TwentyFour Income Fund - Interim results for the six-months ended 30 September 2024
Interim results for the six-months ended
Financial highlights
-- NAV per ordinary share increased 1.6% to 110.50p (FY 31 March 2024 :
108.97p)
-- NAV return per ordinary share was 7.05% (FY 31 March 2024 : 18.10%)
-- Total net assets rose to £826.4m (FY 31 March 2024 : £813.54m)
-- The portfolio returned 8.37% for the six months compared to 16.57% for
the full year to 31 March 2024
-- Dividend payments of 4p for the period ended 30 September 2024 , in line
with the target 8p per annum and before payment of the final, balancing
dividend at the year end
-- Average discount over the period was 4.27%, significantly closer to NAV
than the wider investment company universe
Portfolio highlights
-- Strong ABS performance across the board as spreads tightened driven by
robust supply and demand
-- Collateralised Loan Obligations (“CLOs”) were the biggest beneficiary –
B and BB CLOs delivered returns of 17% and 12% respectively
-- TwentyFour Asset Management LLP (the “Portfolio Manager”) continues to
allocate to significant risk transfer (“SRT”) transactions, where it
sees strong relative value and which also deliver additional
diversification to the portfolio
-- Proactive engagement by the Portfolio Manager on ABS ESG credentials to
meet with investor demands
-- Portfolio book yield of 12.07% and mark-to-market yield of 12.17% at the
end of the period
Outlook
The Portfolio Manager expects a healthy pipeline of ABS issuance for the remainder of the year, following record issuance to date, and sees good value in new BB and B rated CLO investments from top quartile managers. The Portfolio Manager continues to favour shorter dated, secured ABS from larger bank lenders and SRT transactions in order to maintain flexibility in the portfolio.
The main risk to performance continues to be geopolitical risk generating uncertainty in the market. As such, the Portfolio Manager prefers to have greater levels of liquidity and lower levels of gearing allowing them to take advantage of opportunities that may arise in the event of elevated market stress.
Commenting on the results, Bronwyn Curtis OBE, Chair, said
: “The Company continues to deliver a consistent income to shareholders in line with its target of
2024 has seen a significant increase in ABS issuance, particularly from banks, following the end of cheap funding from central banks. This has been positive for the Company, providing the Portfolio Manager with a larger pool of loans in which to invest and driving an improvement in the average asset quality.”
Our focus during the reporting period has been and will continue to be on investing in higher yielding floating rate ABS. In an environment of higher-for-longer rates, these assets should continue to deliver attractive levels of income, which should in turn enable the Company to continue to deliver or improve on its annual target dividend.
Looking forward, we remain cognisant of macro factors, notably continued geopolitical risk, and will therefore look to maintain flexibility and liquidity in the portfolio, giving us the ability to adjust allocations as appropriate.”
For further information please contact:
Deutsche Numis Tel: +44 (0)20 7015 8900
INTERIM MANAGEMENT REPORT AND UNAUDITED CONDENSED
INTERIM FINANCIAL STATEMENTS
For the period from
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
SUMMARY INFORMATION
The Company
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
Target Returns*
The Company has a target annual net total NAV return of between 6% and 9% per annum, which, since
Ongoing Charges
Ongoing charges for the period ended
Discount
As at
Published NAV
* The Issue Price being £1.00. This is an annual target only and not a profit forecast. There can be no assurance that this target will be met or that the Company shall continue to pay any dividends at all. This annual 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 any potential 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 17.
FINANCIAL HIGHLIGHTS
NAV per Ordinary Share As at30 September 2024 As at31 March 2024 110.50p 108.79p Share price As at30 September 2024 As at31 March 2024 105.60p 104.80p Total net assets As at30 September 2024 As at31 March 2024 £826.36 million £813.54 million Total NAV return per Ordinary Share For the six-month period ended 30 September For the year ended31 March 2024 2024 7.05% 18.10% Dividends declared per Ordinary Share For the six-month period ended 30 September For the year ended31 March 2024 2024 4.00p 9.96p Dividends paid per Ordinary Share For the six-month period ended 30 September For the year ended31 March 2024 2024 5.96p 10.46p Ordinary Shares in issue As at30 September 2024 As at31 March 2024 747.84 million 747.84 million Portfolio performance For the six-month period ended 30 September For the year ended31 March 2024 2024 8.37% 16.57% Repurchase agreement borrowing As at30 September 2024 As at31 March 2024 1.70% 1.73% Number of positions in the portfolio As at30 September 2024 As at31 March 2024 213 204 Average discount For the six-month period ended 30 September For the year ended31 March 2024 2024 (4.27%) (1.56%)
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
Bronwyn Curtis OBE
In my capacity as Chair of the Board of Directors (the “Board”) of
Investment Performance
Another positive period for the Company commenced with the payment of the fourth quarter dividend for the previous financial year of 3.96p per Ordinary Share, which meant that the Company paid a total dividend of 10.46p per Ordinary Share in respect of the year ended
During the reporting period, the NAV per Ordinary Share saw an increase from 108.79p to 110.50p, a rise of 1.57%. The NAV per Ordinary Share total return was 7.05%. The Company traded at a narrow discount to NAV for most of the reporting period, with a discount of 3.67% at the beginning of the reporting period, which had widened to 4.43% at the end of
The Company’s portfolio has not had any defaults in its investments since it was launched in 2013 and the portfolio did not see any material interest deferrals or defaults during this reporting period.
The Board is delighted that the Company's performance was officially recognised, post the period end, at the recent Alternative Credit Investor awards, where the Company won the award for "Fund of the year (sub
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
Premium/Discount and Share Capital Management
The wider investment company market saw trading at historically wide discounts across the board, with the Company trading at a discount, averaging 4.27% over the reporting period, significantly closer to NAV than the wider market. Nevertheless, the Board constantly monitors the discount to NAV and would not want to see the shares trading materially wider for a prolonged period of time. The Company has not bought back any shares in this reporting period.
The Company’s triennial realisation opportunity (“Realisation Opportunity”) is due to take place in Autumn 2025, whereby Shareholders may elect, on a rolling basis, to realise some or all of their holdings of Ordinary Shares. The previous Realisation Opportunity in 2022 led to a net fundraise of £34 million of share capital.
Annual General Meeting
The Company’s 2024 Annual General Meeting (“AGM”) was held at
On
The Board would like to thank the team at
Market Overview
2024 has seen a significant increase in ABS issuance, particularly from banks, following the end of cheap funding from central banks. This has been positive for the Company, providing
As a result, ABS performance has been very strong during the period, particularly Collateralised Loan Obligations (“CLO”). Other sectors including Significant Risk Transfer (“SRT”) and mezzanine and junior
The Board remains supportive of the Portfolio Manager’s strategy, which remains focused on investing in secured, higher yielding floating rate assets, with a preference for short spread durations, maintaining liquidity and lower levels of gearing.
Sector Overview
In September, the investment company sector welcomed the news on cost disclosures, with the
Environmental, Social and Governance (“ESG”)
The Board recognises the importance of ESG factors in both investment management and in wider society, and has appointed the Portfolio Manager to advise it in relation to all aspects relevant to the Company’s portfolio. Throughout the period, the Portfolio Manager has continued to work extensively on engaging with issuers to improve disclosures, and expanding their proprietary ESG scoring model to cover ABS-specific metrics, meaning ESG data is factored in to every level of the investment process. The Board and the Portfolio Manager believe this proprietary ESG work is unique in the European ABS space.
