TIDMTFIF
TWENTYFOUR INCOME FUND LIMITED
INTERIM MANAGEMENT REPORT AND UNAUDITED CONDENSED
INTERIM FINANCIAL STATEMENTS
For the period from 1 April 2023 to 30 September 2023
LEI: 549300CCEV00IH2SU369
(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)
The Company has today, in accordance with DTR 6.3.5, released its Interim
Management Report and Unaudited Condensed Financial Statements for the period
ended 30 September 2023. The Report will shortly be available via the
Company'sPortfolio Manager's website www.twentyfouram.com and will shortly be
available for inspectiononline at www.morningstar.co.uk/uk/NSM website.
FINANCIAL AND OPERATIONAL HIGHLIGHTS
·NAV per share of 102.71 pence (FYE 31/03/23: 100.97 pence)
·Total Net Assets of £768.12 million (FYE 31/03/23: £724.98 million)
·Dividends declared for the 6-month period of 4 pence per share (12 months to
FYE 31/03/23: 9.46 pence per share) and remain on track to deliver the Company's
target dividend for the year
·Dividends paid in the 6-month period were 6.46 pence per share (12 months to
FYE 31/3/2023: 7.27 pence per share)
·Total Return of 8.50% (FYE 31/03/23: -3.54%)
·The Company continues to perform strongly, with no defaults or credit concerns
within the portfolio
Aza Teeuwen, Partner & Portfolio Manager at TwentyFour Asset Management, said:
"The rising rate environment coupled with a strong supply and active primary
market has enabled us to position TwentyFour Income Fund Limited positively over
the period. The rise in portfolio coupon rates as base rate hikes were seen,
combined with accretive additions to the portfolio have contributed to the
Company's income levels, while maintaining the credit profile."
Bronwyn Curtis OBE, Chair of TwentyFour Income Fund, said: "We are very pleased
to present the interim financial statements for the Company, which demonstrate
how TwentyFour Income Fund Limited continues to deliver an excellent income
story. The Company's strong NAV performance sits alongside its stand-out share
activity for the period, having traded at or around NAV, while the bulk of the
investment company market saw significant discounts."
SUMMARY INFORMATION
The Company
TwentyFour Income Fund Limited (the "Company" and "TFIF") is a closed-ended
investment company whose shares("Ordinary Shares", being the sole share class)
have a Premium Listing on the Official List of the UK Listing Authority. The
Company was incorporated in Guernsey on 11 January 2013.The Company has been
included in the London Stock Exchange's FTSE 250 Index since 16 September 2022.
Investment Objective and Investment Policy
The Company's investment objective is to generate attractive risk adjusted
returns principally through income distributions. The Company's investment
policy is to invest in a diversified portfolio ("Portfolio") of predominantly UK
and European Asset Backed Securities ("ABS"). The Company maintains a Portfolio
largely diversified by the issuer, it being anticipated that the Portfolio will
comprise at least 50 ABS at all times.
Target Returns*
The Company has a target annual net total return on the Company's NAV of between
6% and 9% per annum, which since 24 February 2023 has included quarterly
dividends with an annual target each financial year of 8% of the Issue Price
(the equivalent of 8 pence per year, per Ordinary Share), effective from the
dividend declared in respect of the 3-month period ended 31 March 2023. Between
21 September 2022 and 23 February 2023 the annual target dividend was 7% and
prior to that was 6%. Total return per Ordinary Share is calculated by adding
the increase or decrease in NAV per share with the dividend per share and
dividing it by the NAV per share at the start of the period/year.
The increases in the annual target dividend are intended to increase the rate of
return to investors following increases in global interest base-rates.
Ongoing Charges
Ongoing charges for the period ended 30 September 2023 have been calculated in
accordance with the Association of Investment Companies (the "AIC") recommended
methodology. The ongoing charges for the period ended 30 September 2023 were
0.99% (30 September 2022: 0.95%).
Discount
As at 23 November 2023, the discount to NAV had moved to 2.49%. The estimated
NAV per share and mid-market share price stood at 102.25p and 99.70p,
respectively.
Published NAV
Northern Trust International Fund Administration Services (Guernsey) Limited
(the "Administrator") is responsible for calculating the NAV per share of the
Company. The unaudited NAV per Ordinary Share will be calculated as at the close
of business on the last business day of every week and the last business day of
every month by the Administrator and will be announced by a Regulatory News
Service the following business day. The basis for determining the Net Asset
Value per share can be found in Note 5.
* The Issue Price being £1.00. This is a target only and not a profit forecast.
There can be no assurance that this target will be met or that the Company shall
pay any dividends at all. This target return should not be taken as an
indication of the Company's expected or actual current or future results. The
Company's actual return will depend upon a number of factors, including the
number of Ordinary Shares outstanding and the Company's total expense ratio, as
defined by the AIC's ongoing charges methodology. Potential investors should
decide for themselves whether or not the return is reasonable and achievable in
deciding whether to invest in or retain or increase their investment in the
Company. Further details on the Company's financial risk management can be found
in note 16.
Financial Highlights
NAV per share
As at 30 September 2023 As at 31 March 2023
102.71p 100.97p
Share price
As at 30 September 2023 As at 31 March 2023
97.80p 100.50p
Total Net Assets
As at 30 September 2023 As at 31 March 2023
£768.12 million £724.98 million
Total return
For the six-month period For the year ended 31 March 2023
ended 30 September 2023
8.50% -3.54%
Dividends declared
For the six-month period For the year ended 31 March 2023
ended 30 September 2023
4p 9.46p
Average premium /
(discount)
For the six-month period For the year ended 31 March 2023
ended 30 September 2023
-0.82% 0.55%
Shares in issue
As at 30 September 2023 As at 31 March 2023
747.84 million 718.04 million
Portfolio performance
For the six-month period For the year ended 31 March 2023
ended 30 September 2023
7.39% -1.17%
Repurchase Agreement
Borrowing
As at 30 September 2023 As at 31 March 2023
0.78% 6.74%
Number of positions in
portfolio
As at 30 September 2023 As at 31 March 2023
197 183
Please see the 'Glossary of Terms and Alternative Performance Measures' for
definitions how the above financial highlights are calculated.
CHAIR'S STATEMENT
for the period from 1 April 2023 to 30 September 2023
Bronwyn Curtis OBE
In my capacity as Chair of the Board of Directors of TwentyFour Income Fund
Limited (the "Company"), I am pleased to present my report on the Company's
progress for the six-month period ended 30 September 2023 (the "reporting
period").
Investment Performance
In May 2023, the Company distributed the final quarterly dividend of its
financial year at 4.46p per share, increasing the overall annual dividend to
9.46p per share. This represented a 40% increase over 2022 and the highest
distribution since inception, an excellent result particularly considering the
wider market backdrop.
During the reporting period, the NAV per share saw an increase from 100.97 to
102.71, a rise of 1.72%. The Company's net assets increased from £725m to £768m
and the NAV per share total return for the reporting period was 8.50%.
Market Overview
The start of the reporting period saw wider financial markets sailing into
calmer waters, following the regional US regional banking turmoil, which gave
the market the necessary stability and favourable backdrop to support primary
issuance in a meaningful way.
Fundamentals have played their part in the overall performance of the sector.
While traditional fixed income markets have been dominated by discussions around
central bank policy and peak rates, with multiple increases in key rates by the
Bank of England and the European Central Bank, the floating rate Asset Backed
Securities ("ABS") and Collateralised Loan Obligations ("CLOs") markets have
benefitted from the anticipated higher for longer rate environment.
In the UK, headline inflation is moderating - although core inflation remains
challenging. House prices have been steadily falling over the reporting period
and the Nationwide House Price Index fell 5.3% year on year to September 2023.
Housing market activity remains weak with just 45,400 mortgage approvals in
August, which is around 30% below the monthly average prevailing in 2019 prior
to the pandemic. This subdued picture is not surprising given rising mortgage
rates and the challenging picture for housing affordability, however, swap rates
stabilised over the reporting period and some lenders started to reduce mortgage
lending rates.
The unemployment rate over the reporting period continued to be very low. As job
losses are generally the biggest driver of mortgage arrears, the actual losses
remain minimal. However, the job market is weakening and while wage growth
continues to be strong; cracks are starting to appear and mortgage arrears have
increased this year. TwentyFour Asset Management LLP (the "Portfolio Manager")
highlighted this development in previous reports to you, so it isn't a surprise
and they have positioned the portfolio for this. The levels of arrears are low,
and the portfolio has seen no defaults. Most of the asset class's
underperformance has been seen in legacy (pre-Global Financial Crisis) non
-conforming mortgage portfolios. None of these are held by the Company.
The debate around rates has shifted from how high rates might go, to how long
rates might remain elevated. Deutsche Bank analysis recently noted that from a
UK RMBS perspective one thing is clear: that the vast majority of borrowers who
reverted from a fixed rate to a floating mortgage in 2023 (the cohort that in
theory, should be most exposed to affordability stress), have so far, weathered
the shock. Actual losses remain almost non-existent within UK and European RMBS
and ABS securitisation pools and the 12-month trailing leveraged loan default
rate remains low at 1.5%, which is well below the levels that had been forecast.
There have been no losses in any tranches of any deals which the Company holds.
Dividend
The Company aims to distribute all its investment income to ordinary
shareholders. The Company is currently targeting quarterly payments equivalent
to an annual dividend of at least 8p per year. The fourth interim dividend is
used to distribute residual income (if any), generated in the year. Dividends
paid by the Company for the reporting period totalled 6.46p per ordinary share.
The increase in dividends for the financial year ending March 2023 was driven by
two main factors; the increase in the Bank of England Rate (which rose by 1%
from 4.25% to 5.25% in the six-month period to 30 September 2023), and the
deployment of available capital from bond amortisations in the portfolio of the
Company, along with share issuance by the Company. This enabled the Portfolio
Manager to invest at the then prevailing higher yields; which was accretive to
the income of the Company.
Premium/Discount and Share Capital Management
In contrast to the wider investment company market, which saw trading at large
discounts across the board, the Company traded close to NAV for the majority of
the reporting period, at an average of only a -0.82% discount.
Due to shareholder demand coupled with the ability to purchase accretive
assets, the Company was able to issue £29.8m of new shares between April and the
end of June 2023.
Annual General Meeting
The Company's 2023 Annual General Meeting was held on 14 September 2023, with
all resolutions being passed.
Board Composition
Richard Burwood retired as Non-Executive Director of the Company and as the
Chair of the Management Engagement Committee, effective from 14 September 2023.
I would like to thank Richard for all his hard work and valued contribution to
the Board and to the Company during his tenure.
With effect from 14 September 2023, Paul Le Page was appointed as Chair of the
Management Engagement Committee.
Outlook
The market consensus is that we are close to terminal rates in the UK and Europe
and the market is pointing towards a soft-landing next year. In this scenario,
the economic conditions for European ABS remains favourable as unemployment and
corporate defaults are expected to remain low. This in turn could mean that we
see central banks keeping interest rates at higher levels for longer, further
supporting the return profile of the Company's asset class.
Bronwyn Curtis OBE
Chair
23 November 2023
PORTFOLIO MANAGER'S REPORT
for the period from 1 April 2023 to 30 September 2023
TwentyFour Asset Management LLP
TwentyFour Asset Management LLP, in our capacity as Portfolio Manager to the
TwentyFour Income Fund Limited, are pleased to present our report on the
Company's progress for the six-month period ended 30 September 2023 ("the
reporting period").
Market Environment
The reporting period has seen around ?47bn of gross issuance in ABS markets,
including CLOs, which culminated in September being the busiest single month for
ABS, since the onset of the Global Financial Crisis ("GFC"). This included ?16bn
of Residential Mortgage-Backed Securities ("RMBS"), ?17bn of auto and consumer
ABS and ?11.5bn of CLOs. Issuance was from a very geographically diverse sector
across the UK and Europe and saw debut deals from new borrowers together with
repeat issuers and from platforms that have not been seen in the market for a
number of years.
One noted feature in the RMBS market was the welcome return of many bank
lenders, which was clearly due to the rolling off, of Central Bank funding
schemes.
It is becoming clear that banks are focussed on not only diversification of
funding but also on diversification of capital sources, following the Credit
Suisse AT1 write down. The market saw an increasing number of significant risk
transfer ("SRT") transactions (which gives banks a way of deleveraging their
balance sheets by transferring the risk of a tranche of a loan portfolio to an
investor in such a way that they obtain regulatory capital relief) and full
capital structures (which allows banks to sell whole loan portfolios rather than
adopt alternative strategies that can obtain capital relief) being issued;
mainly by European banks. We welcome this supply, as the collateral generally
includes the core business (and best performing collateral) of the issuing bank,
which should offer the Company the opportunity to further diversify its
portfolio, in the coming months.
