TIDMNCYF
RNS Number : 5191M
CQS New City High Yield Fund Ltd
14 September 2023
A copy of the Company's Annual Report will shortly be available
on the Company's website (
https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd ), on the
National Storage Mechanism (
https://data.fca.org.uk/#/nsm/nationalstoragemechanism ) and will
also be provided to those shareholders who have requested a printed
or electronic copy
CQS NEW CITY HIGH YIELD FUND LIMITED
Annual Results Announcement
for the year ended 30 June 2023
Financial Highlights
12 months to 12 months to
NAV and share price total return(2) 30 June 2023 30 June 2022
NAV(1) 2.04% 2.04%
Ordinary share price (0.68)% 1.21%
As at As at
Capital values 30 June 2023 30 June 2022 % change
Total assets less current liabilities (with the exception of
the bank loan facility) GBP275.4m GBP268.0m 2.76%
NAV per ordinary share(1) 45.83p 49.30p (7.04)%
Share price (bid)(3) 46.60p 51.20p (8.98)%
12 months to 12 months to
Revenue and dividends 30 June 2023 30 June 2022 % change
Revenue earnings per ordinary share(2) 4.51p 4.16p 8.41%
Annual dividends per ordinary share(2) 4.49p 4.48p 0.22%
Dividend cover(2) 1.00x 0.93x
Revenue reserve per ordinary share (after recognition of
annual dividends)(2) 3.05p 3.26p
Dividend yield(2) 9.64% 8.75%
Premium(2) 1.68% 3.86%
Gearing(2) 11.81% 12.35%
Ongoing charges ratio(2) 1.16% 1.19%
Dividend history Rate xd date Record date Payment date
First interim 2023 1.00p 27 October 2022 28 October 2022 25 November 2022
Second interim 2023 1.00p 26 January 2023 27 January 2023 28 February 2023
Third interim 2023 1.00p 27 April 2023 28 April 2023 26 May 2023
Fourth interim 2023 1.49p 27 July 2023 28 July 2023 31 August 2023
------------------------------------------------- ------------ ---------------- ---------------- -----------------
Annual dividend per ordinary share 4.49p
------------------------------------------------- ------------ ---------------- ---------------- -----------------
First interim 2022 1.00p 28 October 2021 29 October 2021 30 November 2021
Second interim 2022 1.00p 27 January 2022 28 January 2022 25 February 2022
Third interim 2022 1.00p 28 April 2022 29 April 2022 27 May 2022
Fourth interim 2022 1.48p 28 July 2022 29 July 2022 26 August 2022
------------------------------------------------- ------------ ---------------- ---------------- -----------------
Annual dividend per ordinary share 4.48p
------------------------------------------------- ------------ ---------------- ---------------- -----------------
(1) The definition of the terms used can be found in the
glossary below.
(2) A description of the Alternative Performance Measures
("APMs") used above and information on how they are calculated can
be found below.
(3) Source: Bloomberg
Statement from the Chair
Key Points
-- NAV total return of 2.04%
-- Ordinary share price total return decline of 0.68%
-- Dividend yield of 9.64%, based on dividends at an annualised
rate of 4.49 pence and a share price of 46.60 pence as at 30 June
2023
-- Ordinary share price at a premium of 1.68% at 30 June 2023
-- GBP24,235,000 of equity issued during the year to 30 June 2023
-- Dividend cover of 1.00x
Investment and share price performance
The NAV total return of the Company for this financial period
was a positive 2.04% (coincidentally the exact same level as the
previous year), thanks to the dividends paid to Shareholders during
the year. This outcome was despite a difficult background as rising
inflation and interest rates worried investors in the high yield
debt markets in which the Company mainly invests. Many investment
trusts, particularly those with an income focus, were negatively
impacted by this environment with premiums eroded and in many
cases, wide discounts appearing. The Company was not immune and the
share price premium declined but only modestly (from 3.86% at the
close of the last financial year to 1.68% this year) which resulted
in a slight fall in the share price total return of 0.68%. In these
circumstances, I believe this is a commendable outcome,
particularly as the Company's shares remained on a premium and we
were able to continue issuing shares (see below). I also believe
that the Company's longer term performance remains strong.
In the early part of the year under review, the UK debt market
was rattled by the short lived "mini budget" which triggered an
increase in UK Gilt yields to levels not seen in 15 years. Although
they then fell back, investor concerns about the UK, particularly
stubborn inflationary pressures, have subsequently pushed yields
back up, nearly to the levels seen at the time of the mini budget.
Furthermore, the rapid demise of Credit Suisse in March was an
issue for the portfolio. The junior debt of Credit Suisse was
written down to zero ahead of the Company's equity and this unusual
turn of events destabilised the junior debt of banks and financial
companies across the UK and Europe and led to bond prices of these
instruments being written down. Although the Credit Suisse holding
was small, the Company has a material position in other such
instruments. The investment manager, Ian "Franco" Francis, gives
more detail in his report and believes that these junior debt
prices will recover. He discusses the financial year in his review
below.
Earnings and dividends
Despite this difficult environment, I am pleased to report that
the Company's revenue earnings per ordinary share were 4.51 pence
for the year to 30 June 2023, which compares to 4.16 pence earned
in the same period last year. This 8.41% increase was the result of
the Investment Manager being able to take advantage of the decrease
in prices to invest in more quality higher yielding bonds as
interest rates rose. We also saw the repayment of previous arrears
by several positions in the portfolio.
The Board decided to increase this year's dividend, albeit
marginally, maintaining the Company's record of annual dividend
increases which has been unbroken since 2007. The Company declared
three interim dividends of 1.00 pence in respect of the period and
one interim dividend of 1.49 pence since the year end. The
aggregate payment of 4.49 pence per ordinary share represents a
0.22% increase on the 4.48 pence paid last year. It is pleasing to
be able to report that this year's total dividend is covered by
revenue earnings.
As things stand, the Board intends to follow the same pattern of
dividend payments as declared last year and maintain or slightly
increase the total level of dividends for the year. Based on an
annual rate of 4.49 pence and a share price of 47.40 pence at the
time of writing, this represents a dividend yield of 9.47%. As I
stress in every report, the Board pays great attention to dividend
payments as we understand how much shareholders value this aspect
of the Company.
Gearing
The Company has a GBP45,000,000 loan facility with Scotiabank
which is due to expire in December 2023. Out of this facility,
GBP35,000,000 was drawn down as at 30 June 2023 and at the time of
writing the Company has an effective gearing rate of 13.45%. As
interest rates have risen, the cost of borrowing to gear has
increased. The Board monitors this on a regular basis to judge
whether the benefits of gearing outweigh these costs. At present,
we believe that Shareholders will benefit from a modest but
meaningful amount of gearing (a notable advantage of closed-ended
funds compared to open-ended) and expects to maintain approximately
this level of gearing during the next financial year.
Share issuance
Taking advantage of the premium rating that the market continued
to attach to the Company's shares, GBP24,235,000 was raised from
new and existing shareholders during the financial year, with
47,950,000 ordinary shares issued from the block listing facility.
Shares were only issued when the Investment Manager was confident
it could invest the additional funds favourably. As well as a
modest increase in NAV from any issue of shares, the Board believes
that over time, existing Shareholders will benefit from lower
ongoing charges and greater liquidity in the Company's shares, all
other things being equal.
Environmental, Social and Governance ("ESG") statement
The Board's intention is to invest responsibly and to consider
the Company's broader impact on society and the environment. We
believe the integration of ESG factors in the investment process is
consistent with delivering sustainable attractive returns for
Shareholders through deeper, more informed investment decisions.
The Board has reviewed and agreed the ESG approach adopted by the
Company and a summary of this is set out in the Company's Annual
Financial Report and Financial Statements.
Outlook
With the majority of UK interest rate increases likely to be
behind us and inflation showing some signs of moderation, the
outlook for Sterling fixed interest securities appears more stable.
Nevertheless, potential for turbulent events in the macro economic
and geopolitical space remains and although the UK has managed to
avoid a recession thus far, concerns linger. In his 'Outlook'
report, your investment manager provides a bit more detail on what
he is particularly watching. From a revenue perspective the Board
maintains a positive outlook, anticipating strong revenue earnings
and the ability to sustain the relatively high dividend levels
appreciated by our shareholders.
Caroline Hitch
Chair
14 September 2023
Investment Manager's Review
Introduction
All our previously expressed fears about higher inflation and
correspondingly higher interest rates came home to roost over the
course of our last financial year to 30 June 2023. For a high
yielding bond fund, higher interest rates are a mixed blessing. On
one hand there are more opportunities to find quality investments
in stocks and sectors that have previously been too difficult to
invest in as yields have been lower. This has helped the revenue
account and we have covered the dividend this year. On the other
hand, higher rates put pressure on the operating abilities of
companies in the portfolio which can lead to problems. We saw
issues in the retail sector with our holding of Matalan Finance
9.5% 18-31/01/2024 and also in the banking sector where the
troubles of Credit Suisse affected the portfolio. More details of
that are in the portfolio review below. The Company raised new
monies this year as we issued shares at a premium. Proceeds have
been invested into a wide range of sectors and the continuing
diverse nature of the portfolio has meant that the overall NAV
total return for the 12 months to 30 June 2023 is a positive one at
a modest 2.04%.
Market and economic review
When I wrote the market review for the interim report six months
ago, I noted that the period under review from 30 June 2022 to 31
December 2022 was one which most people would want to forget. The
seemingly unending litany of woe - weak markets, higher inflation,
unstable governments, crippling energy prices and rising interest
rates were but a few of the horror stories we saw during the late
Summer and Autumn of 2022. With a feeling of déjà vu, we have moved
six months further on and it feels hard to be more positive -
interest rates have continued to rise and are probably yet to peak
in the UK, US and Europe. Inflation in the UK is starting to come
down with the last reading at 6.80% but food price inflation
remains stubbornly high. The bright spot in the UK has been the
service sector which has seen consumer spending continue at
elevated levels. Despite all the bad news, we saw some signs of
stabilisation towards the end of the year and the forward-looking
stock markets managed to eke out a positive return for the six
months.
The bond markets had a very volatile year. UK 10-year gilts
reached a 15 year high at 4.5% at the end of September on the back
of former Prime Minister Liz Truss's growth plan which proposed
billions of pounds in unfunded tax cuts, shooting up the country's
risk premium. 10-year gilt yields then fell back to 3.7% at the end
of December 2022 but have risen over the last six months as
stubbornly high inflation and weak growth have worried
international investors. At the time of writing the UK 10 year gilt
yield is at 4.44%. This is an important measure for the bond market
as companies wishing to raise money have to reference the gilt
yield which pushes their interest costs up.
In the US, the economy appears to be proving more resilient to
the effects of inflation. Nevertheless the US Federal Reserve has
continued to raise interest rates to try and tame inflation.
Whether this policy will work remains to be seen. In Europe,
interest rates have risen at a slower pace as EU policy makers
worry about anaemic job growth.
Portfolio and revenue review
During the period from June to December 2022, there were several
bonds called or repaid and we were able to invest the proceeds at
higher coupon rates than we have done previously. Good examples of
this would be the Barclays AT1 (Additional Tier 1 bond) 7.75% being
rolled over into an 8.75% coupon and the Shawbrook Group 7.785% FRN
(Floating Rate Note) being called and replaced with a 12.10%
coupon. We also took the opportunity in September when sterling was
weak to sell some of our US dollar denominated Bombardier 7.5% 2025
bonds and replaced them with more attractive UK and Euro bonds. The
Company still has a meaningful exposure to the US$ with 19.09% of
the portfolio investment in that currency and a further 13.79% in
the Euro and other currencies.
There were two major disappointments in the portfolio to report.
Firstly, Matalan Finance 9.5% 18-31/01/2024 underwent a refinancing
of its various bonds and equities in early 2023 and unfortunately
our position was reduced to zero. This reduced the NAV by 1.20%.
Secondly, we had a small position in Credit Suisse 31/12/2049 FRN
AT1 which was written to zero in March 2023 following a forced
take-over of Credit Suisse by Union Bank of Switzerland ("UBS").
This affected the NAV by 0.30% but the forced write-down to zero
ahead of equity holders was unprecedented and rocked the bond
markets. AT1 holdings are the junior debt of banks and financial
institutions and are normally ranked higher than shareholder
equity. The AT1 market is spooked at the possibility of being
ranked lower than equity and caused the bond prices of these
instruments to fall sharply. The Company's portfolio is exposed to
around 18.00% in AT1 holdings in companies such as Barclays and
Deutsche Bank and on average the prices of those securities have
been marked down by between 5.00% and 10.50%. We believe these
positions to be robust and will recover and regulators in the UK
have taken pains to state that the situation that arose in
Switzerland with Credit Suisse would not occur here. We have added
to some of our investments at attractive prices.
New entries into the top 10 this year are Barclays Plc
22-15/12/2170 FRN in the global banking sector and Albion Financing
8.75% 21-15/04/2027 which is the financing company for Aggreko, a
global provider of power and temperature control solutions.
For the year to 30 June 2023, the revenue account earnings were
4.51 pence compared to 4.16 pence for the same period last year.