The Portfolio Manager has engaged on 23 occasions with issuers on ESG factors during the reporting period, with a particular focus on the provisions of lenders to support residential mortgage holders who are classified as vulnerable, and reaching maturities on mortgages issued prior to the Global Financial Crisis (“GFC”). Furthermore, the Portfolio Manager has conducted extended due diligence on unsecured consumer lenders, where it has observed performance divergence between geography and vintage.
On the environmental side, the focus of the Portfolio Manager continues to be the decarbonisaton pathway and carbon reporting. In CLO specifically, the Portfolio Manager noted an increase in the number of managers disclosing carbon data on their deals, and has engaged on the consistency behind the data. An increasing proportion of CLO transactions now have exclusions for EU Paris-aligned Benchmarks in the documentation, which allows investors to assess their alignment to net zero goals.
Outlook
The Board agrees with the Portfolio Manager’s view that the main risk to performance in the medium term is likely to be imported volatility as a result of continued geopolitical uncertainty.
The Board is therefore fully supportive of the Portfolio Manager’s strategy of maintaining flexibility in the Company’s portfolio, and low levels of gearing. The
However, with long-term neutral rates expected to be around 3.5-3.75% in the
Bronwyn Curtis OBE
Chair
PORTFOLIO MANAGER’S REPORT
for the period from
Investment Background
European credit markets have enjoyed a relatively smooth period, notwithstanding an acute episode of volatility in early August, which followed a weaker than expected employment report in the US. Geopolitical uncertainty has continued to be a concern, albeit market reaction to events was relatively muted over the period.
The housing market has moved in tandem with other assets over the period, with the latest House Price Index data for the
The period has been characterised by the data dependency of central banks and the subsequent repricing of market interest rate expectations. In the US, a pivotal moment came in early August with the publication of the labour market report for July, which indicated a slowdown and sparked an acute sell-off across global markets. Subsequent data from the US was in line with expectations, although we subsequently saw the US Federal Reserve (“Fed”) cut interest rates by 50 basis points (“bps”) at its September meeting.
From the
European ABS markets have enjoyed their busiest year for primary issuance since the global financial crisis, with over €110 billion of ABS and €54.5 billion of CLO issuance (€35 billion new issue, €19.5 billion refinancing) providing the portfolio management team with ample opportunity to reinvest amortisations for the Company. We have noted an increase in ABS issuance from banks, largely due to the withdrawal of cheap funding from central bank programmes, which importantly has also driven an increase in average asset quality.
Collateral performance across European markets has remained strong as consumers continue to display resilience. This is largely thanks to the strength of labour markets, which have seen only mild increases in unemployment from post-Covid lows. Additionally, we have seen strong wage growth and continue to see positive wage negotiations across
Performance Review
European ABS performance over the period has been very strong across the board, as spreads have continued their tightening bias from the wider levels they reached in the wake of the UK’s “mini budget” crisis in late 2022.
Despite rate cuts from the
Once again, CLOs were the biggest beneficiary with B and BB rated CLOs delivering more than 17% and 12%, respectively, with a number of early redemptions allowing for healthy returns from positions that were acquired at deeper discounts. We have also seen an ongoing focus on SRT transactions, a sector that offers diversification opportunities for the Company and where we continue to see strong relative value.
We have seen strong performance across various sectors, which has been most pronounced in CLOs, as increasing amount of discounted CLOs are priced to a potential call due to the increase in loan prepayments and the active CLO refinancing market. SRT, mezzanine and junior RMBS allocations within the portfolio have also performed strongly.
Portfolio Allocation
Our focus during the reporting period has been and will continue to be on investing in higher yielding floating rate ABS. In an environment of higher-for-longer rates, these assets should continue to deliver attractive levels of income, which should in turn enable the Company to continue to deliver or improve on its annual target dividend. At the end of the reporting period, the portfolio had a very healthy book yield of 12.07% and a mark-to-market yield of 12.17%. Spreads have generally tightened through the period and the Company has crystallised profits on various older investments in favour of primary supply.
During the period, we booked profits for the Company in certain mezzanine
During the period, we successfully refinanced two pools of Dutch prime mortgages, locking in long-term funding and releasing capital back to the Company.
Fundamental market performance remains strong as consumers continue to demonstrate resilience. However, we acknowledge heightened tail risk surrounding the various conflicts in the
As mitigation to the effects of market volatility, we prefer bonds with relatively short spread durations and value the flexibility of having greater liquidity and lower levels of gearing. The liquidity which is available to the Company could be deployed to take advantage of any investment opportunities which may arise, in the event of elevated market stress. A focus will be for the Company to remain invested in collateral from established lenders with good track records, and to balance refinancing risk from an expected increase in the number of CLOs targeting refinancing.
ESG
ESG disclosures in the ABS market have continued to evolve over the period, with recent updates to the EU Sustainable Finance Disclosure Regulation (“SFDR”) and
Outlook
Political change has been a strong theme during the period, with elections in the
The BoE cut interest rates by a further 0.25% in
Spread products continue to perform well, and we have welcomed record issuance in the ABS market with a healthy pipeline for the remaining months of the year. We expect CLO refinancings to remain elevated as managers capitalise on attractive funding costs. While this has created some more reinvestment risk, we do not expect difficulties staying invested. We see good value in new BB and B rated CLO investments from top quartile managers, offering yields of around Euribor +6.3% and 9.5% respectively. Other favoured allocations include shorter dated secured ABS from larger bank lenders, and SRT transactions.
While we expect the supply-demand technical to persist in the ABS market and drive performance in the medium term, we acknowledge that geopolitical risk may continue to cause uncertainty and we therefore value flexibility in the portfolio to change allocations if opportunities present themselves.
