16 NOVEMBER 2018

 

FOR IMMEDIATE RELEASE

 

THE BOARD OF DIRECTORS OF ALCENTRA EUROPEAN FLOATING RATE INCOME FUND LIMITED ANNOUNCES THE INTERIM REPORT AND UNAUDITED CONDENSED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 30 SEPTEMBER 2018.

 

Financial Highlights and Performance Summary

 

Financial Highlights

 

The NAV total return details the change in NAV from the start of the relevant period and assumes that dividends paid to shareholders are reinvested at NAV. The NAV total return since inception achieved by Alcentra European Floating Rate Income Fund Limited (the "Company") was 40.19%, an annualised return of 5.28%.

 

The Company repurchased 6,567,589 Ordinary Shares during the six month period for a total cost of €7,373,974 (£6,585,927) (Year ended 31 March 2018: 11,277,425 Ordinary Shares were repurchased and cancelled during the year for a total cost of €12,739,819 (£11,272,921)). These repurchased Ordinary Shares are being held in treasury.

 

Performance Summary

(In millions, except per share data and the number of Ordinary Shares in issue)	At 30 September 2018	At 31 March 2018
Number of Ordinary Shares in issue	151,765,882	158,333,471
Market capitalisation1
- Ordinary Shares (in Euro)	€171.3	€178.2
- Ordinary Shares (in Sterling)	£152.5	£156.5
Net Asset Value ("NAV") attributable to Sterling shareholders
- Ordinary Shares	€178.3	€188.5
NAV per share attributable to Sterling shareholders
- Ordinary Shares (in Euro)	€1.1746	€1.1905
- Ordinary Shares (in Sterling)	£1.0460	£1.0455
Ordinary Share price (bid price)1
In Euro	€1.1286	€1.1257
In Sterling	£1.0050	£0.9886
Ordinary Share price discount to NAV
In Euro	€0.0460	€0.0648
In Sterling	£0.0410	£0.0569
Investment in Alcentra European Floating Rate Income S.A. at fair value	€176.0	€186.5
Cash and cash equivalents	€0.4	€0.1
Dividend yield - Ordinary Shares	4.33%	4.31%

 

Dividend History

 

During the period, the Company declared and paid dividends of 1.08p per Ordinary Share for the quarter ended 31 March 2018 and 1.10p per Ordinary Share for the quarter ended 30 June 2018. Subsequent to the period end, the Company declared and paid a dividend of 1.12p per Ordinary Share for the quarter ended 30 September 2018.

 

Please refer to note 9 for further details on dividends paid during the period and note 15 for the dividend paid subsequent to the period end.

 

¹  Source: London Stock Exchange

 

Chairman's Statement

 

Dear Shareholder,

 

I'm pleased to present the Interim Report of the Company for the period ended 30 September 2018.

 

The Company showed modest NAV growth over the six month period with the NAV per share increasing from 104.55p as at 31 March 2018 to 104.60p as at 30 September 2018. During the period, the Company declared and paid dividends of 2.18p per Ordinary Share. Additionally, subsequent to the period end, the Company declared and paid a dividend of 1.12p per Ordinary Share. As at the date of approval of the interim report, total dividends paid since inception are 32.79p per Ordinary Share, giving an overall total return since inception of 40.19%, equating to an annualised return of 5.28%.

 

The Board actively monitors the share price, working closely with the Company's brokers within an agreed framework. We have maintained the buyback programme with the aim of limiting the discount to NAV. During the period, 6,567,589 Ordinary Shares were repurchased and are being held in treasury, bringing the issued share capital of the Company to 151,765,882 Ordinary Shares. Subsequent to the period end, a further 2,643,325 Ordinary Shares have been repurchased and are being held in treasury. The buyback transactions are so far proving successful in limiting the 12 month average discount to less than 5% of NAV over the Discount Calculation Period ended 30 September 2018. Additionally, the Board has commenced a successful dialogue with major shareholders in supporting the company.

 

The Company invests predominantly in senior secured loans and senior secured bonds issued by European corporates and has additional capacity to invest in mezzanine loans and other debt securities. The highly diversified portfolio of well-managed credits has yielded stable dividends over five years. The Company targets long term returns (net of fees and expenses) in excess of 5% per annum and continues to pay quarterly dividends. The spread compression experienced throughout global credit markets in 2016-2017 has halted and spreads have flattened out, while market default rates remain very low. The board is monitoring the situation and maintains confidence in the asset class owing to its floating rate nature and ability to gain from future interest rate rises. 

 

The Board continues to closely monitor the markets in the current environment, including the consequences of the Brexit vote, within the risk management framework that has been established by the Risk Committee. Whilst the impact of Brexit remains unknown, loan markets have historically been far less volatile than bond or equity markets. Moreover, your Board remains confident in the Company's portfolio comprised of well-selected, robust credits and with Alcentra Limited (the "Investment Manager") continues to seek opportunities in our markets to add further value.

 

The Investment Manager believes that the loan market performance over 2018 to date, given the level of financial markets volatility, demonstrates that the loan market continues to provide attractive risk adjusted returns compared to other asset classes. A strong pipeline of M&A activity in 2018 has provided plenty of loan issuance, which alongside strong demand for the asset class should continue to result in new issue margins slightly increasing. Your Board continues to be satisfied with the portfolio's performance to date, the diversity of the portfolio and the strategy that is being applied by the Investment Manager. The Investment Manager will continue to update you on the Company's progress by way of the monthly performance updates.

 

On behalf of the Board, I would like to close by thanking shareholders for your continued commitment and I look forward to updating you on the Company's progress later on this year.

 

Ian Fitzgerald

Chairman

 

16 November 2018

 

Investment Manager's Report

 

Summary

 

·    The gross performance of the Company was up 2.64% for the period, ahead of the Credit Suisse Western European Leveraged Loan Index ("CS WELLI") (hedged to GBP) at 2.00%.

 

·    European loan issuance for the six months ending September 2018 came to €47.5 billion, marginally below the prior year (-5%). However, merger and acquisition ("M&A") driven volumes during this period were up +42%, while re-financings were down -77%. This means that the market saw material net new issuance growth. This strong growth has been driven by a number of larger M&A transactions coming to the market, including MFG/MRH, TDC, Sivantos, Techem, Stars Group and BMC.

 

·    Demand remained robust during the period, with continued strong new collateral loan obligation ("CLO") formation (€14.6 billion, +46% year on year) leaving the year to date CLO issuance at €20.8 billion, +62% above 2017 and within touching distance of last year's record full year amount of €20.9 billion. This growth, coupled with sustained inflows into unleveraged funds, with S&P reporting managed account inflows of roughly €2 billion in the month of September 2018 alone, demonstrates continued very robust demand for the asset class.