The European CLO market was active, seeing issuance during the reporting period
of ?11.5bn, which took the CLO issuance for the full year-to-date to around
?18bn by the end of September. This was despite the challenges that the market
has endured for most of the year, mainly based on the weighted average cost of
capital as AAA spreads have remained stubbornly wide; but also due to a lack of
underlying leveraged loan supply.
We continue to see value in BB rated securities, which at the end of the
reporting period yielded around 13% (in GBP). Commercial Mortgage-Backed
Security ("CMBS") activity remains, understandably, near non-existent over the
reporting period, with just one deal (with low levels of leverage) from Last
Mile Logistic being pre-placed into the market.
However, the over-riding theme for the whole year to date, has really been the
very strong supply-demand technical that has been in play, evidenced by the
oversubscription levels seen across all deals, in particular mezzanine tranches,
which were generally oversubscribed multiple times.
Performance
The Company returned 8.50% in the reporting period, on a total return basis, a
strong performance mainly driven by CLO and RMBS returns.
Portfolio Events
The fundamentals of CLOs and European ABS have been in focus for quite some time
as the market has dealt with multiple headwinds. As spreads have gradually
tightened during this volatile period we have gradually reduced leverage from
5.4% to just under 1% in the Company as we continue to value liquidity and
flexibility in the portfolio.
One further aspect to consider is the rating performance of the ABS transactions
themselves. Since the GFC, securitisation structures have been robust and rating
performance has reflected this with upgrades being significantly higher than
downgrades. There have been no defaults or underlying issues with the assets in
the portfolio of the Company and the core focus has remained on western
European, secured assets (mortgages and leveraged loans). Wider market
volatility is likely to remain elevated and a deterioration of fundamental
performance is expected, and we have taken the opportunity in certain instances
to improve the credit profile in certain sectors. This has been achieved through
selling lower rated bonds and in their stead purchasing other bonds with a
higher rating or by reducing exposure to assets where our deal monitoring has
shown that the performance of those assets is has reduced. We have also pared
back the portfolio's exposure to UK RMBS equity through refinancing in the
region of £32m during the reporting period.
Portfolio Strategy
Our focus during the reporting period, has been and will continue to be on
investing in higher-yielding floating-rate ABS, which, in an environment of
higher-for-longer rates, should continue to deliver ongoing, attractive levels
of income; this should enable the Company to deliver on its annual target
dividend. At the end of the reporting period, the Company had a very healthy
gross purchase yield of 11.3% and a mark-to-market yield of 13.8%. While the
overall performance of UK and European mortgage market is understandably
deteriorating, the levels of losses observed within RMBS and ABS transactions
currently do not give us any cause for concern. The robust nature of the ABS
structures and our internal stress tests indicate that the performance of the
underlying assets would need to deteriorate by many multiples of the levels that
were seen in the GFC before significant losses would be seen on the
transactions.
The issues in the commercial real estate sector are well documented and will
take a long time to be resolved, this suggests that refinancing in the sector
will become more challenging and most CMBS deals are likely to extend in the
near term. As a result, we have re-underwritten all the CMBS holdings and
reduced the CMBS allocation, in the portfolio, to just 3.8%.
Spreads have generally tightened during the reporting period, whilst senior
issuance spreads have been mostly range-bound, without strong moves in either
direction, as the market expects further issuance in the last quarter. Most of
the spread performance has been in mezzanine and sub-investment grade bonds.
Given the elevated volumes of primary and secondary trading were well absorbed,
the market is well positioned in a good technical situation. The liquidity which
the Company has available could be deployed in the event of elevated market
stress to take advantage of any investment opportunities. We currently expect to
increase the allocation to SRT investments instead of future RMBS equity and
junior non-prime transactions.
Key Risks:
We believe the key risks currently perceived by the market are:
· The risk of the central bank rate increases having a lagged impact on
economic fundamentals.
· The risk that central banks overly extend monetary tightening in their fight
against high inflation, resulting in a greater economic slowdown than intended.
· The escalation of geopolitical risk due to the ongoing Ukraine-Russia
conflict and Middle East conflict.
Market Outlook:
· A soft economic landing remains our base case expectation, but a recession
in the EU, UK and/or US cannot be ruled out. We have therefore focussed on
keeping the credit spread duration and leverage of the portfolio relatively low.
· While corporate and consumer fundamentals are likely to deteriorate, we do
not expect this to be problematic for bond holders.
· We expect short term rates to remain elevated for longer. Market sentiment
has already priced in rate cuts in the fixed rate market and floating rate bonds
should benefit in the medium term from higher income due to elevated base rates.
· Protection from broader market volatility is very strong, supported by
relatively short maturities and high income.
· Given the current uncertainty in the global economy, we believe that
flexibility and liquidity remain important and remain of the view that raising
the credit quality of the portfolio seems prudent at this time.
TwentyFour Asset Management LLP
23 November 2023
TOP TWENTY HOLDINGS
as at 30 September 2023
Nominal/ Asset Fair Percentage of
Backed Value Net Asset
Security Value
Security Shares Sector* £
UK MORTGAGES CORP?FDG DAC 20,056,444 RMBS 21,621,569 2.81
KPF1 A 0.0% 31/07/2070
UK MORTGAGES CORPORATE F 24,273,696 RMBS 20,627,326 2.69
'KPF4 A' 0.00% 30/11/2070
SYON SECURITIES 19-1 B 17,508,622 RMBS 16,912,787 2.20
CLO FLT 19/07/2026
TULPENHUIS 0.0% 19,538,092 RMBS 16,674,636 2.17
18/04/2051
UKDAC MTGE 'KPF3 A' 0.0% 18,386,135 RMBS 14,647,940 1.91
31/7/2070
EQTY. RELEASE FNDG. NO 5 16,500,000 RMBS 13,447,500 1.75
'5 B' FRN 14/07/2050
CASTELL 2022-1 PLC '1 D' 13,299,000 RMBS 13,370,311 1.74
FRN 25/4/2054
VSK HOLDINGS LTD VAR 2,058,000 RMBS 13,160,874 1.71
31/7/2061
CHARLES ST CONDUIT ABS 2 12,500,000 RMBS 12,182,500 1.59
LIMITED CABS 2- CL B MEZZ
CHARLES STREET CONDUIT 12,000,000 RMBS 11,548,800 1.50
FRN 0.00% 12/04/2067
SYON SECS. 2020-2 DAC '2 10,441,446 RMBS 10,435,735 1.36
B' FRN 17/12/2027
HABANERO LTD '6W B' VAR 10,200,000 RMBS 10,200,000 1.33
5/4/2024
RRME 8X D '8X D' FRN 13,000,000 CLO 10,171,845 1.32
15/10/2036
VSK HLDGS. '1 C4-1' VAR 1,443,000 RMBS 9,244,830 1.20
01/10/2058
HOPS HILL NO2 PLC '2 E' 9,262,000 RMBS 8,692,280 1.13
FRN 27/11/2054
FONDO DE TITULIZACION 10,000,000 SME 8,674,368 1.13
PYME '7 NOTE' FRN
23/12/2042
UK MORTGAGES CORP FDG DAC 15,965,581 RMBS 8,257,654 1.08
KPF2 A 0.0% 31/07/2070
UK MORTGAGES CORP?FDG DAC 7,686,024 RMBS 8,195,377 1.07
CHL1 A 0.0% 31/07/2070
SYON SECURITIES 2020-2 8,338,258 RMBS 7,859,134 1.02
DESIGNATED A FLTG
17/12/2027
TAURUS 2020-1 NL DAC 10,421,518 CMBS 7,647,846 1.00
'NL1X E' FRN 20/02/2030
The full listing of the Portfolio as at 30 September 2023 can be obtained from
the Administrator on request.
* Definition of Terms
`ABS' - Asset Backed Securities
`CLO' - Collateralised Loan Obligations
`CMBS' - Commercial Mortgage-Backed Securities
`RMBS'- Residential Mortgage-Backed Securities
`SME' - Small and Medium Enterprises
BOARD MEMBERS
Biographical details of the Directors are as follows:
Bronwyn Curtis OBE - (Non-Executive Director and Chair)
Ms Curtis is a resident of the United Kingdom, an experienced Chair, Non
-Executive Director and Senior Executive across banking, media, commodities and
consulting, with global or European wide leadership responsibilities for 20
years at HSBC Bank plc, Bloomberg LP, Nomura International and Deutsche Bank
Group. She is presently a Non-Executive member of the Oversight Board at the UK
Office for Budget Responsibility and Non-Executive Director at Pershing Square
Holdings, The Scottish American Investment Company plc and BH Macro Limited. She
is also a regular commentator in the media on markets and economics. Ms. Curtis
was appointed to the Board on 12 July 2022 and was appointed Chair on 14 October
2022.
Joanne Fintzen - (Non-Executive Director and Senior Independent Director)
Ms Fintzen is a resident of the United Kingdom, with extensive experience of the
finance sector and the investment industry. She trained as a Solicitor with
Clifford Chance and worked in the Banking, Fixed Income and Securitisation
areas. She joined Citigroup in 1999 providing legal coverage to an asset
management division. She was subsequently appointed as European General Counsel
for Citigroup Alternative Investments where she was responsible for the
provision of legal and structuring support for vehicles which invested $100bn in
Asset Backed Securities as well as hedge funds investing in various different
strategies in addition to private equity and venture capital funds. Ms Fintzen
is currently Non-Executive Director of JPMorgan Claverhouse Investment Trust
plc. Ms Fintzen was appointed to the Board on 7 January 2019 and was appointed
Senior Independent Director on 14 October 2022.
John de Garis - (Non-Executive Director and Chair of the Nomination and
Remuneration Committee)
Mr de Garis is a resident of Guernsey with over 30 years of experience in
investment management. He is Managing Director and Chief Investment Officer of
Rocq Capital founded in July 2016 following the management buyout of Edmond de
Rothschild (C.I.) Ltd. He joined Edmond de Rothschild in 2008 as Chief
Investment Officer following 17 years at Credit Suisse Asset Management in
London, where his last role was Head of European and Sterling Fixed Income. He
began his career in the City of London in 1987 at Provident Mutual before
joining MAP Fund Managers where he gained experience managing passive equity
portfolios. He is a Non-Executive Director of VinaCapital Investment Management
Limited in Guernsey. Mr de Garis is a Chartered Fellow of the Chartered
Institute for Securities and Investment and holds the Certificate in Private
Client Investment Advice and Management. Mr de Garis was appointed to the Board
on 9 July 2021.
Paul Le Page (Non-Executive Director and Chair of the Management Engagement
Committee)
Paul Le Page is a resident of Guernsey and has over 24 years' experience in
investment and risk management. He was formerly an Executive Director and
Senior Portfolio Manager of FRM Investment Management Limited, a subsidiary of
the UK's largest listed alternatives manager, Man Group. In this capacity, he
managed alternative funds and institutional client portfolios, worth in excess
of $5bn and was a director of a number of group funds and structures. Prior to
joining FRM, he was employed by Collins Stewart Asset Management (now Canaccord
Genuity) where he was Head of Fund Research responsible for reviewing both
traditional and alternative fund managers and managing the firm's alternative
fund portfolios. He joined Collins Stewart in January 1999 where he completed
his MBA in July 1999. Mr Le Page is currently a Non-Executive Director of
NextEnergy Solar Fund Limited and RTW Biotech Opportunities Limited. Mr Le Page
was appointed to the Board on 16 March 2023.
John Le Poidevin - (Non-Executive Director and Chair of the Audit Committee)
Mr Le Poidevin is a resident of Guernsey and a Fellow of the Institute of
Chartered Accountants in England and Wales. He was formerly an audit partner at
BDO LLP in London where he developed an extensive breadth of experience and
knowledge across a broad range of business sectors in the UK, European and
global markets during over twenty years in practice, including in corporate
governance, audit, risk management and financial reporting. Since 2013 he has
acted as a Non-Executive, including as audit committee chair, on the boards of a
number of listed and private groups. Mr Le Poidevin is currently a Non-Executive
Director of International Public Partnerships Limited, BH Macro Limited, Super
Group (SGHC) Limited, and several other private companies and investment funds.
Mr Le Poidevin was appointed to the Board on 9 July 2021 and was appointed Chair
of the Audit Committee on 14 October 2022.
Board Member who retired during the period
Richard Burwood - (Non-Executive Director)
Mr Burwood is a resident of Guernsey with over 30 years' experience in banking
and investment management. During 18 years with Citibank London, Mr Burwood
spent 11 years as a fixed income portfolio manager spanning both banks/finance
investments and Asset Backed Securities. Mr Burwood has lived in Guernsey since
2010, initially working as a portfolio manager for EFG Financial Products,
managing the treasury department's ALCO Fixed Income portfolio. From 2011 to
2013, Mr Burwood worked as the Business and Investment Manager for Man
Investments, Guernsey. In January 2014, Mr Burwood joined the board of
RoundShield Fund, a Guernsey private equity fund, focused on European small to
mid-cap opportunities. In August 2015, he became a Board Member of SME Credit
Realisation Fund Limited, which provides investors access to a diversified pool
of SME loans originated through Funding Circle's marketplaces in the UK, US and
Europe. Mr Burwood also serves on the boards of Habrok, a hedge fund
specialising in Indian equities, and EFG International Finance, a structured
note issuance company based in Guernsey. Mr Burwood was appointed to the Board
on 17 January 2013 and retired from the Board effective 14 September 2023.
