RNS Number : 6304S
Starwood European Real Estate Finan
18 March 2016
18 March 2016
Starwood European Real Estate Finance Limited
Annual Financial Report year ended 31 December 2015
The Company has today published its annual financial report for the year ended 31 December 2015 and has made it available online at www.starwoodeuropeanfinance.com.
Starwood European Real Estate Finance Limited is an investment company listed on the main market of the London Stock Exchange with an investment objective to provide Shareholders with regular dividends and an attractive total return while limiting downside risk, through the origination, execution, acquisition and servicing of a diversified portfolio of real estate debt investments in the UK and the wider European Union's internal market.
The Group is the largest London-listed vehicle to provide investors with pure play exposure to real estate lending.
The Group's assets are managed by Starwood European Finance Partners Limited, an indirect wholly-owned subsidiary of the Starwood Capital Group.
Key highlights
The Group had net assets of 305.5 million and total assets of 314.4 million at year end, with investments in a portfolio 15 loans which is diversified by sector and geography.
The NAV and share price total return in the period were 7.58% and 8.22% respectively.
At the year end, the shares were quoted at 107.63 pence per share, being a premium of 7.17% to the net asset value per share of 100.43 pence.
Eight new loans and refinancings were made during the period, for a total investment of approximately 108 million and three loans were repaid in full during the year for a total amount of approximately 39 million.
The Company issued shares in two transactions during the period, for total proceeds (gross of transaction costs) of 68 million and has an open placing programme under which further share issues may be made.
The Group experienced minimal cash drag throughout the year by managing cash balances and drawings on the revolving credit facility. The table below shows key financial data as at the year end and for the period under review:
Year ended 31 December 2015
Year ended 31 December 2014
NAV per ordinary share
100.43 p
100.08 p
Share price
107.63 p
106.25 p
Premium to Net Asset Value
7.17%
6.17%
NAV total return for the period
7.58%
6.23%
Share price total return for the period
8.22%
10.93%
Loans advanced (including accrued income)
307.7 m
221.0 m
Total Assets
314.4 m
239.6 m
Amount drawn under Revolving Credit Facility
8.2 m
0.0 m
Total Net Assets
305.5 m
238.3 m
Number of Loans
15
12
Dividends per ordinary share declared for the period(1)
7.0 p
5.8 p
Portfolio yield (2)
8.7%
9.6%
Ongoing charges percentage (3)
1.1%
1.0%
Weighted average portfolio LTV to Group first (4)
16.0%
15.3%
Weighted average portfolio LTV to Group last (4)
65.3%
62.5%
(1) Figure disclosed is the sum of the dividend declared in relation to each quarter of the financial. This will not equal the dividend recognised in the financial statements and actually paid in the financial year as dividends are recognised and paid one quarter in arrears. The Company's dividend target for 2016 is 6.5 pence per share
(2) Calculated on amounts currently outstanding, excluding undrawn commitments, and assuming all currently drawn loans are outstanding for the full contractual term. Nine of the loans are floating rate (partially or in whole and some with floors) and returns are based on an assumed profile for future interbank rates but the actual rate received may be higher or lower. Calculated only on amounts funded to date and excluding committed amounts and cash un-invested. The calculation excludes the origination fee payable to the Investment Manager and commitment fees on undrawn funds.
(3) Prepared in accordance with the AIC's recommended methodology.
(4) LTV to Group last means the percentage which the total loan commitment less any amortisation received to date (when aggregated with any other indebtedness ranking alongside and/or senior to it) bears to the market value determined by the last formal lender valuation received by the date of publication of these financial statements. LTV to first Group means the starting point of the loan to value range of the loan commitments (when aggregated with any other indebtedness ranking senior to it). For Lifecare, W Hotel and Centre Point the calculation includes the total facility available and is calculated against the market value on completion of the project. For Aldgate, the calculation includes the total facility available against the stabilised value of the property.
For further information, please contact:
Peter Denton - Starwood Capital - 020 7016 3664
Robert Peel - Dexion Capital - 020 7832 0900
Full text of annual financial report for the year ended 31 December 2015
Objective and Investment Policy
Investment Objective
The investment objective of Starwood European Real Estate Finance Limited (the "Company"), together with its subsidiaries Starfin Lux S..r.l, Starfin Public LP and Starfin Public GP (collectively the "Group"), is to provide its shareholders with regular dividends and an attractive total return while limiting downside risk, through the origination, execution, acquisition and servicing of a diversified portfolio of real estate debt investments (including debt instruments) in the UK and the wider European Union's internal market.
Investment Policy
TheCompanyinvestsinadiversifiedportfolioofrealestatedebtinvestments(including debt instruments) in the UK and the wider European Union's internal market. Whilst investment opportunitiesinthesecondarymarketswillbeconsidered fromtimetotime,theCompany's predominantfocusistobeadirectprimaryoriginatorofrealestatedebtinvestmentsonthebasis thatthisapproachisexpectedtodeliverbetterpricing,structureandexecutioncontrolandaclient facingrelationshipthatmayleadtofurtherinvestmentopportunities.
TheCompanywillattemptto limitdownsideriskbyfocusingonsecureddebtwithbothquality collateralandcontractualprotection.
TheCompanyanticipatesthatthetypicalloantermwillbebetweenthreeandsevenyears.Whilst theCompanyretainsabsolutediscretiontomakeinvestmentsforeithershorterorlongerperiods, atleast75percent oftotalloansbyvaluewillbeforatermofsevenyearsorless.
TheCompany'sportfolioisintendedtobeappropriately diversifiedbygeography,realestatesector type,loantypeandcounterparty.
The Company will pursue investments across the commercial real estate debt asset class through senior loans, subordinated loans and mezzanine loans, bridge loans, selected loan-on-loan financings and other debt instruments. The split between senior, subordinated and mezzanine loans will be determined by the Investment Manager in its absolute discretion having regard to the Company's target return objectives. However, it is anticipated that whole loans will comprise approximately 40-50 per cent of the portfolio, subordinated and mezzanine loans approximately 40-50 per cent and other loans (whether whole loans or subordinated loans) between 0-20 per cent (including bridge loans, selected loan-on-loan financings and other debt instruments). Pure development loans will not, in aggregate, exceed 25 per cent of the Company's Net Asset Value ("NAV") calculated at the time of investment. The Company may originate loans which are either floating or fixed rate.
The Company may seek to enhance the returns of selected loan investments through the economic transfer of the most senior portion of such loan investments which may be by way of syndication, sale, assignment, sub-participation or other financing (including true sale securitisation) to the same maturity as the original loan (i.e. "matched funding") while retaining a significant proportion as a subordinate investment. It is anticipated that where this is undertaken it would generate a positive net interest rate spread and enhance returns for the Company. It is not anticipated that, under current market conditions, these techniques will be deployed with respect to any mezzanine or other already subordinated loan investments. The proceeds released by such strategies will be available to the Company for investment in accordance with the investment policy.
Loan to Value ("LTV")
The Company will typically seek to originate debt where the effective loan to real estate value ratio of any investment is between 60 per cent and 80 per cent at the time of origination or acquisition. In exceptional circumstances that justify it, the ratio may be increased to an absolute maximum of 85 per cent. In any event, the Company will typically seek to achieve a blended portfolio LTV of no more than 75 per cent (based on the initial valuations at the time of loan origination or participation acquisition) once fully invested.
Geography
The Company's portfolio will be originated from the larger and more established real estate markets in the European Union's internal market. UK exposure is expected to represent the majority of the Company's portfolio. Outside of the UK, investment in the European Union's internal market will mainly be focussed on Northern and Southern Europe. Northern European markets include Germany, France, Scandinavia, Netherlands, Belgium, Poland, Switzerland, Ireland, Slovakia and the Czech Republic. Southern European markets include Italy and Spain. The Company may however originate investments in other countries in the European Union's internal market to the extent that it identifies attractive investment opportunities on a risk adjusted basis.
The Company will not invest more than 50 per cent of the Company's NAV (calculated at the time of investment) in any single country save in relation to the UK, where there shall be no such limit.
In the event that a member state ceases to be a member of the European Union's internal market, it will not automatically cease to be eligible for investment.
Real Estate Sector and Property Type
The Company's portfolio will focus on lending into commercial real estate sectors including office, retail, logistics, light industrial, hospitality, student accommodation, residential for sale and multi-family rented residential. Investments in student accommodation and residential for sale are expected to be limited primarily to the UK, while multi-family investments are expected to be limited primarily to the UK, Germany and Scandinavia. Further, not more than 30 per cent, in aggregate, of the Company's NAV, calculated at the time of investment, will be invested in loans relating to residential for sale. No more than 50 per cent of the Company's NAV will be allocated to any single real estate sector of the UK, except for the UK office sector which is limited to 75 per cent of the Company's NAV.
Counterparty and Property Diversification
No more than 20 per cent of the Company's NAV, calculated at the time of investment, will be exposed to any one borrower legal entity.
No single investment, or aggregate investments secured on a single property or group of properties, will exceed 20 per cent of the Company's Net Asset Value, calculated at the time of investment.
Corporate Borrowings
It is not the intention to pursue Company-level recourse leverage for investment purposes. However, Company-level recourse borrowings may be used from time-to-time for the purpose of bridging, financing repurchases of shares or managing working capital requirements. In this regard, the Company is limited to borrowing an amount equivalent to a maximum of 20 per cent of its NAV, at the time of drawdown. In calculating the Company's borrowings for this purpose, any liabilities incurred under the Company's foreign exchange hedging arrangements shall be disregarded.
Hedging
The Company will not enter into derivative transactions for purely speculative purposes. However, the Company's investments will typically be made in the currency of the country where the underlying real estate assets are located. This will largely be in Sterling and Euros. However, investments may be considered in other European currencies, and the Company may implement measures designed to protect the investments against material movements in the exchange rate between Sterling, being the Company's reporting currency, and the currency in which certain investments are made. The analysis as to whether such measures should be implemented will take into account periodic interest, principal distributions or dividends, as well as the expected date of realisation of the investment. The Company may bear a level of currency risk that could otherwise be hedged where it considers that bearing such risk is advisable. The Company will only enter into hedging contracts, such as currency swap agreements, futures contracts, options and forward currency exchange and other derivative contracts when they are available in a timely manner and on terms acceptable to it. The Company reserves the right to terminate any hedging arrangement in its absolute discretion.
The Company may, but shall not be obliged to, engage in a variety of interest rate management techniques, particularly to the extent the underlying investments are floating rate loans which are not fully hedged at the borrower level (by way of floating to fixed rate swap, cap or other instrument). Any instruments chosen may seek on the one hand to mitigate the economic effect of interest rate changes on the values of, and returns on, some of the Company's assets, and on the other hand help the Company achieve its risk management objectives. The Company may seek to hedge its entitlement under any loan investment to receive floating rate interest.
Cash Strategy
Cash held by the Company pending investment or distribution will be held in either cash or cash equivalents, or various real estate related instruments or collateral, including but not limited to money market instruments or funds, bonds, commercial paper or other debt obligations with banks or other counterparties having a A- or higher credit rating (as determined by any reputable rating agency selected by the Company), Agency RMBS (residential mortgage backed securities issued by government-backed agencies) and AAA rated CMBS (commercial mortgage-backed securities).
Transactions with Starwood Capital Group or Other Accounts
Without prejudice to the pre-existing co-investment arrangements described below, the Company may acquire assets from, or sell assets to, or lend to, companies within the Starwood Capital Group or any fund, company, limited partnership or other account managed or advised by any member of the Starwood Capital Group ("Other Accounts"). In order to manage the potential conflicts of interest that may arise as a result of such transactions, any such proposed transaction may only be entered into if the independent Directors of the Company have reviewed and approved the terms of the transaction, complied with the conflict of interest provisions in the Registered Collective Investment Scheme Rules 2015 issued by the Guernsey Financial Services Commission (the "Commission") under The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended, and, where required by the Listing Rules, Shareholder approval is obtained in accordance with the listing rules issued by the UK Listing Authority. Typically, such transactions will only be approved if: (i) an independent valuation has been obtained in relation to the asset in question; and (ii) the terms are at least as favourable to the Company as would be any comparable arrangement effected on normal commercial terms negotiated at arms' length between the relevant person and an independent party, taking into account, amongst other things, the timing of the transaction.
Co-investment Arrangements
Starwood Capital Group and certain Other Accounts are party to certain pre-existing co-investment commitments and it is anticipated that similar arrangements may be entered into in the future. As a result, the Company may invest alongside Starwood Capital Group and Other Accounts in various investments. Where the Company makes any such co-investments they will be made at the same time, and on substantially the same economic terms, as those offered to Starwood Capital Group and the Other Accounts.
UK Listing Authority Investment Restrictions
The Company currently complies with the investment restrictions set out below and will continue to do so for so long as they remain requirements of the UK Listing Authority:
neither the Company nor any of its subsidiaries will conduct any trading activity which is significant in the context of its group as a whole;
the Company will avoid cross-financing between businesses forming part of its investment portfolio;
the Company will avoid the operation of common treasury functions as between the Company and investee companies;
not more than 10 per cent, in aggregate, of the Company's NAV will be invested in other listed closed-ended investment funds; and
the Company must, at all times, invest and manage its assets in a way which is consistent with its object of spreading investment risk and in accordance with the published investment policy. The Directors do not currently intend to propose any material changes to the Company's investment policy, save in the case of exceptional or unforeseen circumstances. As required by the Listing Rules, any material change to the investment policy of the Company will be made only with the approval of shareholders.
Financial Highlights
Key Highlights
Year ended 31 December 2015
Year ended 31 December 2014
NAV per Ordinary Share
100.43 p
100.08 p
Share Price
107.63 p
106.25 p
NAV total return
7.58%
6.23%
Share Price total return
8.22%
10.93%
Total Net Assets
305.5 m
238.3 m
Loans Advanced (including accrued income)
307.7 m
221.0 m
Cash and Cash Equivalents
0.5 m
13.2 m
Amount drawn under Revolving Credit Facility
8.2 m
0.0 m
Dividends per Ordinary Share (1)
7.0 p
5.8 p
Portfolio yield (2)
8.7%
9.6%
On-going charges percentage (3)
1.1%
1.0%
Weighted average portfolio LTV to Group first (4)
16.0%
15.3%
Weighted average portfolio LTV to Group last (4)
65.3%
62.5%
(1) Figure disclosed is the sum of the dividend declared in relation to each quarter of the financial. This will not equal the dividend recognised in the financial statements and actually paid in the financial year as dividends are recognised and paid one quarter in arrears.
(2) Calculated on amounts currently outstanding, excluding undrawn commitments, and assuming all currently drawn loans are outstanding for the full contractual term. Nine of the loans are floating rate (partially or in whole and some with floors) and returns are based on an assumed profile for future interbank rates but the actual rate received may be higher or lower. Calculated only on amounts funded to date and excluding committed amounts and cash un-invested. The calculation excludes the origination fee payable to the Investment Manager and commitment fees on undrawn funds.
(3) Prepared in accordance with the AIC's recommended methodology.
(4) LTV to Group last means the percentage which the total loan commitment less any amortisation received to date (when aggregated with any other indebtedness ranking alongside and/or senior to it) bears to the market value determined by the last formal lender valuation received by the date of publication of these financial statements. LTV to first Group means the starting point of the loan to value range of the loan commitments (when aggregated with any other indebtedness ranking senior to it). For Lifecare, W Hotel and Centre Point the calculation includes the total facility available and is calculated against the market value on completion of the project. For Aldgate, the calculation includes the total facility available against the stabilised value of the property.
Share Price Performance
As at 31 December 2015 the NAV was 100.43 pence per Ordinary Share (2014: 100.08 pence) and the share price was 107.63 pence (2014: 106.25 pence).
Chairman's Statement
Overview
As at 31 December 2015, the Group had investments and commitments of 309.1 million (of which 7.5 million was unfunded as at the year end). The Group ended the year with 0.5 million of cash and with 8.2 million drawn on the revolving credit facility. The Net Asset Value ("NAV") was 305.5 million, being 100.43 pence per Ordinary Share. The year end share price was 107.63 pence reflecting a 7.2 per cent premium to NAV and throughout 2015 the Ordinary Shares consistently traded at a premium to NAV. NAV total return was 7.58 per cent and share price total return across the financial year was 8.22 per cent.
During 2015, the Group committed to approximately 108 million of new loans, the details of which are contained in the Investment Manager's portfolio review. Loans with a total value of approximately 39 million were also repaid in full during the year. As a result of the strong net investment activity along with continued drawings on existing commitments, the Company issued 66,080,000 Ordinary Shares during the year for total proceeds of 68 million before expenses. In aggregate the Board is pleased to confirm that appropriate management of all these activities by the Investment Manager avoided any material cash drag.
The Company also increased its revolving credit facility by 10 million to 60 million. This facility is an important tool in liquidity management, ensuring new investments can be warehoused in the short term in order to cover expected loan repayments or, once cash drag risk is minimised, facilitate additional equity raises.
During the year the Board communicated that it believed it would be prudent to lower the target portfolio yield and as a consequence the dividend target by 0.5 pence to a dividend target of 6.5 pence from 2016 onwards. The Group has maintained a relative risk/return approach, as opposed to an absolute return strategy, and seeks to deliver to shareholders an attractive balanced return.
Global financial markets have demonstrated greater volatility in recent months when compared to 2015, which is having a negative impact on the availability of traditional banking credit for the Group's target customer base of real estate borrowers. Whilst the volatility should be viewed with caution, it does offer the Group greater origination opportunities assuming transaction volumes are not hit too hard.
The Board is satisfied with the performance of the Investment Manager and Investment Adviser during the year and believes that the continued appointment of the Investment Manager is in the interests of shareholders. Whilst market conditions have changed since the IPO, the Investment Adviser and Investment Manager, working in close collaboration with the Board, have maintained a disciplined and rigorous approach to investment and continue to operate within the risk parameters set out in the prospectus and the investment policy (as amended from time to time).
Placing Programme
It is the intention of the Board to seek to renew the authority at the Annual General Meeting to reset and continue with the Placing Programme that commenced in September 2015, for an amount of 288,118,000 Ordinary Shares.
