SLF Realisation Fund : Half-Yearly Report and Unaudited Condensed Consolidated Financial Statements

SLF REALISATION FUND LIMITED

Half-Yearly Report and Unaudited Condensed Consolidated

Financial Statements for the six months ended 31 December 2023

SLF Realisation Fund Limited

Half-Yearly Report and Unaudited Condensed Consolidated Financial Statements for the six months ended 31 December 2023

GROUP METRICS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023

As at 31 December 2023, the investment objective of SLF Realisation Fund Limited (the "Company" and together with its subsidiaries, the "Group") is to realise all remaining assets in the portfolio of the Ordinary Share class and the 2016 C Share class in a prudent manner consistent with the principles of good investment management and to return cash to shareholders in an orderly manner. The Group's base currency is Sterling.

(

12.54)% per Ordinary Share1

3.57p per Ordinary Share

(21.57)% Ordinary Share1

(4.35)% per 2016 C Share1

5.42p per 2016 C Share

(29.89)% 2016 C Share1

NAV total return per share for

NAV per Share

Share price discount to NAV

the six months ended

as at 31 December 2023

as at 31 December 2023

31 December 2023

£9.97 million for Ordinary

£8.90 million for the

Shares

Ordinary Share class

£5.28 million for 2016 C

£3.47 million for the 2016 C

Shares

Share class

Market capitalisation as at

Return of capital to

31 December 2023

shareholders during the period

ended 31 December 2023

The comparatives for the other group metrics detailed above are disclosed on page 2.

1 These are Alternative Performance Measures; refer to pages 31 and 32 for details.

SLF Realisation Fund Limited

Half-Yearly Report and Unaudited Condensed Consolidated Financial Statements for the six months ended 31 December 2023

GROUP METRICS FOR THE SIX MONTHS ENDED 31 DECEMBER 2023 (CONTINUED)

The key drivers of the change in Net Asset Value ("NAV") per share between 1 July 2023 and 31 December

2023 are highlighted in the graphs below:

Ordinary Shares

2016 C Shares

SLF Realisation Fund Limited

Half-Yearly Report and Unaudited Condensed Consolidated Financial Statements for the six months ended 31 December 2023

Index	Page
Financial Metrics and Performance Summary	1 - 2
Company Overview	3
Chairman's Statement	4 - 5
Investment Report	6- 11
Statement of Directors' Responsibilities	12
Unaudited Condensed Consolidated Statement of Comprehensive Income	13
Unaudited Condensed Consolidated Statement of Financial Position	14
Unaudited Condensed Consolidated Statement of Changes in Equity	15
Unaudited Condensed Consolidated Statement of Cash Flows	16
Notes to the Unaudited Condensed Consolidated Financial Statements	17 - 30
Alternative Performance Measures	31 - 32
Company Information	33
List of Acronyms	34

SLF Realisation Fund Limited

Half-Yearly Report and Unaudited Condensed Consolidated Financial Statements for the six months ended 31 December 2023

FINANCIAL METRICS AND PERFORMANCE SUMMARY

Financial Metrics

NAV Total Return1

The NAV total return measures how the NAV per Ordinary share and 2016 C share has performed over a period, taking into account both capital distributions and dividends paid to shareholders. The NAV total return achieved by the Group is detailed in the table below:

Period	Ordinary Shares	2016 C Shares
Six months to 31 December 2023	(12.54)%	(4.35)%
Year to 31 December 2023	(22.45)%	(13.35)%
3 year2	(22.65)%	10.54%
Since inception	(32.27)%	(7.95)%

The NAV total return since inception is illustrated in the graph below:

Return of Capital

The investment objective of the Ordinary Shares and the 2016 C Shares is to realise all remaining assets in a prudent manner consistent with the principles of good investment management and to return cash to shareholders in an orderly manner. For the six month period ended 31 December 2023, the Company made a return of capital on two occasions, as detailed below, returning a total of £8,899,392 to Ordinary shareholders and £3,473,106 to 2016 C shareholders.

