenged the accuracy of the forecast cash flows, including consideration of the
impact of macro-economic factor changes, as well as the timing of those cash flows,
including
any
probability
weighted
scenarios,
by
obtaining
supporting
documentation for the accuracy of these forecasts;
•
Challenged whether the assigned fair values for the underlying collateral are
considered appropriate and support the forecast cash flows, including challenge of
assumptions relating to the required time and costs to realise the collateral;
•
Recalculated the fair value independently for the entire debt portfolio based on
available data;
•
Performed back testing by comparing the proceeds received from investment
repayments or disposals, both during the year and subsequent to 30 June 2023,
against their fair value prior to realisation; and
•
Evaluated the appropriateness of disclosures made in the financial statements in
light of relevant IFRS requirements.
Key observations
Based on our audit work, we are satisfied that the valuation of the debt portfolio is
appropriate.
6.
Our application of materiality
6.1.
Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the
economic decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in
planning the scope of our audit work and in evaluating the results of our work.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
51
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SLF REALISATION
FUND LIMITED (CONTINUED)
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group Materiality
£724,000 (2022: £1,790,000).
Basis for
determining
materiality
2% of net asset value (2022: 2% of the net asset value).
Rationale for the
benchmark
applied
We believe net asset value is the most appropriate benchmark as it is considered to be a principal
consideration for shareholders of the group in assessing financial performance. Furthermore, given
the group is in a managed wind down, the residual assets are the key focus of the shareholders.
The decrease in the group materiality between the current year and the prior year is due to the
decrease in net asset value which was mainly due to capital distributions following the realisation
of debt investments.
6.2.
Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate,
uncorrected and undetected misstatements exceed the materiality for the financial statements as a whole. Group
performance materiality was set at 70% of group materiality for the 2023 audit (2022: 70% of the group materiality). In
determining performance materiality, we considered the following factors:
-
Our risk assessment, including our assessment of the group’s overall control environment and the fact that we
planned to rely on controls around the revenue recognition process; and
-
Our past experience of the audit and developments in the control environment from prior year.
6.3.
Error reporting threshold
We agreed with the Audit and Risk Committee that we would report to the Committee all audit differences in excess of
£36,200 (2022: £88,000), as well as differences below that threshold that, in our view, warranted reporting on
qualitative grounds. We also report to the Audit and Risk Committee on disclosure matters that we identified when
assessing the overall presentation of the financial statements.
7.
An overview of the scope of our audit
7.1.
Identification and scoping
Our audit was scoped by obtaining an understanding of the group and its environment, including internal control, and
assessing the risks of material misstatement for the company and its subsidiaries.
Audit work to respond to the risks of
material misstatement was performed directly by the group audit engagement team.
Net assets £36.21m
Group materiality
£0.72m
Audit and Risk
Committee
reporting threshold
£0.04m
Net assets
Group materiality
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
52
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SLF REALISATION
FUND LIMITED (CONTINUED)
7.2.
Our consideration of the control environment
In assessing the control environment, we also considered the control environments of the key service providers,
including the administrators of the group, to whom the board have delegated certain functions for the company and its
subsidiary entities.
We obtained an understanding of the relevant controls around key processes and tested controls
around revenue recognition process, but did not then rely on these controls for the purposes of our testing. We reported
an identified control finding in our report to the audit and risk committee.
8.
Other information
The other information comprises the information included in the annual report, other than the financial statements and
our auditor’s report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially
inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears
to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether
this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact.
We have nothing to report in this regard.
9.
Responsibilities of directors
As explained more fully in the statement of directors’ responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s ability to continue as a
going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to
do so.
10.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities
. This description forms part of our auditor’s report.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
53
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SLF REALISATION
FUND LIMITED (CONTINUED)
11.
Extent to which the audit was considered capable of detecting irregularities,
including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud.
The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
11.1.
Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of irregularities, including fraud and non-
compliance with laws and regulations, we considered the following:
the nature of the industry and sector, control environment and business performance including the design of
the group’s remuneration policies, key drivers for directors’ remuneration, bonus levels and performance
targets;
results of our enquiries of management and the audit and risk committee about their own identification and
assessment of the risks of irregularities, including those that are specific to the group’s sector;
any matters we identified having obtained and reviewed the group’s documentation of their policies and
procedures relating to:
o
identifying, evaluating and complying with laws and regulations and whether they were aware of any
instances of non-compliance;
o
detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected
or alleged fraud;
o
the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
the matters discussed among the audit engagement team and relevant internal specialists, including tax and
valuations specialists regarding how and where fraud might occur in the financial statements and any potential
indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation
for fraud and identified the greatest potential for fraud in the following areas:
-
Valuation of the debt portfolio which is mentioned under section 5 of this report.
-
Revenue recognition: The portfolio’s expected realisation or maturity profile and expected cash flows are key
inputs in arriving at the effective interest rate used to recognise finance income over the expected life of the
portfolio, and these judgements may have a significant impact on the level of finance income recorded during
the relevant period.
In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond to the risk
of management override.
We also obtained an understanding of the legal and regulatory frameworks that the group operates in, focusing on
provisions of those laws and regulations that had a direct effect on the determination of material amounts and
disclosures in the financial statements. The key laws and regulations we considered in this context included the Listing
Rules, relevant tax legislation and Companies (Guernsey) Law, 2008.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial
statements but compliance with which may be fundamental to the group’s ability to operate or to avoid a material
penalty.
11.2.
Audit response to risks identified
As a result of performing the above, we identified valuation of the debt portfolio as a key audit matter related to the
potential risk of fraud. The key audit matters section of our report explains the matter in more detail and also
describes the specific procedures we performed in response to that key audit matter.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
54
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SLF REALISATION
FUND LIMITED (CONTINUED)
In addition to above, our procedures to respond to risks identified included the following:
reviewing the financial statement disclosures and testing to supporting documentation to assess compliance
with provisions of relevant laws and regulations described as having a direct effect on the financial statements;
enquiring of management and the audit and risk committee concerning actual and potential litigation and
claims;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of
material misstatement due to fraud;
reading minutes of meetings of those charged with governance and reviewing correspondence with regulators;
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal
entries and other adjustments; assessing whether the judgements made in making accounting estimates are
indicative of a potential bias; and evaluating the business rationale of any significant transactions that are
unusual or outside the normal course of business.; and
in addressing the risk of fraud on revenue recognition, obtained an understanding of the relevant control
environment and tested the relevant controls in relation to the finance income recognition. Furthermore, we
recalculated the finance income independently using the effective interest rate method in accordance with
IFRS 9 requirements.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team
members including internal specialists, and remained alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit.
Report on other legal and regulatory requirements
12.
Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and
that part of the Corporate Governance Statement relating to the group’s compliance with the provisions of the UK
Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent with the financial statements and our knowledge obtained
during the audit:
the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting
and any material uncertainties identified set out on page 19;
the directors’ explanation as to its assessment of the group’s prospects, the period this assessment covers and
why the period is appropriate set out on page 19;
the directors' statement on fair, balanced and understandable set out on page 33;
the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out
on page 16;
the section of the annual report that describes the review of effectiveness of risk management and internal
control systems set out on page 44; and
the section describing the work of the audit and risk committee set out on page 43.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
55
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SLF REALISATION
FUND LIMITED (CONTINUED)
13.
Matters on which we are required to report by exception
13.1.
Adequacy of explanations received and accounting records
Under the Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:
we have not received all the information and explanations we require for our audit; or
proper accounting records have not been kept by the company; or
the financial statements are not in agreement with the accounting records.
We have nothing to report in respect of these matters.
14.
Other matters which we are required to address
14.1.
Auditor tenure
Following the recommendation of the Audit and Risk Committee, we were appointed by the board of directors on 17
September 2019 to audit the financial statements for the year ending 30 June 2020 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and reappointments of the firm is 4 years,
covering the years ending 30 June 2020 to 30 June 2023.
14.2.
Consistency of the audit report with the additional report to the Audit and Risk Committee
Our audit opinion is consistent with the additional report to the Audit and Risk Committee we are required to provide
in accordance with ISAs (UK).
15.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Section 262 of the Companies
(Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the company’s members those
matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.14R,
these consolidated financial statements form part of the European Single Electronic Format (ESEF) prepared Annual
Financial Report filed on the National Storage Mechanism of the UK FCA in accordance with the ESEF Regulatory
Technical Standard ((‘ESEF RTS’). This auditor’s report provides no assurance over whether the annual financial
report has been prepared using the single electronic format specified in the ESEF RTS.
David Becker (Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Recognised Auditor
Guernsey, Channel Islands
29 September 2023
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
56
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2023
Notes
Year ended
30 June 202
3
Year ended
30 June 202
2
£
£
Income
Finance income
Other income
Total income
2.6
Net movement on investment
s
9.3
(18,507,948
)
(3,830,533 )
Foreign
exchange
(loss)/
gain
on
other monetary items
2.2
(59,004
)
Net realised and
unrealised
loss
(18,566,952
)
(3,041,276 )
Expenses
Investment management fees
3(a)
(1,736,229 )
Directors’ fees
3
(595,000 )
(862,606 )
Incentive plan
provision reversal
/(
expense
)
3
(2,266,001 )
Other operating
expenses
4
(2,163,694
)
(2,979,702 )
Total
operating
expense
2.7
(2,451,915
)
(7,844,538 )
Loss before tax
(16,703,455 )
(1,197,196 )
Taxation
2.10
Loss
after
tax
(16,703,455
)
(1,197,196 )
Total comprehensive loss for the year analysed as
follows:
Attributable to Ordinary shareholders
(15,996,193 )
(2,615,318 )
Attributable to 2016 C shareholders
(707,262
)
Total comprehensive loss for the year
(16,703,455 )
(1,197,196 )
Basic and diluted
loss
per Ordinary Share
5
(4.49
)p
(0.73
p
Basic and diluted (loss)/income per 2016 C Share
5
(0.51
The year ended 30 June 2023 has been presented on a basis other than going concern. No operations were acquired or
discontinued during the year.
The Group has no items of other comprehensive income, and therefore the loss for the year is also the total
comprehensive loss.