DISCLOSURE OF DIRECTORSHIPS IN PUBLIC COMPANIES LISTED ON RECOGNISED STOCK
EXCHANGES
Company Name Stock Exchange
Bronwyn Curtis
BH Macro Limited London
Pershing Square Holdings Limited London and Euronext Amsterdam
The Scottish American Investment Company Plc London
Joanne Fintzen
JPMorgan Claverhouse Investment Trust plc London
Paul Le Page
NextEnergy Solar Fund Limited London
RTW Biotech Opportunities Limited London
John Le Poidevin
BH Macro Limited London
International Public Partnerships Limited London
Super Group (SGHC) Limited New York
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
The Company's assets are mainly comprised of ABS carrying exposure to risks
related to the underlying assets backing the security or the originator of the
security. The Company's principal risks are therefore market or economic in
nature.
The principal risks disclosed can be divided into the various areas as follows:
· Market Risk and Investment Valuations
Market risk is the risk associated with changes in market factors including
spreads, interest rates, economic uncertainty, changes in laws and political
circumstances.
Due to inflation concerns and existing geo-political tensions, both the UK and
Europe could go into a prolonged recessionary period, therefore, risk premiums
demanded by the market could continue to rise as risk sentiment deteriorates and
wider spreads could result in lower cash prices.
· Liquidity Risk
Liquidity risk is the risk that the portfolios may not be able to sell
securities at a given price and/or over the desired timeframe. Investments made
by the Company may be relatively illiquid. Some investments held by the Company
may take longer to realise than others and this may limit the ability of the
Company to realise its investments and meet its target dividend payments in the
scenario where the Company has insufficient income arising from its underlying
investments.
· Credit Risk and Investment Performance
Credit risk arises when the issuer of a settled security held by the Company
experiences financing difficulties or defaults on its payment obligations
resulting in an impact to the security market price.
The Company holds Asset Backed Securities which comprises debt securities issued
by companies, trusts or other investment vehicles which, compared to bonds
issued or guaranteed by governments, are generally exposed to greater risk of
default in the repayment of the capital provided to the issuer or interest
payments due to the Company. The amount of credit risk is indicated by the
issuer's credit rating which is assigned by one or more internationally
recognised rating agencies. This does not amount to a guarantee of the issuer's
creditworthiness but generally provides a strong indicator of the likelihood of
default. Securities which have a lower credit rating are generally considered to
have a higher credit risk and a greater possibility of default than more highly
rated securities. There is a risk that an internationally recognised rating
agency may assign incorrect or inappropriate credit ratings to issuers. Issuers
often issue securities which are ranked in order of seniority which, in the
event of default, would be reflected in the priority in which investors might be
paid back. Whilst they have been historically low since the inception of the
Company, the level of defaults in the portfolio and the losses suffered on such
defaults may increase in the event of adverse financial or credit market
conditions.
In the event of a default under an Asset Backed Security, the Company's right to
financial recovery will depend on its ability to exercise any rights that it has
against the borrower under the insolvency legislation of the jurisdiction in
which the borrower is incorporated. As a creditor, the Company's level of
protection and rights of enforcement may therefore vary significantly from one
country to another, may change over time and may be subject to rights and
protections which the relevant borrower or its other creditors might be entitled
to exercise. Information regarding investment restrictions that are currently in
place in order to manage credit risk can be found in the note 16.
· Foreign Currency Risk
The Company is exposed to foreign currency risk through its investments in
predominantly Euro-denominated assets. The Company's share capital is
denominated in Sterling and its expenses are incurred in Sterling. The Company's
financial statements are presented in Sterling. Amongst other factors affecting
the foreign exchange markets, events in the Eurozone may impact upon the value
of the Euro which in turn will impact the value of the Company's Euro
-denominated investments. The Company manages its exposure to currency movements
by using spot and forward foreign exchange contracts, which are rolled forward
periodically.
· Counterparty Credit Risk
Where a market counterparty to an Over the Counter (OTC) derivative transaction
fails, any unrealised positive mark to market profit may be lost. The Company
mitigates this risk by only trading derivatives against approved counterparties
which meet minimum creditworthiness criteria and by employing central clearing
and margining where applicable.
· Settlement Risk
Settlement risk is the risk of loss associated with any security price movements
between trade date and eventual settlement date should a trade fail to settle on
time (or at all). The Company mitigates the risk of total loss by trading on a
delivery versus payment (DVP) basis for all non-derivative transactions and
central clearing helps to ensure that trades settle on a timely basis.
· Reinvestment Risk
The Portfolio Manager is conscious of the challenge to reinvest any monies that
result from principal and income payments and to minimise reinvestment risk.
Cash flow analysis is conducted on an ongoing basis and is an important part of
the Portfolio Management process, ensuring such proceeds can be invested
efficiently and in the best interests of the Company.
The Portfolio Manager expects £61.7m of assets to have a Weighted Average Life
of under 1 year. While market conditions are always subject to change, the
Portfolio Manager does not currently foresee reinvestment risk significantly
impacting the yield nor affecting each quarter's minimum dividend and recognises
the need to be opportunistic as and when market conditions are particularly
favourable in order to reinvest any proceeds or in order to take advantage of
rapidly evolving pricing during periods of market volatility.
· Operational Risks
The Company is exposed to the risk arising from any failures of systems and
controls in the operations of the Portfolio Manager, Administrator, AIFM,
Independent Valuer, Custodian and the Depositary amongst others. The Board and
its Audit Committee regularly review reports from key service providers on their
internal controls, in particular, focussing on changes in working practices. The
Administrator, Custodian and Depositary report to the Portfolio Manager any
operational issues for final approval of the Board as required.
· Accounting, Legal and Regulatory Risks
The Company is exposed to the risk that it may fail to maintain accurate
accounting records or fail to comply with requirements of its Admission document
and fail to meet listing obligations. The accounting records prepared by the
Administrator are reviewed by the Portfolio Manager. The Portfolio Manager,
Administrator, AIFM, Custodian, Depositary and Corporate Broker provide regular
updates to the Board on compliance with the Admission document and changes in
regulation. Changes in the legal or the regulatory environment can have a major
impact on some classes of debt. The Portfolio Manager monitors this and takes
appropriate action.
· Income Recognition Risk
The Board considers income recognition to be a principal risk and uncertainty.
The Portfolio Manager estimates the remaining expected life of the security and
its likely terminal value, which has an impact on the effective interest rate of
the Asset Backed Securities which in turn impacts the calculation of interest
income. This risk is considered on behalf of the Board by the Audit Committee as
discussed in the Annual Report for the year ended 31 March 2023 and is therefore
satisfied that income is appropriately stated in all material aspects in the
Financial Statements.
· Cyber Security Risks
The Company is exposed to risk arising from a successful cyber-attack through
its service providers. The Company requests of its service providers that they
have appropriate safeguards in place to mitigate the risk of cyber-attacks
(including minimising the adverse consequences arising from any such attack),
that they provide regular updates to the Board on cyber security, and conduct
ongoing monitoring of industry developments in this area. The Board is satisfied
that the Company's service providers have the relevant controls in place to
mitigate this risk.
· Geopolitical Risk and Economic Disruption
The Company is exposed to the risk of geopolitical and economic events impacting
on the Company, Portfolio Manager and Shareholders, including elevated levels of
global inflation, recessionary risks and the current conflicts in Ukraine and
the Middle East. The Company does not hold any assets in Ukraine, Belarus,
Russia, or the Middle East, however, the situation in the impacted regions and
wider geopolitical consequences remain volatile and the Board and Portfolio
Manager continue to monitor the situation carefully and will take whatever steps
are necessary and in the best interests of the Company's Shareholders. The
Company's key suppliers do not have operations in Ukraine, Russia, Belarus, or
the Middle East and there is not expected to be any adverse impact from military
operations on the activity (including processes and procedures) of the Company.
· Climate Change Risk
Climate change risk is the risk of the Company not responding sufficiently to
pressure from stakeholders to assess and disclose the impact of climate change
on investment portfolios and address concerns on what impact the Company and its
portfolio has on the environment.
Regular contact is maintained by the Portfolio Manager and Broker with major
stakeholders and the Board receives regular updates from the Portfolio Manager
on emerging policy and best practice within this area and can take action
accordingly.
Environmental, Social, and Governance ("ESG") factors are assessed by the
Portfolio Manager for every transaction as part of the investment process.
Specifically for ABS, for every transaction an ESG assessment is produced by the
Portfolio Manager and an ESG score is assigned. External ESG factors are factors
related to the debt issuers of ABS transactions and they are assessed through a
combination of internal and third-party data. Climate risks are incorporated in
the ESG analysis under environmental factors and taken into consideration in the
final investment decision. CO2 emissions are tracked at issuer and deal level
where information is available. Given the bankruptcy-remoteness feature of
securitisation transactions the climate risks which the manager considers more
relevant and that are able to potentially impact the value of the investment are
the ones related to the underlying collateral which include physical and
transitional risks. Those risks are also assessed and considered as
environmental factors in the ESG analysis.
The Board and Portfolio Manager do not consider these risks to have changed
materially and these risks are considered to remain relevant for the remaining
six months of the financial year.
The Board's process of identifying and responding to emerging risks is disclosed
under the Statement of Principal Risks and Uncertainties in the Annual Report
for the year ended 31 March 2023.
Going Concern
The Directors believe that it is appropriate to adopt the going concern basis in
preparing the Unaudited Condensed Interim Financial Statements in view of the
Company's holdings in cash and cash equivalents and the liquidity of investments
and the income deriving from those investments, meaning the Company has adequate
financial resources and suitable management arrangements in place to continue as
a going concern for at least twelve months from the date of approval of the
Unaudited Condensed Interim Financial Statements.
The Company's articles provide for a realisation opportunity ("Realisation
Opportunity") under which Shareholders may elect to realise some or all of their
holdings of Ordinary Shares at each third Annual General Meeting, with the next
Realisation Opportunity being in September 2025.
The Company's continuing ability to continue as a going concern, in light of the
external geo-political and macro factors, the increased risk of default due to
rising inflation, increasing global interest rates and the next Realisation
Opportunity has been considered by the Directors and no material doubts to going
concern have been identified.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We confirm that to the best of our knowledge:
· these Unaudited Condensed Interim Financial Statements have been prepared in
accordance with International Accounting Standard 34, "Interim Financial
Reporting" and give a true and fair view of the assets, liabilities, equity and
profit or loss of the Company as required by DTR 4.2.4R.
· the interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of
important events that have occurred during the period from 1 April 2023 to 30
September 2023 and their impact on the Unaudited Condensed Interim Financial
Statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place during the period from 1 April 2023 to 30
September 2023 and that have materially affected the financial position or
performance of the Company during that period as included in note 14.
By order of the Board
Bronwyn CurtisJohn Le Poidevin
ChairDirector
23 November 2023
The directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website, and for the
preparation and dissemination of financial statements. Legislation in Guernsey
governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
INDEPENT REVIEW REPORT
TO TWENTYFOUR INCOME FUND LIMITED
Conclusion
We have been engaged by TwentyFour Income Fund Limited (the "Company") to review
the condensed set offinancial statements in the half-yearly financial report for
the six months ended 30 September 2023 of the Company, which comprises the
statement of financial position, the statement of comprehensive income, the
statement of changes in equity, the statement of cash flows and the related
explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set offinancial statements in the half-yearly financial
report for the six months ended 30 September 2023 is not prepared, in all
material respects, in accordance with IAS 34 Interim Financial Reporting and the
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial
Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued by the Financial
Reporting Council for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. We read
the other information contained in the half-yearly financial report and consider
whether it contains any apparent misstatements or material inconsistencies with
the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed in
an audit as described in the Scope of review section of this report, nothing has
come to our attention to suggest that the directors have inappropriately adopted
the going concern basis of accounting or that the directors have identified
material uncertainties relating to going concern that are not appropriately
disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However future events or conditions may cause the Company to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Company will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the interim
financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annualfinancial statements of theCompany are
prepared in accordance with International Financial Reporting Standards. The
directors are responsible for preparing the condensed set offinancial statements
included in the half-yearly financial report in accordance with IAS 34 Interim
Financial Reporting.
In preparing the half-yearly financial report, the directors are responsible for
assessing the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using 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.