Results
Total dividends of 7.0 pence per Ordinary Share have been declared in relation to the year ending 31 December 2015.
Period
Dividend declared
Payment date
Amount per share
1 January 2015 to 31 March 2015 1 April 2015 to 30 June 2015 1 July 2015 to 30 September 2015 1 October 2015 to 31 December 2015
28 April 2015 24 July 2015 22 October 2015 26 January 2016
29 May 2015 24 August 2015 13 November 2015 18 February 2016
1.75p 1.75p 1.75p 1.75p
Total
7.00p
Proposed Changes to Leverage
At present the revolving credit facility is in place for the purpose of bridging, financing repurchases of shares or managing working capital requirements. Currently the amount of this facility is limited to 20 per cent of the NAV at the time of drawdown (ignoring FX hedging positions). Whilst this facility has already been extremely useful, the Board believes that, if restructured appropriately, it could offer additional investment and operational flexibility and risk mitigation. The Board is considering an amendment to the investment policy which would provide these advantages, subject to approval by shareholders at the forthcoming Annual General Meeting.
By way of background, whole loan investment opportunities identified by the Investment Adviser may already fall within the Group's return targets or may require the sale or syndication of a senior tranche to a third party investor in order to achieve the return targets. Such syndication may occur at the time the loan is entered into, where a senior loan provider has been identified that will close the investment alongside the Group's mezzanine position, or alternatively, the Group may be comfortable in underwriting the whole loan with a view to subsequent senior syndication. Historically, the Group has originated investments which reflect all three scenarios.
Whilst the first and second approaches, described above, do not carry risks associated with having to sell down part of the loan, the Group has, as a result of its prudent approach, not originated many loans where it takes the risk of subsequent syndication. A conservative policy, particularly during the early phase of the Group's life, of not wanting to be left with a whole loan if syndication is not possible, was justifiable in the short term but does impact returns - even when the underlying collateral is excellent. It is the Board's view that the Group has reached a point in its development where the policy can be relaxed without undue risk to shareholders, recognising that the current conservative approach may have impeded additional business creation.
With the market continuing to shift towards the provision of whole loans to real estate owners, with structures comprising separate senior and mezzanine tranches becoming less popular, the Board believes it is now appropriate to consider adjusting the Company's policy on borrowings. It is proposed that, subject to approval by shareholders, the Company should be permitted to have borrowings of up to 30 per cent of NAV, of which up to 20 per cent of NAV may be for longer term investment purposes, such as bridging to syndication or buying to hold.
The change would permit the Group to invest with greater confidence in the right transactions; a whole loan could be underwritten with the expectation that a portion of the senior would be sold down but, should this not prove possible then the whole investment could be retained by the Group without impacting returns. It should be recognised that the Group's leverage levels are expected to remain cautious given the nature and composition of the overall portfolio. The Board believes that a renewed approach to leverage will permit the Group to source more accretive investments with greater confidence, and without significantly increased investment or operational risk.
Outlook
As we move into 2016, the Group continues to be well positioned with a diversified high quality loan portfolio with an overall conservative risk profile delivering a portfolio return in line with the IPO dividend target. A continued focus of the Board, working closely with the Investment Manager and Investment Adviser, is to maintain this balance and minimise cash drag risk which could result from repayments of loans originated early in the life of the Group, whilst looking to grow the Group and to take advantage of new investment opportunities.
Overall the world presents both new and familiar risks but it should not be forgotten that the Group commenced business in a challenging global market at the IPO in 2012. Now, as then, it is important to maintain an appropriately cautious investment approach, balanced by a willingness to take advantage of the opportunities that such a market can provide. The Group continues to have an appropriate strategy together with excellent real estate and credit skills, which should combine to deliver continued good performance.
The Board will continue to update you on progress by way of the quarterly fact sheets and investment updates when deals are signed. On behalf of the Board, I would like to close by thanking shareholders for your commitment and I look forward to updating you on the Group's progress later this year.
Strategic Report
The Strategic Report describes the business of the Group and details the principal risks and uncertainties associated with its activities. These are amplified in the Investment Manager's Report.
Objective, Investment Policy and Business Model
The Objective and Investment Policy describes the Group's strategy and business model.
The Investment Manager is Starwood European Finance Partners Limited, a Company incorporated in Guernsey with registered number 55819 and regulated by the Commission. The Investment Manager has appointed Starwood Capital Europe Advisers, LLP ("the Investment Adviser"), an English limited liability partnership authorised and regulated by the Financial Conduct Authority, to provide investment advice, pursuant to an Investment Advisory Agreement.
Current and Future Development
A review of the year and outlook is contained in the Investment Highlights and Portfolio Review sections of the Investment Manager's Report and also within the Chairman's Statement.
Performance
A review of performance is contained in the Investment Highlights and Portfolio Review sections of the Investment Manager's Report.
A number of performance measures are considered by the Board, the Investment Manager and Investment Adviser in assessing the Company's success in achieving its objectives. The Key Performance Indicators ("KPIs") used to measure the progress and performance of the Group are established industry measures and are as follows:
The portfolio yield;
The movement in NAV per Ordinary Share;
The movement in share price and the discount / premium to NAV;
On-going charges as a percentage of undiluted NAV; and
Weighted average loan to value for the portfolio.
Risk Management
It is the role of the Board to review and manage all risks associated with the Group, both those impacting the performance and the prospects of the Group, and those which threaten the existence of the Group. It is the role of the Board to mitigate these either directly or through the delegation of certain responsibilities to the Audit Committee and Investment Manager. The Board performs a review of a risk matrix at each Board meeting.
The Board consider the following principal risks could impact the performance and prospects of the Group but do not threaten its ability to continue in operation and meet its liabilities, and has identified the mitigating actions in place to manage them.
Long Term Strategic Risk
The Group's targeted returns are based on estimates and assumptions that are inherently subject to significant business and economic uncertainties and contingencies, and the actual rate of return may be materially lower than the targeted returns. In addition, the pace of investment has in the past and may in the future be slower than expected, or principal may be repaid earlier than anticipated, causing the return on affected investments to be less than expected. In addition, if repayments are not promptly re-invested this may result in cash drag which may lower portfolio returns. As a result, the level of dividends to be paid by the Company may fluctuate and there is no guarantee that any such dividends will be paid. As a consequence, the shares may trade at a discount to NAV per share and shareholders may be unable to realise their investments through the secondary market at NAV per share.
The Investment Adviser provides the Investment Manager and the Board with a weekly report on pipeline opportunities, which includes analysis of the strength of the pipeline and returns available. The Directors also regularly receive information on the performance of the existing loans including the performance of the underlying assets. This also includes analysis of the likelihood of any early repayments which may impact returns.
The Board monitors the level of premium or discount of share price to NAV per share. While the Directors may seek to mitigate any discount to NAV per share through the discount management mechanisms set out in the Prospectus, there can be no guarantee that they will do so or that such mechanisms will be successful. Please see the Investment Objective and Investment Policy for further information on the discount management mechanisms.
The Board monitors investment strategy and performance on an on-going basis and regularly reviews the Investment Objective and Investment Policy in light of prevailing investor sentiment to ensure the Company remains attractive to its shareholders.
Interest Rate Risk
The Group is subject to the risk that the loan income and income from the cash and cash equivalents will fluctuate due to movements in interbank rates.
The loans in place at 31 December 2015 have been structured so that 51.6 per cent of the loans are fixed rate which provides protection from downward interest rate movements to the overall portfolio. In addition, whilst the remaining 48.4 per cent is classified as floating, 95.3 per cent of the 48.4 per cent are subject to interbank rate floors such that the interest cannot drop below a certain level which provides significant additional protection against downward interest rate risk. When reviewing future investments, the Investment Manager will continue to review such opportunities to protect against downward interest rate risk.
The Board considers that the following principal risks could impact both the performance and prospects of the Group and could also threaten its ability to continue its operations and meet its liabilities, and has identified the mitigating actions in place to manage them.
Market Deterioration Risk
The Group's investments are comprised principally of debt investments in the UK, and the wider European Union's internal market and it is therefore exposed to economic movements and changes in these markets. Any deterioration in the global, UK or European economy could have a significant adverse effect on the activities of the Group and may result in significant loan defaults or impairments.
In the event of a default the Group is generally entitled to enforce security, but the process may be expensive and lengthy and the outcome is dependent on sufficient capital being available to meet the borrower's obligations. Some of the investments made would rank behind senior debt tranches for repayment in the event that a borrower defaults, with the consequence of greater risk of partial or total loss. In addition, repayment of loans could be subject to the availability of refinancing options, including the availability of senior and subordinated debt and is also subject to the underlying value of the real estate collateral at the date of maturity.
In mitigation, the average weighted loan to value of the portfolio is 65.3 per cent. Therefore, the portfolio should be able to withstand a significant level of deterioration before credit losses are incurred.
The Investment Adviser also mitigates the risk of credit losses by undertaking detailed due diligence on each loan. Whilst the precise scope of due diligence will depend on the proposed investment, such diligence will typically include independent valuations, building and measurement and environmental surveys, legal reviews of property title and key leases, where necessary mechanical and engineering surveys, accounting and tax reviews and know your customer checks.
The Investment Adviser, Investment Manager and Board also manage these risks by ensuring a diversification of investments in terms of geography, market and type of loan. The Investment Manager and Investment Adviser operate in accordance with the guidelines, investment limits and restrictions policy determined by the Board. The Directors review the portfolio against these guidelines, limits and restrictions on a regular basis.
The Investment Adviser meets with all borrowers on a regular basis to monitor developments in respect of each loan and reports to the Investment Manager and the Board periodically and on an ad hoc basis where considered necessary.
The Group's loans are held at amortised cost and are reviewed quarterly for signs of impairment by the Investment Adviser. The results of the impairment review are discussed with the Investment Manager and the Board.
Risk of Default Under the Revolving Credit Facility
The Group is subject to the risk that a borrower could be unable or unwilling to meet a commitment that it has entered into with the Group as outlined above under market deterioration risk. As a consequence of this, the Group could breach the covenants of its revolving credit facility, and fall into default.
A number of the measures the Group takes to mitigate market deterioration risk as outlined above, such as portfolio diversification and rigorous due diligence on investments and monitoring of borrowers, will also help to protect the Group from the risk of default under the revolving credit facility as this is only likely to occur as a consequence of borrower defaults or loan impairments.
The Board regularly reviews the balances drawn under the revolving credit facility against commitments and pipeline and reviews the performance under the agreed covenants. The loan covenants are also stress tested to test how robust they are to withstand default of the Group's investments.
Community, Social, Employee, Human Rights and Environmental Issues
In carrying out its activities and in its relationship with the community, the Group aims to conduct itself responsibly, ethically and fairly, including in relation to social and human rights issues. The Group has no employees and the Board is composed entirely of non-executive Directors. As an investment company, the Group has no direct impact on the environment. However, the Group believes that it is in shareholders' interests to consider environmental, social and ethical factors when selecting and retaining investments.
Board Diversity
The Board considers that its members have a balance of skills, qualifications and experience which are relevant to the Company. The Board supports the recommendations of the Davies Report and believes in the value and importance of diversity in the boardroom but it does not consider it is appropriate or in the interest of the Company and its shareholders to set prescriptive targets for gender or nationality on the Board.
The Company has no employees and therefore has no disclosures to make in this regard.
Investment Manager's Report - Investment Highlights
The Investment Manager and Investment Adviser are both part of the Starwood Capital Group, a leading global real estate investment group.
Portfolio Statistics
The Investment Manager and the Board of the Company considers that the Group is engaged in a single segment of business, being the provision of a diversified portfolio of real estate backed loans. The analysis presented in this report is presented to demonstrate the level of diversification achieved within that single segment. The Board does not believe that the Group's investments constitute separate operating segments.
As at 31 December 2015, the portfolio was invested in line with the Group's investment policy and is summarised below.
31 December 2015
31 December 2014
Number of investments
15
12
Percentage of currently invested portfolio in floating rate loans (1)
48.4%
42.1%
Portfolio Yield (2)
8.7%
9.6%
Weighted average portfolio LTV - to Group first (3)
16.0%
15.3%
Weighted average portfolio LTV - to Group last (3)
65.3%
62.5%
Average loan term
4.1 Years
3.7 years
Net Asset Value
305.5 m
238.3 m
Amount drawn under Revolving Credit Facility (excl. accrued interest)
8.2 m
0.0 m
Portfolio value (including accrued income)
307.7 m
221.0 m
Cash
0.5 m
13.2 m
Other net assets (including the value of FX hedges)
5.5 m
4.3 m
(1) Calculated on loans currently drawn using the exchange rates applicable when the loans were funded.
(2) Calculated on amounts currently outstanding, excluding undrawn commitments, and assuming all currently drawn loans are outstanding for the full contractual term. Nine of the loans are floating rate (partially or in whole and some with floors) and returns are based on an assumed profile for future interbank rates but the actual rate received may be higher or lower. Calculated only on amounts funded to date and excluding committed amounts and cash un-invested. The calculation excludes the origination fee payable to the Investment Manager and commitment fees on undrawn funds.
(3) LTV to Group last means the percentage which the total loan commitment less any amortisation received to date (when aggregated with any other indebtedness ranking alongside and/or senior to it) bears to the market value determined by the last formal lender valuation received by the date of publication of these financial statements. LTV to first Group means the starting point of the loan to value range of the loan commitments (when aggregated with any other indebtedness ranking senior to it). For Lifecare, W Hotel and Centre Point the calculation includes the total facility available and is calculated against the market value on completion of the project. For Aldgate, the calculation includes the total facility available against the stabilised value of the property.
Portfolio Diversification
Country
% of invested assets
UK
61.6
Netherlands
16.2
Finland
9.2
Denmark
10.1
Republic of Ireland
2.9
Sector
% of invested assets
Office
20.6
Retail
12.2
Light Industrial / logistics
27.6
Hospitality
12.5
Residential for sale
16.2
Residential for rent
2.8
Healthcare
8.1
Loan type
% of invested assets
Whole loans
65.6
Mezzanine
30.6
Other
3.8
Loan type
% of invested assets
Sterling
61.6
Euro
28.3
Danish Krona
10.1
Capital Market Activities and Liquidity Facility
In July 2015 the Company issued 23.78 million Ordinary Shares for gross issue proceeds (before expenses) of 24.5 million. In September 2015 the Company published a prospectus in connection with a 12 month placing programme and issued 42.3 million Ordinary Shares for gross issue proceeds (before expenses) of 43.5 million. In the subsequent period to 31 December 2015 not only were these proceeds invested without material cash drag, but also the proceeds from two loan repayments received in the final quarter for 22.2 million were reinvested, with the revolving credit facility drawn 8.2 million at the year end.
During the final quarter of 2015, the Company extended its revolving credit facility by 10 million to 60 million, following the increase in Net Asset Value as a result of the issue of additional Ordinary Shares outlined above. This facility was originally arranged in December 2014 and, being multi-currency, helps mitigate FX risks on new non-sterling commitments (where a syndication is envisaged) and allows cash drag to be mitigated through the short term warehousing of new investments prior to refinancing with loan repayment receipts or additional equity.
Foreign Exchange
The Group continues to recognise unrealised foreign exchange gains or losses relating to investment activity. The Group has fully hedged the principal of each individual non-sterling denominated loan with forward contracts, together with interest receipts during the period of prepayment protection. If the loans repay at their scheduled repayment date, the Group would expect that this policy will be effective in protecting against realising FX losses on capital invested.
However, the accounting treatment for the non-sterling loans is to value the loan at the foreign exchange rate at the relevant Statement of Financial Position date, and to value the hedge based on the market forward rates at the Statement of Financial Position date to the maturity date of the relevant hedge (discounted back to present value). As a result of this accounting treatment, whilst the loan principal is economically fully hedged (if held to loan maturity), unrealised foreign exchange gains or losses are recognised in the accounts during the life of the loan due to changes in the shape of the relevant forward curves. For this reason, the Group disregards unrealised foreign exchange gains and losses when declaring dividends.
It is important to note that should any of the non sterling denominated loans repay early, and the Group has no alternative use for the funds repaid and therefore breaks the hedges early, foreign exchange gains or losses could be realised at that point. The size of this will depend on the shape of the relevant forward curve at the point at which the relevant hedge is broken. In general, a steeper curve would result in greater gains/losses.
Investment Outlook
The Group starts 2016 with a portfolio that is achieving an annualised return that enables it to meet the revised dividend target of 6.5 pence per annum. The Group is well diversified in terms of geography and sector and the loan-to-value is lower than anticipated at IPO due, in part, to a higher proportion of whole loans. The Investment Manager and Adviser continue to find interesting opportunities to advance whole loans with attractive risk adjusted returns.
Over the coming year the Investment Manager and Adviser will be focussed on managing the repayments which can be expected from some of the loans originated early in the life of the Group and seeking to minimise any resulting cash drag risk. The Group is able to use the revolving credit facility to help manage this risk.
It is expected that sufficient new opportunities will be identified to then enable the Group to raise further equity under the placing programme, but there can be no assurances on this.
Dividend Policy
The Company declared dividends of 7.0 pence per Ordinary Share in respect of the year ended 31 December 2015 (2014: 5.8 pence per Ordinary Share). These dividends are recognised in the Consolidated Statement of Changes in Equity when declared, which is usually within one month after the end of the financial period to which they relate. Dividends are usually paid within one month of the declaration date. As such the amount declared in respect of each financial year does not always reconcile to the amounts disclosed in the financial statements.
The future dividend policy of the Company is discussed in the Chairman's Statement.
Market Summary
The quarterly factsheets published by the Company contain more detail on our view of the market and can be found on the Company's website.
In the last few factsheets we have written about how the global macroeconomic volatility has filtered through to the real estate credit market and how this, in turn, gives us optimism that the investment opportunities for the Group could expand further.
The events of early 2016 in Chinese financial markets, a potential exit of the UK from the EU and, more generally, volatility in the equity, fixed income and commodity markets may, however, have more far reaching consequences for the European economy and real estate markets which could influence the Group's own strategy.
