TwentyFour Income Fund Limited
Interim results for the six-months ended 30 September 2024
TwentyFour Income Fund Limited ("TFIF" or "the Company"), the FTSE 250-listed
investment Company that invests in less liquid asset-backed securities ("ABS")
in the UK and Europe , is pleased to announce its Interim Results for the six
-months ended 30 September 2024.
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 8 pence / share per annum, driven by strong performance of the portfolio
during the period, returning 8.4%, and supported by strong fundamentals across
the ABS sector. We are delighted this performance was officially recognised at
the recent Alternative Credit Investor awards, where TFIF won the award for
"Fund of the year (sub $1bn )".
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."
Aza Teeuwen, Portfolio Manager, TFIF said: "A buoyant first half produced
positive investment opportunities across the ABS sector, where CLOs were the
main beneficiary, but with strong performance across the board, including SRT
transactions and mezzanine and junior residential mortgage-backed securities
("RMBS").
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:
TwentyFour Income Fund LimitedTel: +44 (0)20 7260 1000
Deutsche NumisTel: +44 (0)20 7015 8900
Hugh Jonathan / Matt Goss
JPES PartnersTel: +44 (0)20 7520 7620
Miles Donohoe / Charlotte Walsh
TWENTYFOUR INCOME FUND LIMITED
INTERIM MANAGEMENT REPORT AND UNAUDITED CONDENSED
INTERIM FINANCIAL STATEMENTS
For the period from 1 April 2024 to 30 September 2024
LEI: 549300CCEV00IH2SU369
(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)
The Company has today, in accordance with DTR 6.3.5, released its Interim
Management Report and Unaudited Condensed Financial Statements for the period
ended 30 September 2024. The report will shortly be available via the Company's
Portfolio Manager's website
https://www.twentyfouram.com/view/GG00B90J5Z95/twentyfour-income-fund for
professional/institutional investors and twentyfourincomefund.com for retail
investors, and will shortly be available for inspection online at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
SUMMARY INFORMATION
The Company
TwentyFour Income Fund Limited (the "Company") is a closed-ended investment
company whose shares("Ordinary Shares", being the sole share class) are listed
on the Official List of the UK Listing Authority. The Company was incorporated
in Guernsey on 11 January 2013. The Company has been included in the London
Stock Exchange's FTSE 250 Index since 16 September 2022.
Investment Objective and Investment Policy
The Company's investment objective is to generate attractive risk adjusted
returns principally through income distributions. The Company's investment
policy is to invest in a diversified portfolio ("Portfolio") of predominantly UK
and European Asset-Backed Securities ("ABS"). The Company maintains a Portfolio
largely diversified by the issuer, it being anticipated that the Portfolio will
comprise at least 50 ABS at all times.
Target Returns*
The Company has a target annual net total NAV return of between 6% and 9% per
annum, which, since 31 March 2023, has been an annual target each financial year
of 8% of the Issue Price (the equivalent of 8 pence per year, per Ordinary
Share). Total NAV return per Ordinary Share is calculated by adding the increase
or decrease in NAV per Ordinary Share to the total dividends paid per Ordinary
Share during the period/year and dividing by the NAV per Ordinary Share at the
start of the period/year.
Ongoing Charges
Ongoing charges for the period ended 30 September 2024 have been calculated in
accordance with the Association of Investment Companies (the "AIC") recommended
methodology. The ongoing charges for the period ended 30 September 2024 were
0.85% (30 September 2023: 0.99%).
Discount
As at 15 November 2024, the discount to NAV had moved to 4.07%. The estimated
NAV per Ordinary Share and mid-market share price stood at 110.08p and 105.60p,
respectively.
Published NAV
Northern Trust International Fund Administration Services (Guernsey ) Limited
(the "Administrator") is responsible for calculating the NAV per Ordinary Share
of the Company. The unaudited NAV per Ordinary Share will be calculated as at
the close of business on the last business day of every week and the last
business day of every month by the Administrator and will be announced by a
Regulatory News Service the following business day. The basis for determining
the Net Asset Value per Ordinary Share can be found in note 5.
* 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 at 30 September 2024 As at 31 March 2024
110.50p 108.79p
Share price
As at 30 September 2024 As at 31 March 2024
105.60p 104.80p
Total net assets
As at 30 September 2024 As at 31 March 2024
£826.36 million £813.54 million
Total NAV return per
Ordinary Share
For the six-month period For the year ended 31 March 2024
ended 30 September 2024
7.05% 18.10%
Dividends declared per
Ordinary Share
For the six-month period For the year ended 31 March 2024
ended 30 September 2024
4.00p 9.96p
Dividends paid per
Ordinary Share
For the six-month period For the year ended 31 March 2024
ended 30 September 2024
5.96p 10.46p
Ordinary Shares in issue
As at 30 September 2024 As at 31 March 2024
747.84 million 747.84 million
Portfolio performance
For the six-month period For the year ended 31 March 2024
ended 30 September 2024
8.37% 16.57%
Repurchase agreement
borrowing
As at 30 September 2024 As at 31 March 2024
1.70% 1.73%
Number of positions in
the portfolio
As at 30 September 2024 As at 31 March 2024
213 204
Average discount
For the six-month period For the year ended 31 March 2024
ended 30 September 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 1 April 2024 to 30 September 2024
Bronwyn Curtis OBE
In my capacity as Chair of the Board of Directors (the "Board") of TwentyFour
Income Fund Limited, I am pleased to present my report on the Company's progress
for the six-month period ended 30 September 2024 (the "reporting period").
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 31 March 2024. The Company has subsequently
maintained its dividend policy, declaring another two dividends of 2p per
Ordinary Share with respect of the current reporting period. The strategy of
investing in higher yielding floating rate ABS in a higher interest rate
environment has enabled the Company to deliver these attractive dividends, as
substantially all excess investment income is paid out each year.
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 September 2024.
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 $1bn )".
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 8 pence per year. The fourth quarter dividend
is used to distribute residual income (if any), generated in the year. Dividends
paid by the Company in the reporting period totalled 5.96p per Ordinary Share in
line with expectations. The Company has successfully met and exceeded its annual
target dividend every year since Initial Public Offering.
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 9am on 12
September 2024 at the offices of Northern Trust International Fund
Administration Services (Guernsey ) Limited, Trafalgar Court, Les Banques, St
Peter Port, Guernsey , Channel Islands , with all resolutions duly passed.
Alternative Investment Fund Manager ("AIFM") Appointment
On 21 June 2024, after a thorough tender process, the Company appointed Waystone
Management Company IE Limited ("Waystone") as its new AIFM. The Board, along
with the Portfolio Manager, look forward to working with Waystone in its
capacity as AIFM.
The Board would like to thank the team at Apex FundRock Limited for their work
as AIFM since the Company's inception.
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 TwentyFour Asset Management LLP (the "Portfolio
Manager") with a larger pool of loans in which to invest and driving an
improvement in the average asset quality.
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 Residential Mortgage
-Backed Securities ("RMBS") have also performed well.
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 UK government setting out the intention to exempt closed
-ended UK -listed investment funds from the requirements of the current PRIIPs
Regulation and parts of Articles 50 and 51 of the MiFID Org Regulation, with
immediate effect. Since January 2018, PRIIPs and MiFID have required investment
companies to report costs in the same format as unlisted open-ended funds, which
has led to an element of double counting of costs for investment companies.
Whilst the industry's application of the decision is still to play out, the
Board joins the rest of the sector in welcoming the news as positive in
providing greater clarity around actual underlying costs for investors.
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 Bank of England ("BoE") has begun its rate cutting cycle, and with the
Company being fully invested in floating rate securities, the Board recognises
the impact this has on future income.
However, with long-term neutral rates expected to be around 3.5-3.75% in the UK ,
the Board is confident in the Company's ability to continue to deliver on the
current annual target dividend of 8 pence per share. In what looks likely to be
a prolonged economic cycle, the Board believes spreads could tighten further as
falling rates push investors to search for yield.