Our responsibility
Our responsibility is to express to the Company a conclusion on thecondensed set
of financial statements in the half-yearly financial report based on our
review.Our conclusion, including our conclusions relating to going concern, are
based on procedures that are less extensive than audit procedures, as described
in the scope of review paragraph of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement letter to assist the Company in meeting the requirements of the DTR
of the UK FCA. Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work, for
this report, or for the conclusions we have reached.
Rachid Frihmat
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants
Guernsey
23 November 2023
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the period from 1 April 2023 to 30 September 2023
For the For the
period period
from from
01.04.23 to 01.04.22 to
30.09.23 30.09.22
Notes £ £
(Unaudited) (Unaudited)
Income
Interest income on financial assets 39,617,803 27,159,169
at fair value through profit or loss
Net foreign currency gains/(losses) 7 6,714,557 (11,081,941)
Net gains/(losses) on financial
assets
at fair value through profit or loss 8 18,179,471 (95,521,570)
Total income/(loss) 64,511,831 (79,444,342)
Operating expenses
Portfolio management fees 14 (2,785,136) (2,516,061)
Directors' fees 14 (136,245) (149,846)
Administration and secretarial fees 15 (175,947) (161,765)
Audit fees (78,000) (65,000)
Custody fees 15 (37,139) (33,548)
Broker fees (24,939) (25,057)
AIFM management fees 15 (126,343) (115,684)
Depositary fees 15 (50,155) (45,695)
Legal and professional fees (28,635) (31,216)
Listing fees (12,500) (14,105)
Registration fees (44,030) (19,783)
Other expenses 56,041 (152,697)
Total operating expenses (3,443,028) (3,330,457)
Total operating profit/(loss) 61,068,803 (82,774,799)
Finance costs on repurchase 11 (383,505) (255,413)
agreements
Total comprehensive income/(loss) 60,685,298 (83,030,212)
for the period*
Earning/(loss) per Ordinary Share 3 0.0817 (0.1299)
All items in the above statement derive from continuing operations.
The Company's income and expenses are not affected by seasonality or cyclicity.
The notes below form an integral part of these Unaudited Condensed Interim
Financial Statements.
*There was no other comprehensive income during the current and prior periods.
CONDENSED STATEMENT OF FINANCIAL POSITION
as at 30 September 2023
30.09.23 31.03.23
Notes £ £
Assets (Unaudited) (Audited)
Non-current assets
Financial assets at fair
value through profit or loss
- Investments1 8 757,872,773 739,385,970
Current assets
Financial assets at fair
value through profit or loss
- Derivative assets: Forward 17 28,274 2,281,253
currency contracts
Other receivables 9 8,319,864 6,976,028
Cash and cash equivalents 15,024,303 27,235,318
Total assets 781,245,214 775,878,569
Liabilities
Current liabilities
Financial liabilities at fair
value through profit or loss
- Derivative liabilities: 17 3,763,080 1,509
Forward currency contracts
Amounts payable under 11 5,921,313 49,827,700
repurchase agreements
Amounts due to broker 2,342,079 -
Share issue costs payable - 5,219
Other payables 10 1,094,157 1,061,379
Total liabilities 13,120,629 50,895,807
Net assets 768,124,585 724,982,762
Equity
Share capital account 12 780,213,410 750,558,986
(Accumulated losses) (12,088,825) (25,576,224)
Total equity 768,124,585 724,982,762
Ordinary Shares in issue 12 747,836,661 718,036,661
Net Asset Value per Ordinary 5 102.71 100.97
Share (pence)
1 The entire balance of investments in Financial assets at fair value through
profit or loss was reclassified from current assets to non-current assets. For
more information please see Note 8 - Investments.
The Unaudited Condensed Interim Financial Statements were approved by the Board
of Directors on 23 November 2023 and signed on its behalf by:
Bronwyn CurtisJohn Le Poidevin
DirectorDirector
The notes below form an integral part of these Unaudited Condensed Interim
Financial Statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the period from 1 April 2023 to 30 September 2023
Share
capital
account (Accumulated Total
losses)
Notes £ £ £
Balances at 1 750,558,986 (25,576,224) 724,982,762
April 2023
Issue of 12 30,244,890 - 30,244,890
shares
Share issue 12 (347,817) - (347,817)
costs
Dividends - (47,440,548) (47,440,548)
paid
Income 4 (242,649) 242,649 -
equalisation
on new issues
Total - 60,685,298 60,685,298
comprehensive
income for
the period
Balances at 780,213,410 (12,088,825) 768,124,585
30 September
2023
(Unaudited)
Share Retained
capital earnings/
account (Accumulated Total
losses)
£ £ £
Balances at 1 675,350,674 43,126,544 718,477,218
April 2022
Issue of 1,054,500 - 1,054,500
shares
Share issue (12,127) - (12,127)
costs
Release of 803,803 803,803
UKML share
issue costs
payable
Dividends - (24,088,138) (24,088,138)
paid
Income 4 (16,079) 16,079 -
equalisation
on new issues
Total - (83,030,212) (83,030,212)
comprehensive
loss for the
period
Balances at 677,180,771 (63,975,727) 613,205,044
30 September
2022
(Unaudited)
The notes on below form an integral part of these Unaudited Condensed Interim
Financial Statements.
CONDENSED STATEMENT OF CASH FLOWS
for the period from 1 April 2023 to 30 September 2023
For the For the
period period
Notes from 01.04.23 from 01.04.22
to 30.09.23 to 30.09.22
£ £
(Unaudited) (Unaudited)
Cash flows from operating
activities
Total comprehensive 60,685,298 (83,030,212)
gain/(loss) for the period
Less:
Interest income on financial (39,617,803) (27,159,169)
assets at fair value through
profit or loss
Movement in interest income 1,400,933 (1,525,481)
receivable
Adjustments for non-cash
transactions:
Net (gains)/losses on 8 (18,179,471) 95,521,570
investments
Amortisation adjustment under 8 (7,931,404) (7,226,952)
effective interest rate method
Unrealised losses on forward 7 6,014,551 4,310,247
currency contracts
Exchange losses/(gains) on 2,812 (26,446)
cash and cash equivalents
Investment income 37,793,736 25,366,644
Bank interest income 423,134 267,044
Increase in other receivables (1,343,836) (1,498,828)
Increase/(decrease) in other 32,778 (698,449)
payables
Finance costs on repurchase 383,505 255,413
agreements
Purchase of investments (141,096,823) (129,995,550)
Sale of investments/principal 151,062,974 87,130,635
repayments
Net cash generated from/(used 49,630,384 (38,309,534)
in) operating activities
Cash flows from financing
activities
Proceeds from issue of 30,244,890 1,054,500
Ordinary Redeemable Shares
Share issue costs (353,037) (2,406,742)
Dividend paid (47,440,548) (24,088,138)
Finance costs (383,505) (255,413)
(Decrease)/increase in amounts (43,906,387) 24,270,170
payable under repurchase
agreements
Net cash used in financing (61,838,587) (1,425,623)
activities
Decrease in cash and cash (12,208,203) (39,735,157)
equivalents
Cash and cash equivalents at 27,235,318 59,706,062
beginning of the period
Exchange (losses)/gains on (2,812) 26,446
cash and cash equivalents
Cash and cash equivalents at 15,024,303 19,997,351
end of the period
The notes below form an integral part of these Unaudited Condensed Interim
Financial Statements.
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
for the period from 1 April 2023 to 30 September 2023
1.General Information
TwentyFour Income Fund Limited (the "Company") is a closed-ended investment
company whose shares ("Ordinary Shares", being the sole share class) have a
Premium Listing on the Official List of the UK Listing Authority and trade on
the Main Market of the London Stock Exchange. The Company was incorporated in
Guernsey on 11 January 2013.
Since 16 September 2022, the Company has been included on the London Stock
Exchange's FTSE 250 Index.
The Company's investment objective and policy is set out in the Summary
Information.
The Portfolio Manager of the Company is TwentyFour Asset Management LLP (the
"Portfolio Manager").
2.Principal Accounting Policies
a) Statement of Compliance
The Unaudited Condensed Interim Financial Statements for the period 1 April 2023
to 30 September 2023 have been prepared on a going concern basis in accordance
with IAS 34 "Interim Financial Reporting", the Disclosure Guidance and
Transparency Rules Sourcebook of the United Kingdom's Financial Conduct
Authority ("FCA") and applicable legal and regulatory requirements.
The Unaudited Condensed Interim Financial Statements should be read in
conjunction with the annual audited financial statements for the year ended 31
March 2023, which were prepared in accordance with International Financial
Reporting Standards ("IFRS") and were in compliance with The Companies
(Guernsey) Law, 2008 and which received an unqualified Auditor's report.
b) Presentation of Information
In the current financial period, there have been no changes to the accounting
policies from those applied in the most recent audited annual financial
statements.
c) Significant Judgements and Estimates
There have been no changes to the significant accounting judgements, estimates
and assumptions from those applied in the most recent audited annual financial
statements.
d) Standards, Amendments and Interpretations Effective during the Period
At the reporting date of these Financial Statements, the following standards,
interpretations and amendments, were adopted for the period ended 30 September
2023 and the year ending 31 March 2024:
- Insurance Contracts (IFRS 17) (applicable to accounting periods beginning
on or after 1 January 2023);
- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2) (applicable to accounting periods beginning on or after 1 January
2023);
- Definition of Accounting Estimates (Amendments to IAS 8) (applicable to
accounting periods beginning on or after 1 January 2023); and
- Deferred Tax related to Assets and Liabilities arising from a Single
Transaction (Amendments to IAS 12) (applicable to accounting periods beginning
on or after 1 January 2023).
The Directors ("Directors") of the Company (the "Board") believe that the
adoption of the above standards does not have a material impact on the Company's
Unaudited Condensed Interim Financial Statements for the period ended 30
September 2023 and for the Annual Audited Financial Statements for the year
ending 31 March 2024.
e) Standards, Amendments and Interpretations Issued but not yet Effective
The following standards, interpretations and amendments, which have not been
applied in these Unaudited Condensed Interim Financial Statements, were in issue
but not yet effective:
- Non-current Liabilities with Covenants and Classification of Liabilities as
Current or Non-Current (Amendments to IAS 1) (applicable to accounting periods
beginning on or after 1 January 2024);
- Lease (https://www.ifrs.org/content/ifrs/home/projects/completed
-projects/2020/classification-of-liabilities.html) Liability in a Sale or
Leaseback (Amendments to IFRS 16) (applicable to accounting periods beginning on
or after 1 January 2024);
- Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7) (applicable
to accounting periods beginning on or after 1 January 2024);
- Lack of Exchangeability (Amendments to IAS 21) (applicable to accounting
periods beginning on or after 1 January 2025);
The Directors anticipate that the adoption of the above standards, effective in
future periods, will not have a material impact on the financial statements of
the Company.
3.Earnings/(Loss) per Ordinary Share - Basic & Diluted
The earnings per Ordinary Share - Basic is calculated by dividing a company's
income or profit by the number of shares outstanding. Diluted earnings per
Ordinary Share takes into account all potential dilution that would occur if
convertible securities were exercised or options were converted to stocks.
As the Company has not issued options, only the Basic Earnings per Share has
been calculated.
Basic earnings per Ordinary Share has been calculated based on the weighted
average number of Ordinary Shares of 742,733,383 (30 September 2022:
638,959,048) and a net gain of £60,685,298 (30 September 2022: net loss of
£83,030,212).
4.Income Equalisation on New Issues
In order to ensure there are no dilutive effects on earnings per share for
current holders of shares ("Ordinary Shares") issued by the Company
("Shareholders") when issuing new Ordinary Shares earnings are calculated in
respect of accrued income at the time of purchase and a transfer is made from
share capital to income to reflect this. The transfer for the period is £242,649
(30 September 2022: £16,079).
5.Net Asset Value per Ordinary Share
The net asset value ("NAV") of each Ordinary Share of £1.03 (31 March 2023:
£1.01) is determined by dividing the value of the net assets of the Company
attributed to the Ordinary Shares of £768,124,585 (31 March 2023: £724,982,762)
by the number of Ordinary Shares in issue at 30 September 2023 of 747,836,661
(31 March 2023: 718,036,661).
6. Taxation
The Company has been granted Exempt Status under the terms of The Income Tax
(Exempt Bodies) (Guernsey) Ordinance, 1989 to income tax in Guernsey. Its
liability for Guernsey taxation is limited to an annual fee of £1,200 (2022:
£1,200).