Earnings per share have improved as we have invested at slightly
higher yields and received repayment of historic arrears from the
REA preference shares we hold. It is noticeable that as markets
settle around current levels, there are more opportunities to
invest, particularly as UK Gilt yields have elevated which pushes
up the coupons paid by companies when they issue debt instruments
priced at a margin over the relevant UK Gilt. In our regular
discussions with Shareholders, the revenue and dividends are topics
of crucial importance and the ability of any portfolio company to
pay its coupon or expected dividend is one of the major indicators
we follow.
Outlook
The economic outlook for the UK will be affected by several
factors in the months ahead. These include any continued rise in
interest rates, how fast inflation continues to fall towards
Government targets and whether the UK falls back into recession.
Another factor we look at is the UK housing market, how resilient
prices are over the next 12 months and whether the recent weakness
is set to continue. Finally, as we approach the end of 2024, the
prospect of the general election with a possible (at this time
according to polls) change of Government makes us look at how
policies could change.
Globally, a lot will depend on the world's two biggest
economies, the USA and China. The USA economy is moving along
nicely but there will be a lot of political factors to consider in
the run up to the 2024 Presidential elections. The Chinese
macro-economic picture looks horrible with major weakness in the
property sector which is 30% of their GDP.
As regards markets affecting the Company, we believe that we are
nearing the top of the interest rate cycle and that we will see a
recovery in capital values of higher yielding bonds in the next
year or so which would positively impact the ability of companies
to refinance debt. But a word of caution: all of this can be
affected by external influences.
Ian "Franco" Francis
New City Investment Managers
14 September 2023
Classification of Investment Portfolio
As at 30 June 2023
By currency 2023 Total 2022 Total
investments investments
% %
Sterling 67.12 62.16
------------- -------------
US dollar 19.09 23.59
------------- -------------
Euro 11.59 12.14
------------- -------------
Swedish krona 1.69 1.52
------------- -------------
Norwegian krone 0.35 0.40
------------- -------------
Canadian dollar 0.09 0.12
------------- -------------
Australian dollar 0.07 0.07
------------- -------------
Total investments 100.00 100.00
------------- -------------
By asset class 2023 Total 2022 Total
investments investments
% %
------------- -------------
Fixed income securities(1) 82.80 81.14
------------- -------------
Equity shares(2) 17.20 18.86
------------- -------------
Total investments 100.00 100.00
------------- -------------
(1) Fixed income securities include fixed and floating rate
securities, convertible securities and preference shares.
(2) Equity shares include investment funds.
Classification of Investment Portfolio by Sector
As at 30 June 2023
2023 Total 2022 Total
investments investments
% %
Financials 44.21 36.88
------------- -------------
Energy 21.47 21.82
------------- -------------
Consumer staples 9.55 8.96
------------- -------------
Consumer discretionary 6.98 4.91
------------- -------------
Industrials 6.50 10.80
------------- -------------
Information technology 6.22 10.10
------------- -------------
Real estate 3.17 4.27
------------- -------------
Materials 1.90 2.26
------------- -------------
Total investments 100.00 100.00
------------- -------------
Investment Portfolio
As at 30 June 2023
Company Sector Valuation GBP'000 Total investments %
Galaxy Finco Ltd 9.25% 31/07/2027 Financials 12,346 4.64
------------------------ ------------------ --------------------
Co-Operative Fin 25/04/2029 FRN Financials 11,952 4.49
------------------------ ------------------ --------------------
Shawbrook Group 22-08/06/2171 FRN Financials 11,917 4.48
------------------------ ------------------ --------------------
Aggregated Micro 8% 17/10/2036 Energy 11,110 4.18
------------------------ ------------------ --------------------
Virgin Money FRN PERP Financials 10,811 4.06
------------------------ ------------------ --------------------
REA Finance 8.75% 31/08/2025 Consumer staples 8,592 3.23
------------------------ ------------------ --------------------
Stonegate Pub 8.25% 31/07/2025 Consumer discretionary 8,326 3.13
------------------------ ------------------ --------------------
Barclays Plc 22-15/12/2170 FRN Financials 8,262 3.11
------------------------ ------------------ --------------------
Albion Financing 8.75% 21-15/04/2027 Industrials 7,724 2.90
------------------------ ------------------ --------------------
Diversified Energy Co Plc Energy 7,187 2.71
------------------------ ------------------ --------------------
Top ten investments 98,227 36.93
------------------ --------------------
Inspired Enterta 7.875% 21-01/06/2026 Information technology 7,021 2.64
------------------------ ------------------ --------------------
Mangrove Luxco Ltd 7.775% 19-09/10/2025 Financials 6,792 2.55
------------------------ ------------------ --------------------
Boparan Finance 7.625% 30/11/2025 Consumer staples 6,666 2.51
------------------------ ------------------ --------------------
Just Group Plc 31/12/2059 FRN Financials 6,605 2.48
------------------------ ------------------ --------------------
Euronav NV Energy 6,553 2.46
------------------------ ------------------ --------------------
American Tanker 7.75% 02/07/2025 Energy 6,455 2.43
------------------------ ------------------ --------------------
Azerion Holdings 7.25% 28/04/2024 Information technology 5,174 1.95
------------------------ ------------------ --------------------
Transocean Inc 11.5% 20-30/01/2027 Energy 4,904 1.84
------------------------ ------------------ --------------------
TVL Finance 9% 20-15/01/2025 Financials 4,884 1.84
------------------------ ------------------ --------------------
VPC Specialty Lending Invest Financials 4,636 1.73
------------------------ ------------------ --------------------
Top twenty investments 157,917 59.36
------------------ --------------------
Garfunkelux Hold 7.75% 20-01/11/2025 Financials 4,568 1.72
------------------------ ------------------ --------------------
RL Finance No6 23-25/11/2171 FRN Financials 4,417 1.66
------------------------ ------------------ --------------------
Lloyds Banking 29/12/2049 FRN Financials 4,211 1.58
------------------------ ------------------ --------------------
M&G Plc Financials 4,211 1.58
------------------------ ------------------ --------------------
Arrow Bidco Llc 9.5% 15/03/2024 Consumer discretionary 4,197 1.58
------------------------ ------------------ --------------------
Shamaran 12% 21-30/07/2025 Energy 4,063 1.53
------------------------ ------------------ --------------------
Ithaca Energy N 9% 21-15/07/2026 Energy 4,014 1.51
------------------------ ------------------ --------------------
REA Holdings Plc PREF Consumer staples 3,986 1.50
------------------------ ------------------ --------------------
Co-op Wholesale 7.5% 11-08/07/2026 Consumer staples 3,871 1.46
------------------------ ------------------ --------------------
Enquest Plc 7% 15/10/2023 Energy 3,581 1.34
------------------------ ------------------ --------------------
Top thirty investments 199,036 74.82
------------------ --------------------
Stonegate Pub 8% 20-13/07/2025 Consumer discretionary 3,274 1.23
------------------------ ------------------ --------------------
Phoenix Group Holdings Plc Financials 3,191 1.20
------------------------ ------------------ --------------------
Welltec A/S 9.5% 01/12/2022 Energy 3,191 1.20
------------------------ ------------------ --------------------
Summer BC Holdco 9.25% 19-31/10/2027 Industrials 3,152 1.18
------------------------ ------------------ --------------------
Deutsche Bank AG 30/05/2049 FRN Financials 3,060 1.15
------------------------ ------------------ --------------------
Channel Island Property Fund Real estate 2,880 1.08
------------------------ ------------------ --------------------
Coburn Resources 12% 20/03/2026 Materials 2,807 1.06
------------------------ ------------------ --------------------
Barclays Plc 29/12/2049 FRN Financials 2,703 1.02
------------------------ ------------------ --------------------
Bidco Rely 23-12/05/2026 FRN Financials 2,581 0.97
------------------------ ------------------ --------------------
Booster Precisio 22-28/11/2026 SR Industrials 2,576 0.97
------------------------ ------------------ --------------------
Top forty investments 228,451 85.88
------------------ --------------------
Doric Nimrod Air Three Ltd Industrials 2,380 0.89
------------------------ ------------------ --------------------
RM Infrastructure Income Plc Financials 2,176 0.82
------------------------ ------------------ --------------------
HDL Debenture 10.375% 93-31/07/2023 Real estate 2,100 0.79
------------------------ ------------------ --------------------
First Quantum 7.5% 01/04/2025 Materials 2,052 0.77
------------------------ ------------------ --------------------
Quilter Plc 23-18/04/2033 FRN Financials 2,034 0.76
------------------------ ------------------ --------------------
Tufton Oceanic Assets Ltd Financials 1,894 0.71
------------------------ ------------------ --------------------
Bluewater Hold 12% 22-10/11/2026 Energy 1,805 0.68
------------------------ ------------------ --------------------
Gaming Innovation 11/06/2024 FRN Information technology 1,797 0.68
------------------------ ------------------ --------------------
NewRiver REIT plc Real estate 1,655 0.62
------------------------ ------------------ --------------------
Hipgnosis Songs Fund Ltd Consumer discretionary 1,592 0.61
------------------------ ------------------ --------------------
Top fifty investments 247,936 93.21
------------------ --------------------
Greenfood AB 21-04/11/2025 FRN Consumer staples 1,486 0.56
------------------------ ------------------ --------------------
Kent Global Plc 10% 28/06/2026 Energy 1,363 0.51
------------------------ ------------------ --------------------
Eurobank Ergasia 22-06/12/2032 Frn Financials 1,343 0.50
------------------------ ------------------ --------------------
Skill Bidco APS 23-02/03/2028 FRN Industrials 1,231 0.46
------------------------ ------------------ --------------------
Cabonline GR 22-19/04/2026 FRN Information technology 1,223 0.46
------------------------ ------------------ --------------------
Palace Capital Plc Real estate 1,099 0.41
------------------------ ------------------ --------------------
West Bromwich BS 18-20/08/2170 Financials 1,072 0.40
------------------------ ------------------ --------------------
N0r5ke Viking 21-03/05/2024 FRN Information technology 918 0.35
------------------------ ------------------ --------------------
Independent Oil 20/09/2024 FRN Energy 867 0.33
------------------------ ------------------ --------------------
REA Trading 9.5% 21-30/06/2024 Consumer discretionary 863 0.33
------------------------ ------------------ --------------------
Top sixty investments 259,401 97.52
------------------ --------------------
Navigator Holdings 8% 10/09/2025 Energy 773 0.29
------------------------ ------------------ --------------------
REA Holdings Plc 7.5% 30/06/2026 Consumer staples 732 0.28
------------------------ ------------------ --------------------
Regional REIT Ltd Real estate 693 0.26
------------------------ ------------------ --------------------
Marex Group 22-30/12/2170 FRN Financials 585 0.22
------------------------ ------------------ --------------------
Hoist Finance AB 31/12/2060 FRN Financials 548 0.21
------------------------ ------------------ --------------------
Harbour Energy Plc Energy 546 0.21
------------------------ ------------------ --------------------
West Bromwich BS 11% 18-12/04/2038 Financials 454 0.17
------------------------ ------------------ --------------------
Croma Security Solutions Group Information technology 420 0.16
------------------------ ------------------ --------------------
Secured Income Fund Plc Financials 321 0.11
------------------------ ------------------ --------------------
New Look Pik Facility16.5% 09/11/2025 Consumer discretionary 307 0.11
------------------------ ------------------ --------------------
Top seventy investments 264,780 99.54
------------------ --------------------
Other investments (38) 1,231 0.46
------------------ --------------------
Total investments 266,011 100.00
------------------ --------------------
Notes:
FRN - Floating Rate Note
PERP - Perpetual
PREF - Preference shares
REIT - Real Estate Investment
Trust
Ten Largest Holdings
Valuation Purchases Sales Revaluation Valuation
30 June GBP'000 GBP'000 gain/(loss) 30 June
2022 GBP'000 2023
GBP'000 GBP'000
Galaxy Finco Ltd 9.25% 31/07/2027
A specialist provider of warranties
for consumer electric products. 12,774 405 - (833) 12,346
---------- ---------- --------- ------------- ----------
Co-Operative Finance 25/04/2029
FRN
A retail and commercial bank
in the United Kingdom. 8,616 2,979 - 357 11,952
---------- ---------- --------- ------------- ----------
Shawbrook Group 22-08/06/2171
FRN
A holding company of Shawbrook
Bank Limited, a specialist lending
and savings bank serving consumers
in the UK. - 13,066 - (1,149) 11,917
---------- ---------- --------- ------------- ----------
Aggregated Micro 8% 17/10/2036
A British company using small
scale, established technologies
to convert wood and waste into
energy in the form of heat and
electricity. 10,900 470 (279) 19 11,110
---------- ---------- --------- ------------- ----------
Virgin Money FRN PERP
A British banking company concentrating
on UK Retail and small and medium
enterprises regional banking
services. 12,188 - - (1,377) 10,811
---------- ---------- --------- ------------- ----------
REA Finance 8.75% 15-31/08/2025
Cultivator of oil palms in the
Indonesian province of East
Kalimantan and producer of crude
palm oil and palm products from
fruit harvested from oil palms. 8,592 - - - 8,592
---------- ---------- --------- ------------- ----------
Stonegate Pub 8.25% 20-31/07/2025
Operator of various formats
ranging from high-street pubs
and traditional country inns
to local community pubs, student
pubs and late-night bars and
venues in the UK. 8,308 - - 18 8,326
---------- ---------- --------- ------------- ----------
Barclays Plc 22-15/12/2170
FRN
A global financial services
provider engaged in retail banking,
credit cards, wholesale banking,
investment banking, wealth management
and investment management services. - 8,676 - (414) 8,262
---------- ---------- --------- ------------- ----------
Albion Financing 8.75% 21-15/04/2027
A financing company for Aggreko
which is a global provider of
power and temperature control
solutions to customers. 7,221 - - 503 7,724
---------- ---------- --------- ------------- ----------
Diversified Energy Co Plc
Energy Company focusing on US
natural gas. 7,490 1,435 - (1,738) 7,187
---------- ---------- --------- ------------- ----------
76,089 27,031 (279) (4,614) 98,227
---------- ---------- --------- ------------- ----------
Strategic Review
Introduction
This review is part of a Strategic Report being presented by the
Company and is designed to provide information primarily about the
Company's business and results for the year ended 30 June 2023. It
should be read in conjunction with the Statement from the Chair and
the Investment Manager's Review above, which give a detailed review
of the investment activities for the year and look to the
future.
