Blackstone/GSO LnFin - Half-year Report - Part 2
20/09/2017 11:30
- Part 2: For the preceding part double click ID:nRST2982Ra
Cash and cash equivalents at the start of the period 813,119 252,610
Cash and cash equivalents at the end of the period 1,146,502 5,009,837
The accompanying notes form an integral part of the condensed financial
statements.
Notes to the Financial Statements
For the six months ended 30 June 2017
1 General information
The Company is a closed-ended limited liability company domiciled and
incorporated under the laws of Jersey with variable capital pursuant to the
Companies (Jersey) Law 1991 and is a collective investment fund as defined in
the Collective Investment Funds (Jersey) Law 1988. It was incorporated on 30
April 2014 with registration number 115628. The Company's Euro shares were
admitted to trading on the Specialised Fund Segment ("SFS") of the LSE on 23
July 2014 and from 17 April 2015 to TISE.
On 28 June 2017, the Company announced it had received confirmation from the
UK Listing Authority that it was eligible for a premium listing on the
Official List. Accordingly, the Company made applications to the UK Listing
Authority and the LSE for listing on the Official List and a transfer to
trading from the SFS to the Premium Segment of the Main Market of the LSE in
respect of 404,700,446 ordinary Euro shares of no par value. Admission
occurred with effect from 8am on 29 June 2017.
The Company's investment objective is to provide Shareholders with stable and
growing income returns, and to grow the capital value of the investment
portfolio by exposure predominately to floating rate senior secured loans
directly and indirectly through CLO Securities and investments in loan
warehouses. The Company seeks to achieve its investment objective solely
through exposure (directly or indirectly) to one or more risk retention
companies or entities established from time to time ("Risk Retention
Companies").
At 30 June 2017, all shares in issue were Euro shares. The Company may issue
one or more additional classes of shares in accordance with the Articles of
Association.
The Company has a wholly owned Luxemburg subsidiary, Blackstone / GSO Loan
Financing (Luxembourg) S.à r.l., which has an issued share capital of
2,000,000 Class A shares and 1 Class B share held by the Company. The Company
also holds 357,993,064 Class B Cash Settlement Warrants (the "CSWs") issued by
the Lux Subsidiary.
The Company's registered address is IFC1, The Esplanade, St. Helier, Jersey,
JE1 4BP, Channel Islands.
2 Significant accounting policies
2.1 Statement of compliance
The Annual Report and Financial Statements ("Annual Report") are prepared in
accordance with the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority and with International Financial Reporting
Standards ("IFRSs") as adopted by the European Union, which comprise standards
and interpretations approved by the International Accounting Standards Board,
and interpretations issued by the International Financial Reporting Standards
and Standing Interpretations Committee as approved by the International
Accounting Standards Committee which remain in effect. The Half Yearly
Financial Report has been prepared in accordance with International Accounting
Standards ("IAS") 34 - "Interim Financial Reporting". It has also been
prepared using the same accounting policies applied for the year ended 31
December 2016 Annual Report.
The Half Yearly Financial Report has been prepared on a going concern basis.
After reviewing the Company's budget and cash flow forecast for the next
financial period, the Directors are satisfied that, at the time of approving
the condensed financial statements, it is appropriate to adopt the going
concern basis in preparing the condensed financial statements.
There have been no changes in accounting policies during the period.
Amendments to IAS 7: Disclosure Initiative requires an entity to provide
disclosures that enable users of financial statements to evaluate changes in
liabilities arising from financing activities. The amendments apply
prospectively for annual periods beginning on or after 1 January 2017 with
earlier application permitted. Amendments to IAS 7: Disclosure Initiative has
not yet been endorsed by the EU and hence has not been adopted in these
condensed financial statements.
IFRS 9 "Financial Instruments" ("IFRS 9"), addresses the classification,
measurement and recognition of financial assets and financial liabilities and
will become effective for the periods beginning on or after 1 January 2018.
IFRS 9 requires financial assets to be classified into two measurement
categories: those measured at fair value and those measured at amortised cost.
The determination is made at initial recognition. The classification depends
on the entity's business model for managing its financial instruments and the
contractual cash flow characteristics of the instrument. For financial
liabilities, IFRS 9 retains most of the IAS 39 requirements. The main change
is that, in cases where the fair value option is taken for financial
liabilities, the part of a fair value change due to an entity's own credit
risk is recorded in other comprehensive income rather than the profit or loss,
unless this creates an accounting mismatch. The Company is yet to assess IFRS
9's full impact.
IFRS 15 "Revenue from contracts with customers" ("IFRS 15") establishes a
single comprehensive model for entities to use in accounting for revenue
arising from contracts with customers. IFRS 15 will supersede the current
revenue recognition guidance including IAS 18 Revenue, IAS 11 Construction
Contracts and the related interpretations when it becomes effective for the
periods beginning on or after 1 January 2018. The Company is yet to assess
IFRS 15's full impact.