The accompanying notes form an integral part of these Audited Consolidated Financial Statements.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
57
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
Notes
30 June 2023
30 June 2022
£
£
Current assets
Residual value of finance lease investments
2.4,9.1
Investments designated at fair value through profit or
loss
9.1,9.2
Cash and cash equivalents
2.9
Other receivables and prepayments
10
Investment receivable
Total assets
Current liabilities
Investment payable
11
(304,552 )
Other payables and accrued expenses
11
(260,435 )
(688,355 )
Incentive plan payable
3
(1,959,222 )
(2,266,001 )
(2,524,209 )
(2,954,356 )
Net assets
Equity
Share capital
13
Retained deficit
(267,981,376 )
(251,277,921 )
NAV per Share
-
Ordinary Shares
6
-
2016 C Shares
6
on 29 September 2023 and signed on its behalf by:
Brendan Hawthorne
David Copperwaite
Chairman
The accompanying notes form an integral part of these Audited Consolidated Financial Statements.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
58
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2023
Note
Share
Capital
Retained
Deficit
Total
£
£
£
As at 1 July 2022
(251,277,921 )
Total comprehensive loss for the year
(16,703,455 )
(16,703,455 )
Transactions with shareholders
Capital distributions
14
(35,250,962 )
(35,250,962 )
Total transactions with shareholders
(35,250,962 )
(35,250,962 )
As at 30 June 202
3
(267,981,376
)
For the year ended 30 June 2022
Note
Share
Capital
Retained
Deficit
Total
£
£
£
As at 1 July 2021
(250,080,725 )
Total comprehensive loss for the year
(1,197,196 )
(1,197,196 )
Transactions with shareholders
Capital distributions
14
(86,826,227 )
(86,826,227 )
Total transactions with shareholders
(86,826,227 )
(86,826,227 )
As at 30 June 202
2
(251,277,921
)
The accompanying notes form an integral part of these Audited Consolidated Financial Statements.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
59
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2023
Notes
Year ended
30 June 20
2
3
Year ended
30 June 20
2
2
£
£
Cash flow from operating activities:
Total comprehensive loss for the year
(16,703,455 )
(1,197,196 )
Adjustments for:
Finance income
(4,201,691 )
(9,435,954 )
Net movement on investments
Foreign exchange loss/(gain) on other monetary items
(789,257 )
(Decrease)/increase in incentive plan payable
3
(306,779 )
(Increase)/decrease in other receivables and prepayments
(15,335 )
Decrease/(increase) in investment receivable
(164,332 )
(Decrease)/increase in other payables and accrued expenses
11
(427,920 )
Increase in investment payable
11
Acquisition of investments
9.1
(196,564 )
(100,000 )
Sale of investments designated at fair value through profit or
loss
9.1
Disposal of PPE
8
Interest income collections
Net cash movement in operating activities
Cash flow from financing activities
Capital distributions
14
(35,250,962 )
(86,826,227 )
Net cash used in financing activities
(35,250,962 )
(86,826,227 )
Net movement in cash and cash equivalents
(6,105,147 )
(7,465,367 )
Cash and cash equivalents at start of the year
Effect of exchange rate changes on cash and cash
equivalents
(59,004 )
Cash and cash equivalents at end of the year
The accompanying notes form an integral part of these Audited Consolidated Financial Statements.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
General Information
The Company
The Company was incorporated on 28 May 2014 and registered in Guernsey
Investment Scheme. The Company’s registered office is BNP Paribas House, St Julian’s Avenue, St Peter
trading on the Main Market of the London Stock Exchange on 14 July 2014.
The 2016 C Shares are listed separately on the Main Market of the London Stock Exchange and were
admitted on 12 December 2016. The investments held by the 2016 C Shares are accounted for and managed
as a separate pool of assets in accordance with the Company’s investment policy. Shared expenses are split
between Ordinary Shares and 2016 C Shares in proportion to their respective NAV.
During the year, as part of the managed wind down, the Company made a return of capital on three separate
occasions, returning a total of £21,358,540 to Ordinary shareholders and £13,892,422 to 2016 C shareholders.
Refer to note 14 for full details of the Company’s return of capital and note 18 for return of capital made post
year-end.
The Company’s subsidiaries, SLF (Guernsey) Limited, SLF (Amber) Limited, SLF (Bronze) Limited, SLF
(Cobalt) Limited and SLF (Diamond) Limited (the “Subsidiaries”) are wholly owned subsidiaries incorporated
in Guernsey and established for the primary purpose of acting as investment holding companies (refer to note
2.1(e) for further details). The Subsidiaries’ registered office is BNP Paribas House, St Julian’s Avenue, St
Peter Port, Guernsey, GY1 1WA.
Effective 1 January 2022, the Company met the definition of control under IFRS 10 – “Consolidated Financial
Statements” in respect to its investment holding in SQN Asset Finance (Ireland) Designated Activity Company
(“SQN Ireland”). As such, the results for SQN Ireland have been consolidated with the Group’s Audited
Consolidated Financial Statements from this effective date. The Board of SQN Ireland are employees of its
administrator, Cafico International. Refer to Note 2.1(f) for further information. The registered office for SQN
Ireland is 2
nd
Floor Palmerston House, Fenian Street, Dublin 2. SQN Ireland is administered by Cafico
Accounting Policies
The principal accounting policies applied in the preparation of these consolidated financial statements are set
out below. These policies have been consistently applied throughout all the years presented, unless otherwise
stated.
Basis of Preparation
The Audited Consolidated Financial Statements for the year ended 30 June 2023 have been prepared in
accordance with IFRS as adopted by the European Union. They give a true and fair view of the Group’s affairs
and comply with the Company (Guernsey) Law 2008.
The financial statements have been prepared on the historical cost basis, except for the revaluation of
financial instruments that are measured at fair value at the end of each reporting period, as explained in the
accounting policies below. Historical cost is generally based on the fair value of the consideration given in
exchange for goods and services.
2.1
Basis of Preparation
During the year, a number of amendments and interpretations became applicable, which are not relevant to
The Board are not aware of any additional impact on the Audited Consolidated Financial Statements in regard
to the Company being in managed wind down. These Audited Consolidated Financial Statements do not
include provisions for the wind down of the Company that have not been contractually committed. The Board
is satisfied that the Company has sufficient cash balances to meet its annual operating expenses and will
ensure that sufficient cash is retained by the Company to meet ongoing expenses.
The Board expects the bulk of the portfolio to be realised within 12 months of the date of the approval of these
Audited Consolidated Financial Statements, although there will be a portion of the portfolio that will take longer
(c) Standards, amendments and interpretations issued but not yet effective
Detailed below are new standards, amendments and interpretations to existing standards that become
effective in future accounting periods, which have not been early adopted by the Group:
for
periods
beginning on or after
IFRS 17 – Insurance contracts
1 January 2023 (effective 1
July 2023 for the Group)
IAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors
- amendments regarding the definition of accounting estimates
1 January 2023 (effective 1
July 2023 for the Group)
IAS 12 Income Taxes - amendments
1 January 2023 (effective 1
July 2023 for the Group)
IAS 1 – Presentation of Financial Statements and IFRS Practice
Statement 2 – amendments
1 January 2023 (effective 1
The Board has undertaken an assessment of the impact of IFRS 17 on the Audited Consolidated Financial
Statements and concluded that there will be no material impact as the Group does not have any insurance
amounts in the financial statements that are subject to measurement uncertainty. The amendments also
clarify the relationship between accounting policies and accounting estimates by specifying that a Company
develops an accounting estimate to achieve the objective set out by an accounting policy. The definition of
accounting policies remains unchanged. The Directors do not believe that the application of this amendment
The amendments to IAS 12 relate to a temporary exemption from requirements regarding deferred tax assets
and liabilities. The amendments to IAS 1 are intended to help preparers in deciding which accounting policies
to disclose in their financial statements. The Directors do not believe that the application of either amendment
Items included in the Audited Consolidated Financial Statements are measured using Sterling as the currency
of the primary economic environment in which the Group operates (the “Functional Currency”). The Audited
In accordance with IFRS 10 - Consolidated Financial Statements (“IFRS 10”), if the Company meets the
definition of an investment entity (“IE”) it qualifies for a consolidation exemption. The relevant provisions for
an IE under IFRS 10 are set out below:
IFRS 10.27 – An IE is an entity that:
a.
obtains funds from one or more investors for the purpose of providing those investor(s) with investment
management services;
b.
commits to its investor(s) that its business purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
c.
measures and evaluates the performance of substantially all of its investments on a fair value basis.
IFRS 10.28 – An entity shall consider whether it has the following characteristics of an IE:
a.
it has more than one investment;
b.
it has more than one investor;
c.
it has investors that are not related parties of the entity; and
d.
it has ownership interests in the form of equity or similar interests.
The Board considered all the above factors and noted that the Company does not provide investors with
investment management services and that the Company’s business model is no longer to invest but to realise
remaining assets in the portfolio in a prudent manner to return cash to shareholders in an orderly manner.
The Board have concluded that the Company does not meet the definition of an IE and does not qualify for
the IFRS 10 consolidation exemption. The Subsidiaries and SQN Ireland have therefore been consolidated
Critical Accounting Judgements and Key Sources of Estimation Uncertainty
management to make
judgements, estimates and assumptions that affect the application of policies and the
reported amounts of assets and liabilities, income and expenses. It also requires management to exercise its
judgement in the process of applying the Company’s accounting policies. Uncertainty about these
assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount
of assets and liabilities affected in future periods.
The estimates and associated assumptions are based on various factors that are believed to be reasonable
under the circumstances, the results of which form the basis of making judgements about carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period, or in the
period of the revision and future periods, if the revision affects both current and future periods.
Key Sources of Estimation Uncertainty
Fair value
For the fair value of all financial instruments held, the Company determines fair values using appropriate
techniques.
Refer to note 2.3(c) and note 9.1 for further details on the significant estimates applied in the valuation of the
Company’s financial instruments measured at fair value. Refer to note 17.1 Credit Risk for sensitivity analysis.
As at 30 June 2023, the Group does not believe that dividend distributions paid to the Group by SQN Ireland
are subject to withholding tax in the Republic of Ireland.
Refer to note 17.4 for Price Risk sensitivity analysis. The fair value of investments is monitored by the Board
to ensure that judgements, estimates and assumptions made and methodologies applied are appropriate and
Critical Accounting Judgements
The Subsidiaries and SQN Ireland are all entities (including special purpose entities) which the Company
controls as it is exposed, or has rights, to variable returns from its involvement with the Subsidiaries and SQN
Effective 1 January 2022, the Group met all three elements of control as prescribed by IFRS 10 over SQN
Ireland and therefore is required to consolidate SQN Ireland into these Audited Consolidated Financial
Statements. For the years ended 30 June 2023 and 2022, SQN Ireland has been consolidated into the
Foreign Currency Translation
Transactions in currencies other than the Functional Currency are recorded using the exchange rate
prevailing at the transaction date. Foreign exchange gains and losses resulting from the settlement of such
transactions and those from the translation at year-end exchange rates of monetary and non-monetary assets
and liabilities measured at fair value through profit or loss (“FVTPL”) denominated in foreign currencies are
recognised in profit or loss in the Consolidated Statement of Comprehensive Income.
Foreign operations translation
The trading results of Group undertakings in currencies other than the Functional Currency are recorded
using the average exchange rates for the year. The assets and liabilities of overseas undertakings are
translated at the exchange rates ruling at the year-end. Exchange gains and losses arising from the translation
Financial Assets
Financial assets are classified into the following specified categories: financial assets at fair value through
profit or loss and amortised cost.
Classification and measurement of financial assets depends on the results of the ‘solely payments of principal
and interest’ and the business model test. The Group determines the business model at a level that reflects
how groups of financial assets are managed together to achieve a particular business objective. This
assessment includes judgement reflecting all relevant evidence including how the performance of the assets
is evaluated and their performance measured, the risks that affect the performance of the assets and how
these are managed and how the managers of the assets are compensated. Monitoring is part of the Group’s
continuous assessment of whether the business model for which the remaining financial assets are held
continues to be appropriate and if it is not appropriate whether there has been a change in business model
and so a prospective change to the classification of those assets.
With the Audited Consolidated Financial Statements being prepared on a basis other than going concern and
with the change in the business model of the Company, IFRS 9 requires financial assets to be measured
FVTPL.
There is no guarantee that financial assets classified as current will be repaid within the 12 months period
post the date of the statement of financial position.
Financial assets designated at fair value through profit or loss at inception
Financial assets designated at fair value, can be designated at FVTPL or through other comprehensive
income. The Group’s fair value financial assets are designated at FVTPL at inception. These include lease
participation, loans, construction finance, finance lease, hire purchase and equity holdings.
The Group’s policy requires the AIFM and the Directors to evaluate the information about these financial
assets on a fair value basis together with other related financial information. Changes in fair value of financial
assets at FVTPL are recorded in profit or loss in the Consolidated Statement of Comprehensive Income.