 

·    The six month period ended September 2018 saw two different themes in new issue spreads and secondary trading levels. April 2018 to July 2018 saw the high level of issuance, coupled with a strong forward pipeline, led to investors being selective on new investments. This drove new issue spreads wider (from 347bps in March to 429bps in July) and secondary prices lower, particularly for lower margin deals as investors looked to cycle out of these loans to buy attractively priced primary. August 2018 and September 2018 however saw a reversal of this trend, as continued strong demand from CLO issuance and inflows into unleveraged funds saw secondary prices recover and new deal margins tighten (368bps average for September 2018), in anticipation of a thinner forward pipeline.

 

·    This continued strong demand for the asset class, along with the thinner forward pipeline, means we expect support for European loans to remain robust into December 2018.

 

·    The last 12 month default rate has dropped to a record low 0.11% as of September 2018, reflecting the continuing constructive corporate fundamental backdrop.

 

Portfolio Commentary

 

·    For the six month period ending September 2018, the best performing asset within the portfolio was an industrial business that was up 7.28% on the back of reporting solid results and a strong market technical for the debt. The second best performing asset was a healthcare business that saw a 4.38% recovery in its price after reporting improved results and announcing the sale of a division.

 

·    The weakest performing asset within the portfolio was an agricultural products business which decreased -8.52% after reporting weaker than expected results, impacted by a number of one-off and operational issues. The second weakest asset was a retailer that was impacted by weakness in the French retail sector due to unseasonably warm weather and after receiving a partial par paydown which led to the residual debt trading lower.

 

As at 30 September 2018 the NAV was 1.0460 pence per Ordinary Share.

 

Portfolio

 

As at 30 September 2018, the portfolio was diversified by obligor and industry with 107 issuers/borrowers across 27 different industry sectors and no individual borrower representing an exposure of more than 5 percent of the portfolio. Against a volatile financial markets backdrop over the past few years, the Company's performance has been strong, outperforming both US and European loan indices, as shown below:

Key Portfolio Statistics as at 30 September 2018

 

Number of Issuers	107
Number of Assets	135
Number of Industries	27
Weighted Average Mid Price of the Portfolio	99.18
Portfolio Current Yield	4.71%
Yield to Maturity (Legal)	5.08%
Percentage of Portfolio in Floating Rate Assets	92.23%
Weighted Average Floating Rate Plus Margin	4.28%
Weighted Average Coupon	5.53%
Weighted Average Maturity (Years)	5.31

 

Portfolio Statistics as 30 September 2018

 

The below tables highlight key aspects of the portfolio as of 30 September 2018

5 Largest Holdings					5 Largest Industry Positions
Issuer	% of NAV	Currency	Country		Issuer	% of NAV
Stada	2.32	EUR GBP	DE		Health care	19.25
Oberthur Technologies	2.25	EUR	FR		Business equipment and services	15.02
Cabot Financial	2.06	EUR GBP	USA		Financial Intermediaries	9.21
ERM	1.89	USD	UK		Leisure Goods/Activities/ Movies	5.81
Busy Bees	1.88	GBP	UK		Retailers (other than food/drug	5.14

 

 

Asset Breakdown	% of NAV
Senior secured loans	85.33
Senior secured FRNs	2.99
Mezzanine loans	0.57
Second lien loans	3.44
Senior secured bonds	4.89
Cash	2.78

Currency Breakdown	% of NAV
Euro	74.79
Pound Sterling	19.69
US Dollar	4.75
Swiss Franc	0.77

 

Geographical Region	% of NAV
UK		20.51
France		19.73
Germany		12.73
Netherlands		10.67
USA		5.70
Luxembourg		4.46
Sweden		3.88
Ireland		3.69
Spain		3.62
Other		15.01

 

Performance

 

Since inception the portfolio has evolved as follows:

 

·    Increased the number of assets from 47 to 135 improving further diversity within the portfolio.

·    Remained well diversified by sector and geography.

·    Maintained the high UK exposure to take advantage of the better margins available for Sterling loans.

·    Not significantly increased US exposure, given better total return on non-US Dollar tranches on cross-border deals.

Key attractions of loans: 

 

·    In Q2 2018 the average new issue spread was E+3.72%¹.

·    Senior secured, so lower risk of loss in the event of default than unsecured asset classes.

·    Low market default rates (0.12%)².

·    Active new issue market with €120.4 billion of leveraged loans issued in 2017³ and a liquid secondary market with over €12.1 billion traded in Q4 2017⁴.

·    Low secondary market price volatility compared to other asset classes.

·    Floating rate income benefiting from a GBP interest rate rise; non-sterling assets are hedged back into GBP so all assets will benefit from rate rises.

 

With demand remaining strong due to growth in CLO formation and continued inflows into unleveraged funds, we continue to remain constructive in our outlook for the market. While short term there has been some pressure on existing tighter margin loans in secondary, in the medium term the growth in well priced new loan issuance is a positive for the market.

 

·    European Loan issuance has been strong year to date, with volumes through Q1 2018 standing at €62.2 billion, c 6.5%⁵ higher than at this point in the prior year. Significantly, M&A volumes are up +97% year to date versus the prior year while re-financings are down -51%, resulting in material net new issuance growth⁶.

·    New issue spreads were better in Europe than the US over the last 3 months⁷. The high level of loan net-issuance has allowed investors to be more selective on new investments, driving new issue spreads wider. As a reminder, negative European rates do not harm the Fund's performance. Currencies are hedged plus the underlying EUR assets will typically have a return pick-up from interest rate floors.

 

Alcentra Limited

16 November 2018

 

¹Standard & Poor's Global Leveraged Lending Review Q2 2018.

²Standard & Poor's LCD Global View 30 June 2018.

³Standard & Poor's LCD European Playbook 2January2018.

⁴Markit European Loan Volume Survey Q4 2017, based on Leveraged Par.

⁵Standard & Poor's LCD Global View, 30June2018.

⁶S&P Global Market Intelligence, LCD European Weekly, 29June2018.

⁷Standard & Poor's Global Leveraged Lending Review Q2 2018.

 

Corporate Summary

 

Principal Activities and Business Review

The principal activity of the Company is to carry out business as an investment company. The Directors do not envisage any changes in this activity for the foreseeable future.

 

The following review is designed to provide information primarily about the Company's business, the principal risks and uncertainties it faces, and results for the period. The review should be read in conjunction with the Chairman's Statement and with the Investment Manager's Report which give a detailed review of the investment activities for the period and an outlook on the future.

 

Structure

The Company is a non-cellular company limited by shares and was incorporated in Guernsey on 3 November 2011 under the Companies (Guernsey) Law, 2008, as amended (the "Companies Law"). The Company has registration number 54200 and has been authorised by the Guernsey Financial Services Commission as an authorised closed-ended collective investment scheme.