TOP TWENTY HOLDINGS
as at
Percenta
ge
Nominal/ Asset-Backed Fair Value
Security of Net
Shares Security Sector* £ Asset
Value
UK MORTGAGES CORP FDG DAC KPF1 28,000,000 RMBS 31,660,748 3.83
A 0.0% 31/07/2070
UK MORTGAGES CORPORATE F 'KPF4 22,428,058 RMBS 20,954,400 2.54
A' 0.00% 30/11/2070
LLOYDS BANK PLC FRN 19/11/2029 17,250,000 SRT 17,331,938 2.10
UK MORTGAGES CORP FDG DAC KPF2 12,105,859 RMBS 16,555,004 2.00
A 0.0% 31/07/2070
SYON SECURITIES 19-1 B CLO FLT 15,597,926 RMBS 15,755,106 1.91
19/07/2026
TULPENHUIS 0.0% 18/04/2051 19,326,989 RMBS 15,698,634 1.90
CHARLES ST CONDUIT ABS 2 15,000,000 RMBS 15,000,000 1.82
LIMITED CABS 2- CL B MEZZ
HABANERO LTD '6W B' VAR 14,875,000 RMBS 14,875,000 1.80
5/4/2024
EQTY. RELEASE FNDG. NO 5 '5 B' 16,500,000 RMBS 14,364,040 1.74
FRN 14/07/2050
UKDAC MTGE 'KPF3 A' 0.0% 17,144,104 RMBS 14,012,939 1.70
31/7/2070
CHARLES STREET CONDUIT FRN 14,000,000 RMBS 14,000,000 1.69
0.00% 12/04/2067
DEUTSCHE BANK AG/CRAFT 202 '1X 18,000,000 SRT 13,396,153 1.62
CLN' FRN 21/11/2033
VSK HOLDINGS LTD VAR 31/7/2061 2,058,000 RMBS 13,066,199 1.58
RRME 8X D '8X D' FRN 15/10/2036 13,000,000 CLO 10,537,842 1.28
VSK HLDGS. '1 C4-1' VAR 1,587,000 RMBS 9,812,410 1.19
01/10/2058
SYON SECS. 2020-2 DAC '2 B' FRN 9,249,987 RMBS 9,706,307 1.16
17/12/2027
UK MORTGAGES CORP FDG DAC CHL1 5,641,912 RMBS 8,324,845 1.01
A 0.0% 31/07/2070
HIGHWAYS 2021 PLC '1X D' FRN 8,000,000 CMBS 7,825,516 0.95
18/11/2026
SANTANDER CONSUMER FINANCE SA 69,931,060 SRT 7,805,199 0.94
SER 23-1 CL B FLTG R
SYON SECURITIES 2020-2 7,400,850 RMBS 7,613,751 0.92
DESIGNATED A FLTG 17/12/202
278,296,031 33.68
The full listing of the Portfolio as at
* Definition of Terms
‘CLO’ – Collateralised Loan Obligations
‘CMBS’ –
‘RMBS’-
‘SRT’ – Significant Risk Transfer
BOARD MEMBERS
Biographical details of the Directors are as follows:
Bronwyn Curtis OBE - (Non-Executive Director and Chair)
DISCLOSURE OF DIRECTORSHIPS IN PUBLIC COMPANIES LISTED ON RECOGNISED STOCK EXCHANGES
CompanyName Stock Exchange Bronwyn Curtis BH Macro LimitedLondon Pershing Square Holdings LimitedLondon and EuronextAmsterdam Joanne Fintzen JPMorgan Claverhouse Investment Trust plcLondon Paul Le Page NextEnergy Solar Fund LimitedLondon RTW Biotech Opportunities Limited London Sequoia Economic Infrastructure Income Fund LimitedLondon John Le Poidevin BH Macro LimitedLondon International Public Partnerships LimitedLondon Super Group (SGHC) LimitedNew 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.
Geopolitical risks are heightened raising the possibility of adverse shocks to both growth and inflation in the
-- Liquidity Risk
Liquidity risk is the risk that the Company 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. The Company has the ability to borrow to ensure sufficient cash flows and the Portfolio Manager maintains a liquidity management policy to monitor the liquidity risk of the Company.
-- 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 adverse impact on the market price of the security.
The Company holds debt securities including ABS which, compared to bonds issued or guaranteed by developed market 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 for an ABS is typically indicated by a credit rating which is assigned by one or more internationally recognised rating agencies. This does not amount to a guarantee of creditworthiness of an ABS 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 ABS issues. 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.
The Company is also exposed to unrated equity tranches of ABS that invest predominantly in the residential mortgage markets in the
In the event of a default of an ABS, 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 note 17 to the Condensed Interim Financial Statements.
-- 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 predominantly 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 uses OTC derivatives to hedge interest rate risk and 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 is also able to borrow against individual holdings in the portfolio via repurchase agreements which facilitate rapid tactical investments when opportunities arise.
The Portfolio Manager expects £101.6 million 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 ABS which in turn impacts the calculation of interest income. This risk is considered on behalf of the Board by the Audit Committee as discussed on pages 36 to 39 of the Annual Report for the year ended
-- Cyber Security Risks
The Company is exposed to the 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.
-- Geopolitical Risk and Economic Disruption
The Company is exposed to the risk of geopolitical and economic events impacting on the Company, service providers and Shareholders, including elevated levels of global inflation, recessionary risks and the current conflicts in
-- 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 Corporate 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.
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. CO 2 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 Portfolio 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 on pages 14 to 17 of the Annual Report for the year ended
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 pursuant to which Shareholders may elect, on a rolling basis, to realise some or all of their holdings of Ordinary Shares at each third Annual General Meeting, with the next Realisation Opportunity due to be in Autumn 2025.
The Company’s continuing ability to meet its dividend target, along with the Company’s ability to continue as a going concern, has been considered by the Directors, paying attention to the external geopolitical and macroeconomic factors, the increased risk of default due to elevated levels of inflation above target, higher global interest rates and the next Realisation Opportunity. No material doubts in respect of the Company’s ability to continue as a 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
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place during the period from
By order of the Board
Director Director
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
INDEPENDENT REVIEW REPORT TO TWENTYFOUR INCOME FUND LIMITED
Conclusion
We have been engaged by
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of
financial statements in the half-yearly financial report for the six months ended
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (
A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (
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 (
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
As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards. The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.
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 the condensed 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
Rachid Frihmat
For and on behalf of
Chartered Accountants
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the period from
For the period For the period from
from 01.04.24 to 01.04.23 to
Notes
30.09.24 30.09.23
£ £
(Unaudited) (Unaudited)
Income
Interest income on financial assets 39,806,456 39,617,803
at fair value through profit or loss
Net foreign currency gains 7 15,825,992 6,714,557
Net gains on financial assets at 5,636,331 18,179,471
fair value through profit or loss
Total income 61,268,779 64,511,831
Operating expenses
Portfolio management fees 14 (2,631,614) (2,785,136)
Directors' fees 14 (142,500) (136,245)
Administration and secretarial fees 15 (193,658) (175,947)
Audit fees (80,784) (78,000)
Custody fees 15 (41,408) (37,139)
Broker fees (25,312) (24,939)
AIFM management fees 15 (120,349) (126,343)
Depositary fees 15 (55,582) (50,155)
Legal and professional fees (80,108) (28,635)
Listing fees (12,161) (12,500)
Registration fees (24,314) (44,030)
Other expenses (65,027) 56,041
Total operating expenses (3,472,817) (3,443,028)
Total operating profit 57,795,962 61,068,803
Finance costs on repurchase 11 (402,967) (383,505)
agreements
Total comprehensive income for the 57,392,995 60,685,298
period*
Earnings per Ordinary Share 3 0.0767 0.0817
All items in the above statement derive from continuing operations.
The Company’s income and expenses are not affected by seasonality or cyclicity.