Amortised cost
Cash and cash equivalents, investment receivables and other receivables are classified at amortised cost.
These financial assets are initially recognised at fair value plus transaction costs and subsequently measured
at amortised cost
.
Income is recognised on an effective interest basis for debt instruments measured subsequently at amortised
cost or FVTPL. Gains and losses are recognised in profit or loss in the Consolidated Statement of
Comprehensive Income when they are derecognised or impaired, as well as through the amortisation
Financial assets are initially recognised on the trade date, when the Company becomes a party to the
arrangement.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire,
or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risk
and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially
all the risk and rewards of ownership and does not retain control over the transferred asset.
Any interest in such derecognised financial assets that is created or retained by the Group is recognised as
a separate asset or liability.
when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the
liability is conducted in either:
• the principal market for the asset or liability; or
• in the absence of a principal market, the most advantageous market for the asset or liability.
The fair value of an asset or liability is measured using the assumption that market participants would use
when pricing the asset or liability, assuming that market participants act in their economic best interest.
A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate
economic benefits by using the asset in its highest and best use capacity or by selling it to another market
participant that would use the asset in its highest and best use capacity.
Fair value methodology
The Company typically invested in private debt financing in SME’s and SPVs with loans and leases. These
facilities are typically structured as loans or leases. The Company has also invested in equity participation in
the form of warrants on some transactions to benefit from company growth or shareholders typically taken
exposures.
The fair value of financial assets designated at fair value through profit or loss is determined using the
discounted cash flow method. The approach also takes into consideration of the impact of the Ukraine conflict
and the current economic environment on valuations as applicable. The fair value methodology considers the
following two key inputs:
1.
The expected cash flows from the facility including any appropriate adjustment in timing to realise
these cash flows.
2.
Discount rate.
Overview
The Company designates each financial asset designated at fair value through profit or loss into a common
risk category, which allows exposures to be categorised on a similar basis. Future cash flows are estimated
and an appropriate discount rate is applied to determine the fair value.
Where an appropriate market comparable is available, the Company will apply such discount at that rate and
for performing loans with no credit deterioration the Company will assume the rate at origination adjusted for
the change in the risk free rate between the reporting date and the facility origination date and any appropriate
macro-economic factors that impact the rate.
The Fair Value Discount Matrix, as outlined on page 67, is based on the Risk Grade and asset type, taking
into consideration typical market rates for each allocated sector.
For some exposures, external asset valuers have been instructed to provide valuations using a fair value
approach. Where external asset valuers were instructed due to expectation of enforcement, the Company
has used these as the basis of the cash flows likely for the facility using the likely time to realise the assets.
Where valuation ranges have been provided, the Company has assumed the mid-point, assuming all
valuations have the same probability weighting.
A discounted cash flow model is then used as the basis for each valuation within the portfolio. The purpose
of this model is to appropriately value the assets in a wind down scenario.
There are specified describing characteristics and attributes for each individual loan. Certain of those loan
characteristics will be used to allocate the Risk Grade and the asset type.
Risk Grade
The approach for monitoring credit risk remained unchanged with the Risk Grades being maintained
(
as
detailed in note 17.1).
The Risk Grade is assigned by the Company based on embedded risks associated with the loan provided
and therefore the probability of a default which allows for a nominal rating equivalent to be allocated. The
Company considers a facility in default when payments are overdue by more than 15 days and no likely
remedy appears possible. The Company monitors incoming information on a monthly and quarterly basis
adjusting the Risk Grade as appropriate, should credit risk change over time. Factors likely to influence a
change in internal rating include changes in financial performance of position e.g., turnover and debt to
EBITDA or a change in security quality e.g., LTV or recovery value. Other qualitative factors are also
considered, which include key staff departures, strength of financial management and sector cyclicality.
Discount rate
To calculate the FV discount rate the Company considers the following waterfall:
1.
A direct comparable from a market observable transaction interest rate where possible.
2.
If performing position with no material credit change, the Company will adjust the rate by the change
in the relevant risk-free rate and any appropriate macro-economic factors that impact the rate.
3.
The corresponding rate from the FV Discount Matrix (as outlined below) based on generic funding
rates for the various sectors.
When determining market observable rates, the Company will review recent transactions, where available;
for performing debt, examine the relevant risk-free rate in the currency/jurisdiction of the facility against the
relevant 5-year risk free rate; and review refinancing rates used in comparable transactions observed. Where
the Company has identified a direct comparable market rate, this rate is used in preference to the matrix rates
presented below.
Fair Value Discount Matrix
Risk
Grade
Realisable -
Assets
collectable and
saleable within a 1-3
month window with a
transparent
marketplace
Fixed Asset -
Assets
movable and saleable
within a 4-12 month
window with some
marketability
Project Finance -
Fixed assets with
limited resale
opportunity
High Risk -
Non-
typical facility either no
assets or limited
enforcement
opportunities
Discount rate (%)
Discount rate (%)
Discount rate (%)
Discount rate (%)
4
6.0%
7.0%
8.0%
n/a
5
7.0%
8.0%
9.0%
n/a
6
8.0%
10.0%
10.0%
n/a
7+
10.0%
12.0%
15.0%
20.0%
E.g., Helicopter,
Vessel etc.
E.g., Printing Press,
removable machinery
E.g., Facility under
construction
Non-typical facility –
subordinated debt,
insurance capital
The Company makes assumptions on the expected future cash flows, taking consideration of the expected
time to realise these expected cash flows for each position as part of the valuation process.
Discounted projected cash flow models are carried out, adjusted for any likely delay in payment, based on
credit reviews carried out (in line with Risk Grades) and probability based outcomes based on historic
evidence and other market data inputs, as deemed applicable. Where more than one possibility is reasonably
likely, the Company will assign probabilities to these outcomes to create a weighted average value.
Each quarter expected projected cash flows are updated to take into consideration latest available
information.
The fair value process is carried out on a quarterly basis to update the valuation of each position held, taking
into consideration the Risk Grades, amortisation, time passed and changes in expected cash flow
expectations, if any.
Refer to note 9.1 for further details on the significant estimates applied in the valuation of the Company’s
Finance Lease and Hire Purchase Investments
The Group, as lessor, categorises finance leases and hire purchase investments as lease arrangements
where the terms of the lease transfer substantially all risks and rewards of ownership to the lessee (in
accordance with the requirements of IFRS 16 - Leases). Hire purchase investments include a purchase option
exercisable by the lessee upon fulfilment of specified conditions. Under such arrangements, at the
commencement of the lease term, the Group records finance lease and hire purchase investments in the
Statement of Financial Position as a receivable, at an amount equal to the net investment in the lease.
The net investment in the lease is equal to the gross investment in the lease (minimum lease payments
receivable by the Group under finance lease and hire purchase investments plus any unguaranteed residual
value accruing to the Group) discounted by the interest rate implicit in the lease.
On subsequent measurement, the Group splits the minimum payments received under the lease between
finance income and reduction of the lease receivable.
The Group applies the principles of IFRS 9 to lease receivables with respect to FVTPL.
Residual Value on Finance Leases
The unguaranteed residual value on finance leases is calculated by estimating the fair market value of the
leased assets less the lease payments from the lessee.
Estimates of market value are based on a number of assumptions including, but not limited to, the in-place
value of the equipment or assets to the end-user, the secondary market value of similar assets and
equipment, the replacement cost of the asset or equipment including the cost of de-installation and re-
Property, Plant and Equipment
Property, Plant and Equipment comprised operating leases, which the Group categorised as a lease
arrangement in which a significant portion of the risks and rewards of ownership are retained by the lessor
(in accordance with the requirements of IFRS 16 - Leases).
All Property, Plant and Equipment was disposed of during the year ended 30 June 2022, refer to note 8 for
Income
Income is recognised to the extent that it is probable that economic benefits will flow to the Group and can
be reliably measured.
to the fair value.
For financial assets measured at amortised cost, interest income is calculated by applying the effective
Expenses
Expenses are recognised in profit or loss in the Consolidated Statement of Comprehensive Income on an
Dividends Payable
The Group pays dividends to shareholders subject to the solvency test prescribed by Guernsey Law. The
Company recognises a liability for dividends payable after a dividend has been approved by the Directors
Cash and Cash Equivalents
Cash and cash equivalents comprise cash at bank, and deposits held at call with banks. Cash equivalents
are short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject
Taxation
Profits arising in the Company and the Subsidiaries are subject to tax in Guernsey at the standard rate of 0%.
SQN Ireland is a qualifying Company within the meaning of Section 110 of the TCA (Taxes Consolidation Act
1997). As such, the profits are chargeable to corporation tax under Case III of Schedule D at a rate of 25%,
Equity Holdings
Equity holdings are measured at fair value which is the same as the net realisable value given that the Audited
Consolidated Financial Statements are now prepared on a basis other than going concern.
For the year ended 30 June 2023, in accordance with IFRS 9, investment in the shares was measured initially
at cost and subsequently at fair value through profit or loss, taking into account all information available
including possible future cash flows, progress of the projects and any call options available to the developer.
Material Agreements and Related Party Transactions
(a) Investment Management Agreement (the “IMA”)
The IMA terminated with effect from midnight on 31 December 2021 and the AIFM delegated responsibility
for the management of the portfolio to the Company. For the period 1 July to 31 December 2021, investment
management fees were incurred as follows:
Management fees payable of: (i) £230,000 for the month of July 2021; and (ii) £218,500 per month
from 1 August 2021 to 31 December 2021;
A payment of £100,000 in total payable by the Company to the Portfolio Manager for the publication
of the Company's Annual Report and Audited Consolidated Financial Statements for the year ended
30 June 2021 and the provision of certain employees' services to the Company to 31 December
2021; and
The clawback arrangement was cancelled with effect from 1 July 2021. The amount outstanding of
£313,733 was cancelled on 1 July 2021.
(b) Administration Agreement
The Administrator provides administration and custodian services and is entitled to receive:
a fixed annual administration fee of £300,000 to 31 March 2023, which was amended effective 1 April
2023 to a fixed annual fee of £270,000;
an annual fee of £36,000 for performing the function of Company Secretary plus fees for ad-hoc
Board meetings;
an annual fee of £10,000 for the provision of compliance services; and
an annual fixed fee of £5,000 for each Guernsey Subsidiary (up to seven Guernsey subsidiaries).
(c) Registrar Agreement
Link Market Services (Guernsey) Limited and the Company entered into a Registrar Agreement on 30
November 2020, with a fixed fee of £23,750 per annum for the period 1 January 2021 to 31 December 2023.
Link is also entitled to a fee of £12,000 for each capital return and the issuance and immediate redemption
and cancellation of B and D shares.
(d) Broker Agreements
Winterflood Securities Limited are entitled to an annual brokerage and advisory fee, during the year it
increased in line with the retail price index from £50,293 per annum to £56,227 per annum.
(e) AIFM
The Company has engaged the services of the AIFM, the AIFM is responsible for managing the Company’s
investments and the risks it faces in accordance with AIFMD, subject to the overall scrutiny of the Board.
The AIFM is entitled to receive a minimum annual management fee of £85,000. The Group may also
reimburse the AIFM for documented expenses in the proper performance of its duties. The AIFM also provide
SQN Ireland
Certain investments in the loans and construction finance investment categories as disclosed in note 9.1,
have been invested through SQN Ireland. SQN Ireland purchased investments by issuing bonds to the Group.
As at 1 January 2022, SQN Ireland has been deemed to be under the control of the Group and results of
SQN Ireland consolidated as part of the Audited Consolidated Financial Statements for the year ended 30
June 2023 (refer to Note 2.1(f)).