 

The Initial Public Offering of the Company took place on 29 February 2012 and the Company commenced business on 6 March 2012, when its 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. For details on the Company's share capital refer to note 8.  

 

The Company's Ordinary Shares are denominated in Sterling.

 

Investment Manager

The investment manager during the period was Alcentra Limited (the "Investment Manager"), a company incorporated in England and Wales on 4 March 2003, with registration number 2958399. The Investment Manager is regulated by the UK's Financial Conduct Authority and the US Securities and Exchange Commission.

 

Investment Objective

The investment objective of the Company is to provide its shareholders with quarterly dividends and the opportunity for capital growth by utilising the skills of the Investment Manager in selecting suitable investments.

 

The Company, together with its wholly-owned Subsidiary, Alcentra European Floating Rate Income S.A., as advised by the Investment Manager, invests either directly or, through sub-participation, indirectly in floating rate, secured loans or high-yield bonds issued by European and US corporate entities predominantly rated below investment grade or deemed by the Investment Manager to be of a corresponding credit quality.

 

The Company aims to satisfy the guideline in its investment policy that at least 80% of its investments are to be in debt obligations of corporate entities with significant operations, or which are domiciled, in Western Europe (including the United Kingdom). Investments are expected to be denominated in, but not limited to, Euro, Sterling or US Dollars. The Investment Manager seeks to identify investment opportunities that combine an attractive current return with a strong probability of ultimate return of capital.

 

Discount Control Mechanism

As per the Articles of the Company, under the discount control mechanism, if, as at 31 March, 30 June, 30 September or 31 December in any calendar year, the Shares of any class in issue have, on average over the last twelve calendar months preceding such date (a ''Discount Calculation Period''), traded at a discount in excess of 5% of the average net asset value (the "NAV") per share of that class¹, the Directors will, subject to any legal or regulatory requirements, implement a redemption offer (a ''Redemption Offer'') pursuant to which each shareholder of the relevant class shall be permitted to redeem up to 50% of his shares of that class. No more than one Redemption Offer shall be made in respect of any class of Ordinary Share in a twelve month period.

 

The Ordinary Shares did not trade at a discount in excess of 5% of the average NAV per share over the Discount Calculation Periods ended 30 June 2018 and 30 September 2018.

 

Share Buybacks

The Directors operate an active discount management policy through the use of share buy backs. On 27 September 2018, the Directors were granted authority to repurchase 23,635,898 Shares for cancellation or to be held as treasury shares. This authority will expire at the next AGM which will be held in 2019.

 

Pursuant to this authority, and subject to the Companies Law and the discretion of the Directors, the Company may purchase Ordinary Shares in the market on an ongoing basis with a view to addressing any imbalance between the supply of and demand for Ordinary Shares, thereby increasing the NAV per Ordinary Share and assisting in controlling the discount to NAV per Ordinary Share in relation to the price at which the Ordinary Shares may be trading.

 

Please refer to note 8 for details of Ordinary Share buy backs during the period ended 30 September 2018.

 

Life of the Company

The Company does not have a fixed life. As required by the Articles of Incorporation, the Directors were required to convene a general meeting on or before the third anniversary of the date that the Company's Ordinary Shares were listed on the Official List of the Financial Conduct Authority and to trading on the London Stock Exchange ("Admission") to propose an ordinary resolution that the Company continues its business as a closed-ended collective investment scheme (a "Continuation Resolution"). The Directors were required to propose a further Continuation Resolution on or before the sixth anniversary of Admission. Thereafter, the Directors are required to convene a general meeting to propose a Continuation Resolution on or before the anniversary of the date on which the previous Continuation Resolution was passed. If a Continuation Resolution is not passed, the Directors shall put proposals to shareholders for the reconstruction or reorganisation of the Company.

 

In accordance with the Articles of Incorporation, a Continuation Resolution was passed at the Annual General Meeting (the "AGM") on 25 September 2014, the AGM on 20 September 2017 and the AGM on 27 September 2018. The next Continuation Resolution will be considered at the AGM on 26 September 2019.

 

The Board have a reasonable expectation that the next Continuation Resolution will be passed and as such consider that the Company remains a going concern.

 

¹Calculated by reference to the middle market quotations of the shares of that class on the Daily Official List of the London Stock Exchange on each trading day in the relevant Discount Calculation Period and the most recently published NAV per share of the relevant class for each such trading day.

 

Directors' Biographies

 

Ian Fitzgerald (Non-Executive Chairman, Chairman of the Management Engagement Committee and Chairman of the Risk Committee)

Ian is currently a Director and Chief Executive Officer of Loans Specialist Advisory Services Limited, a company established to provide specialist loan product business services. Ian held senior management positions within Lloyds Bank Capital Markets from 1997 to 2011. From 2004 he was Managing Director and Head of Loan Markets, responsible for the bank's primary and secondary loan market businesses globally, including all corporate, acquisition, leveraged, project, infrastructure and property-related loan finance.

 

Ian joined Lloyds from Hill Samuel as Head of Loan Syndication and Distribution, upon Lloyds' merger with Hill Samuel TSB Bank plc in 1997. Prior to joining Hill Samuel in 1992, Ian held senior lending and syndicate roles at Chemical Bank, Manufacturers Hanover Limited, Bankers Trust International Limited, and other financial institutions. Ian commenced his banking career with Barclays Bank International in 1975. Ian was chairman of the Loan Market Association (''LMA'') from 2009 to 2011, having been appointed as a non-executive Director of the LMA in 2006.

 

Jonathan Bridel (Non-Executive Director and Chairman of the Audit Committee)

Jonathan is a Guernsey resident and is currently a non-Executive Director of the Renewables Infrastructure Group Limited (FTSE 250), Starwood European Real Estate Finance Limited, Funding Circle SME Income Fund Limited and Sequoia Economic Infrastructure Income Fund Limited (FTSE 250) which are listed on the Main Market of the London Stock Exchange. Other companies for which Jonathan acts as a Director include DP Aircraft I Limited and Fair Oaks Income Fund Limited. Jonathan was previously Managing Director of Royal Bank of Canada's investment businesses in the Channel Islands and served as a Director on other RBC companies including RBC Regent Fund Managers Limited.  Prior to joining RBC, Jonathan served in a number of senior management positions in banking, specialising in credit and corporate finance and private businesses as Chief Financial Officer in London, Australia and Guernsey having previously worked at Price Waterhouse Corporate Finance in  London.

 

Jonathan graduated from the University of Durham with a degree of Master of Business Administration, holds qualifications from the Institute of Chartered Accountants in England and Wales (1987) where he is a Fellow, the Chartered Institute of Marketing and the Australian Institute of Company Directors. Jonathan is a Chartered Marketer and a member of the Chartered Institute of Marketing, a Chartered Director and Fellow of the Institute of Directors, and a Chartered Fellow of the Chartered Institute for Securities and Investment.