Bronwyn Curtis OBE
Chair
19 November 2024
PORTFOLIO MANAGER'S REPORT
for the period from 1 April 2024 to 30 September 2024
TwentyFour Asset Management LLP
TwentyFour Asset Management LLP, in our capacity as Portfolio Manager to the
Company, are pleased to present our report on the Company's progress for the six
-month period ended 30 September 2024.
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 UK and Eurozone showing growth of 2.7%
and 2.9% respectively in the 12 months to 30 June 2024 (non-seasonally
-adjusted). Mortgage rates fell across the period, with demand increasing to
reflect growing consumer confidence, such that mortgage borrowing in the UK sits
at a two-year high. Mortgage affordability remains more in focus in the UK due
to the prevalence of shorter term fixed contracts in contrast to the rest of
Europe .
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. The Fed also indicated it
would remain agile on the pace of future rate cuts to ensure the path to
sustainable inflation is maintained.
From the European Central Bank ("ECB") and BoE, we saw 50bps and 25bps cuts
respectively over the period. The ECB has acted in line with expectations,
though persistently weak economic data in core economies such as Germany and
France , particularly concerning manufacturing, led markets to price in a further
25bps cut in October. The BoE has been the most cautious of the trio on rate
cuts, supported by a resilient labour market and stronger economic activity data
and, with core inflation failing to return to target until after the period end,
we may expect higher for longer rates in the UK .
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 Europe . These two factors have supported healthy
savings rates; saving rates in the UK and Europe remain above pre-Covid
averages, supporting consumer balance sheets.
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 ECB and BoE, the running income on spread products
remains attractive and we anticipate higher neutral rates will support potential
returns going forward. We have seen collateral performance holding up well, with
European consumers demonstrating significant resilience in the face of the cost
-of-living pressures. Spread performance can be attributed significantly to the
supply-demand technical apparent in European ABS, giving way to another period
of strong performance for the Company's assets.
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 UK
RMBS positions where we felt spread tightening had been overstated. Proceeds
were reinvested in shorter European consumer ABS transactions and CLOs, where
spreads remained attractive. We have continued to derive profits, through
positions in Commercial Mortgage-Backed Securities ("CMBS"), where the pick-up
to more liquid segments of the market remains minimal. The leverage in the
Company currently remains unchanged, but we remain flexible should opportunities
arise for the Company.
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 Middle East and Ukraine , particularly with
secondary consequences for oil prices, as well as uncertainty surrounding the US
presidential election. For this reason, we favour secured collateral (mortgages,
senior secured corporate loans, auto loans, etc.) from Western European
countries, where governments have a proven track record of supporting consumers
and corporates during recessions.
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
Task Force on Climate-Related Financial Disclosures ("TCFD") being the main
drivers in improved disclosures, as investors require data such as emissions or
ESG indicators to comply with reporting requirements. We have continued to
engage with RMBS and ABS issuers on Scope 3 financed emissions and alignment
with the UN Sustainable Development Goals ("SDGs"), prioritising SDG 10 (Reduced
Inequalities) and SDG 11 (Sustainable Cities and Communities). Investor demand
for ESG integration, in respect of CLOs, has increased significantly, resulting
in most CLO managers increasing loan exclusions at portfolio level and within
disclosures. We have focused particularly on new CLO deals for the Company,
managed by CLO managers with strong ESG credentials, with positive and negative
screening employed.
Outlook
Political change has been a strong theme during the period, with elections in
the UK , France , India and a number of other major economies, with the US going
to the polls in November. In the UK , the Labour Party gained a landslide victory
to return to power after 14 years of Conservative rule, whilst in Europe , we
have generally seen a rise in support for parties on the far-right of politics,
followed by a resounding victory for Trump in the US. Following the news of
Trump's return to the White House, the rates market reacted sharply with 10 year
US Treasuries reaching 4.45% as the expectation of future increases in spending
and borrowings heightened. Both the credit and equity markets responded
positively, viewing Trump victory as good for medium-term growth. European
credit spreads also tightened, with Crossover (the benchmark for European High
Yield bonds) tightening by almost 20bps to circa 290bps in the days after the
election, despite the fear of increased tariffs leading to a tougher competitive
landscape. Whilst the exact impact of a new Trump administration has yet to be
seen, risk sentiment looks to be strong and we expect this to have a positive
impact on the supply-demand technical in the medium term. The current rate
market expectation shows significant diverging paths with both the Fed and BoE
expected to remain higher for longer, and the ECB rate to decrease to under 2%
by the end of 2025. The slowdown of the German economy and the struggling
manufacturing and automotive industries, as well as the impact of the UK budget,
are likely bigger risks to European risk sentiment than the outcome of the US
elections.
The BoE cut interest rates by a further 0.25% in November 2024 to 4.75%.
Governor Andrew Bailey confirmed investors' views that there is a risk that the
recent UK budget is potentially inflationary and hinted to a less certain future
path of rate cutting. The Gilt market was quick to react and the general
expectation in the rates market is that the BoE will cut interest rates by a
further 0.75% in 2025 and the (admittedly very volatile) 3 year expectation is
that base rates will remain around 4%. While this is a positive development for
floating rate bond investors, there could be an impact on UK consumers as the
cost of borrowing will not drop as much as was anticipated prior to the budget.
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.
TwentyFour Asset Management LLP
19 November 2024
TOP TWENTY HOLDINGS
as at 30 September 2024
Security Nominal/ Asset Fair Value Percentage
-Backed
Shares £ of Net Asset
Security
Sector* Value
UK MORTGAGES CORP FDG DAC 28,000,000 RMBS 31,660,748 3.83
KPF1 A 0.0% 31/07/2070
UK MORTGAGES CORPORATE F 22,428,058 RMBS 20,954,400 2.54
'KPF4 A' 0.00% 30/11/2070
LLOYDS BANK PLC FRN 17,250,000 SRT 17,331,938 2.10
19/11/2029
UK MORTGAGES CORP FDG DAC 12,105,859 RMBS 16,555,004 2.00
KPF2 A 0.0% 31/07/2070
SYON SECURITIES 19-1 B 15,597,926 RMBS 15,755,106 1.91
CLO FLT 19/07/2026
TULPENHUIS 0.0% 19,326,989 RMBS 15,698,634 1.90
18/04/2051
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 16,500,000 RMBS 14,364,040 1.74
'5 B' 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 14,000,000 RMBS 14,000,000 1.69
FRN 0.00% 12/04/2067
DEUTSCHE BANK AG/CRAFT 18,000,000 SRT 13,396,153 1.62
202 '1X CLN' FRN
21/11/2033
VSK HOLDINGS LTD VAR 2,058,000 RMBS 13,066,199 1.58
31/7/2061
RRME 8X D '8X D' FRN 13,000,000 CLO 10,537,842 1.28
15/10/2036
VSK HLDGS. '1 C4-1' VAR 1,587,000 RMBS 9,812,410 1.19
01/10/2058
SYON SECS. 2020-2 DAC '2 9,249,987 RMBS 9,706,307 1.16
B' FRN 17/12/2027
UK MORTGAGES CORP FDG DAC 5,641,912 RMBS 8,324,845 1.01
CHL1 A 0.0% 31/07/2070
HIGHWAYS 2021 PLC '1X D' 8,000,000 CMBS 7,825,516 0.95
FRN 18/11/2026
SANTANDER CONSUMER 69,931,060 SRT 7,805,199 0.94
FINANCE SA 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 30 September 2024 can be obtained from
the Administrator on request.