Investment Manager's Report - Portfolio Review
Investment Deployment
As at 31 December 2015 the Group had investments and commitments of 309.1 million (Sterling equivalent at year end exchange rates) as follows:
Sterling equivalent balance
Sterling equivalent unfunded commitments
Lifecare Residences, London
14.0 m
0.4 m
Salesforce Tower, London
11.6 m
-
Centre Point, London
45.0 m
-
5 Star Hotel, London
13.0 m
-
Aldgate Tower, London
40.6 m
4.4 m
Center Parcs Bonds, UK
9.5 m
-
Industrial Portfolio, UK
31.8 m
-
Hospitals, UK
25.0 m
-
Total Sterling Loans
190.5 m
4.8 m
Retail Portfolio, Finland
23.7 m
-
Industrial Portfolio, Netherlands
20.3 m
-
Office, Amsterdam
10.3 m
-
W Hotel, Amsterdam
15.6 m
2.7 m
Retail & Residential Portfolio, Ireland
4.5 m
-
Residential Portfolio, Cork, Ireland
4.6 m
-
Total Euro Loans
79.0 m
2.7 m
Industrial Portfolio, Denmark
32.1 m
-
Total Danish Krona Loans
32.1 m
-
Total Portfolio
301.6 m
7.5 m
During the financial year, the following new loans were originated:
Danish Industrial Portfolio: In June 2015, the Group provided two facilities for a total of DKK 327.4 million for a portfolio of light industrial assets throughout Denmark. The first facility is a mezzanine facility to refinance a portfolio already owned by the sponsor. The second facility is a whole loan to support the acquisition of a new portfolio. The facilities were partially drawn in June 2015, with a further drawdown made in July 2015.
Irish Portfolio: In July 2015, the Company provided a 6.1 million loan on a portfolio of retail and residential rental properties in the Republic of Ireland.
5 Star Hotel, London: In July 2015, the Company increased its existing loan to the 5 Star London Hotel by 6.2 million.
Center Parcs, UK: In July 2015, the Group entered into an arrangement with Ravenscroft Ltd, as Stockbroker, for the purpose of purchasing, settling and holding 8.0 million of the 560 million Class B2 Fixed Rate Secured Notes issued by CPUK Finance Limited following the acquisition of the Center Parcs group by a Brookfield managed fund. On 1 October 2015, the Group purchased an additional 1.5 million of the notes.
Industrial Portfolio, UK: In August 2015 the Group provided a 32.5 million whole loan to refinance a portfolio of industrial properties in the UK.
Residential Portfolio, Ireland: In November 2015 the Group funded a 6.2 million 4 year floating whole loan relating to the acquisition of 47 apartments in Cork to a strong and highly regarded local sponsor.
Industrial Portfolio, Netherlands: In December 2015 the Group entered into an agreement with an existing borrower to refinance and enlarge upon the previous facility. The Group initially increased its commitment by 20.4 million to 40.3 million and subsequently syndicated 12.7 million of this increased commitment, resulting in a net investment of 27.6 million. The decision to increase the commitment reflected the positive asset management being achieved in an improving occupational and investment market and by amending this agreement the Group mitigated one of the larger and more imminent repayment risks as well as deploying further funds into an attractive loan position.
Hospitals, UK: In December 2015 the Group advanced a 25 million mezzanine loan in relation to a portfolio of UK hospitals subject to long term leases to a strong underlying tenant. The UK healthcare sector is demonstrating solid growth potential and the Group sought to take advantage of a very interesting investment opportunity which also gave greater diversity to the portfolio.
During the financial year, the following loans were repaid:
FC200: In June 2015 the FC200 loan of 10.1 million was repaid following a sale of the property.
Maybourne: In January 2015, the Maybourne facilities were amended and restated with the effect of increasing the senior financing by 40 million and the mezzanine facilities being reduced by a corresponding amount. This restructure was an alternative to a complete refinancing of the debt and enabled the Group to retain an investment (albeit lower) notwithstanding the improvement in the debt markets since the time of the original transaction. Subsequently, during the final quarter of 2015 the remaining loan of 11.2 million was repaid.
West End Developments: The 10 million loan was repaid in December 2015.
Events After the Reporting Period
The following new investments have closed since the year end, up to17 March 2016:
Sterling equivalent
Hotel, Channel Islands
27.0 m
Residential Portfolio, Dublin
6.2 m
Amounts also continued to be drawn under the outstanding commitments on the W Hotel, Amsterdam and Aldgate Tower facilities.
The Company has drawn additional funds on the revolving credit facility in order to fund the new investments shown above. At 17 March 2016 42 million is outstanding on the revolving credit facility.
The following loan amortisation (both scheduled and unscheduled) has been received since the year end up to 17 March 2016:
Sterling equivalent
Salesforce Tower, London
867,607
Retail Portfolio, Finland
354,374
Office, Amsterdam
26,948
5 Star Hotel, London
13,173
Retail & Residential Portfolio, Ireland
52,275
Residential Portfolio, Cork, Ireland
27,241
Industrial Portfolio, Denmark
1,083,456
On 26 January 2016 the Company declared a dividend of 1.75 pence per Ordinary Share payable to shareholders on the register on 18 February 2016.
Board of Directors
Stephen Smith (non-executive Chairman - Chairman of the Board)
Stephen is currently a Director of Gatehouse Bank Plc (appointed in June 2013), a Director of Tritax Big Box REIT Plc, which floated on the London Stock Exchange in December 2013. Previously, he was the Chief Investment Officer of British Land Company PLC, the FTSE 100 real estate investment trust from January 2010 to March 2013 with responsibility for the group's property and investment strategy, leaving at the end of June 2013. He was formerly Global Head of Asset Management and Transactions at AXA Real Estate Investment Managers, where he was responsible for the asset management of a portfolio of more than 40 billion on behalf of life funds, listed property vehicles, unit linked and closed end funds. Prior to joining AXA in 1999 he was Managing Director at Sun Life Properties for five years. Stephen is a UK resident.
Jonathan Bridel (non-executive Director - Management Engagement Committee Chairman)
Jonathan is currently a non-executive Chairman or Director of listed and unlisted companies comprised mainly of investment funds and investment managers. These include Alcentra European Floating Rate Income Fund Limited, The Renewables Infrastructure Group Limited, Sequoia Economic Infrastructure Income Fund Limited and FundingCircle SME Income Fund Limited which are listed on the main market of the London Stock Exchange andDP Aircraft I Limited and Fair Oaks Income Fund Limited. He was previously Managing Director of Royal Bank of Canada's investment business in the Channel Islands. Prior to this, after working at Price Waterhouse Corporate Finance in London, Jonathan served in senior management positions in the British Isles and Australia in banking, specialising in credit and in private businesses as Chief Financial Officer. Graduating from the University of Durham with a degree of Master of Business Administration in 1988, Jonathan also holds qualifications from the Institute of Chartered Accountants in England and Wales where he is a Fellow, the Chartered Institute of Marketing and the Australian Institute of Company Directors. Jonathan is a Chartered Marketer and a member of the Chartered Institute of Marketing, the Institute of Directors anda Chartered Fellow of the Chartered Institute for Securities and Investment. Jonathan is a resident of Guernsey.
John Whittle (non-executive Director - Audit Committee Chairman)
John is a Fellow of the Institute of Chartered Accountants in England and Wales and holds the Institute of Directors Diploma in Company Direction. He is a non-executive Director of International Public Partnerships Limited (FTSE 250), India Capital Growth Fund Limited, Globalworth Real Estate Investments Limited and Advance Frontier Markets Fund Limited (all listed on AIM), Toro Ltd (listed on SFM), and also acts as non-executive Director to several other Guernsey investment funds. He was previously Finance Director of Close Fund Services, a large independent fund administrator, where he successfully initiated a restructuring of client financial reporting services and was a key member of the business transition team. Prior to moving to Guernsey he was at Price Waterhouse in London before embarking on a career in business services, predominantly telecoms. He co-led the business turnaround of Talkland International (now Vodafone Retail) and was directly responsible for the strategic shift into retail distribution and its subsequent implementation; he subsequently worked on the 20million private equity acquisition of Ora Telecom. John is also a resident of Guernsey.
Report of the Directors
Principal Activities and Investment Objective
The investment objective of the Company is to provide its shareholders with regular dividends and an attractive total return while limiting downside risk, through the origination, execution, acquisition and servicing of a diversified portfolio of real estate debt investments (including debt instruments) in the UK and wider European Union's internal market, focusing on Northern and Southern Europe. Whilst investment opportunities in the secondary market are considered, the Group's main focus is to originate direct primary real estate debt investments.
The Group attempts to limit downside risk by focusing on secured debt with both quality collateral and contractual protection. The typical loan term is between three and seven years and at least 75 per cent of total loans by value are for a term of seven years or less.
The Group is and intends to remain appropriately diversified by geography, real estate sector, loan type and counterparty. The Group pursues investments across the commercial real estate debt asset class through senior loans, subordinated loans and mezzanine loans, bridge loans, selected loan-on-loan financings and other debt instruments.
Structure
The Company was incorporated with limited liability in Guernsey under the Companies (Guernsey) Law, 2008, as amended, on 9 November 2012 with registered number 55836, and has been authorised by the Guernsey Financial Services Commission ("GFSC") as a registered closed-ended investment company. The Company's Ordinary Shares were admitted to the premium segment of the UK Listing Authority's Official List and to trading on the Main Market of the London Stock Exchange as part of its IPO which completed on 17 December 2012. Further issues took place in March 2013, April 2013, July 2015 and September 2015. The issued capital during the year comprises the Company's Ordinary Shares denominated in Sterling.
The Company makes its investments through Starfin Lux S..r.l ("Luxco"), an indirect wholly-controlled subsidiary not subject to regulation in Luxembourg or elsewhere. The Company's interest in Luxco is held through a Guernsey limited partnership, Starfin Public LP ("the Partnership") of which Starfin Public GP Limited ("the GP") is the general partner.
The GP is wholly owned and controlled by the Company. Starfin Carry LP ("the Special Limited Partner") is the only other limited partner of the Partnership and is majority owned by the Starwood Capital Group ("Starwood") and has no control over the GP.
References to the Group refer to the Company, the GP, the Partnership and Luxco.
Dividend Policy
At launch, the Company had targeted a dividend of 7.0 pence per Ordinary Share upon full investment, based on quarterly dividend payments. In July 2015, the Company communicated that it considered it prudent to lower the dividend target by 0.5 pence per Ordinary Share to 6.5 pence per Ordinary Share for 2016 onwards.
Dividends Paid
The Company declared dividends of 1.75 pence for each of the calendar quarters of 2015.
The Company has paid a total of 18,120,500 during the year (6.95 pence per Ordinary share) (2014: 12,381,200 : 5.2 pence per Ordinary Share).
Business Review
The Group's performance during the year to 31 December 2015, its position at that date and the Group's future developments are detailed in the Chairman's Statement, the Strategic Report and the Investment Manager's Report.
Capital
As part of the Company's IPO completed on 17 December 2012, 228,500,000 Ordinary Shares of the Company, with an issue price of 100 pence per share, were 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.
Shortly after the IPO and in order to meet market demand, principally following the Company's inclusion in the FTSE UK Index Series and to manage the higher share price premium over the NAV per share at that time, the Company issued an additional 9,600,000 Ordinary Shares within the limits imposed by the Prospectus Rules.
During 2015 the Company issued an additional 66,080,000 Ordinary Shares to fund investment opportunities.
Following these issues, the Company now has issued share capital consisting of 304,180,000 Ordinary Shares.
Details of the Company's capital are provided in more detail in note 16 of the consolidated financial statements.
Substantial Interests
As of 31 December 2015, the Company is aware of the following material shareholdings:
Name
Ordinary Shares held
% holding of Ordinary Shares at 31 December 2015
Schroder Investment Management
36,790,219
12.09
Quilter Cheviot Investment Management
33,621,337
11.05
SG Private Banking
21,361,772
7.02
Schroder & Co, London (PB)
18,090,422
5.95
Premier Asset Management
15,805,000
5.20
Thames River Capital
13,700,000
4.50
Smith & Williamson
11,423,432
3.76
East Riding of Yorkshire
10,000,000
3.29
Starwood Property Trust
9,140,000
3.00
Architas Multi Manager
9,048,198
2.97
Directors' Interests in Shares
The Directors' interests in shares are shown below:
Name
Ordinary Shares at Company's Launch
Ordinary Shares purchased
Ordinary Shares at 31 December 2015
Stephen Smith
40,000
38,929
78,929
John Whittle
-
11,866
11,866
Jonathan Bridel and Spouse
-
11,866
11,866
The Directors have adopted a code of Directors' dealings in Ordinary Shares, which is based on the Model Code for Directors' dealings contained in the Listing Rules (the ''Model Code''). The Board is responsible for taking all proper and reasonable steps to ensure compliance with the Model Code by the Directors, and review the Model Code on a regular basis.
Events After the Reporting Period
Details of events are the reporting period are contained in note 24 to the consolidated financial statements.
Independent Auditors
The Board of Directors elected to appoint PricewaterhouseCoopers CI LLP as Auditors to the Company at the inaugural meeting of the Company on 22 November 2012 and they have been re-appointed at each Annual General Meeting held since. PricewaterhouseCoopers CI LLP has indicated their willingness to continue as Auditors. The Directors will place a resolution before the Annual General Meeting to re-appoint them as independent Auditors for the ensuing year, and to authorise the Directors to determine their remuneration.
Investment Manager and Service Providers
The Investment Manager during the year was Starwood European Finance Partners Limited (the "Investment Manager"), incorporated in Guernsey with registered number 55819 and regulated by the GFSC. The Investment Manager has appointed Starwood Capital Europe Advisers, LLP ("the Investment Adviser"), an English limited liability partnership authorised and regulated by the Financial Conduct Authority ("FCA"), to provide investment advice pursuant to an Investment Advisory Agreement.
The administration of both the Company and Investment Manager was delegated to Ipes (Guernsey) Limited (the "Administrator") during the year.
Discount Control
TheCompany'sdiscountmanagement strategyhasthreeelements,summarisedasfollowsand explainedingreaterdetailbelow:
a discount-triggeredrealisationmechanismthatwouldapplyiftheOrdinarySharestrade at anaveragediscountoffivepercentormoreduringthelastsixmonthsofthefinancialyear ending31December2017andwouldprovidefortherealisationofupto75percentofthe outstanding Ordinary Share capital by means of the orderly realisation over time of the relevantproportion oftheCompany'sassetsandrelatedphaseddistributionsofcapitalto Shareholderswhomaketherelevantelection.
save where the discount-triggeredrealisationmechanism has been activated, a realisation votebynolaterthan28February2018toimplementarealisation ofupto75percentofthe outstandingcapitalonsubstantiallythesamebasisasdescribedabove;and
share repurchase powers that allow the Company to repurchase Ordinary Shares in the marketup to 14.99 per cent of the share capital, subject to annual renewal of the Shareholderauthority.
Discount-triggeredRealisation
IftheOrdinarySharestradeatanaveragediscounttoNetAssetValueperShare(calculateddaily inaccordancewiththemethodologysetoutbelow)offivepercent ormore during the six-month periodending31December2017,theDirectorsattheirabsolutediscretionmayputarealisation offertoShareholders,subjecttoapplicablelawincludingtherequirementsoftheCompaniesLaw
(aRealisationOffer).
RealisationVote
Intheeventthatthediscount-triggeredrealisationmechanismisnotactivated,theDirectorsshall exercise their discretion under the Articles to put forward a realisation vote (as an ordinary resolution)toShareholdersbynolaterthan28February2018.IfShareholdersvoteinfavourof thisresolutionthentheCompanywillprocurethataRealisationOfferonsubstantiallythesame terms as that described above is offered to Shareholders. Under the Realisation Offer all Shareholderswillbeabletoelecttoredeemupto75percent.oftheirOrdinaryShares.Following thereceiptofallelections,ifeither:(i)morethan75percent.oftheOrdinarySharestheninissue wereelectedforrealisation;or(ii)theNAVoftheCompanyfollowingtherealisationwouldbeless than100million,theDirectorsmayexercisetheirdiscretionnottoproceedwiththeRealisation Offerandinsteadputforwardalternativeproposalswhicharenolessfavourable toelecting Shareholders and which may include the reorganisation or winding up of the Company. Any realisationoftheCompany'sportfoliorequiredasaresultoftheimplementationofaRealisation Offerwillbeconductedintheorderlymannerdescribedaboveinrelationtothediscount-triggered realisationmechanism.
IfShareholdersvoteagainsttherealisationvotethentheCompanywillcontinueinexistenceasit isthenconstitutedwithoutanyliquidityeventforShareholders.
ShareBuybacks
TheDirectorshavetheauthoritytopurchaseinthemarketupto14.99percentoftheOrdinary Sharesinissueon8May2015atapricenotexceeding:(i)fivepercent.abovetheaverageof themid-marketvaluesoftheOrdinarySharesforthefiveBusinessDaysbeforethepurchaseis made;or(ii)thehigherofthelastindependent tradeorthehighestcurrentindependentbidforthe OrdinaryShares.
TheDirectorswillgiveconsiderationtorepurchasingSharesunderthisauthority,butarenotbound todoso,wherethemarketpriceofanOrdinarySharetradesatmorethan7.5percentbelowthe Net AssetValue per Share for more than 3 months, subject to available cash not otherwise required for working capital purposes or the payment of dividends in accordance with the Company'sdividendpolicy.
Ifnotpreviouslyused,thisauthorityshallexpireattheconclusion oftheCompany'sAnnualGeneral Meeting ("AGM") in2016.TheDirectorsintendtoseekannual renewalofthisbuybackauthorityfrom ShareholderseachyearattheCompany'sAGM.
Directors' Remuneration Report
Remuneration Policy & Components
The Board endeavours to ensure the remuneration policy reflects and supports the Company's strategic aims and objectives throughout the year under review. It has been agreed that, due to the small size and structure of the Company, a separate Remuneration Committee would be inefficient; therefore the Board as a whole is responsible for discussions regarding remuneration. No external remuneration consultants were appointed during the year under review.
As per the Company's Articles of Association, all Directors are entitled to such remuneration as is stated in the Company's Prospectus or as the Company may determine by ordinary resolution; to not exceed the aggregate overall limit of 200,000. Subject to this limit, it is the Company's policy to determine the level of Directors' fees, having regard for the level of fees payable to non-executive Directors in the industry generally, the role that individual Directors fulfil in respect of responsibilities related to the Board, Management Engagement Committee and Audit Committee and the time dedicated by each Director to the Company's affairs. Base fees are set out below.