 

Anne Ewing (Non-Executive Senior Independent Director, Chairman of the Remuneration and Nomination Committee)

Anne is a Guernsey resident and has over 35 years of financial services experience in banking, asset and fund management, corporate treasury, life insurance and the fiduciary sector. Anne has held senior roles in Citibank, Rothschilds, Old Mutual International and KPMG Channel Islands Limited and latterly has been instrumental in the start-ups of a Guernsey fund manager and two fiduciary licensees. Anne is self-employed and has a number of Non-Executive Directorships and Chairman roles in investment companies, banks and trust companies in the Channel Islands and in London. Anne is currently an Independent Non-Executive Director of Clareant Structured Credit Opportunities Fund III GP Limited and is an Independent Non-Executive Director on the LSE listed Merian Chrysalis Investment Company Limited. 

 

Anne graduated from Bournemouth University with Masters of Science Degree in Corporate Governance & Administration/Grad ICSA and holds an ACCA Certified Diploma in Accounting & Finance. Anne is a Chartered Fellow of the Chartered Institute of Securities & Investment, a Fellow of the Institute of Chartered Secretaries and Administrators and a past Guernsey Chairman, an Associate Member of the Association of Corporate Treasurers, a member of the Institute of Directors  and is a past Guernsey Branch Chairman. Anne is a member of the Guernsey Investment Fund Association.

 

Trudi Clark (Non-Executive Director) (Appointed 1 November 2018)

Trudi Clark graduated with a first class honours degree in business studies and is a qualified Chartered Accountant. She spent 10 years in Chartered Accountancy practices in the UK and Guernsey. In 1991 she joined the Bank of Bermuda to head their European Internal Audit function before moving into private banking in 1993.

 

Between 1995 and 2005 she was with Schroders (C.I.) Limited, an offshore private bank and investment manager. She was appointed Banking Director in 2000 and Managing Director in 2003. In 2006 she left Schroders to establish and run a private family office. In July 2009 Trudi went on to establish the Guernsey practice of David Rubin & Partners Limited, an internationally known insolvency and liquidation specialist. Since 2017 Trudi is concentrating on a portfolio of non-executive directorships.

 

Directors' Responsibilities Statement

 

The principal risks and uncertainties of the Company remain unchanged from what was disclosed in the Audited Financial Statements for the year ended 31 March 2018. The Board's view is that these risks remain appropriate up to 31 March 2019.

 

We confirm that to the best of our knowledge:

 

·    the Unaudited Condensed Financial Statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union;

 

·    the Chairman's Statement, the Investment Manager's Report and the notes to the Unaudited  Condensed Financial Statements together meet the requirements of an interim management report, and include a fair view of the information required by:

 

1.   Rule 4.2.7R of the Disclosure Guidance and Transparency Rules of the UK's Financial Conduct Authority ("DTR"), being an indication of important events that have occurred during the first six months of the financial year and their impact on the set of Unaudited Condensed Financial Statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

2.   DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so.

 

Signed on behalf of the Board of Directors on 16 November 2018:

 

 

Anne Ewing                                                     Jonathan Bridel

Director                                                           Director

 

Independent Review Report to Alcentra European Floating Rate Income Fund Limited

 

Conclusion 

 

We have been engaged by Alcentra European Floating Rate Income Fund Limited (the "Company") to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2018 of the Company which comprises of the Unaudited Condensed Statement of Comprehensive Income, the Unaudited Condensed Statement of Financial Position, the Unaudited Condensed Statement of Changes in Shareholders' Equity, the Unaudited Condensed Statement of Cash Flows and the related explanatory notes. 

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2018 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

 

Scope of review 

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements. 

 

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 

 

Directors' responsibilities 

The half-yearly financial report is the responsibility of, and has been approved by, the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

As disclosed in note 3, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards, as adopted by the EU. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34, as adopted by the EU. 

 

Our responsibility

 

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. 

The purpose of our review work and to whom we owe our responsibilities

This report is made solely to the Company in accordance with the terms of our engagement letter to assist the Company in meeting the requirements of the DTR of the UK FCA. Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached. 

Dermot Dempsey

For and on behalf of KPMG Channel Islands Limited 

Chartered Accountants, Guernsey

16 November 2018     

 

Unaudited Condensed Statement of Comprehensive Income

For the six months ended 30 September 2018

 

	Notes	Six months ended 30 September 2018	Six months ended 30 September 2017
		(Unaudited)	(Unaudited)
		€	€
Other income		39,724	41,374
Total income		39,724	41,374
Realised foreign exchange loss on forwards		(1,098,782)	(5,506,285)
Unrealised foreign exchange (loss)/gain on forwards		(456,230)	2,348,100
Foreign exchange loss		(538,127)	(56,214)
Net gain on investment at fair value through profit or loss	6	4,063,443	2,338,359
Net realised and unrealised gain/(loss)		1,970,304	(876,040)
Investment management fees	11	(653,332)	(696,385)
Directors' fees and travel expenses	11	(80,327)	(68,705)
Administration and professional fees		(223,256)	(278,949)
Total operating expenses		(956,915)	(1,044,039)
Profit/(loss) and total comprehensive income for the period		1,053,113	(1,878,705)
Basic and diluted gain/(loss) per Ordinary Share (in Euro)	4	0.6718c	(1.1216)c
Basic and diluted gain/(loss) per Ordinary Share (in Sterling)	4	0.5982p	(0.9883)p

 

All results are derived from continuing operations.

 

The accompanying notes form an integral part of these unaudited condensed financial statements.

 

Unaudited Condensed Statement of Financial Position

As at 30 September 2018

 

	Notes	30 September 2018	31 March 2018
		(Unaudited)	(Audited)
		€	€
Non-current assets
Investment at fair value through profit or loss	6	176,027,159	186,463,716
Current assets
Cash and cash equivalents		424,180	74,563
Other receivables and prepayments		57,387	101,201
Derivative assets	6	2,169,923	2,626,153
Total current assets		2,651,490	2,801,917
Total assets		178,678,649	189,265,633
Current liabilities
Other payables and accrued expenses	7	(412,339)	(768,965)
Total current liabilities		(412,339)	(768,965)
Net assets		178,266,310	188,496,668
Capital and reserves
Share capital	8	189,289,264	196,663,238
Retained earnings		(11,022,954)	(8,166,570)
Equity shareholders' funds		178,266,310	188,496,668
Number of Ordinary Shares	8	151,765,882	158,333,471
NAV per Ordinary Share (in Euro)	5	117.4614c	119.0504c
NAV per Ordinary Share (in Sterling)	5	104.5994p	104.5501p

 

These unaudited condensed financial statements were approved and authorised for issue by the Board of Directors on 16 November 2018, and signed on its behalf by:

 

Anne Ewing                                                                             Jonathan Bridel

Director                                                                                   Director

 

The accompanying notes form an integral part of these unaudited condensed financial statements.