The accounting policies in respect of financial instruments are set out below
in Note 2.3 respectively due to the significance of financial instruments to
the Company.
2.2 Segmental reporting
The Directors view the operations of the Company as one operating segment,
being investment holding. All significant operating decisions are based upon
analysis of the Company's investments as one segment. The financial results
from this segment are equivalent to the financial results of the Company as a
whole, which are evaluated regularly by the chief operating decision-maker
(the Board with insight from the Adviser).
2.3 Financial instruments
Financial assets and financial liabilities are recognised when the Company
becomes a party to the contractual provisions of the instruments.
Financial assets
(a) Classification
The Company classifies its investments in accordance with IAS 39 Financial
Instruments: Recognition and Measurement ("IAS 39") as financial assets at
fair value through profit or loss. These are financial instruments held for
investment purposes. Financial assets also include cash and cash equivalents
and other receivables.
Financial assets designated at fair value through profit or loss at inception
Financial assets designated at fair value through profit or loss at inception
are financial instruments that are not classified as held for trading but are
managed, and their performance is evaluated on a fair value basis in
accordance with the Company's documented investment strategy.
The Company's policy requires the Adviser and the Board to evaluate the
information about these financial assets on a fair value basis together with
other related financial information.
(b) Recognition, measurement and derecognition
Purchases and sales of investments are recognised on the trade date - the date
on which the Company commits to purchase or sell the investment. Financial
assets designated at fair value through profit or loss are measured initially
and subsequently at fair value. Transaction costs are expensed as incurred and
movements in fair value are recorded in the Statement of Comprehensive
Income.
Financial assets are derecognised when the rights to receive cash flows from
the investments have expired or the Company has transferred substantially all
risks and rewards of ownership.
(c) Fair value estimation
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.
As at 30 June 2017, the Company held 357,993,064 CSWs, 2,000,000 Class A
shares and 1 Class B share issued by the Lux Subsidiary (the "Investments")
(31 December 2016: 295,083,704 CSWs, 2,000,000 Class A shares and 1 Class B
share in the Lux Subsidiary). These Investments are not listed or quoted on
any securities exchange, are not traded regularly and on this basis no active
market exists. The Company is not entitled to any voting rights in respect of
the Lux Subsidiary by reason of their ownership of the CSWs.
The fair value of the CSWs is based on the NAV of the Lux Subsidiary which is
based substantially in turn on the NAV of BGCF attributable to the PPNs. The
fair values of the Class A and Class B shares held in the Lux Subsidiary are
deemed to approximate to their cost.
(d) Valuation process
The Directors have held discussions with third party providers of BGCF in
order to gain comfort around the valuation of the assets in the BGCF portfolio
and through this, the valuation of the CSWs and PPNs as of the Statement of
Financial Positiondate.
The Directors, through ongoing communication with the Adviser including
quarterly meetings, discuss the performance of the Adviser and the underlying
portfolio and in addition review monthly investment performance reports. The
Directors analyse the BGCF portfolio in terms of the investment mix in the
portfolio. The Directors also consider the impact of general credit conditions
and more specifically credit events in the US and European corporate
environment on the valuation of the CSWs, PPNs and the BGCF portfolio.
The Investments
The investments are valued by the Administrator based on information from the
Adviser and are reviewed and approved by the Directors, taking into
consideration a range of factors including the unaudited NAV of both the Lux
Subsidiary and BGCF, and other relevant available information. The other
relevant information includes the review of available financial and trading
information of BGCF and its underlying portfolio including the US MOA, advice
received from the Adviser and such other factors as the Directors, in their
sole discretion, deem relevant in considering a positive or negative
adjustment to the valuation.
The estimated fair values may differ from the values that would have been
realised had a ready market existed and the difference could be material.
The fair value of the investments are assessed on an ongoing basis by the
Board.
BGCF Portfolio
The Directors discuss BGCF by the Board.aluation process to understand
the methodology regarding valuation of Level 3 assets. The majority of Level
3 assets in BGCF are comprised of collateralised loan obligations (CLOs). On
13 March 2017, BGCF invested in Class A preference shares issued by Blackstone
/ GSO US Corporate Funding Limited, the US Majority Owned Affiliate. In
reviewing the fair value of these assets, the Directors look at the
assumptions used and any significant fair value changes during the period
under analysis.
Loan asset fair value prices used in the valuation of the BGCF portfolio are
based on prices provided by Markit Group Limited (iMarkitLimite Limited (ited
(prices used in the valuation of the BGCF portfolio are based on prices
provided by Markit Group Limited ( during the period under analysis.d loan
obligations (CLOs). des the review of available financial and trading
information of osts. Investments in loan assets for which Markit indicates
limited broker quotes are available and for which no other evidence of
liquidity exists are classified as Level 3. If a quoted market price is not
available on a recognised stock exchange or from Markit for non-exchange
traded financial instruments, the fair value of the instrument is estimated
using the valuation techniques of the Adviser, which are discussed, reviewed
and accepted by the Board of BGCF and their independent service provider.
