REG-TwentyFour Income Fund: Interim results for the six-months ended 30 September 2024
20/11/2024 07:15
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 Limited Tel: +44 (0)20 7260 1000
Deutsche Numis Tel: +44 (0)20 7015 8900
Hugh Jonathan / Matt Goss
JPES Partners Tel: +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 ended 30 September 2024 For the year ended 31 March 2024
7.05% 18.10%
Dividends declared per Ordinary Share
For the six-month period ended 30 September 2024 For the year ended 31 March 2024
4.00p 9.96p
Dividends paid per Ordinary Share
For the six-month period ended 30 September 2024 For the year ended 31 March 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 ended 30 September 2024 For the year ended 31 March 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 ended 30 September 2024 For the year ended 31 March 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/ Shares Asset-Backed Security Sector* Fair Value £ Percentage of Net Asset Value
UK MORTGAGES CORP FDG DAC KPF1 A 0.0% 31/07/2070 28,000,000 RMBS 31,660,748 3.83
UK MORTGAGES CORPORATE F 'KPF4 A' 0.00% 30/11/2070 22,428,058 RMBS 20,954,400 2.54
LLOYDS BANK PLC FRN 19/11/2029 17,250,000 SRT 17,331,938 2.10
UK MORTGAGES CORP FDG DAC KPF2 A 0.0% 31/07/2070 12,105,859 RMBS 16,555,004 2.00
SYON SECURITIES 19-1 B CLO FLT 19/07/2026 15,597,926 RMBS 15,755,106 1.91
TULPENHUIS 0.0% 18/04/2051 19,326,989 RMBS 15,698,634 1.90
CHARLES ST CONDUIT ABS 2 LIMITED CABS 2- CL B MEZZ 15,000,000 RMBS 15,000,000 1.82
HABANERO LTD '6W B' VAR 5/4/2024 14,875,000 RMBS 14,875,000 1.80
EQTY. RELEASE FNDG. NO 5 '5 B' FRN 14/07/2050 16,500,000 RMBS 14,364,040 1.74
UKDAC MTGE 'KPF3 A' 0.0% 31/7/2070 17,144,104 RMBS 14,012,939 1.70
CHARLES STREET CONDUIT FRN 0.00% 12/04/2067 14,000,000 RMBS 14,000,000 1.69
DEUTSCHE BANK AG/CRAFT 202 '1X CLN' FRN 21/11/2033 18,000,000 SRT 13,396,153 1.62
VSK HOLDINGS LTD VAR 31/7/2061 2,058,000 RMBS 13,066,199 1.58
RRME 8X D '8X D' FRN 15/10/2036 13,000,000 CLO 10,537,842 1.28
VSK HLDGS. '1 C4-1' VAR 01/10/2058 1,587,000 RMBS 9,812,410 1.19
SYON SECS. 2020-2 DAC '2 B' FRN 17/12/2027 9,249,987 RMBS 9,706,307 1.16
UK MORTGAGES CORP FDG DAC CHL1 A 0.0% 31/07/2070 5,641,912 RMBS 8,324,845 1.01
HIGHWAYS 2021 PLC '1X D' FRN 18/11/2026 8,000,000 CMBS 7,825,516 0.95
SANTANDER CONSUMER FINANCE SA SER 23-1 CL B FLTG R 69,931,060 SRT 7,805,199 0.94
SYON SECURITIES 2020-2 DESIGNATED A FLTG 17/12/202 7,400,850 RMBS 7,613,751 0.92
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 Limited London
Pershing Square Holdings Limited London and Euronext Amsterdam
Joanne Fintzen
JPMorgan Claverhouse Investment Trust plc London
Paul Le Page
NextEnergy Solar Fund Limited London
RTW Biotech Opportunities Limited London
Sequoia Economic Infrastructure Income Fund Limited London
John Le Poidevin
BH Macro Limited London
International Public Partnerships Limited London
Super Group (SGHC) Limited New York
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
The Company’s assets are mainly comprised of ABS carrying exposure to risks
related to the underlying assets, backing the security or the originator of
the security. The Company’s principal risks are therefore market or economic
in nature.