 

Unaudited Condensed Statement of Changes in Shareholders' Equity

For the six months ended 30 September 2018 (Unaudited)

 

			Share capital	Retained earnings	Total
		Notes	€	€	€
Opening equity shareholders' funds at 1 April 2018			196,663,238	(8,166,570)	188,496,668
Total comprehensive income for the period				1,053,113	1,053,113
Transactions with owners, recorded directly to equity
Dividends		9		(3,909,497)	(3,909,497)
Ordinary Shares repurchased		8	(7,373,974)		(7,373,974)
Closing equity shareholders' funds at 30 September 2018			189,289,264	(11,022,954)	178,266,310

 

For the six months ended 30 September 2017 (Unaudited)

 

			Share capital	Retained earnings	Total
		Note	£	£	£
Opening equity shareholders' funds at 1 April 2017			209,403,057	(2,306,589)	207,096,468
Total comprehensive loss for the period			-	(1,878,705)	(1,878,705)
Transactions with owners, recorded directly to equity
Dividends		9	-	(4,191,128)	(4,191,128)
Ordinary Shares repurchased and cancelled			(3,767,481)	-	(3,767,481)
Closing equity shareholders' funds at 30 September 2017			205,635,576	(8,376,422)	197,259,154

 

The accompanying notes form an integral part of these unaudited condensed financial statements.

 

Unaudited Condensed Statement of Cash Flows

For the six months ended 30 September 2018

 

	Six months ended 30 September 2018	Six months ended 30 September 2017
	(Unaudited)	(Unaudited)
	€	€
Cash flow from operating activities
Profit/(loss) for the period	1,053,113	(1,878,705)
Adjustments for:
Net gain on investment at fair value through profit or loss	(4,063,443)	(2,338,359)
Unrealised foreign exchange loss/(gain) on forwards	456,230	(2,348,100)
Decrease/(increase) in other receivables and prepayments	43,814	(31,272)
Proceeds from sale of investment at fair value through profit or loss	14,500,000	14,000,000
(Decrease)/increase in other payables and accrued expenses	(356,626)	752,673
Net cash inflow from operating activities	11,633,088	8,156,237
Cash flow from financing activities
Ordinary Shares repurchased	(7,373,974)	(3,767,481)
Dividends paid	(3,909,497)	(4,191,128)
Net cash flows used in financing activities	(11,283,471)	(7,958,609)
Net decrease in cash and cash equivalents	349,617	197,628
Cash and cash equivalents at start of the period	74,563	1,107,637
Cash and cash equivalents at end of the period	424,180	1,305,265

The accompanying notes form an integral part of these unaudited condensed financial statements.

 

Notes to the Unaudited Condensed Financial Statements

For the six months ended 30 September 2018

 

1.  General Information

 

The Company is a non-cellular company limited by shares and was registered in Guernsey under the Companies (Guernsey) Law, 2008 (as amended) (the "Companies Law") on 3 November 2011 with registered number 54200 as a closed-ended investment company. The Company's Ordinary Shares are listed on the FCA's Official List and on the main market of the London Stock Exchange.

 

The registered office and principal place of business of the Company is BNP Paribas House, St Julian's Avenue, St Peter Port, Guernsey, GY1 1WA.

 

The Company controls its subsidiary, Alcentra European Floating Rate Income S.A. (the "Subsidiary"), through a holding of 100% (31 March 2018: 100%) of its shares. The Subsidiary is domiciled in Luxembourg and has no subsidiaries. No financial or other support was provided without a contractual obligation to do so during the reporting period. As at 30 September 2018, there were no significant restrictions on the ability of the Subsidiary to transfer funds to the Company in the form of redemption of the shares held by the Company.

 

Alcentra Limited has been appointed by the Company as the investment manager (the "Investment Manager") and the administration of the Company is delegated to BNP Paribas S.C.A., Guernsey Branch (the "Administrator").

 

The Company's investment objective is to provide its shareholders with regular quarterly dividends and the opportunity for capital growth by utilising the skills of the Investment Manager in selecting suitable investments. To pursue its investment objective, the Company uses net issue proceeds to invest into Profit Participating Bonds issued by the Subsidiary. The Subsidiary then uses these proceeds to invest in floating rate, secured loans or high-yield bonds issued by European or US corporate entities predominantly rated below investment grade or deemed by the Investment Manager to be of corresponding credit quality.

 

The Company expects at least 80% of the Subsidiary's investments to be debt obligations of corporate entities domiciled or with significant operations in Western Europe (including the United Kingdom). Investments are expected to be denominated in Euros, Sterling or US Dollars.

 

2. Going Concern

 

The Directors are satisfied that, at the time of approving these Unaudited Condensed Financial Statements, no material uncertainties exist that may cast significant doubt concerning the Company's ability to continue for at least twelve months from the date of approval of these Unaudited Condensed Financial Statements. The Directors consider it is appropriate to adopt the going concern basis in preparing these Unaudited Condensed Financial Statements based on the following assessment:

 

1. Working capital - As at 30 September 2018, the working capital surplus in the Company was approximately €2.24 million. The Company has the ability to sell bonds in the Subsidiary and/or request repayment of accrued interest. The Subsidiary has a working capital surplus of approximately €2.58 million.

 

2. Closed-ended company - The Company has been registered with the Guernsey Financial Services Commission  as a registered closed-ended collective investment scheme. As such shareholders have no right to have their Ordinary Shares redeemed, and therefore no cash flows out of the Company in this respect.

 

3. In accordance with the Articles of Incorporation, a continuation resolution was passed at the Annual General Meeting (the "AGM") on 27 September 2018. The next continuation resolution will be considered at the AGM on 26 September 2019. If a Continuation Resolution is not passed, the Directors shall put proposals to shareholders for the reconstruction or reorganisation of the Company. The Board have a reasonable expectation that the next continuation resolution will also be passed.

 

4. Discount Control Mechanism - the Company's Ordinary Shares did not trade at an average discount in excess of 5% of the NAV per share over the Discount Calculation Period ended 30 September 2018 and as a result the Discount Control Mechanism has not been triggered. The Company has repurchased Ordinary Shares in the market to assist in controlling the discount in the Ordinary Share price to NAV per Ordinary Share. Although the Board operates an active discount management policy to mitigate any discount to NAV per Ordinary Share, there can be no guarantee that they will do so or that such mechanisms will be successful. Please refer to page 10 for details regarding the Discount Control Mechanism and Redemption Offer and note 8 for details of Ordinary Share buybacks.

