REAL ESTATE CREDIT INVESTMENTS LIMITED About the Company 3
Chairman's Statement 4
Financial Highlights / Key Performance Indicators 5
Investment Manager's Report 6
Directors' Responsibility Statement 9
Independent Review Report 10
Condensed Statement of Comprehensive Income 11
Condensed Statement of Financial Position 12
Condensed Statement of Changes in Equity 14
Condensed Statement of Cash Flows 15
Notes to the Condensed Unaudited financial statements 17
Directors and Advisers 36
About the CompanyReal Estate Credit Investments PCC Limited is a protected cell company (the 'Company'), being a cellular company governed by the Companies (Guernsey) Law 2008, comprising a core segment (the 'Core' or 'RECI') and a cell segment (the 'Cell' or 'ERII'). The Cell has been wound down and no longer has any material value.
The RECI Ordinary Shares (ticker RECI) reflect the performance of the Company's Core real estate debt strategy. The RECI Ordinary Shares are currently listed on the premium segment of the Official List of the UK Listing Authority and trade on the Main Market of the London Stock Exchange plc. RECI Ordinary Shares offer investors a levered exposure to a portfolio of real estate credit investments and aim to pay a quarterly dividend. Such leverage is provided by the RECI Preference Shares (ticker RECP) which confer the right to a preferential cumulative preference dividend (which is an amount in Sterling equal to 8 per cent per annum of the Preference Share Notional Value) payable quarterly on each Payment Date. The RECP Preference Shares are currently listed on the standard segment of the Official List of the UK Listing Authority and trade on the Main Market of the London Stock Exchange plc.
The Core real estate debt strategy focuses on secured residential and commercial debt in the UK and Western Europe, seeking to exploit opportunities in publicly traded securities and real estate loans. In making these investments the Company uses the expertise and knowledge of its investment manager, Cheyne Capital Management (UK) LLP ('Cheyne'). The Company has adopted a long term strategic approach to investing and focuses on identifying value.
The Cell within the Company is known as 'European Residual Income Investments Cell' or 'ERII'. The trading of the Cell Shares on the Specialist Funds Market of the London Stock Exchange (ticker ERII LN) was cancelled on 23 December 2014 following the realisation of ERII's substantive assets. There is one Residual Income Position remaining as at 30 September 2015. That position has been held at zero value since the ERII Cell was created.
Website and Share Price Information
The Company has a dedicated web page, which may be found at www.recreditinvest.com which contains comprehensive information, including regulatory announcements, share price information, financial reports, investment objectives and strategy, investor contracts and information on the Board.
Chairman's StatementReal Estate Credit Investments PCC Limited ('RECI' or the 'Company') has reported another period of positive performance in the financial half-year ended 30 September 2015.
Net asset value ('NAV') at 30 September 2015 was £1.625 per RECI ordinary share ('Ordinary Share'), which when combined with dividends declared in the half year of 5.4p per share, provides a NAV total return to Ordinary Shareholders of 3.5% in the half year.
RECI reported increased operating income of £9.0 million in the financial half-year ended 30 September 2015, up from £7.2m in the half year ended 30 September 2014. Total net profits for the half-year ended 30 September 2015 were £4.1 million, compared with £7.5 million in the half year ended 30 September 2014. The Loan portfolio provided strong returns in line with expectation, but the bond portfolio performance was lower than expected due to mark to market price performance driven by volatility in the wider markets.
A dividend of 2.7p per Ordinary Share has been declared for the quarter ended 30 September 2015. Total dividends declared in respect of the financial half year will therefore be 5.4p per Ordinary Share, returning £3.9 million to Ordinary Shareholders.
Total dividends declared in respect of the financial half year were 4.0p per Preference Share, returning £1.7 million to Preference Shareholders. A further dividend of 2.0p per Preference Share has been declared for the quarter ended 31 December 2015.
During the half-year RECI continued to increase its loan portfolio from £102 million committed at 31 March 2015 to £120 million as at 30 September 2015, up from 63% of Gross Asset Value ('GAV') to 73%, increasing its exposure to higher-yielding loans. This strategy contributed to delivering a positive performance, notwithstanding challenging market conditions for asset back securities and loans.
I am pleased to be writing my first Chairman's Statement since succeeding Tom Chandos on 12th June 2015. The Board remains grateful to Tom for his leadership of the Company, and to Mr Talmai Morgan, who retired as a Director at the AGM in August 2015, both of whom had served RECI since its launch.
On 19th October 2015, the Company announced that Ravi Stickney, the Head of Cheyne's real estate business, would take responsibility for and continue to manage with his team, the Company's portfolio, following the decision of Graham Emmett to leave Cheyne. The Board remains confident that Cheyne's real estate debt team, comprising 13 professionals, is well resourced and welcomes Cheyne's plans to strengthen the team further.
RECI continues to benefit from the ability, through Cheyne and its transaction pipeline, to participate in the structuring and underwriting of relatively complex and specialised loans, in order to maximise risk-adjusted returns for its investors. The expectation of supportive market conditions for high-yielding loans across our core geographical target areas, to support the generation of positive returns from the growing loans portfolio, is balanced by a cautious outlook on the asset backed bond market. Accordingly, the Company will maintain its disciplined investment process in selecting loans and bonds that will combine to continue to deliver attractive returns for investors.
Chairman
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