* Definition of Terms
`CLO' - Collateralised Loan Obligations
`CMBS' - Commercial Mortgage-Backed Securities
`RMBS'- Residential Mortgage-Backed Securities
`SRT' - Significant Risk Transfer
BOARD MEMBERS
Biographical details of the Directors are as follows:
Bronwyn Curtis OBE - (Non-Executive Director and Chair)
Ms Curtis is a resident of the United Kingdom , an experienced Chair, Non
-Executive Director and Senior Executive across banking, media, commodities and
consulting, with global or European wide leadership responsibilities for 20
years at HSBC Bank plc, Bloomberg LP, Nomura International and Deutsche Bank
Group. She is currently Non-Executive Director at Pershing Square Holdings, BH
Macro Limited and a number of private companies. She is also a regular
commentator in the media on markets and economics. Ms Curtis was appointed to
the Board on 12 July 2022 and was appointed Chair on 14 October 2022.
Joanne Fintzen - (Non-Executive Director and Senior Independent Director)
Ms Fintzen is a resident of the United Kingdom , with extensive experience of the
finance sector and the investment industry. She trained as a Solicitor with
Clifford Chance and worked in the Banking, Fixed Income and Securitisation
areas. She joined Citigroup in 1999 providing legal coverage to an asset
management division. She was subsequently appointed as European General Counsel
for Citigroup Alternative Investments where she was responsible for the
provision of legal and structuring support for vehicles which invested $100bn in
Asset-Backed Securities as well as hedge funds investing in various different
strategies in addition to private equity and venture capital funds. Ms Fintzen
is currently Non-Executive Director of JPMorgan Claverhouse Investment Trust
plc. Ms Fintzen was appointed to the Board on 7 January 2019 and was appointed
Senior Independent Director on 14 October 2022.
John de Garis - (Non-Executive Director and Chair of the Nomination and
Remuneration Committee)
Mr de Garis is a resident of Guernsey with over 30 years of experience in
investment management. He is Managing Director and Chief Investment Officer of
Rocq Capital founded in July 2016 following the management buyout of Edmond de
Rothschild (C.I.) Ltd. He joined Edmond de Rothschild in 2008 as Chief
Investment Officer following 17 years at Credit Suisse Asset Management in
London , where his last role was Head of European and Sterling Fixed Income. He
began his career in the City of London in 1987 at Provident Mutual before
joining MAP Fund Managers where he gained experience managing passive equity
portfolios. He is a Non-Executive Director of VinaCapital Investment Management
Limited in Guernsey . Mr de Garis is a Chartered Fellow of the Chartered
Institute for Securities and Investment and holds the Certificate in Private
Client Investment Advice and Management. Mr de Garis was appointed to the Board
on 9 July 2021.
Paul Le Page (Non-Executive Director and Chair of the Management Engagement
Committee)
Paul Le Page is a resident of Guernsey and has over 24 years' experience in
investment and risk management. He was formerly an Executive Director and Senior
Portfolio Manager of FRM Investment Management Limited, a subsidiary of the UK's
largest listed alternatives manager, Man Group. In this capacity, he managed
alternative funds and institutional client portfolios, worth in excess of $5bn
and was a director of a number of group funds and structures. Prior to joining
FRM, he was employed by Collins Stewart Asset Management (now Canaccord Genuity)
where he was Head of Fund Research responsible for reviewing both traditional
and alternative fund managers and managing the firm's alternative fund
portfolios. He joined Collins Stewart in January 1999 where he completed his MBA
in July 1999. Mr Le Page is currently a Non-Executive Director of NextEnergy
Solar Fund Limited, RTW Biotech Opportunities Limited and Sequoia Economic
Infrastructure Income Fund Limited. Mr Le Page was appointed to the Board on 16
March 2023.
John Le Poidevin - (Non-Executive Director and Chair of the Audit Committee)
Mr Le Poidevin is a resident of Guernsey and a Fellow of the Institute of
Chartered Accountants in England and Wales . He was formerly an audit partner at
BDO LLP in London where he developed an extensive breadth of experience and
knowledge across a broad range of business sectors in the UK , European and
global markets during over twenty years in practice, including in corporate
governance, audit, risk management and financial reporting. Since 2013, he has
acted as a non-executive director, including as audit committee chair, on the
boards of several listed and private groups. Mr Le Poidevin is currently a Non
-Executive Director of International Public Partnerships Limited, BH Macro
Limited, Super Group (SGHC) Limited, and a number of other private companies and
investment funds. Mr Le Poidevin was appointed to the Board on 9 July 2021 and
was appointed Chair of the Audit Committee on 14 October 2022.
DISCLOSURE OF DIRECTORSHIPS IN PUBLIC COMPANIES LISTED ON RECOGNISED STOCK
EXCHANGES
Company Name Stock Exchange
Bronwyn Curtis
BH Macro London
Limited
Pershing London and Euronext Amsterdam
Square
Holdings
Limited
Joanne Fintzen
JPMorgan London
Claverhouse
Investment
Trust plc
Paul Le Page
NextEnergy London
Solar Fund
Limited
RTW Biotech London
Opportunities
Limited
Sequoia London
Economic
Infrastructure
Income Fund
Limited
John Le
Poidevin
BH Macro London
Limited
International London
Public
Partnerships
Limited
Super Group New York
(SGHC) Limited
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 UK and Europe . Risk premiums demanded by the
market could rise as risk sentiment deteriorates and wider spreads could result
in lower cash prices.
· 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 UK and the Netherlands
where the Company originates and purchases securitisations, respectively. Under
EU and UK laws, originators of securitisations are required to retain 5% of the
value of their securitisation which creates a retention risk. As equity tranches
bear first loss in the event of a default, the Company may also diversify its
retention risk by holding more senior tranches in the securitisations that it
issues, a process known as a vertical tranche retention. Realised default rates
for RMBS securities have historically been very low since the global financial
crisis.
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 31 March 2024 and is therefore
satisfied that income is appropriately stated in all material aspects in the
Condensed Interim Financial Statements.
· 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 Ukraine and
the Middle East . The Company does not hold any assets in Ukraine , Belarus ,
Russia , or the Middle East , however, the situation in the impacted regions and
wider geopolitical consequences remain volatile and the Board and Portfolio
Manager continue to monitor the situation carefully and will take whatever steps
are necessary and in the best interests of the Company's Shareholders. The
Company's key suppliers do not have operations in Ukraine , Belarus , Russia or
the Middle East and there is not expected to be any direct adverse impact from
military operations on the activity (including processes and procedures) of the
Company.
· Climate Change Risk
Climate change risk is the risk of the Company not responding sufficiently to
pressure from stakeholders to assess and disclose the impact of climate change
on investment portfolios and address concerns on what impact the Company and its
portfolio has on the environment.
Regular contact is maintained by the Portfolio Manager and 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. CO2 emissions are
tracked at issuer and deal level where information is available. Given the
bankruptcy-remoteness feature of securitisation transactions, the climate risks
which the 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 31 March 2024.
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 1 April 2024 to 30
September 2024 and their impact on the Unaudited Condensed Interim Financial
Statements; and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place during the period from 1 April 2024 to 30
September 2024 and that have materially affected the financial position or
performance of the Company during that period as included in note 14.
By order of the Board
Bronwyn CurtisJohn Le Poidevin
DirectorDirector
19 November 2024
The directors are responsible for the maintenance and integrity of the corporate
and financial information included on the Company's website, and for the
preparation and dissemination of financial statements. Legislation in Guernsey
governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
INDEPENDENT REVIEW REPORT TO TWENTYFOUR INCOME FUND LIMITED
Conclusion
We have been engaged by TwentyFour Income Fund Limited (the "Company") to review
the condensed set offinancial statements in the half-yearly financial report for
the six months ended 30 September 2024 of the Company, which comprises the
condensed statement of financial position, the condensed statement of
comprehensive income, the condensed statement of changes in equity, the
condensed statement of cash flows and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to believe
that the condensed set offinancial statements in the half-yearly financial
report for the six months ended 30 September 2024 is not prepared, in all
material respects, in accordance with IAS 34 Interim Financial Reporting and the
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial
Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK ) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK ) 2410") issued by the Financial
Reporting Council for use in the UK.A review of interim financial information
consists of making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures.We read
the other information contained in the half-yearly financial report and consider
whether it contains any apparent misstatements or material inconsistencies with
the information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK ) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed in
an audit as described in the Scope of review section of this report, nothing has
come to our attention to suggest that the directors have inappropriately adopted
the going concern basis of accounting or that the directors have identified
material uncertainties relating to going concern that are not appropriately
disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK ) 2410. However future events or conditions may cause the Company to
cease to continue as a going concern, and the above conclusions are not a
guarantee that the Company will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the interim
financial report in accordance with the DTR of the UK FCA.