7.Net Foreign Currency Gains/(Losses)
For the For the
period period
from from
01.04.23 to 01.04.22 to
30.09.23 30.09.22
£ £
(Unaudited) (Unaudited)
Movement on (6,014,551) (4,310,247)
unrealised
loss on
forward
currency
contracts
Realised 12,705,591 (7,171,088)
gains/(losse
s) on
foreign
currency
contracts
Unrealised 4,063 219,025
foreign
currency
gain on
receivables/
payables
Unrealised 19,454 180,369
foreign
currency
exchange
gain on
interest
receivable
6,714,557 (11,081,941)
8.Investments
For the For the year
period
01.04.23 to 01.04.22 to
30.09.23 31.03.23
Financial £ £
assets at
fair value
through
profit or
loss:
(Unaudited) (Audited)
Opening book 832,506,047 693,217,802
cost
Purchases at 143,438,902 390,806,347
cost
Proceeds on (151,062,974) (297,663,729)
sale/principa
l repayment
Amortisation 7,931,404 19,931,829
adjustment
under
effective
interest
rate method
Realised 3,173,775 57,193,656
gains on
sale/principa
l repayment
Realised (43,700,421) (30,979,858)
losses on
sale/principa
l repayment
Closing book 792,286,733 832,506,047
cost
Unrealised 14,553,298 3,919,689
gains on
investments
Unrealised (48,967,258) (97,039,766)
losses on
investments
Fair value 757,872,773 739,385,970
For the For the
period period
from 01.04.23 from 01.04.22
to 30.09.23 to 30.09.22
£ £
(Unaudited) (Unaudited)
Realised 3,173,775 46,974,421
gains on
sales/princip
al repayment
Realised (43,700,421) (38,404,969)
losses on
sales/princip
al repayment
Movement in 10,633,609 (35,448,173)
unrealised
gains
Movement in 48,072,508 (68,642,849)
unrealised
losses
Net 18,179,471 (95,521,570)
gains/(losses
) on
financial
assets at
fair value
through
profit or
loss
In the six-month period ended 30 September 2023, investments have been
reclassified as 'non-current assets' from 'current assets'. This is to more
accurately reflect the Company's intention not to hold the majority of
investments in the portfolio for sale in any given period.
The reclassification has no impact on the Company's NAV.
9.Other Receivables
As at As at
30.09.23 31.03.23
£ £
(Unaudited) (Audited)
Coupon interest receivable 8,149,957 6,808,822
Bank interest receivable 121,388 61,590
Prepaid expenses 48,519 105,616
8,319,864 6,976,028
There are no material expected credit losses for coupon interest receivable as
at 30 September 2023.
10.Other Payables
As at As at
30.09.23 31.03.23
£ £
(Unaudited) (Audited)
Portfolio management fees payable 759,976 738,231
Custody fees payable 12,642 6,974
Administration and secretarial fees payable 175,211 83,039
Directors' fee payable 1,375 12,629
Audit fees payable 71,939 136,389
AIFM management fees payable 113,236 47,885
Depositary fees payable 25,326 16,792
General expenses payable (65,548) 19,440
1,094,157 1,061,379
A summary of the expected payment dates of payables can be found in the
`Liquidity Risk' section of Note 16.
11.Amounts payable under repurchase agreements
The Company, as part of its investment strategy, may enter into repurchase
agreements. A repurchase agreement is a short-term loan where both parties agree
to the sale and future repurchase of assets within a specified contract period.
Repurchase agreements may be entered into in respect of securities owned by the
Company which are sold to and repurchased from counterparties on contractually
agreed dates and the cash generated from this arrangement can be used to
purchase new securities, effectively creating leverage. The Company still
benefits from any income received, attributable to the security. Under the
Company's Global Master Repurchase Agreement it may from time to time enter into
transactions with a buyer or seller under the terms and conditions as governed
by the agreement.
Finance costs on repurchase agreements have been presented separately from
interest income for the period end 30 September 2023.
Finance costs on repurchase agreements amounted to £383,505 (30 September 2022:
£255,413). As at 30 September 2023, finance cost liabilities on open repurchase
agreements amounted to £120,196 (31 March 2023: £157,335).
At the end of the period, amounts repayable under open repurchase agreements
were £5,921,313 (31 March 2023: £49,827,700). 2 securities were designated as
collateral against the repurchase agreements (31 March 2023: 9 securities), with
a total fair value of £7,855,797 (31 March 2023: £50,574,587), all of which were
investment grade residential mortgage backed securities. The total exposure was
-0.77% (31 March 2023: -6.87%) of the Company's NAV. The contracts were across
one counterparty and were all rolling agreements with a maturity of 3 months.
12.Share Capital
Authorised Share Capital
Unlimited number of Ordinary Shares at no par value.
Issued Share Capital
For the For the year
period
01.04.23 to 01.04.22 to 31.03.23
30.09.23
Ordinary Shares £ £
Ordinary Redeemable (Unaudited) (Audited)
Shares
Share Capital at the 750,558,986 675,350,674
beginning of the
period/year
Issued Share Capital 30,244,890 76,631,101
Share issue costs (347,817) (773,112)
Release of UKML share - 798,176
issue costs payable1
Income equalisation (242,649) (1,447,853)
on new issues
Total Share Capital 780,213,410 750,558,986
at the end of the
period/year
1.The release of UKML share issue costs payable was as a result of an over
-accrual of estimated costs at 31 March 2022 attributed to the issue of new
shares from the acquisition of UKML assets.
For the For the year
period
01.04.23 to 01.04.22 to 31.03.23
30.09.23
Shares Shares
(Unaudited) (Audited)
Ordinary Shares
Shares at the 718,036,661 638,942,655
beginning of the
period/year
Issue of Shares 29,800,000 79,094,006
Total Shares in 747,836,661 718,036,661
issue at the end of
the period/year
For the For the year
period
01.04.23 to 01.04.22 to 31.03.23
30.09.23
£ £
(Unaudited) (Audited)
Treasury Shares
Treasury Share - 43,083,300
capital at the
beginning of the
period/year
Issue of Ordinary - (43,083,300)
Shares from
Treasury
Total Treasury - -
Share capital at
the end of the
period/year
For the For the year
period
01.04.23 to 01.04.22 to 31.03.23
30.09.23
Shares Shares
(Unaudited) (Audited)
Treasury Shares
Treasury Shares at - 39,000,000
the beginning of
the period/year
Issue of Ordinary - (39,000,000)
Shares from
Treasury
Total Shares at the - -
end of the
period/year
The Share Capital of the Company consists of an unlimited number of Ordinary
Shares at no par value which, upon issue, the Directors may designate as:
Ordinary Shares; Realisation Shares or such other class as the Board shall
determine and denominated in such currencies as shall be determined at the
discretion of the Board.
As at 30 September 2023, one share class has been issued, being the Ordinary
Shares of the Company.
The Ordinary Shares carry the following rights:
a) The Ordinary Shares carry the right to receive all income of the Company
attributable to the Ordinary Shares.
b) The Shareholders present in person or by proxy or present by a duly
authorised representative at a general meeting has, on a show of hands, one vote
and, on a poll, one vote for each Share held.
c) 56 days before the annual general meeting date of the Company in each
third year ("Reorganisation Date"), the Shareholders are entitled to serve a
written notice ("Realisation Election") requesting that all or a part of the
Ordinary Shares held by them be redesignated to Realisation Shares, subject to
the aggregate NAV of the continuing Ordinary Shares on the last business day
before the Reorganisation Date being not less than £100 million. A Realisation
Notice, once given is irrevocable unless the Board agrees otherwise. If one or
more Realisation Elections be duly made and the aggregate NAV of the continuing
Ordinary Shares on the last business day before the Reorganisation Date is less
than £100 million, the Realisation Opportunity will not take place. Shareholders
do not have a right to have their shares redeemed and shares are redeemable at
the discretion of the Board. The most recent Realisation Election took place in
October 2022. The next Realisation Opportunity is due to occur at the end of the
next three-year term, at the date of the AGM in September 2025.
The Company has the right to issue and purchase up to 14.99% of the total number
of its own shares at £0.01 each, to be classed as Treasury Shares and may cancel
those Shares or hold any such Shares as Treasury Shares, provided that the
number of Shares held as Treasury Shares shall not at any time exceed 10% of the
total number of Shares of that class in issue at that time or such amount as
provided in the Companies (Guernsey) Law, 2008.
The Company has the right to re-issue Treasury Shares at a later date.
£2,396,197 of share issue costs paid in the Condensed Statement of Cash Flows
for the period from 1 April 2022 to 30 September 2022 related to issue costs
incurred during the period ended 30 September 2022 in relation to the
acquisition of UKML assets. During the year ended 31 March 2023, £798,176 of the
original costs capitalised were released back to the NAV of the Company.
13.Analysis of Financial Assets and Liabilities by Measurement Basis
Assets at
fair
value Amortised
through
profit or cost Total
loss
£ £ £
30 September
2023
Financial
Assets as
per
Condensed
Statement of
Financial
Position
(Unaudited)
Financial
assets at
fair value
through
profit or
loss:
- Investments 757,872,773 - 757,872,773
- Derivative 28,274 - 28,274
assets:
Forward
currency
contracts
Other - 8,271,345 8,271,345
receivables
(excluding
prepayments)
Cash and - 15,024,303 15,024,303
cash
equivalents
757,901,047 23,295,648 781,196,695
Liabilities
at fair
value Amortised
through
profit or cost Total
loss
£ £ £
Financial
Liabilities
as per
Condensed
Statement of
Financial
Position
(Unaudited)
Financial
liabilities
at fair
value
through
profit or
loss:
- Derivative 3,763,080 - 3,763,080
liabilities:
Forward
currency
contracts
Amounts - 5,921,313 5,921,313
payable
under
repurchase
agreements
Amounts due - 2,342,079 2,342,079
to brokers
Other - 1,094,157 1,094,157
payables
3,763,080 9,357,549 13,120,629
Assets at
fair
value Amortised
through
profit or cost Total
loss
£ £ £
31 March
2023
Financial
Assets as
per
Condensed
Statement of
Financial
Position
(Audited)
Financial
assets at
fair value
through
profit or
loss:
- Investments 739,385,970 - 739,385,970
- Derivative 2,281,253 - 2,281,253
assets:
Forward
currency
contracts
Other - 6,870,412 6,870,412
receivables
(excluding
prepayments)
Cash and - 27,235,318 27,235,318
cash
equivalents
741,667,223 34,105,730 775,772,953
Liabilities
at fair
value Amortised
through
profit or cost Total
loss
£ £ £
Financial
Liabilities
as per
Condensed
Statement of
Financial
Position
(Audited)
Financial
liabilities
at fair
value
through
profit or
loss:
- Derivative 1,509 - 1,509
liabilities:
Forward
currency
contracts
Amounts - 49,827,700 49,827,700
payable
under
repurchase
agreements
Share issue - 5,219 5,219
costs
payable
Other - 1,061,379 1,061,379
payables
1,509 50,894,298 50,895,807
14.Related Parties
a) Directors' Remuneration & Expenses
The Directors of the Company are remunerated for their services at such a rate
as the Directors determine. Shareholders approved the upper limit of aggregate
Director fees at £400,000 per annum at an Annual General Meeting on 14 October
2022.
Following an independent review of directors' fees by external evaluation
practitioner Trust Associates Limited, with effect from 1 January 2023 the
annual fees have been £60,000 for the Chair of the Board, £50,000 for the Audit
Committee Chair, £42,000 for the Senior Independent Director, the Chair of the
Management Engagement Committee and the Chair of the Nomination and Remuneration
Committee and £40,000 for all other Directors.
During the period ended 30 September 2023, Directors fees of £136,245 (30
September 2022: £149,846) were charged to the Company, of which £1,375 (31 March
2023: £Nil) remained payable at the end of the period.
b) Shares Held by Related Parties
As at 30 September 2023, Directors of the Company held the following shares
beneficially:
Number of Shares Number of Shares
30.09.23 31.03.23
Bronwyn Curtis 105,313 105,313
Richard Burwood1 N/A 87,186
John de Garis 39,753 39,753
Joanne Fintzen 38,538 38,538
Paul Le Page 49,457 49,457
John Le Poidevin 260,121 260,121
1Richard Burwood retired from the Board on 14 September 2023.
None of the Directors purchased or sold any shares, during the six month period
ended 30 September 2023.
As at 30 September 2023, the Portfolio Manager held 36,406,018 Shares (31 March
2023: 31,805,683 Shares), which is 4.87% (31 March 2023: 4.89%) of the Issued
Share Capital. Partners and employees of the Portfolio Manager held 8,433,080
Shares (31 March 2023: 12,155,104 Shares), which is 1.13% (31 March 2023: 1.69%)
of the Issued Share Capital.
Any shares purchased by Directors, the Portfolio Manager and employees of the
Portfolio Manager are carried out in their capacity as Shareholders. No shares
are offered or awarded to any Related Parties as remuneration.
c) Portfolio Manager
The portfolio management fee is payable to the Portfolio Manager, monthly in
arrears at a rate of 0.75% per annum of the lower of NAV, which is calculated
weekly on each valuation day, or market capitalisation of each class of shares.