These valuation techniques include use of recent arm's length market
transactions, reference to the current market fair value of another instrument
that is substantially the same, discounted cash flow techniques, option
pricing models or any other valuation technique that provides a reliable
estimate of prices obtained in actual market transactions.
The CLO subordinated notes are valued by Thomson Reuters using a mark to model
approach based on discounted cash flows. The key model input assumptions are
the loan prepayment rates, loan default rates, loan recovery given default
rates and reinvestment rates. For the avoidance of doubt, to the extent there
are market clearing levels, broker quotations or bids wanted in competition
related to a CLO retention security, such data points may be considered in the
selection of scenario assumptions and/or discount rates by Thomson Reuters,
however, the market colour will not replace the mark to model approach
outright. The CLO retention securities typically represent a controlling
interest which entitles the holder to certain rights and optionality which a
non-controlling interest would not benefit from. There is significant
judgement and subjectivity related to the assumptions and inputs used to
determine the fair values. Additionally, Thomson Reuters review each CLO
indenture and the latest underlying CLO loan portfolio forming various
projections based on the quality of the collateral and general macroeconomic
conditions. CLOs are classified as Level 3 as certain inputs which have a
substantial impact on the fair value at period end are considered
unobservable.
The following table summarises the inputs and assumptions used in determining
the fair value of the CLO subordinated notes held by BGCF as of 30 June 2017.
The table is not meant to be all inclusive, but rather provide information on
the significant Level 3 inputs as they relate to the fair value measurement of
the CLO subordinated notes held by BGCF as of 30 June 2017.
Asset Valuation Methodology Unobservable Input Weighted Average
30 June 2017 31 December 2016
CLO Subordinated Notes Discounted Cash Flows Constant Default Rate 2% 2%
Conditional Prepayment Rate 20% 20%
Reinvestment Spread (bp over LIBOR) 414.80 411.40
Recovery Rate 70% 70%
Recovery Lag (Months) 12 12
Discount Rate 11.96% 9.94%
Increases (decreases) in the constant default rate and discount rate in
isolation would result in a lower (higher) fair value measurement. Increases
(decreases) in the reinvestment spread and recovery rate in isolation would
result in a higher (lower) fair value measurement. Changes in the constant
prepayment rate may result in a higher or lower fair value, depending on the
circumstances. Generally, a change in the assumption used for the constant
default rate may be accompanied by a directionally opposite change in the
assumption used for the constant prepayment rate and recovery rate.
Financial liabilities
(e) Classification
Financial liabilities include payables which are held at amortised cost using
the effective interest rate method.
The effective interest method is a method of calculating the amortised cost of
a financial liability and of allocating interest expense over the relevant
period. The effective interest rate is the rate that exactly discounts
estimated future cash payments (including all fees and points paid or received
that form an integral part of the effective interest rate, transaction costs
and other premiums or discounts) through the expected life of the financial
liability, or where appropriate a shorter period, to the net carrying amount
on initial recognition.
(f) Recognition, measurement and derecognition
Financial liabilities are measured initially at their fair value plus any
directly attributable incremental costs of acquisition or issue.
Gains and losses are recognised in the Statement of Comprehensive Income when
the liabilities are derecognised.
The Company derecognises a financial liability when the obligation specified
in the contract is discharged, cancelled or expires.
2.4 Shares in issue
The shares of the Company are classified as equity based on the substance of
the contractual arrangements and in accordance with the definition of equity
instruments under IAS 32 "Financial Instruments: Presentation" ("IAS 32"). The
proceeds from the issue of shares are recognised in the Statement of Changes
in Equity, net of the incremental issuance costs.
2.5 Taxation
Profit arising in the Company for the period will be subject to Jersey tax at
the standard corporate income tax rate of 0% (30 June 2016: 0%).
2.6 Critical accounting judgements and estimates
The preparation of the financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect items
reported in the Statement of Financial Position and Statement of Comprehensive
Income. 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.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to estimates are recognised prospectively.
(a) Fair value
For the fair value of all financial instruments held, the Company determines
fair values using appropriate techniques. Refer to Note 2.3 for further
details on the significant estimates applied in the valuation of the
underlying financial instruments.
(b) Non-consolidation of the Lux Subsidiary undertaking
The Company meets the definition of an Investment Entity as defined by IFRS 10
and is required to account for its investments at fair value through profit or
loss.
The Company has multiple unrelated investors and holds multiple investments in
the Lux Subsidiary. The Company has been deemed to meet the definition of an
Investment Entity per IFRS 10 as the following conditions exist:
i. The Company has obtained funds for the purpose of providing investors
with investment management services;
ii. The Company's business purpose, which has been communicated directly
to investors, is investing solely for returns from capital appreciation,
investment income, or both; and
iii. The performance of investments made through the Lux Subsidiary are
measured and evaluated on a fair value basis.
The Company has also considered the typical characteristics of an investment
entity per IFRS 10 in assessing whether it meets the definition of an
Investment Entity.