As disclosed in note 2, the annualfinancial statements of theCompany are
prepared in accordance with International Financial Reporting Standards.The
directors are responsible for preparing the condensed set offinancial statements
included in the half-yearly financial report in accordance with IAS 34 Interim
Financial Reporting 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 thecondensed set
of financial statements in the half-yearly financial report based on our
review.Our conclusion, including our conclusions relating to going concern, are
based on procedures that are less extensive than audit procedures, as described
in the scope of review paragraph of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement letter to assist the Company in meeting the requirements of the DTR
of the UK FCA. Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose.To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company for our review work, for this
report, or for the conclusions we have reached.
Rachid Frihmat
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants
Guernsey
19 November 2024
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the period from 1 April 2024 to 30 September 2024
Notes For the For the
period period from
from 01.04.23 to
01.04.24 to
30.09.23
30.09.24
£
£
(Unaudited) (Unaudited)
Income
Interest income on 39,806,456 39,617,803
financial assets
at fair value
through profit or
loss
Net foreign 7 15,825,992 6,714,557
currency gains
Net gains on 5,636,331 18,179,471
financial assets
at
fair value through
profit or loss
Total income 61,268,779 64,511,831
Operating expenses
Portfolio 14 (2,631,614) (2,785,136)
management fees
Directors' fees 14 (142,500) (136,245)
Administration and 15 (193,658) (175,947)
secretarial fees
Audit fees (80,784) (78,000)
Custody fees 15 (41,408) (37,139)
Broker fees (25,312) (24,939)
AIFM management 15 (120,349) (126,343)
fees
Depositary fees 15 (55,582) (50,155)
Legal and (80,108) (28,635)
professional fees
Listing fees (12,161) (12,500)
Registration fees (24,314) (44,030)
Other expenses (65,027) 56,041
Total operating (3,472,817) (3,443,028)
expenses
Total operating 57,795,962 61,068,803
profit
Finance costs on 11 (402,967) (383,505)
repurchase
agreements
Total 57,392,995 60,685,298
comprehensive
income for the
period*
Earnings per 3 0.0767 0.0817
Ordinary Share
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 POSITION
as at 30 September 2024
Notes 30.09.2024 31.03.2024
£ £
(Unaudited) (Audited)
Assets 8 822,676,708 813,356,415
Financial assets at fair
value through profit or loss
- Investments
- Derivative assets: Forward 17 7,673,202 1,958,943
currency contracts
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 17 287,672 20,877
Financial liabilities at fair
value through profit or loss
- Derivative liabilities:
Forward currency contracts
Amounts payable under 11 14,002,088 14,090,507
repurchase agreements
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 5 110.50 108.79
Share (pence)
The Unaudited Condensed Interim Financial Statements were approved by the Board
of Directors on 19 November 2024 and signed on its behalf by:
John Le PoidevinPaul Le Page
DirectorDirector
The accompanying notes form an integral part of these Unaudited Condensed
Interim Financial Statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the period from 1 April 2024 to 30 September 2024
Notes Share capital Retained Total
account earnings £
£ £ (Unaudited)
(Unaudited) (Unaudited)
Balances at 1 April 780,234,543 33,305,443 813,539,986
2024
Dividends paid 19 - (44,571,065) (44,571,065)
Total comprehensive - 57,392,995 57,392,995
income for the
period
Balances at 30 780,234,543 46,127,373 826,361,916
September 2024
Share capital Accumulated Total
account losses
£ £ £
(Unaudited) (Unaudited) (Unaudited)
Balances at 1 April 750,558,986 (25,576,224) 724,982,762
2023
Issue of Ordinary 30,244,890 - 30,244,890
Shares
Share issue costs (347,817) - (347,817)
Dividends paid - (47,440,548) (47,440,548)
Income equalisation 4 (242,649) 242,649 -
on new issues
Total comprehensive - 60,685,298 60,685,298
income for the
period
Balances at 30 780,213,410 (12,088,825) 768,124,585
September 2023
The accompanying notes form an integral part of these Unaudited Condensed
Interim Financial Statements.
CONDENSED STATEMENT OF CASH FLOWS
for the period from 1 April 2024 to 30 September 2024
For the For the
period period
Notes from 01.04.24 from 01.04.23
to 30.09.24 to 30.09.23
£ £
(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 (39,806,456) (39,617,803)
financial assets at
fair
value through profit
or loss
Net gains on 8 (5,636,331) (18,179,471)
investments
Amortisation (3,315,054) (7,931,404)
adjustment under
effective
interest rate method
Unrealised 7 (5,447,465) 6,014,551
(gains)/losses on
forward currency
contracts
Exchange losses on 39,653 2,812
cash 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 (120,332,686) (141,096,823)
investments
Sale of 130,134,340 151,062,974
investments/principal
repayments
Investment income 38,372,304 37,793,736
received
Bank interest income 473,291 423,134
received
Net cash generated 52,506,109 49,630,384
from 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 (76,439) (43,869,248)
payable under
repurchase
agreements, excluding
finance cost
liabilities
Net cash used in (45,062,451) (61,838,587)
financing activities
Increase/(decrease) in 7,443,658 (12,208,203)
cash and cash
equivalents
Cash and cash 13,142,803 27,235,318
equivalents at
beginning of the
period
Exchange losses on (39,653) (2,812)
cash and cash
equivalents
Cash and cash 20,546,808 15,024,303
equivalents at end of
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 April 2024 to 30 September 2024
1.General Information
TwentyFour Income Fund Limited (the "Company") was incorporated with limited
liability in Guernsey , as a closed-ended investment company on 11 January 2013.
The Company's shares ("Ordinary Shares", being the sole share class) were listed
on the Official List of the UK Listing Authority and admitted to trading on the
Main Market of the London Stock Exchange on 6 March 2013.
Since 16 September 2022, the Company has been included on the London Stock
Exchange's FTSE 250 Index.
The Company's investment objective and policy is set out in the Summary
Information.
The Portfolio Manager of the Company is TwentyFour Asset Management LLP (the
"Portfolio Manager").
2.Material Accounting Policies
a) Statement of Compliance
The Unaudited Condensed Interim Financial Statements for the period 1 April 2024
to 30 September 2024 have been prepared on a going concern basis in accordance
with IAS 34 "Interim Financial Reporting", the Disclosure Guidance and
Transparency Rules Sourcebook of the United Kingdom's Financial Conduct
Authority ("FCA") and applicable legal and regulatory requirements.
The Unaudited Condensed Interim Financial Statements should be read in
conjunction with the Audited Financial Statements for the year ended 31 March
2024, which were prepared in accordance with International Financial Reporting
Standards ("IFRS") and were in compliance with The Companies (Guernsey ) Law,
2008 and which received an unqualified Auditor's report.
b) Presentation of Information
In the current financial period, there have been no changes to the accounting
policies from those applied in the most recent audited annual financial
statements.
c) Significant Judgements and Estimates
There have been no changes to the significant accounting judgements, estimates
and assumptions from those applied in the most recent audited annual financial
statements.
d) Standards, Amendments and Interpretations Effective during the Period
At the reporting date of these Financial Statements, the following standards,
interpretations and amendments, were adopted for the period ended 30 September
2024 and the year ending 31 March 2025:
- 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 30
September 2024 and for the Annual Audited Financial Statements for the year
ending 31 March 2025.