Total portfolio management fees for the period amounted to £2,785,136 (30
September 2022: £2,156,061) of which £759,976 (31 March 2023: £738,231) is due
and payable at the period end. The Portfolio Management Agreement dated29 May
2014 remains in force until determined by the Company or the Portfolio Manager
giving the other party not less than twelve months' notice in writing. Under
certain circumstances, the Company or the Portfolio Manager is entitled to
immediately terminate the agreement in writing.
The Portfolio Manager is also entitled to a commission of 0.15% of the aggregate
gross offering proceeds plus any applicable VAT in relation to any issue of new
Shares, following admission, in consideration of marketing services that it
provides to the Company. During the period, the Portfolio Manager received
£45,367 (30 September 2022: £1,582) in commission.
15.Material Agreements
a) Alternative Investment Fund Manager
The Company's Alternative Investment Fund Manager (the "AIFM") is Apex Fundrock
Ltd. In consideration for the services provided by the AIFM under the AIFM
Agreement, the AIFM is entitled to receive from the Company a minimum fee of
£20,000 per annum and fees payable quarterly in arrears at a rate of 0.07% of
the NAV of the Company below £50 million, 0.05% on Net Assets between £50
million and £100 million and 0.03% on Net Assets in excess of £100 million.
During the period ended 30 September 2023, AIFM fees of £126,343 (30 September
2022: £115,684) were charged to the Company, of which £113,236 (31 March 2023:
£47,885) remained payable at the end of the period.
b) Administrator and Secretary
Administration fees are payable to Northern Trust International Fund
Administration Services (Guernsey) Limited monthly in arrears at a rate of 0.06%
of the NAV of the Company below £100 million, 0.05% on Net Assets between £100
million and £200 million and 0.04% on Net Assets in excess of £200 million as at
the last business day of the month subject to a minimum £75,000 each year. In
addition, an annual fee of £25,000 is charged for corporate governance and
company secretarial services. Total administration and secretarial fees for the
period amounted to £175,947 (30 September 2022: £161,765) of which £175,211 (31
March 2023: £83,039) is due and payable at end of the period.
c) Depositary
Depositary fees are payable to Northern Trust (Guernsey) Limited, monthly in
arrears, at a rate of 0.0175% of the NAV of the Company up to £100 million,
0.0150% on Net Assets between £100 million and £200 million and 0.0125% on Net
Assets in excess of £200 million as at the last business day of the month
subject to a minimum £25,000 each period. Total depositary fees and charges for
the period amounted to £50,155, (30 September 2022: £45,695) of which £25,326
(31 March 2023: £16,792) is due and payable at the period end.
The Depositary is also entitled to a Global Custody fee of a minimum of £8,500
per annum plus transaction fees. Total Global Custody fees and charges for the
period amounted to £37,139 (30 September 2022: £33,548) of which £12,642 (31
March 2023: £6,974) is due and payable at the period end.
16.Financial Risk Management
The Company's objective in managing risk is the creation and protection of
Shareholder value. Risk is inherent in the Company's activities, but it is
managed through an ongoing process of identification, measurement and
monitoring.
The Company's financial instruments include investments classified at fair value
through profit or loss, cash and cash equivalents, derivative liabilities and
amounts payable under repurchase agreements. The main risks arising from the
Company's financial instruments are market risk, credit risk and liquidity risk.
The techniques and instruments utilised for the purposes of efficient portfolio
management are those which are reasonably believed by the Board to be
economically appropriate to the efficient management of the Company.
Market Risk
Market risk embodies the potential for both losses and gains and includes
currency risk, interest rate risk, reinvestment risk and price risk. The
Company's strategy on the management of market risk is driven by the Company's
investment objective of generating attractive risk adjusted returns principally
through investment in ABS.
The underlying investments comprised in the Portfolio are subject to market
risk. The Company is therefore at risk that market events may affect performance
and in particular may affect the value of the Company's investments. Market risk
involves changes in market prices or rates, including interest rates,
availability of credit, inflation rates, economic uncertainty, changes in law,
national and international political circumstances.
(i) Price Risk
The price of an Asset Backed Security can be affected by a number of factors,
including: (i) changes in the market's perception of the underlying assets
backing the security; (ii) economic and political factors such as interest
rates, levels of unemployment and taxation which can have an impact on arrears,
foreclosures and losses incurred with respect to the pool of assets backing the
security; (iii) changes in the market's perception of the adequacy of credit
support built into the security's structure to protect against losses caused by
arrears and foreclosures; (iv) changes in the perceived creditworthiness of the
originator of the security or any other third parties to the transaction; (v)
the speed at which mortgages or loans within the pool are repaid by the
underlying borrowers (whether voluntary or due to arrears or foreclosures).
The Company's policy also stipulates that no more than 10% of the Portfolio
value can be exposed to any single Asset Backed Security or issuer of ABS.
(ii) Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest rates
will affect the fair value of financial assets and liabilities at fair value
through profit or loss.
The tables below summarise the Company's exposure to interest rate risk:
Floating rate Fixed rate Non-interest
bearing Total
£ £ £
£
(Unaudited) (Unaudited) (Unaudited)
(Unaudited)
As at 30
September
2023
Financial 757,872,773 -
757,872,773
assets at -
fair value
through
profit or
loss
Derivative 28,274
28,274
assets - -
Other 8,271,345
8,271,345
receivables - -
(excluding
prepayments)
Cash and 15,024,303 -
15,024,303
cash -
equivalents
Repurchase (5,921,313) -
(5,921,313)
agreements -
Amounts due (2,342,079)
(2,342,079)
to brokers - -
Other (1,094,157)
(1,094,157)
payables - -
Derivative (3,763,080)
liabilities - -
(3,763,080)
Net current 772,897,076 (5,921,313) 1,100,303
768,076,066
assets
Floating rate Fixed rate Non-interest
bearing Total
£ £ £
£
As at 31 (Audited) (Audited) (Audited)
(Audited)
March 2023
Financial 739,385,970
739,385,970
assets at - -
fair value
through
profit or
loss
Derivative 2,281,253
2,281,253
assets - -
Other 6,870,412
6,870,412
receivables - -
(excluding
prepayments)
Cash and 27,235,318
27,235,318
cash - -
equivalents
Repurchase (49,827,700)
agreements - -
(49,827,700)
Share issue
(5,219)
costs - -
(5,219)
payable
Other
(1,061,379)
payables - -
(1,061,379)
Derivative
(1,509)
liabilities - -
(1,509)
Net current 766,621,288 (49,827,700) 8,083,558
724,877,146
assets
The Company only holds floating rate financial assets and when short-term
interest rates increase, the interest rate on a floating rate will increase. The
time to re-fix interest rates range from daily to a maximum of 6 months. As at
period end, the Company had 0.69% exposure to fixed-rate Asset Backed Securities
and therefore the Company has minimal interest rate risk. However, the Company
may choose to utilise appropriate strategies to achieve the desired level of
interest rate exposure (the Company is permitted to use, for example, interest
rate swaps and repurchase agreements to accomplish this). The value of asset
backed securities may be affected by interest rate movements. Interest
receivable on bank deposits or payable on bank overdraft positions will be
affected by fluctuations in interest rates, however the underlying cash
positions will not be affected. Please see note 11 for details of the amounts
payable under repurchase agreements.
The Company's continuing position in relation to interest rate risk is monitored
on a weekly basis by the Portfolio Manager as part of its review of the weekly
NAV calculations prepared by the Company's Administrator.
(iii) Foreign Currency Risk
Foreign currency risk is the risk that the value of a financial instrument will
fluctuate due to changes in foreign exchange rates. The Company invests in some
Euro assets while its Shares are denominated in Sterling and its expenses are
incurred in Sterling. Therefore the Statement of Financial Position may be
affected by movements in the exchange rate between Euro and Sterling. The
Company manages the exposure to currency movements by using spot and forward
foreign exchange contracts, rolling forward on a periodic basis.
Foreign
currency
risk
Open
forward
currency
contracts
Contract Outstanding Mark to Unrealised
values contracts market gains/(losses
equivalent )
30.9.2023 30.9.2023 30.9.2023 30.9.2023
Two Euro (Unaudited) (Unaudited) (Unaudited) (Unaudited)
forward
foreign
currency
contracts
totalling:
Settlement ?15,700,000 £13,652,270 £13,623,996 £28,274
date 18
October
2023
Three Euro
forward
foreign
currency
contracts
totalling:
Settlement ?453,283,432 £389,582,904 £393,345,984 (£3,763,080)
date 18
October
2023
(£3,734,806)
Unrealised
gains/(losses
)
Contract Outstanding Mark to
contracts market
values equivalent
31.03.2023 31.03.2023 31.03.2023 31.03.2023
(Audited) (Audited) (Audited) (Audited)
Three
Sterling
forward
foreign
currency
contracts
totalling:
Settlement ?416,268,352 £368,081,043 £365,820,527 £2,260,516
date 12
April 2023
One Euro
forward
foreign
currency
Settlement (?7,463,014) (£6,539,339) (£6,558,567) £19,228
date 12
April 2023
£2,279,744
Contract values represent the contract's notional value. Outstanding contracts
are the contract's notional values, translated at the contracted FX rate from
Euro to Sterling, or from Sterling to Euro.
As at 30 September 2023 and as at 31 March 2023, the Company held the following
assets and liabilities denominated in Euro, with the effective net exposure of
open Euro forward currency contracts:
As at As at
30.9.2023 31.03.2023
£ £
Assets/(Liabilities): (Unaudited) (Audited)
Investments 402,715,424 361,420,402
Cash and cash equivalents 1,351,492 970,272
Other receivables 6,259,074 5,083,861
Amounts due to broker (2,342,079) -
Open forward currency contracts (406,969,980) (359,261,960)
1,013,931 8,212,575
The tables below summarise the sensitivity of the Company's assets and
liabilities to changes in foreign exchange movements between Euro and Sterling
at 30 September 2023 and 31 March 2023. The analysis is based on the assumption
that the relevant foreign exchange rate increased/decreased by the percentage
disclosed in the table, with all other variables held constant. This represents
management's best estimate of a reasonable possible shift in the foreign
exchange rates, having regard to historical volatility of those rates.
As at As at
30.9.2023 31.03.2023
£ £
Impact on (Unaudited) (Audited)
Condensed
Statement of
Comprehensive
Income in
response to
a:
- 20% (36,990) (1,321,137)
increase
- 20% 448,754 2,123,313
decrease
Impact on
Statement of
Changes in
Equity in
response to
a:
- 20% (36,990) (1,321,137)
increase
- 20% 448,754 2,123,313
decrease
(iv) Reinvestment Risk
Reinvestment risk is the risk that future coupons from a bond will not be
reinvested at the prevailing interest rate when the bond was initially
purchased.
A key determinant of a bond's yield is the price at which it is purchased and,
therefore, when the market price of bonds generally increases, the yield of
bonds purchased generally decreases. As such, the overall yield of the
Portfolio, and therefore the level of dividends payable to Shareholders, would
fall to the extent that the market prices of ABS generally rise and the proceeds
of ABS held by the Company that mature or are sold are not able to be reinvested
in ABS with a yield comparable to that of the Portfolio as a whole.
The Company assesses reinvestment risk on at least a monthly basis by
calculating the projected amortisation profile of the Company across the next
three years. In addition, changes in the Company's yield and income are assessed
over the same timeframe as securities redeem or mature to identify any periods
where reinvestment risk may be more significant.
(v) Price Sensitivity Analysis
The analysis below shows the Company's sensitivity to movement in market prices
based on a 10% increase or decrease, representing management's best estimate of
a reasonable possible shift in market prices, having regard to historical
volatility.
At 30 September 2023, if market prices had been 10% higher with all other
variables held constant, the increase in net assets attributable to Shareholders
would have been £75,787,277 (31 March 2023: £73,938,597). An equal change in the
opposite direction would have decreased the net assets attributable to
Shareholders by the same amount. This price sensitivity analysis covers the
market prices received from price vendors, brokers and those determined using
models (such as discounted cash flow models) on the assumption that the prices
determined from these sources had moved by the indicated percentage.
As noted in Note 17, the valuation models used (typically discounted cash flow
models) include unobservable inputs that may rely on assumptions that are
subject to judgement. The sensitivity analysis of such inputs was available for
the period ended 30 September 2023 and year ended 31 March 2023.
Actual trading results may differ from the above sensitivity analysis and those
differences may be material.
Credit Risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Company. The
Portfolio Manager monitors exposure to credit risk on an on-going basis.
The main concentration of credit risk to which the Company is exposed arises
from the Company's investments in ABS. The Company is also exposed to
counterparty credit risk on forwards, cash and cash equivalents, amounts due
from brokers and other receivable balances. During the period, none of the
Company's investments in ABS defaulted (31 March 2023: none).
The Company's policy to manage this risk is by no more than 20% of the value of
the Portfolio being backed by collateral in any single country (save that this
restriction will not apply to Northern European countries). The Company also
manages this credit risk by no more than 10% of the Portfolio being exposed to
any single Asset Backed Security or issuer of ABS, no more than 40% of the
Portfolio being exposed to issues with a value greater than 5%, and no more than
10% of the Portfolio value being exposed to instruments not deemed securities
for the purposes of the Financial Services and Market Act, 2000.