		Ordinary Shares	2016 C Shares
Record date	Amount	Amount returned to	Amount	Amount returned to
		per Share	shareholders	per Share	shareholders
11	August 2023	1p	£3,559,757	2.5p	£3,473,106
15	December 2023	1.5p	£5,339,635	-	-

Please refer to note 14 for full details of the Company's return of capital.

1. Refer to pages 31 to 32 for the calculation of these alternative performance measures.
2. NAV total return over a 3-year period from 1 January 2021 to 31 December 2023.

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SLF Realisation Fund Limited

Half-Yearly Report and Unaudited Condensed Consolidated Financial Statements for the six months ended 31 December 2023

FINANCIAL METRICS AND PERFORMANCE SUMMARY (CONTINUED)

Performance Summary

Sterling in millions, except per share	31 December 2023	30 June 2023	31 December 2022
data (disclosed in pence) and number	(Unaudited)	(Audited)	(Unaudited)
of shares in issue
Number of shares in issue
- Ordinary Shares	355,975,669	355,975,669	355,975,669
- 2016 C Shares	138,924,222	138,924,222	138,924,222
NAV
- Ordinary Shares	£12.70	£24.71	£43.94
- 2016 C Shares	£7.53	£11.50	£18.30
NAV per share
- Ordinary Shares	3.57p	6.94p	12.34p
- 2016 C Shares	5.42p	8.28p	13.18p
NAV total return per share during the
period/year
- Ordinary Shares	(12.54)%	(25.80)%	(14.91)%
- 2016 C Shares	(4.35)%	(2.71)%	4.74%
Share price1
- Ordinary Shares	2.80p	2.80p	6.10p
- 2016 C Shares	3.80p	6.20p	6.50p
Share price discount
- Ordinary Shares	(21.57)%	(59.65)%	(50.57)%
- 2016 C Shares	(29.89)%	(25.12)%	(50.68)%
Market capitalisation1
- Ordinary Shares	£9.97	£9.97	£21.71
- 2016 C Shares	£5.28	£8.61	£9.03
(Loss)/earnings per share
- Ordinary Shares	(0.88)p	(4.49)p	(2.59)p
- 2016 C Shares	(0.36)p	(0.51)p	0.89p
Return of Capital during the
period/year
- Ordinary Shares	£8.90	£21.36	£8.90
- 2016 C Shares	£3.47	£13.89	£9.03
Comprehensive (loss)/income
- Ordinary Shares	£(3.12)	£(16.00)	£(9.23)
- 2016 C Shares	£(0.49)	£(0.71)	£1.23
Investments and other receivables and
prepayments
- Ordinary Shares	£9.22	£20.35	£39.15
- 2016 C Shares	£6.22	£5.88	£14.83
Cash and cash equivalents
- Ordinary Shares	£4.55	£5.67	£6.01
- 2016 C Shares	£2.47	£6.84	£4.77

1 Source: Bloomberg

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SLF Realisation Fund Limited

Half-Yearly Report and Unaudited Condensed Consolidated Financial Statements for the six months ended 31 December 2023

COMPANY OVERVIEW

Company	SLF Realisation Fund Limited
	Incorporated in Guernsey on 28 May 2014.
	Registered Guernsey Closed-ended Collective Investment Scheme.
	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 on 14
	July 2014 for Ordinary Shares, 9 November 2015 for the first issuance of C
	Shares (which were converted into Ordinary Shares on the 25 October
	2016) and 12 December 2016 for the second issuance of C Shares (the
	"2016 C Shares").
	Registration number 58519.

Alternative Investment	FundRock Management Company (Guernsey) Limited
Fund Manager	Regulated by the Guernsey Financial Services Commission under the
	Protection of Investors (Bailiwick of Guernsey) Law 2020.
	Incorporated in Guernsey with registration number 17484.
	(the "AIFM")

Details of other service providers are provided on page 33.