From 1 January 2022, the Company has acted as the investment advisor to SQN Ireland. Refer to note 2.1
(e) and 2.1 (f) for further information on the consolidation of SQN Ireland into these Audited Consolidated
Financial Statements.
Share Interest
The table below details the Ordinary Shares and 2016 C Shares held by the Directors in the Company:
30 June 202
3
30 June 20
22
Director
Number of
Ordinary Shares
Number of 2016
C Shares
Number of
Ordinary Shares
Number of 2016
C Shares
David Copperwaite
1,000,000
-
410,000
-
Brendan Hawthorne
-
-
-
-
Brett Miller
2,000,000
400,000
-
-
Shareholders at the AGM held on 29 November 2021 approved an incentive plan (the “Incentive Plan”).
The structure of the Incentive Plan is for a bonus pool to be created for the Board (excluding David
Copperwaite as the independent Director), employees and consultants of the Company (both present and
future) comprising cash equivalent to 1.4% of the aggregate funds distributed to shareholders since 1 July
2021 for a period up to 31 December 2023, following which the amount shall fall to 1.0% of aggregate funds
distributed to shareholders for the period from 1 January 2024 to 30 June 2024 and will thereafter reduce by
a further 0.2% every 3 months (the "Bonus Pool"). The precise allocation of the Bonus Pool will be at the
discretion of the Board, subject to the approval of the independent Director. The Board will not distribute more
than 50% of the Bonus Pool until the net assets of the Company fall below £20 million and no part of the
Bonus Pool will be paid out until a minimum of £80 million has been returned to shareholders cumulatively
since 1 July 2021. The Bonus Pool has been capped at £2.3 million.
As at 30 June 2023, the incentive plan provision was £1,959,222 (30 June 2022: £2,266,001). For the year
ended 30 June 2023, the incentive plan provision reversal was £306,779 (30 June 2022: expense of
£2,266,001).
Bonus payments
At the AGM held on 29 November 2021, shareholders approved a one-off cash bonus of £280,000 to the
Directors, payable in such proportions as the Directors determine to recognise their achievements to 30 June
2021, in achieving the aims of the Company’s investment objective of a managed wind down.
The Board voluntarily agreed to split the bonus into two parts, with the first half paid in the year ended 30
June 2022. During the year ended 30 June 2023, the second half of the bonus payment in the sum of
£140,000, which had been accrued as at 30 June 2022, was paid to the Directors as a further £30 million has
been returned to shareholders since the AGM held on 29 November 2021.
Directors’ remuneration
During the year ended 30 June 2023, total Directors’ remuneration, including extra services was £595,000
(30 June 2022: £862,606) and included consultancy fees of £300,000 (30 June 2022: £300,000) paid to Brett
Other Operating Expenses
30 June 202
3
Year ended
30 June 20
22
£
£
Administration and secretarial fees (refer to note 3(b))
394,848
419,082
Audit fees
135,000
173,790
Brokerage fees (refer to note 3(d))
55,733
109,664
Registrar fees (refer to note 3(c))
63,911
73,819
Legal fees
402,918
498,122
Professional fees
75,159
162,894
Transaction fees
159,767
50,000
Other expenses
224,042
177,979
Investment valuation fees
-
196,856
Employee remuneration
117,111
245,490
Consultancy fees
437,840
682,781
AIFM fees
97,365
85,393
Irrecoverable withholding tax
-
103,832
Total
2,
163,694
Audit fees of £135,000, did not include overrun fees (30 June 2022: audit fees of £173,790, included £47,000
of overrun fees). There were no non-audit related services provided by the Auditor during the years ended
During the year ended 30 June 2023, employee remuneration related to an employee providing operational
support (30 June 2022: two employees for part of the year). The employee remuneration expense includes
wages, payroll taxes, contributions to defined contribution pension plans, termination of employment
expenses and reimbursement of expenses approved by the Board.
Consultancy fees relate to the fees paid to the four Consultants from 1 January 2022, including reimbursement
of expenses approved by the Board. A project commission is payable to the Consultants for their role in
assisting with the wind down of the Company if the Company’s NAV is less than £5 million before 1 January
2024. As at 30 June 2023, the project commission accrual was £nil (30 June 2022: £309,160), as the
Basic and Diluted (Loss)/Earnings per Share
30 June 20
2
3
Ordinary Shares
2016 C Share
Total comprehensive
loss
for the year
£
(
15,996,193
)
£
(
707,262
)
Weighted average number of shares in issue during
the year
355,975,669
138,924,222
Basic and diluted loss per share
(4.49)p
(0.51)p
30 June 20
2
2
Ordinary Shares
2016 C Share
Total comprehensive (loss)/income for the year
£(2,615,318)
£1,418,122
Weighted average number of shares in issue during
the year
355,975,669
138,924,222
Basic and diluted (loss)/earnings per share
(0.73)p
30 June 20
2
3
Ordinary
Shares
2016 C Shares
NAV
£
24,
712
,
641
£
11,
500
,
933
Number of shares in issue
at year end
355,975,669
138,924,222
NAV per share
6.94p
8.28p
30 June 20
2
2
Ordinary Shares
2016 C Shares
NAV
£62,067,375
£26,100,616
Number of shares in issue
at year end
355,975,669
138,924,222
NAV per share
17.44p
Segmental Reporting
There are two reportable segments as at 30 June 2023: Ordinary Shares and 2016 C Shares. Each Share
Class has its own portfolio, is listed separately on the Main Market of the London Stock Exchange and the
Directors review the investment held in each segment separately.
The Directors view the operations of the two reportable segments as one operating segment, being
investment business and both segments have the same investment objectives as at 30 June 2023. All
significant operating decisions are based upon analysis of the Group’s investments as one segment. The
financial results from this segment are equivalent to the financial results of the Group as a whole.
The tables below provide a breakdown of the consolidated statement of comprehensive income between the
reportable segments:
For the year ended 30 June 2023
Ordinary Shares
2016 C Shares
Total
£
£
£
Total income
3,197,723
1,117,689
4,315,412
Net realised and unrealised loss
(17,512,326)
(1,054,626)
(18,566,952)
Total operating expenses and incentive
plan provision reversal
(1,681,590)
(770,325)
(2,451,915)
Total comprehensive loss for the year
(
15,996,193
)
(
707,262
)
(16,
703,455
)
For the year ended 30 June 20
2
2
Ordinary Shares
2016 C Shares
Total
£
£
£
Total income
6,064,371
3,624,247
9,688,618
Net realised and unrealised (loss)/gain
(4,076,661)
1,035,385
(3,041,276)
Total operating expenses and incentive
plan provision
(4,603,028)
(3,241,510)
(7,844,538)
Total comprehensive (loss)/income for
the year
(2,615,318)
1,418,122
(
1,197,196
)
The tables below provide a breakdown of the consolidated statement of financial position between the
reportable segments:
30 June 2023
Ordinary Share
2016 C Share
Total
£
£
£
Investments and other receivables and
prepayments
20,347,924
5,879,177
26,
227,101
Cash and cash equivalents
5,673,594
6,837,088
12,510,682
Total current assets
26,021,518
12,716,265
38,737,783
Current liabilities
(1,308,877)
(1,215,332)
(2,524,209)
Net assets
24,
712,641
11,
500,933
36,
213,574
Equity
24,712,641
11,500,933
36,213,574
30 June 2022
Ordinary Share
2016 C Share
Total
£
£
£
Investments and other receivables and
prepayments
55,928,528
16,518,986
72,447,514
Cash and cash equivalents
7,717,975
10,956,858
18,674,833
Total current assets
63,646,503
27,475,844
91,122,347
Current liabilities
(1,579,129)
(1,375,227)
(2,954,356)
Net assets
62,067,374
26,100,617
88,167,991
Equity
62,067,374
26,100,617
88,167,991
As at 30 June 2023, there was an intercompany loan balance of £2,110,021 receivable by the Ordinary Share
Property, Plant and Equipment
All PPE investments were disposed of during the year ended 30 June 2022:
3
30 June 2022
Cost
£
£
Opening balance
-
15,775,272
Disposals during the year
1
-
(15,775,272)
Closing balance
-
-
Accumulated depreciation
and impairment
Opening balance
-
(13,706,663)
Disposals during the year
1
-
13,706,663
Closing balance
-
1
Financial Instruments
Fair Value Investments
The Group’s accounting policy on fair value measurements is discussed in note 2.3(c).
The Group measures fair values using the following fair value hierarchy that reflects the significance of the
inputs used in making the measurements:
Level 1: Inputs that reflect unadjusted price quotes in active markets for identical assets or liabilities that the
Group has the ability to access at the measurement date;
Level 2: Inputs that reflect price quotes of similar assets and liabilities in active markets, and price quotes of
identical assets and liabilities in markets that are considered to be less than active as well as inputs other
than price quotes that are observable for the asset or liability either directly or indirectly; and
Level 3: Inputs that are unobservable for the asset or liability and reflect the Company’s own assumptions
based upon experience of similar assets and/or on third party appraised values. This category includes
instruments that are valued based on price quotes for which the inputs are unobservable or price quotes for
similar instruments for which significant unobservable adjustments or assumptions are required to reflect
differences between the instruments.
For financial assets not carried at amortised cost, the Company determines fair value using valuation
techniques approved by the Directors.
An assessment is made at each reporting date for any events or changes in circumstances that caused a
transfer. Transfers between levels are deemed to have occurred at the reporting date. There were no transfers
of investments between the Levels during the year.
30 June 2023
Level 1
£
Level 2
£
Level 3
£
Total
£
Financial assets
Investments designated at FVTPL
-
Loans and other investments
-
Finance lease and hire purchase
investments
-
Equity
-
-
-
-
-
-
18,824,636
7,046,590
154,840
18,824,636
7,046,590
154,840
Finance lease residual value
-
-
123,105
123,105
Total financial assets
-
-
26,149,171
26,149,171
30 June 2022
Level 1
£
Level 2
£
Level 3
£
Total
£
Financial assets
Investments designated at FVTPL
-
Lease participation
-
Loans and other investments
-
Finance lease and hire purchase
investments
-
-
-
-
-
-
497,445
47,354,490
24,256,673
497,445
47,354,490
24,256,673
Finance lease residual value
-
-
111,979
111,979
Total financial assets
-
-
72,220,587
Investments designated at FVTPL
Loans and other investments
The Group held construction finance investments, which comprised initial drawings or advances made under
loan agreements, finance leases or hire purchase agreements during a period of procurement or construction
of underlying assets (the “Construction Period”). During the Construction Period, interest or similar service
payments on the advances may have been paid or (more usually) rolled-up and capitalised on expiry of the
Construction Period, typically when the assets were commissioned and (if applicable) commercial operations
commenced. Following the expiry of the Construction Period, construction finance investments were
converted into either loans, finance leases or hire purchase and reclassified in the Audited Consolidated
Financial Statements to the loans, finance lease and hire purchase investment categories.
The Group’s investments include a portfolio of leases of plant and machinery leased under finance lease
agreements that transfer substantially all the risks and rewards incidental to ownership to the lessee and in
hire purchase agreements that include a purchase option exercisable by the lessee upon fulfilment of
specified conditions. Under these agreements, the lessee pays periodic rent for the use of the assets for a
fixed or minimum initial term of typically 3 to 10 years. At the end of the fixed or minimum term, the lessee
can typically elect to:
return the asset to the Group;
in the case of hire purchase, exercise an option to purchase the assets, typically at a ‘bargain’ price;
extend the lease for a further minimum term or from year to year on payment of a pre-agreed rent
(which is typically substantially lower than the rent paid during the initial term); or
arrange a sale of the asset to a third party and (typically) receive all or the majority of the proceeds
of sale. Legal title to the leased assets remains with the Group at all times prior to such sale.