The accompanying notes 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 POSITIO
N
as at
30.09.2024 31.03.2024
Notes
£ £
(Unaudited) (Audited)
Assets
Financial assets at fair value through profit or 8 822,676,708 813,356,415
loss
- Investments
- Derivative assets: Forward currency contracts 17 7,673,202 1,958,943
Amounts due from broker - 3,427,786
Other receivables 9 8,709,709 7,642,019
Cash and cash equivalents 20,546,808 13,142,803
Total assets 859,606,427 839,527,966
Liabilities
Financial liabilities at fair value through
profit or loss 17 287,672 20,877
- Derivative liabilities: Forward currency
contracts
Amounts payable under repurchase agreements 11 14,002,088 14,090,507
Amounts due to broker 17,339,213 10,596,437
Other payables 10 1,615,538 1,280,159
Total liabilities 33,244,511 25,987,980
Net assets 826,361,916 813,539,986
Equity
12 780,234,543 780,234,543
Share capital account
Retained earnings 46,127,373 33,305,443
Total equity 826,361,916 813,539,986
Ordinary Shares in issue 12 747,836,661 747,836,661
Net Asset Value per Ordinary Share (pence) 5 110.50 108.79
The Unaudited Condensed Interim Financial Statements were approved by the Board of Directors on
Director Director
The accompanying notes form an integral part of these Unaudited Condensed Interim Financial Statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the period from
Share capital Retained
Total
account earnings
Notes £
£ £
(Unaudited)
(Unaudited) (Unaudited)
Balances at 1 April 2024 780,234,543 33,305,443 813,539,986
Dividends paid 19 - (44,571,065) (44,571,065)
Total comprehensive income for the - 57,392,995 57,392,995
period
Balances at 30 September 2024 780,234,543 46,127,373 826,361,916
Sharecapital Accumulated
Total
account losses
£ £ £
(Unaudited) (Unaudited) (Unaudited)
Balances at 1 April 2023 750,558,986 (25,576,224) 724,982,762
Issue of Ordinary Shares 30,244,890 - 30,244,890
Share issue costs (347,817) - (347,817)
Dividends paid - (47,440,548) (47,440,548)
Income equalisation on new issues 4 (242,649) 242,649 -
Total comprehensive income for the - 60,685,298 60,685,298
period
Balances at 30 September 2023 780,213,410 (12,088,825) 768,124,585
The accompanying notes form an integral part of these Unaudited Condensed Interim Financial Statements.
CONDENSED STATEMENT OF CASH FLOWS
for the period from
For the period For the period
Notes from 01.04.24 to from 01.04.23 to 30.09.23
30.09.24
£ £
(Unaudited) (Unaudited)
Cash flows from
operating activities
Total comprehensive 57,392,995 60,685,298
income for the period
Less:
Adjustments for non-cash
transactions:
Interest income on
financial assets at fair (39,806,456) (39,617,803)
value through profit or
loss
Net gains on investments 8 (5,636,331) (18,179,471)
Amortisation adjustment
under effective interest (3,315,054) (7,931,404)
rate method
Unrealised
(gains)/losses on 7 (5,447,465) 6,014,551
forward currency
contracts
Exchange losses on cash 39,653 2,812
and cash equivalents
(Increase)/decrease in (106,828) 57,097
other receivables
Increase in other 335,379 32,778
payables
Finance costs on 402,967 383,505
repurchase agreements
Purchase of investments (120,332,686) (141,096,823)
Sale of
investments/principal 130,134,340 151,062,974
repayments
Investment income 38,372,304 37,793,736
received
Bank interest income 473,291 423,134
received
Net cash generated from 52,506,109 49,630,384
operating activities
Cash flows from
financing activities
Proceeds from issue of - 30,244,890
Ordinary Shares
Share issue costs - (353,037)
Dividend paid (44,571,065) (47,440,548)
Finance costs paid (414,947) (420,644)
Decrease in amounts
payable under repurchase (76,439) (43,869,248)
agreements, excluding
finance cost liabilities
Net cash used in (45,062,451) (61,838,587)
financing activities
Increase/(decrease) in
cash and cash 7,443,658 (12,208,203)
equivalents
Cash and cash
equivalents at beginning 13,142,803 27,235,318
of the period
Exchange losses on cash (39,653) (2,812)
and cash equivalents
Cash and cash
equivalents at end of 20,546,808 15,024,303
the period
The accompanying notes form an integral part of these Unaudited Condensed Interim Financial Statements.
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
for the period from
1. General Information
Since
The Company’s investment objective and policy is set out in the Summary Information.
The Portfolio Manager of the Company is
2. Material Accounting Policies
a) Statement of Compliance
The Unaudited Condensed Interim Financial Statements for the period
The Unaudited Condensed Interim Financial Statements should be read in conjunction with the Audited Financial Statements for the year ended
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
- 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 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);
The directors of the Company (the “Directors” or 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
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:
- Lack of Exchangeability (Amendments to IAS 21) (applicable to accounting periods beginning on or after 1 January 2025);
-
Classification and Measurement of Financial Instruments (Amendments to IFRS 7 and IFRS 9) (applicable to periods beginning on or after
- Presentation and Disclosures in Financial Statements (IFRS 18) (applicable to accounting periods beginning on or after 1 January 2027).
The Directors are in process of assessing the impact of the adoption of the new standards on the financial statements of the Company.
3. Earnings 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 Ordinary 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 Ordinary Share has been calculated.
Basic earnings per Ordinary Share has been calculated based on the weighted average number of Ordinary Shares of 747,836,661 (
4. Income Equalisation on New Issues
In order to ensure there are no dilutive effects on earnings per Ordinary Share for current holders of Ordinary Shares 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 £Nil (
5. Net Asset Value per Ordinary Share
The net asset value (“NAV”) of each Ordinary Share of £1.11 (
6. Taxation
The Company has been granted Exempt Status under the terms of The Income Tax (Exempt Bodies) (
7. Net Foreign Currency Gains
Fortheperiod Fortheperiod
01.04.24 to 01.04.23 to
30.09.24 30.09.23
£ £
(Unaudited) (Unaudited)
Movement on unrealised gain/(loss) on forward 5,447,465 (6,014,551)
currency contracts
Realised gains on foreign currency contracts 10,425,600 12,705,591
Unrealised foreign currency gain on 87,163 4,063
receivables/payables
Unrealised foreign currency exchange (loss)/gain on (134,236) 19,454
interest receivable
15,825,992 6,714,557
8. Investments
For the period For the period
01.04.24 to 01.04.23 to
30.09.24 31.03.24
£ £
(Unaudited) (Audited)
Financial assets at fair value through profit or
loss:
Opening book cost 815,142,981 832,506,047
Purchases at cost 127,075,462 281,155,894
Proceeds on sale/principal repayment (126,706,554) (269,963,403)
Amortisation adjustment under effective interest 3,315,054 8,874,421
rate method
Realised gains on sale/principal repayment 18,306,551 3,698,699
Realised losses on sale/principal repayment (76,273,069) (41,128,677)
Closing book cost 760,860,425 815,142,981
Unrealised gains on investments 84,709,945 19,029,145
Unrealised losses on investments (22,893,662) (20,815,711)
Fair value 822,676,708 813,356,415
For the period For the period
01.04.24 to 01.04.23 to
30.09.24 30.09.23
£ £
(Unaudited) (Unaudited)
Realised gains on sales/principal repayment 18,306,551 3,173,775
Realised losses on sales/principal repayment (76,273,069) (43,700,421)
Increase in unrealised gains 65,680,800 10,633,609
(Increase)/decrease in unrealised losses (2,077,951) 48,072,508
Net gains on financial assets at fair value 5,636,331 18,179,471
through profit or loss
9. Other Receivables
As at As at
30.09.24 31.03.24
£ £
(Unaudited) (Unaudited)
Coupon interest receivable 8,578,246 7,617,384
Prepaid expenses 131,463 24,635
8,709,709 7,642,019
There are no material expected credit losses for coupon interest receivable as at
10. Other Payables
As at As at
30.09.24 31.03.24
£ £
(Unaudited) (Audited)
Portfolio management fees payable 1,027,242 835,269
Custody fees payable 34,106 25,479
Administration and secretarial fees payable 285,723 92,065
Audit fees payable 75,324 156,000
AIFM fees payable 33,065 66,283
Depositary fees payable 45,792 34,720
General expenses payable 114,286 70,343
1,615,538 1,280,159
A summary of the expected payment dates of payables can be found in the ‘Liquidity Risk’ section of note 17.