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SLF Realisation Fund Limited

Half-Yearly Report and Unaudited Condensed Consolidated Financial Statements for the six months ended 31 December 2023

CHAIRMAN'S STATEMENT

Introduction

I am pleased to provide shareholders with my interim Chairman's Statement, covering the period from 1 July 2023 to 31 December 2023. It has been another busy period with further progress being made in achieving the investment objective of the Company, namely, to follow a realisation strategy and return capital to shareholders.

I am pleased to report that the realisation program for both the Ordinary Share class and the 2016 C Share class has made good progress, with returns of capital having been made during the period of 2.5p per Ordinary Share (£8.9 million) and 2.5p per 2016 C Share (£3.5 million).

In total, as at the date hereof, £96.1 million or 27p per share has been returned to Ordinary shareholders and £100.7 million or 72.5p per share has been returned to 2016 C shareholders since the realisation program began.

Performance

The NAV total return per Ordinary Share was (12.54)% and the NAV total return per 2016 C Share was

(4.35)% for the period ended 31 December 2023. Other key metrics were:

• For the reporting period, the Company has reported a combined loss after tax of £3.61 million.
• The Ordinary Share NAV at 31 December 2023 was £12.70 million (3.57p per Ordinary Share) compared to £24.71 million (6.94p per Ordinary Share) as at 30 June 2023.
• The 2016 C Share NAV at 31 December 2023 was £7.53 million (5.42p per 2016 C Share) compared to £11.5 million (8.28p per 2016 C Share) as at 30 June 2023.

Shareholder Engagement

The Board have engaged with shareholders over the reporting period, taking feedback and responding to their recommendations where appropriate. Brett Miller has led this activity and will continue to do so as we continue to wind down the Company.

Key Developments

• In July 2023, it was announced that Borrower 22 within the Ordinary Share Class portfolio, had repaid £1.81 million, being a full repayment of the facility. The asset had a carrying value of £1.8 million as at 30 June 2023.
• A return of capital was announced in July 2023, with 1p per Ordinary Share and 2.5p per 2016 C Share being returned to shareholders.
• In November 2023, it was announced that Borrower 5 within the Ordinary Share Class portfolio, had received $1.8 million in settlement of a parental company guarantee on the original lending position to a solar manufacturing plant in the USA. The position had a carrying value of £0.3 million as at 30 June 2023.
• A further return of capital was announced in November 2023, with 1.5p per Ordinary Share being returned to shareholders.
• In December 2023, it was announced that Borrower 61, within the Ordinary Share Class portfolio, had settled their facility. The position repaid a negotiated £0.8 million. It had a carrying value of £1.2 million as at 30 June 2023.

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SLF Realisation Fund Limited

Half-Yearly Report and Unaudited Condensed Consolidated Financial Statements for the six months ended 31 December 2023

CHAIRMAN'S STATEMENT (CONTINUED)

The Score So Far

In posing the question: "How is the realisation proceeding?" it is worth recalling the background. With effect from 31 December 2020, the current Directors constituted a majority of the Board and from that point Brett Miller then had free rein to really work with the portfolio manager initially and then subsequently with the consultants and employee on running off the portfolio and returning cash to shareholders. So far, the results have been marginally quicker and slightly better than expected but there remains more work to be done on a portfolio that comprises mostly difficult assets, most of which are in default and distressed.

As at 31 December 2020, the share price of the Ordinary Shares was 16.5p bid and the 2016 C Shares was 34.8p bid. Since then, we have returned 27p a share in cash to the Ordinary shareholders and 72.5p a share to the 2016 C shareholders. As of 20 March 2024, the Ordinary Shares traded at 1.5p bid and the 2016 C Shares at 3.5p bid. That's approximately a 73% return for the Ordinary shareholders and a 118% return for the 2016 C shareholders. And there's still more work to do.