During the year, eachoftheDirectorsreceivedanadditionalfeeof5,000inrespectofthe additional workinvolvedinrespectofthePlacing Programme and undertooktoinvesttheentiretyofthisfeetosubscribeforNewOrdinaryShares.
Director
(1) Revised base fee
Base Fee Payable 2015
(2)Additional Fee Paid 2015
Total Fee 2015
Base Fee 2014
Stephen Smith
47,500
46,250
5,000
51,250
45,000
John Whittle
40,000
37,500
5,000
42,500
35,000
Jonathan Bridel
35,000
33,750
5,000
38,750
32,500
Aggregate Fees
122,500
117,500
15,000
132,500
112,500
Aggregate Expenses
6,341
2,783
Total
138,841
115,283
(1) This is the revised base fees following an increase of 2,500, effective 1 July 2015, for Stephen Smith, Jonathan Bridel and 5,000 for John Whittle.
(2) 5,000inrespectofthe additional workinvolvedinrespectofthePlacing Programme which was invested into 4,866 shares each
As outlined in the Articles of Association, the Directors may also be paid for all reasonable travelling, accommodation and other out-of-pocket expenses properly incurred in the attendance of Board or Committee meetings, general meetings, or meetings with shareholders or debentures of the Company or otherwise in discharge of their duties; and all reasonable expenses properly incurred by them seeking independent professional advice on any matter that concerns them in the furtherance of their duties as Directors of the Company.
No Director has any entitlement to pensions, paid bonuses or performance fees, has been granted share options or been invited to participate in long-term incentive plans. No loans have been originated by the Company for the benefit of any Director.
None of the Directors has a service contract with the Company. Each of the Directors has entered into a letter of appointment with the Company dated 22 November 2012 subject to re-election every three years thereafter at the AGM. Any Director who has served on the Board for longer than nine years will be subject to annual re-election. The Directors do not have any interests in contractual arrangements with the Company or its investments during the year under review, or subsequently. Each appointment can be terminated in accordance with the Company's Articles and without compensation. As outlined in the letters of appointment, each appointment can be terminated at the will of both parties with one month's notice either by (i) written resignation; (ii) unauthorised absences from Board meetings for 12 months or more; (iii) written request of the other Directors; or (iv) a resolution of the shareholders.
Directors' and Officers' liability insurance cover is maintained by the Company but is not considered a benefit in kind nor constitutes a part of the Directors' remuneration. The Company's Articles indemnify each Director, secretary, agent and officer of the Company, former or present, out of assets of the Company in relation to charges, losses, liabilities, damages and expenses incurred during the course of their duties, in so far as the law allows and provided that such indemnity is not available in circumstances of fraud, wilful misconduct or negligence.
Corporate Governance Statement
As a regulated Guernsey incorporated company with a Premium Listing on the Official List and admission to trading on the Main Market for Listed Securities of the London Stock Exchange, the Company is required to comply with the principles of the UK Corporate Governance Code dated September 2014 ("UK Code").
As an AIC member, the Board has also considered the principles and recommendations of the AIC Code of Corporate Governance dated February 2015 ("AIC Code") by reference to the AIC Corporate Governance Guide for Investment Companies ("AIC Guide"). The AIC Code addresses all the principles set out in the UK Code, as well as setting out additional principles and recommendations on issues of specific relevance to the Company. The AIC Code was updated in February 2015 to include the new provisions of the UK Code announced in September 2014, and has been endorsed by the Financial Reporting Council as ensuring investment company boards fully meet their obligations to the UK Code and LR 9.8.6 of the Listing Rules. Having adopted the AIC Code with effect from Admission (17 December 2012), the Board has therefore assessed itself, the Committees and performance of the Directors against the parameters and principles outlined within the AIC Code on a regular basis throughout 2015.
Except as disclosed within the report, the Board is of the view that throughout the year ended 31 December 2015, the Company complied with the recommendations of the AIC Code and the relevant provisions of the UK Code. Key issues affecting the Company's corporate governance responsibilities, how they are addressed by the Board and application of the AIC Code are presented below.
The Code includes provisions relating to: the role of the chief executive; executive Directors' remuneration; and the need for an internal audit function which are not considered by the Board to be relevant to the Company, being an externally managed investment company. The Company has therefore not reported further in respect of these provisions.
The Guernsey Financial Services Commission Finance Sector Code of Corporate Governance ("GFSC Code") came into force in Guernsey on 1 January 2012. The Company is deemed to satisfy the GFSC Code provided that it continues to conduct its governance in accordance with the requirements of the UK Code.
Chairman
Appointed to the permanent position of Chairman of the Board on 22 November 2012, Stephen Smith is responsible for leading the Board in all areas, including determination of strategy, organising the Board's business and ensuring the effectiveness of the Board and individual Directors. He also endeavours to produce an open culture of debate within the Board.
Prior to the Chairman's appointment, a job specification was prepared which included an assessment of the time commitment anticipated for the role. Discussions were undertaken to ensure the Chairman was sufficiently aware of the time needed for his role, and agreed to upon signature of his letter of appointment. Other significant business commitments of the Chairman were disclosed to the Company prior to appointment to the Board, and were publicly disclosed in the Company's Prospectus dated 28 November 2012. Any subsequent changes have been declared. Certain of these commitments, and their subsequent changes, can be identified in his biography.
The effectiveness and independence of the Chairman is evaluated on an annual basis as part of the Board's performance evaluation; the Audit Committee Chairman is tasked with collating feedback and discussing with the Chairman on behalf of the rest of the Board.
As per the Company's Articles, all Directors, including the Chairman, must disclose any interest in a transaction that the Board and Committees will approve. To ensure all Board decisions are independent, the said conflicted Director is not entitled to vote in respect of any arrangement connected to the interested party.
Board
Independence and Disclosure
The Board and Chairman confirm that they were selected prior to the Company's launch and were able to assume all responsibilities at an early stage, independent of the Investment Manager and Investment Adviser. The Board is composed entirely of non-executive Directors, who meet as required without the presence of the Investment Manager or service providers to scrutinise the achievement of agreed goals and objectives, and monitor performance. Through the Audit Committee and the Management Engagement Committee they are able to ascertain the integrity of financial information and confirm that all financial controls and risk management systems are robust, and analyse the performance of the Investment Manager and other service providers on a regular basis.
Following the annual performance evaluation, it was deemed that the Directors had been proven to challenge the Investment Manager throughout the year under review, as minuted and recorded, therefore for the purposes of assessing compliance with the AIC Code, the Board as a whole considers that each Director is independent of the Investment Manager and free from any business or other relationship that could materially interfere with the exercise of his independent judgment. If required, the Board is able to access independent professional advice. The Investment Manager is also requested to declare any potential conflicts surrounding votes, share dealing and soft commissions on an annual basis to the Board to help with the assessment of investments.
Open communication between the Investment Manager and the Board is facilitated by regular Board meetings, to which the Investment Manager is invited to attend and update the Board on the current status of the Company's investments, along with ad hoc meetings as required.
Coming to mutual agreement on all decisions, it was agreed the Board had acted in the best interests of the Company to the extent that, if deemed appropriate, a Director would abstain or have his objection noted, which would be reflected within the minutes.
Similar to the process outlined above for the appointment of the Chairman, a job specification was prepared for each directorship which included an assessment of the time commitment anticipated for the role to ensure each Director was aware of the time commitment needed for the role. The Directors' other significant business commitments were disclosed to the Company prior to appointment to the Board, and were publicly disclosed in the Company's Prospectus dated 28 November 2012. Any subsequent changes have been declared. Certain of these commitments can be identified in each Director's biography. Details of the skills and experience provided by each Director can also be found in their biographies, alongside identification of the role each Director currently holds in the Company.
The terms and conditions of appointment for non-executive Directors are outlined in their letters of appointment, and are available for inspection by any person at the Company's registered office during normal business hours and at the AGM for fifteen minutes prior to and during the meeting.
There is no executive Director function in the Company; all day-to-day functions are outsourced to external service providers.
Development
The Board believes that the Company's Directors should develop their skills and knowledge through participation at relevant courses. The Chairman is responsible for reviewing and discussing the training and development of each Director according to identified needs. Upon appointment, all Directors participate in discussions with the Chairman and other Directors to understand the responsibilities of the Directors, in addition to the Company's business and procedures. The Company also provides regular opportunities for the Directors to obtain a thorough understanding of the Company's business by regularly meeting members of the senior management team from the Investment Manager, Investment Adviser and other service providers, both in person and by phone.
Balance of the Board and Diversity Policy
It is perceived that the Board is well-balanced, with a wide array of skills, experience and knowledge that ensures it functions correctly and that no single Director may dominate the Board's decisions. Having three Directors appointed ensures that during any transition period, there are at least two Directors to provide stability.
The Board's position on diversity can be seen in the Strategic Report. All Directors currently sit on all the Committees; each Director also fills one chairmanship post only.
Annual Performance Evaluation
The Board's balance is reviewed on a regular basis as part of a performance evaluation review. Using a pre-determined template based on the AIC Code's provisions as a basis for review, the Board undertook an evaluation of its performance, in addition, an evaluation focusing on individual commitment, performance and contribution of each Director was conducted. The Chairman then met with each Director to fully understand their views of the Company's strengths and to identify potential weaknesses. If appropriate, new members are proposed to resolve the perceived issues, or a resignation is sought. Following discussions and review of the Chairman's evaluation by the other Directors, the Audit Committee Chairman reviewed the Chairman's performance. Training and development needs are identified as part of this process, thereby ensuring that all Directors are able to discharge their duties effectively.
Given the Company's size and the structure of the Board, no external facilitator or independent third party was used in the performance evaluation.
Re-election and Board Tenure
There is currently no Nominations Committee for the Company as it is deemed that the size, composition and structure of the Company would mean the process would be inefficient and counter-productive. The Board therefore undertakes a thorough process of reviewing the skill set of the individual Directors, and proposes new, or renewal of current, appointments to the Board.
Each Director is required to be elected by shareholders at the AGM following his appointment by the Board, and to be re-elected once every three years thereafter. Jonathan Bridel is therefore submitting himself for re-election at the AGM on 6 May 2016. Any Director who has served on the Board for more than nine years is required to submit himself for re-election annually.
The Audit Committee Members and Chairman of the Board confirm that Jonathan Bridel has proven his ability to fulfil all legal responsibilities and to provide effective independent judgment on issues of strategy, performance, resources and conduct. The Board therefore has no hesitation in recommending to Shareholders that Jonathan Bridel be re-elected.
Appointment Process
As no new Director has been appointed since the Company's launch and the Board believes there is no gap that currently needs to be filled, no appointment process has been formalised. It is anticipated, however, that the process will involve identifying gaps and needs in the Board's composition, then reviewing the skill set of potential candidates. For renewal of current appointments, all Directors except the individual in question are entitled to vote at the meeting. Similarly, no new nominations have been made for the role of Chairman of the Board since prior to launch.
Board and Committees
Board
Matters reserved for the Board include review of the Company's overall strategy and business plans; approval of the Company's half-yearly and annual report; review and approval of any alteration to the Group's accounting policies or practices and valuation of investments; approval of any alteration to the Company's capital structure; approval of dividend policy; appointments to the Board and constitution of Board Committees; observation of relevant legislation and regulatory requirements; and performance review of key service providers. The Board also retains ultimate responsibility for Committee decisions; every Committee is required to refer to the Board, who will make the final decision.
Terms of reference that contain a formal schedule of matters reserved for the Board of Directors and its duly authorised Committee for decision has been approved and can be reviewed at the Company's registered office.
The meeting attendance record is displayed within the Corporate Governance statement. The Company Secretary acts as the secretary to the Board.
Audit Committee
The Board has established an Audit Committee composed of all the independent members of the Board. The Chairman of the Board is included as a Committee member to enable a full understanding of the issues facing the Company, but cannot be Audit Committee Chairman. The Audit Committee, its membership and its terms of reference are kept under regular review by the Board, and it is perceived all members have sufficient financial skills and experience. John Whittle is Audit Committee Chairman.
The Audit Committee met three times during 2015 (2014: three times); the meeting attendance record is displayed within the Corporate Governance statement. The Company Secretary acts as the secretary to the Audit Committee.
Owing to the size and structure of the Company, there is no internal audit function. The Audit Committee has reviewed the need for an internal audit function, and perceived that the internal financial and operating control systems in place within the Company and its service providers, as evidenced by the internal control reports provided by the Administrator, give sufficient assurance that a sound system of internal control is maintained that safeguards shareholders' investment and Company assets.
The Audit Committee is intended to assist the Board in discharging its responsibilities for the integrity of the Company's consolidated financial statements, as well as aiding the assessment of the Company's internal control effectiveness and objectivity of the external Auditors. Further information on the Audit Committee's responsibilities is given in the Report of the Audit Committee.
Formal terms of reference for the Audit Committee are available at the registered office and on the Company's website, and are reviewed on a regular basis.
Management Engagement Committee
The Company has established a Management Engagement Committee which comprises all the Directors, with Jonathan Bridel as the Chairman of the Committee. The Management Engagement Committee's main function is to review and make recommendations on any proposed amendment to the Investment Management Agreement and keep under review the performance of the Investment Manager; and undertake an assessment of the Investment Manager's scope and responsibilities as outlined in the service agreement and prospectus on a formal basis every year. Discussions on the Investment Manager's performance are also conducted regularly throughout the year by the Board. Reviews of engagements with other service providers, such as the Administrator, to ensure all parties are operating satisfactorily are also undertaken by the Management Engagement Committee so as to ensure the safe and accurate management and administration of the Company's affairs and business and that they are competitive and reasonable for shareholders.
The Management Engagement Committee met once during 2015 (2014: once) and undertook a review of the key service providers to the Group and the Company, utilising a service provider questionnaire. No material weaknesses were identified and the recommendation to the Board was that the current arrangements were appropriate and provided good quality services and advice to the Company and the Group.
During November 2015, the Management Engagement Committee, together with members of the Investment Manager, visited the offices of the Investment Adviser to receive an overview of its policies and processes and were satisfied with the policies and processes in place.
Formal terms of reference for the Management Engagement Committee are available at the registered office and the Company's website, and are reviewed on a regular basis.
The Company Secretary acts as the secretary to the Management Engagement Committee.
Board and Committee Meeting Attendance
Individual attendance at Board and Committee meetings is set out below:
Scheduled Board
Ad hoc Board1
Audit Committee
Management Engagement Committee
Stephen Smith1
4
4
3
1
John Whittle
4
12
3
1
Jonathan Bridel
4
11
3
1
Total Meetings for year
4
13
3
1
1The ad hoc Board meetings are convened at short notice to deal with administrative matters. It is not therefore always logistically feasible, or a necessity, for the Chairman of the Board to attend such meetings.
In addition to the scheduled quarterly and additional offshore ad hoc meetings, the Directors and the Investment Manager have been provided with a number of telephone and face to face investment briefings by the Investment Adviser in order to keep the Directors and the Investment Manager fully apprised and up to date with the current investment status and progress.
Board Remuneration
As outlined in the Prospectus, Directors are paid in accordance with agreed principles aimed at focusing on long-term performance of the Company. Further information can be found in the Directors' Remuneration Report.
Company Secretary
Reports and papers, containing relevant, concise and clear information, are provided to the Board and Committees in a timely manner to enable review and consideration prior to both scheduled and ad-hoc specific meetings. This ensures that Directors are capable of contributing to, and validating, the development of Company strategy and management. The regular reports also provide information that enables scrutiny of the Company's Investment Manager and other service providers' performance. When required, the Board has sought further clarification of matters with the Investment Manager and other service providers, both by means of further reports and in-depth discussions, in order to make more informed decisions for the Company.
Under the direction of the Chairman, the Company Secretary facilitates the flow of information between the Board, Committees, Investment Manager and other service providers through the development of comprehensive, detailed meeting packs, agendas and other media. These are circulated to the Board and other attendees in sufficient time to review the data.
Full access to the advice and services of the Company Secretary is available to the Board; in turn, the Company Secretary is responsible for advising on all governance matters through the Chairman. The Articles and schedule of matters reserved for the Board indicate the appointment and resignation of the Company Secretary is an item reserved for the full Board. A review of the performance of the Company Secretary is undertaken by the Board on a regular basis.
Financial and Business Information
An explanation of the Directors' roles and responsibilities in preparing the Annual Report and Audited Consolidated Financial Statements for the year ended 31 December 2015 is provided in the Statement of Directors' Responsibilities.
For the purposes solely of the audit of the consolidated financial statements, the Auditors have reviewed the Company's compliance with certain of the AIC Code's provisions, the UK Listing Authority's Listing Rules and other applicable rules of the Financial Conduct Authority as reported within the Independent Auditors' Report to the Members of Starwood European Real Estate Finance Limited.
Further information enabling shareholders to assess the Company's performance, business model and strategy can be sourced in the Chairman's Statement, the Strategic Report and the Report of the Directors.
Assessment of prospects
The Group's strategy is central to an understanding of its prospects, and details can be found in the Strategic Report.
The Group's focus is particularly on managing expected repayments in order to minimise any potential for cash drag and continuing to grow the Group by sourcing investments with good risk adjusted returns. The Group does not assume in its planning that the revolving credit facility remains available to it beyond the current term and assumes that the realisation vote in 2018 will not result in a significant requirement to realise assets.
The Group's prospects are assessed primarily through its strategic review process which the Board participates fully in. The Directors' have assessed the prospect of the Group over a period of three years which has been selected because the strategic review covers a three-year period and this is also the approximate average remaining loan term.
The Group updates its plan and financial forecasts on a monthly basis and detailed financial forecasts are maintained and reviewed by the Board regularly.
Assessment of Viability
Although the strategic plan reflects the Directors' best estimate of the future prospects of the business, they have also tested the potential impact on the Group of a number of scenarios over and above those included in the plan, by quantifying their financial impact. These scenarios are based on aspects of the following principal risks, as described below:
Market deterioration risk; and
Risk of default under the revolving credit facility.