The Company controls the Lux Subsidiary through its 100% holding of the voting
rights and ownership. The Lux Subsidiary is incorporated in Luxembourg.
Refer to Note 9 for further disclosures relating to the Company's interest in
the Lux Subsidiary.
(c) Non-consolidation of BGCF
To determine control, there has to be a linkage between power and the exposure
to risks and rewards. The main link from ownership would allow a company to
control the payments of returns and operating policies and decisions of a
subsidiary. To meet the definition of a subsidiary under the single control
model of IFRS 10, the investor has to control the investee.
Control involves power, exposure to variability of returns and a linkage
between the two:
i. The investor has existing rights that give it the ability to direct
the relevant activities that significantly affect the investee's returns;
ii. The investor has exposure or rights to variable returns from its
involvement with the investee; and
iii. The investor has the ability to use its power over the investee to
affect the amount of the investor's returns.
In the case of BGCF, the relevant activities are the investment decisions made
by it. However, in the Lux Subsidiary's case, the power to influence or direct
the relevant activities is not attributable to the Lux Subsidiary. The Lux
Subsidiary does not have the ability to direct or stop investments by BGCF;
therefore, it does not have the ability to control the variability of
returns.
Accordingly, BGCF has been determined not to be a subsidiary undertaking as
defined under IFRS 10 and the Lux Subsidiary's investment in the PPNs issued
by BGCF are accounted for at fair value through profit or loss.
(d) Presentation and functional currency
The Directors have used their judgement to determine that the Company's
presentation and functional currency is Euro.
3 Operating expenses
Six months ended30 June 2017(Unaudited) Six months ended 30 June 2016(Unaudited)
E E
Administration fees 162,981 139,468
Brokerage fees 87,808 206,576
Directors' fees (see Note 4) 95,523 152,909
Regulatory fees 2,341 14,293
Audit fees 57,848 80,877
Professional fees 199,361 13,601
Registrar fees 16,636 15,837
Placement costs - 721,431
Sundry expenses 114,529 80,815
737,027 1,425,807
Administration fees
Under the administration agreement, the Administrator is entitled to receive
variable fees based on the NAV of the Company for the provision of
administrative and compliance oversight services and a fixed fee for the
provision of company secretarial services. The overall charge for the
above-mentioned fees for the Company for the six months ended 30 June 2017 was
E162,981 (30 June 2016: E139,468) and the amount due at 30 June 2017 was
E51,193 (30 June 2016: E53,878).
Audit and non-audit fees
The Company incurred E57,848 (30 June 2016: E80,877) in audit fees during the
year of which E76,669 (30 June 2016: E80,877) was outstanding at the year
end.
Other Deloitte member firms Type of service provided Six months ended 30 June 2017(Unaudited) Six months ended 30 June 2016(Unaudited)
E E
Deloitte LLP Guernsey Advisory work on migration 58,768 -
Deloitte Jersey Advisory 17,184 80,200
Deloitte Luxembourg Tax advisory 45,107 105,272
Non audit fees 121,059 185,472
4 Directors' fees and interests
During the six months ended 30 June 2017, the Directors were each remunerated
for their services at a fee of £35,000 per annum (£50,000 for the Chair). The
Chairs of the Audit Committee and Risk Committee received an additional £5,000
for their services in these roles.
During the six months ended 30 June 2017, the Directors received no one off
payments (30 June 2016: £10,000 each).
The Company has no employees. Directors' fees payable as at 30 June 2017 were
E46,457 (30 June 2016: E48,877).
Charlotte Valeur and Gary Clark held beneficial interests in the shares of the
Company during the six months ended 30 June 2017. Charlotte Valeur purchased
11,500 Euro shares pursuant to the placing in March 2017 and as at 30 June
2017 held 11,500 Euro shares (30 June 2016: Nil). Gary Clark held 73,700 Euro
shares as at 30 June 2017 (30 June 2016: 53,700 Euro shares).
No pension contributions were payable in respect of any of the Directors.
Mr Austin is also a Director of Blackstone / GSO Debt Funds Europe Limited, an
affiliate of DFME.
5 Other receivables
As at30 June 2017(Unaudited) As at31 December 2016(Audited)
E E
Prepayments 16,323 33,298
Other assets - 676,045
16,323 709,343
Other assets as at 31 December 2016 relate to costs incurred with respect to
the prospectus. These costs have been offset against the placing proceeds in
March 2017.
6 Financial assets designated at fair value through profit or
loss
As at30 June 2017(Unaudited) As at31 December 2016(Audited)
E E
Financial assets designated at fair value through profit or loss 400,987,272 331,213,706
Financial assets designated at fair value through profit or loss consists of
357,993,064 CSWs, 2,000,000 Class A shares and 1 Class B share issued by the
Lux Subsidiary (31 December 2016: 295,083,704 CSWs, 2,000,000 Class A shares
and 1 Class B share issued by the Lux Subsidiary).