We have repeatedly represented to shareholders that we would aim to get back to them as much as possible of the June 2020 NAV in cash. That NAV was prepared with the benefit of independent valuations for quite a few names in the portfolio that the portfolio manager had determined were difficult to value. The 30 June 2020 NAV was 36.19p per Ord Share and 68.17p per C Share. We have therefore already returned circa 74.6% of the Ordinary NAV and 106.4% of the C Share NAV. Certainly for the 2016 C Share class that is ahead of expectations at the outset and we remain confident about being able to return some more cash in due course. In respect of the Ordinary Share class, progress has been slower than expected largely due to the problems with Suniva and the AD plants, but we remain optimistic about making further progress.

Outlook

As can be seen from the paragraph above, the bulk of the realisations for the 2016 C Share class has been completed and a substantial part of the Ordinary Share class has also been completed. The Board expects the wind-down plan for the bulk of what remains will likely take approximately 6 to 12 months to exit, with a further tail likely to take approximately a further 12 months. As part of a review of costs, and due to the small size of the Company, the Board is reviewing a plan to delist the Company's Ordinary and 2016 C Shares from the London Stock Exchange. A further announcement on this will be made in due course. Our goal is to achieve a balance between maximising value received for assets and making timely returns of capital. Whilst the realisation program has proceeded to plan so far, we are cognisant of the greater risk that remains in the balance of the portfolio, as whatever remains in the portfolio has not yet achieved a satisfactory exit. The Board continues to work on achieving positive outcomes. Working out the remainder of the portfolio will not be easy but as always, we shall keep investors informed of any developments as they occur.

We thank investors for their continued support and we hope to be in a position to report more progress in the coming months.

Brendan Hawthorne

Chairman

21 March 2024

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SLF Realisation Fund Limited

Half-Yearly Report and Unaudited Condensed Consolidated Financial Statements for the six months ended 31 December 2023

INVESTMENT REPORT

Overview

Realisations remained the focus of the first half of the year, with increasingly challenging disposals remaining. The key disposals were all residual parts of previous transactions and, included the much delayed refinance of an AD plant alongside two deferred payments. The remaining positions are either in the process of being refinanced or were unlikely to do so, as is described below.

The Company's efforts to optimise the return of capital to shareholders resulted in £12.4 million being returned to shareholders during the half-year. All distributions were paid as capital returns, as opposed to dividends, which were suspended in March 2020. No foreign exchange ("FX") hedging has been undertaken during the reporting period with non-GBP balances converted into GBP at the soonest opportunity.

With few exposures left, future redemptions will be very credit specific. The outcomes for these credits in many cases is highly uncertain and therefore a very wide dispersion of likely returns exists.

The FX exposures in the portfolio as at 31 December 2023 were:

FX Exposures	Fair value
(in millions)
Ordinary Share	Original Currency	GBP
GBP	2.1	2.1
EUR	7.9	6.9
USD	-	-
HKG	0.9	0.1

2016 C Share	Original Currency	GBP
GBP	2.4	2.4
EUR	4.4	3.8

Market backdrop

Economic and political uncertainty, rising interest rates and inflation provides a headwind for most businesses. While interest rates stabilised, they remain at elevated levels. This increase means that the fixed rates charged by the company are now much closer to bank rates limiting ability and or appetite to refinance.

Inflation remains a concern for most borrowers, as they seek to pass cost pressures through to customers.

The Ordinary Share Class and 2016 C Share Class Portfolios

As the portfolio is in wind down, all borrowers were asked to consider redemption or refinance where possible and the Company seeks to facilitate sale of other investments. The Company returns capital to shareholders via capital repayments.

Dividends

No dividends were distributed during the reporting period. However, it should be noted that the Company was able to continue capital distributions to shareholders as loans were refinanced or matured. In the half- year, £8.9 million was returned to Ordinary shareholders and £3.5 million returned to 2016 C shareholders.

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