These scenarios represent 'severe but plausible' circumstances that the Group could experience. The scenarios tested included:
A very high level of loan default meaning that the Group stopped receiving interest on a substantial part of the portfolio; and
An analysis of the robustness of the covenants under the revolving credit facility to withstand default of the underlying investments.
The results of this stress testing showed that the Group would be able to withstand a very high level of underlying loan default or impairment resulting from either of the risks identified over the period of the financial forecasts.
Viability Statement
Based on their assessment of prospects and viability above, and subject to passing the continuation vote, the Directors confirm they have a reasonable expectation that the Group will continue in operation and meet its liabilities as they fall due over the three-year period ending 31 December 2018.
In connection with the viability statement the Board confirm that they have carried out a robust assessment of the principal risks facing the company, including those which would threaten its business model, future performance, solvency or liquidity for the year ended 31 December 2015.
Going Concern
The Directors also considered it appropriate to prepare the financial statements on the going concern basis, as explained in the Basis of preparation paragraph in Note 2 to the financial statements.
Risk Control
In addition to the earlier assessment of principal risks and uncertainties contained within the Strategic Report, the Board is required annually to review the effectiveness of the Group's key internal controls such as financial, operational and compliance controls and risk management. The controls are designed to ensure that the risk of failure to achieve business objectives is minimised, and are intended to provide reasonable assurance against material misstatement or loss. This is not absolute assurance that all risks are eliminated.
Through regular meetings of the Audit Committee, the Board seeks to maintain full and effective control over all strategic, financial, regulatory and operational issues. The Board maintains an organisational and committee structure with clearly defined lines of responsibility and delegation of authorities.
Risk Management
As part of the compilation of the risk register for the Company, appropriate consideration has been given to the relevant control processes and that risk is considered, assessed and managed as an integral part of the business. The Company's system of internal control includes inter alia the overall control exercise, procedures for the identification and evaluation of business risk, the control procedures themselves and the review of these internal controls by the Audit Committee on behalf of the Board. Each of these elements that make up the Company's system of internal financial and operating control is explained in further detail as below.
(i) Control Environment
The Company is ultimately dependent upon the quality and integrity of the staff and management of the Investment Manager, the Investment Adviser and its Fund Administration & Company Secretarial service provider. In each case, qualified and able individuals have been selected at all levels. The staff of both the Investment Manager and Administrator are aware of the internal controls relevant to their activities and are also collectively accountable for the operation of those controls. Appropriate segregation and delegation of duties is in place.
The Audit Committee undertakes a review of the Company's internal financial and operating controls on a regular basis. The Auditors of the Company, consider internal controls relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design their audit procedures, but not for the purpose of expressing an audit opinion on the effectiveness of the Company's internal controls.
In its role as a third-party fund administration services provider, the Ipes Group, of which Ipes (Guernsey) Limited is a part, produces an annual AAF 01/06 Assurance Report on the internal control procedures in place within the Ipes Group, and this is subject to review by the Audit Committee and the Board.
(ii) Identification and Evaluation of Business Risks
Another key business risk is the performance of the Company's investments. This is managed by the Investment Manager, which undertakes regular analysis and reporting of business risks in relation to the loan portfolio, and then proposes appropriate courses of action to the Board for their review.
(iii) Key Procedures
In addition to the above, the Audit Committee's key procedures include a comprehensive system for reporting financial results to the Board regularly, as well as quarterly impairment reviews of loans (including reports on the underlying investment performance).
Although no system of internal control can provide absolute assurance against material misstatement or loss, the Company's system is designed to assist the Directors in obtaining reasonable assurance that problems are identified on a timely basis and dealt with appropriately. The Company, given its size, does not have an internal audit function. It is the view of the Board that the controls in relation to the Company's operating, accounting, compliance and IT risks performed robustly throughout the year. In addition, all have been in full compliance with the Company's policies and external regulations, including:
Investment policy, as outlined in the IPO documentation, and subsequently amended by EGM's held on 2 May 2014 and 9 March 2015;
Personal Account Dealing, as outlined in the Model Code;
Whistleblowing Policy;
Anti-Bribery Policy;
Applicable Financial Conduct Authority Regulations;
Listing Rules, and Disclosure and Transparency Rules;
Treatment and handling of confidential information;
Conflicts of interest;
Compliance policies; and
Anti-Money Laundering Regulations.
There were no protected disclosures made pursuant to the Company's whistleblowing policy, or that of service providers in relation to the Company, during the year to 31 December 2015.
In summary, the Board considers that the Company's existing internal financial and operating controls, coupled with the analysis of risks inherent in the business models of the Company and its subsidiaries, continue to provide appropriate tools for the Company to monitor, evaluate and mitigate its risks.
Alternative Investment Fund Management Directive ("AIFMD")
The AIFMD, which was implemented across the EU on 22 July 2013 with the transition period ending 22 July 2014, aims to harmonise the regulation of Alternative Investment Fund Managers ("AIFMs") and imposes obligations on managers who manage or distribute Alternative Investment Funds ("AIFs") in the EU or who market shares in such funds to EU investors.
After seeking professional regulatory and legal advice, the Company was established in Guernsey such that, upon implementation of AIFMD it would be a Non-EU AIF, with Starwood European Finance Partners Limited appointed to act as the Non-EU AIFM. No changes of significance are envisaged in the management arrangements for the Company as a result of AIFMD.
In accordance with AIFMD disclosure obligations, note 6 provides a summary of realised gains and losses.
The Investment Manager does not receive an additional fee, to that stated in note 23, as a result of acting as the AIFM. The Board of the Investment Manager received an aggregate fee of 33,750 for the year ended 31 December 2015.
The marketing of shares in AIFs that are established outside the EU (such as the Company) to investors in an EU member state is prohibited unless certain conditions are met. Certain of these conditions are outside the Company's control as they are dependent on the regulators of the relevant third country (in this case Guernsey) and the relevant EU member state entering into regulatory co-operation agreements with one another.
The AIFM has given written notification to the United Kingdom Financial Conduct Authority ("FCA"), pursuant to Regulation 59 of the Alternative Investment Fund Managers Regulations 2013 (SI 1773/2013) (the "AIFM Regulations") of its intention to market the shares to investors in the United Kingdom in accordance with the AIFM Regulations and the rules and guidance of the FCA.
The AIFM has given written notification to the Netherlands Authority for the Financial Markets ("AFM") pursuant to Article 1:13b section 1 and 2 of the Act on the Financial Supervision (Wet op het financieel toezicht) (the "AFS") of its intention to market the shares to investors in the Netherlands in accordance with the AFS, any rules and regulations promulgated pursuant thereto and the rules and guidance of the AFM.
On 12 February 2016, the AIFM obtained a marketing licence in Sweden in accordance with Chapter 5, Section 10 of the Swedish Alternative Investment Fund Managers Act (Sw. lag (2013:561) om frvaltare av alternativa investeringsfonder). This enables shares in the Company to be marketed to professional investors in Sweden.
Currently, the National Private Placement Regime ("NPPR") provides a mechanism to market Non-EU AIFs that are not allowed to be marketed under the AIFMD domestic marketing regimes. The Board is utilising NPPR in order to market the Company, specifically in the UK, Sweden and the Netherlands. The Board works with the Company's advisers to ensure the necessary conditions are met, and all required notices and disclosures are made under NPPR. Eligible AIFMs will be able to continue to use NPPR until at least 22 July 2018, and at present NPPR remains the sole regime available to market in the EEA. A non-EEA marketing passport may be introduced, but this depends on a number of conditions being satisfied (as set out in the AIFMD and its Regulations).
Any regulatory changes arising from implementation of the AIFMD (or otherwise) that limit the Company's ability to market future issues of its shares may materially adversely affect the Company's ability to carry out its investment policy successfully and to achieve its investment objective, which in turn may adversely affect the Company's business, financial condition, results of operations, NAV and/or the market price of the Ordinary Shares.
The Board, in conjunction with the Company's advisers, will continue to monitor the development of the AIFMD and its impact on the Company. The Company will continue to use NPPR pending further consultation from the European Securities and Marketing Authority ("ESMA").
The Board has considered the disclosure obligations under Articles 22 and 23 and can confirm that the Company complies with the various organisational, operational and transparency obligations.
Foreign Account Tax Compliance Act ("FATCA") and The OECDCommon Reporting Standards ("CRS")
FATCA became effective on 1 January 2013 and is being gradually implemented internationally. The legislation is aimed at determining the ownership of US assets in foreign accounts and improving US Tax compliance with respect to those assets.
More than 90 jurisdictions, including all 34 member countries of the Organisation for Economic Co-operation and Development ("OECD") and the G20 members, have committed to implement the Common Reporting Standard for automatic exchange of tax information ("CRS"). Building on the model created by FATCA, the CRS creates a global standard for the annual automatic exchange of financial account information between the relevant tax authorities.
The Board in conjunction with the Company's service providers and advisers have ensured that the Company will comply with FATCA and CRS's requirements to the extent relevant to the Company.
Dialogue with Shareholders
The Directors place a great deal of importance on communication with shareholders. The Company's Chairman, Investment Manager and the Brokers, aim to meet with large shareholders at least annually, together with the Investment Adviser, and calls are undertaken on a regular basis with shareholders. The Board also receives regular reports from the Brokers on shareholder issues. Publications such as the Annual Report and Consolidated Financial Statements and quarterly factsheets are reviewed and approved by the Board prior to circulation, and are widely distributed to other parties who have an interest in the Company's performance, and are available on the Company's website.
All Directors are available for discussions with the shareholders, in particular the Chairman and the Audit Committee Chairman, as and when required.
Constructive use of AGM
The Notice of AGM is sent out at least 20 working days in advance of the meeting. All shareholders have the opportunity to put questions to the Board or Investment Manager, either formally at the Company's AGM, informally following the meeting, or in writing at any time during the year via the Company Secretary. The Company Secretary is also available to answer general shareholder queries at any time throughout the year.
Report of the Audit Committee
The Board is supported by the Audit Committee, which comprised all the Directors during the year under review (including the Chairman of the Board, to enable his greater understanding of the issues facing the Group). The Board has considered the composition of the Audit Committee and is satisfied it has sufficient recent and relevant skills and experience, in particular, one member having a background as a chartered accountant.
Role and Responsibilities
The primary role and responsibilities of the Audit Committee are outlined in the Audit Committee's terms of reference, available at the registered office, including:
Monitoring the integrity of the consolidated financial statements of the Group and any formal announcements relating to the Group's financial performance, and reviewing significant financial reporting judgements contained within said statements and announcements;
Reviewing the Group's internal financial controls, and the Group's internal control and risk management systems;
Monitoring the need for an internal audit function annually;
Monitoring and reviewing the scope, independence, objectivity and effectiveness of the external Auditors, taking into consideration relevant regulatory and professional requirements;
Making recommendations to the Board in relation to the appointment, re-appointment and removal of the external Auditors and approving their remuneration and terms of engagement, which in turn can be placed before the shareholders for their approval at the AGM;
Development and implementation of the Group's policy on the provision of non-audit services by the external Auditors, as appropriate;
Reviewing the arrangements in place to enable Directors and staff of service providers to, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters insofar as they may affect the Group;
Providing advice to the Board on whether the consolidated financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's performance, business model and strategy; and
Reporting to the Board on how the Committee discharged all relevant responsibilities at each Board meeting.
Financial Reporting
The primary role of the Audit Committee in relation to the financial reporting is to review with the Administrator, Investment Manager and the Auditors the appropriateness of the Annual Report and Audited Consolidated Financial Statements and Interim Condensed 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 Auditors;
Whether the Annual Report and Audited Consolidated Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for the shareholders to assess the Group's performance, business model and strategy; and
Any correspondence from regulators in relation to the Group's financial reporting.
To aid its review, the Audit Committee considers reports from the Administrator and Investment Manager and also reports from the Auditors on the outcomes of their half-year review and annual audit. The Audit Committee supports PricewaterhouseCoopers CI LLP in displaying the necessary professional scepticism their role requires.
The Audit Committee met three times during the year under review; individual attendance of Directors is outlined within the Corporate Governance statement. The main matters discussed at those meetings were:
Review and approval of the annual audit plan of the external Auditors;
Discussion and approval of the fee for the external audit;
Approval of the Annual Report and Audited Consolidated Financial Statements Accounts and discussion of final audit findings document;
Review and approval of the interim review plan of the external Auditors;
Detailed review of the Interim Condensed Consolidated Financial Statements and recommendation for approval by the Board;
Discussion of reports from the external Auditors following their interim review and annual audit;
Assessment of the effectiveness of the Auditors as described below;
Assessment of the independence of the external Auditors;
Review of the Group's key risks and internal controls; and
Consideration of the 2014 UK Corporate Governance Code, Guidance on Audit Committees and other regulatory guidelines, and the subsequent impact upon the Company.
The Committee has also reviewed and considered the whistleblowing policy in place for the Administrator and other service providers, and is satisfied the relevant staff can raise concerns in confidence about possible improprieties in matters of financial reporting or other matters insofar as they may affect the Company.
Annual General Meeting
The Audit Committee Chairman, or other members of the Audit Committee appointed for the purpose, shall attend each AGM of the Company, prepared to respond to any shareholder questions on the Audit Committee's activities.
Internal Audit
The Audit Committee considers at least once a year whether or not there is a need for an internal audit function. Currently, the Audit committee does not consider there to be a need for an internal audit function, given that there are no employees in the Group and all outsourced functions are with parties / administrators who have their own internal controls and procedures. This is evidenced by the internal control reports provided by the providers, which give sufficient assurance that a sound system of internal control is maintained.
Significant Issues in Relation to the Consolidated Financial Statements
During the year, the Audit Committee considered a number of significant issues in respect of the Annual Report and Audited Consolidated Financial Statements. The Audit Committee reviewed the external audit plan at an early stage and concluded that the appropriate areas of audit risk relevant to the Group had been identified and that suitable audit procedures had been put in place to obtain reasonable assurance that the consolidated financial statements as a whole would be free of material misstatements. The table below sets out the Audit Committee's view of the key areas of risk and how they have addressed the issues.
Significant Issues
Actions to Address Issue
Recoverability and impairment to the carrying values of loan investments.
The Audit Committee reviews the investment process of the Investment Manager and Investment Adviser including the controls in place around deal sourcing, investment analysis, due diligence and the role of the Investment Adviser's investment committee and the Investment Manager's Board. The Audit Committee also reviews the controls in place around the effective interest loan models and is notified regularly by the Investment Manager of any changes to underlying assumptions made in the loan models. The Audit Committee receives regular updates on the performance of each loan and discusses whether there are any indicators of impairment with the Investment Manager and Investment Adviser. Formal, detailed impairment reviews are also prepared by the Investment Adviser and Investment Manager which are reviewed at each Audit Committee meeting and the Audit Committee considers whether there are any indicators of impairment.
Risk of fraud or error in revenue recognition
The Audit Committee discusses with the Investment Manager and Investment Adviser the reasons for the changes in key assumptions made in the loan models such as changes to expected drawdown or repayment dates or other amendments to expected cash flows such as changes in interbank rates on floating loans. The Audit Committee ensures that any changes made to the models are justifiable based on the latest available information. A separate income rationalisation which is prepared outside of the detailed loan models is provided to the Board on a quarterly basis as a secondary check on the revenue being recognised in the loan models. This is also reviewed by the Audit Committee and questions raised where appropriate.
Review of External Audit Process Effectiveness
The Audit Committee communicated regularly with the Investment Manager, Investment Adviser and Administrator to obtain a good understanding of the progress and efficiency of the audit process. Similarly, feedback in relation to the efficacy of the Investment Manager, Investment Adviser and other service providers in performing their relevant roles was sought from relevant involved parties, including the audit partner and team. The external Auditor is invited to attend the Audit Committee meetings at which the semi-annual and annual consolidated financial statements are considered, also enabling the Auditors to meet and discuss any matters with the Audit Committee without the presence of the Investment Manager or the Administrator.
During the year, the Audit Committee reviewed the external Auditors' performance, considering a wide variety of factors including:
The quality of service, the Auditors' specialist expertise, the level of audit fee, identification and resolution of any areas of accounting judgement, and quality and timeliness of papers analysing these judgements;
Review of the audit plan presented by the Auditors, and when tabled, the final audit findings report;
Meeting with the Auditors regularly to discuss the various papers and reports in detail;
Furthermore, interviews of appropriate staff in the Investment Manager, Investment Adviser and Administrator to receive feedback on the effectiveness of the audit process from their perspective; and
Compilation of a checklist with which to provide a means to objectively assess the Auditors' performance.
The Audit Committee is satisfied with the Auditors' effectiveness, and therefore does not consider it necessary to require the Auditors to tender for the audit work.
Auditors' Tenure and Objectivity
The Group has developed an audit tender policy which the Board will re-consider after five years from the appointment date of the current Auditor. A review of policy will therefore occur in the second half of 2017, subject to regular reviews by the Board and shareholder approval.
The Group's current Auditors, PricewaterhouseCoopers CI LLP, have acted in this capacity since the Company's inaugural meeting on 22 November 2012. The Committee reviews the Auditors' performance on a regular basis to ensure the Group receives an optimal service. Subject to annual appointment by shareholder approval at the AGM, the appointment of the Auditor is formally reviewed by the Audit Committee on an annual basis. The Auditors are required to rotate the audit partner every five years, and the current partner has been in place since the Company's launch.
PricewaterhouseCoopers CI LLP regularly updates the Audit Committee on the rotation of audit partners, staff, level of fees, details of any relationships between the Auditors, the Group and its loan portfolio, and also provides overall confirmation of its independence and objectivity. There are no contractual obligations that restrict the Group's choice of Auditors.
During the year under review, the Auditors provided the Group with non-audit services in respect reporting accountant work for the Placing Programme. A fee of 40,000 was approved for payment. Any non-audit work would be reviewed by the Audit Committee and approved by the Audit Committee Chairman prior to the Auditors undertaking any work, if the fees are over 12,500. This threshold is reviewed periodically to ensure it is set at an appropriate value.
As a result of its review, the Audit Committee is satisfied that PricewaterhouseCoopers CI LLP is independent of the Group, the Investment Manager and other service providers and recommends the continuing appointment of the Auditors by the Board.