 

Taking into consideration the analysis detailed above, the Company's ability to meet its liabilities as they fall due and reasonably manage any uncertainties as they arise, and after making enquiries of the Company's Investment Manager and corporate brokers, the Directors are satisfied that it is appropriate to continue to prepare the condensed financial statements on a going concern basis.

 

3. Principal Accounting Policies

 

a) Basis of preparation

The Unaudited Condensed Financial Statements for the period ended 30 September 2018 have been prepared in accordance with IAS 34 - Interim Financial Reporting, as adopted by the European Union.

 

The Unaudited Condensed Financial Statements do not include all the information and disclosures required in the Annual Audited Financial Statements and therefore should be read in conjunction with the 31 March 2018 Audited Financial Statements, which were prepared in accordance with International Financial Reporting Standards, as adopted by the European Union ("IFRS").

 

The Directors have determined that the Company continues to meet the investment entity criteria. Therefore, in accordance with the investment entity exemption within IFRS 10 - Consolidated Financial Statements, the Company has prepared individual financial statements and measures its investment in the Subsidiary at fair value.

 

The Company applies, for the first time, IFRS 15 - Revenue from Contracts with Customers ("IFRS 15") and IFRS 9 - Financial Instruments ("IFRS 9") that became effective on 1 January 2018. These standards do not result in a restatement of previous financial statements. As required by IAS 34, the nature and effect of these changes are disclosed below.

 

IFRS 15 replaces IAS 11 - Construction Contracts, IAS 18 - Revenue and related Interpretations

As disclosed in the Annual Audited Financial Statements, the Directors believe that the application of IFRS 15 will not be applicable as the Company does not have any revenue that should be accounted for under IFRS 15.

 

IFRS 9 replaces IAS 39 - Financial Instruments: Recognition and Measurement 

IFRS 9 introduced a new approach to the classification of financial assets which is driven by the business model in which the asset is held and their cash flow characteristics. A new business model approach was introduced which does allow certain financial assets to be categorised as "fair value through other comprehensive income" in certain circumstances. IFRS 9 carries forward the derecognition requirements of financial assets and liabilities from IAS 39.

 

As disclosed in the Annual Audited Financial Statements, the Board has undertaken an assessment of the impact of IFRS 9 on the Company's financial statements and concluded that there will be no impact to the classification and measurement of the Company's financial assets and financial liabilities.

 

 

b) Significant accounting policies

With the exception of the application of IFRS 9 and IFRS 15 with effect from 1 April 2018, the accounting policies adopted in the preparation of the Unaudited Condensed Financial Statements are consistent with those followed in the preparation of the Audited Financial Statements for the year ended 31 March 2018.

 

4. Basic and Diluted Earnings per Ordinary Share

 

	30 September 2018		30 September 2017
	In Euro	In Sterling	In Euro	In Sterling
Total comprehensive income/(loss) for the period	€1,053,113	£937,797	€(1,878,705)	£(1,655,477)
Weighted average number of Ordinary Shares in issue during the period	156,761,559	156,761,559	167,503,908	167,503,908
Basic and diluted income/(loss) per Ordinary Share	0.6718c	0.5982p	(1.1216)c	(0.9883)p

 

5. NAV per Ordinary Share

 

	30 September 2018		31 March 2018
	In Euro	In Sterling	In Euro	In Sterling
NAV	€178,266,310	£158,746,149	€188,496,668	£165,537,774
Number of Ordinary Shares in issue at period/year end	151,765,882	151,765,882	158,333,471	158,333,471
NAV per Ordinary Share	117.4614c	104.5994p	119.0504c	104.5501p

 

6. Financial Assets and Liabilities Designated at Fair Value Through Profit or Loss

 

The Company's investment at fair value through profit and loss is the Profit Participating Bonds it holds in the Subsidiary. The fair value of the Profit Participating Bonds is based on the NAV of the Subsidiary, which has been prepared in accordance with IFRS.

 

Fair values of the Company's forward foreign exchange contracts are determined with reference to the forward exchange rates applicable as at valuation date.

 

Fair Value Hierarchy

The Company categorises its financial assets according to the following fair value hierarchy, that reflects the significance of the inputs used in determining their fair values:

 

Level 1: Inputs that reflect unadjusted price quotes in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date;

 

Level 2: Inputs that reflect price quotes of similar assets and liabilities in active markets, and price quotes of identical assets and liabilities in markets that are considered to be less than active as well as inputs other than price quotes that are observable for the asset or liability either directly or indirectly; and

 

Level 3: Inputs that are unobservable for the asset or liability and reflect the Investment Manager's own assumptions.

 

The following table details the Company's fair value hierarchy.

 

30 September 2018 (Unaudited)	Level 1	Level 2	Level 3	Total
	€	€	€	€
Financial assets
Investment at fair value through profit or loss	-	-	176,027,158	176,027,159
Derivative assets	-	2,169,923	-	2,169,923

 

31 March 2018 (Audited)	Level 1	Level 2	Level 3	Total
	€	€	€	€
Financial assets
Investment at fair value through profit or loss	-	-	186,463,716	186,463,716
Derivative assets	-	2,626,153	-	2,626,153

 

Reconciliation of the Company's Financial Assets Categorised Within Level 3

The following table shows a reconciliation of all movements in the fair value of financial assets categorised within Level 3 during the period/year.

 

	30 September 2018	31 March 2018
	(Unaudited)	(Audited)
	€	€
Opening balance	186,463,716	203,860,076
Purchases	-	1,500,000
Sales	(14,500,000)	(24,900,000)
Net gain on investment at fair value through profit or loss	4,063,443	6,003,640
Capitalised interest	5,992,594	13,966,281
Interest received in specie1	(5,992,594)	(13,966,281)
Closing balance	176,027,159	186,463,716

 

During the period ended 30 September 2018 and the year ended 31 March 2018, there were no reclassifications between levels of the fair value hierarchy.

 

Company's Investment in the Subsidiary

The NAV of the Subsidiary predominantly comprises the fair values of the investment portfolio of the Subsidiary consisting of Level 1, Level 2 and Level 3 investments and other financial assets and liabilities at carrying value, which together form the NAV of the Subsidiary.

 

 

 

¹ As at 31 March 2018, interest of €5,992,594 was due to the Company by the Subsidiary. On 10 September 2018, the Subsidiary elected to pay the interest due to the Company by way of the issue and allocation to the Company of new Profit Participating Bonds for which no cash payment was required.

 

The investments in the Subsidiary's portfolio are valued as follows:

 

Fair values of debt instruments are initially based on price quotes, where available. Price quotes are sourced from the Company's approved pricing providers. The approved pricing providers source price quotes from brokers/market makers and determine an average bid price based on the quotes obtained, after adjusting for outliers as identified by the approved pricing providers.