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 1 January 2026); and
- 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 (30 September 2023:
742,733,383) and a net gain of £57,392,995 (30 September 2023: net gain of
£60,685,298).
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 (30 September 2023: £242,649).
5.Net Asset Value per Ordinary Share
The net asset value ("NAV") of each Ordinary Share of £1.11 (31 March 2024:
£1.09) is determined by dividing the value of the net assets of the Company
attributed to the Ordinary Shares of £826,361,915 (31 March 2024: £813,539,986)
by the number of Ordinary Shares in issue at 30 September 2024 of 747,836,661
(31 March 2024: 747,836,661).
6. Taxation
The Company has been granted Exempt Status under the terms of The Income Tax
(Exempt Bodies) (Guernsey ) Ordinance, 1989 to income tax in Guernsey . Its
liability for Guernsey taxation is limited to an annual fee of £1,600 (2023:
£1,200).
7.Net Foreign Currency Gains
For the period For the period
01.04.24 to 01.04.23 to
30.09.24 30.09.23
£ £
(Unaudited) (Unaudited)
Movement on unrealised gain/(loss) 5,447,465 (6,014,551)
on forward currency contracts
Realised gains on foreign currency 10,425,600 12,705,591
contracts
Unrealised foreign currency gain on 87,163 4,063
receivables/payables
Unrealised foreign currency (134,236) 19,454
exchange (loss)/gain on 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 (126,706,554) (269,963,403)
repayment
Amortisation adjustment under 3,315,054 8,874,421
effective interest rate method
Realised gains on sale/principal 18,306,551 3,698,699
repayment
Realised losses on sale/principal (76,273,069) (41,128,677)
repayment
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 18,306,551 3,173,775
repayment
Realised losses on (76,273,069) (43,700,421)
sales/principal repayment
Increase in unrealised gains 65,680,800 10,633,609
(Increase)/decrease in unrealised (2,077,951) 48,072,508
losses
Net gains on financial assets at 5,636,331 18,179,471
fair value 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 30 September 2024.
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 (30
September 2023: £383,505). As at 30 September 2024, finance cost liabilities on
open Repurchase Agreements amounted to £37,305 (31 March 2024: £49,285).
At the end of the period, amounts repayable under open Repurchase Agreements
were £14,002,088 (31 March 2024: £14,090,507). Two securities were designated as
collateral against the Repurchase Agreements (31 March 2024: two securities),
with a total fair value of £17,677,193 (31 March 2024: £17,525,866), all of
which were investment grade residential mortgage backed securities. The total
exposure was -1.69% (31 March 2024: -1.73%) of the Company's NAV. The contracts
were across two counterparties and were all rolling agreements with a maturity
of 3 months.
The changes in amounts payable under Repurchase Agreements are disclosed below:
For the For the year
period
01.04.24 to 01.04.23 to 31.03.24
30.09.24
£ £
(Unaudited) (Audited)
Amounts
payable
under
Repurchase
Agreements
Opening 14,041,222 49,670,365
balance,
excluding
finance
cost
liabilities
Agreements 27,993,829 66,055,670
entered
during the
period/year
Repaid/matur (28,070,268) (101,684,813)
ities
during the
period/year
Closing 13,964,783 14,041,222
balance,
excluding
finance
cost
liabilities
Finance
cost
liabilities
Opening 49,285 157,335
balance
Charged 402,967 755,788
during the
period/year
Repayments (414,947) (863,838)
during the
period/year
Closing 37,305 49,285
balance
12.Share Capital
a) Authorised Share Capital
Unlimited number of Ordinary Shares at no par value.
b) Issued Share Capital
For the period For the year
01.04.24 to 01.04.23 to
30.09.24 31.03.24
£ £
(Unaudited) (Audited)
Ordinary Shares
Share Capital at the 780,234,543 750,558,986
beginning of the
period/year
Issue of Ordinary Shares - 30,244,890
Share issue costs - (347,816)
Income equalisation on - (221,517)
new issues
Total Share Capital at 780,234,543 780,234,543
the end of the
period/year
For the period For the year
01.04.24 to 01.04.23 to
30.09.24 31.03.24
Number of Number of
Ordinary Shares Ordinary Shares
(Unaudited) (Audited)
Ordinary Shares
Shares at the beginning 747,836,661 718,036,661
of the period/year
Issue of Ordinary Shares - 29,800,000
Total Shares in issue at 747,836,661 747,836,661
the end of the
period/year
The Share Capital of the Company consists of an unlimited number of Ordinary
Shares at no par value which, upon issue, the Directors may designate as:
Ordinary Shares; realisation shares, 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 30 September 2024, one share class has been issued, being the Ordinary
Shares of the Company.
No shares were held in Treasury or sold from Treasury during the period ended 30
September 2024 or during the year ended 31 March 2024.
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
October 2022. The next Realisation Opportunity is due to occur at the end of the
next three-year term, at the date of the AGM in September 2025.
The Company has the right to issue and purchase up to 14.99% of the total number
of its own shares at £0.01 each, to be classed as Treasury Shares and may cancel
those Shares or hold any such Shares as Treasury Shares, provided that the
number of 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 (Guernsey ) Law, 2008.
The Company has the right to re-issue Treasury Shares at a later date.
Shares held in Treasury are excluded from calculations when determining earnings
per Ordinary Share or NAV per Ordinary Share, as detailed in notes 3 and 5,
respectively.
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:
- Investments 822,676,708 - 822,676,708
- Derivative 7,673,202 - 7,673,202
assets:
Forward
currency
contracts
Other - 8,578,246 8,578,246
receivables
(excluding
prepayments)
Cash and - 20,546,808 20,546,808
cash
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 287,672 - 287,672
liabilities:
Forward
currency
contracts
Amounts - 14,002,088 14,002,088
payable
under
repurchase
agreements
Amounts due - 17,339,213 17,339,213
to brokers
Other - 1,615,538 1,615,538
payables
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:
- Investments 813,356,415 - 813,356,415
- Derivative 1,958,943 - 1,958,943
assets:
Forward
currency
contracts
Amounts due - 3,427,786 3,427,786
from broker
Other - 7,617,384 7,617,384
receivables
(excluding
prepayments)
Cash and - 13,142,803 13,142,803
cash
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 20,877 - 20,877
liabilities:
Forward
currency
contracts
Amounts - 14,090,507 14,090,507
payable
under
repurchase
agreements
Amounts due - 10,596,437 10,596,437
to brokers
Other - 1,280,159 1,280,159
payables
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 14 October
2022, Shareholders approved the increase of the upper limit of aggregate
director fees from £225,000 to £400,000 per annum.
Following a review of external market data, with effect from 1 April 2024, the
annual fees were increased from £60,000 to £75,000 for the Chair of the Board,
from £50,000 to £60,000 for the Audit Committee Chair, from £42,000 to £50,000
for the Senior Independent Director, the Chair of the Management Engagement
Committee and the Chair of the Nomination and Remuneration Committee, and from
£40,000 to £48,000 for all other Directors.
During the period ended 30 September 2024, directors' fees of £142,500 (30
September 2023: £136,245) were charged to the Company, of which £Nil (31 March
2024: £Nil) remained payable at the end of the period.
14.Related Parties
b) Shares Held by Related Parties
As at 30 September 2024, Directors of the Company held the following shares
beneficially:
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 August 2024, John Le Poidevin purchased 94,679 Ordinary Shares.
² On 5 April 2024, Joanne Fintzen purchased 47,722 Ordinary Shares.
As at 30 September 2024, the Portfolio Manager held 37,660,875 Ordinary Shares
(31 March 2024: 36,406,018 Ordinary Shares), which is 5.04% (31 March 2024:
4.87%) of the Issued Share Capital. Partners and employees of the Portfolio
Manager held 5,585,336 Ordinary Shares (31 March 2024: 8,432,398 Ordinary
Shares), which is 0.75% (31 March 2024: 1.13%) of the Issued Share Capital.