Conclusions in Respect of the Consolidated Financial Statements
The production and the audit of the Annual Report and Audited Consolidated Financial Statements is a comprehensive process requiring input from a number of different contributors. In order to reach a conclusion on whether the Group's consolidated financial statements are fair, balanced and understandable, as required under the UK Code and the AIC Code, the Board has requested that the Audit Committee advise on whether it considers that the Annual Report and Consolidated Financial Statements fulfils these requirements. In outlining its advice, the Audit Committee has considered the following:
The comprehensive documentation that is in place outlining the controls in place for the production of the Annual Report and Audited Consolidated Financial Statements, including the verification processes in place to confirm the factual content;
The detailed reviews undertaken at various stages of the production process by the Investment Manager, Investment Adviser, Administrator, Auditors and the Audit Committee that are intended to ensure consistency and overall balance;
Controls enforced by the Investment Manager, Investment Adviser, Administrator and other third party service providers to ensure complete and accurate financial records and security of the Group's assets; and
The existence and content of a satisfactory control report produced by the Ipes Group that has been reviewed and reported upon by the Administrator's external Auditors to verify the effectiveness of the internal controls of the Administrator, such as the Audit and Assurance Faculty (AAF) Report.
As a result of the work performed, the Audit Committee has concluded that it has acted in accordance with its' terms of reference and has ensured the independence and objectivity of the external Auditors. It has reported to the Board that the Annual Report for the year ended 31 December 2015, 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. The Board's conclusions in this respect are set out in the Statement of Directors' Responsibilities.
The Audit Committee has recommended to the Board that the external auditor is re-appointed.
Statementof Directors'Responsibilities
The Directors are responsible for preparing consolidated financial statements for each financial year which give a true and fair view, in accordance with applicable laws and regulations, of the state of affairs of the Company and of the profit and loss of the Company for that year.
Company law requires the Directors to prepare financial statements for each financial year. The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS"). In preparing the consolidated financial statements, the Directors are required to:
Select suitable accounting policies and apply them consistently;
Make judgments and estimates that are reasonable and prudent;
State whether applicable accounting standards have been followed, subject to any material departures
disclosed and explained in the consolidated financial statements; and
Prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The maintenance and integrity of the Company's website is the responsibility of the Directors; the work conducted by the Auditors does not involve consideration of the maintenance and integrity of the website and, accordingly, the Auditors accept no responsibility for any changes that may have occurred to the consolidated financial statements since they are initially presented on the website. Legislation in Guernsey governing the preparation and dissemination of the consolidated financial statements may differ from legislation in other jurisdictions.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the consolidated financial statements comply with The Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Each of the Directors confirms that, to the best of their knowledge:
They have complied with the above requirements in preparing the consolidated financial statements;
There is no relevant audit information of which the Company's Auditors are unaware;
All Directors have taken the necessary steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the Auditors are aware of said information;
The consolidated financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
The Chairman's Statement, Strategic Report, Investment Manager's Report, Report of the Directors and Corporate Governance Statement include a fair review of the development and the position of the Company and the Group, together with a description of the principal risks and uncertainties that they face.
The UK Code, as adopted through the AIC Code by the Company, also requires Directors to ensure that the Annual Report and Consolidated Financial Statements are fair, balanced and understandable. In order to reach a conclusion on this matter, the Board has requested that the Audit Committee advise on whether it considers that the Annual Report and Consolidated Financial Statements fulfill these requirements. The process by which the Committee has reached these conclusions is set out in the report of the Audit Committee. Furthermore, the Board believes that the disclosures set out within the Annual Report provide the information necessary for shareholders to assess the Company's performance, business model and strategy.
Having taken into account all the matters considered by the Board and brought to the attention of the Board during the year ended 31 December 2015, as outlined in the Corporate Governance Statement, Strategic Report and the Report of the Audit Committee, the Board has concluded that the Annual Report and Audited Consolidated Financial Statements for the year ended 31 December 2015, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.
Independent Auditors' Report to the Members of Starwood European Real Estate Finance Limited
Report on the Financial Statements
We have audited the accompanying consolidated financial statements (the "financial statements") of Starwood European Real Estate Finance Limited which comprise the Consolidated Statement of Financial Position as of 31 December 2015 and the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the year then ended and a summary of significant accounting policies and other explanatory information.
Directors' Responsibility for the Financial Statements
The Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and with the requirements of Guernsey law. The Directors are also 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.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of the Group as of 31 December 2015, and of the financial performance and cash flows of the Group for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and have been properly prepared in accordance with the requirements of The Companies (Guernsey) Law, 2008.
Report on other Legal and Regulatory Requirements
We read the other information contained in the Annual Report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. The other information comprises the other items listed in the Index to the Annual Report.
In our opinion:
the information given in the Report of the Directors is consistent with the financial statements.
the information given in the Corporate Governance Statement with respect to internal control and risk management systems is consistent with the financial statements.
Thisreport,includingtheopinion,hasbeenpreparedforandonlyfortheCompany's membersasabodyin accordancewithSection262ofTheCompanies (Guernsey)Law, 2008andfornootherpurpose.Wedonot, ingivingthisopinion,acceptorassumeresponsibilityforanyotherpurposeortoanyotherpersontowhom thisreportisshownorintowhosehandsitmaycomesavewhereexpressly agreedbyourpriorconsentin writing.
Matters on which we are required to Report by Exception
We have nothing to report in respect of the following matters which we are required to review under the Listing Rules:
the Directors' statement in relation to going concern. As noted in the Directors' statement, the Directors have concluded that it is appropriate to adopt the going concern basis in preparing the financial statements. The going concern basis presumes that the Company has adequate resources to remain in operation, and that the Directors intend it to do so, for at least one year from the date the financial statements were signed. As part of our audit we have concluded that the Directors' use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Company's ability to continue as a going concern;
the Directors' statement that they have carried out a robust assessment of the principal risks facing the Company and the Directors' statement in relation to the longer-term viability of the Company. Our review was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors' process supporting their statements; checking that the statements are in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statements are consistent with the knowledge acquired by us in the course of performing our audit;
the part of the Corporate Governance Statement relating to the Company's compliance with the ten further provisions of the UK Corporate Governance Code specified for our review; and
certain elements of the report to shareholders by the Board on Directors' remuneration.
Other Matter
As explained in note 22 to the financial statements, in addition to our responsibility to audit and express an opinion on the financial statements in accordance with International Standards on Auditing and Guernsey law, we have been requested by the Directors to express an opinion on the financial statements in accordance with auditing standards generally accepted in the United States of America as issued by the AICPA, in order to meet the requirements of Rule 206(4)-2 under the Investment Advisors Act (the "Custody Rule"). We have reported separately in this respect.
Independent Auditors' Report to the Members of Starwood European Real Estate Finance Limited
We have audited the accompanying consolidated financial statements of Starwood European Real Estate Finance Limited and its subsidiaries (the "Group"), which comprise the Consolidated Statement of Financial Position as of 31 December 2015 and the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the year then ended.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the European Union; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Starwood European Real Estate Finance Limited and its subsidiaries at 31 December 2015, and the results of their operations, changes in their net assets, and their cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union.
Other Matter
Ourauditwasconductedforthe purpose offorminganopinionontheconsolidatedfinancialstatementstaken asawhole. TheotheritemslistedintheIndextotheAnnualReportarepresentedforpurposesofadditional analysis andarenotarequiredpartoftheconsolidatedfinancialstatements. Theinformationisthe responsibilityofmanagementandwasderivedfromand relatesdirectlytothe underlyingaccountingandother recordsusedtopreparethefinancial statements. Theinformationhasbeensubjectedtotheauditing proceduresappliedintheauditofthefinancialstatementsandcertainadditional procedures,including comparingandreconcilingsuchinformationdirectlytotheunderlying accountingandotherrecordsusedto preparethefinancialstatementsortothefinancialstatementsthemselves andotheradditionalprocedures,in accordancewithauditingstandardsgenerally acceptedintheUnitedStatesofAmerica. Inouropinion,the informationisfairlystated,inall materialrespects,inrelationtothe consolidatedfinancialstatementstakenas awhole.
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2015
1 January 2015 to
1 January 2014 to
31 December 2015
31 December 2014
Notes
Income
Income from loans advanced
11
22,716,523
16,050,220
Income from cash and cash equivalents
34,262
130,311
Other income
9,307
-
Total income
22,760,092
16,180,531
Expenses
Investment management fees
23
1,976,640
1,528,333
Directors' fees and travel expenses
4, 23
138,841
115,283
Administration fees
3(c)
249,599
220,999
Auditors' fees
5
135,882
157,619
Broker's fees
3(e)
47,802
97,736
Legal and professional fees
151,158
112,691
Net foreign exchange losses / (gains)
6
443,435
(881,125)
Revolving credit facility commitment fees
275,741
25,278
Revolving credit facility expenses amortisation
230,662
16,990
Revolving credit facility interest
226,964
-
Other expenses
125,844
140,908
Total operating expenses
4,002,568
1,534,712
Operating profit for the year before tax
18,757,524
14,645,819
Taxation
21
2,439
2,662
Operating profit for the year and total comprehensive income
18,755,085
14,643,157
Weighted average number of shares in issue
7
259,548,110
238,100,000
Basic and diluted earnings per Ordinary Share (pence)
7
7.23
6.15
Consolidated Statement of Financial Position
as at 31 December 2015
As at
As at
31 December 2015
31 December 2014
Notes
Assets
Cash and cash equivalents
8
520,558
13,172,978
Other receivables and prepayments
9
95,684
31,962
Revolving credit facility capitalised costs
10
212,348
443,010
Loans advanced
11
307,694,827
220,954,400
Financial assets at fair value through profit or loss
12
5,918,115
5,023,584
Total assets
314,441,532
239,625,934
Liabilities
Revolving credit facility
13
8,162,405
-
Trade and other payables
14
806,083
1,341,518
Total liabilities
8,968,488
1,341,518
Net assets
305,473,044
238,284,416
Capital and reserves
Share capital
300,397,205
233,843,162
Retained earnings
5,075,839
4,441,254
Total equity
305,473,044
238,284,416
Number of Ordinary Shares in issue
304,180,000
238,100,000
Net asset value per Ordinary Share (pence)
100.43
100.08
These consolidated financial statements were approved and authorised for issue by the Board of Directors on 17 March 2016
Consolidated Statement of Changes in Equity
for the year ended 31 December 2015
Year ended 31 December 2015
Share capital
Retained earnings
Total Equity
Balance at 1 January 2015
233,843,162
4,441,254
238,284,416
Issue of share capital
67,971,650
-
67,971,650
Cost of issues
(1,417,607)
-
(1,417,607)
Dividends paid
-
(18,120,500)
(18,120,500)
Operating profit and total comprehensive income
-
18,755,085
18,755,085
Balance at 31 December 2015
300,397,205
5,075,839
305,473,044
Year ended 31 December 2014
Share capital
Retained earnings
Total Equity
Balance at 1 January 2014
233,843,162
2,179,297
236,022,459
Dividends paid
-
(12,381,200)
(12,381,200)
Operating profit and total comprehensive income
-
14,643,157
14,643,157
-
Balance at 31 December 2014
233,843,162
4,441,254
238,284,416
Consolidated Statement of Cash Flows
for the year ended 31 December 2015
1 January 2015 to
1 January 2014 to
31 December 2015
31 December 2014
Operating activities:
Operating profit for the year and total comprehensive income
18,755,085
14,643,157
Adjustments
Net interest income
(22,716,523)
(16,050,220)
Interest income on cash and cash equivalents
(34,262)
(130,311)
(Increase) / decrease in prepayments and receivables
(63,722)
246,776
Increase in trade and other payables
28,869
197,394
Net gain on financial instruments held at fair value through profit or loss
(894,531)
(4,936,404)
Net foreign exchange losses
3,239,456
3,689,527
Revolving credit facility interest
226,964
-
Revolving credit facility expenses amortisation
230,662
16,990
Revolving credit facility commitment fees
275,741
-
Other non-cash items
-
(205,237)
(952,261)
(2,528,328)
Loans advanced 1
(145,454,076)
(115,070,574)
Loans repaid
63,499,033
49,981,644
Origination fees paid
(1,372,444)
(646,574)
Origination expenses paid
(97,194)
(5,454)
Interest, commitment and exit fee income from loans advanced
16,022,619
14,468,574
Syndication expenses paid
(133,200)
(180,690)
Net cash outflow from operating activities
(68,487,523)
(53,981,402)
Cash flows from investing activities
Interest income from cash and cash equivalents
34,262
139,043
Net cash inflow from investing activities
34,262
139,043
Cash flows from financing activities
Net share issue proceeds received 2
66,554,043
-
Revolving credit facility expenses paid
-
(315,064)
Revolving credit facility utilised
8,155,816
-
Revolving credit facility interest paid
(220,375)
-
Revolving credit facility commitment fees
(280,470)
-
Dividends paid
(18,120,500)
(12,381,200)
Net cash inflow from financing activities
56,088,514
(12,696,264)
Net decrease in cash and cash equivalents
(12,364,747)
(66,538,623)
Cash and cash equivalents at the start of the year
13,172,978
79,706,084
Net foreign exchange (loss) / gain on cash and cash equivalents
(287,673)
5,517
Cash and cash equivalents at the end of the year
520,558
13,172,978
1
Net of arrangement fees of 1,479,139 (2014: 2,184,680) withheld.
2
Net of share issue costs of 1,057,802 (2014: nil) withheld.
Notes to the Consolidated Financial Statements
for the year ended 31 December 2015
1. General Information
StarwoodEuropeanRealEstateFinanceLimited("theCompany")wasincorporatedwithlimitedliabilityin Guernsey undertheCompanies(Guernsey) Law,2008,asamended,on9November2012with registerednumber55836,andhasbeenauthorisedbytheGFSCasanauthorised closed-ended investmentcompany.TheregisteredofficeandprincipalplaceofbusinessoftheCompany is1,Royal Plaza,RoyalAvenue,StPeterPort,Guernsey,ChannelIslands,GY12HL.
On12December2012,theCompanyannouncedtheresultsofitsIPO,whichraisednetproceedsof 223.9million.TheCompany'sOrdinaryShareswereadmittedtothe premiumsegment ofthe UKListing Authority'sOfficialListandtotradingontheMainMarketoftheLondonStock ExchangeaspartofitsIPO which completedon17December2012.Afurther9.9millionofnetproceedswasraisedviatapissues throughouttheperiodended31December2013. On3July2015theCompanyissued23,780,000 OrdinarySharesandon24September201542,300,000OrdinarySharesandreceivednetproceedsof 24.2millionand42.4millionrespectively.
Theconsolidated financialstatementscomprisethefinancialstatementsoftheCompany,StarfinPublic GPLimited(the"GP"),StarfinPublicLP(the"Partnership")and StarfinLuxS..r.l("Luxco")(together"the Group")asat31December2015.
The Company'sinvestment objectiveis to provideits shareholderswith regulardividendsand an attractivetotalreturnwhilelimitingdownsiderisk,throughtheorigination, execution,acquisitionand servicingofadiversifiedportfolioofrealestatedebtinvestments(including debtinstruments)intheUK andwiderEuropeanUnion'sinternalmarket.Topursueitsinvestmentobjective,theCompany, through thePartnership,investsintheLuxcothroughbothequityandprofitparticipationinstrumentsorother fundinginstruments.TheLuxcothengrantsoracquireloans(orotherdebtinstruments)toborrowers in accordancewiththeGroup'sinvestmentpolicy.Someinvestmentsmaybemadeviaspecialpurpose vehicleswhollyownedbytheLuxcoorthe Company.TheGroupexpects allofitsinvestmentstobedebt obligationsofcorporateentitiesdomiciledorwithsignificantoperationsintheUnitedKingdomandwider EuropeanUnion'sinternalmarket.
TheCompanyhasappointedStarwood EuropeanFinancePartnersLimitedastheInvestmentManager ("theInvestmentManager"),acompanyincorporatedinGuernsey andregulatedbytheGFSC.The InvestmentManagerhasappointedStarwoodCapitalEuropeAdvisers,LLP("theInvestmentAdviser"), anEnglishlimitedliabilitypartnershipauthorisedandregulatedbytheFinancialConductAuthority,to provideinvestmentadvicepursuanttoanInvestmentAdvisoryAgreement.Theadministrationofthe CompanyisdelegatedtoIpes(Guernsey)Limited("theAdministrator").
2. Basis of Preparation and Principal Accounting Policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to the year presented, unless otherwise stated.
a)GoingConcern
Note18includestheGroup'sobjectives, policiesandprocessesformangingitscapital,itsfinancialrisk managementobjectives,detailsoffinancialinstrumentsandexposuretocreditriskandliquidityrisk.The directorshaveundertakenarigorousreviewoftheGroup'sabilitytocontinueasagoingconcern includingreviewingthe on-goingcashflowsand the levelofcash balancesandavailableliquidityfacilities asofthereportingdateaswellastakingforecastsoffuturecashflowsintoconsideration.
AftermakingenquiriesoftheInvestmentManagerandtheAdministrator,theDirectorshaveareasonable expectationthattheGrouphasadequateresourcestocontinueinoperational existenceforatleastone yearfromthe datethe consolidatedfinancialstatementsweresigned.Accordingly,theDirectorscontinue toadoptagoingconcernbasisinpreparingtheseconsolidatedfinancialstatements.
b) Statement of compliance
TheCompanyhasprepareditsconsolidatedfinancialstatementsinaccordancewithTheCompanies (Guernsey)Law,2008(asamended)andInternationalFinancialReporting Standardsasadoptedbythe EuropeanUnion("IFRS"),whichcomprisestandardsandinterpretationsapprovedbytheInternational AccountingStandardsBoards("IASB")togetherwiththeinterpretations oftheIFRSInterpretations Committee("IFRIC")asapprovedbytheInternational AccountingStandardsCommittee("IASC")which remainineffect.TheDirectorsoftheCompany havetakentheexemptioninSection244ofThe Companies(Guernsey)Law,2008(asamended)andhavethereforeelectedtoonlyprepareconsolidated financialstatementsfortheyear.