 

Where price quotes are unavailable, the Investment Pricing Committee of the Investment Manager determines fair value using valuation techniques. Valuation techniques used include comparison to similar instruments for which market observable prices exist. Assumptions and inputs used in the valuation technique include interest rates and credit spreads used in estimating discount rates. The Investment Pricing Committee has applied judgement and estimation and used significant unobservable inputs in selecting the appropriate valuation technique used, consideration of identical or similar instruments, and selection of appropriate discount rates.

 

As at 30 September 2018 and 31 March 2018, the fair value measurement of the Profit Participating Bonds is categorised into Level 3 within the fair value hierarchy. This classification reflects the Company's ability to redeem its investment in the Subsidiary on the reported date at the reported NAV and whether adjustments to the NAV are required to reflect the inherent uncertainty in the timing and range of possible outcomes of any realisation between the reported NAV and the ultimate recoverable amount. There were no adjustments to the NAV in the period ended 30 September 2018 (31 March 2018: Nil). The fair value level of the investment in the Subsidiary reflects management's consideration that this investment is not readily tradable. Management has considered that there are no reasonably possible alternatives in determining the fair value of the Subsidiary.

 

The fair value of the Subsidiary is predominantly influenced by the fair value determination of the underlying debt investments held by the Subsidiary. The Company recognises any transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change occurred.

 

The following table provides a reconciliation of the Company's investment in the Subsidiary measured at fair value:

 

	30 September 2018	31 March 2018
	(Unaudited)	(Audited)
	€	€
Subsidiary's investments at fair value through profit and loss	173,486,316	184,793,666
Subsidiary's net current assets	2,540,843	1,670,050
Closing balance	176,027,159	186,463,716

 

As at 30 September 2018, the net gain on the Company's investment in the Subsidiary included in the Statement of Comprehensive Income amounted to €4,063,443 (30 September 2017: €2,338,359). The breakdown of the gain is detailed in the table below:

 

	30 September 2018	30 September 2017
	(Unaudited)	(Unaudited)
Investment income	4,262,967	4,667,809
Realised loss on investments at fair value through profit or loss	(1,992,263)	(2,911,678)
Unrealised gain on investments at fair value through profit or loss	1,878,421	666,635
Dividend paid to the Company	(39,724)	(41,329)
Expenses	(45,958)	(43,078)
Total	4,063,443	2,338,359

 

Subsidiary Financial Assets and Liabilities Designated at Fair Value Through Profit or Loss

The following table details the investment holding of the Subsidiary, categorising these assets by level according to the fair value hierarchy. The disclosures have been included to provide an insight to shareholders of the asset class mix held by the Subsidiary. 

 

30 September 2018 (Unaudited)	Level 1	Level 2	Level 3	Total
	€	€	€	€
Financial assets
Interest bearing securities
Corporate bonds and debt instruments	-	171,812,962	1,673,354	173,486,316
Total	-	171,812,962	1,673,354	173,486,316

 

31 March 2018 (Audited)	Level 1	Level 2	Level 3	Total
	€	€	€	€
Financial assets
Interest bearing securities
Corporate bonds and debt instruments	-	183,217,100	1,576,566	184,793,666
Total	-	183,217,100	1,576,566	184,793,666

 

7. Other Payables and Accrued Expenses

 

	30 September 2018	31 March 2018
	(Unaudited)	(Audited)
	€	€
Investment management fees	323,357	667,569
Administration and company secretarial fees	16,399	13,935
Audit fees	41,225	58,848
Other expenses	6,401	6,451
Loan administration fees	5,153	5,667
Printing fees	5,596	1,842
Director fees and travel expenses	12,414	12,766
Registrar fees	1,794	1,887
Total	412,339	768,965

 

The Company has financial risk management policies in place to ensure that all payables are paid within the credit time frame. The Directors considers that the carrying amount of all payables approximates to their fair value.

 

8. Share Capital

 

The authorised share capital of the Company is represented by an unlimited number of Ordinary Shares with or without a par value, which upon issue, the Directors may designate as: (a) Ordinary Shares; (b) B Shares; (c) C Shares, in each case of such classes and denominated in such currencies as the Directors may determine.

 

Since inception of the Company, Sterling Ordinary Shares and C Shares have been issued, however the Company has the authority to issue Euro Ordinary Shares.

 

The Company had issued and fully paid up share capital as follows:

 

	30 September 2018	31 March 2018
Ordinary Shares of no par value
Issued and fully paid	151,765,8821	158,333,471

 

Rights attached to Ordinary Shares

The Company's share capital may be denominated in Sterling and Euro. At any general meeting of the Company each Euro share carries one vote and each Sterling share carries 1.2 votes. The shares also carry rights to receive all income and capital available for distribution by the Company.

 

Share Buybacks

The Directors operate an active discount management policy through the use of share buybacks. On 27 September 2018, the Directors were granted authority to repurchase 23,635,898 Ordinary Shares for cancellation or to be held as treasury shares. This authority will expire at the next AGM which will be held on 26 September 2019.

 

To assist in controlling the discount in the Ordinary Share price to NAV per Ordinary Share, during the period ended 30 September 2018, the Company used its authority to repurchase 6,567,589 Ordinary Shares in the market at a total cost of €7,373,974 (£6,585,927). The repurchased Ordinary Shares are being held in treasury.

 

¹ The number of shares in issue does not include 6,567,589 treasury shares.

 

Significant Share Movements

	30 September 2018			31 March 2018
	Number	€		Number	€
Balance at start of the period/year	158,333,471	196,663,238		169,610,896	209,403,057
Ordinary Shares repurchased  during the period/year	(6,567,589)	(7,373,974)		(11,277,425)	(12,739,819)
Balance at end of the period/year	151,765,882	189,289,264		158,333,471	196,663,238

 

9. Dividends

 

In any financial year, the Company will aim to pay regular quarterly dividends to shareholders subject to the solvency test prescribed by the Companies Law. It is expected that a distribution will be made by way of a dividend with respect to each calendar quarter. Immediately after the distribution of dividends the Board of Directors is of the opinion that the Company will satisfy the solvency test.

 

The Directors in their absolute discretion can offer a scrip dividend alternative to shareholders when a cash dividend is declared from time to time. The option of a scrip dividend was not offered to shareholders for the six months ending 30 September 2018 or the six months ending 30 September 2017.