CSWs
The Company has the right, at any time during the exercise period (being the
period from the date of issuance, 3 February 2016, and ending on earlier of
the 3 February 2046 or the date on which the liquidation of the Lux Subsidiary
is closed), to request that the Lux Subsidiary redeems all or part of the CSWs
at the redemption price (see below), by delivering a redemption notice,
provided that the redemption price will be due and payable only if and to the
extent that (a) the Lux Subsidiary will have sufficient funds available to
settle its liabilities to all other ordinary or subordinated creditors,
whether privileged, secured or unsecured, prior in ranking to the CSWs, after
any such payment, and (b) the Lux Subsidiary will not be insolvent after
payment of the redemption price.
The redemption price is the amount payable by the Lux Company on the
redemption of CSWs outstanding, which shall be at any time equal to the fair
market value of the ordinary shares, (that would have been issued in case of
exercise of all CSWs), as determined by the Board on a fully diluted basis on
the date of redemption, less a margin (determined by the Board on the basis of
a transfer pricing report prepared by an independent advisor), and the
redemption price for each CSW shall be obtained by dividing the amount
determined in accordance with the preceding sentence by the actual number of
CSWs outstanding.
If at the end of any financial year there is excess cash, as determined in
good faith by the Lux Subsidiary board (but for this purpose only), the Lux
Subsidiary will automatically redeem, to the extent of such excess cash, all
or part of the CSWs at the redemption price provided the requirements in the
previous paragraph are met, unless the Company notifies the Lux Subsidiary
otherwise. For the avoidance of doubt, to the extent the subscription price
for the CSWs to be redeemed has not been paid at the time the CSWs were
issued, the subscription price for such CSWs to be redeemed shall be deducted
from the Redemption Price.
CSWs listed in an exercise notice may not be redeemed.
Class A and Class B shares held in the Lux Subsidiary
Class A and Class B shares are redeemable and have a par value of one Euro per
share. Class A and Class B Shareholders have equal voting rights commensurate
with their shareholding.
Class A and Class B Shareholders are entitled to dividend distributions from
the net profits of the Lux Subsidiary (net of an amount equal to five per cent
of the net profits of the Lux Subsidiary which is allocated to the general
reserve, until this reserve amounts to ten per cent of the Lux Subsidiary
nominal share capital).
Dividend distributions are paid in the following order of priority:
i. Each Class A share is entitled to the Class A dividend, being a
cumulative dividend in an amount of not less than 0.10% per annum of the face
value of the Class A shares.
ii. Each Class B share is entitled to the Class B dividend (if any), being
any income such as but not limited to interest or revenue deriving from the
receivable from the PPN's held by the Lux Subsidiary, less any non-recurring
costs attributable to the Class B shares.
Any remaining dividend amount for allocation of the Class A dividend and Class
B dividend shall be allocated pro rata among the Class A shares.
The Board does not expect income from the Lux Subsidiary to significantly
exceed the anticipated annual running costs of the Lux Subsidiary and
therefore does not expect that the Lux Subsidiary will pay significant, or
any, dividends although it reserves the right to do so.
Class B2 shares held in BGCF
Class B2 shares are redeemable and have a par value of one Euro per share (and
share premium of E999,999 per share). The Class B2 shares do not carry any
right to receive a dividend nor have any voting rights attached. All Class B2
shares held in BGCF were redeemed on 20 December 2016.
Fair value hierarchy
IFRS 13 'Fair Value Measurement' ("IFRS 13") requires an analysis of
investments valued at fair value based on the reliability and significance of
information used to measure their fair value.
The Company categorises its financial assets according to the following fair
value hierarchy detailed in IFRS 13, that reflects the significance of the
inputs used in determining their fair values:
· Level 1: Quoted market price (unadjusted) in an active market for an
identical instrument.
· Level 2: Valuation techniques based on observable inputs, either
directly (i.e., as prices) or indirectly (i.e., derived from prices). This
category includes instruments valued using: quoted market prices in active
markets for similar instruments; quoted prices for identical or similar
instruments in markets that are considered less than active; or other
valuation techniques where all significant inputs are directly or indirectly
observable from market data.
· Level 3: Valuation techniques using significant unobservable inputs.
This category includes all instruments where the valuation technique includes
inputs not based on observable data and the unobservable variable inputs have
a significant effect on the instrument's valuation. This category includes
instruments that are valued based on quoted prices for similar instruments
where significant unobservable adjustments or assumptions are required to
reflect differences between the instruments.