Principal activity and status
The Company is a closed-ended investment company and was
incorporated with limited liability in Jersey under the Companies
(Jersey) Law 1991 on 17 January 2007, with registered number 95691.
In addition, the Company constitutes and is regulated as a
collective investment fund under the Collective Investment Funds
(Jersey) Law 1988.
The Company's ordinary shares are listed on the Official List
maintained by the Financial Conduct Authority ("FCA") and admitted
to trading on the Main Market of the London Stock Exchange
("LSE").
Investment policy
The Company invests predominantly in fixed income securities,
including, but not limited to, preference shares, loan stocks,
corporate bonds (convertible and/or redeemable) and government
stocks. The Company also invests in equities and other income
yielding securities.
Exposure to higher yielding securities may also be obtained by
investing in other closed-ended investment companies and open-ended
collective investment schemes.
There are no defined limits on countries, size or sectors,
therefore the Company may invest in companies regardless of
country, size or sector and accordingly, the Company's portfolio is
constructed without reference to the composition of any stock
market index or benchmark.
The Company may, but is not obliged to, invest in derivatives,
financial instruments, money market instruments and currencies for
the purpose of efficient portfolio management.
There are no defined limits on listed securities and,
accordingly, the Company may invest up to 100% of total assets in
any particular type of listed security.
The Company may acquire securities that are unlisted or unquoted
at the time of investment, but which are about to be convertible,
at the option of the Company, into securities which are listed or
traded on a stock exchange. The Company may continue to hold
securities that cease to be listed or traded if the Investment
Manager considers this appropriate. The Board has established a
maximum investment limit in this regard of 10% (calculated at the
time of any relevant investment) of the Company's total assets. In
addition, the Company may invest up to 10% (calculated at the time
of any relevant investment) of its total assets in other securities
that are neither listed nor traded at the time of investment.
The Company will not invest more than 10% (calculated at the
time of any relevant investment) of its total assets in other
collective investment undertakings (open-ended or
closed-ended).
The Board has established a maximum investment limit whereby, at
the time of investment, the Company may not invest more than 5% of
its total investments in the same investee company.
The Company uses gearing and the Board has set a current limit
that gearing will not exceed 25% of Shareholders' funds at the time
of borrowing. This limit is reviewed from time to time by the
Board.
The Investment Manager expects that the Company's assets will
normally be fully invested. However, during periods in which
changes in economic circumstances, market conditions or other
factors so warrant, the Company may reduce its exposure to
securities and increase its positions in cash, money market
instruments and derivative instruments in order to seek protection
from stock market falls or volatility.
Investment approach
Investments are typically made in securities which the
Investment Manager has identified as undervalued by the market and
which it believes will generate above average income returns
relative to their risk, thereby also generating the scope for
capital appreciation. In particular, the Investment Manager seeks
to generate capital growth by exploiting the opportunities
presented by the fluctuating yield base of the market and from
redemptions, conversions, reconstructions and take-overs.
Performance measurement and Key Performance Indicators
("KPIs")
The Board uses a number of performance measures to monitor and
assess the Company's success in meeting its objectives and to
measure its progress and performance. The KPIs are as follows:
-- Dividend yield and dividend cover
The Company pays four quarterly dividends each year and
accordingly, the Board reviews the Company's dividend yield and
dividend cover on a quarterly basis. For the year ended 30 June
2023, the Company's dividend yield was 9.64% (2022: 8.75%) based
upon a share price of 46.60 pence (bid price) as at 30 June 2023
(2022: 51.20 pence) and its dividend cover was 1.00x (2022:
0.93x).
-- Revenue earnings and dividends per ordinary share
The Company has opted to follow the AIC Statement of Recommended
Practice ("SORP") and in accordance with the provisions of the AIC
SORP, distinguishes its profits derived from revenue and capital
items. The Company declares and pays its dividend out of only the
revenue profits of the Company. The revenue earnings , whether
generated this year or in previous years and held in revenue
reserves, represent the total available funds that the Directors
are able to make a dividend payment from. The Board reviews revenue
forecasts on a quarterly basis in order to determine the quarterly
dividend. In respect of the current financial year, the Company
declared dividends of 4.49 pence per ordinary share (2022: 4.48
pence) out of revenue earnings per ordinary share of 4.51 pence per
ordinary share (2022: 4.16 pence).
-- Ongoing charges
The ongoing charges ratio represents the Company's management
fee and all other operating expenses incurred by the Company
expressed as a percentage of the average Shareholders' funds over
the year. The Board regularly reviews the ongoing charges and
monitors all Company expenses. The ongoing charges ratio for the
year ended 30 June 2023 was 1.16% (2022: 1.19%).
The Board measures the Company's performance by reviewing the
KPIs against their expectations of performance from their knowledge
of the industry sector.
These KPIs fall within the definition of APMs under guidance
issued by the European Securities and Markets Authority. Additional
information explaining how these are calculated is set out in the
APMs section below.
Going concern
The Company does not have a fixed winding-up date and therefore,
unless Shareholders vote to wind-up the Company, Shareholders will
only be able to realise their investment through the secondary
market.
At each AGM of the Company, Shareholders are given the
opportunity to vote on an ordinary resolution to continue the
Company as an investment company. If any such resolution is not
passed, the Board will put forward proposals at an extraordinary
general meeting to either liquidate or otherwise reconstruct or
reorganise the Company. Given the performance of the Company, input
from the Company's major Shareholders and its Broker and
considering that 98% of the Shareholder's votes at the last AGM
held on 1 December 2022, were in favour of the continuation of the
Company, the Board considers it likely that Shareholders will vote
in favour of continuation at the forthcoming AGM.
The Company's existing loan facility as detailed below is due to
expire on 17 December 2023 after which it is anticipated the
Company will take out a new facility on comparable terms. After
making enquiries of the Investment Manager and having considered
the Company's investment objective, nature of the investment
portfolio, loan facility, expenditure projections and impact of the
current geo-political and market uncertainty on the Company, the
Directors consider that the Company has adequate resources to
continue in operational existence for the foreseeable future. For
this reason, the Directors continue to adopt the going concern
basis in preparing the Financial Statements, notwithstanding that
the Company is subject to an annual continuation vote as described
above.
Viability Statement
In accordance with the provisions of the AIC Code, the Directors
have assessed the viability of the Company over a period longer
than the 12 months required by the 'Going concern' provision. The
Board conducted this viability review for a period of three years.
The Board continues to consider that this period reflects the
long-term objectives of the Company, being a Company with no fixed
life, whilst taking into account the impact of uncertainties in the
markets.
Whilst the Directors do not expect there to be any significant
changes to the current principal and emerging risks facing the
Company, certain risks have increased due to the general economic
environment, rising interest rates and global rise in inflation.
Despite these increased risks, the Directors believe that the
Company has sufficient controls in place to mitigate those risks.
Furthermore, the Directors do not envisage any change in strategy
which would prevent the Company from operating over the three year
period. This is based on the assumption that there are no
significant changes in market conditions or the tax and regulatory
environment that could not reasonably have been foreseen. The Board
also considers the annual continuation vote should not be a factor
to affect the three year period given the strong demand seen for
the Company's shares.
In making this statement the Board: (i) considered the
continuation vote to be proposed at the AGM which the Board
considers will be voted in favour of by Shareholders; and (ii)
carried out a robust assessment of the principal and emerging risks
facing the Company. These risks and their mitigations are set out
under Principal Risks and Uncertainties and Risk Mitigation section
of the Company's Annual Financial Report and Financial
Statements.
The principal risks identified as most relevant to the
assessment of the viability of the Company were those relating to
potential under-performance of the portfolio and its effect on the
ability to pay dividends. When assessing these risks the Directors
have considered the risks and uncertainties facing the Company in
severe but reasonable scenarios, taking into account the controls
in place and mitigating actions that could be taken.
When considering the risk of under-performance, a series of
stress tests was carried out including in particular the effects of
any substantial future falls in investment value on the ability to
re-pay and re-negotiate borrowings, potential breaches of loan
covenants and the maintenance of dividend payments.
The Board considered the Company's portfolio and concluded that
the diverse nature of investments held contributes to the stability
and liquidity along with flexibility to be able to react positively
to market and political forces beyond the Board's control.
The Board also considered the impact of potential regulatory
changes and the control environment of significant third party
providers, including the Investment Manager.
The Scotiabank Europe Plc ("Scotiabank") loan facility is due to
expire on 17 December 2023. It is anticipated a new facility on
comparable terms will be negotiated prior to this date.
The Board carries out stress testing on a range of downside
scenarios to ensure that the Company can meet its liabilities in
full.
Based on the Company's processes for monitoring revenue and
costs, with the use of frequent revenue forecasts and the
Investment Manager's compliance with the investment objective and
policies, the Directors have concluded that there is a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due for a period of three
years from the date of approval of this Report.
Social, community, human rights, employee responsibilities and
environmental policy
The Directors recognise that their first duty is to act in the
best financial interests of the Company's Shareholders and to
achieve good financial returns against acceptable levels of risk,
in accordance with the objectives of the Company. In asking the
Company's Investment Manager to deliver against these objectives,
they have also requested that the Investment Manager take into
account the broader social, ethical and environmental issues of
companies within the Company's portfolio, acknowledging that
companies failing to manage these issues adequately run a long-term
risk to the sustainability of their businesses.
Greenhouse gas emissions
The Board recognises its impact on the environment, including
greenhouse gas emissions, through the underlying portfolio
companies which it invests in. The Board requested that ESG factors
be incorporated into the Company's investment strategy and further
details on ESG can be found in the Company's Annual Financial
Report and Financial Statements.
Modern slavery
The Company would not fall into the scope of the UK Modern
Slavery Act 2015 (as the Company does not have any turnover derived
from goods and services) if it was incorporated in the UK.
Furthermore, as a closed-ended investment company, the Company has
a non-complex structure, no employees and its supply chain is
considered to be low risk given that suppliers are typically
professional advisers based in either the Channel Islands or the
UK. Based on these factors, the Board determined that it is not
necessary for the Company to make a slavery and human trafficking
statement.
By Order of the Board
Caroline Hitch
Chair
14 September 2023
Statement of Directors' Responsibilities in respect of the
Annual Report and Financial Statements
The Directors are responsible for preparing the Annual Report
and Financial Statements in accordance with applicable law and
regulations. Company law requires the Directors to prepare
financial statements for each financial year. Under that law they
have elected to prepare the Financial Statements in accordance with
the International Financial Reporting Standards ("IFRS") as adopted
by the EU and applicable law.
Under Companies (Jersey) Law 1991, the Directors must not
approve the Financial Statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of its profit or loss for that period. In preparing
these Financial Statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable, relevant and reliable;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the Financial Statements;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters relating to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the Financial Statements comply with Companies (Jersey) Law, 1991.
They are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error
and have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. The Financial Statements are published on the
www.ncim.co.uk website, which is a website maintained by the
Company's Investment Manager. Legislation in Jersey governing the
preparation and dissemination of Financial Statements may differ
from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the
Annual Financial Report
We confirm that to the best of our knowledge:
-- the Financial Statements, prepared in accordance with the
IFRS as adopted by the EU, give a true and fair and balanced view
of the assets, liabilities, financial position and profit or loss
of the Company; and
-- the Strategic Report and Directors' Report include a fair
review of the development and performance of the business and the
position of the Company, together with a description of the
principal risks and uncertainties that the Company faces.
We consider the Annual Report and Financial Statements, taken as
a whole, is fair, balanced and understandable and provides the
information necessary for Shareholders to assess the Company's
position and performance, business model and strategy.