Lease Participation
The Lease Participation investment represented a single participation investment in a portfolio of leases. The
investment was held in a special purpose vehicle (“SPV”) company that owned a number of aging helicopter
assets.
The investment was disposed of during the year ended 30 June 2023 (30 June 2022: fair value of £497,445).
Finance lease residual value
Assets leased to third parties under finance leases had an unguaranteed residual value at the end of the year
of £123,105 (30 June 2022: £111,979).
During the year ended 30 June 2023, no residual investments were sold (30 June 2022: no residual
Equity Holdings
Refer below for the Company’s shareholding in each equity holding held:
30 June 202
3
30 June 20
2
2
Equity
Holding
1
15%
15%
3
25.5%
25.5%
4
25.5%
25.5%
5
20%
20%
6
-
45%
7
-
45%
9
-
100%
10
2%
-
The Board have reviewed each equity holding position and do not believe that any of the equity holding
positons held by the Group qualify for equity method accounting under IAS 28 – Investments in Associates
and Joint Ventures (“IAS 28”). The Board have judged that the Group does not have significant influence,
being where the Company has the power to participate in the financial and operating policy decisions of the
equity holdings, but not control them. Details of each equity holding are outlined below.
The Company and the AIFM monitor the fair value of the equity holdings and review the relevant information
available. As at 30 June 2023, the companies the Group holds equity in are not meeting expected operating
or financial performance levels and the Board believe that the net realisable value of all the above detailed
equity holdings throughout the year and as at 30 June 2023 is £nil (30 June 2022: £nil).
Equity Holding 1
Following a review of the capital position in one of its investments held by the Group, it received an equity
holding in the underlying company. The Group holds junior equity, based on the sale price of the underlying
asset and after senior debt has been repaid, any remaining value will go to senior equity.
The Group has not accounted for this equity holding using IAS 28 as it holds less than 20% of the equity and
does not have significant influence.
Equity Holding 3 and 4
The Group has provided asset finance facilities in the form of construction finance and hire purchase
investments to three AD plants.
In addition to these finance arrangements, the Group acquired an equity holding in each investee company.
The terms of the shareholder agreement included an option (the “Call Option”), exercisable by the developer
upon or following full repayment of the asset finance/loan, to purchase the Group’s shares at a price that will
produce a maximum 12% per annum return on capital to the Group, taking account of both interest paid under
the debt facilities and (if applicable) any dividends, assuming each project is fully delivered.
The equity holdings do not qualify for equity method accounting under IAS 28, although the Group holds
greater than 20% of the voting power in each of the investees, the Board judge that the Group does not have
significant influence due to the following factors for each investment:
The equity holdings can be bought back at the developer’s discretion once conditions per the
shareholder agreement are satisfied.
The return is fixed at a maximum of 12% per annum across the entire investment (loan and shares).
If the investment performs better than expected, the developer will exercise the option to purchase
the shares at the agreed price and therefore the Group has no realistic chance of participating in
residual value.
During the year, no Call Option was exercised by the developers (30 June 2022: no Call Option was exercised
by the developers).
Equity Holding 5
The Group holds an effective 20% (30 June 2022: 20%) shareholding in a holding company. The Group has
not accounted for these equities using IAS 28 as the Board have judged the Group does not have significant
influence.
Equity Holding 6 and 7
The Group held an effective 45% shareholding in two holding companies. The Group did not account for
these equities using IAS 28 as the Board judged the Group did not have significant influence. The shares
were disposed of during the year.
Equity Holding 9
The Group held an effective 100% shareholding in a holding company. The Group did not account for this
equity using IAS 28 as it did not have beneficial ownership of the shares and they were held for security only.
In addition, the Board judged the Group did not have significant influence. The shares were disposed of during
the year.
Equity Holding 10
During the year, the Group acquired 100 million shares in Shunfeng International Clean Energy Limited, which
is listed on the Hong Kong Stock Exchange. The shares were received as Shunfeng International Clean
Energy Limited was Borrower 5’s guarantor and the shares were part of the settlement agreement. As at 30
June 2023, the fair value of the shareholding was £154,840 (30 June 2022: n/a as not held).
The following table summarises the changes in the fair value of the Group’s Level 3 investments designated
at fair value through profit or loss:
30 June 20
2
3
30 June 20
2
2
£
£
Opening balance
72,220,587
148,865,606
Purchases during the year
196,564
100,000
Sales during the year
(27,760,032)
(72,963,900)
Unrealised loss on revaluation of investments
(4,816,132)
(4,529,380)
Realised (loss)/gain on investments
(13,691,816)
748,261
Closing balance
26,
149,171
72,220,587
Information about the Level 3 Investments
Lease participation, loans, construction finance, finance lease and hire purchase investments
The fair value of “loans and other investments” and “finance lease and hire purchase” investments is based
on two key inputs being the expected cash flows from the facility including any appropriate adjustment in
timing to realise these cash flows and an appropriate discount rate. Refer to note 2.3(c) for further detail and
FV discount matrix and below for sensitivity analysis to significant changes in unobservable inputs within
Level 3 hierarchy.
When examining target returns sought by private debt funds, the Company has examined a number of public
data sources. By nature, Private Debt is not publicly disclosed, however, a number of consultants and market
participants share typical ranges within sectors that ties into the Company’s experience from market studies
completed historically.
Finance lease residual value
The Company makes assumptions about the residual value of certain assets and equipment. This assumed
cash flow is typically a minor part of the assumed cash flows from the investment. In determining the cash
flow, we will review contractual terms that may limit any payment and consider market observable inputs
relating to percentages of value retained.
As determined by the Company, the residual value is a function of the in-place value and/or the secondary
market value of the equipment or assets.
The in-place value is an assessment of the value of the equipment or assets if the equipment or assets were
to continue to operate and provide value to the end-user. This takes into account the marginal cost of keeping
the asset in place as well as the cost to the end-user of decommissioning, redelivering, and replacing the
equipment. In some cases, this amount (or a maximum value) is negotiated in advance with the end-user.
The secondary market value is determined utilising the Company’s historical experience, quotes from dealers,
third party appraisals and recent sales. The secondary market value also takes into account the geography
of the equipment or assets, the timeframe required to conduct a sale, and the associated costs that are not
passed on to the end-user.
9.2
Valuation Process
The following table provides information about fair value measurements and key unobservable inputs with
respect to each category of financial assets designated at fair value through profit or loss:
30 June 2023
Description
Fair Value
Valuation Techniques
Unobservable Inputs
£
Loans
18,
824,636
Discounted cash flow
Expected cash flows and discount
rate
Finance lease
5,368,499
Discounted cash flow
Expected cash flows and discount
rate
Hire purchase
1,678,091
Discounted cash flow
Expected cash flows and discount
rate
Finance lease residual
value
123,105
Discounted cash flow
Future cash flows resulted from
leases modifications and discount
rate
Equity holdings 1 and 3 to 5
-
Discounted cash flow
Discount rate and EBITDA growth
rate
Equity holding 10
154,840
Adjusted share price
Illiquidity discount of 50% applied to
the share price as at 30 June 2023*
*
The illiquidity discount might differ from 50% and there may be no market for the size of shareholding held
by the Company.
30 June 2022
Description
Fair Value
Valuation Techniques
Unobservable Inputs
£
Lease participation
497,445
Discounted cash flow
Expected cash flows and discount
rate
Loans
33,875,154
Discounted cash flow
Expected cash flows and discount
rate
Construction finance
13,479,336
Discounted cash flow
Expected cash flows and discount
rate
Finance lease
18,645,391
Discounted cash flow
Expected cash flows and discount
rate
Hire purchase
5,611,282
Discounted cash flow
Expected cash flows and discount
rate
Finance lease residual
value
111,979
Discounted cash flow
Future cash flows resulted from
leases modifications and discount
rate
Equity holdings 1, 3 to 7
and 9
-
Discounted cash flow
Discount rate and EBITDA growth
rate
Sensitivity Analysis
The table below provides the valuation basis of financial assets designated at fair value through profit or loss,
being the summation of contractual future cash flows, offer/settlement agreement, and third-party expert
valuations (“Expert Valuations”):
30 June 202
3
30 June 202
2
£
£
Contractual future cash flows
15,115,702
33,744,119
Offer/settlement agreement
10,878,629
6,358,005
Expert Valuations
-
32,118,463
Listed share price
154,840
-
Total
26,
149
,
171
72,220,587
The tables below detail sensitivity analysis on the key unobservable inputs considering the discount rate and
the expected cash flows from the facility including any appropriate adjustment in timing to realise these cash
flows with respect to the fair value measurement of financial assets designated at fair value through profit or
loss.
Discount rate
The Company has reviewed the current discount rates compared with the rates charged at issue on the
transactions. After removing non-standard positions from the analysis, it was ascertained that +1.75%/- 1.75%
is a suitable sensitivity range for the discount rates. Refer below for discount rate sensitivity analysis:
30 June 202
3
30 June 20
2
2
£
£
£
£
Increase of
1
.
7
5%
Decrease of
1
.
7
5%
Increase of
1.75
%
Decrease of
1.75
%
Contractual future cash flows
(35,657)
219,585
(257,297)
720,874
Offer/settlement agreement
(15,788)
52,446
-
11,401
Expert Valuations
-
-
(307,841)
409,372
Total
(
5
1
,44
5
)
272,03
1
(565,138)
1,141,647
Expected cash flow adjustment
For the purposes of determining the sensitivity, the Company has reviewed expected cash flow transactions
over the prior 12 months, against actual cash flow transactions and identified that cash flows achieved were
in line with cash flows expected within an approximate 10% threshold. From this analysis, the Company
believes that a +10%/-10% represents the majority of changes in cash flows experienced.
Refer below for
discount rate sensitivity analysis:
30 June 202
3
30 June 202
2
£
£
£
£
Increase of
10%
Decrease of
10%
Increase of
10%
Decrease of
10%
Contractual future cash flows
1,122,083
(1,511,568)
3,993
(3,374,412)
Offer/settlement agreement
863,172
(1,087,863)
n/a
n/a
Expert Valuations
-
-
715,565
(3,211,846)
Total
1,
985,255
(2,
599,431
)
719,558
(6,586,258)
Listed equity illiquidity discount
As at 30 June 2023, the Company estimated that a 50% discount was appropriate given the large percentage
of shares held compared with the average volume traded compounded by a heavily indebted balance sheet.
If the discount increased to 75% the value would fall by £77,640 to £77,200 and if the discount fell to 25% the
value would increase by £77,200 to £232,040.
Timings to realise expected cash flows
The Company has analysed historic transactions and identified that settlements are often delayed by 3-9
months.
On this basis, the below sensitivity details the impact on bringing forward settlements by 6 months
and extending by 6 months.