30 June 2017 (Unaudited) Level 1 Level 2 Level 3 Total
E E E E
Financial assets designated at fair value through profit or loss - - 400,987,272 400,987,272
31 December 2016 (Audited) Level 1 Level 2 Level 3 Total
E E E E
Financial assets designated at fair value through profit or loss - - 331,213,706 331,213,706
Financial assets designated at fair value through profit or loss
reconciliation
The following table shows a reconciliation of all movements in the fair value
of financial assets categorised within Level 3 between the start and the end
of the reporting period:
30 June 2017 Total
E
Balance as at 1 January 2017 331,213,706
Movements:
Purchases - CSWs 80,152,154
Sale proceeds - CSWs (19,027,296)
Realised gain on financial assets designated at fair value through profit or loss 1,784,501
Unrealised gain on financial assets designated at fair value through profit or loss 6,864,207
Balance as at 30 June 2017 400,987,272
Total change in unrealised gains on financial assets designated at fair value through profit or loss for the period 6,864,207
Realised gain on financial assets designated at fair value through profit or loss 1,784,501
Net gains on investments designated at fair value through profit or loss 8,648,708
During the six months ended 30 June 2017, there were no reclassifications
between levels of the fair value hierarchy.
The following table shows a reconciliation of all movements in the fair value
of financial assets categorised within Level 3 between the start and the end
of the reporting period:
31 December 2016 Total
E
Balance as at 1 January 2016 326,032,708
Movements:
Lux restructuring
Issuance - CSWs, Class A and B shares 311,013,368
Transfer - PPNs (311,013,368)
Purchases - CSWs 18,000,000
Sale proceeds - CSWs and Class B2 Shares (48,272,545)
Realised gain on financial assets designated at fair value through profit or loss 1,322,881
Unrealised gain on financial assets designated at fair value through profit or loss 34,130,662
Balance as at 31 December 2016 331,213,706
Total change in unrealised gains on financial assets designated at fair value through profit or loss for the year 34,130,662
Realised gain on financial assets designated at fair value through profit or loss 1,322,881
Investment income 7,426,394
Net gains on investments designated at fair value through profit or loss 42,879,937
During the year ended 31 December 2016, there were no reclassifications
between levels of the fair value hierarchy.
Please refer to Note 2.3 for valuation methodology of financial assets
designated at fair value through profit and loss.
The Company's investments, through the Lux Subsidiary, in BGCF are untraded
and illiquid. The Board has considered these factors and concluded that there
is no further need to apply a discount for illiquidity as at the end of the
reporting period.
7 Payables
As at 30 June 2017(Unaudited) As at 31 December 2016(Audited)
E E
Administration fees 51,193 21,996
Directors' fees 46,457 48,325
Audit fees 76,669 76,148
Placement costs - 202,646
Other payables 21,571 48,733
Total payables 195,890 397,848
8 Stated capital
Authorised
The authorised share capital of the Company is represented by an unlimited
number of shares at no par value.
Allotted, called up and fully-paid
Euro shares Number of shares Stated capital
E
As at 1 January 2017 324,600,700 325,023,176
Euro shares issued during the period 73,380,746 73,030,149
Euro shares issued during the period out of treasury 6,719,000 6,909,411
Total issued share capital as at 30 June 2017 404,700,446 404,962,736
Euro shares Number of shares Stated capital
E
As at 1 January 2016 331,319,700 331,307,652
Euro shares issued during the year - -
Euro shares repurchased during the year and held in treasury (6,719,000) (6,284,476)
Total issued share capital as at 31 December 2016 324,600,700 325,023,176
Euro shares
On 3 March 2017, the Company issued 71,380,746 Euro shares of no par value at
a price of E1.02 per Euro share, which were admitted to trading on the
Specialist Fund Segment of the London Stock Exchange; raising gross proceeds
of E72,808,360 (net proceeds of E71,013,029).
On each of 8 March 2017 and on 14 March 2017, the Company issued 1,000,000
Euro shares of no par value at a price of E1.03 per Euro share, which were
admitted to trading on the Specialist Fund Segment of the London Stock
Exchange; raising gross proceeds of E2,060,000 (net proceeds of E2,017,120).
On 29 March 2017, the Company sold 6,719,000 Euro shares out of treasury at a
price of E1.0304 per Euro share; raising gross proceeds of E6,923,258 (net
proceeds of E6,909,411).
As at 30 June 2017, the Company had 404,700,446 Euro shares in issue and no
treasury shares following the sale as mentioned above (31 December 2016:
324,600,700 in issue excluding 6,719,000 Treasury shares).
Voting rights
Holders of Euro shares participate in the profits of the Company. Shareholders
have the right to attend, speak and vote at any general meetings of the
Company in accordance with the provisions of the Articles of Association and
have one vote in respect of each whole share held.
Dividends
The Company may, by ordinary resolution, declare dividends in accordance with
the respective rights of the Shareholders, but no such dividend shall exceed
the amount recommended by the Directors. The Directors may pay fixed rate and
interim dividends.
A general meeting declaring a dividend may, upon the recommendation of the
Directors, direct that payment of a dividend shall be satisfied wholly or
partly by the issue of shares or the distribution of assets and the Directors
shall give effect to such resolution.
Except as otherwise provided by the rights attaching to or terms of issue of
any shares, all dividends shall be apportioned and paid pro rata according to
the amounts paid on the shares during any portion or portions of the period in
respect of which the dividend is paid. No dividend or other monies payable in
respect of a share shall bear interest against the Company.