The Portfolio of ABS by ratings category using the highest rating assigned by
Standard and Poor's ("S&P"), Moody's Analytics (Moody's") or Fitch Ratings
("Fitch"):
30.09.23 31.03.23
(Unaudited) (Audited)
AAA 1.72% 0.23%
AA - 0.68%
AA- 2.14% 1.92%
A+ 4.47% 3.82%
A 3.14% 2.93%
A- 4.11% 2.95%
BBB+ 6.36% 8.47%
BBB 1.34% 1.73%
BBB- 4.94% 4.90%
BB+ 6.92% 5.37%
BB 4.52% 3.71%
BB- 12.06% 10.58%
B+ 6.33% 5.94%
B 5.54% 5.04%
B- 11.15% 10.81%
CCC - 0.17%
NR* 25.26% 30.75%
100.00% 100.00%
*The non-rated exposure within the Company is managed in exactly the same way as
the exposure to any other rated bond in the Portfolio. A bond not rated by any
of Moody's, S&P or Fitch does not necessarily translate as poor credit quality.
Often smaller issues/tranches, or private deals which the Company holds, will
not apply for a rating due to the cost of doing so from the relevant credit
agencies. The Portfolio Manager has no credit concerns with the unrated, or
rated, bonds currently held, as there have been no defaults in the period.
To further minimise credit risk, the Portfolio Manager undertakes extensive due
diligence procedures on investments in ABS and monitors the on-going investment
in these securities. The Company may also use credit default swaps to mitigate
the effects of market volatility on credit risk.
The Company manages its counterparty exposure in respect of cash and cash
equivalents and forwards by investing with counterparties with a "single A" or
higher credit rating. All cash is currently placed with The Northern Trust
Company. The Company is subject to credit risk to the extent that this
institution may be unable to return this cash. The Northern Trust Company is a
wholly owned subsidiary of The Northern Trust Corporation, a publicly traded
constituent of the S&P 500 with a credit rating of A+ from Standard & Poor's and
A2 from Moody's.
The Company's maximum credit exposure is limited to the carrying amount of
financial assets recognised as at the Condensed Statement of Financial Position
date, as summarised below:
Maximum credit exposure
As at As at
30.09.23 31.03.23
£ £
(Unaudited) (Audited)
Investments 757,872,773 739,385,970
Cash and cash equivalents 15,024,303 27,235,318
Unrealised gains on derivative assets 28,274 2,281,253
Other receivables 8,271,345 6,870,412
781,196,695 775,772,953
Investments in ABS that are not backed by mortgages present certain risks that
are not presented by Mortgage-Backed Securities ("MBS"). Primarily, these
securities may not have the benefit of the same security interest in the related
collateral. Therefore, there is a possibility that recoveries on defaulted
collateral may not, in some cases, be available to support payments on these
securities. The risk of investing in these types of Asset Backed Securities is
ultimately dependent upon payment of the underlying debt by the debtor.
Liquidity Risk
Liquidity risk is the risk that the Company may not be able to generate
sufficient cash resources to settle its obligations as they fall due or can only
do so on terms that are materially disadvantageous.
Investments made by the Company in ABS may be relatively illiquid and this may
limit the ability of the Company to realise its investments. Investments in ABS
may also have no active market and the Company has no redemption rights in
respect of these investments. The Company has the ability to borrow to ensure
sufficient cash flows.
The Portfolio Manager considers expected cash flows from financial assets in
assessing and managing liquidity risk, in particular its cash resources and
trade receivables. Cash flows from trade and other receivables are all
contractually due within twelve months.
The Portfolio Manager maintains a liquidity management policy to monitor the
liquidity risk of the Company.
Shareholders have no right to have their shares redeemed or repurchased by the
Company, however, Shareholders may elect to realise their holdings as detailed
in note 12 and the Capital Risk Management section of this note.
Shareholders wishing to divest of their investment in the Company are required
to dispose of their shares on the market. Therefore, there is no risk that the
Company will not be able to fund redemption requests.
Liquidity
risk
Up to 1 1-6 months 6-12 months Total
month
£ £ £ £
As at 30 (Unaudited) (Unaudited) (Unaudited)
(Unaudited)
September
2023
Financial
liabilities
Repurchase - (5,921,313) -
(5,921,313)
agreements
Unrealised (3,763,080) - -
(3,763,080)
loss on
derivative
liabilities
Director (1,375) - - (1,375)
fees
payable
Amounts due (2,342,079) - -
(2,342,079)
to broker
Other (985,843) (106,939) -
(1,092,782)
payables
Total (7,092,377) (6,028,252) -
(13,120,629)
Up to 1 1-6 months 6-12 months Total
month
£ £ £ £
As at 31 (Audited) (Audited) (Audited)
(Audited)
March 2023
Financial
liabilities
Repurchase - (49,827,700) -
(49,827,700)
agreements
Unrealised (1,509) - - (1,509)
loss on
derivative
liabilities
Share issue (5,219) - - (5,219)
costs
payable
Director (12,629) - - (12,629)
fees
payable
Other (912,361) (136,389) -
(1,048,750)
payables
Total
(931,718) (49,964,089) -
(50,895,807)
Capital Risk Management
The Company manages its capital to ensure that it is able to continue as a going
concern while following the Company's stated investment policy and when
considering and approving dividend payments. The capital structure of the
Company consists of Shareholders' equity, which comprises Share Capital and
other reserves. To maintain or adjust the capital structure, the Company may
return capital to Shareholders or issue new Shares. There are no regulatory
requirements to return capital to Shareholders.
(i) Share Buybacks
The Company has been granted the authority to make market purchases of up to a
maximum of 14.99% of the aggregate number of Ordinary Shares in issue at a price
not exceeding the higher of (i) 5% above the average of the mid-market values of
the Ordinary Shares for the 5 business days before the purchase is made or, (ii)
the higher of the price of the last independent trade and the highest current
investment bid for the Ordinary Shares.
In deciding whether to make any such purchases, the Directors will have regard
to what they believe to be in the best interests of the Company as a whole, to
the applicable legal requirements and any other requirements in its Articles.
The making and timing of any buybacks will be at the absolute discretion of the
Board and not at the option of the Shareholders, and is expressly subject to the
Company having sufficient surplus cash resources available (excluding
borrowings). The Listing Rules prohibit the Company from conducting any share
buybacks during close periods.
(ii) Realisation Opportunity
A Realisation Opportunity takes place at the annual general meeting of the
Company every three years, the most recent of which was on 21 October 2022. The
next Realisation Opportunity is expected to take place in Autumn 2025, subject
to the aggregate NAV of the continuing Ordinary Shares on the last Business Day
before Reorganisation being not less than £100 million.
The Company will attempt, where possible to offset realisation requests with a
simultaneous placing programme. If this is not possible it has the ability to
designate realisation assets as a realisation pool and to convert ordinary
shares to realisation shares to prevent any adverse impact on the liquidity of
its investment portfolio. In the event that Realisation shares are issued, it is
anticipated that the ability of the Company to make returns of cash to the
holders of these Shares will depend in part on the ability of the Portfolio
Manager to realise the portfolio.
It is anticipated that realisations will be satisfied by the assets underlying
the relevant shares being managed on a realisation basis, which is intended to
generate cash for distribution as soon as practicable and may ultimately
generate cash which is less than the published NAV per Realisation Share.
In the event that the Realisation takes place, it is anticipated that the
ability of the Company to make returns of cash to the holders of Realisation
Shares will depend in part on the ability of the Portfolio Manager to realise
the Portfolio.
(iii) Continuation Votes
In the event that the Company does not meet the dividend target in any financial
reporting period as disclosed in note 19, the Directors may convene a general
meeting of the Company where the Directors will propose a resolution that the
Company should continue as an Investment Company.
17. Fair Value Measurement
All assets and liabilities are carried at fair value or at amortised cost, which
equates to fair value.
IFRS 13 requires the Company to classify fair value measurements using a fair
value hierarchy that reflects the significance of the inputs used in making the
measurements. The fair value hierarchy has the following levels:
(i)Quoted prices (unadjusted) in active markets for identical assets or
liabilities (Level 1).
(ii) Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices including interest rates, yield curves,
volatilities, prepayment speeds, credit risks and default rates) or other market
corroborated inputs (Level 2).
(iii) Inputs for the asset or liability that are not based on observable market
data (that is, unobservable inputs) (Level 3).
The following tables analyse within the fair value hierarchy the Company's
financial assets and liabilities (by class) measured at fair value for the
period ended 30 September 2023 and year ended 31 March 2023.
Level 1 Level 2 Level 3 Total
£ £ £ £
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Assets
Financial
assets at fair
value through
profit or
loss:
Asset Backed
Securities:
Auto Loans - 24,747,741 - 24,747,741
CLO - 268,922,889 - 268,922,889
CMBS - 29,034,217 - 29,034,217
Consumer ABS - 16,537,013 - 16,537,013
RMBS - 243,074,974 161,754,064 404,829,038
SME 8,674,368 - 8,674,368
Student Loans - 5,127,507 - 5,127,507
Forward - 28,274 - 28,274
currency
contracts
Total assets
as at 30
September 2023
- 596,146,983 161,754,064 757,901,047
Liabilities
Financial
liabilities at
fair
value through
profit or
loss:
Forward - 3,763,080 - 3,763,080
currency
contracts
Total
liabilities as
at 30
September 2023
- 3,763,080 - 3,763,080
Level 1 Level 2 Level 3 Total
£ £ £ £
(Audited) (Audited) (Audited) (Audited)
Assets
Financial
assets at fair
value through
profit or
loss:
Asset Backed
Securities:
Auto Loans - 13,473,200 - 13,473,200
CLO - 249,763,889 - 249,763,889
CMBS - 34,835,106 - 34,835,106
Consumer ABS - 14,143,352 - 14,143,352
CRE ABS - 12,224,121 - 12,224,121
RMBS - 202,733,570 207,207,308 409,940,878
Student Loans - 5,005,424 - 5,005,424
Forward - 2,281,253 - 2,281,253
currency
contracts
Total assets
as at 31 March
2023
- 534,459,915 207,207,308 741,667,223
Liabilities
Financial
liabilities at
fair
value through
profit or
loss:
Forward - 1,509 - 1,509
currency
contracts
Total - 1,509 - 1,509
liabilities as
at 31
March 2023
ABS which have a value based on quoted market prices in active markets are
classified in Level 1. At the end of the period, no ABS held by the Company are
classified as Level 1.
ABS which are not traded or dealt on organised markets or exchanges are
classified in Level 2 or Level 3. ABS with prices obtained from independent
price vendors, where the Portfolio Manager is able to assess whether the
observable inputs used for their modelling of prices are accurate and the
Portfolio Manager has the ability to challenge these vendors with further
observable inputs, are classified as Level 2. Prices obtained from vendors who
are not easily challengeable or transparent in showing their assumptions for the
method of pricing these assets, are classified as Level 3. ABSs priced at an
average of two vendors' prices are classified as Level 3.
Where the Portfolio Manager determines that the price obtained from an
independent price vendor is not an accurate representation of the fair value of
the Asset Backed Security, the Portfolio Manager may source prices from third
party broker or dealer quotes and if the price represents a reliable and an
observable price, the Asset Backed Security is classified as Level 2. Any broker
quote that is over 20 days old is considered stale and is classified as Level 3.
Any stale price within the portfolio as at 30 September 2023 has been assessed
by the Portfolio Manager and the resulting valuation considered a fair value at
that date. Furthermore, the Portfolio Manager may determine that the application
of a mark-to-model basis may be appropriate where they believe such a model will
result in more reliable information with regards to the fair value of any
specific investments.
The Portfolio Manager has engaged an independent valuation agent for certain
other specific assets where the Portfolio Manager believes the independent
valuation agent would provide more reliable, fair value information with regards
to certain of the Company's investments for the year ended 30 September 2023.
The valuation of these assets and others that the Portfolio Manager may deem
appropriate to provide a valuation at fair value, primarily use discounted cash
flow analysis but may also include the use of a comparable arm's length
transaction, reference to other securities that are substantially the same, and
other valuation techniques commonly used by market participants making the
maximum use of market inputs and relying as little as possible on entity
-specific inputs. The discounted cash flow models include assumptions that are
subject to judgement such as prepayment rates, recovery rates and the discount
margin/ discount rate. As at 30 September 2023, investments (related primarily
to RMBS/MBS investments) totalling 17.96% of the portfolio were valued by the
independent valuation agent (31 March 2023: 21.73%). Valuations performed by the
independent valuation agent are classified as Level 3. Please see Note 3 (ii) of
the Audited Financial Statements for the year ended 31 March 2023 for the
accounting policy outlining the treatment fair value of securities not quoted in
an active market.