The principal risks disclosed can be divided into the various areas as
follows:
* Market Risk and Investment Valuations
Market risk is the risk associated with changes in market factors including
spreads, interest rates, economic uncertainty, changes in laws and political
circumstances.
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 Curtis John Le Poidevin
Director Director
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 of financial 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 of financial 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 annual financial statements of the Company are
prepared in accordance with International Financial Reporting Standards. The
directors are responsible for preparing the condensed set of financial
statements included in the half-yearly financial report in accordance with IAS
34 Interim Financial Reporting as adopted by the EU.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless they either intend to liquidate the
Company or to cease operations, or have no realistic alternative but to do so.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed
set of financial statements in the half-yearly financial report based on our
review. Our conclusion, including our conclusions relating to going concern,
are based on procedures that are less extensive than audit procedures, as
described in the scope of review paragraph of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement letter to assist the Company in meeting the requirements of the DTR
of the 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 period from 01.04.24 to 30.09.24 £ For the period from 01.04.23 to 30.09.23 £
(Unaudited) (Unaudited)
Income
Interest income on financial assets at fair value through profit or loss 39,806,456 39,617,803
Net foreign currency gains 7 15,825,992 6,714,557
Net gains on financial assets at fair value through profit or loss 5,636,331 18,179,471
Total income 61,268,779 64,511,831
Operating expenses
Portfolio management fees 14 (2,631,614) (2,785,136)
Directors' fees 14 (142,500) (136,245)
Administration and secretarial fees 15 (193,658) (175,947)
Audit fees (80,784) (78,000)
Custody fees 15 (41,408) (37,139)
Broker fees (25,312) (24,939)
AIFM management fees 15 (120,349) (126,343)
Depositary fees 15 (55,582) (50,155)
Legal and professional fees (80,108) (28,635)
Listing fees (12,161) (12,500)
Registration fees (24,314) (44,030)
Other expenses (65,027) 56,041
Total operating expenses (3,472,817) (3,443,028)
Total operating profit 57,795,962 61,068,803
Finance costs on repurchase agreements 11 (402,967) (383,505)
Total comprehensive income for the period* 57,392,995 60,685,298
Earnings per Ordinary Share 3 0.0767 0.0817
All items in the above statement derive from continuing operations.
The Company’s income and expenses are not affected by seasonality or
cyclicity.
The accompanying notes form an integral part of these Unaudited Condensed
Interim Financial Statements.
*There was no other comprehensive income during the current and prior periods.
CONDENSED STATEMENT OF FINANCIAL POSITION
as at 30 September 2024
Notes 30.09.2024 £ 31.03.2024 £
(Unaudited) (Audited)
Assets Financial assets at fair value through profit or loss - Investments 8 822,676,708 813,356,415
- Derivative assets: Forward currency contracts 17 7,673,202 1,958,943
Amounts due from broker - 3,427,786
Other receivables 9 8,709,709 7,642,019
Cash and cash equivalents 20,546,808 13,142,803
Total assets 859,606,427 839,527,966
Liabilities Financial liabilities at fair value through profit or loss - Derivative liabilities: Forward currency contracts 17 287,672 20,877
Amounts payable under repurchase agreements 11 14,002,088 14,090,507
Amounts due to broker 17,339,213 10,596,437
Other payables 10 1,615,538 1,280,159
Total liabilities 33,244,511 25,987,980