Standards,AmendmentsandInterpretationsinissueandeffectiveonorafter1January2016:
New standards
Effective date
IFRS 9 Financial Instruments - Classifications and Measurement
1 January 2018
IFRS 15 Financial Instruments - Revenue from Contracts from Customers
1 January 2018
Revised and amended standards
IAS 1 Presentation of Financial Statements (amendments resulting from disclosure initiative)
1 January 2016
IFRS 7 Financial Instruments - Disclosures (amendments resulting from September 2014 Annual improvements to IFRSs)
1 January 2016
Unless stated otherwise the Directors do not consider the changes will have a material impact.
c) Basis of preparation
Theseconsolidated financialstatementshavebeenpreparedonagoingconcernbasisandunderthe historicalcostconventionasmodifiedbytherevaluationofcertainassetsandliabilitiestofairvalue.
Criticalaccountingjudgementsandkeysourcesofestimationuncertainty
Thepreparation offinancialstatementsinconformitywithIFRSrequirestheuseofcertaincritical accounting estimates.Italsorequiresmanagementtoexerciseitsjudgementintheprocessofapplying theGroup'saccountingpolicies.Theareasinvolvingahigherdegreeofjudgementorcomplexity,or areaswhereassumptionsandestimatesaresignificanttotheconsolidatedfinancialstatementsrelateto:
theimpairmentoffinancialassetsheldasloansadvanced,thekeyareaofjudgementbeing,asto whetherthereisanyindicationthataloanmaybeimpaired(seenote2(h));
thefunctionalcurrencyofsubsidiaryundertakingsoftheCompany,whichisconsideredbythe
o DirectorstobeSterling(seenotes2(e)and2(k));
theoperatingsegments,ofwhichtheDirectorsarecurrentlyoftheopinionthattheCompanyandits subsidiaries areengagedinasinglesegmentofbusiness,whichisbasedontheloansadvancedas atthereportingdate(seenote2(f));and
thereceiptofandestimatedtimingofscheduledandunscheduledpre-paymentsofloansadvanced andtheimpactonliquidityriskandtheinterestincome(seenote18);and
thesyndicationofloans,andtheassessmentofhowthesyndicated facilityshouldbetreatedunder therelevantaccountingstandards.Thekeyareaofjudgementbeingwhethersubstantiallyallofthe risksandrewardsofownershiphave transferredtothetransfereeand whetherthe syndicatedloanis derecognisedornot(seenote2(g)).
d) Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiary undertakings) made up to the Consolidated Statement of Financial Position date. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits directly from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls another entity. The Company also assesses existence of control where it does not have more than 50 per cent of the voting power but is able to govern the financial and operating policies by virtue of de-facto control.
Dateof
Ownership
Countryof
Principalplaceof
Subsidiaryundertakings
Control
%
Establishment
business
StarfinPublicGPLimited
20/11/12
100
Guernsey
Guernsey
StarfinPublicLP
22/11/12
100
Guernsey
Guernsey
StarfinLuxS..r.l
30/11/12
100
Luxembourg
Luxembourg
SubsidiaryundertakingsarefullyconsolidatedfromthedateonwhichcontrolistransferredtotheGroup. Theyarede-consolidatedfromthedatethatcontrolceases.
TheGroupappliestheacquisitionmethodtoaccountforbusinesscombinations.
Acquisition-relatedcostsareexpensedasincurredunlessdirectlyattributabletotheacquisition.No consideration, otherthanfortheparvalueofanysharecapitalorcapitalcontributions, hasbeenpaidin respectoftheacquisitionofsubsidiaryundertakings.TheCompanyacquired thesubsidiariesatthetime oftheirinitialestablishmentandhencetheyhadnonetassetsatthedateoftheacquisition.
Intercompany transactions, balances, income and expenses on transactions between Group companies are eliminated on consolidation. Profits and losses resulting from intercompany transactions that are recognised in assets are also eliminated.
e) Functional and presentation currency
ItemsincludedinthefinancialstatementsofeachoftheGroup'sentitiesaremeasuredusingthe currencyoftheprimaryeconomicenvironmentinwhichtheentityoperates("thefunctionalcurrency"). ThereforetheDirectorshaveconsideredinassessingthefunctionalcurrencyofeachoftheGroup's entities:
the share capital of all members of the Group is denominated in Sterling;
the dividends are paid in Sterling;
the majority of loans advanced are denominated in Sterling; and
Euro non-investment transactions represent only a small proportion of transactions in the
Luxembourg entity.
Thefunctionalandpresentation currencyofeachGroupentityisSterling.TheDirectorshavealso adopted Sterling as the Group's presentation currency and therefore the consolidated financial statementsfortheCompanyarepresentedinSterling.
f) Segment reporting
Operatingsegmentsarereportedinamannerconsistentwiththeinternalreporting providedto thechief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resourcesandassessingperformanceoftheoperatingsegments,hasbeenidentifiedastheBoard,as theBoardmakesstrategicdecisions.TheDirectors,afterhavingconsideredthewayinwhichinternal reportingisprovided tothem,areoftheopinionthattheCompany anditssubsidiariesareengagedina singlesegmentofbusiness,beingtheprovisionofadiversifiedportfolioofrealestatebackedloans. Equally,basedontheinternalreportingprovided,theDirectorsdonotanalysetheportfoliobasedon geographicalsegments.
g) Financial assets
Classification
TheGroupclassifiesitsfinancialassetsinthefollowing categories:atfairvaluethroughprofitorloss, loansandreceivables,andavailable forsale.Theclassificationdependsonthepurposeforwhichthe financialassetswereacquired.Management determinestheclassification ofitsfinancialassetsatinitial recognition.
Financialassetsatfairvaluethroughprofitorloss
Financialassetsatfairvaluethroughprofitorlosscomprisederivativesnotdesignatedashedges.
Loansandreceivables
Loansandreceivablesarenon-derivative financialassetswithfixedordeterminablepaymentsthatare notquotedinanactivemarket.TheGroup'sloansandreceivables comprisesecuredloansadvanced, tradeandotherreceivablesandcashandcashequivalents.
Available-for-salefinancialassets
Available-for-sale financialassetsarenon-derivativesthatareeitherdesignatedinthiscategoryornot classifiedinany oftheothercategories.Theyareincluded innon-currentassetsunlesstheinvestment maturesormanagementintendstodisposeofitwithin12monthsoftheendofthereportingperiod.
Recognition andmeasurement
Regularpurchasesandsalesoffinancialassetsarerecognisedonthetradedate,thedateonwhichthe Groupcommitstopurchaseorselltheasset.Investmentsareinitiallyrecognisedatfairvalueplus transactioncostsforallfinancialassetsnotcarriedatfairvaluethroughprofitorloss.Financial assets carriedatfairvaluethroughprofitorlossareinitially recognisedatfairvalue,andtransactioncostsare expensedintheConsolidated StatementofComprehensiveIncome.Financialassetsarederecognised whentherightstoreceivecashflowsfromtheinvestmentshaveexpiredorhavebeentransferredand theGrouphastransferredsubstantiallyallrisksandrewardsofownership.Available-for-salefinancial assetsandfinancialassetsatfairvaluethroughprofitorlossaresubsequentlycarriedatfairvalue.Loans andreceivablesaresubsequently carriedatamortisedcostusingtheeffectiveinterestmethodless provisionsforanyimpairments.
Loansyndication
Loansandreceivablesmeasuredatamortisedcostarederecognisedfollowingsyndicationiftherisks andrewardsofownershiphavesubstantially transferredtothecounterparty. Transactioncostsof syndicationsarerecognisedintheConsolidatedStatementofComprehensiveIncomewhenincurred.
h)Impairmentoffinancialassets
Impairments for specific bad and doubtful debts are made against loans and receivables, by an evaluationoftheexposureonacase-by-casebasis.Anassessmentismade,onaquarterlybasis,asto whetherthereisanyindication thataloanmaybeimpaired;ifanysuchindication existsandwherethe carrying valueexceedstheestimatedrecoverable amountbasedonrevisedfuturecashflows,theloan willbereducedbytheestimatedimpairmentloss.Theimpairmentlossiscalculated asthedifference betweenthepresentvalueoffuturecashflows,discountedattheloan'soriginaleffectiveinterestrate, andtheloan'scurrentcarryingvalue.Theamountofanyimpairmentloss,ifany,wouldberecordedinthe ConsolidatedStatementofComprehensiveIncome.Noimpairmenthasbeenrecognisedtodate.
i)Cashandcashequivalents
IntheConsolidatedStatementofCashFlows,cash andcash equivalentsincludescash inhand,deposits heldatcallwithbanksandothershort-termhighlyliquidinvestmentswithoriginalmaturitiesofthree monthsorless.
j) Sharecapital
OrdinarySharesareclassifiedasequity.Incrementalcostsdirectlyattributabletotheissueofnew
OrdinarySharesareshowninequityasadeduction,netoftax,fromtheproceeds.
k) Foreigncurrencytranslation
Transactionsandbalances
Foreigncurrency transactionsaretranslatedintothefunctionalcurrencyusingtheexchangerates prevailing atthedatesofthetransactionsorvaluationwhereitemsarere-measured.Foreignexchange gainsandlossesresultingfromthesettlementofsuchtransactionsandfromthetranslation atyear-end exchangeratesofmonetaryassetsandliabilitiesdenominatedinforeigncurrenciesarerecognisedinthe ConsolidatedStatementofComprehensiveIncome.Foreignexchangegainsandlossesthatrelateto borrowingsand cash and cash equivalentsand all other foreign exchange gains and losses are presentedintheConsolidated StatementofComprehensiveIncomewithin"netforeignexchange gains/(losses)".
Groupcompanies
The results and financial position of all the Group entities that have a functional currency different from the presentation currency of the Group are translated into the presentation currency of the Group as follows:
i. ii.
assetsandliabilities foreachStatementofFinancialPositionpresentedaretranslatedattheclosing rateatthedateofthatStatementofFinancialPosition;
incomeandexpensesforeachStatementofComprehensive Incomearetranslatedataverage exchangerates(unlessthisaverageisnot areasonableapproximationofthe cumulativeeffectofthe ratesprevailing onthetransactiondates,inwhichcaseincomeandexpensesaretranslatedatthe rateonthedatesofthetransactions);and
None of the Group entities have a functional currency different to their presentation currency.
l) Interest income
Interestincomeonloansadvanced isrecognisedusingtheeffectiveinterestratemethod.Ifaloanand receivableisimpaired,theGroupreducesthecarrying amounttoitsrecoverable amount,beingthe estimatedfuturecashflowdiscounted attheoriginal effectiveinterestrateoftheinstrument,and continuesunwindingthediscountasinterestincome.Interestincomeonimpairedloansandreceivables isrecognisedusingtheoriginaleffectiveinterestratetotheextentthattheGroupexpectstorecoverthe interestreceivable.
Interestoncashandcashequivalentsisrecognisedonanaccrualsbasis.
m) Origination, exit and loan arrangement fees
OriginationfeespaidtotheInvestmentManagerandexitanddirectloanarrangementfeesreceivedwill berecognisedusingtheeffectiveinterestratemethodunderloansadvancedandamortisedoverthe lifetimeoftherelatedfinancialassetthroughincomefromloansadvancedintheConsolidatedStatement ofComprehensiveIncome.Syndication costsarerecognisedintheConsolidatedStatementof ComprehensiveIncomewhenincurred.
n) Expenses
Allotherexpensesareincludedinthe ConsolidatedStatementofComprehensiveIncomeonanaccruals basis.
o) Taxation
TheCompanyisatax-exemptGuernseylimitedliabilitycompanyasitisdomiciledandregisteredfor taxationpurposesinGuernseywhereitpaysanannualexemptstatusfeeunderTheIncomeTax (ExemptBodies)(Guernsey)Ordinances1989(asamended). Accordingly,noprovisionforGuernseytax ismade.
ThePartnershipistransparentforbothGuernsey andLuxembourgtaxpurposes,andthereforeno provisionfortaxeshasbeenmade.
TheLuxcoissubjecttotheapplicable generaltaxregulationsinLuxembourgandtaxationisprovided basedontheresultsfortheyear(seenote21).
p) Other receivables
Tradeandotherreceivables areamountsdueintheordinarycourseofbusiness.Theyareclassifiedas assets.Tradeandotherreceivablesarerecognisedinitiallyatfairvalueandsubsequentlymeasuredat amortisedcostusingtheeffectiveinterestmethod,lessprovisionforimpairment.
q) Other payables
Tradeandotherpayablesareobligationstopayforservicesthathavebeenacquiredintheordinary courseofbusiness.Theyareclassifiedasliabilities.Tradeandotherpayablesarerecognisedinitiallyat fairvalueandsubsequentlymeasuredatamortisedcostusingtheeffectiveinterestratemethod.
r) Dividend distributions
DividenddistributionstotheCompany'sshareholdersarerecognisedasaliabilityintheCompany's financialstatementsintheperiodinwhichthedividendsaredeclaredbytheBoardofDirectors.
s) Offsetting financial assets and liabilities
Financialassetsandliabilities areoffsetandthenetamountreportedontheConsolidatedStatementof FinancialPositionwhenthereisalegallyenforceable righttooffsettherecognisedamountsandthereis anintentiontosettleonanetbasisorrealisetheassetandsettletheliabilitysimultaneously.
t) Financial liabilities
Financialliabilities,includingbankloansareinitiallyrecognisedatfairvalueandsubsequentlyaccounted for with interest on an accruals basis. Financial liabilitiesare derecognisedwhen the contractual obligationisdischarged,cancelledorexpires.
3. Material Agreements
a) Investment management agreement
TheCompany andtheInvestmentManagerhaveenteredintoaninvestmentmanagementagreement, dated28November2012(the"InvestmentManagement Agreement"),pursuanttowhichtheInvestment ManagerhasbeengivenoverallresponsibilityforthediscretionarymanagementoftheCompany'sassets (includinguninvestedcash)inaccordancewiththeCompany'sinvestmentobjectivesandpolicy.
TheInvestmentManagerisentitledtoamanagementfeewhichiscalculated andaccruedmonthlyata rateequivalentto0.75percentperannumofNAV(excludinganycashbalancesuntilsuchtimeas75 percentoftheNetIssueProceedsareinvested.TheCompanyandInvestmentManageragreedto increasethe75percentthresholdto90percentduringtheprioryear.The90percentthreshold was reachedinMay2014).Themanagementfeeispayablequarterlyinarrears.
Inaddition,theInvestmentManagerisentitledtoanassetoriginationfeeof0.75percentofthevalueof allnewloaninvestmentsmadeoracquiredbytheGroup(seenote23).Theassetorigination feetobe paidbytheGroupisexpectedtobepaiduponreceiptbytheGroupofloanarrangementfeesreceivedon thedeploymentoftheGroup'sfunds.
TheInvestmentManagementAgreementisterminablebyeithertheInvestmentManageror theCompany givingtotheothernotlessthan12months'writtennotice,suchnoticenottobegiven beforethefourth anniversaryofAdmission(17December2016).
TheInvestmentManagerhasappointed StarwoodCapitalEuropeAdvisers,LLP("theInvestment Adviser"),anEnglishlimitedliability partnershipauthorisedandregulatedbytheFinancialConduct Authority,toprovideinvestmentadvicepursuanttoanInvestmentAdvisoryAgreement.
b) Partnership agreement
AspertheAmendedandRestatedLimitedPartnershipAgreementrelatingtoStarfinPublicLP,dated 28 November2012,theCompanycommitssubstantiallyallofthenetissueproceedsplusproceedsfrom subsequenttapissuestothePartnership.Thatcommitmentisdrawndownasrequiredbythe GPforthe fundingofinvestments.0.01percentoftheCompany's commitmentwaspaidasacapitalcontribution shortlyafteradmissiontotradingontheLondon StockExchange ("Admission")andthebalance of99.99 percent,iscommittedandispaidoverwhenrequestedbytheGP.
EachamountofincomeandcapitalproceedsreceivedbythePartnershipwillbedistributedinthe followingorderofpriority:
First, to the GP until the GP has received distributions equal to the GP's Share, the GP will be entitled to receive and there will be allocated to the GP in each accounting period a sum of 1,000;
Second, to the extent of any excess, to the Company until the Company has achieved the hurdle total return; and
Third, 20 per cent of the excess to Starfin Carry LP ("the Special Limited Partner") and 80 per cent of the excess to the Company.
ThehurdletotalreturnwillbeachievedwhentheNAVoftheCompany,plusthetotalofalldividends declaredandpaidtoordinaryshareholders,isequaltotheNAVoftheCompanyasatAdmissionas increasedby8percentperannum,onasimpleinterestbasis(butexcluding actualcarriedinterest accruedanddeemedasacreditorontheStatementofFinancialPosition). Totheextentthatthe CompanymakesfurtherissuesofOrdinaryShares,the hurdletotalreturnwillbeadjustedaccordingly,by referencetotheissuepricesofsuchfurtherissuesanddividendsdeclaredsubsequenttosuchissues.
c)Administrationagreement
TheCompanyhasengagedtheservicesofIpes(Guernsey)Limited("theAdministrator")toactasAdministratorandCompanySecretary.Undertheterms of the administrationagreementdated28 November2012,theAdministratorisentitledtoafeeofnolessthan135,000 perannumwithan additionalamountchargeableof0.035percentperannumontheamountbywhichtheCompany'sNAV exceeds140millionandfurtheramountsasmaybeagreedinrelationtoanyadditional services providedbytheAdministrator.TheAdministratoris,inaddition,entitled torecoverthirdparty expenses anddisbursements.
d)Registrar'sagreement
TheCompanyandComputershareInvestorServices(Guernsey) Limited("theRegistrar")enteredintoa Registraragreementdated28November2012,pursuanttowhichtheCompany appointedtheRegistrar toactasRegistraroftheCompanyforaminimumannualfeepayablebytheCompanyof7,500in respectofbasicregistration.
e)IPOSponsor'sandplacingagreement
InconnectionwiththeIPO,theCompanyengagedtheservicesofDexionCapitalplc("Dexion")and JefferiesInternationalLimited("Jefferies")(collectively"theJointBookrunners")toactasjointglobalco- ordinators, bookrunners,placementagents,arrangersandsponsorsinconnection withtheissueofthe OrdinaryShares("theIssue")andtheapplicationforAdmission.