On behalf of the Board
Caroline Hitch
Chair
14 September 2023
Statement of Comprehensive Income
For the year ended 30 June 2023
Year ended Year ended
30 June 2023 30 June 2022
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ------ --------- ----------- ----------- --------- ----------- -----------
Net capital gains/(losses)
Losses on financial assets at fair
value 9 - (17,988) (17,988) - (14,459) (14,459)
Foreign exchange (loss)/gain(1) - (252) (252) - 61 61
Revenue
Investment income 2 26,229 - 26,229 22,362 - 22,362
------------------------------------ ------ --------- ----------- ----------- --------- ----------- -----------
Total Income 26,229 (18,240) 7,989 22,362 (14,398) 7,964
------------------------------------ ------ --------- ----------- ----------- --------- ----------- -----------
Expenses
Investment management fee 3 (1,591) (530) (2,121) (1,595) (531) (2,126)
Other expenses 4 (647) (89) (736) (772) (75) (847)
------------------------------------ ------ --------- ----------- ----------- --------- ----------- -----------
Total expenses (2,238) (619) (2,857) (2,367) (606) (2,973)
------------------------------------ ------ --------- ----------- ----------- --------- ----------- -----------
Profit/(loss) before finance
income/(costs) and taxation 23,991 (18,859) 5,132 19,995 (15,004) 4,991
------------------------------------ ------ --------- ----------- ----------- --------- ----------- -----------
Finance income/(costs)
Interest income 124 - 124 1 - 1
Interest expense 5 (1,167) (389) (1,556) (456) (152) (608)
------------------------------------ ------ --------- ----------- ----------- --------- ----------- -----------
Profit/(loss) before taxation 22,948 (19,248) 3,700 19,540 (15,156) 4,384
Irrecoverable withholding tax 6 (505) - (505) (377) - (377)
------------------------------------ ------ --------- ----------- ----------- --------- ----------- -----------
Profit/(loss) after taxation and
total comprehensive income/(loss) 22,443 (19,248) 3,195 19,163 (15,156) 4,007
Basic and diluted earnings/(losses)
per ordinary share (pence) 8 4.51p (3.87)p 0.64p 4.16p (3.29)p 0.87p
(1) Excludes foreign exchange gains and losses on financial
assets at fair value through profit and loss which are presented
within losses on financial assets at fair value.
The total column of this statement represents the Company's
Statement of Comprehensive Income, prepared in accordance with IFRS
as adopted by the EU (refer to note 1). The supplementary revenue
return and capital return columns are both prepared under guidance
published by the AIC.
There is no other comprehensive income as all income is recorded
in the Statement of Comprehensive Income above.
All revenue and capital items in the above statement are derived
from continuing operations.
No operations were acquired or discontinued in the year.
The accompanying notes below are an integral part of these
Financial Statements.
Statement of Financial Position
As at 30 June 2023
As at 30 June 2023 As at 30 June 2022
Notes GBP'000 GBP'000
------------------------------------------------------- ------ ------------------- -------------------
Non-current assets
Financial assets at fair value through profit or loss 9 266,011 263,393
------------------------------------------------------- ------ ------------------- -------------------
Current assets
Debtors and other receivables 10 7,010 3,819
Cash and cash equivalents 6,597 3,985
------------------------------------------------------- ------ ------------------- -------------------
13,607 7,804
------------------------------------------------------- ------ ------------------- -------------------
Total assets 279,618 271,197
------------------------------------------------------- ------ ------------------- -------------------
Non-current liabilities
Bank loan 11 - (33,000)
------------------------------------------------------- ------ ------------------- -------------------
Current liabilities
Bank loan 11 (35,000) -
Creditors and other payables 12 (4,187) (3,211)
------------------------------------------------------- ------ ------------------- -------------------
Total liabilities (39,187) (36,211)
------------------------------------------------------- ------ ------------------- -------------------
Net asset value 240,431 234,986
------------------------------------------------------- ------ ------------------- -------------------
Stated capital and reserves
Stated capital account 13 244,884 220,649
Special distributable reserve 50,385 50,385
Capital reserve (70,858) (51,610)
Revenue reserve 16,020 15,562
------------------------------------------------------- ------ ------------------- -------------------
Equity Shareholders' funds 240,431 234,986
------------------------------------------------------- ------ ------------------- -------------------
Net asset value per ordinary share (pence) 15 45.83p 49.30p
------------------------------------------------------- ------ ------------------- -------------------
The Financial Statements were approved by the Board of Directors
and authorised for issue on 14 September 2023 and were signed on
its behalf by:
Caroline Hitch
Chair
14 September 2023
The accompanying notes below are an integral part of these
Financial Statements.
Statement of Changes in Equity
For the year ended 30 June 2023
Stated Special Capital Revenue Total
capital distributable reserve reserve
account reserve (1) (3)
Notes (1) (2)
GBP'000 GBP'000 GBP'000
GBP'000 GBP'000
----------------------- -------- --------- --------------- --------- --------- ---------
At 1 July 2022 220,649 50,385 (51,610) 15,562 234,986
Total comprehensive
income for the year:
Profit/(loss) for
the year - - (19,248) 22,443 3,195
Transactions with
owners recognised
directly in equity:
Dividends paid 7 - - - (21,985) (21,985)
Net proceeds from
issue of shares 13 24,235 - - - 24,235
At 30 June 2023 244,884 50,385 (70,858) 16,020 240,431
----------------------- -------- --------- --------------- --------- --------- ---------
For the year ended 30 June 2022
Stated Special Capital Revenue Total
capital distributable reserve reserve
account reserve (1) (3)
Notes (1) (2)
GBP'000 GBP'000 GBP'000
GBP'000 GBP'000
----------------------- -------- --------- --------------- --------- --------- ---------
At 1 July 2021 203,416 50,385 (36,454) 16,831 234,178
Total comprehensive
income for the year:
Profit/(loss) for
the year - - (15,156) 19,163 4,007
Transactions with
owners recognised
directly in equity:
Dividends paid 7 - - - (20,432) (20,432)
Net proceeds from
issue of shares 13 17,233 - - - 17,233
At 30 June 2022 220,649 50,385 (51,610) 15,562 234,986
----------------------- -------- --------- --------------- --------- --------- ---------
(1) Following a change in Companies (Jersey) Law 1991 effective
27 June 2008, dividends can be paid out of any capital account of
the Company subject to certain solvency restrictions. However, it
is the Company's policy to account for revenue items and pay
dividends, drawing where necessary from a separate revenue
reserve.
(2) The balance on the special distributable reserve of
GBP50,385,000 (2022: GBP50,385,000) is treated as distributable
profits available to be used for all purposes permitted by Jersey
Company Law including the buying back of ordinary shares, the
payment of dividends and the payment of preliminary expenses.
(3) The balance on the revenue reserve of GBP16,020,000 (2022:
GBP15,562,000) is available for paying dividends.
The accompanying notes below are an integral part of these
Financial Statements.
Cash Flow Statement
For the year ended 30 June 2023
Year ended Year ended
30 June 2023 30 June 2022
Notes GBP'000 GBP'000
------------------------------------------------------------------------------ ------ -------------- --------------
Operating activities
Profit before taxation(1) 3,700 4,384
Adjustments to reconcile profit before taxation to net cash flows:
Realised losses/(gains) on financial assets at fair value through
profit or loss 9 1,273 (3,631)
Unrealised losses on financial assets at fair value through profit
or loss 9 16,715 18,090
Effective interest adjustment 9 (243) (154)
Foreign exchange loss/(gain) 252 (61)
Finance costs (1) 1,432 607
Purchase of financial assets at fair value through profit or loss (2) (77,242) (110,433)
Proceeds from sale of financial assets at fair value through profit or loss
(3) 57,170 85,833
Changes in working capital
Increase in other receivables (3,191) (508)
Increase in other payables 657 2,266
Irrecoverable withholding tax paid (505) (377)
------------------------------------------------------------------------------ ------ -------------- --------------
Net cash generated from/(used in) operating activities 18 (3,984)
------------------------------------------------------------------------------ ------ -------------- --------------
Financing activities
Dividends paid 7 (21,985) (20,432)
Drawdown of bank loan 11 2,000 -
Finance costs (1,404) (595)
Proceeds from issuance of ordinary shares(4) 13 24,235 17,508
------------------------------------------------------------------------------ ------ -------------- --------------
Net cash generated from/(used in) financing activities 2,846 (3,519)
------------------------------------------------------------------------------ ------ -------------- --------------
Increase/(decrease) in cash and cash equivalents 2,864 (7,503)
------------------------------------------------------------------------------ ------ -------------- --------------
Cash and cash equivalents at the start of the year 3,985 11,427
Exchange (loss)/gain (252) 61
------------------------------------------------------------------------------ ------ -------------- --------------
Cash and cash equivalents at the end of the year 6,597 3,985
------------------------------------------------------------------------------ ------ -------------- --------------
(1) For the comparative year, in accordance with IAS 7 Statement
of Cash Flows, the Cash Flow Statement has been re-presented to
start with 'profit before taxation' of GBP4,384,000 instead of
'profit before finance income/costs and taxation' of GBP4,991,000.
Subsequently, 'finance costs' of GBP607,000 have been added under
'Adjustments to reconcile profit before taxation to net cash flows
'.
Included within profit before taxation is dividend income of
GBP4,964,000 (2022: GBP3,684,000) and interest income of
GBP21,265,000 (2022: GBP18,678,000).
(2) Amounts due to brokers as at 30 June 2023 relating to
purchases of financial assets at fair value through profit amounted
to GBP904,000 (2022: GBP613,000).
(3) Amounts due from brokers as at 30 June 2023 relating to
sales of financial assets at fair value through profit amounted to
GBP nil (2022: GBP nil ).
(4) Amounts due on new share issuance not yet received as at 30
June 2023 amounted to GBPnil (2022: GBPnil).
The accompanying notes below are an integral part of these
Financial Statements.
Notes to the Financial Statements
1 Accounting Policies
(a) Basis of accounting
These Financial Statements have been prepared in accordance with
IFRS as adopted by the EU and in accordance with the guidance set
out in the SORP: Financial Statements of Investment Trust Companies
and Venture Capital Trusts issued by the AIC in November 2014 and
updated most recently in July 2022 with consequential amendments.
Notwithstanding that the Company is not an investment trust
company, given the purpose of the Company and certain similar
characteristics, the Company has chosen to follow the guidance set
out in the SORP where it is consistent with the requirements of
IFRS.
The functional and reporting currency of the Company is pound
sterling because that is the primary economic environment in which
the Company operates. The Financial Statements and notes are
presented in pound sterling and are rounded to the nearest thousand
except where otherwise indicated.
The Financial Statements have been prepared on the historical
cost basis, except that investments are stated at fair value and
categorised as financial assets at fair value through profit or
loss.
Going concern
At each AGM of the Company, Shareholders are given the
opportunity to vote on an ordinary resolution to continue the
Company as an investment company. If any such resolution is not
passed, the Board will put forward proposals at an extraordinary
general meeting to liquidate or otherwise reconstruct or reorganise
the Company. Given the performance of the Company, input from the
Company's major Shareholders and its Broker and considering that
98% of the Shareholder's votes at the last AGM held on 1 December
2022, were in favour of the continuation of the Company, the Board
considers it likely that Shareholders will vote in favour of
continuation at the forthcoming AGM.
The Company's existing loan facility as detailed below, is of an
amount of up to GBP45,000,000 and is due to mature on 17 December
2023 after which it is anticipated the Company will take out a new
facility on comparable terms. After making enquiries of the
Investment Manager and having considered the Company's investment
objective, nature of the investment portfolio, loan facility,
expenditure projections and the impact of the current geo-political
and market uncertainty on the Company, the Directors consider that
the Company has adequate resources to continue in operational
existence for the foreseeable future. For this reason the Directors
continue to adopt the going concern basis in preparing the
Financial Statements, notwithstanding that the Company is subject
to an annual continuation vote as described above.
Accounting developments
Standards and amendments to existing standards effective in
current year
There were no new standards, amendments or interpretations that
are effective for the financial year beginning 1 July 2022 which
the Directors consider to have a material impact on the Financial
Statements of the Company.
Standards and amendments becoming effective in future
periods
The following standards become effective in future accounting
periods and have not been adopted by the Company:
Effective
for periods
beginning on
Standards or after
1 January 2023
* IFRS 17 Insurance Contracts
-----------------
1 January 2023
* Amendments to IFRS 17
-----------------
1 January 2023
* Disclosure of Accounting Policies (Amendments to IAS
1 and IFRS Practice Statement 2)
-----------------
1 January 2023
* Definition of Accounting Estimate (Amendments to IAS
8)
-----------------
* Deferred Tax Related to Assets and Liabilities 1 January 2023
Arising from a Single Transaction - Amendments to IAS
12 Income Taxes
-----------------
* Initial Application of IFRS 17 and IFRS 9 - 1 January 2023
Comparative Information (Amendments to IFRS 17)
-----------------
1 January 2024
* Classification of liabilities as current or
non-current (Amendments to IAS 1)
-----------------
1 January 2024
* Lease Liability in a Sale and Leaseback (Amendments
to IFRS 16)
-----------------
1 January 2024
* Non-current Liabilities with Covenants (Amendments to
IAS 1)
-----------------
* Sale or Contribution of Assets between an Investor
and its Associate or Joint Venture (Amendments to
IFRS 10 and IAS 28) Optional
-----------------
The Directors believe that the application of these amendments
and interpretations will not materially impact the Company's
Financial Statements when they become effective.
Critical accounting estimates and judgements
The preparation of the Financial Statements necessarily requires
the exercise of judgement both in application of accounting
policies which are set out below and in the selection of
assumptions used in the calculation of estimates. These estimates
and judgements are reviewed on an ongoing basis and are continually
evaluated based on historical experience and other factors.
However, actual results may differ from these estimates.