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 Agreement”). 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, pursuant to the terms and conditions as governed by the agreement.
Finance costs on Repurchase Agreements have been presented separately from interest income. Finance costs on Repurchase Agreements amounted to £402,967 (
At the end of the period, amounts repayable under open Repurchase Agreements were £14,002,088 (
The changes in amounts payable under Repurchase Agreements are disclosed below:
For the period For the year
01.04.24 to 01.04.23 to
30.09.24 31.03.24
£ £
(Unaudited) (Audited)
Amounts payable under Repurchase
Agreements
Opening balance, excluding finance cost 14,041,222 49,670,365
liabilities
Agreements entered during the period/year 27,993,829 66,055,670
Repaid/maturities during the period/year (28,070,268) (101,684,813)
Closing balance, excluding finance cost 13,964,783 14,041,222
liabilities
Finance cost liabilities
Opening balance 49,285 157,335
Charged during the period/year 402,967 755,788
Repayments during the period/year (414,947) (863,838)
Closing balance 37,305 49,285
12. Share Capital
a) Authorised Share Capital
Unlimited number of Ordinary Shares at no par value.
b) Issued Share Capital
Fortheperiod Fortheyear
01.04.24 to 01.04.23 to
30.09.24 31.03.24
£ £
(Unaudited) (Audited)
OrdinaryShares
Share Capital at the beginning of the period/year 780,234,543 750,558,986
Issue of Ordinary Shares - 30,244,890
Share issue costs - (347,816)
Income equalisation on new issues - (221,517)
Total Share Capital at the end of the period/year 780,234,543 780,234,543
Fortheperiod Fortheyear
01.04.24 to 01.04.23to
30.09.24 31.03.24
Numberof Numberof
OrdinaryShares OrdinaryShares
(Unaudited) (Audited)
OrdinaryShares
Shares at the beginning of the period/year 747,836,661 718,036,661
Issue of Ordinary Shares - 29,800,000
Total Shares in issue at the end of the 747,836,661 747,836,661
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, being the Ordinary Shares of Shareholders who have elected to realise their investment in the Company during a Realisation Opportunity (“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
No shares were held in
The Ordinary Shares carry the following rights:
i) The Ordinary Shares carry the right to receive all income of the Company attributable to the Ordinary Shares.
ii) 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.
iii)
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
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 Ordinary Shares held as Treasury Shares shall not at any time exceed 10% of the total number of Ordinary Shares of that class in issue at that time or such amount as provided in The Companies (
The Company has the right to re-issue Treasury Shares at a later date.
Shares held in
13. Analysis of Financial Assets and Liabilities by Measurement Basis
Assets at
fair
value Amortised
through
profit or cost Total
loss
£ £ £
30 September 2024
Financial Assets as per Statement of
Financial Position (Unaudited)
Financial assets at fair value through
profit or loss:
- 822,676,708 - 822,676,708
Investments
- Derivative assets: 7,673,202 - 7,673,202
Forward currency contracts
Other receivables
(excluding - 8,578,246 8,578,246
prepayments)
Cash and cash - 20,546,808 20,546,808
equivalents
830,349,910 29,125,054 859,474,964
Liabilities
at fair
value Amortised
through
profit or cost Total
loss
30 September 2024 £ £ £
Financial Liabilities as per Statement of
Financial Position (Unaudited)
Financial liabilities at fair value
through profit or loss:
- Derivative liabilities: 287,672 - 287,672
Forward currency contracts
Amounts payable under repurchase - 14,002,088 14,002,088
agreements
Amounts due to brokers - 17,339,213 17,339,213
Other payables - 1,615,538 1,615,538
287,672 32,956,839 33,244,511
Assets at
fair
value Amortised
through
profit or cost Total
loss
£ £ £
31 March 2024
Financial Assets as per Statement of
Financial Position (Audited)
Financial assets at fair value through
profit or loss:
- 813,356,415 - 813,356,415
Investments
- Derivative assets: 1,958,943 - 1,958,943
Forward currency contracts
Amounts due from - 3,427,786 3,427,786
broker
Other receivables
(excluding - 7,617,384 7,617,384
prepayments)
Cash and cash - 13,142,803 13,142,803
equivalents
815,315,358 24,187,973 839,503,331
Liabilities
at fair
value Amortised
through
profit or cost Total
loss
31 March 2024 £ £ £
Financial Liabilities as per Statement of
Financial Position (Audited)
Financial liabilities at fair value
through profit or loss:
- Derivative liabilities: 20,877 - 20,877
Forward currency contracts
Amounts payable under - 14,090,507 14,090,507
repurchase agreements
Amounts due to brokers - 10,596,437 10,596,437
Other payables - 1,280,159 1,280,159
20,877 25,967,103 25,987,980
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. At the Annual General Meeting held on
Following a review of external market data, with effect from
During the period ended
14. Related Parties
b) Shares Held by Related Parties
As at
Number of Number of
Ordinary Shares Ordinary Shares
30.09.24 31.03.24
Bronwyn Curtis 114,154 114,154
John Le Poidevin¹ 354,800 260,121
John de Garis 39,753 39,753
Joanne Fintzen² 86,260 38,538
Paul Le Page 49,457 49,457
¹ On
² On
As at
The Portfolio Manager, partner and employee amounts therefore exclude shares held under any long-term incentive plan (“LTIP”) which has not yet vested. Ordinary Shares that are held in employee and partner LTIPs total 736,412, which is 0.10% 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 £2,631,614 (
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 £Nil (
15. Material Agreements
a) Alternative Investment Fund Manager
The Company’s
Effective
During the period ended
b) Administrator and Secretary
Administration fees are payable to
c) Depositary
Depositary fees are payable to
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 £41,408 (
16. Interests in Unconsolidated Structured Entities
IFRS 12 defines a structured entity as an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to the administrative tasks only and the relevant activities are directed by means of contractual agreements.
A structured entity often has some of the following features or attributes:
i) restricted activities,
ii) a narrow and well defined objective, and
iii) financing in the form of multiple instruments that create concentrations of credit or other risks.
The Company holds various investments in Asset-Backed Securities (“ABS”). The fair value of the ABS is recorded in the “Financial assets at fair value through profit or loss - Investments” line in the Condensed Statement of Financial Position. The Company’s maximum exposure to loss from these investments is equal to their total fair value. Once the Company has disposed of its holding in any of these investments, the Company ceases to be exposed to any risk from that investment. The Company has not provided, and would not be required to provide, any financial support to these investees. The investments are non-recourse.