 

The Company has declared and paid the following dividends to its shareholders:

 

Period ended 30 September 2018	Date declared	Payment date	Amount per Ordinary Share	Amount
1 January 2018 to 31 March 2018	12 April 2018	11 May 2018	1.08p	€1,966,016
1 April 2018 to 30 June 2018	12 July 2018	10 August 2018	1.10p	€1,943,481
			Total	€3,909,497

 

 

Period ended 30 September 2017	Date declared	Payment date	Amount per Ordinary Share	Amount
1 January 2017 to 31 March 2017	11 April 2017	12 May 2017	1.09p	€2,205,701
1 April 2017 to 30 June 2017	13 July 2017	11 August 2017	1.07p	€1,985,427
			Total	€4,191,128

 

10.  Reconciliation of NAV to Published NAV

 

	30 September 2018		31 March 2018
	NAV	NAV per Ordinary Share	NAV	NAV per Ordinary Share
	€	€	€	€
Published NAV	178,959,310	1.1792	189,563,160	1.1972
Impact of fair value adjustment on investments held by the Subsidiary1	(691,885)	(0.0046)	(777,150)	(0.0049)
Accrual adjustment 2	(1,115)	-	(289,342)	(0.0018)
NAV attributable to shareholders	178,266,310	1.1746	188,496,668	1.1905

 

11. Related Party Transactions

 

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.

 

Total investment management fees for the period amounted to €653,332 (30 September 2017: €696,385, 31 March 2018: €1,367,780), with outstanding fees of €323,357 at 30 September 2018 (31 March 2018: €667,569).

 

The table below provides details of the Ordinary Shares held in the Company by the Directors:

 

	30 September 2018	31 March 2018
Ian Fitzgerald	15,000	15,000
Jonathan Bridel (together with their spouse)	5,000	5,000
Anne Ewing (together with their spouse)	5,000	5,000

 

The Directors of the Company are remunerated per annum as follows:

 

Chairman and Chairman of the Risk Committee and of the Management Engagement Committee - £52,500.

 

Chairman of the Audit Committee - £42,000.

 

Chairman of the Remuneration and Nomination Committee - £40,000.

 

The total Directors' fees and travel expenses for the year amounted to €80,327 (30 September 2017: €68,705, 31 March 2018: €150,233), with outstanding fees of €12,414 (31 March 2018: €12,766), due to the Directors at 30 September 2018. 

 

¹ The investments held by the Subsidiary have been valued at bid price which is consistent with the basis used in the prior year audited financial statements.

² The published NAV was calculated as at 28 September 2018, which did not take into consideration expense accruals for the 29 and 30 September 2018.

 

12. Risk Management Policies and Procedures

 

The Company's financial risk management objectives and policies are consistent with those disclosed in the Audited Financial Statements for the year ended 31 March 2018. In the opinion of the Directors, there have been no changes to the financial risk management objectives.

 

13. Seasonality of Operations

 

The Company's operations are not cyclical or seasonal in nature. As such its performance is not subject to seasonal fluctuations.

 

14. Operating Segments

The Chief Operating Decision Makers of the Company are the Board of Directors. The Directors are of the opinion that the Company is engaged in a single segment of business, being investing, via its Subsidiary, in investments in floating rate, secured loans or high-yield bonds. Segment information is measured on the same basis as those used in the preparation of the Company's financial statements with the exception of the valuation of financial instruments. For the purpose of segment reporting, at the Subsidiary level, financial instruments are measured in accordance with the method set out in the Company's prospectus, this being the mid-price of the securities as at the valuation day.

 

The Board of Directors reviews internal management reports on a quarterly basis. The Investment Manager, together with the Administrator and the Company Secretary, ensure that the Directors receive relevant information in a timely manner.

 

The key measurement of performance used by the Board to assess the Company's performance and to allocate resources is the movement in the NAV which is prepared on a daily basis.

 

The majority of the Subsidiary's assets are held in Europe and are held in Sterling, Euros, Swiss Franc and US Dollars.

 

A detailed analysis of the operating segment with respect to geographical disclosures is included in the Investment Manager's Report.

 

The Company had no shareholders with a holding of greater than 10% as at 30 September 2018 and 31 March 2018.

 

15. Events After the Reporting Date

 

On 11 October 2018, the Company declared a dividend of 1.12p per Ordinary Share, covering the period 1 July 2018 to 30 September 2018. This dividend was paid to the shareholders on 9 November 2018.

 

Trudi Clark was appointed as a Non-Executive Director of the Company with effect from 1 November 2018.

 

The Company repurchased 2,643,325 Ordinary Shares subsequent to the period end at a total cost of €2,997,750 (£2,618,960) and the current number of shares in issue is 149,122,557.

 

There were no other events which occurred subsequent to the period end until the date of approval of the financial statements, which would have a material impact on the financial statements of the Company as at 30 September 2018.

 

Company Information

 

Directors

Ian Fitzgerald (Non-Executive Chairman)

Anne Ewing (Non-Executive Senior Independent Director)

Jonathan Bridel (Non-Executive Director)

Trudi Clark (Non-Executive Director) (Appointed 1 November 2018)

 

Registered Office

BNP Paribas House, St Julian's Avenue, St Peter Port, GY1 1WA, Guernsey, Channel Islands

 

Investment Manager

Alcentra Limited

160 Queen Victoria Street, London, EC4V 4LA, United Kingdom

 

Solicitors to the Company (as to English law)

Linklaters LLP 

One Silk Street, London, EC2Y 8HQ, United Kingdom

 

Advocates to the Company (as to Guernsey law)

Carey Olsen,

P.O. Box 98, Carey House, Les Banques, St. Peter Port, GY1 4BZ, Guernsey, Channel Islands

 

Corporate Broker

J.P. Morgan Securities Plc

25 Bank Street, London, E14 5JP, United Kingdom

 

Independent Auditor

KPMG Channel Islands Limited

Glategny Court, Glategny Esplanade, St Peter Port, GY1 1WR, Guernsey, Channel Islands

 

Registrar

Computershare Investor Services (Guernsey) Limited

1^st Floor, Tudor House, Le Bordage, St Peter Port, GY1 1DB, Guernsey, Channel Islands

 

Principal Bankers

BNP Paribas Securities Services S.C.A. 

BNP Paribas House, St Julian's Avenue, St Peter Port, GY1 1WA, Guernsey, Channel Islands

 

Designated Manager, Administrator, Custodian and Company Secretary

BNP Paribas Securities Services S.C.A., Guernsey Branch

BNP Paribas House, St Julian's Avenue, St Peter Port, GY1 1WA, Guernsey, Channel Islands

 

Enquiries:

 

BNP Paribas Securities Services S.C.A., Guernsey Branch

Company Secretary

Jasper Cross

01481 750859

 

JP Morgan Cazenove

William Simmonds

Oliver Kenyon

0207 742 4000

 

Copies of the Company's Interim Report and Unaudited Condensed Financial Statements will be available from the Company Secretary, BNP Paribas Securities Services S.C.A., Guernsey Branch at BNP Paribas House, St Julian's Avenue, St Peter Port, Guernsey, GY1 1WA, or on the Company's website WWW.AEFRIF.COM Neither the contents of the Company's website, nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.