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 (30
September 2023: £2,785,136) of which £1,027,242 (31 March 2024: £835,269) is due
and payable at the period end. The Portfolio Management Agreement dated29 May
2014 remains in force until determined by the Company or the Portfolio Manager
giving the other party not less than twelve months' notice in writing. Under
certain circumstances, the Company or the Portfolio Manager is entitled to
immediately terminate the agreement in writing.
The Portfolio Manager is also entitled to a commission of 0.15% of the aggregate
gross offering proceeds plus any applicable VAT in relation to any issue of new
Shares, following admission, in consideration of marketing services that it
provides to the Company. During the period, the Portfolio Manager received £Nil
(30 September 2023: £45,367) in commission.
15.Material Agreements
a) Alternative Investment Fund Manager
The Company's Alternative Investment Fund Manager (the "AIFM") is Waystone
Management (IE) Limited ("Waystone"), effective 21 June 2024 upon retirement of
the previous AIFM, Apex Fundrock Ltd ("Apex"). In consideration for the services
provided by the AIFM under the AIFM Agreement, up until the end of 20 June 2024,
Apex was entitled to receive from the Company a minimum fee of £20,000 per annum
and fees payable quarterly in arrears at a rate of 0.07% of the NAV of the
Company below £50 million, 0.05% on Net Assets between £50 million and £100
million and 0.03% on Net Assets in excess of £100 million.
Effective 21 June 2024, Waystone is entitled to receive from the Company a
minimum fee of £65,000 and fees payable monthly or quarterly in arrears at a
rate of 0.03% of the Net Assets below £250 million, 0.025% of the Net Assets
between £250 million and £500 million, 0.02% on Net Assets between £500 million
and £1 billion and 0.015% on Net Assets in excess of £1 billion.
During the period ended 30 September 2024, AIFM fees of £120,349 (30 September
2023: £126,343) were charged to the Company, of which £33,065 (31 March 2024:
£66,283) remained payable at the end of the period.
b) Administrator and Secretary
Administration fees are payable to Northern Trust International Fund
Administration Services (Guernsey ) Limited monthly in arrears at a rate of 0.06%
of the NAV of the Company below £100 million, 0.05% on Net Assets between £100
million and £200 million and 0.04% on Net Assets in excess of £200 million as at
the last business day of the month subject to a minimum £75,000 each year. In
addition, an annual fee of £25,000 is charged for corporate governance and
company secretarial services. Total administration and secretarial fees for the
period amounted to £193,658 (30 September 2023: £175,947) of which £285,723 (31
March 2024: £92,065) was due and payable at end of the period.
c) Depositary
Depositary fees are payable to Northern Trust (Guernsey ) Limited, monthly in
arrears, at a rate of 0.0175% of the NAV of the Company up to £100 million,
0.0150% on Net Assets between £100 million and £200 million and 0.0125% on Net
Assets in excess of £200 million as at the last business day of the month
subject to a minimum £25,000 each period. Total depositary fees and charges for
the period amounted to £55,582, (30 September 2023: £50,155) of which £45,792
(31 March 2024: £34,720) was due and payable at the period end.
The Depositary is also entitled to a global custody fee of a minimum of £8,500
per annum plus transaction fees. Total global custody fees and charges for the
period amounted to £41,408 (30 September 2023: £37,139) of which £34,106 (31
March 2024: £25,479) was due and payable at the period end.
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 30 September 2024 and 31 March 2024:
As at 30 Number of Range of Average Carrying % of
September investments Nominal Nominal Value Company's
2024 NAV
(Unaudited) £ million £ million £ million
(Unaudited)
(Unaudited) (Unaudited) (Unaudited)
Asset-Backed 14 5 - 58 24 34 4.1%
Securities*:
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 1 33 33 4 0.5%
Loans
213 823
Number of % of
As at 31 investments Range of Average Carrying Company's
March 2024 Nominal Nominal Value NAV
£ million £ million £ million
(Audited) (Audited) (Audited) (Audited) (Audited)
Asset-Backed 14 7 - 55 22 28 3.4%
Securities*:
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 1 33 33 4 0.5%
Loans
204 813
*Definition of Terms
"CLO" - Collateralised Loan Obligations
"CMBS" - Commercial Mortgage-Backed Securities
"CRE" - Commercial Real Estate
"RMBS" - Residential Mortgage-Backed Securities
"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:
Floating Fixed rate Non-interest
Total
rate
£ bearing
£
£
£
(Unaudited) (Unaudited) (Unaudited)
(Unaudited)
As at 30
September
2024
Financial 822,676,708 - -
822,676,708
assets at
fair
value
through
profit or
loss
Derivative - - 7,673,202
7,673,202
assets
Other - - 8,578,246
8,578,246
receivables
(excluding
prepayments)
Cash and 20,546,808 - -
20,546,808
cash
equivalents
Repurchase - (14,002,088) -
(14,002,088)
agreements
Amounts due - - (17,339,213)
(17,339,213)
to brokers
Other - - (1,615,538)
(1,615,538)
payables
Derivative - - (287,672)
(287,672)
liabilities
Net assets 843,223,516 (14,002,088) (2,990,975)
826,230,453
Floating Fixed rate Non-interest
Total
rate
bearing
£ £ £
£
(Audited) (Audited) (Audited)
(Audited)
As at 31
March 2024
Financial 813,356,415 - -
813,356,415
assets at
fair
value
through
profit or
loss
Derivative - - 1,958,943
1,958,943
assets
Amounts due - - 3,427,786
3,427,786
from broker
Other - - 7,617,384
7,617,384
receivables
(excluding
prepayments)
Cash and 13,142,803 - -
13,142,803
cash
equivalents
Repurchase - (14,090,507) -
(14,090,507)
agreements
Amounts due - - (10,596,437)
(10,596,437)
to brokers
Other - - (1,280,159)
(1,280,159)
payables
Derivative - - (20,877)
(20,877)
liabilities
Net assets 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 (31 March 2024: gain or
loss of £20,662,480).
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.
Contract Outstanding Mark-to-market
Unrealised
values
contracts equivalent
gains/(losse
s)
30.09.2024 30.09.2024 30.09.2024
30.09.2024
(Unaudited) (Unaudited) (Unaudited)
(Unaudited)
Two Danish
Krone
forward
foreign
currency
contracts:
Settlement 81,000,000 kr. £9,181,986 £9,040,634 £141,352
date 2
October
2024
Settlement 81,000,000 kr. £9,049,887 £9,056,550 (£6,663)
date 6
November
2024
Contract
to close
out 2
October
2024
Danish
Krone
foreign (81,000,000) (£9,033,424) (£9,040,634) £7,210
currency kr.