The valuation of financial assets involves estimation and
judgements. The major part of the Company's financial assets is its
financial assets held at fair value through profit or loss which
are valued by reference to listed and quoted bid prices, however
some of these financial assets are thinly traded. Such financial
assets are best valued by reference to current market price quotes
provided by independent brokers. The Directors may overlay such
prices with situation specific adjustments including (a) taking a
second independent opinion on a specific investment, or (ii)
reducing the value to a net present value, to reflect the likely
time to be taken to realise a stock which the Company is actively
looking to sell. The outturn is reflected in the valuations of
investments as set out in note 22 to the Financial Statements.
Financial assets which are not listed or where trading in the
securities of an investee company is suspended are valued at the
Board's estimate of fair value in accordance with International
Private Equity and Venture Capital valuation guidance. Unquoted
financial assets are valued by the Directors on the basis of all
the information available to them at the time of valuation. This
includes a review of the financial and trading information of the
investee company, covenant compliance, ability to pay the interest
due and cash held. For convertible bonds this also includes
consideration of their discounted cash flows and underlying equity
value based on information provided by the Investment Manager.
There were no other significant accounting estimates or
significant judgements in the current or previous year.
A summary of the principal accounting policies which have been
applied to all periods presented in these Financial Statements is
set out below.
(b) Financial assets
Financial assets which comprise equity shares, convertible bonds
and fixed income securities, are classified as held at fair value
through profit or loss as the Company's business model is not to
hold these financial assets for the sole purposes of collecting
contractual cash flows. In making this assessment, the Directors
have given regard to the investment strategy of the Company, the
fact that the performance of the portfolio is evaluated on a fair
value basis and the fact that the Investment Manager is remunerated
on a percentage of total assets.
Purchases or sales of financial assets are
recognised/derecognised on the date the Company trades the
investments. On initial recognition investments are measured at
fair value and classified as fair value through profit or loss with
any subsequent gain or loss, including any gain or loss arising
from a change in exchange rates, recognised in the Statement of
Comprehensive Income.
Financial assets held at fair value through profit or loss are
valued in accordance with the policies described in the critical
accounting estimates and judgements section above .
Financial assets also include the Company's cash and cash
equivalents (comprising of cash held in current accounts and
overdraft balances) and debtors and other receivables which are
held at amortised cost using effective interest rate, less any
impairment.
(c) Financial liabilities
Financial liabilities include amounts due to brokers, bank loan,
interest on bank loan and other creditors which are held at
amortised cost using the effective interest rate method. Financial
liabilities are recognised initially at fair value, net of
transaction costs incurred and are subsequently carried at
amortised cost using the effective interest rate method. Financial
liabilities are derecognised when the obligation specified in the
contract is discharged, cancelled or expires.
(d) Income
Dividends receivable on equity shares (including preference
shares) are recognised as income on the date that the related
investments are marked ex-dividend. Dividends receivable on equity
shares where no ex-dividend date is quoted are recognised as income
when the Company's right to receive payment is established.
Dividends from overseas companies are shown gross of any
non-recoverable withholding taxes which are disclosed separately in
the Statement of Comprehensive Income.
Fixed returns on non-equity shares and debt securities
(including preference shares) are recognised on a time apportioned
basis so as to reflect the effective interest rate on those
instruments. Other returns on non-equity shares are recognised when
the right to the return is established.
Where the Company has elected to receive its dividends in the
form of additional shares rather than cash, an amount equal to the
cash dividend is recognised as income. Any excess in the value of
the shares received over the amount of the cash dividend is
recognised in the capital reserve.
(e) Expenses, including finance charges
All expenses are accounted for on an accruals basis. Expenses
are charged through the revenue account except as follows:
- expenses which are incidental to the acquisition of an
investment are charged to the capital account;
- expenses which are incidental to the disposal of an investment charged to the capital account;
- the Company charges 25% of investment management fees and
interest costs to capital, in line with the Board's expected long
term return in the form of capital gains and income respectively
from the investment portfolio of the Company. For further details
refer to notes 3 and 5; and
- expenses incurred in connection with the maintenance or
enhancement of the value of the investments or for the long term
benefit of the Company are charged to capital.
(f) Foreign currencies
Transactions denominated in foreign currencies are recorded in
the functional currency at actual exchange rates at the date of the
transaction. Monetary assets and liabilities denominated in foreign
currencies at the period end are reported in sterling at the rates
of exchange prevailing at the period end. Exchange gains and losses
on investments held at fair value through profit or loss are
included in 'Gains or losses on investments held at fair value
through profit or loss'. Exchange gains and losses on other
balances are disclosed separately in the Statement of Comprehensive
Income.
(g) Reserves
(i) Capital reserve. Following a change in Jersey Company law
effective 27 June 2008, dividends can be paid out of any capital
account of the Company subject to certain solvency restrictions. It
is the Company's policy however to account for revenue items and
pay dividends through a separate revenue reserve. The following are
accounted for in the capital reserve:
-- gains and losses on the realisation of investments;
-- realised and unrealised exchange differences of a capital nature;
-- expenses and finance costs charged in accordance with the policies above; and
-- increases and decreases in the valuation of investments held at the period end.
(ii) Special distributable reserve. This reserve is treated as
distributable profits available to be used for all purposes
permitted by Jersey company law including the buying back of
ordinary shares, the payment of dividends (see note 7 ) and the
payment of preliminary expenses.
(iii) Revenue reserve. The net profit/(loss) and total
comprehensive income/(loss) arising in the revenue column of the
Statement of Comprehensive Income is added to or deducted from this
reserve and is available for paying dividends.
(h) Share capital
Ordinary shares
The Company's ordinary shares are classified as equity based on
the substance of the contractual arrangements and in accordance
with the definition of equity instruments under International
Accounting Standard ("IAS") 32. The proceeds from the issue of
ordinary shares are recognised in the Statement of Changes in
Equity, net of issue costs.
Treasury shares
When the Company purchases its ordinary shares to be held in
treasury, the amount of the consideration paid, which includes
directly attributable costs is recognised as a deduction from the
stated capital account. When these shares are sold subsequently,
the amount received is recognised as an increase in equity and the
resulting surplus or deficit on the transaction is transferred to
or from the stated capital account.
(i) Segmental information
The Company, holds a wide variety of different investments in a
wide range of issues locating in different geographies and
operating in different sectors. However, resources are allocated
and the business is managed by the chief operating decision-makers,
the Directors, on an aggregated basis. Strategic and financial
management decisions are determined centrally by the Directors and,
on this basis, the Company operates as a single investment
management business and no segmental reporting is provided.
2 Investment income
2023 2022
GBP'000 GBP'000
Income from financial assets at fair value through profit or loss (1)
--------- ---------
Dividend income 4,964 3,684
--------- ---------
Interest on fixed income securities(2) 21,265 18,678
--------- ---------
Total income 26,229 22,362
--------- ---------
(1) All investment income arises on financial assets valued at
fair value through profit or loss.
(2) Fixed income securities include fixed and floating rate
securities, convertible securities and preference shares.
3 Investment management fee
2023 2023 2023 2022 2022 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment management fee 1,591 530 2,121 1,595 531 2,126
--------- --------- --------- --------- --------- ---------
The Company's investment manager is CQS (UK) LLP.
As per the Investment Management Agreement dated 18 September
2019, the management fee is charged at a rate of 0.80% per annum on
the Company's total assets (being total assets less current
liabilities (other than bank borrowings and ignoring any taxation
which is or may be payable by the Company)) up to GBP200 ,000,000 ,
0.70% per annum of total assets in excess of GBP200 ,000,000 and up
to and including GBP300 ,000,000 and 0.60% per annum thereafter.
The management fee is paid monthly in arrears.
The contract between the Company and the Investment Manager may
be terminated by either party giving not less than 12 months'
notice of termination.
During the year ended 30 June 2023, investment management fees
of GBP2,121,000 were incurred (2022: GBP2,126,000), of which
GBP176,000 was payable at the year-end (2022: GBP173,000).
Investment management fees have been allocated 75% to revenue and
25% to capital.
4 Other expenses
2023 2023 2023 2022 2022 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Secretarial and administration fees 206 - 206 207 - 207
--------- --------- --------- --------- --------- ---------
Directors' fees 169 - 169 169 - 169
--------- --------- --------- --------- --------- ---------
Auditors' remuneration for audit services(1) 51 - 51 48 - 48
--------- --------- --------- --------- --------- ---------
Broker fees 30 - 30 30 - 30
--------- --------- --------- --------- --------- ---------
Printing 18 - 18 8 - 8
--------- --------- --------- --------- --------- ---------
Bank and custody (rebate)/charges (53) - (53) 110 - 110
--------- --------- --------- --------- --------- ---------
Registrars' fees 33 - 33 37 - 37
--------- --------- --------- --------- --------- ---------
Depositary fees 45 - 45 45 - 45
--------- --------- --------- --------- --------- ---------
Legal and professional fees 44 - 44 40 - 40
--------- --------- --------- --------- --------- ---------
Other 104 89 193 78 75 153
--------- --------- --------- --------- --------- ---------
647 89 736 772 75 847
--------- --------- --------- --------- --------- ---------
Directors' fees
For the year ended 30 June 2023, Directors' remuneration were as
follows:
Chair GBP42,500
Audit Chair GBP36,500
Other GBP30,000
Directors' fees of GBP7,500 were accrued as at 30 June 2023
(2022: GBP7,500).
No pension contributions were payable in respect of any of the
Directors and the Company does not have any employees.
(1) Non-audit fees paid to the auditor
There were no non-audit fees paid to the auditor during the year
ended 30 June 2023 (2022: GBPnil).
5 Interest expense
2023 2023 2023 2022 2022 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Interest expense 1,167 389 1,556 456 152 608
--------- --------- --------- --------- --------- ---------
Interest expense and similar charges have been allocated 75% to
revenue and 25% to capital as explained in note 1(e).
6 Irrecoverable withholding tax
The taxation charge for the year is comprised of:
2023 2023 2023 2022 2022 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Irrecoverable withholding tax suffered 505 - 505 377 - 377
--------- --------- --------- --------- --------- ---------
The taxation on profit differs from the theoretical expense that
would apply on the Company's profit before taxation using the
applicable tax rate in Jersey of 0% for the year ended 30 June 2023
(2022: 0%) as follows:
2023 2022
GBP'000 GBP'000
Profit on ordinary activities before taxation 3,700 4,384
--------- ---------
Theoretical tax expense at 0% (2022: 0%) - -
--------- ---------
Effects of:
--------- ---------
Foreign withholding tax 505 377
--------- ---------
Current year revenue tax charge 505 377
--------- ---------
7 Dividends
2023 2022
GBP'000 GBP'000
Amounts recognised as distributions to equity holders in the year:
--------- ---------
Dividends in respect of the year ended 30 June 2022
--------- ---------
- Fourth interim dividend of 1.48p (2021: 1.47p) per ordinary share 7,054 6,557
--------- ---------
Dividends in respect of the year ended 30 June 2023
--------- ---------
- First interim dividend of 1.00p (2022: 1.00p) per ordinary share 4,815 4,552
--------- ---------
- Second interim dividend of 1.00p (2022: 1.00p) per ordinary share 4,963 4,636
--------- ---------
- Third interim dividend of 1.00p (2022: 1.00p) per ordinary share 5,153 4,687
--------- ---------
21,985 20,432
--------- ---------
A fourth interim dividend in respect of the year ended 30 June
2023 of 1.49p per ordinary share was paid on 31 August 2023 to
Shareholders on the register on 28 July 2023, having an ex-dividend
date of 27 July 2023.
In accordance with IFRS, dividends paid to the Company's
Shareholders are recognised when they become payable on the
ex-dividend date, consequently the fourth interim dividend has not
been included as a liability in these Financial Statements and will
be recognised in the period in which it becomes payable.
8 Basic and diluted earnings/(losses) per ordinary share
2023 2023 2023 2022 2022 2022
Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence
Basic and diluted earnings/(losses) per ordinary
share 4.51p (3.87p) 0.64p 4.16p (3.29)p 0.87p
--------- ---------- -------- --------- ---------- --------
The revenue earnings per ordinary share is based on the net
profit after taxation of GBP22,443,000 (2022: GBP19,163,000) and
the capital return per ordinary share is based on a net capital
loss of GBP19,248,000 (2022: GBP15,156,000). Both the revenue and
capital earnings per ordinary share is based on a weighted average
of 497,695,146 (2022: 460,845,694) ordinary shares in issue
throughout the year.
Total earnings per ordinary share reflects both revenue earnings
and capital returns per ordinary share. The Company has not issued
any instruments that could potentially dilute basic earnings per
ordinary share in the future. Therefore, the Company's basic
earnings per ordinary share is equivalent to its diluted earnings
per ordinary share.
There have been no transactions involving the Company's ordinary
shares between 1 July 2023 and 14 September 2023 other than those
disclosed in note 24, which were issued at a premium to the 30 June
2023 NAV.
9 Financial assets at fair value through profit or loss
All financial assets are valued at fair value through profit or
loss. Gains or losses arising from changes in the fair value of
investments are included in the Statement of Comprehensive
Income.
2023 2022
GBP'000 GBP'000
Equity shares(1) 45,763 49,687
--------- ---------
Fixed income securities(2) 220,248 213,706
--------- ---------
266,011 263,393
--------- ---------
(1) Equity shares include investment funds.
(2) Fixed income securities include fixed and floating rate
securities, convertible securities and preference shares.