30 June 202
3
30 June 202
2
£
£
£
£
Increase of
182 days
Decrease of
182 days
Increase of
182 days
Decrease of
182 days
Contractual future cash flows
(215,432)
-
-
-
Offer/settlement agreement
(551,024)
20,773
n/a
n/a
Expert Valuations
-
-
(1,179,653)
1,245,033
Total
(766,456)
20,773
(1,179,653)
1,245,033
9.3
Net movement on investments
30 June 2023
30 June 2022
£
£
Net unrealised loss on revaluation of investments
(4,816,132)
(4,529,380)
Net realised (loss)/gain on investments
(13,691,816)
748,261
Net realised loss on PPE (note 8)
-
(49,414)
Net movement on investments
(18,507,948)
Receivables
30 June 2023
30 June 2022
£
£
Other receivables
29,010
37,611
Prepaid transaction fees
48,920
24,984
77,930
Payables
30 June 2023
30 June 2022
£
£
Administration and secretarial fees
27,584
30,085
Audit fees
81,000
88,290
Brokerage fees
9,371
8,382
Other payables
37,846
29,229
Director fees (bonus accrual, refer to note 3)
-
140,000
Consultancy fees
62,250
371,410
AIFM fees
42,384
20,959
260,435
688,355
The Group has financial risk management policies in place to ensure that all payables are paid within the credit
time frame.
The Directors consider that the carrying amount of all payables approximates to their fair value.
As at 30 June 2023, consultancy fees did not include a project commission accrual (30 June 2022: accrual of
Investment Payable
Borrower 1 was restructured and sold during the year and the completion accounts amount of £0.3 million
remained outstanding as at 30 June 2023 as deferred consideration. £0.3 million was paid by the Company
Commitments and Provisions
The Group had not committed to invest any further amounts as at 30 June 2023 and 30 June 2022.
As at 30 June 2023, the Group had a provision in regard to the incentive plan in the sum of £1,959,222 (30
June 2022: £2,266,001). Refer to note 3 for further details.
A project commission is payable to each consultant of 50% of their annual fee for meeting certain criteria in
assisting with the wind down of the Company. As at 30 June 2023, the accrual was £nil (30 June 2022:
Share Capital
The authorised share capital of the Company is represented by an unlimited number of shares of no par value
which may be designated as Ordinary Shares, C Shares or otherwise as the Directors may from time to time
determine. All shares hold equal rights with no restrictions and no shares carry special rights with regard to
the control of the Company. There are no special rights attached to the shares in the event that the Company
is wound down. In accordance with the Company’s articles, the Company holds separate share class
meetings, for both the Ordinary Shares and the 2016 C Shares, at which shareholders vote on resolutions
specific to each share class.
The 2016 C Share investments are accounted for and managed as a separate pool of assets in accordance
with the Company’s investment policy. Shared expenses, which relate to both classes are split between
Ordinary Shares and 2016 C Shares based on their respective NAV.
The Company’s share capital is denominated in Sterling.
30 June 202
3
30 June 20
2
2
Number of Shares
in Issue
Stated Capital
Number of Shares
in Issue
Stated Capital
£
£
Ordinary Shares
355,975,669
264,937,833
355,975,669
286,296,373
2016 C Shares
138,924,222
39,257,117
138,924,222
53,149,539
Total
494,899,891
304,194,950
494,899,891
339,445,912
Share Buybacks
At the AGM held on 2 December 2022, the Directors were granted authority to repurchase 53,360,753
Ordinary Shares and 20,824,741 2016 C Shares (being equal to 14.99% of the number of Ordinary Shares
and 2016 C Shares in issue) for cancellation. This authority will expire at the forthcoming AGM. The Directors
intend to seek annual renewal of this authority from shareholders. Pursuant to this authority, and subject to
Companies Law and the discretion of the Directors, the Company may purchase Ordinary Shares and 2016
C Shares in the market if they believe it to be in shareholders’ interests.
The Group did not repurchase any Ordinary Shares or 2016 C Shares during the years ended 30 June 2023
and 30 June 2022.
Issued Share Movements
30 June 20
2
3
30 June 20
2
2
Number
Stated Capital
Number
Stated Capital
£
£
Balance at the start of the year
494,899,891
339,445,912
494,899,891
426,2
72
,
139
Redemption of B and D shares –
capital return (refer to note 14)
-
(35,250,962)
-
(86,826,227)
Balance at the end of the year
494,899,891
304,194,950
494,899,891
339,445,912
14.
Return of Capital
As part of the managed wind down of the Company, the Board returned cash to shareholders using a B Share
Mechanism and a D Share Mechanism.
The B Share Mechanism involves the issue of new redeemable shares of no par value (“B Shares”), paid
out
of the Company’s assets to existing Ordinary shareholders pro rata to their holdings of Ordinary Shares at
the time of such issue. The D Share Mechanism involves the issue of new redeemable shares of no par value
(“D Shares”), paid out of the Company’s assets to existing 2016 C shareholders pro rata to their holdings of
2016 C Shares at the time of such issue. The B Shares and D Shares shall be non-transferable and shall be
redeemable for cash subsequent to issue at the option of the Board on such terms, as the Board shall
determine.
Rights attaching to the B and D Shares
The B Shares and D Shares do not carry any right to any dividends, any other income distributions, or any
capital distributions of the Company other than as expressly permitted under the new Articles.
The B Shares and D Shares do not entitle any holder thereof to any surplus assets of the Company remaining
after payment of all creditors of the Company apart from a distribution in respect of any capital paid up on the
B Shares and D Shares which shall rank behind any amounts due in respect of other classes of shares (apart
from any B Shares D Shares) and such distribution shall be distributed pro rata.
The B Shares and D Shares will be issued on terms that each B Share and D Share shall be redeemable at
the option of the Board and on the terms the Board determine. Redemption monies will be paid in accordance
with the terms of the new Articles.
The B Shares and D Shares shall not carry any right to receive notice of, or attend, speak or vote at, any
general meeting of the Company or any right to vote on written resolutions of the Company. The B Shares
and D Shares shall not be transferrable. The Board expect that the B Shares and D Shares will only ever be
in issue for a short period of time.
Return of Capital during the year ended 30 June 2023
On 12 July 2022, the Company announced the seventh return of capital which was paid to shareholders on
3 August 2022. This return of capital was effected by way of an issue and immediate redemption and
cancellation of 355,975,669 B Shares and 138,924,222 D Shares on 26 July 2022.
On 15 November 2022, the Company announced the eighth return of capital, which was paid to shareholders
on 14 December 2022. This return of capital was effected by way of an issue and immediate redemption and
cancellation of 355,975,669 B Shares and 138,924,222 D Shares on 6 December 2022.
On 27 March 2023, the Company announced the ninth return of capital which was paid to shareholders on
28 April 2023. This return of capital was effected by way of an issue and immediate redemption and
cancellation of 355,975,669 B Shares and 138,924,222 D Shares on 20 April 2023.
During the year ended 30 June 2023, the Company made a return of capital on three separate occasions, as
detailed below, returning a total of £21,358,540 to Ordinary shareholders and £13,892,422 to 2016 C
shareholders).
Record date
Number of B
Shares
issued and
cancelled
Amount
per
Share
Amount
returned to
Ordinary
shareholders
Number of D
Shares issued
and cancelled
Amount
per
Share
Amount
returned to
2016 C
shareholders
25 July 2022
355,975,669
1p
£3,559,757
138,924,222
5p
£6,946,211
5 December
2022
355,975,669
1.5p
£5,339,635
138,924,222
1.5p
£2,083,863
19 April 2023
355,975,669
3.5p
£12,459,148
138,924,222
3.5p
£4,862,348
£21,358,540
£13,892,422
Refer to note 18 for detail of return of capital post year-end.
Return of Capital during the year ended 30 June 2022
On 7 July 2021, the Company announced the third return of capital which was paid to shareholders on 29
July 2021. This return of capital was effected by way of an issue and immediate redemption and cancellation
of 355,975,669 B Shares and 138,924,222 D Shares on 21 July 2021.
On 18 August 2021, the Company announced the fourth return of capital, which was paid to shareholders on
13 September 2021. This return of capital was effected by way of an issue and immediate redemption and
cancellation of 355,975,669 B Shares and 138,924,222 D Shares on 3 September 2021.
On 24 February 2022, the Company announced the fifth return of capital which was paid to shareholders on
18 March 2022. This return of capital was effected by way of an issue and immediate redemption and
cancellation of 355,975,669 B Shares and 138,924,222 D Shares on 10 March 2022.
On 21 April 2022, the Company announced the sixth return of capital which was paid to shareholders on 19
May 2022. This return of capital was effected by way of an issue and immediate redemption and cancellation
of 355,975,669 B Shares and 138,924,222 D Shares on 11 May 2022.
During the year ended 30 June 2022, the Company made a return of capital on four separate occasions, as
detailed below, returning a total of £28,478,054 to Ordinary shareholders and £58,348,173 to 2016 C
shareholders).
Record date
Number of B
Shares
issued and
cancelled
Amount
per
Share
Amount
returned to
Ordinary
shareholders
Number of D
Shares
issued and
cancelled
Amount
per
Share
Amount
returned to
2016 C
shareholders
20 July 2021
355,975,669
3p
£10,679,270
138,924,222
7p
£9,724,695
2 September
2021
355,975,669
3p
£10,679,270
138,924,222
21p
£29,174,087
9 March 2022
355,975,669
1p
£3,559,757
138,924,222
10p
13,892,422
10 May 2022
355,975,669
1p
£3,559,757
138,924,222
4p
5,556,969
£28,478,054
Dividends
No dividends were declared by the Company to its shareholders during the years ended 30 June 2023 and
30 June 2022. With the Company in managed wind down, the Board does not intend to declare any further
Capital Management Policies and Procedures
The Board defines capital as financial resources available to the Group.
The Group’s total capital at 30 June 2023 was £36,213,574
(30 June 2022: £88,167,991) and comprised
equity share capital and reserves. The Group was ungeared at the year-end.
The Group’s capital management objective is to provide returns to shareholders.
As the Company is in managed wind down, the Group's principal use of cash is to return cash to shareholders,
whist maintaining sufficient balances to meet ongoing operational expenses.
The Board monitors and reviews the broad structure of the Group’s capital on an ongoing basis.
Financial Risk Management
The Group’s financial assets mainly comprise investments and cash balances. Note 2 sets out the accounting
policies, including criteria for recognition and the basis for measurement, applied to significant financial assets
and liabilities. Note 2 also includes the basis on which income and expenses arising from financial assets and
liabilities are recognised.
Principal risks and uncertainties are detailed in the Strategic Report. The Directors and the AIFM, with the
assistance of the Consultants and the Company’s employee, work together to mitigate these risks by
employing the following risk mitigation strategies:
(i) Credit Management – sound credit management is a prerequisite for an entity's stability and profitability.
Prudent management of credit risk can minimise both operational and credit risks. The Board pre-emptively
begin to manage risk through the comprehensive underwriting process to ensure that there is not more than
an acceptable amount of risk within the transaction. The risk is continually managed throughout the term of
the lease (or other finance agreement) until the ultimate disposition of the asset(s). Stringent underwriting
procedures are applied to mitigate risk.
(ii) Due Diligence – the Company performs comprehensive due diligence on all counter parties, individuals
and businesses relevant to the investment strategy of the Group.
(iii) On-going Portfolio Management – ensures that if a problem starts to arise, it is identified giving the
capability to address it and put into action whatever remediation steps are necessary to help mitigate a
potentially larger risk down the line.
(iv) Legal Review – the Company engages legal professionals in order to ensure, on an on-going basis, that
all rights, title and interests, held as security for the Company’s investments are being protected and
preserved.
(vi) Records Management – the Company has a comprehensive electronic documentation system that is
subject to their internal/external backup procedure, maintaining information access and retrieval 24/7 with
offsite redundant backup in case of a disaster when recovery would need to be deployed.
The AIFM, in close cooperation with the Directors, coordinate the Group’s risk management.
Additional risks arising from the Group’s activities listed in order of severity and likelihood and the policies for
managing each of these risks are summarised in this note and have been applied throughout the year.