contract
Eight Euro
forward
foreign
currency
contracts
totalling:
Settlement €525,917,428 £444,626,279 £437,581,607
£7,044,672
date 2
October
2024
Contract
to close
out 2
October
2024 Euro
foreign (€523,732,989) (£435,478,744) (£435,764,078) £285,334
currency
contract
Two Euro
forward
foreign
currency
contracts
totalling:
Settlement €527,844,193 £439,533,029 £439,797,081
(£264,052)
date 6
November
2024
Two US
Dollar
forward
foreign
currency
contracts:
Settlement $18,001,273 £13,614,287 £13,420,264 £194,023
date 2
October
2024
Settlement $18,001,273 £13,427,073 £13,420,565 £6,508
date 6
November
2024
Contract
to close
out 2
October
2024 US
Dollar
foreign ($18,001,273 ) (£13,426,773) (£13,420,264) (£6,509)
currency
contract
One Euro
forward
foreign
currency
contract:
Settlement (€2,184,439) (£1,834,485) (£1,817,529)
(£16,956)
date 2
October
2024
Spot £611
contract
receivable
£7,385,53
0
Unrealise
d
gains/(lo
sse
s)
Contract Outstanding Mark-to-market
contracts equivalent
values
31.03.2024 31.03.2024 31.03.2024
31.03.2024
(Audited) (Audited) (Audited)
(Audited)
One Danish
Krone
forward
foreign
currency
contract:
Settlement 91,000,000 kr. £10,485,538 £10,440,444 £45,094
date 29
April 2024
Three Euro
forward
foreign
currency
contracts
totalling:
Settlement €510,373,983 £438,550,084 £436,669,844
£1,880,240
date 29
April 2024
One US
Dollar
forward
foreign
currency
contract:
Settlement $18,001,273 £14,281,840 £14,248,231 £33,609
date 29
April 2024
One Euro
forward
foreign
currency
contract:
Settlement (€8,401,262) (£7,208,896) (£7,188,019)
(£20,877)
date 29
April 2024
£1,938,06
6
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 30 September 2024 and as at 31 March 2024, the Company held the following
assets and liabilities denominated in foreign currencies:
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 30 September 2024 and 31 March 2024. The analysis is based on
the assumption that the relevant foreign exchange rate increased/decreased by
the percentage disclosed in the table, with all other variables held constant.
This represents management's best estimate of a reasonable possible shift in the
foreign exchange rates, having regard to historical volatility of those rates.
As at As at
30.09.2024 31.03.2024
£ £
(Unaudited) (Audited)
Impact on
Statement of
Comprehensive
Income and
Statement of
Changes in
Equity in
response to
a:
- 20% (131,980) (49,200)
increase in
Danish Krone
- 20% 237,759 99,327
decrease in
Danish 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% 758,713 563,495
increase in
Euro
- 20% 392,777 (29,071)
decrease in
Euro
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% (178,708) (8,484)
increase in
US Dollar
- 20% 268,813 8,381
decrease in
US 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 30 September 2024, if market prices had been 10% higher with all other
variables held constant, the increase in net assets attributable to Shareholders
would have been £82,267,671 (31 March 2024: £81,335,642). An equal change in the
opposite direction would have decreased the net assets attributable to equity
Shareholders by the same amount. This price sensitivity analysis covers the
market prices received from price vendors, brokers and those determined using
models (such as discounted cash flow models) on the assumption that the prices
determined from these sources had moved by the indicated percentage.
As noted in note 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 (31 March 2024: none).
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 Northern Trust
Company. The Company is subject to credit risk to the extent that this
institution may be unable to return this cash. The Northern Trust Company is a
wholly owned subsidiary of The Northern Trust Corporation. The Northern Trust
Corporation is publicly traded and a constituent of the S&P 500. The Northern
Trust Corporation has a credit rating of A+ from Standard & Poor's and A2 from
Moody's.
The Company's maximum credit exposure is limited to the carrying amount of
financial assets recognised as at the Condensed Statement of Financial Position
date, as summarised below:
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 Mortgage-Backed Securities ("MBS"). Primarily, these
securities may not have the benefit of the same security interest in the related
collateral. Therefore, there is a possibility that recoveries on defaulted
collateral may not, in some cases, be available to support payments on these
securities. The risk of investing in these types of ABS ultimately dependent
upon payment of the underlying debt by the debtor.
Liquidity Risk
Liquidity risk is the risk that the Company may not be able to generate
sufficient cash resources to settle its obligations as they fall due or can only
do so on terms that are materially disadvantageous.
Investments made by the Company in ABS may be relatively illiquid and this may
limit the ability of the Company to realise its investments. Investments in ABS
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 1-6 months 6-12
months Total
month
£ £ £
£
(Unaudited) (Unaudited)
(Unaudited) (Unaudited)
As at 30
September
2024
Financial
liabilities
Repurchase - (14,002,088) -
(14,002,088)
agreements
Unrealised (287,672) - -
(287,672)
loss on
derivative
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 1-6 months 6-12
months Total
month
£ £ £
£
(Audited) (Audited)
(Audited) (Audited)
As at 31
March 2024
Financial
liabilities
Repurchase - (14,090,507) -
(14,090,507)
agreements
Unrealised (20,877) - -
(20,877)
loss on
derivative
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 21 October 2022, the Company concluded its most recent
Realisation Opportunity. The next Realisation Opportunity is expected to take
place in Autumn 2025, subject to the aggregate NAV of the continuing Ordinary
Shares on the last Business Day before Reorganisation being not less than £100
million.
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 30 September 2024 and year ended 31 March 2024.
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 - 7,673,202 - 7,673,202
currency
contracts
Total assets
as at 30
September
2024
- 642,689,992 187,659,918 830,349,910
Liabilities
Financial
liabilities
at fair value
through
profit or
loss:
Forward - 287,672 - 287,672
currency
contracts
Total
liabilities
as at 30
September
2024
- 287,672 - 287,672
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 - 1,958,943 - 1,958,943
currency
contracts
Total assets
as at 31
March 2024
- 631,399,829 183,915,529 815,315,358
Liabilities
Financial
liabilities
at fair value
through
profit or
loss:
Forward - 20,877 - 20,877
currency
contracts
Total - 20,877 - 20,877
liabilities
as at 31
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 30 September 2024 has been assessed
by the Portfolio Manager and the resulting valuation considered a fair value at
that date. Furthermore, the Portfolio Manager may determine that the application
of a mark-to-model basis may be appropriate where they believe such a model will
result in more reliable information with regards to the fair value of any
specific investments.
The Portfolio Manager has engaged 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 30 September 2024. The valuation
of these assets and others that the Portfolio Manager may deem appropriate to
provide a valuation at fair value, primarily use discounted cash flow analysis
but may also include the use of a comparable arm's length transaction, reference
to other securities that are substantially the same, and other valuation
techniques commonly used by market participants making the maximum use of market
inputs and relying as little as possible on entity-specific inputs. The
discounted cash flow models include assumptions that are subject to judgement
such as prepayment rates, recovery rates and the discount margin/discount rate.
As at 30 September 2024, investments (related primarily to RMBS/MBS investments)
totalling 19.29% of the portfolio were valued by the third-party valuer (31
March 2024: 19.12%). These investments are presented in the following tables.
Valuations performed by the third-party valuer are classified as Level 3.
Please see note 3 (ii) of the Audited Financial Statements for the year ended 31
March 2024 for the accounting policy outlining the treatment fair value of
securities not quoted in an active market.
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 September 2024 and 31
March 2024:
30 Fair Value Financial Unobservable Sensitivity Effect
on
September (£) Assets/Lia Input Used Fair
2024 Value
(£)
bilit
ies
(Unaudited)
Dutch RMBS 48,347,137 Financial Discount +5% / -5%
5,043,328 / (4,001,981)
Asset Margin
(970 bps)
UK RMBS 43,684,694 Financial Discount +5% / -5%
3,062,793 / 411,951
Asset Margin
(174 bps/
950 bps/
1005 bps/
1050 bps)
UK RMBS 31,660,748 Financial Discount +0.5% /
362,486 / (356,162)
Asset Margin -0.5%
(149 bps)
UK RMBS 34,967,339 Financial Discount +3% / -3%
1,814,659 / (1,713,125)
(underlying Asset Margin
risk - AAA) (303 bps/
305 bps)
31 March Fair Value Financial Unobservable Sensitivity Effect
on
2024 (£) Assets/Lia Input Used Fair
Value
(£)
bilit
ies
(Audited)
Dutch RMBS 54,142,754 Financial Discount +5% / -5%
6,871,331 / (5,477,982)
Asset Margin
(965 bps)
UK RMBS 64,557,878 Financial Discount +5% / -5%
5,712,626 / (4,538,301)
Asset Margin
(179 bps/
950 bps/
1025 bps/
1060 bps)
UK RMBS 36,853,297 Financial Discount +3% / -3%
3,338,550 / (2,880,236)
(underlying Asset Margin
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 30
September 2024 totalling £29 million (31 March 2024: £28.3 million), no
meaningful sensitivity on inputs can be performed due to the unobservable nature
of the pricing. The valuations of these positions are provided monthly from
external sources.