Net assets 826,361,916 813,539,986
Equity Share capital account 12 780,234,543 780,234,543
Retained earnings 46,127,373 33,305,443
Total equity 826,361,916 813,539,986
Ordinary Shares in issue 12 747,836,661 747,836,661
Net Asset Value per Ordinary Share (pence) 5 110.50 108.79
The Unaudited Condensed Interim Financial Statements were approved by the
Board of Directors on 19 November 2024 and signed on its behalf
by:
John Le Poidevin Paul Le Page
Director Director
The accompanying notes form an integral part of these Unaudited Condensed
Interim Financial Statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the period from 1 April 2024 to 30 September 2024
Notes Share capital account £ (Unaudited) Retained earnings £ (Unaudited) Total £ (Unaudited)
Balances at 1 April 2024 780,234,543 33,305,443 813,539,986
Dividends paid 19 - (44,571,065) (44,571,065)
Total comprehensive income for the period - 57,392,995 57,392,995
Balances at 30 September 2024 780,234,543 46,127,373 826,361,916
Share capital account Accumulated losses Total
£ £ £
(Unaudited) (Unaudited) (Unaudited)
Balances at 1 April 2023 750,558,986 (25,576,224) 724,982,762
Issue of Ordinary Shares 30,244,890 - 30,244,890
Share issue costs (347,817) - (347,817)
Dividends paid - (47,440,548) (47,440,548)
Income equalisation on new issues 4 (242,649) 242,649 -
Total comprehensive income for the period - 60,685,298 60,685,298
Balances at 30 September 2023 780,213,410 (12,088,825) 768,124,585
The accompanying notes form an integral part of these Unaudited Condensed
Interim Financial Statements.
CONDENSED STATEMENT OF CASH FLOWS
for the period from 1 April 2024 to 30 September 2024
For the period For the period
Notes from 01.04.24 to 30.09.24 from 01.04.23 to 30.09.23
£ £
(Unaudited) (Unaudited)
Cash flows from operating activities
Total comprehensive income for the period 57,392,995 60,685,298
Less:
Adjustments for non-cash transactions:
Interest income on financial assets at fair value through profit or loss (39,806,456) (39,617,803)
Net gains on investments 8 (5,636,331) (18,179,471)
Amortisation adjustment under effective interest rate method (3,315,054) (7,931,404)
Unrealised (gains)/losses on forward currency contracts 7 (5,447,465) 6,014,551
Exchange losses on cash and cash equivalents 39,653 2,812
(Increase)/decrease in other receivables (106,828) 57,097
Increase in other payables 335,379 32,778
Finance costs on repurchase agreements 402,967 383,505
Purchase of investments (120,332,686) (141,096,823)
Sale of investments/principal repayments 130,134,340 151,062,974
Investment income received 38,372,304 37,793,736
Bank interest income received 473,291 423,134
Net cash generated from operating activities 52,506,109 49,630,384
Cash flows from financing activities
Proceeds from issue of Ordinary Shares - 30,244,890
Share issue costs - (353,037)
Dividend paid (44,571,065) (47,440,548)
Finance costs paid (414,947) (420,644)
Decrease in amounts payable under repurchase agreements, excluding finance cost liabilities (76,439) (43,869,248)
Net cash used in financing activities (45,062,451) (61,838,587)
Increase/(decrease) in cash and cash equivalents 7,443,658 (12,208,203)
Cash and cash equivalents at beginning of the period 13,142,803 27,235,318
Exchange losses on cash and cash equivalents (39,653) (2,812)
Cash and cash equivalents at end of the period 20,546,808 15,024,303
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 30.09.24 01.04.23 to 30.09.23
£ £
(Unaudited) (Unaudited)
Movement on unrealised gain/(loss) on forward currency contracts 5,447,465 (6,014,551)
Realised gains on foreign currency contracts 10,425,600 12,705,591
Unrealised foreign currency gain on receivables/payables 87,163 4,063
Unrealised foreign currency exchange (loss)/gain on interest receivable (134,236) 19,454
15,825,992 6,714,557