Below is a summary of the Company’s holdings in unconsolidated structured entities as at
Range of Average Carrying Value
Number of Nominal Nominal % of Company's
As at 30 investments £ million NAV
September 2024 £ million £ million
(Unaudited) (Unaudited) (Unaudited)
(Unaudited) (Unaudited)
Asset-Backed
Securities*: 14 5 - 58 24 34 4.1%
Auto Loans
CLO 116 9 - 36 16 312 37.7%
CMBS 5 15 - 65 35 24 2.9%
Consumer ABS 10 11 - 58 28 26 3.1%
CRE ABS 6 7 - 17 12 28 3.4%
Credit Cards 1 18 18 4 0.5%
RMBS 55 2 - 398 25 345 41.8%
SRT 5 87 - 1,263 392 46 5.6%
Student Loans 1 33 33 4 0.5%
213 823
Number of % of
As at 31 March investments Range of Average Carrying Value Company's NAV
2024 Nominal Nominal
£ million £ million £ million
(Audited) (Audited) (Audited) (Audited) (Audited)
Asset-Backed
Securities*: 14 7 - 55 22 28 3.4%
Auto Loans
CLO 108 9 - 36 16 302 37.1%
CMBS 6 15 - 65 35 26 3.3%
Consumer ABS 6 11 - 45 27 16 1.9%
RMBS 66 2 - 85 18 406 49.9%
SRT 3 143 - 1,263 591 31 3.8%
Student Loans 1 33 33 4 0.5%
204 813
*Definition of Terms
“CLO” – Collateralised Loan Obligations
“CMBS” –
“CRE” –
“RMBS” –
“SRT” – Significant Risk Transfer
17. 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 following tables summarise the Company’s exposure to interest rate risk:
Non-interest
Floating rate Fixed rate Total
bearing
£ £ £
£
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
As at 30 September 2024
Financial assets at fair
value through profit or 822,676,708 - - 822,676,708
loss
Derivative assets - - 7,673,202 7,673,202
Other receivables - - 8,578,246 8,578,246
(excluding prepayments)
Cash and cash 20,546,808 - - 20,546,808
equivalents
Repurchase agreements - (14,002,088) - (14,002,088)
Amounts due to brokers - - (17,339,213) (17,339,213)
Other payables - - (1,615,538) (1,615,538)
Derivative liabilities - - (287,672) (287,672)
Netassets 843,223,516 (14,002,088) (2,990,975) 826,230,453
Non-interest
Floating rate Fixed rate Total
bearing
£ £ £ £
(Audited) (Audited) (Audited) (Audited)
As at 31 March 2024
Financial assets at fair
value through profit or 813,356,415 - - 813,356,415
loss
Derivative assets - - 1,958,943 1,958,943
Amounts due from broker - - 3,427,786 3,427,786
Other receivables - - 7,617,384 7,617,384
(excluding prepayments)
Cash and cash 13,142,803 - - 13,142,803
equivalents
Repurchase agreements - (14,090,507) - (14,090,507)
Amounts due to brokers - - (10,596,437) (10,596,437)
Other payables - - (1,280,159) (1,280,159)
Derivative liabilities - - (20,877) (20,877)
Netassets 826,499,218 (14,090,507) 1,106,640 813,515,351
If interest rates were to increase or decrease by 2.5%, with all other variables held constant, the expected effect of the returns from floating rate net assets would be a gain or loss of £21,080,588, respectively (
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 ranges from 1 month to a maximum of 6 months and therefore the Company has minimal interest rate risk. However, the Company may choose to utilise appropriate strategies to achieve a desired level of interest rate exposure (the Company is permitted to use, for example, interest rate swaps to accomplish this). The value of ABS 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 Administrator of the Company.
(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 predominantly in non-Sterling assets while its Shares are denominated in Sterling, and its expenses are incurred in Sterling. Therefore, the Condensed Statement of Financial Position may be significantly affected by movements in the exchange rate between foreign currencies and Sterling. The Company manages the exposure to currency movements by using spot and forward foreign exchange contracts, rolling forward on a periodic basis.
Outstanding Mark-to-market Unrealised
Contract
values contracts equivalent gains/
(losses)
30.09.2024 30.09.2024 30.09.2024 30.09.2024
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Two Danish Krone
forward foreign
currency contracts:
Settlement date 2 81,000,000 kr. £9,181,986 £9,040,634 £141,352
October 2024
Settlement date 6 81,000,000 kr. £9,049,887 £9,056,550 (£6,663)
November 2024
Contract to close
out 2 October 2024
Danish Krone
foreign (81,000,000)
currency kr. (£9,033,424) (£9,040,634) £7,210
contract
Eight Euro
forward foreign
currency
contracts
totalling:
Settlement date 2 €525,917,428 £444,626,279 £437,581,607 £7,044,672
October 2024
Contract to
close out 2
October 2024
Euro
foreign
currency (€523,732,989) (£435,478,744) (£435,764,078) £285,334
contract
Two Euro
forward foreign
currency
contracts
totalling:
Settlement date 6 €527,844,193 £439,533,029 £439,797,081 (£264,052)
November 2024
Two US Dollar
forward foreign
currency contracts:
Settlement date 2 $18,001,273 £13,614,287 £13,420,264 £194,023
October 2024
Settlement date 6 $18,001,273 £13,427,073 £13,420,565 £6,508
November 2024
Contract to close
out 2 October 2024
US Dollar
foreign
currency ($18,001,273 ) (£13,426,773) (£13,420,264) (£6,509)
contract
One Euro
forward foreign
currency
contract:
Settlement date 2 (€2,184,439) (£1,834,485) (£1,817,529) (£16,956)
October 2024
Spot
contract £611
receivable
£7,385,530
Contract Unrealised
Outstanding Mark-to-market
gains/
values contracts equivalent (losses)
31.03.2024 31.03.2024 31.03.2024 31.03.2024
(Audited) (Audited) (Audited) (Audited)
One Danish Krone
forward foreign
currency contract:
Settlement
date 29 April 91,000,000 kr. £10,485,538 £10,440,444 £45,094
2024
Three Euro
forward foreign
currency
contracts
totalling:
Settlement
date 29 April €510,373,983 £438,550,084 £436,669,844 £1,880,240
2024
One US Dollar
forward foreign
currency contract:
Settlement
date 29 April $18,001,273 £14,281,840 £14,248,231 £33,609
2024
One Euro
forward foreign
currency
contract:
Settlement
date 29 April (€8,401,262) (£7,208,896) (£7,188,019) (£20,877)
2024
£1,938,066
Contract values represent the contract’s notional value. Outstanding contracts are the contract’s notional values, translated at the contracted foreign exchange rate from foreign currencies to Sterling, or from Sterling to foreign currencies.
As at
As at As at
30.09.2024 31.03.2024
£ £
Danish Krone (Unaudited) (Audited)
Assets/(Liabilities):
Investments 7,805,199 9,626,337
Cash and cash equivalents 1,962,450 974,405
Other receivables 160,358 185,957
Open forward currency contracts (18,097,185) (10,440,444)
Close out forward currency contract 9,040,634 -
871,456 346,255
As at As at
30.09.2024 31.03.2024
£ £
Euro (Unaudited) (Audited)
Assets/(Liabilities):
Investments 441,907,500 435,362,991
Cash and cash equivalents 3,301,721 (2,911,638)
Spot contract receivable 3,420,664 -
Other receivables 6,505,822 5,868,282
Amounts due to broker (16,829,213) (10,586,437)
Open forward currency contracts (875,561,159) (429,481,825)
Close out forward currency contract 435,764,078 -
(1,490,587) (1,748,627)
As at As at
30.09.2024 31.03.2024
£ £
US Dollar (Unaudited) (Audited)
Assets/(Liabilities):
Investments 13,396,153 14,248,960
Cash and cash equivalents 875,639 41,484
Other receivables 222,522 -
Open forward currency contracts (26,840,829) (14,248,231)
Close out forward currency contract 13,420,264 -
1,073,749 42,213
The tables below summarise the sensitivity of the Company’s assets and liabilities to changes in foreign exchange movements between foreign currencies and Sterling at
As at As at
30.09.2024 31.03.2024
£ £
(Unaudited) (Audited)
Impact on Statement of Comprehensive Income and
Statement of Changes in Equity in response to a:
- 20% increase in Danish (131,980) (49,200)
Krone
- 20% decrease in Danish 237,759 99,327
Krone
As at As at
30.09.2024 31.03.2024
£ £
(Unaudited) (Audited)
Impact on Statement of Comprehensive Income and
Statement of Changes in Equity in response to a:
- 20% increase in Euro 758,713 563,495
- 20% decrease in Euro 392,777 (29,071)
As at As at
30.09.2024 31.03.2024
£ £
(Unaudited) (Audited)
Impact on Statement of Comprehensive Income and
Statement of Changes in Equity in response to a:
- 20% increase in US (178,708) (8,484)
Dollar
- 20% decrease in US 268,813 8,381
Dollar
(iv) Reinvestment Risk
Reinvestment risk is the risk that future coupons from a bond will not be reinvested upon redemption at the interest rate which was prevailing 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.
