1
Annual Report and
Audited Consolidated
Financial Statements
for the year ended 31 December 2022
2
1
CONTENTS
Overview
Financial Highlights 2
Objective and Investment Policy 4
Chairman’s Statement 8
Strategic and Business Review
Strategic Report 12
Investment Manager’s Report 18
Governance
Board of Directors 28
Report of the Directors 29
Directors’ Remuneration Report 32
Corporate Governance Statement 33
Report of the Audit Committee 40
Statement of Directors’ Responsibilities 45
Financial Statements
Independent Auditor’s Report 47
Independent Auditor’s Report (US GAAS) 55
Consolidated Statement of Comprehensive Income 57
Consolidated Statement of Financial Position 58
Consolidated Statement of Changes in Equity 59
Consolidated Statement of Cash Flows 60
Notes to the Consolidated Financial Statements 61
Further Information
Alternative Performance Measures 98
Corporate Information 101
2
Overview
Financial Highlights
Key Highlights
Year ended
31 December 2022
Year ended
31 December 2021
NAV per Ordinary Share 105.20 p 103.09 p
Share Price 89.0 p 94.0 p
NAV total return
(1) (2)
7.7% 4.6%
Share Price total return
(1) (2)
0.45% 11.1%
Total Net Assets £416.1 m £421.6 m
Loans advanced at amortised cost
(including accrued income)
£432.5 m £414.6 m
Financial assets held at fair value
through profit or loss
£0.7 m £13.3 m
Cash and Cash Equivalents £3.6 m £3.0 m
Amount drawn under Revolving Credit
Facility (excluding accrued interest)
£19.0 m £8.5 m
Dividends per Ordinary Share
(2)
5.5 p 5.5 p
Invested Loan Portfolio unlevered
annualised total return
(1)
7.8% 6.9%
Invested Loan Portfolio levered
annualised total return
(1)
7.9% 7.0%
Ongoing charges percentage
(1)
1.1% 1.0%
Weighted average portfolio LTV to
Group first £
(1)
13.2% 16.4%
Weighted average portfolio LTV to
Group last £
(1)
58.6% 61.9%
(1)
Further explanation and definitions of the calculation is contained in the section
“Alternative Performance Measures” at the end of this financial report.
(2 )
Excludes additional dividend for 2022 announced on 23 March 2023.
3
-40.00
-30.00
-20.00
-10.00
0.00
10.00
20.00
Dec 12
Mar 13
Jun 13
Sep 13
Dec 13
Mar 14
Jun 14
Sep 14
Dec 14
Mar 15
Jun 15
Sep 15
Dec 15
Mar 16
Jun 16
Sep 16
Dec 16
Mar 17
Jun 17
Sep 17
Dec 17
Mar 18
Jun 18
Sep 18
Dec 18
Mar 19
Jun 19
Sep 19
Dec 19
Mar 20
Jun 20
Sep 20
Dec 20
Sep 21
Dec 21
Mar 21
Jun 21
Mar 22
Jun 22
Sep 22
Dec 22
Premium / Discount Cum-Fair
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Dec 12
Mar 13
Jun 13
Sep 13
Dec 13
Mar 14
Jun 14
Sep 14
Dec 14
Mar 15
Jun 15
Sep 15
Dec 15
Mar 16
Jun 16
Sep 16
Dec 16
Mar 17
Jun 17
Sep 17
Dec 17
Mar 18
Jun 18
Sep 18
Dec 18
Mar 19
Jun 19
Sep 19
Dec 19
Mar 20
Jun 20
Sep 20
Dec 20
Sep 21
Dec 21
Mar 21
Jun 21
Mar 22
Jun 22
Sep 22
Dec 22
Cumulative Fair NAV Total Return Index Share price total return Index
Share Price and Cum-Fair NAV Total Return
SHARE PRICE PERFORMANCE
As at 31 December 2022, the NAV was 105.20 pence per Ordinary Share
(2021: 103.09 pence) and the share price was 89.0 pence (2021: 94.0 pence).
The Company’s share price has been volatile since the market turbulence caused by Covid-19
in March 2020. The volatility has been driven by market conditions and trading flows rather
than a change in the Company’s performance.
Source: Morningstar
Premium / discount (%)
Cumulative fair NAV total return index Share price total return index
-40.00
-30.00
-20.00
-10.00
0.00
10.00
20.00
Dec 12
Mar 13
Jun 13
Sep 13
Dec 13
Mar 14
Jun 14
Sep 14
Dec 14
Mar 15
Jun 15
Sep 15
Dec 15
Mar 16
Jun 16
Sep 16
Dec 16
Mar 17
Jun 17
Sep 17
Dec 17
Mar 18
Jun 18
Sep 18
Dec 18
Mar 19
Jun 19
Sep 19
Dec 19
Mar 20
Jun 20
Sep 20
Dec 20
Sep 21
Dec 21
Mar 21
Jun 21
Mar 22
Jun 22
Sep 22
Dec 22
Premium / Discount Cum-Fair
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Dec 12
Mar 13
Jun 13
Sep 13
Dec 13
Mar 14
Jun 14
Sep 14
Dec 14
Mar 15
Jun 15
Sep 15
Dec 15
Mar 16
Jun 16
Sep 16
Dec 16
Mar 17
Jun 17
Sep 17
Dec 17
Mar 18
Jun 18
Sep 18
Dec 18
Mar 19
Jun 19
Sep 19
Dec 19
Mar 20
Jun 20
Sep 20
Dec 20
Sep 21
Dec 21
Mar 21
Jun 21
Mar 22
Jun 22
Sep 22
Dec 22
Cumulative Fair NAV Total Return Index Share price total return Index
Share Price and Cum-Fair NAV Total Return
4
INTRODUCTION
The Company, together with its subsidiaries
Starfin Public Holdco 1 Limited, Starfin
Public Holdco 2 Limited, Starfin Lux S.à.r.l,
Starfin Lux 3 S.à.r.l, and Starfin Lux 4 S.à.r.l,
(collectively the “Group”), has provided
a regular dividend to shareholders whilst
preserving capital by limiting downside risk.