2023 2022
GBP'000 GBP'000
Opening valuation 263,393 257,467
--------- ---------
Purchases at cost 77,533 106,064
--------- ---------
Sales proceeds (57,170) (85,833)
--------- ---------
Realised (losses)/gains on sales (1,273) 3,631
--------- ---------
Effective interest adjustment 243 154
--------- ---------
Unrealised losses (16,715) (18,090)
--------- ---------
Closing valuation 266,011 263,393
--------- ---------
2023 2022
Losses on investments GBP'000 GBP'000
Realised (losses)/gains(1) (1,273) 3,631
--------- ---------
Unrealised losses(2) (16,715) (18,090)
--------- ---------
(17,988) (14,459)
--------- ---------
(1) Realised (losses)/gains on financial assets at fair value
through profit or loss is made up of gains of GBP6,030,000 (2022:
5,680,000) and losses of GBP7,303,000 (2022: 2,049,000).
(2) Unrealised losses on financial assets at fair value through
profit or loss is made up of gains of GBP8,225,000 (2022:
14,225,000) and losses of GBP24,940,000 (2022: 32,315,000).
10 Debtors and other receivables
2023 2022
GBP'000 GBP'000
Accrued income 7,000 3,807
--------- ---------
Prepayments and other debtors 10 12
--------- ---------
7,010 3,819
--------- ---------
11 Bank loan
2023 2022
GBP'000 GBP'000
Bank loan facility- opening balance 33,000 33,000
--------- ---------
Drawdowns 2,000 -
--------- ---------
Bank loan facility - closing balance 35,000 33,000
--------- ---------
The Company has a short-term unsecured loan facility with
Scotiabank up to a limit of GBP45 ,000,000 which is due to expire
on 17 December 2023. At the start of the year, the Company had
drawn down GBP33 ,000,000 from the facility and on 20 June 2023, it
drew down a further GBP2 ,000,000 . As at 30 June 2023, the drawn
down amount of the facility was GBP35,000,000 (2022:
GBP33,000,000).
As per the Seventh Amendment Agreement dated 17 December 2021,
the terms of the loan facility are as follows:
-- the Agreement contains an option to increase the facility by
a further GBP5 ,000,000 - no commitment fees are payable on the
GBP5 ,000,000 until this option is exercised.
-- the interest on the loan would be a margin of 1.45% p.a plus
a daily non-cumulative compounded Reference Rate (RFR).
-- the commitment fees would be 0.375% p.a on the daily
Available Commitment if the utilised Commitment exceeds 50 per cent
of the Commitment and 0.425% on the daily Available Commitment if
the utilised Commitment is less than or equal to 50 per cent of the
Commitment.
The following are the covenants for the facility held as at 30
June 2023:
-- the borrower shall not permit the adjusted asset coverage to be less than 4 to 1
-- the borrower shall not permit the NAV to be less than GBP95 ,000,000 at any time
-- the borrower shall maintain an additional adjusted asset
coverage of at least 1.5 to 1 at all times
For the year ended 30 June 2023 and up until the date of this
report, the Company has complied with all covenants of the loan
facility.
The bank loan facility is a financial liability held at
amortised cost.
12 Creditors and other payables
2023 2022
GBP'000 GBP'000
Amounts due to brokers 904 613
--------- ---------
Interest on bank loan facility 56 28
--------- ---------
Other creditors 3,227 2,570
--------- ---------
4,187 3,211
--------- ---------
13 Stated capital account
Authorised
The authorised share capital of the Company is represented by an
unlimited number of ordinary shares of no par value.
Allotted, called up and fully-paid
Amount Share Issue Costs
Number of received GBP'000 Share capital
ordinary shares GBP'000 GBP'000
Total as
at 1 July
2022 476,651,858 220,649
------------------------------- --------------------------------- ------------------------------------- ------------------------
750,000
ordinary
shares of
no par
value
allotted
on 4
August
2022 at
51.80p 750,000 388 (3) 385
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 9
August
2022 at
52.00p 500,000 260 (2) 258
------------------------------- --------------------------------- ------------------------------------- ------------------------
750,000
ordinary
shares of
no par
value
allotted
on 16
August
2022 at
52.50p 750,000 394 (3) 391
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 26
August
2022 at
53.00p 500,000 265 (2) 263
------------------------------- --------------------------------- ------------------------------------- ------------------------
850,000
ordinary
shares of
no par
value
allotted
on 31
August
2022 at
53.00p 850,000 450 (3) 447
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 2
September
2022 at
53.16p 500,000 266 (2) 264
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 15
September
2022 at
53.25p 500,000 266 (2) 264
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 22
September
2022 at
53.30p 500,000 267 (2) 265
------------------------------- --------------------------------- ------------------------------------- ------------------------
3,500,000
ordinary
shares of
no par
value
allotted
on 1
November
2022 at
51.25p 3,500,000 1,794 (14) 1,780
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 4
November
2022 at
51.50p 500,000 258 (3) 255
------------------------------- --------------------------------- ------------------------------------- ------------------------
2,600,000
ordinary
shares of
no par
value
allotted
on 8
November
2022 at
51.20p 2,600,000 1,331 (13) 1,318
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 11
November
2022 at
51.30p 500,000 257 (3) 254
------------------------------- --------------------------------- ------------------------------------- ------------------------
600,000
ordinary
shares of
no par
value
allotted
on 15
November
2022 at
51.50p 600,000 309 (3) 306
------------------------------- --------------------------------- ------------------------------------- ------------------------
750,000
ordinary
shares of
no par
value
allotted
on 17
November
2022 at
51.60p 750,000 387 (4) 383
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 24
November
2022 at
51.60p 500,000 258 (3) 255
------------------------------- --------------------------------- ------------------------------------- ------------------------
950,000
ordinary
shares of
no par
value
allotted
on 28
November
2022 at
51.60p 950,000 490 (5) 485
------------------------------- --------------------------------- ------------------------------------- ------------------------
750,000
ordinary
shares of
no par
value
allotted
on 1
December
2022 at
51.50p 750,000 386 (4) 382
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 2
December
2022 at
51.40p 500,000 257 (3) 254
------------------------------- --------------------------------- ------------------------------------- ------------------------
1,000,000
ordinary
shares of
no par
value
allotted
on 5
December
2022 at
51.30p 1,000,000 513 (5) 508
------------------------------- --------------------------------- ------------------------------------- ------------------------
1,350,000
ordinary
shares of
no par
value
allotted
on 11
January
2023 at
53.40p 1,350,000 721 (5) 716
------------------------------- --------------------------------- ------------------------------------- ------------------------
1,250,000
ordinary
shares of
no par
value
allotted
on 16
January
2023 at
52.50p 1,250,000 656 (5) 651
------------------------------- --------------------------------- ------------------------------------- ------------------------
4,700,000
ordinary
shares of
no par
value
allotted
on 31
January
2023 at
51.00p 4,700,000 2,397 (18) 2,379
------------------------------- --------------------------------- ------------------------------------- ------------------------
1,300,000
ordinary
shares of
no par
value
allotted
on 3
February
2023 at
51.00p 1,300,000 663 (5) 658
------------------------------- --------------------------------- ------------------------------------- ------------------------
2,750,000
ordinary
shares of
no par
value
allotted
on 8
February
2023 at
51.00p 2,750,000 1,403 (11) 1,392
------------------------------- --------------------------------- ------------------------------------- ------------------------
4,000,000
ordinary
shares of
no par
value
allotted
on 15
February
2023 at
51.25p 4,000,000 2,050 (15) 2,035
------------------------------- --------------------------------- ------------------------------------- ------------------------
2,500,000
ordinary
shares of
no par
value
allotted
on 17
February
2023 at
51.20p 2,500,000 1,280 (10) 1,270
------------------------------- --------------------------------- ------------------------------------- ------------------------
2,000,000
ordinary
shares of
no par
value
allotted
on 13
March
2023 at
51.40p 2,000,000 1,028 (8) 1,020
------------------------------- --------------------------------- ------------------------------------- ------------------------
750,000
ordinary
shares of
no par
value
allotted
on 16
March
2023 at
51.20p 750,000 384 (4) 380
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 28
March
2023 at
49.60p 500,000 248 (2) 246
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 12
April
2023 at
49.80p 500,000 249 (2) 247
------------------------------- --------------------------------- ------------------------------------- ------------------------
2,600,000
ordinary
shares of
no par
value
allotted
on 3 May
2023 at
48.85p 2,600,000 1,270 (13) 1,257
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 10 May
2023 at
48.85p 500,000 244 (2) 242
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 12 May
2023 at
48.85p 500,000 244 (2) 242
------------------------------- --------------------------------- ------------------------------------- ------------------------
750,000
ordinary
shares of
no par
value
allotted
on 18 May
2023 at
48.70p 750,000 365 (4) 361
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 23 May
2023 at
48.70p 500,000 243 (2) 241
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 24 May
2023 at
48.80p 500,000 244 (2) 242
------------------------------- --------------------------------- ------------------------------------- ------------------------
500,000
ordinary
shares of
no par
value
allotted
on 25 May
2023 at
49.00p 500,000 245 (2) 243
------------------------------- --------------------------------- ------------------------------------- ------------------------
2,500,000
ordinary
shares of
no par
value
allotted
on 1 June
2023 at
48.90p 2,500,000 1,223 (12) 1,211
------------------------------- --------------------------------- ------------------------------------- ------------------------
1,000,000
ordinary
shares of
no par
value
allotted
on 6 June
2023 at
49.00p 1,000,000 490 (5) 485
------------------------------- --------------------------------- ------------------------------------- ------------------------
Total as
at 30
June 2023 524,601,858 24,443 (208) 244,884
------------------------------- --------------------------------- ------------------------------------- ------------------------
The balance of shares left in Treasury at the year-end was nil
(2022: nil shares).
On 22 May 2023, a block listing facility for 21,690,000 new
shares was approved by the UK Listing Authority. This facility is
used for the purposes of satisfying market demand.
Because the criteria in paragraphs 16c and 16d of IAS 32
Financial Instruments: Presentation have been met, the stated
capital of the Company is classified as equity even though there is
an annual continuation vote.
Ordinary shares issued are accounted for based on the associated
trade date.
14 Reserves
The capital of the Company is managed in accordance with its
investment policy, in pursuit of its investment objective, which is
detailed above.
On 24 May 2007, the Royal Court of the Island of Jersey
confirmed that the amount standing to the credit of the Company's
stated capital account be reduced by 75% and was used to create the
special distributable reserve in the Company's accounts. This
reserve is treated as distributable profits available to be used
for all purposes permitted by Jersey company law including the
buying back of ordinary shares, the payment of dividends and the
payment of preliminary expenses.
Capital management policies and procedures
The Board defines capital as financial resources available to
the Company. The Company's capital as at 30 June 2023 comprises its
stated capital, special distributable reserve, capital reserve and
revenue reserve at a total of GBP240,431,000 (2022:
GBP234,986,000).
The Company's capital management objectives are:
-- to ensure that the Company will be able to continue as a going concern; and
-- to maximise the capital return to its equity Shareholders
through an appropriate balance of equity capital and debt.
The Board normally seeks to limit gearing to 25% of
Shareholders' funds at the time of borrowing. The Board monitors
and reviews the broad structure of the Company's capital on an
ongoing basis. This review includes the nature and planned level of
gearing, which takes account of the Investment Manager's views on
the market and the extent to which revenue in excess of that which
is required to be distributed should be retained. The Company has
no externally imposed capital requirements.
The capital of the Company is managed in accordance with its
investment policy detailed in the Strategic Review of the Company's
Annual Financial Report and Financial Statements.
15 Net asset value per ordinary share
The NAV per ordinary share and the NAV attributable to the
ordinary shares at the year-end calculated in accordance with their
entitlements in the Articles of Association were as follows:
2023 2022
NAV (GBP'000) 240,431 234,986
-------- --------
NAV per ordinary share (pence) 45.83p 49.30p
-------- --------
NAV per ordinary share has been calculated based on the share
capital in issue as at year end. The issued share capital as at 30
June 2023 comprised of 524,601,858 ordinary shares (2022:
476,651,858).
16 Financial instruments
The Company's financial instruments comprise its investment
portfolio, cash balances, bank loan and debtors and creditors that
arise directly from its operations. As an investment company, the
Company holds a portfolio of financial assets and financial
liabilities in pursuit of its investment objective. The Company
uses flexible borrowings for short term purposes and to seek to
enhance the returns to Shareholders, when considered appropriate by
the Investment Manager.
Financial assets at fair value through profit or loss (see note
9) are held at fair value. For listed securities trading actively,
fair value is considered to be equivalent to the most available
recent bid price. Where listed securities are not trading actively,
independent broker quotes are referenced to estimate fair value.
For unlisted securities, fair value is determined by the Board
using valuation techniques based on unobservable inputs, mainly
using broker quotes. The fair value of other receivables, cash and
cash equivalents and other payables is represented by their
carrying value in the S tatement of Financial Position shown above.
These are short term financial assets and liabilities whose
carrying value approximate fair value.
The main risks that the Company faces arising from its financial
instruments are:
(i) market price risk, being the risk that the fair value or
future cash flows of a financial instrument will fluctuate because
of changes in market prices and comprises currency risk, interest
rate risk and other price risk;
(ii) interest rate risk, being the risk that the future cash
flows of a financial instrument will fluctuate because of changes
in market interest rates;
(iii) foreign currency risk, being the risk that the value of
investment holdings, investment purchases, investment sales and
income will fluctuate because of movements in currency exchange
rates;
(iv) credit risk, being the risk that a counterparty to a
financial instrument will fail to discharge an obligation or
commitment that it has entered into with the Company; and
(v) liquidity risk, being the risk that the bank may demand
repayment of the loan and/or that the Company may not be able to
liquidate quickly its investments.