(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
As noted in note 18, the valuation models used for some of the portfolio assets (typically discounted cash flow models) include unobservable inputs that may rely on assumptions that are subject to judgement. 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 were in default (
The Company’s policy to manage this risk is by no more than 20% of the portfolio value 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”) :
30.09.24 31.03.24
AAA 0.68% -
AA+ 1.75% -
AA- 0.67% 2.42%
A+ 5.13% 3.62%
A 0.55% 2.31%
A- 1.48% 3.00%
BBB+ 6.30% 6.83%
BBB 1.15% 1.77%
BBB- 3.61% 4.10%
BB+ 9.39% 8.62%
BB 3.86% 4.65%
BB- 12.03% 12.78%
B+ 5.15% 4.70%
B 5.90% 5.35%
B- 12.93% 12.26%
CCC- 0.55% 0.59%
NR* 28.87% 27.00%
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. The Portfolio Manager will estimate an internal rating for unrated bonds by considering all relevant factors, including but not limited to, the relationship between the bond’s maturity and its price and/or yield, the ratings of comparable bonds, and the issuer’s financial statements; however, this is not used for any investment monitoring, reporting or otherwise.
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 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:
As at As at
30.09.24 31.03.24
£ £
(Unaudited) (Audited)
Investments 822,676,708 813,356,415
Cash and cash equivalents 20,546,808 13,142,803
Unrealised gains on derivative assets 7,673,202 1,958,943
Amounts due from broker - 3,427,786
Other receivables (excluding prepayments) 8,578,246 7,617,384
859,474,964 839,503,331
Investments in ABS that are not backed by mortgages present certain risks that are not presented by
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 could also have no active market and the Company could have 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.
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 these arrangements can be used for short-term liquidity.
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 release their investment in the Company are therefore 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.
Up to 1 month 1-6 months 6-12 months Total
£ £ £ £
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
As at 30
September
2024
Financial
liabilities
Repurchase - (14,002,088) - (14,002,088)
agreements
Unrealised loss on
derivative (287,672) - - (287,672)
liabilities
Amounts due (17,339,213) - - (17,339,213)
to broker
Other (1,505,214) (110,324) - (1,615,538)
payables
Total (19,132,099) (14,112,412) - (33,244,511)
Up to 1 month 1-6 months 6-12 months Total
£ £ £ £
(Audited) (Audited) (Audited) (Audited)
As at 31
March 2024
Financial
liabilities
Repurchase - (14,090,507) - (14,090,507)
agreements
Unrealised loss on
derivative (20,877) - - (20,877)
liabilities
Amounts due (10,596,437) - - (10,596,437)
to broker
Other (1,124,159) (156,000) - (1,280,159)
payables
Total (11,741,473) (14,246,507) - (25,987,980)
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 Ordinary 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 borrowed moneys).
(ii) Realisation Opportunity
A Realisation Opportunity shall be at the annual general meeting of the Company in each third year. On
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 shall propose an Ordinary Resolution that the Company continues its business as a closed-ended collective investment scheme at the Annual General Meeting following that financial reporting period.
18. 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
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 - 33,727,009 - 33,727,009
CLO - 311,390,487 - 311,390,487
CMBS - 24,111,286 - 24,111,286
Consumer ABS - 25,693,446 - 25,693,446
CRE ABS - 27,840,820 - 27,840,820
Credit Cards - 4,428,637 - 4,428,637
RMBS - 157,576,941 187,659,918 345,236,859
SRT - 46,054,236 - 46,054,236
Student Loans - 4,193,928 - 4,193,928
Forward
currency - 7,673,202 - 7,673,202
contracts
Total assets as at 30 - 642,689,992 187,659,918 830,349,910
September 2024
Liabilities
Financial liabilities at fair
value through profit or loss:
Forward currency contracts - 287,672 - 287,672
Total liabilities as at 30 - 287,672 - 287,672
September 2024
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 - 27,531,003 - 27,531,003
CLO - 302,173,103 - 302,173,103
CMBS - 26,496,489 - 26,496,489
Consumer ABS - 15,682,235 - 15,682,235
RMBS - 222,368,778 183,915,529 406,284,307
SRT - 30,840,110 - 30,840,110
Student Loans - 4,349,168 - 4,349,168
Forward
currency - 1,958,943 - 1,958,943
contracts
Total assets as at 31 March - 631,399,829 183,915,529 815,315,358
2024
Liabilities
Financial liabilities at fair
value through profit or loss:
Forward currency contracts - 20,877 - 20,877
Total liabilities as at 31 - 20,877 - 20,877
March 2024
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. ABS 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
The Portfolio Manager has engaged a third-party valuer for certain other specific assets where the Portfolio Manager believes the third-party valuer would provide more reliable, fair value information with regards to certain of the Company’s investments for the period ended
Please see note 3 (ii) of the Audited Financial Statements for the year ended
The tables below represent the significant unobservable inputs used in the fair value measurement of Level 3 investments, valued by a third-party valuer, together with a quantitative sensitivity analysis as of
30 Fair Value Financial Unobservable Sensitivity Effect on Fair Value
September (£) Assets/Liabilities Input Used (£)
2024
(Unaudited)
Discount
Dutch RMBS 48,347,137 Financial Asset Margin +5% / -5% 5,043,328 / (4,001,981)
(970 bps)
Discount
Margin
UK RMBS 43,684,694 Financial Asset (174 bps/ +5% / -5% 3,062,793 / 411,951
950 bps/
1005 bps/
1050 bps)
Discount +0.5% /
UK RMBS 31,660,748 Financial Asset Margin -0.5% 362,486 / (356,162)
(149 bps)
UK RMBS Discount
(underlying 34,967,339 Financial Asset Margin +3% / -3% 1,814,659 / (1,713,125)
risk - AAA) (303 bps/
305 bps)
31 March Fair Value Financial Unobservable Sensitivity Effect on Fair Value
2024 (£) Assets/Liabilities Input Used (£)
(Audited)
Discount
Dutch RMBS 54,142,754 Financial Asset Margin +5% / -5% 6,871,331 / (5,477,982)
(965 bps)
Discount
Margin
UK RMBS 64,557,878 Financial Asset (179 bps/ +5% / -5% 5,712,626 / (4,538,301)
950 bps/
1025 bps/
1060 bps)
UK RMBS Discount
(underlying 36,853,297 Financial Asset Margin +3% / -3% 3,338,550 / (2,880,236)
risk - AAA) (300 bps/
351 bps)
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.