On 31 October 2022, the Company
announced, that following a review of the
Company’s strategy and advice sought
from its advisers, the Board intended
to recommend to shareholders that the
investment objective and policy of the
Company were amended such that the
Board can pursue a strategy of orderly
realisation and the return of capital over
time to shareholders (the “Proposed Orderly
Realisation”). If approved by the shareholders,
the Company would seek to return cash to
shareholders in an orderly manner as soon
as reasonably practicable following the
repayment of loans, while retaining sufficient
working capital for ongoing operations and the
funding of committed but currently unfunded
loan commitments.
Overview
Objective and Investment Policy
On 28 December 2022, a Circular relating
to the Proposed Orderly Realisation and
containing a Notice of Extraordinary General
Meeting (EGM) was published. The Circular
set out details of, and sought shareholder
approval for, certain proposals (the
“Proposals”). The Proposals were:
(a) a change to the Company’s Investment
Policy to reflect the fact that the Company
will cease making any new investments
and will pursue a realisation strategy of
the remaining assets in the Company’s
portfolio; and
(b) adoption of new articles which provide for
the periodic Compulsory Redemption of
the Company’s Shares at the discretion of
the Directors to allow cash to be returned
to Shareholders following the full or partial
realisation of assets.
On 27 January 2023, these Proposals were
approved at the EGM.
The Investment Objective and Policy
which applied prior to the approval of the
Proposals, and for the whole of 2022, are
set out in the prior year Annual Report which
can be found on the company’s website
https://starwoodeuropeanfinance.com.
The Investment Objective applied for
the whole of 2022 was 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 in
the UK and the European Union’s internal
market. The Investment Policy applied for the
whole of 2022 was to invest in a diversified
portfolio of real estate debt investments in
the UK and the European Union’s internal
market as the Group had done since its initial
public offering (IPO) in December 2012.
Set out below is the current Investment
Objective and Policy of the Company
following the approval of the Proposals.
5
INVESTMENT OBJECTIVE
Following the Company’s EGM on 27 January
2023, the Company’s investment objective is
to conduct an orderly realisation of the assets
of the Group.
INVESTMENT POLICY
The assets of the Group will be realised
in an orderly manner, returning cash to
Shareholders at such times and in such
manner as the Board may, in its absolute
discretion, determine. The Board will
endeavour to realise all of the Group’s
investments in a manner that achieves a
balance between maximising the net value
received from those investments and making
timely returns to Shareholders.
The Group may not make any new
investments save that:
• investments may be made to honour
commitments under existing contractual
arrangements or to preserve the value of
any underlying security; and
• cash held by the Group pending distribution
will be held in either cash or cash
equivalents for the purposes of cash
management.
Subject to the above restrictions, the
Company retains the ability to seek to
enhance the returns of selected loan
investments through the economic transfer
of the most senior portion of such loan
investments which would be by way
of syndication, sale, assignment, sub-
participation or other financing (including
but not limited to true sale securitisation,
repurchase transactions and loan-on-
loan financing) 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.
Transactions with Starwood Capital Group
or Other Accounts
Subject to the above restrictions, the
Company retains the ability to transact
with 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 furtherance of the Company’s investment
objective to conduct an orderly realisation
of the Group’s assets (for example, sales of
the Group’s assets to companies within the
Starwood Capital Group or certain Other
Accounts or amendments to pre-existing
arrangements). In order to manage the
potential conflicts of interest that may arise
as a result of any 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 and Guidance, 2021 issued by the
Guernsey Financial Services Commission
(“Commission”) under The Protection of
Investors (Bailiwick of Guernsey) Law, 2020,
as amended, and, where required by the
Listing Rules, Shareholder approval would be
obtained in accordance with the listing rules
issued by the Financial Conduct 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.
6
While Starwood Capital Group and certain
Other Accounts are party to certain
pre-existing co-investment commitments,
no new co-investment arrangements are
expected to be entered into by, or in relation
to, the Company in the future during the
orderly realisation of the Company’s assets.
The change in investment objective does not
impact the below classifications.
Borrowings
The Company may utilise borrowings
from time to time for working capital and
general corporate purposes provided such
borrowings will not exceed an amount
equal to 30 per cent of the Net Asset Value
immediately following the drawdown of the
borrowings.
In calculating the Company’s borrowings for
this purpose, any liabilities incurred under
its foreign exchange hedging arrangements
(described below) shall be disregarded.
Hedging
The Company will not enter into derivative
transactions for purely speculative purposes.
However, the Company’s investments have
been typically made in the currency of the
country where the underlying real estate
assets are located. The Company may
continue to 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 have been 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.
FCA Listing Rule restrictions
The Company will continue to comply with
the restrictions imposed by the Listing Rules
in force and as amended from time to time.
Any material change to the Company’s
published investment policy will be made
only with the prior approval of the Financial
Conduct Authority and of Shareholders by
ordinary resolution at a general meeting of
the Company.
Overview
Objective and Investment Policy