During the current and prior periods, there were no transfers between Level 2
and Level 3.
The following tables present the movement in Level 3 instruments for the period
ended 30 September 2024 and year ended 31 March 2024 by class of financial
instrument.
Opening Total Total sales Realised Realised
Unrealised Unrealised Transfer Transfer Closing
balance at purchases during the gains on losses on gains
for losses into Level out Level 3 balance at
1 April during the period Level 3 Level 3 the
period for the 3 30
2024 period ended Investments Investments for
period for September
ended 30 30 September held during held during Level
3 Level 3 2024
September 2024 the the
Investments Investments
2024 period period ended held
at 30 held at 30
ended 30
September September
30 September 2024
2024
September 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
Opening Total Total sales Realised Realised
Unrealised Unrealised Transfer Transfer Closing
balance at purchases during the gains on losses on gains
for losses into Level out Level 3 balance at
1 April during the year Level 3 Level 3 the
year for the year 3 31 March
2023 year ended ended Investments Investments for
Level for 2024
31 March 31 March 2024 held during held during 3
Investment Level
2024 the the year
3 Investments
year ended ended 31 s held
31 March 2024 at 31
March held
March 2024
at 31 March
2024
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 24 February 2023, the annual target dividend was changed from 7% to 8% (the
equivalent of 8 pence per Ordinary Share) or higher of the Issue Price. The
change became effective from the dividend declared in respect of the 3-month
period ended 31 March 2023.
Dividends paid with respect to any quarter comprise (a) the accrued income of
the Portfolio for the period, and (b) an additional amount to reflect any income
purchased in the course of any share subscriptions that took place during the
period. Including purchased income in this way ensures that the income yield of
the shares is not diluted as a consequence of the issue of new shares during an
income period and (c) any income on the foreign exchange contracts created by
the SONIA differentials between each foreign currency pair, less (d) total
expenditure for the period.
The Company, being a Guernsey regulated entity, is able to pay dividends out of
capital. Nonetheless, the Board carefully considers any dividend payments made
to ensure the Company's capital is maintained in the longer term. Careful
consideration is also given to ensuring sufficient cash is available to meet the
Company's liabilities as they fall due.
The Board expects that dividends will constitute the principal element of the
return to the holders of Ordinary Shares.
Under The Companies (Guernsey ) Law, 2008, the Company can distribute dividends
from capital and revenue reserves, subject to the net asset and solvency test.
The net asset and solvency test considers whether a company is able to pay its
debts when they fall due, and whether the value of a company's assets is greater
than its liabilities. The Board confirms that the Company passed the net asset
and solvency test for each dividend paid.
The Company declared the following dividends during the period ended 30
September 2024:
Period to Dividend Net dividend Ex Record Pay date
rate per payable (£) -dividend date
Ordinary date
Share (£)
31 March 0.0396 29,614,332 18 April 19 3 May
2024 2024 April 2024
2024
30 June 0.0200 14,956,733 18 July 19 July 2 August
2024* 2024 2024 2024
44,571,065
30 0.0200 14,956,733 17 18 1 Novembe
September October October r 2024
2024* 2024 2024
*These dividends were declared in respect of distributable profit for the period
ended 30 September 2024.
20.Ultimate Controlling Party
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 Ukraine , as a result of military action being undertaken by
Russia in 2022, may impact on securities directly or indirectly related to
companies domiciled in Russia and/or listed on exchanges located in Russia
("Russian Securities"). As at 30 September 2024, the Company does not have any
direct exposure to securities in either region.
In early October 2023, the situation in Israel and Gaza escalated significantly
with the Hamas attacks and resulting Israeli military action in Gaza , and
subsequent global government reactions dominated news flow. As at 30 September
2024, the Company does not have any direct exposure to securities in either
region. The Directors are monitoring developments related to this military
action, including current and potential future interventions of foreign
governments and economic sanctions.
During the period, asset managers within the UK and Europe have seen increased
pressure from stakeholders to assess and disclose the impact of climate change
on investment portfolios. The Portfolio Manager has a formalised approach to the
risk integrated within a robust ESG framework which is a major factor in the
Portfolio Manager's investment analysis. The Board continues to evaluate what
aspects the Company will consider reporting, based on the regulatory
requirements of the Company and developing best practice in the Company's
sector.
22.Subsequent Events
These Unaudited Condensed Interim Financial Statements were approved for
issuance by the Board on 19 November 2024. Subsequent events have been evaluated
until this date.
On 9 October 2024, the Company declared a dividend of 2.00p per Ordinary Share,
which was paid on 1 November 2024.
As at 15 November 2024, the published NAV per Ordinary Share for the Company was
110.08p. This represents a decrease of 0.38% (NAV as at 30 September 2024:
110.50p).
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 2.00 pence per Ordinary Share. A fourth quarter dividend is
declared in respect of March where the residual income for the year is
distributed.
Dividend Yield
Dividend yield is the percentage of dividends declared in respect of the period,
divided by the initial share issue price of 100.00 pence . The strategy aims to
generate an annual dividend of 6 pence per Ordinary Share or higher, as the
Directors determine at their absolute discretion from time to time, with all
excess income being distributed to investors at the year end of the Company.
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 (31 March 2024: £813,539,986)
by the number of Ordinary Shares at the end of the period of 747,836,661 units
(31 March 2024: 747,836,661). This produces a NAV per Ordinary Share of 110.50p
(31 March 2024: 108.79p), which was an increase of 1.57% (31 March 2024:
increase of 7.74%).
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 14,002,088 14,090,507
payable
under
repurchase
agreements
(a)
Investments 822,676,708 813,356,415
at fair
value
through
profit or
loss (b)
Repurchase 1.70% 1.73%
agreement
borrowing
(a/b)
CORPORATE INFORMATION
Directors UK Legal Advisers to the Company
Bronwyn Curtis (Chair) Hogan Lovells International LLP
John de Garis Atlantic House
Joanne Fintzen (Senior Holborn Viaduct
Independent Director)
London, EC1A 2FG
Paul Le Page
Eversheds Sutherland (International) LLP
John Le Poidevin
1 Wood Street
Registered Office
London, EC2V 7WS
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey, GY1 3QL
Alternative Investment Administrator and Company Secretary
Fund Manager ("AIFM")
Northern Trust International Fund Administration
Effective 21 June 2024
Services (Guernsey) Limited
Waystone Management
Company (IE) Limited PO Box 255
35 Shelbourne Road Trafalgar Court
Ballsbridge Les Banques
Dublin St Peter Port
Ireland Guernsey, GY1 3QL
Up until 21 June 2024 Financial Adviser and Corporate Broker
Apex Fundrock Ltd Deutsche Numis
Hamilton Centre 45 Gresham Street
Rodney Way London, EC2V 7BF
Chelmsford , CM13BY
Portfolio Manager Independent Auditor
TwentyFour Asset KPMG Channel Islands Limited
Management LLP
Glategny Court
8th Floor, The
Monument Building Glategny Esplanade
11 Monument Street St Peter Port
London, EC3R 8AF Guernsey, GY1 1WR
Custodian, Principal Receiving Agent
Banker and Depositary
Computershare Investor Services PLC
Northern Trust
(Guernsey) Limited The Pavilions
PO Box 71 Bridgwater Road
Trafalgar Court Bristol, BS13 8AE
Les Banques
St Peter Port
Guernsey, GY1 3DA
Guernsey Legal Adviser Registrar
to the Company
Computershare Investor Services (Guernsey) Limited
Carey Olsen
1st Floor
Carey House
Tudor House
Les Banques
Le Bordage
St Peter Port
St Peter Port
Guernsey, GY1 4BZ
Guernsey, GY1 1DB
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