Please refer to the price sensitivity analysis disclosed in note 17 where the price sensitivity related to market risk has been disclosed.
The above sensitivity analysis has been completed on those assets valued by the third-party valuer. For the remaining assets classified as Level 3 at
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
Realised Realised
Total gains on losses on Unrealised Unrealised
purchases Total sales Level 3 Level 3 gains for losses for Closing
Opening during the during the Investments Investments the period the period Transfer balance at
balance at period period ended held during held during for Level 3 for Level 3 into Level Transfer 30
1 April ended 30 30 September the period the period Investments Investments 3 out Level 3 September
2024 September 2024 ended ended 30 held at 30 held at 30 2024
2024 30 September September September
September 2024 2024 2024
2024
£ £ £ £ £ £ £ £ £ £
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
RMBS 183,915,529 20,895,694 (26,314,022) 13,300,389 (62,862,595) 72,459,600 (13,734,677) - - 187,659,918
183,915,529 20,895,694 (26,314,022) 13,300,389 (62,862,595) 72,459,600 (13,734,677) - - 187,659,918
Realised Realised Unrealised Unrealised
Total gains on losses on gains for losses for
Opening purchases Total sales Level 3 Level 3 the year the year for Transfer Closing
balance at during the during the Investments Investments for Level 3 Level 3 into Level Transfer balance at
1 April year ended year ended held during held during Investments Investments 3 out Level 3 31 March
2023 31 March 31 March 2024 the year the year held at 31 held at 31 2024
2024 ended 31 ended 31 March 2024 March 2024
March 2024 March 2024
£ £ £ £ £ £ £ £ £ £
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
RMBS 207,207,308 68,388,091 (111,175,331) 2,023,664 (15,796,291) 36,159,879 (2,891,791) - - 183,915,529
207,207,308 68,388,091 (111,175,331) 2,023,664 (15,796,291) 36,159,879 (2,891,791) - - 183,915,529
All other financial assets and liabilities are carried at amortised cost. Their carrying values are a reasonable approximation of fair value.
19. 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.
From
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
The Board expects that dividends will constitute the principal element of the return to the holders of Ordinary Shares.
Under The Companies (
The Company declared the following dividends during the period ended
Dividend
Period to rate per Net dividend Ex-dividend Record date Pay date
Ordinary payable (£) date
Share (£)
31 March 0.0396 29,614,332 18 April 19 April 2024 3 May 2024
2024 2024
30 June 0.0200 14,956,733 18 July 2024 19 July 2024 2 August 2024
2024*
44,571,065
30 September 0.0200 14,956,733 17 October 18 October 1 November
2024* 2024 2024 2024
*These dividends were declared in respect of distributable profit for the period ended
20.
In the opinion of the Directors on the basis of shareholdings advised to them, the Company has no ultimate controlling party.
21. Significant Events during the Period
Events arising in
In early
During the period, asset managers within the
22. Subsequent Events
These Unaudited Condensed Interim Financial Statements were approved for issuance by the Board on
On
As at
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 below are unaudited and outside the scope of IFRS.
Discount/Premium
If the share price of an investment company is lower than the NAV per Ordinary 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 Ordinary Share and is usually expressed as a percentage of the NAV per Ordinary Share. If the share price is higher than the NAV per Ordinary Share, the shares are said to be trading at a premium.
30.09.2024 31.03.2024
pence pence
Share price 105.60 104.80
NAV per Ordinary Share (a) 110.50 108.79
Discount to NAV (b) (4.90) (3.99)
Discount as a percentage (b/a) (4.43%) (3.67%)
Average Discount/Premium
The discount or premium is calculated as described above at the close of business on every Friday that is also a business day, as well as the last business day of every month, and an average taken for the year.
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. The fixed interim dividend is
Dividend Yield
Dividend yield is the percentage of dividends declared in respect of the period, divided by the initial share issue price of
Net Asset Value (“NAV”)
NAV is the net assets attributable to Shareholders. NAV is calculated using the accounting standards specified 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 £826,361,916 (
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 NAV Return per Ordinary Share
Total NAV return per Ordinary Share is calculated by adding the increase or decrease in NAV per Ordinary Share to the dividends paid per Ordinary Share and dividing it by the NAV per Ordinary Share at the start of the period/year.
30.09.2024 31.03.2024
pence pence
Opening NAV per share (a) 108.79 100.97
Closing NAV per share 110.50 108.79
Increase in NAV per share (b) 1.71 7.82
Dividends paid per Ordinary Share (c) 5.96 10.46
Total NAV return ((b+c)/a) 7.05% 18.10%
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 year, divided by the closing book cost for the year, stated as a percentage.
30.09.2024 31.03.2024
£ £
Interest income earned 39,806,456 74,803,793
Net gains on investments 5,636,331 53,903,533
Unrealised foreign exchange losses on investments (18,217,196) (6,323,259)
Total portfolio income (a) 63,659,983 135,030,585
Closing portfolio book cost (b) 760,860,425 815,142,981
Portfolio performance (a/b) 8.37% 16.57%
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.
30.09.2024 31.03.2024
£ £
Amounts payable under repurchase agreements (a) 14,002,088 14,090,507
Investments at fair value through profit or loss (b) 822,676,708 813,356,415
Repurchase agreement borrowing (a/b) 1.70% 1.73%
CORPORATE INFORMATION
Directors Bronwyn Curtis (Chair)John de Garis UK Legal Advisers to the CompanyJoanne Fintzen (Senior IndependentHogan Lovells International LLP Director) Atlantic HousePaul Le Page Holborn Viaduct John Le Poidevin London , EC1A 2FG Registered OfficeEversheds Sutherland (International) LLP PO Box 2551 Wood Street Trafalgar CourtLondon , EC2V 7WS Les BanquesSt Peter Port Guernsey, GY1 3QLAlternative Investment Fund ManagerAdministrator and Company Secretary (“AIFM”)Northern Trust International Fund Effective21 June 2024 AdministrationWaystone Management Company (IE)Services (Guernsey) Limited Limited PO Box 25535 Shelbourne Road Trafalgar Court Ballsbridge Les BanquesDublin St Peter Port IrelandGuernsey , GY1 3QL Up until21 June 2024 Financial Adviser and Corporate BrokerApex Fundrock Ltd Deutsche Numis Hamilton Centre45 Gresham Street Rodney Way London , EC2V 7BFChelmsford , CM1 3BY Independent Auditor Portfolio ManagerKPMG Channel Islands Limited TwentyFour Asset Management LLP Glategny Court 8th Floor,The Monument Building Glategny Esplanade11 Monument Street St Peter Port London, EC3R 8AFGuernsey , GY1 1WR Custodian, Principal Banker and Depositary Receiving AgentNorthern Trust (Guernsey) Limited Computershare Investor Services PLC PO Box 71 The Pavilions Trafalgar CourtBridgwater Road Les BanquesBristol , BS13 8AESt Peter Port Guernsey, GY1 3DA Registrar Guernsey Legal Adviser to theCompany Computershare Investor Services Carey Olsen (Guernsey ) LimitedCarey House 1st Floor Les BanquesTudor House St Peter Port Le BordageGuernsey , GY1 4BZSt Peter Port Guernsey , GY1 1DB