The Directors may deduct from any dividend or other moneys payable to a
Shareholder all sums of money (if any) presently payable by the holder to the
Company on account of calls or otherwise in relation to such shares.
Any dividend unclaimed after a period of 10 years from the date on which it
became payable shall, if the Directors so resolve, be forfeited and cease to
remain owing by the Company.
The dividends declared by the Board during the period are detailed above.
Please refer to Note 15 for dividends declared after the period end.
Share buybacks
At the AGM held on 21 June 2017, the Directors were generally and
unconditionally authorised for the purposes of Article 57 of the Companies
(Jersey) Law 1991, as amended, to make one or more on-market purchases, up to
a maximum of 40,470,044 shares in the Company for cancellation or to be held
as Treasury shares. This authority will expire at the 2018 AGM.
The Board intends to seek annual renewal of this authority from the
Shareholders at the Company's AGM in 2018.
The Board may, at its absolute discretion, use available cash to purchase Euro
shares in issue in the secondary market at any time.
Rights as to Capital
On a winding up, the Company may, with the sanction of a special resolution
and any other sanction required by the Companies Law, divide the whole or any
part of the assets of the Company among the Shareholders in specie provided
that no holder shall be compelled to accept any assets upon which there is a
liability. On return of assets on liquidation or capital reduction or
otherwise, the assets of the Company remaining after payments of its
liabilities shall subject to the rights of the holders of other classes of
shares, be applied to the Shareholders equally pro rata to their holdings of
shares.
9 Interests in other entities
Interests in unconsolidated structured entities
IFRS 12 "Disclosure of Interests in Other Entities" defines a structured
entity as an entity that has been designed so that voting or similar rights
are not the dominant factor in deciding who controls the entity, such as when
any voting rights relate to the administrative tasks only and the relevant
activities are directed by means of contractual agreements. A structured
entity often has some of the following features or attributes:
i. Restricted activities;
ii. A narrow and well-defined objective;
iii. Insufficient equity to permit the structured entity to finance its
activities without subordinated financial support; and
iv. Financing in the form of multiple contractually linked instruments that
create concentrations of credit or other risks.
Involvement with unconsolidated structured entities
The Directors have concluded that the CSWs and voting shares of the Lux
Subsidiary in which the Company invests, but that it does not consolidate,
meet the definition of a structured entity.
The Directors have also concluded that the PPNs held by the Lux Subsidiary in
BGCF also meet the definition of a structured entity.
Interests in subsidiary
As at 30 June 2017, the Company has a 100% holding of the entire outstanding
balance of its Lux Subsidiary being 2,000,000 Class A shares and one Class B
share (31 December 2016: 2,000,000 Class A shares and one class B share).
Other than the investments noted above, the Company did not provide any
financial support for the six months ended 30 June 2017 and the year ended 31
December 2016, nor had it any intention of providing financial or other
support. In 2015, the Company provided an intercompany loan of E30,000 to the
Lux Subsidiary. This intercompany loan was settled in December 2016.
10 Basic and diluted earnings per Euro share
As at30 June 2017(Unaudited) As at30 June 2016(Unaudited)
E E
Total comprehensive income for the period 7,908,856 23,608,812
Weighted average number of shares during the period 376,863,626 330,723,810
Basic and diluted earnings per Euro share 0.0210 0.0714
11 Net asset value per Euro share
As at30 June 2017(Unaudited) As at31 December 2016(Audited)
E E
Net asset value 401,954,207 332,338,320
Number of shares at period end 404,700,446 324,600,700
Net asset value per Euro share 0.9932 1.0238
12 Reconciliation of NAV to published NAV
As at30 June 2017(Unaudited) As at31 December 2016 (Audited)
NAV NAV per share NAV NAV per share
E E E E
NAV attributable to Shareholders 401,954,207 0.9932 332,338,320 1.0238
Amortisation adjustment - - (7,168) (0.0000)
Published NAV 401,954,207 0.9932 332,331,152 1.0238
13 Related party transactions
All transactions between related parties were conducted on terms equivalent to
those prevailing in an arm's length transaction.
Transactions with entities with significant influence
In accordance with IAS 24 "Related Party Disclosures", the related parties and
related party transactions during the period comprised transactions with an
affiliate of DFME. As at 30 June 2017, Blackstone Asia Treasury Pte held
46,062,500 Euro shares in the Company (31 December 2016: 50,000,000 Euro
shares).
Blackstone Asia Treasury Pte undertook, by entering into a Lock-Up Agreement
with the Company and Joint Brokers, not to dispose the placing shares it
acquired in the Company pursuant to the placing for a period of 12 months
following Admission. This agreement expired on 23 July 2015 and as at 30 June
2017 Blackstone Asia Treasury Pte holds 46,062,500 Euro shares in the
Company.