8. Investments
For the period 01.04.24 to 30.09.24 For the period 01.04.23 to 31.03.24
£ £
(Unaudited) (Audited)
Financial assets at fair value through profit or loss:
Opening book cost 815,142,981 832,506,047
Purchases at cost 127,075,462 281,155,894
Proceeds on sale/principal repayment (126,706,554) (269,963,403)
Amortisation adjustment under effective interest rate method 3,315,054 8,874,421
Realised gains on sale/principal repayment 18,306,551 3,698,699
Realised losses on sale/principal repayment (76,273,069) (41,128,677)
Closing book cost 760,860,425 815,142,981
Unrealised gains on investments 84,709,945 19,029,145
Unrealised losses on investments (22,893,662) (20,815,711)
Fair value 822,676,708 813,356,415
For the period For the period
01.04.24 to 30.09.24 01.04.23 to 30.09.23
£ £
(Unaudited) (Unaudited)
Realised gains on sales/principal repayment 18,306,551 3,173,775
Realised losses on sales/principal repayment (76,273,069) (43,700,421)
Increase in unrealised gains 65,680,800 10,633,609
(Increase)/decrease in unrealised losses (2,077,951) 48,072,508
Net gains on financial assets at fair value through profit or loss 5,636,331 18,179,471
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 period For the year
01.04.24 to 30.09.24 01.04.23 to 31.03.24
£ £
(Unaudited) (Audited)
Amounts payable under Repurchase Agreements
Opening balance, excluding finance cost liabilities 14,041,222 49,670,365
Agreements entered during the period/year 27,993,829 66,055,670
Repaid/maturities during the period/year (28,070,268) (101,684,813)
Closing balance, excluding finance cost liabilities 13,964,783 14,041,222
Finance cost liabilities
Opening balance 49,285 157,335
Charged during the period/year 402,967 755,788
Repayments during the period/year (414,947) (863,838)
Closing balance 37,305 49,285
12. Share Capital
a) Authorised Share Capital
Unlimited number of Ordinary Shares at no par value.
b) Issued Share Capital
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 beginning of the period/year 780,234,543 750,558,986
Issue of Ordinary Shares - 30,244,890
Share issue costs - (347,816)
Income equalisation on new issues - (221,517)
Total Share Capital at the end of the period/year 780,234,543 780,234,543
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 of the period/year 747,836,661 718,036,661
Issue of Ordinary Shares - 29,800,000
Total Shares in issue at the end of the period/year 747,836,661 747,836,661
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 through Amortised
profit or loss cost Total
£ £ £
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 assets: Forward currency contracts 7,673,202 - 7,673,202
Other receivables (excluding prepayments) - 8,578,246 8,578,246
Cash and cash equivalents - 20,546,808 20,546,808
830,349,910 29,125,054 859,474,964
Liabilities at fair
value through Amortised
profit or loss cost Total
30 September 2024 £ £ £
Financial Liabilities as per Statement of Financial Position (Unaudited)
Financial liabilities at fair value through profit or loss:
- Derivative liabilities: Forward currency contracts 287,672 - 287,672
Amounts payable under repurchase agreements - 14,002,088 14,002,088
Amounts due to brokers - 17,339,213 17,339,213
Other payables - 1,615,538 1,615,538
287,672 32,956,839 33,244,511
Assets at fair
value through Amortised
profit or loss cost Total
£ £ £
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 assets: Forward currency contracts 1,958,943 - 1,958,943
Amounts due from broker - 3,427,786 3,427,786
Other receivables (excluding prepayments) - 7,617,384 7,617,384
Cash and cash equivalents - 13,142,803 13,142,803
815,315,358 24,187,973 839,503,331
Liabilities at fair
value through Amortised
profit or loss cost Total
31 March 2024 £ £ £
Financial Liabilities as per Statement of Financial Position (Audited)