Credit Risk
This is the risk of the failure of a lessee to make lease payments, the failure of the issuer of a security or
borrower to pay interest or principal in a timely manner, or that the effect of negative perceptions of the
issuer’s ability to make such payments causing the value of the investment to decline. Counterparties with
debt securities rated below investment-grade (or unrated) are especially susceptible to this risk. The Group
looks to source investments that can provide various credit and structural enhancements to attempt to
mitigate credit exposure to any single counterparty or asset class.
Credit concentration risk
As the Company is in managed wind down, the Company will not be making any new investments. The Board
will monitor concentration risk of the investment portfolio as the portfolio is liquidated as part of the Company’s
investment objective and policy.
BNP Paribas S.A., Guernsey Branch is the bank used by the Group to hold cash balances and there is a risk
that it could fail or that there may be fraud or theft by employees and that the Group’s assets may not be
returned. BNP Paribas S.A., Guernsey Branch, is a branch of BNP Paribas whose credit rating is A+ with
Standard & Poor's.
Credit risk of cash and custodian is mitigated by the Company’s policy to only undertake significant
transactions with leading commercial counterparties.
Exposure to Credit Risk
The following tables detail the Company’s financial assets maximum exposure to credit risk:
30
June 2
02
3
30
June 2
02
2
£
£
Residual value of finance lease
investments
123,105
111,979
Investments
designated
at
fair
value
through profit or loss
26,026,066
72,108,608
Cash and cash equivalents
12,
510,682
18,674,833
Other receivables (excludes prepayments)
29,010
201,943
Total assets
38,688,863
91,097,363
Financial assets credit quality summary
The table below shows the different risk categories, the associated PDs and the nominal rating equivalent in
relation to unsecured loans:
Company Risk Grade
Nominal Rating
Equivalent
1: Virtually no risk
AAA
2: Low risk
AA
3: Moderate risk
A
4: Average risk
BBB
5: Acceptable risk
BB
6: Borderline risk
B
7: High risk
CCC
8: Extremely high risk
CC
9: Doubtful
D
10: Loss
D
Refer below for Risk Grades and nominal rating equivalent as at 30 June 2023 (excluding other receivables
of £29,010).
Company
Risk
Grade
Nominal
Rating
Equivalent
Investment Category
£
N/A
A+1
Cash and cash equivalents
12,510,682
5
BB
Investments designated at fair value
through profit or loss
4,871,174
5
BB
Residual value of finance lease
investments
93,660
7
CCC
Investments designated at fair value
through profit or loss
731,835
7
CCC
Residual value of finance lease
investments
29,445
8
CC
Investments designated at fair value
through profit or loss
11,220,815
10
D
Investments designated at fair value
through profit or loss
9,047,402
N/A
N/A
Investments designated at fair value
through profit or loss
154,840
Total
38,659,853
Refer below for Risk Grades and nominal rating equivalent as at 30 June 2022 (excluding other receivables
of £201,943).
Company
Risk
Grade
Nominal
Rating
Equivalent
Investment Category
£
N/A
A+1
Cash and cash equivalents
18,674,833
5
BB
Investments designated at fair value
through profit or loss
13,190,350
5
BB
Residual value of finance lease
investments
85,272
6
B
Investments designated at fair value
through profit or loss
112,945
7
CCC
Investments designated at fair value
through profit or loss
850,654
7
CCC
Residual value of finance lease
investments
26,707
8
CC
Investments designated at fair value
through profit or loss
20,280,741
10
D
Investments designated at fair value
through profit or loss
37,673,918
Total
Liquidity Risk
This is the risk that the Group will encounter difficulty in meeting obligations associated with financial liabilities
or funding commitments. The Board manages and monitors the Group’s liquidity risk.
The Group’s investments (excluding cash deposits) are asset-backed loan or finance transactions with
commercial entities. The investments are substantially less liquid than traded securities and will have a highly
limited (if any) secondary market. Some transactions may incorporate provisions that restrict transfer or
disposal of the investment.
As at 30 June 2023 and 30 June 2022, the Group did not have any foreign exchange forward contracts.
The table below shows the Company’s financial liabilities as at 30 June 2023:
Less than 1
year
1 to 5 years
More than 5
years
No maturity
date
Total
£
£
£
£
£
Financial liabilities
Other payables and
accrued expenses
(2,535,731)
-
-
-
(2,535,731)
Total undiscounted
financial liabilities
(2,535,731)
-
-
-
(2,535,731)
The table below shows the Company’s financial liabilities as at 30 June 2022:
Less than 1
year
1 to 5 years
More than 5
years
No maturity
date
Total
£
£
£
£
£
Financial liabilities
Other payables and
accrued expenses
(379,195)
(2,673,500)
-
-
(3,052,695)
Total undiscounted
financial liabilities
(379,195)
(2,673,500)
-
-
17.3.
Operational Risk
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the
processes, technology and infrastructure supporting the Group’s activities with financial instruments either
internally within the Group or externally at the Group’s service providers, and from external factors other than
credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally
accepted standards of investment management behaviour.
The Group’s objective is to manage operational risk so as to balance limiting of financial losses and damage
to its reputation with achieving its investment objective. The Group manages this risk by having oversight of
the Administrator, the Consultants and the Company’s employee.
Market Risk
The fair value of future cash flows of a financial instrument held by the Group may fluctuate. This market risk
comprises currency risk, interest rate risk and price risk. The Board reviews and agrees policies for managing
these risks.
The functional and presentation currency of the Group is Sterling and, therefore, the Group’s principal
exposure to foreign currency risk comprises investments denominated in other currencies, principally US
Dollars and Euros. The Company monitors the Group’s exposure to foreign currencies. The Board measures
the risk to the Group of the foreign currency exposure by considering the effect on the NAV and income of a
movement in the rates of exchange to which the Group’s assets, liabilities, income and expenses are exposed.
The table below details the carrying amounts of the Company’s financial assets and financial liabilities that
have foreign currency risk exposure:
30 June 20
2
3
GBP
USD
EUR
HKD
Total
£
£
£
£
£
Investments including the residual
value of finance lease investments
9,421,834
333,707
16,238,790
154,840
26,149,171
Cash and cash equivalents
12,016,477
211,338
282,867
-
12,510,682
Other receivables
29,010
-
-
-
29,010
Investment payables, other
payables and accrued expenses
(2,524,209)
-
-
-
(2,524,209)
Total net foreign currency exposure
18,943,112
545,045
16,521,657
154,840
36,164,654
Percentage of total
52.38%
1.51%
45.68%
0.43%
100%
30
June 20
2
2
GBP
USD
EUR
Total
£
£
£
£
Investments including the residual
value of finance lease investments
47,200,403
1,572,223
23,447,961
72,220,587
Cash and cash equivalents
16,998,380
652,542
1,023,911
18,674,833
Other receivables
201,943
-
-
201,943
Investment payables, other
payables and accrued expenses
(2,954,356)
-
-
(2,954,356)
Total net foreign currency exposure
61,446,370
2,224,765
24,471,872
88,143,007
Percentage of total
69.7
2
%
2.52
%
27.
76
%
100.00%
Currency sensitivity analysis
Should the value of Sterling against the Euro and the US Dollar increase or decrease by 5% with all other
variables held constant and excluding the impact of currency hedging described below, the impact on the net
assets of the Company would be as follows:
Currency
30 June 20
2
3
30 June 20
2
2
£
£
£
£
Increase of 5%
Decrease of 5%
Increase of 5%
Decrease of
5%
USD
(27,252)
27,252
(111,238)
111,238
EUR
(826,083)
826,083
(1,223,594)
1,223,594
HKD
(7,742)
7,742
-
-
The Board believe that a 500 basis point movement in the value of Sterling against other currencies is
reasonable given the average volatility in these currency rates during the years ended 30 June 2023 and 30
June 2022.
Interest Rate Risk
Most of the Group’s investments receive a fixed rate of interest. The value of fixed income securities usually
rise and fall in response to changes in market interest rates. Declining interest rates generally increase the
fair value of existing instruments, and rising interest rates generally decrease the fair value of existing
instruments. Changes in value usually will not affect the amount of interest income or final principal
repayments but could affect the market value of the investment prior to maturity. Interest rate risk is generally
greater for investments with longer maturities.
Certain income generating securities pay interest at variable rates. Variable rate securities reset at specified
intervals, while floating rate securities reset whenever there is a change in a specified index rate. The market
prices of these securities may fluctuate significantly when interest rates change. As at 30 June 2023 and 30
June 2022, no variable interest rate positions were held, except for cash at bank.
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are
taken into account when making investment decisions. Expected cash flows are monitored as investment
updates are provided and the Company considers changes to cash flows on a quarterly basis. Each facility
has a rate applied to fair value based on market observable transactions, performance, credit type and risk.
The waterfall requires a market rate to be applied, if applicable, if not and the facility continues to perform in
line with origination, the initial rate is adjusted by the relevant risk free rate change; where these are not
appropriate the rate is taken from the fair value rate matrix.
The Board reviews on a regular basis the values
of the financial instruments.
The following table details the Group’s exposure to interest rate risks. It includes the financial assets
designated at FVTPL and at amortised cost and financial liabilities at amortised cost as at 30 June 2023 and
30 June 2022.
At 30 June 2023
Interest bearing
Non-interest
bearing
Variable
Fixed interest
Total
£
£
£
£
Assets
designated at fair value through profit or loss:
Residual value of finance
lease investments
-
-
123,105
123,105
Investments
designated
at fair value through profit
or loss
-
25,871226
154,840
26,026,066
Financial assets at amortised cost:
Cash
and
cash
equivalents
12,510,682
-
-
12,510,682
Other receivables
-
-
29,010
29,010
Total assets
12,
510,682
25,871,226
306,955
38,688,863
Liabilities
Financial liabilities at amortised
cost:
Other
payables
and
accrued expenses
-
-
(2,524,209)
(2,524,209)
Total liabilities
-
-
(2,
524,209
)
(2,
524,209
)
Total interest
sensitivity gap
12,
510,682
25,871,22
6
(2,
217
,
254
)
36,
164,654
At 30 June 202
2
Interest bearing
Non
-
interest
bearing
Variable
Fixed interest
Total
£
£
£
£
Assets
designated at fair value through profit or loss:
Residual value of finance
lease investments
-
-
111,979
111,979
Investments
designated
at fair value through profit
or loss
-
72,108,608
-
72,108,608
Financial assets at
amortised cost:
Cash
and
cash
equivalents
18,674,833
-
-
18,674,833
Other receivables
-
-
201,943
201,943
Total assets
18,674,833
72,108,608
313,922
91,097,363
Liabilities
Financial liabilities at amortised
cost:
Other
payables
and
accrued expenses
-
-
(
2,954,356
)
(
2,954,356
)
Total liabilities
-
-
(
2,954,356
)
(
2,954,356
)
Total interest
sensitivity gap
18,674,833
72,108,608
(
2,640,434
)
88,143,007
Interest rate sensitivity
An increase of 175 basis points (30 June 2022: 175 basis points) in interest rates as at the reporting date
would increase cash from interest by £218,937 and decrease investments designated at
FVTPL
by £51,445,
which would increase NAV by £167,492 (30 June 2022: increase cash from interest by £326,810 and
decrease investments designated at
FVTPL
by £565,138, which would decrease NAV by £238,328).
A decrease of 175 basis points (30 June 2022: 175 basis points) would decrease cash from interest by
£218,937 and increase Investments designated at
FVTPL
by £272,031, which would increase NAV by £53,094
(30 June 2022: decrease cash from interest by £308,135 and increase Investments designated at
FVTPL
by
£1,141,647, which would increase NAV by £833,512).