The Company held the following categories of financial
instruments as at 30 June 2023, all of which are held at amortised
cost, other than financial assets at fair value through profit or
loss, which are held at fair value. The Directors are of the
opinion that for the financial instruments held at amortised cost,
the carrying value approximates their fair value.
2023 2022
GBP'000 GBP'000
Financial assets
--------- ---------
Financial assets at fair value through profit or loss 266,011 263,393
--------- ---------
Cash and cash equivalents 6,597 3,985
--------- ---------
Accrued income 7,000 3,807
--------- ---------
Financial liabilities
--------- ---------
Amount due to brokers (904) (613)
--------- ---------
Bank loan (35,000) (33,000)
--------- ---------
Interest on bank loan facility (56) (28)
--------- ---------
Other creditors (3,227) (2,570)
--------- ---------
17 Market price risk
Market price risk (including other price risk) arises mainly
from uncertainty about future prices of financial instruments held.
It represents the potential loss the Company might suffer through
holding market positions in the face of price movements. To
mitigate the risk the Investment Manager's investment strategy
is:
-- to select investments for their fundamental value. Stock
selection is based on disciplined accounting, thorough market and
sector analysis, with the emphasis on investments that will redeem
in full at the end of their maturity date.
-- to ensure that an appropriate spread of investments is held
in the portfolio in order to reduce both the statistical risk and
the risk arising from factors specific to a country or sector.
-- to monitor market prices throughout the year and report to
the Board, which meets regularly in order to consider investment
strategy.
Investment and portfolio performance are discussed in the
Investment Manager's Review and further information on the
investment portfolio is set out above. These pages do not form part
of the audited Financial Statements.
If the investment portfolio valuation fell 7.5% at 30 June 2023
(2022: fall of 7.5%), the impact on the profit or loss and the NAV
would have been negative GBP19,951,000 (2022: negative
GBP19,754,000). Due to the effect of gearing, the impact on the NAV
per ordinary share would have been a decrease of 8.3% (2022:
decrease of 8.4%). If the investment portfolio valuation rose by
the same amount, the effect would have been equal and opposite. The
calculations are based on the portfolio valuation at the Statement
of Financial Position date and is not representative of the period
as a whole and may not be reflective of future market
conditions.
The Directors believe 7.5% is a relevant percentage based on
average market volatility in recent years.
18 Interest rate risk
The Company's financial assets and liabilities, with the
exception of cash and cash equivalents (see below), that are
subject to interest rate risk are detailed below.
2023 2023 2023 2022 2022 2022
GBP'000 Weighted Weighted GBP'000 Weighted Weighted
average average average average
interest period interest period
rate (%) for which rate (%) for which
the rate the rate
is fixed is fixed
(years) (years)
-------- ---------- ----------- -------- ---------- -----------
Financial assets:
-------- ---------- ----------- -------- ---------- -----------
Fixed rate instruments
& convertible securities 144,383 7.35 4.09 158,941 7.12 4.31
-------- ---------- ----------- -------- ---------- -----------
Floating rate notes 75,637 5.08 n/a 54,531 4.08 n/a
-------- ---------- ----------- -------- ---------- -----------
Preference shares 228 0.00 n/a 234 11.90 n/a
-------- ---------- ----------- -------- ---------- -----------
Financial liabilities:
-------- ---------- ----------- -------- ---------- -----------
Bank Loan 35,000 6.38 n/a 33,000 2.64 n/a
-------- ---------- ----------- -------- ---------- -----------
Financial assets
Fixed, floating rate and preference share yields and their
prices, are determined by market perception as to the appropriate
level of yields given the economic background. Key determinants
include economic growth prospects, inflation, the Government's
fiscal position, short term interest rates and international market
comparisons. The Investment Manager takes all these factors into
account when making any investment decisions as well as considering
the financial standing of the potential investee company.
Interest rates on fixed income instruments are fixed at the time
of purchase, as the fixed coupon payments are known, as are the
final redemption proceeds. Consequentially, if a fixed income
instrument is held until its redemption date, the total return
achieved is unaltered from its purchase date. However, over the
life of a fixed income instrument the market price at any given
time will depend on the market environment at that time. Therefore,
a fixed income instrument sold before its redemption date is likely
to have a different price to its purchase level and a profit or
loss may be incurred.
Interest rates on floating rate instruments vary throughout the
life of the instrument based on movements in the applicable
underlying base rate. Consequentially, the total return achieved on
these positions changes throughout the life of position. In
addition, over the life of the financial instrument, the market
price of such instruments will depend on the market environment at
that time. Therefore, a floating rate instrument sold before its
redemption date is likely to have a different price to its purchase
level and a profit or loss may be incurred.
Cash and cash equivalents
When the Company retains cash balances they are held in floating
rate deposit accounts. As at 30 June 2023, cash and cash
equivalents included cash amount of GBP2,987,000 held in sterling
(2022: GBP4,088,000) and GBP3,610,000 in a range of other
currencies (2022: cash overdraft of GBP103,000). The benchmark rate
which determines the interest payments received on sterling
interest bearing cash balances is the UK bank base rate, which was
5.00% at 30 June 2023 (2022: 1.25%).
Financial liabilities
The Company has borrowed in sterling at a variable rate of
interest based on the UK bank base rate. The impact of a 1%
increase (or decrease) in the bank base rate would be a NAV loss
(or gain) of GBP350,000 (2022: GBP330,000). The impact is linear -
in other words, a 2% increase (or decrease) in the bank base rate
would result in twice the NAV loss (or gain) as 1%. The
calculations are based on borrowings as at the respective Statement
of Financial Position dates and are not representative of the year
as a whole.
At year-end, the Company held a bank loan of GBP35,000,000 from
Scotiabank, details of which are contained in note 11 above.
19 Foreign currency risk
The Company invests in overseas securities and may hold foreign
currency cash balances which give rise to currency risks. It is not
the Company's policy to hedge this risk on a continuing basis, but
it may do so from time to time.
Foreign currency exposure at 30 June 2023 and 30 June 2022 was
as follows:
2023 2023 2023 2023 2022 2022 2022 2022
Investments Cash Accrued Total Investments Cash Accrued Total
GBP'000 GBP'000 Income GBP'000 GBP'000 GBP'000 Income GBP'000
GBP'000 GBP'000
Euro 30,838 1,168 331 32,337 31,977 (22) 237 32,192
------------- --------- --------- --------- ------------- --------- --------- ---------
Australian
dollar 193 5 - 198 191 - - 191
------------- --------- --------- --------- ------------- --------- --------- ---------
US dollar 50,770 2,298 1,011 54,079 62,126 (315) 1,418 63,229
------------- --------- --------- --------- ------------- --------- --------- ---------
Norwegian
krone 929 51 17 997 1,064 - 15 1,079
------------- --------- --------- --------- ------------- --------- --------- ---------
Canadian
dollar 228 4 - 232 314 191 - 505
------------- --------- --------- --------- ------------- --------- --------- ---------
Swedish krona 4,507 84 72 4,663 4,015 43 38 4,096
------------- --------- --------- --------- ------------- --------- --------- ---------
87,465 3,610 1,431 92,506 99,687 (103) 1,708 101,292
------------- --------- --------- --------- ------------- --------- --------- ---------
If the value of sterling had weakened against each of the
currencies in the portfolio by 5% (2022: 5%), the impact on the
profit or loss and the NAV would have been positive GBP4,679,000
(2022: positive GBP5,337,000).
If the value of sterling had strengthened by the same amount the
impact on the profit or loss and the NAV would have been negative
GBP4,233,000 (2022: negative GBP4,828,000).
The calculations are based on the portfolio valuation and
accrued income balances at the balance sheet date are not
representative of the period as a whole and may not be reflective
of future market conditions.
The Directors believe 5% is relevant based on the average market
volatility in exchange rates in recent years.
20 Credit risk
Credit risk is the risk that a counterparty to a financial
instrument will fail to discharge an obligation or commitment that
it has entered into with the Company. The Investment Manager has in
place a monitoring procedure in respect of counterparty risk which
is reviewed on an ongoing basis. The carrying amounts of financial
assets best represents the maximum risk exposure at the balance
sheet date.
At the reporting date, the Company's financial assets exposed to
credit risk amounted to the following:
2023 2022
GBP'000 GBP'000
Fixed income securities(1) 220,248 213,706
--------- ---------
Cash and cash equivalents 6,597 3,985
--------- ---------
Accrued income 7,000 3,807
--------- ---------
233,845 221,498
--------- ---------
(1) Fixed income securities include fixed and floating rate
securities, convertible securities and preference shares.
Credit risk on fixed income securities and convertible bonds
instruments is considered to be part of market price. The credit
ratings for the fixed income securities held by the Company as at
30 June have been listed below:
2023 2022
Rating of fixed income securities % %
BB- 9.1 5.3
------ ------
B+ 3.9 4.0
------ ------
B 3.9 4.0
------ ------
B- 2.6 1.3
------ ------
BBB 1.3 -
------ ------
CC - 1.3
------ ------
CCC 2.6 2.7
------ ------
CCC+ 3.9 6.7
------ ------
CCC- - 1.3
------ ------
C- 1.3 -
------ ------
Not rated 71.4 73.4
------ ------
100.0 100.0
------ ------
Source: 2023: S&P, 2022: S&P
The percentage above represents the value of fixed income
securities of GBP220,248,000 (2022: GBP213,706,000) included in the
Statement of Financial Position which are exposed to credit and
counterparty risk by credit rating.
Credit risk arising on transactions with brokers relates to
transactions awaiting settlement. Risk relating to unsettled
transactions is considered to be small due to the short settlement
period involved and the acceptable credit quality of the brokers
used. The Board monitors the quality of service provided by the
brokers used to further mitigate this risk.
The Company's cash and most of the assets are held by the
Administrator. The Company holds a residual cash balance with The
Hong Kong and Shanghai Banking Corporation ("HSBC") of GBP11,000
(2022: GBP11,000). The rating agency Moody's assigns a rating of A1
to HSBC and Aa3 to BNP Paribas .
There were no contingencies or guarantees outstanding at the
balance sheet date.
21 Liquidity risk
Market liquidity risk
The Company's financial instruments include investments which
are not traded in an organised public market and which generally
may be illiquid. As a result, the Company may not be able to
liquidate these investments within a short time frame.
The Company's listed securities are considered to be readily
realisable.
Funding liquidity risk
The following are the remaining contractual maturities of
financial liabilities at the reporting date. The amounts are gross
and undiscounted and include contractual interest payments.
30 June 2023 Contractual cash flows
Carrying amount 0-1 year 1-2 years
GBP000 GBP000 GBP000
---------------- ----------- ------------
Bank loan 35,000 (37,232) -
---------------- ----------- ------------
Creditors and other payables 4,187 (4,187) -
---------------- ----------- ------------
39,187 (41,419) -
---------------- ----------- ------------
30 June 2022 Contractual cash flows
Carrying amount 0-1 year 1-2 years
GBP000 GBP000 GBP000
---------------- ----------- ------------
Bank loan 33,000 (318) (33,318)
---------------- ----------- ------------
Creditors and other payables 3,211 (3,211) -
---------------- ----------- ------------
36,211 (3,529) (33,318)
---------------- ----------- ------------
The table above illustrates the contractual undiscounted cash
flows relating to the financial liabilities of the Company.
As disclosed in note 11, the Company has availed of a secured
bank loan facility of GBP45,000,000 with Scotiabank, out of which,
GBP35,000,000 has been drawn-down and is outstanding as at 30 June
2023. In addition to this, the Company maintains sufficient cash
and readily realisable securities to pay accounts payable, accrued
expenses and any repayment on its bank facility.
The interest payments on the bank loan in the table above
reflect market forward interest rates available at the reporting
date and these amounts may change as market interest rates
change.
The Company's liquidity risk is managed on an ongoing basis by
the Investment Manager in accordance with policies and procedures
in place as described in the Directors' Report. The Company's
overall liquidity risks are monitored on a quarterly basis by the
Board.
22 Fair value hierarchy
IFRS 13 Fair Value Measurement requires an analysis of
investments valued at fair value based on the reliability and
significance of information used to measure their fair value. The
level is determined by the lowest (that is the least reliable or
independently observable) level of input that is significant to the
fair value measurement for the individual investment in its
entirety as follows:
-- Level 1 - investments quoted in an active market;
-- Level 2 - investments whose fair value is based directly on
observable current market prices or indirectly being derived from
market prices;
-- Level 3 - investments whose fair value is determined using a
valuation technique based on assumptions that are not supported by
observable current market prices or based on observable market
data.
Transfers in and out of the levels are deemed to have occurred
at the start of the reporting period.
Investments valued using stock market active prices are
disclosed as Level 1 and this is the case for the quoted equity
investments that the Company holds.
Securities in Level 2 are priced using evaluated prices from a
third party vendor, together with a price comparison made to
evaluated secondary and tertiary third party sources, including
broker quotes and benchmarks. As a result, these investments are
disclosed as Level 2 - recognising that the fair values of these
investments are not as visible as quoted investments and their
higher inherent pricing risk.