Transactions with key management personnel
The Directors are the key management personnel as they are the persons who
have the authority and responsibility for planning, directing and controlling
the activities of the Company. The Directors are entitled to remuneration for
their services. Refer to Note 4 for further detail.
Transactions with other related parties
At 30 June 2017, current employees of the Adviser and its affiliates, and
accounts managed or advised by them, hold 24,875 Euro shares (31 December
2016: 524,875) which represents approximately 0.01% (31 December 2016: 0.162%)
of the issued shares of the Company. The reduction in holding was as a result
of departing employees from the Adviser.
The Company has exposure to the CLOs, originated by BGCF, through its
investment in the Lux Subsidiary. The Adviser is also appointed as a service
support provider to BGCF and as the Collateral Manager to most of the CLOs.
DFM has been appointed as the Collateral Manager to Dorchester Park CLO
Designated Activity Company and Bristol Park CLO Limited. On 13 March 2017,
BGCF invested in Class A preference shares issued by Blackstone / GSO US
Corporate Funding Limited, the US Majority Owned Affiliate.
Transactions with Subsidiaries
The Company held 357,993,064 CSWs as at 30 June 2017 (31 December 2016:
295,083,703). Refer to Note 6 for further details.
As at 30 June 2017, the Company held 2,000,000 Class A shares and 1 Class B
share in the Lux Subsidiary with a nominal value of E2,000,001 (31 December
2016: 2,000,000 Class A shares and 1 Class B share in the Lux Subsidiary with
a nominal value of E2,000,001).
During the year ended 31 December 2016, the intercompany loan receivable of
E30,000 from the Lux Subsidiary was repaid. No financial support was provided
for the six months ended 30 June 2017.
14 Controlling party
In the Directors' opinion, the Company has no ultimate controlling party.
15 Events after the reporting period
The Board has evaluated subsequent events for the Company through to 20
September 2017, the date the financial statements are available to be issued,
and, other than those listed below, concluded that there are no material
events that require disclosure or adjustment to the financial statements:
On 20 July 2017, the Board declared a dividend of E0.025 per Euro share in
respect of the period from 1 April 2017 to 30 June 2017 with an ex-dividend
date of 27 July 2017. A total payment of E10,117,511 was made on 18 August
2017.
On 20 July 2017, the Company announced that Joanna Dentskevich, a
non-executive Director, had given notice that with effect from 31 October 2017
that she would be stepping down as a Director.
On 11 August 2017, the Company announced that Steven Wilderspin was appointed
as non-executive Director with effect from 11 August 2017.
On 21 August 2017, the Company announced that it had applied to The
International Stock Exchange Authority Limited for the cancellation of the
TISE Listing.
On 7 September 2017, the Company announced that Heather MacCallum was
appointed as non-executive Director with effect from 7 September 2017.
COMPANY INFORMATION
Director Registered Office
Ms Charlotte Valeur (Chair)Mr Philip AustinMr Gary ClarkMs Joanna DentskevichMr Steven WilderspinMs Heather MacCallumAll c/o the Company's registered office IFC1The EsplanadeSt. HelierJersey, JE1 4BP, Channel Islands
Adviser Registrar
Blackstone / GSO Debt Funds Management Europe Limited30 Herbert Street Capita Registrars (Jersey) Limited
2nd Floor 12 Castle Street
Dublin 2, Ireland St Helier
Jersey, JE2 3RT, Channel Islands
Joint Broker Joint Broker
Nplus1 Singer Advisory LLP Fidante Partners Europe Limited (trading as Fidante Capital)
1 Bartholomew Lane 1 Tudor Street
London, EC2N 2AX , United Kingdom London, EC4Y 0AH, United Kingdom
Legal Adviser to the Company (as to Jersey Law) Legal Adviser to the Company
(as to English Law)
Carey Olsen Herbert Smith Freehills LLP
47 Esplanade Exchange House
St Helier Primrose Street
Jersey LondonEC2A 2EG, United Kingdom
JE1 0BD, Channel Islands
Reporting Accountant and Auditor Administrator / Company Secretary / Custodian / Depository
Deloitte LLP BNP Paribas Securities Services S.C.A.
Gaspe House66-72 EsplanadeSt HelierJE2 3QTChannel Islands (As from 10 April 2017) 44 Esplanade IFC1The EsplanadeSt. HelierJersey, JE1 4BP, Channel Islands (As from 1 September 2017) Liberté House19-23 La Motte Street
St. Helier St Helier
JerseyJE4 8WAChannel Islands (Up to 9 April 2017) Jersey, JE2 4SY, Channel Islands (Up to 31 August 2017)
-END-
The person responsible for arranging for the release of this announcement on
behalf of the Company is Melissa Le Cheminant of BNP Paribas Securities
Services S.C.A., Jersey Branch, Company Secretary.
IFC1 - The Esplanade- St Helier - Jersey - JE1 4BP
Company Secretary
Tel: +44 (0) 1534 709181
This information is provided by RNS
The company news service from the London Stock Exchange
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