The table below represents the signi?cant unobservable inputs, that have been
deemed material, used in the fair value measurement of Level 3 investments,
valued by an independent valuer, together with a quantitative sensitivity
analysis as of 30 September 2023.
30 Fair Value Financial Unobservable Sensitivity Effect on
September (£) Assets/Lia Input Used Fair Value
2023 (£)
(Unaudited) bilit
ies
Dutch RMBS 45,344,788 Financial Discount +5% / -5% 6,629,900 /
(5,280,879)
Asset Margin
UK RMBS 55,470,700 Financial Discount +5% / -5% 6,071,758 /
(4,613,494)
Asset Margin
UK RMBS 14,647,940 Financial Discount +3% / -3% 1,085,138 /
(990,555)
(underlying Asset Margin
risk - AAA)
UK RMBS 20,627,326 Financial Discount +2% / -2% 1,336,691 /
(1,240,263)
Asset Margin
31 March Fair Value Financial Unobservable Sensitivity Effect on
2023 (£) Assets/Lia Input Used Fair Value
(Audited) (£)
bilit
ies
Dutch RMBS 42,531,838 Financial Discount +5% / -5% 6,826,229 /
(5,364,235)
Asset Margin
UK RMBS 103,350,298 Financial Discount +5% / -5% 12,567,742 /
(8,660,011)
Asset Margin
UK RMBS 14,782,507 Financial Discount +3% / -3% 1,429,217 /
(1,223,561)
(underlying Asset Margin
risk - AAA)
Although various variable inputs are used in the valuation models of these
investments, including constant default rate, the only unobservable input that
may have a material impact is the discount margin. As a result, only this input
has been disclosed.
Level 3 assets that are priced based on prices from independent vendors are not
required to be included in the above analysis, as the inputs into these prices
are not developed by the Company and are not readily available.
During the current and prior periods, there were no transfers between Level 2
and Level 3.
The following tables present the movement in Level 3 instruments for the period
ended 30 September 2023 and year ended 31 March 2023 by class of financial
instrument.
Opening Total Total sales Realised Realised
Unrealised Unrealised Transfer Transfer Closing
balance purchases gains on losses on
gains losses into Level out Level 3 balance
Level 3 Level 3
for the for the 3
Investments Investments
period for period for
held held
Level 3 Level 3
during the during the
Investments Investments
period period
held held at 30
ended 30 ended 30
at 30 September
September September
September 2023
2023 2023
2023
£ £ £ £ £
£ £ £ £
£
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
RMBS 207,207,308 36,183,926 (87,108,923) 2,110,286 (22,161,066)
31,392,954 (5,870,421) - - 161,754,064
Total at 207,207,308 36,183,926 (87,108,923) 2,110,286 (22,161,066)
31,392,954 (5,870,421) - - 161,754,064
30
September
2023
Opening Total Total sales Realised Realised
Unrealised Unrealised Transfer Transfer Closing
balance purchases gains on losses on
gains losses into Level out Level 3 balance
Level 3 Level 3
for the for the year 3
Investments Investments
year for for
held held
Level 3 Level
during the during the
Investments 3 Investments
year ended year
held held
31 March ended 31
at 31 March at 31 March
2023 March 2023
2023 2023
£ £ £ £ £ £
£ £ £ £
(Audited) (Audited) (Audited) (Audited) (Audited)
(Audited) (Audited) (Audited) (Audited) (Audited)
RMBS 192,389,060 194,765,464 (158,397,907) 31,414,705 (25,738,076)
29,880,198 (57,106,136) - - 207,207,308
Total at 192,389,060 194,765,464 (158,397,907) 31,414,705 (25,738,076)
29,880,198 (57,106,136) - - 207,207,308
31
March
2023
All other financial assets and liabilities are carried at amortised cost. Their
carrying values are a reasonable approximation of fair value.
18.Dividend Policy
The Board intends to distribute an amount at least equal to the value of the
Company's income available for distribution arising each quarter to the holders
of Ordinary Shares. For these purposes, the Company's income will include the
interest payable by the ABS in the Portfolio and the amortisation of any
discount or premium to par at which an Asset Backed Security is purchased over
its remaining expected life, prior to its maturity. However, there is no
guarantee that the dividend target for future financial years will be met or
that the Company shall pay any dividends at all.
Since 24 February 2023, the Company has maintained a dividend target of 8 pence,
per Ordinary Share per annum. Between 21 September 2022 and 23 February 2023,
the dividend target was 7 pence and prior to that it was 6 pence.
Dividends paid with respect to any quarter comprise (a) the accrued income of
the Portfolio for the period, and (b) an additional amount to reflect any income
purchased in the course of any share subscriptions that took place during the
period. Including purchased income in this way ensures that the income yield of
the shares is not diluted as a consequence of the issue of new shares during an
income period and (c) any income on the foreign exchange contracts created by
the SONIA differentials between each foreign currency pair, less (d) total
expenditure for the period.
The Company, being a Guernsey regulated entity, is able to pay dividends out of
capital. Nonetheless, the Board carefully considers any dividend payments made
to ensure the Company's capital is maintained in the longer term. Careful
consideration is also given to ensuring sufficient cash is available to meet the
Company's liabilities as they fall due.
The Board expects that dividends will constitute the principal element of the
return to the holders of Ordinary Shares.
Under The Companies (Guernsey) Law, 2008, the Company can distribute dividends
from capital and revenue reserves, subject to the net asset and solvency test.
The net asset and solvency test considers whether a company is able to pay its
debts when they fall due, and whether the value of a company's assets is greater
than its liabilities. The Board confirms that the Company passed the net asset
and solvency test for each dividend paid.
The Company declared the following dividends in respect of distributable profit
for the period ended 30 September 2023:
Period to Dividend rate Net dividend Ex Record Pay date
per Share (£) payable (£) -dividend date
date
31 March 0.0446 32,483,815 20 April 21 3 May
2023 2023 April 2023
2023
30 June 0.0200 14,956,733 20 July 21 July 4 August
2023* 2023 2023 2023
47,440,548
30 0.0200 14,956,733 19 20 3 Novembe
September October October r 2023
2023* 2023 2023
*These dividends were declared in respect of distributable profit for the year
ended 31 March 2024.
19.Ultimate Controlling Party
In the opinion of the Directors on the basis of shareholdings advised to them,
the Company has no ultimate controlling party.
20. Significant Events during the Period
Geopolitical events and global inflation levels have continued to dominate the
economic landscape, with interest rate increases from all major central banks
during the period, although this has slowed, with no raises from the ECB, Fed or
BoE since the summer. A soft landing looks more likely than it did at the
beginning of the period, but a recession cannot be ruled out. Employment levels
in many developed countries have continued to remain high throughout the period.
The ongoing conflict in Ukraine continues to impact global foreign policy and
economic activity, contributing to volatility, particularly in energy prices.
After the end of the period, in early October, the situation in Israel and Gaza
escalated significantly with the Hamas attacks and resulting Israeli military
action in Gaza, and subsequent global government reactions dominating news flow.
During the period, asset managers within the UK and Europe have seen increased
pressure from stakeholders to assess and disclose the impact of climate change
on investment portfolios. The Portfolio Manager has a formalised approach to
this risk integrated within a robust ESG framework which is a major factor in
the Portfolio Manager's investment analysis. The Board continues to evaluate
which ESG aspects the Company will consider reporting, based on the regulatory
requirements of the Company and developing best practice in the Company's
sector.
21.Subsequent Events
These Unaudited Condensed Interim Financial Statements were approved for
issuance by the Board on 23 November 2023. Subsequent events have been evaluated
until this date.
On 12 October 2023, a dividend of 2.00p per share was declared, which was paid
on 3 November 2023.
As at 23 November 2023, the published NAV per Ordinary Share for the Company was
102.25p. This represents an decrease of 0.45% (NAV as at 30 September 2023:
102.71p).
GLOSSARY OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES
Alternative Performance Measures ("APMS")
In accordance with ESMA Guidelines on Alternative Performance Measures ("APMs")
the Board has considered what APMs are included in the Interim Management Report
and Unaudited Condensed Interim Financial Statements which require further
clarification. APMs are defined as a financial measure of historical or future
financial performance, financial position or cash flows, other than a financial
measure defined or specified in the applicable financial reporting framework.
The APMs included in the annual report and accounts, is unaudited and outside
the scope of IFRS.
Discount/Premium
If the share price of an investment company is lower than the NAV per share, the
shares are said to be trading at a discount. The size of the discount is
calculated by subtracting the share price from the NAV per share and is usually
expressed as a percentage of the NAV per share. If the share price is higher
than the NAV per share, the shares are said to be trading at a premium.
Dividends Declared
Dividends declared are the dividends that are announced in respect of the
current accounting period. They usually consist of 4 dividends: three interim
dividends in respect of the periods to June, September and December. Until 21
September 2022, the Company aimed to declare a fixed dividend of 1.50 pence. On
21 September 2022, the fixed dividend increased to 1.75 pence and on 24 February
2023, it further increased to 2.00 pence per Ordinary Share. A final dividend
declared in respect of March where the residual income for the year is
distributed.
Dividend Yield
Dividend yield is the percentage of dividends declared in respect of the period,
divided by the initial share issue price of 100.00 pence. The strategy aims to
generate a dividend in the Reporting Period of 6 pence per Ordinary Share and in
each subsequent Reporting discretion from time to time, with all excess income
being distributed to investors at the period/year end of the Company.
Net Asset Value ("NAV")
NAV is the net assets attributable to Shareholders. NAV is calculated using the
accounting standards speci?ed by International Financial Reporting Standards
("IFRS") and consists of total assets, less total liabilities.
NAV per Ordinary Share
NAV per Ordinary Share is the net assets attributable to Shareholders, expressed
as an amount per individual share. NAV per Ordinary Share is calculated by
dividing the total net asset value of £768,124,585 (31 March 2023: £724,982,762)
by the number of shares at the end of the period of 747,836,661 units (31 March
2023: 718,036,661). This produces a NAV per share of 102.71p (2023: 100.97p),
which was an increase of 1.72%.
Ongoing Charges
The ongoing charges represent the Company's management fee and all other
operating expenses, excluding finance costs, share issue or buyback costs and
non-recurring legal and professional fees, expressed as a percentage of the
average of the weekly net assets during the period/year. The Board continues to
be conscious of expenses and works hard to maintain a sensible balance between
good quality service and cost.
Total Return per Ordinary Share
Total return per Ordinary Share is calculated by adding the increase or decrease
in NAV per share with the dividend per share and dividing it by the NAV per
share at the start of the period/year.
Portfolio Performance
Portfolio performance is calculated by summing interest earned, realised and
unrealised gains or losses on investments, less unrealised foreign exchange
gains or losses on investments during the period and divided by closing book
cost for the period, stated as a percentage.
Repurchase Agreement Borrowing
Repurchase agreement borrowing is calculated by taking the fair value of
repurchase agreements, divided by the fair value of investments, stated as a
percentage.
CORPORATE INFORMATION
Directors Custodian, Principal Banker and Depositary
Bronwyn Curtis (Chair) Northern Trust (Guernsey) Limited
John de Garis PO Box 71
Joanne Fintzen (Senior Trafalgar Court
Independent Director)
Les Banques
Paul Le Page
St Peter Port
John Le Poidevin
Guernsey, GY1 3DA
Richard Burwood
(retired 14 September Administrator and Company Secretary
2023)
Northern Trust International Fund Administration
Registered Office
Services (Guernsey) Limited
PO Box 255
PO Box 255
Trafalgar Court
Trafalgar Court
Les Banques
Les Banques
St Peter Port
St Peter Port
Guernsey, GY1 3QL
Guernsey, GY1 3QL
Alternative Investment Broker and Financial Adviser
Fund Manager ("AIFM")
Numis Securities Limited
Apex Fundrock Ltd
45 Gresham Street
Hamilton Centre
London, EC2V 7BF
Rodney Way
Chelmsford, CM13BY
Portfolio Manager Independent Auditor
TwentyFour Asset KPMG Channel Islands Limited
Management LLP
Glategny Court
8th Floor, The
Monument Building Glategny Esplanade
11 Monument Street St Peter Port
London, EC3R 8AF Guernsey, GY1 1WR
Guernsey Legal Adviser Receiving Agent
to the Company
Computershare Investor Services PLC
Carey Olsen
The Pavilions
Carey House
Bridgwater Road
Les Banques
Bristol, BS13 8AE
St Peter Port
Guernsey, GY1 4BZ
UK Legal Adviser to Registrar
the Company
Computershare Investor Services (Guernsey) Limited
Eversheds Sutherland
(International) LLP 1st Floor
1 Wood Street Tudor House
London, EC2V 7WS Le Bordage
St Peter Port
Guernsey, GY1 1DB
This information was brought to you by Cision http://news.cision.com
END
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