Investments included as Level 3 are priced by the investment
manager using a valuation technique reviewed by the Board taking
into account, where appropriate, latest dealing prices, broker
statements, valuation information and other relevant factors.
Level 1 Level 2 Level 3 Total
Financial assets at fair value GBP'000 GBP'000 GBP'000 GBP'000
Fixed income securities(1) 228 219,970 50 220,248
--------- --------- --------- ---------
Equity shares(2) 42,088 3,621 54 45,763
--------- --------- --------- ---------
As at 30 June 2023 42,316 223,591 104 266,011
--------- --------- --------- ---------
Level 1 Level 2 Level 3 Total
Financial assets at fair value GBP'000 GBP'000 GBP'000 GBP'000
Fixed income securities(1) 234 209,627 3,845 213,706
--------- --------- --------- ---------
Equity shares(2) 45,195 4,038 454 49,687
--------- --------- --------- ---------
As at 30 June 2022 45,429 213,665 4,299 263,393
--------- --------- --------- ---------
(1) Fixed income securities include fixed and floating rate
securities, convertible securities and preference shares.
(2) Equity shares include investment funds.
If the market value of the Level 3 investments fell by 5% (2022:
5%), the impact on the profit or loss and the NAV would have been
negative GBP5,000 (2022: negative GBP215,000). If the value of the
Level 3 investments rose by the same amount, the effect would have
been equal and opposite.
IFRS 13 requires disclosure, by class of financial instrument,
if the effect of changing one or more input to reasonably possible
alternative assumptions would result in a significant change to the
fair value measurement. The information used in determination of
the fair value of Level 3 investments is chosen with reference to
the specific underlying circumstances and position of the investee
company. On that basis the Board believes that the impact of
changing one or more of the inputs to reasonably possible
alternative assumptions would not change the fair value
significantly. The following shows a reconciliation from the
beginning to the end of the year for fair value measurements in
Level 3 of the fair value hierarchy.
2023 2022
Level 3 Financial Assets GBP'000 GBP'000
Opening valuation 4,299 636
--------- ---------
Additions 1,231 374
--------- ---------
Sales (204) (88)
--------- ---------
Unrealised (losses)/gains 1,949 (9,954)
--------- ---------
Realised gains/(losses) (7,292) 198
--------- ---------
Transfers out of Level 3 - (623)
--------- ---------
Transfers into Level 3 121 13,756
--------- ---------
Closing valuation 104 4,299
--------- ---------
Transfers into Level 3:
Trevali Mining Corp GBPnil (30 June 2022: GBP80,000) was
transferred out of Level 1 to Level 3 because it was delisted
during the year ended 30 June 2023.
Oro Negro Dril 7.5% 14-24/01/2019 GBP8,000 (30 June 2022:
GBP41,000) was transferred out of Level 2 to Level 3 because it has
been categorized as being in default.
Quantitative information of significant unobservable inputs -
Level 3
The following tables summarise the significant unobservable
inputs the Company used to value its significant investments
categorised within Level 3 as at 30 June 2023 and 30 June 2022:
30 June 2023
Fair value as at Valuation technique Significant Range/input Weighted Average
30 June 2023 Unobservable inputs
Description GBP000
R.E.A Holdings Plc
CW 15/07/2025 54 Black Scholes model Volatility 50.1 N/A
------------------- -------------------- -------------------- ------------ -----------------
ORO SG 12% Unadjusted Broker
19-20/12/2025 DFLT 42 Vendor Pricing Quote 1 N/A
------------------- -------------------- -------------------- ------------ -----------------
ORO NEGRO DRIL 7.5% Unadjusted Broker
14-24/01/2019 DFLT 8 Vendor Pricing Quote 1 N/A
------------------- -------------------- -------------------- ------------ -----------------
Total 104
------------------- -------------------- -------------------- ------------ -----------------
30 June 2022
Fair value as at Valuation technique Significant Range/input Weighted Average
30 June 2022 Unobservable inputs
Description GBP000
Matalan Finance Unadjusted Broker
9.5% 18-31/01/2024 3,845 Vendor Pricing Quote 1 N/A
------------------- -------------------- -------------------- ------------ -----------------
R.E.A Holdings Plc
CW 15/07/2025 454 Black Scholes model Volatility 57.1 N/A
------------------- -------------------- -------------------- ------------ -----------------
Total 4,299
------------------- -------------------- -------------------- ------------ -----------------
The remaining 22 investments (2022: 22) classified as Level 3
have not been included in the above analysis as they have fair
value of GBPnil as at 30 June 2023 and 30 June 2022.
23 Transaction with the Investment Manager and related
parties
All transactions with related parties are carried out at an
arm's length basis.
There are no transactions with the Board other than aggregated
remuneration for services as Directors as disclosed in note 4 to
the Financial Statements. The beneficial interests of the Directors
in the shares of the Company are disclosed in the Company's Annual
Financial Report and Financial Statements. There are no outstanding
balances to the Directors at the year end.
Details of the fee arrangement with the Investment Manager are
disclosed in note 3.
24 Subsequent events
The Board has evaluated subsequent events for the Company
through to 14 September 2023, the date the Financial Statements
were available to be issued and has concluded that the material
events listed below do not require adjustment of the Financial
Statements.
Dividend declaration
The fourth interim dividend of 1.49 pence per ordinary share was
announced on 21 July 2023 and paid on 31 August 2023 to
Shareholders on the register on 28 July 2023, having an ex-dividend
date of 27 July 2023.
Glossary of Terms and Definitions
Alternative Performance Alternative performance measures are numerical measures
Measures ("APMs") of the Company's current, historical or future performance,
financial position or cash flows, other than financial
measures defined or specified in the applicable financial
framework. The Company's applicable financial framework
includes IFRS and the AIC SORP.
Net Asset Value The value of total assets less total liabilities. Liabilities
or NAV and NAV for this purpose include current and long-term liabilities.
per ordinary share To calculate the NAV per ordinary share, the NAV divided
by the number of shares in issue.
--------------------------------------------------------------
Reference rate The SONIA (Sterling Overnight Index Average) reference
("RFR") rate displayed in the relevant screen of any authorised
distributor of that reference rate.
--------------------------------------------------------------
Shareholder Investor who holds shares in the Company.
--------------------------------------------------------------
Alternative Performance Measures
In accordance with European Securities and Markets Authority
Guidelines on APMs the Board has considered what APMs are included
in the Annual Financial Report and Financial Statements which
require further clarification.
The Company uses the following APMs (as described below) to
present a measure of profitability which is aligned with the
requirements of our investors and potential investors, to draw out
meaningful data around revenues and earnings and to provide
additional information not required for disclosure under accounting
standards:
-- NAV total return
-- Ordinary share price total return
-- Revenue earnings per ordinary share
-- Annual dividends per ordinary share
-- Dividend cover
-- Revenue reserve per ordinary share
-- Dividend yield
-- Premium
-- Gearing
-- Ongoing charges ratio
All APMs relate to past performance. The following tables detail
the methodology of the Company's APMs.
NAV and ordinary share price total return
The return to Shareholders is calculated on a per ordinary share
basis by adding dividends paid and declared in the period to the
increase or decrease in the share price (bid) or NAV. The dividends
are assumed to have been reinvested in the form of ordinary shares
or net assets.
Annual dividend per ordinary share NAV Share
2023 price (bid)
30 June 2022 4.48p 49.30 51.20
----------------------------------- -------- -------------
30 June 2023 4.49p 45.83 46.60
----------------------------------- -------- -------------
Capital return (7.04)% (8.98)%
----------------------------------- -------- -------------
Effect of dividend reinvestment 9.08% 8.30%
----------------------------------- -------- -------------
Total return 2.04% (0.68)%
----------------------------------- -------- -------------
Annual dividend per ordinary share NAV Share
2022 price (bid)
30 June 2021 4.47p 52.62 54.80
----------------------------------- -------- -------------
30 June 2022 4.48p 49.30 51.20
----------------------------------- -------- -------------
Capital return (6.31%) (6.57%)
----------------------------------- -------- -------------
Effect of dividend reinvestment 8.35% 7.78%
----------------------------------- -------- -------------
Total return 2.04% 1.21%
----------------------------------- -------- -------------
Revenue earnings per ordinary share
Revenue earnings (which includes dividends paid out during the
year) divided by the weighted average number of ordinary shares in
issue during the financial year.
2023 2022
Revenue earnings a GBP22,443,000 GBP19,163,000
----------- -------------- --------------
Weighted average number of ordinary shares in issue b 497,695,146 460,845,694
----------- -------------- --------------
Revenue earnings per ordinary share (a/b)*100 4.51p 4.16p
----------- -------------- --------------
Annual dividend per ordinary share
The total amount of dividends declared for every issued ordinary
share over the Company's financial year.
Dividend History Rate xd date Record date Payment date
First interim 2023 1.00p 27 October 2022 28 October 2022 25 November 2022
------ ---------------- ---------------- -----------------
Second interim 2023 1.00p 26 January 2023 27 January 2023 28 February 2023
------ ---------------- ---------------- -----------------
Third interim 2023 1.00p 27 April 2023 28 April 2023 26 May 2023
------ ---------------- ---------------- -----------------
Fourth interim 2023 1.49p 28 July 2023 29 July 2023 31 August 2023
------ ---------------- ---------------- -----------------
Annual dividend per ordinary share 4.49p
------ ---------------- ---------------- -----------------
First interim 2022 1.00p 28 October 2021 29 October 2021 30 November 2021
------ ---------------- ---------------- -----------------
Second interim 2022 1.00p 27 January 2022 28 January 2022 25 February 2022
------ ---------------- ---------------- -----------------
Third interim 2022 1.00p 28 April 2022 29 April 2022 27 May 2022
------ ---------------- ---------------- -----------------
Fourth interim 2022 1.48p 28 July 2022 29 July 2022 26 August 2022
------ ---------------- ---------------- -----------------
Annual dividend per ordinary share 4.48p
------ ---------------- ---------------- -----------------
Dividend cover
Revenue earnings per ordinary share divided by the annual
dividend per ordinary share expressed as a ratio.
2023 2022
Revenue earnings per ordinary share a 4.51p 4.16p
----- ------ ------
Annual dividend per ordinary share b 4.49p 4.48p
----- ------ ------
Dividend cover a/b 1.00x 0.93x
----- ------ ------
Revenue reserves per ordinary share
Revenue reserve (which includes dividends paid out during the
year) divided by the number of ordinary shares at the Statement of
Financial Position date.
2023 2022
Revenue reserve a GBP16,020,000 GBP15,562,000
----------- -------------- --------------
Ordinary shares in issue b 524,601,858 476,651,858
----------- -------------- --------------
Revenue reserves per ordinary share (a/b)*100 3.05p 3.26p
----------- -------------- --------------
Dividend yield
The annual dividend per ordinary share expressed as a percentage
of the share price (bid price).
2023 2022
Annual dividend per ordinary share a 4.49p 4.48p
----------- ------- -------
Share price (bid price) b 46.60p 51.20p
----------- ------- -------
Dividend yield (a/b)*100 9.64% 8.75%
----------- ------- -------
Premium
The amount by which the market price per ordinary share of an
investment company is higher or lower than the NAV per ordinary
share. The discount or premium is expressed as a percentage of the
NAV per ordinary share.
2023 2022
Share price (bid price) a 46.60p 51.20p
--------- ------- -------
NAV per ordinary share b 45.83p 49.30p
--------- ------- -------
Premium (a-b)/b 1.68% 3.86%
--------- ------- -------
Gearing
The level of borrowing that the Company has undertaken.
Represented by total assets (being total assets less current
liabilities (excluding borrowings)) less all cash, expressed as a
percentage of Shareholders' funds (being the NAV of the Company)
minus 100.
2023 2022
GBP'000 GBP'000
Total assets 279,618 271,197
--------- ---------
Current liabilities (excluding borrowings) (4,187) (3,211)
--------- ---------
Cash and cash equivalents (6,597) (3,985)
--------- ---------
Total a 268,834 264,001
--------------- --------- ---------
NAV b 240,431 234,986
--------------- --------- ---------
Gearing ((a/b)-1)*100 11.81% 12.35%
--------------- --------- ---------
Ongoing charges ratio
A measure of all operating costs incurred in the reporting
period, calculated as a percentage of average net assets in that
year. Operating costs exclude costs suffered within underlying
investee funds, costs of buying and selling investments, interest
costs, taxation and the costs of buying back or issuing ordinary
shares.
2023 2022
Average NAV a 239,062,011 239,974,073
------------- ------------ ------------
Operating expenses per Statement of Comprehensive Income 2,857,000 2,973,000
------------ ------------
Ineligible expenses (79,000) (125,000)
------------ ------------
Operating expenses b 2,778,000 2,848,000
------------- ------------ ------------
Ongoing charges figure
(calculated using the AIC methodology) (b/a)*100 1.16% 1.19%
------------- ------------ ------------
A copy of the Company's Annual Report will be available shortly
from the Company Secretary, (BNP Paribas S.A., Jersey Branch, IFC
1, The Esplanade, St Helier, Jersey, JE1 4BP), or will be
circulated on the Company's website
(https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd).
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END
FR SFUFMLEDSEIU
(END) Dow Jones Newswires
September 14, 2023 13:01 ET (17:01 GMT)
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