ThetotalexpensesoftheIssuepaidbytheCompany (includingcustomarycommissionsandexpenses payable totheJointBookrunners,certainfees,costsandexpensesofStarwoodCapitalGroup Management,LLCanditsaffiliates("Starwood")) relatingtotheestablishmentoftheCompanyandthe feesofallotheradvisersandservicesproviderstotheCompanyandtheJointBookrunnerswereequalto 2percentofthegrossSterlingproceedsoftheIssueandwerecappedatthislevel.
On5February2013, theCompanyappointedDexion andJefferiesasjointBrokerstotheGroup.Dexion andJefferiesareeachentitled toreceiveafeeof50,000 perannumplusexpenses.On24June2015, theCompanyterminateditsagreenentwithJefferies.
On7September2015,theCompany enteredintoaPlacingProgrammeAgreementwithDexionandis subjecttoamaximumaggregatecommissionpayabletoDexionof2percentofgrossproceedsraised. Aspartofthisagreementthe50,000annualfeeisoffsetagainstanycommissionearned.
ThePlacingProgrammeAgreementisgovernedbythelawsofEnglandandWales.
f) Licenceagreement
TheCompanyandStarwoodCapital GroupManagement,LLC("theLicensor")haveenteredintoatrade marklicenceagreementdated28November2012("theLicenceAgreement"),pursuanttowhichthe LicensorhasagreedtogranttotheCompany aroyalty-free,non-exclusiveworldwidelicencefortheuse ofthe"Starwood"nameforthepurposesoftheCompany'sbusiness.
UnderthetermsoftheLicenceAgreement, itmaybeterminatedbytheLicensor;(i)iftheInvestment ManagementAgreementoranyothersimilaragreementbetween theCompanyandtheInvestment Manager(oreither oftheirrespectiveaffiliates)isterminated foranyreasonwhatsoeverorexpires: (ii)if the Companysuffersaninsolvencyeventorbreaches anycourtorder relatingtotheLicenceAgreement; or(iii)upontwomonths'writtennoticewithoutcause.
g)Hedgingagreements
TheCompanyandLloydsBankplcenteredintoaninternationalforwardexchangemasteragreement dated5April2013andon7February 2014theCompanyenteredintoaProfessionalClientAgreement withGoldmanSachs,pursuanttowhichthepartiescanenterintoforeignexchangetransactionswiththe intentionofhedgingagainstfluctuationsintheexchangeratebetweenSterlingandothercurrencies.Both agreementsaregovernedbythelawsofEnglandandWales.
h)Revolvingcreditfacility
On4December2014,theCompany enteredintoa50millionrevolvingcreditfacilitywithamajorUK clearingbankwhichisintendedforshort-termliquidity.Underitsinvestmentpolicy,theCompanyis limitedtoborrowing anamountequivalent toamaximumof20percentofitsNAVatthetimeof drawdown.IncalculatingtheCompany'sborrowingsforthispurpose,anyliabilitiesincurredunderthe Company'sforeignexchangehedgingarrangementsshallbedisregarded.Theinterestratepayable will dependonhowlongtheloanisoutstanding:LIBORplus2.50percentperannumatinitialdrawdownand increasingforloansoutstanding formorethansixmonths.Thefacilityissecuredbyapledgeoverthe bankaccountsoftheCompany,itsinterestsinStarfinPublicLPandtheintercompanyfundingprovided bytheCompanytoStarfinPublicLP. StarfinPublicLPalsoactsasguarantorofthefacilityandhas pledgeditsbankaccountsascollateral.Theundertakingsandeventsofdefaultarecustomaryfora transactionofthisnature.On22December2015,therevolvingcreditfacilitywasincreasedto60million.
4.
Directors' Fees
31 December 2015
31 December 2014
Directors' emoluments
132,500
112,500
Other expenses
6,341
2,783
138,841
115,283
5.
Auditors' Remuneration
31 December 2015
31 December 2014
Audit fees
118,382
140,619
Non-audit fees
17,500
17,000
135,882
157,619
In addition, the Auditors also received 40,000 (2014: nil) for professional services in relation to the Placing Programme. As these fees were directly related to the Placing Pragamme, it was recognised in the Consolidated Statement of Changes in Equity as Cost of Issues. Non-audit fees of 17,500 (2014: 17,000) relate to the Group's interim review of its condensed consolidated financial statements.
6.
Net Foreign Exchange Losses / (Gains)
31 December 2015
31 December 2014
Loans advanced losses (unrealised)
2,951,783
3,689,527
Loans advanced losses (realised)
-
1,239,793
Forward contracts gains (unrealised)
(3,525,752)
(5,036,777)
Forward contracts losses (unrealised)
2,631,221
100,373
Forward contracts gains (realised)
(1,873,801)
(972,722)
Forward contracts losses (realised)
-
141,886
Other
259,984
(43,205)
443,435
(881,125)
7. Earnings Per Share and Net Asset Value Per Share
ThecalculationofbasicearningsperOrdinaryShareisbasedontheoperatingprofitof18,755,085 (2014: 14,643,157)andontheweightedaveragenumberofOrdinarySharesinissueduringtheyearof259,548,110(2014:238,100,000)OrdinaryShares.
ThecalculationofNAVperOrdinaryShareisbasedonaNAVof305,473,044(2014:238,284,416)and theactualnumberofOrdinarySharesinissueat31December2015of304,180,000(2014:238,100,000).
8. Cash and Cash Equivalents
Cashandcashequivalentscomprisethefollowing:
31 December 2015
31 December 2014
Fixed deposits
-
8,194,296
Cash at bank
520,558
4,978,682
520,558
13,172,978
Cash and cash equivalents comprises cash held by the Group and short term deposits held with various banking institutions with original maturities of three months or less. The carrying amount of these assets approximates their fair value. For further information and the associated risks refer to note 18.
9. Other Receivables and Prepayments
Forfurtherinformationonthefairvalueofloansadvanced,refertonote19.
12. Financial Assets at Fair Value through Profit or Loss
Financial assetsatfairvaluethroughprofitorlosscomprisecurrency forwardcontractswhichrepresent contractualobligationstopurchasedomesticcurrencyandsellforeigncurrencyonafuturedateata specifiedprice.Theunderlyinginstrumentsbecomefavourable(assets)orunfavourable(liabilities)asa resultoffluctuations offoreignexchangeratesrelative totheirterms.Theaggregatecontractualor notionalamountofderivativefinancialinstruments,theextenttowhichinstrumentsarefavourableor unfavourable,and thusthe aggregatefairvaluesofderivativefinancialassetsand liabilities,canfluctuate significantlyfromtimetotime.Thefairvalueofderivativeinstrumentsheldaresetoutbelow:
Goldman Sachs:
Notional contract amount 1
Fair values
Assets
Liabilities
Total
31 December 2015
Foreign exchange derivatives
Currency forwards
22,551,503
2,072,414
(87,249)
1,985,165
Total
22,551,503
2,072,414
(87,249)
1,985,165
Lloyds Bank plc:
Notional contract amount 1
Fair values
Assets
Liabilities
Total
31 December 2015
Foreign exchange derivatives
Currency forwards
96,295,877
5,426,435
(1,493,485)
3,932,950
Total
96,295,877
5,426,435
(1,493,485)
3,932,950
Total:
Notional contract amount 1
Fair values
Assets
Liabilities
Total
31 December 2015
Foreign exchange derivatives
Currency forwards
118,847,380
7,498,849
(1,580,734)
5,918,115
Total
118,847,380
7,498,849
(1,580,734)
5,918,115
1 Euro and Danish Krone amounts are translated at the year end exchange rate
Goldman Sachs:
Notional contract amount 1
Fair values
Assets
Liabilities
Total
31 December 2014
Foreign exchange derivatives
Currency forwards
20,952,906
983,938
-
983,938
Total
20,952,906
983,938
-
983,938
Lloyds Bank plc:
Notional contract amount 1
Fair values
Assets
Liabilities
Total
31 December 2014
Foreign exchange derivatives
Currency forwards
52,791,971
4,039,646
-
4,039,646
Total
52,791,971
4,039,646
-
4,039,646
Total:
Notional contract amount 1
Fair values
Assets
Liabilities
Total
31 December 2014
Foreign exchange derivatives
Currency forwards
73,744,877
5,023,584
-
5,023,584
Total
73,744,877
5,023,584
-
5,023,584
1 Euro and Danish Krone amounts are translated at the year end exchange rate
Total financial assets subject to interest rate risk
308,215,385
234,127,378
1Loans advanced at floating rates include loans with interbank rate floors.
If interest rates had changed by 25 basis points, with all other variables remaining constant, the effect on the net profit and equity would have been as shown in the table below:
31 December 2015
31 December 2014
Increase of 25 basis points1
371,451
245,648
Decrease of 25 basis points
(371,451)
(245,648)
1The calculation assumes no interbank rate floors.
19. Fair Value Measurement
FRS13requirestheGrouptoclassifyfairvaluemeasurementsusingafairvaluehierarchythatreflects thesignificanceoftheinputsusedinmakingthemeasurements.Thefairvaluehierarchyhasthe followinglevels:
(i)
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
(ii)
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices including interest rates, yield curves, volatilities, prepayment speeds, credit risks and default rates) or other market corroborated inputs (level 2).
(iii)
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
Thecarryingvaluesoftheassetsandliabilitiesincludedintheabovetableareconsideredtoapproximate theirfairvalues,exceptforloansadvanced. Thefairvalueofloansadvancedhasbeendeterminedby discountingtheexpectedcash flowsusingadiscountedcashflowmodel.For the avoidanceofdoubt,the Groupcarriesitsloansadvancedatamortisedcostintheconsolidatedfinancialstatements.
Cashandcashequivalents includecashathandandfixeddepositsheldwithbanks.Otherreceivables and prepaymentsincludethecontractualamountsand obligationsdue tothe Groupand considerationfor advancepaymentsmade bytheGroup.Trade andotherpayablesrepresentthecontractualamountsand obligationsduebytheGroupforcontractualpayments.
20. Controlling Party
IntheopinionoftheDirectors,onthebasisofshareholdingsadvisedtothem,theCompanyhasno immediateorultimatecontrollingparty.
21. Taxation
TheCompanyisexemptfromGuernseytaxationundertheIncomeTax(ExemptBodies)(Guernsey) Ordinance1989forwhichitpaysanannualfeeof1200.
TheLuxembourgindirectsubsidiaryoftheCompanyissubjecttotheapplicabletaxregulationsinLuxembourg.ThetablebelowanalysesthetaxchargesincurredatLuxembourglevel:
31 December 2015
31 December 2014
Current tax
Current tax on profit for the year
2,439
2,662
Total current tax
2,439
2,662
TheLuxcohadnooperatinggainonordinaryactivitiesbeforetaxationandwasthereforefortheyear ended 31December2015subjecttotheLuxembourgminimumcorporateincometaxationat3,210 (2014:3,210).
22. Reconciliation of IFRS to US GAAP
TomeettherequirementsofRule206(4)-2underthe InvestmentAdvisorsAct1940(the"CustodyRule") theconsolidated financialstatementsoftheCompanyhavealsobeenauditedinaccordancewith Generally AcceptedAuditingStandardsapplicableintheUnitedStates("USGAAS"). Assuchtwo independentAuditors'reportsareincluded,oneunderInternationalStandardson AuditingasrequiredbytheCrownDependenciesAuditRulesandtheotherunderUSGAAS.Compliance withtheCustodyRulealsorequiresareconciliationoftheoperatingprofitandnetassetsunderIFRSto USGAAP.
TheprincipaldifferencesbetweenIFRSandUSGAAPrelatetoaccounting forfinancialassetsthatare carriedatamortisedcost.UnderUSGAAPthecalculation oftheeffectiveinterestrateisbasedon contractualcashflowsovertheasset'scontractuallife.International FinancialReportingStandards, however,basetheeffectiveinterestratecalculationontheestimatedcashflowsoverthe expectedlifeof theasset.
TheDirectorshaveassessedtheoperating profitandNAVoftheCompany andGroupunderbothIFRS andUSGAAPandhaveconcludedthatnomaterialdifferenceswereidentified andthereforeno reconciliationhasbeenpresentedinthesefinancialstatements.
23. Related Party Transactions
Partiesareconsideredtoberelatedifonepartyhastheabilitytocontroltheotherpartyorexercise significantinfluenceovertheotherparty inmakingfinancialoroperational decisions.Detailsonthe InvestmentManagerandotherrelatedparty transactionsareincluded innote3totheconsolidated financialstatements.
Fees,expensesandotherpayments
Outstanding at 31 December 2015
For the year ended 31 December 2015
Directors' fees and expenses paid
Stephen Smith
-
46,250
John Whittle
-
37,500
Jonathan Bridel
-
33,750
Placing programme fees
-
15,000
Expenses paid
-
6,341
Investment Manager
Investment management fees earned
575,154
1,976,640
Origination fees earned
-
946,069
Expenses
18,012
41,754
Hatfield Phillips International 1
Origination expenses
-
50,000
Outstanding at 31 December 2014
For the year ended 31 December 2014
Directors' fees and expenses paid
Stephen Smith
-
45,000
John Whittle
-
35,000
Jonathan Bridel
-
32,500
Expenses paid
-
2,783
Investment Manager
Investment management fees earned
446,949
1,528,333
Origination fees earned
426,375
1,072,949
Expenses
5,216
16,010
StarConsult S..r.l 2
Administrative services
-
8,369
1
Hatfield Phillips International is a subsidiary of Starwood Property Trust.
2
StarConsult S..r.l is a Company managed by Thierry Drinka, who is also a Director of Luxco.
Shareholdings and dividends paid
Dividends paid for the year ended 31 December 2015
As at 31 December 2015
Number of shares
Starwood Property Trust Inc
639,331
9,180,000
SCG Starfin Investor LP
158,808
2,285,000
Stephen Smith
7,566
78,929
John Whittle
572
11,866
Jonathan Bridel
572
11,866
Dividends paid for the year ended 31 December 2014
As at 31 December 2014
Number of shares
Starwood Property Trust Inc
475,280
9,140,000
SCG Starfin Investor LP
118,820
2,285,000
Stephen Smith
2,080
40,000
John Whittle
364
7,000
Jonathan Bridel
364
7,000
Other
TheGroupcontinuestoparticipateinanumberofloansinwhichStarwoodPropertyTrust,Inc. ("STWD") andStarfinEuropean DebtTC,L.P.("StarfinTC")actedasacolender. Thedetailsoftheseloansare showninthetablebelow.
Loan
Related party co-lenders
Lifecare Residences, London
STWD
Salesforce Tower, London
STWD
Centre Point, London
STWD, Starfin TC
Aldgate Tower, London
STWD, Starfin TC
5 Star Hotel, London
Starfin TC
W Hotel, Netherlands
STWD, Starfin TC
Retail Portfolio, Finland
STWD
Starwood CapitalEuropeAdvisers,LLPactsasInvestmentAdvisertoStarwoodEuropeanFinance Partners,theInvestmentManageroftheGroupandStarfinGPLimited,theGeneralPartnerofStarfin TC.On10December2015StarfinTCtransferreditsrightsandobligationsundertheIndustrialPortfolio, NetherlandsloanagreementtotheGroupinconsideration forapayment equaltotheprincipalbalance andaccruedinterestofStarfinTC'sproportionoftheexistingloan,beingtheamount,5,609,131,thatit wouldreceiveiftheexistingloanwererepaidinfullbytheborrower.A fairnessopinionwasreceivedfrom Dexioninrelationtothistransaction.
24. Events After the Reporting Period
Thefollowingnewinvestmentshaveclosedsincetheyearend,uptothedateofpublicationofthisreport:
Sterling equivalent
Hotel, Channel Islands
27.0 million
Residential Portfolio, Dublin
6.2 million
Amounts also continuetobedrawnunderthe outstandingcommitmentsonthe WHotel,AmsterdamandAldgateTowerfacilities.
TheCompanyhasdrawnadditionalfundsontherevolvingcreditfacilityinordertofundthenew investmentsshownabove.At17March201642millionisoutstandingontherevolvingcreditfacility.
Thefollowingloanamortisation(bothscheduledandunscheduled)hasbeenreceivedsincetheyearend uptothedateofpublicationofthisreport:
Sterling equivalent
Salesforce Tower, London
867,607
Retail Portfolio, Finland
354,374
Office, Amsterdam
26,948
5 Star Hotel, London
13,173
Retail & Residential Portfolio, Ireland
52,275
Residential Portfolio, Cork
27,241
Industrial Portfolio, Denmark
1,083,456
Corporate Information
Directors Stephen Smith (Non-executive Chairman) Jonathan Bridel (Non-executive Director) John Whittle (Non-executive Director) (all care of the registered office) Investment Manager Starwood European Finance Partners Limited 1, Royal Plaza, Royal Avenue St Peter Port, Guernsey, GY1 2HL Solicitors to the Company (as to English law and U.S. securities law) Norton Rose LLP 3 More London Riverside London, SE1 2AQ United Kingdom Registrar Computershare Investor Services (Guernsey) Limited 3rd Floor Natwest House Le Truchot St Peter Port Guernsey, GY1 1WD Broker Dexion Capital plc 1 Tudor Street London, EC4Y 0AH United Kingdom Administrator, Designated Manager and Company Secretary Ipes (Guernsey) Limited 1, Royal Plaza, Royal Avenue St Peter Port, Guernsey, GY1 2HL
Registered Office 1, Royal Plaza, Royal Avenue St Peter Port, Guernsey, GY1 2HL Investment Adviser Starwood Capital Europe Advisers, LLP 2nd Floor, One Eagle Place St. James`s London, SW1Y 6AF United Kingdom Advocates to the Company (as to Guernsey law) Mourant Ozannes 1 Le Marchant Street St Peter Port Guernsey, GY1 4HP Independent Auditors PricewaterhouseCoopers CI LLP Royal Bank Place 1 Glategny Esplanade St Peter Port Guernsey, GY1 4ND Principal Bankers Barclays Private Clients International Limited PO Box 41 Le Marchant House St Peter Port Guernsey, GY1 3BE Website: www.starwoodeuropeanfinance.com
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR LLFLEVTITLIR
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