Interest rates in the UK increased from 1.25% as at 1 July 2022 to 5.00% as at 30 June 2023, with a further
increase to 5.25% post year end in August 2023. The Board believe that a 175 basis (30 June 2022: 175
basis) point movement in interest rates is reasonable as it captures the expected largest upswing possible
from rates as at 30 June 2023 and a down swing appears extremely unlikely to exceed the same level.
Price risk
Price risk is the risk that the Company’s performance will be adversely affected by changes in the markets it
invests (other than those arising from currency risk and interest rate risk) whether caused by factor specific
to an individual investment or all factors affecting all investments traded in the market.
As at 30 June 2023 and 30 June 2022, the Company is exposed to price risk on investments designated at
fair value through profit or loss and on its residual value of finance lease investments.
Refer to note 2.3(c) and note 9.1 for detail regarding fair value measurement of investments designated at
fair value through profit or loss.
The Company makes assumptions about the residual value of certain assets and equipment. The residual
value is a function of the in-place value and/or the secondary market value of the equipment or assets. Equity
holdings are valued on a market approach, taking into consideration NAV information of the investee, call
options exercisable on the holdings and external pricing of recent transactions (if available). Lease
participation investments are valued based on the principal balance of the participation interest adjusted for
information provided by third party appraisals.
The Company attempts to mitigate asset pricing risk by using comparable recent market transactions and
other valuation/information sources, however, these investments may be extremely difficult to value
accurately, and the valuations provided may differ, sometimes significantly. Third-party pricing information
may not be available for certain positions held.
The estimated fair values of lease participation investments, equity holdings and residual value of finance
lease investments, loans and other investments and finance lease and hire purchase investments are
monitored and reassessed on an ongoing basis by the Company.
Refer below for sensitivity analysis on the impact on the Statement of Comprehensive Income and NAV of
the Company, if the fair value the investments exposed to price risk increased or decreased by 15% (30 June
2022: 15%). Refer to note 9 for detail on sensitivity analysis on fair value measurement unobservable inputs.
30 June 202
3
Increase by
15%
Decrease by
15%
Financial assets
£
£
£
Investments designated at FVTPL
1
26,026,066
3,903,910
(3,903,910)
Finance lease residual value
123,105
18,466
(18,466)
Total
26,149,171
3,922,376
(3,
922,376
)
30 June 202
2
Increase by 15%
Decrease by 15%
Financial assets
£
£
£
Investments designated at FVTPL
1
72,108,608
10,816,291
(10,816,291)
Finance lease residual value
111,979
16,797
(16,797)
Total
72,220,587
10,833,088
(10,833,088)
1
Includes, loans and other investments and finance lease and hire purchase investments.
The Board believe that a 15% (year ended 30 June 2022: 15%) movement is reasonable based on market
Return of Capital
On 20 July 2023, the Company announced the tenth return of capital which was paid to shareholders on 21
August 2023. This return of capital was effected by way of an issue and immediate redemption and
cancellation of 355,975,669 B Shares and 138,924,222 D Shares on 11 August 2023.
The table below summaries the amounts returned to shareholders:
Ordinary Shares
2016 C Shares
Record date
Amount per
Share
Amount returned
to shareholders
Amount per Share
Amount returned
to shareholders
10 August 2023
1p
£3,559,757
2.5p
£3,473,106
Asset Realisations
Borrower 22 within the Ordinary Share Class portfolio (as outlined in the Investment Report)
On 19 July 2023, the Board announced that Borrower 22 repaid £1.8 million, being a full repayment of the
facility. The investment had a fair value of £1.8 million as at 30 June 2023 and £2.0 million as at 30 June
2022.
Borrowers 1 and 2 within the Ordinary Share Class portfolio (as outlined in the Investment Report)
On 10 August 2023, deferred consideration in the sum of £328,222 was paid in regard to borrower 1 and
19.
Ultimate Controlling Party
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
98
Alternative Performance Measures (Unaudited)
1.
Share Price Discount
The share price discount to NAV has been calculated as the percentage difference between the NAV per
share and the closing share price of the Ordinary Shares and 2016 C Shares on the same date (source:
Bloomberg).
Reason for use
To provide transparency in the difference between the NAV and the Ordinary Share and 2016 C Share price
and to help investors identify and monitor the performance of the Group.
Ordinary Shares
2016 C Shares
30 June 2023
30 June 2022
30 June 2023
30 June 2022
NAV per share (A)
£0.0694
£0.1744
£0.0828
£0.1879
Closing share price per
Bloomberg (B)
£0.0280
£0.0600
£0.0620
£0.1108
Discount to NAV per share
((B-A)/A)
(59.65)%
(65.60)%
(25.12)%
(41.03)%
2.
NAV Total Return
The NAV total return measures how the NAV per Ordinary Share and 2016 C Share has performed over a
period of time, taking into account both capital distributions and dividends paid to shareholders. The Company
quotes NAV total return as a percentage change from a certain point in time, such as the initial issuance of
Ordinary Shares and 2016 C Shares or the beginning of the period, to the latest reporting date, being 30 June
2023 in this instance. It assumes that capital and dividends paid to shareholders are reinvested back into the
Company.
Total return since inception is for the period 31 July 2014 to 30 June 2023 for Ordinary Shares and 31
December 2016 to 30 June 2023 for 2016 C Shares.
Reason for use
To provide transparency in the Company’s performance and to help investors identify and monitor the
compounded total returns of the Company.
Annualised return
The 3 year annualised return is calculated as the geometric average amount of monthly total returns over the
past 3 years.
Reason for use
To provide transparency of the Company’s performance and to help investors identify and monitor their total
return over a 3 year period if the annual return was compounded.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
99
Alternative Performance Measures (Unaudited) (Continued)
2.
NAV Total Return (Continued)
Ordinary Shares
Year to
30 June 2023
3 year
Since Inception
Opening NAV per share (A)
£0.1744
£0.3619
£1.0000
Closing NAV per share (B)
£0.0694
£0.0694
£0.0694
Dividends paid (C)
-
-
£0.3716
Capital distributions (D)
£0.0600
£0.2450
£0.2450
NAV total return per share
(E=(B-A+C+D)/A)
(25.80)%
(13.13)%
(31.40)%
2016 C Shares
Year to
30 June 2023
3 year
Since Inception
Opening NAV per share (A)
£0.1879
£0.6817
£1.0000
Closing NAV per share (B)
£0.0828
£0.0828
£0.0828
Dividends paid (C)
-
-
£0.1413
Capital distributions (D)
0.1000
0.7000
0.7000
NAV total return per share
(E=(B-A+C+D)/A)
(2.71)%
14.83%
(7.59)%
3.
Ongoing charges
Ongoing charges reflect those expenses of a type which are likely to recur in the foreseeable future and which
relate to the operation of the Company, excluding the costs of acquisition or disposal of investments, finance
charges, gains or losses arising on investments and Ordinary Shares.
Ongoing charges is a measure, expressed as a percentage of NAV, based on actual costs incurred in the
year as being the best estimate of future costs excluding any non-recurring fees divided by the average NAV
of the Company during the year.
The ongoing charges ratio for the year ended 30 June 2023 was 4.12% (30 June 2022: 2.60%). The
methodology for calculating an ongoing charges figure is based on annualised ongoing charges, as calculated
overleaf, of £2,367,000 (30 June 2022: £3,725,429) divided by average NAV in the period of £57,469,764 (30
June 2022: £143,334,260).
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
100
Alternative Performance Measures (Unaudited) (Continued)
3.
Ongoing charges (Continued)
Reason for use
Ongoing Charges details the annual percentage reduction in shareholder returns as a result of recurring
operational expenses assuming markets remain static and the portfolio is not traded.
The ongoing charges are based on actual costs incurred in the year excluding any non-recurring fees.
Expense items have been excluded in the calculation of the ongoing charges figure when they are not deemed
to meet the following definition:
“Ongoing charges are those expenses of a type which are likely to recur in the foreseeable future, whether
charged to capital or revenue, and which relate to the operation of the investment company as a collective
fund, excluding the costs of acquisition/disposal of investments, financing charges and gains/losses arising
on investments. Ongoing charges are based on costs incurred in the year as being the best estimate of future
costs.”
Please refer below for ongoing charges reconciliation for the years ended 30 June 2023 and 30 June 2022:
30 June 2023
£
30 June 2022
£
Total operating expense for the year (including incentive fee
expense)
(2,451,916)
(7,844,538)
Expenses included in the calculation of ongoing charges figures
Professional and Administration fees
1
(1,772,000)
(1,406,594)
Investment management fees
-
(1,736,229)
Directors’ fees (excluding bonus)
(595,000)
(582,606)
Total ongoing charges for the year
(2
,
367
,
000
)
(3,725,429)
1
includes administration and secretarial fees, audit fees, brokerage fees, registrar fees, employee
remuneration, consultancy fees, AIFM fees and recurring professional fees.
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
101
COMPANY INFORMATION
Non-Executive, Independent Directors
Brendan Hawthorne
(Chairman of the Board and Chairman of Audit and
Risk Committee)
David Copperwaite
(Chairman of the Remuneration and Nomination
Committee
)
Non-Independent Director
Brett Miller
(Chairman of Management Engagement Committee)
Registered Office
BNP Paribas House, St Julian’s
Avenue
, St Peter Port, Guernsey, GY1 1WA
Alternative Fund Investment Manager (AIFM)
FundRock Management Company (Guernsey) Limited (formerly known as Sanne Fund Management
(Guernsey) Limited), 1 Royal Plaza, Royal Avenue, St Peter Port, Guernsey, GY1 2HL
Financial Adviser and Broker
Winterflood Securities Limited, The Atrium Building, Cannon Bridge House, 25 Dowgate, Hill, London,
EC4R 2GA
Auditor
Deloitte LLP, PO Box 137, Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3HW
Registrar
Link Market Services (Guernsey) Limited, Mont Crevelt House, Bulwer Avenue, St Sampson, Guernsey, GY2
4LH
Principal Bankers
BNP Paribas S.A., BNP Paribas House, St Julian’s Avenue, St Peter Port, Guernsey, GY1 1WA
Designated Administrator, Custodian and Secretary
BNP Paribas S.A., Guernsey Branch, BNP Paribas House, St Julian’s Avenue, St. Peter Port, Guernsey, GY1
1WA
Receiving Agent
Link Market Services Limited, The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU
Legal Advisers to the Group (English Law)
CMS Cameron McKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon Street, London, EC4N 6AF
Legal Advisers to the Group (Guernsey Law)
Mourant Ozannes, Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey, GY1 4HP
Website www.slfrealisationfund.co.uk
SLF Realisation Fund Limited
Annual Report and Audited Consolidated Financial Statements
for the year ended 30 June 2023
102
LIST OF ACRONYMS
Terms
Definition
AD
Anaerobic Digestion
AGM
Annual General Meeting
AIFM
Alternative Fund Investment Manager
AIFMD
Alternative Fund Investment Manager Directive
EBITDA
Earnings Before Interest, Tax, Depreciation & Amortisation
FCA
Financial Conduct Authority
FRC
Financial Reporting Council
FV
Fair Value
FVTPL
Fair value through profit or loss
FX
Foreign Exchange
IFRS
International Financial Reporting Standards
LTV
Loan to Value
NAV
Net Asset Value
RNS
Regulatory News Service
PD
Probability of Default
SME
Small & Me
dium Enterprise
SPV
Special Purpose Vehicle