Financial liabilities at fair value through profit or loss:
- Derivative liabilities: Forward currency contracts 20,877 - 20,877
Amounts payable under repurchase agreements - 14,090,507 14,090,507
Amounts due to brokers - 10,596,437 10,596,437
Other payables - 1,280,159 1,280,159
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 Ordinary Shares Number of 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 dated 29 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 September 2024 Number of investments (Unaudited) Range of Nominal £ million (Unaudited) Average Nominal £ million (Unaudited) Carrying Value £ million (Unaudited) % of Company's NAV (Unaudited)
Asset-Backed Securities*: Auto Loans 14 5 - 58 24 34 4.1%
CLO 116 9 - 36 16 312 37.7%
CMBS 5 15 - 65 35 24 2.9%
Consumer ABS 10 11 - 58 28 26 3.1%
CRE ABS 6 7 - 17 12 28 3.4%
Credit Cards 1 18 18 4 0.5%
RMBS 55 2 - 398 25 345 41.8%
SRT 5 87 - 1,263 392 46 5.6%
Student Loans 1 33 33 4 0.5%
213 823
Number of % of
As at 31 March 2024 investments Range of Nominal Average Nominal Carrying Value Company's NAV
£ million £ million £ million
(Audited) (Audited) (Audited) (Audited) (Audited)
Asset-Backed Securities*: Auto Loans 14 7 - 55 22 28 3.4%
CLO 108 9 - 36 16 302 37.1%
CMBS 6 15 - 65 35 26 3.3%
Consumer ABS 6 11 - 45 27 16 1.9%
RMBS 66 2 - 85 18 406 49.9%
SRT 3 143 - 1,263 591 31 3.8%
Student Loans 1 33 33 4 0.5%
204 813
*Definition of Terms
“CLO” – Collateralised Loan Obligations
“CMBS” – 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 rate £ Fixed rate £ Non-interest bearing £ Total £
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
As at 30 September 2024
Financial assets at fair value through profit or loss 822,676,708 - - 822,676,708
Derivative assets - - 7,673,202 7,673,202
Other receivables (excluding prepayments) - - 8,578,246 8,578,246
Cash and cash equivalents 20,546,808 - - 20,546,808
Repurchase agreements - (14,002,088) - (14,002,088)
Amounts due to brokers - - (17,339,213) (17,339,213)
Other payables - - (1,615,538) (1,615,538)
Derivative liabilities - - (287,672) (287,672)
Net assets 843,223,516 (14,002,088) (2,990,975) 826,230,453
Floating rate Fixed rate Non-interest bearing Total
£ £ £ £
(Audited) (Audited) (Audited) (Audited)
As at 31 March 2024
Financial assets at fair value through profit or loss 813,356,415 - - 813,356,415
Derivative assets - - 1,958,943 1,958,943
Amounts due from broker - - 3,427,786 3,427,786
Other receivables (excluding prepayments) - - 7,617,384 7,617,384
Cash and cash equivalents 13,142,803 - - 13,142,803
Repurchase agreements - (14,090,507) - (14,090,507)
Amounts due to brokers - - (10,596,437) (10,596,437)
Other payables - - (1,280,159) (1,280,159)
Derivative liabilities - - (20,877) (20,877)
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 values Outstanding contracts Mark-to-market equivalent Unrealised gains/(losses)
30.09.2024 30.09.2024 30.09.2024 30.09.2024
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Two Danish Krone forward foreign currency contracts:
Settlement date 2 October 2024 81,000,000 kr. £9,181,986 £9,040,634 £141,352
Settlement date 6 November 2024 81,000,000 kr. £9,049,887 £9,056,550 (£6,663)
Contract to close out 2 October 2024 Danish Krone
foreign currency contract (81,000,000) kr. (£9,033,424) (£9,040,634) £7,210
Eight Euro forward foreign currency
contracts totalling:
Settlement date 2 October 2024 €525,917,428 £444,626,279 £437,581,607 £7,044,672
Contract to close out 2 October 2024 Euro
foreign currency contract (€523,732,989) (£435,478,744) (£435,764,078) £285,334
Two Euro forward foreign currency
contracts totalling:
Settlement date 6 November 2024 €527,844,193 £439,533,029 £439,797,081 (£264,052)
Two US Dollar forward foreign currency contracts:
Settlement date 2 October 2024 $18,001,273 £13,614,287 £13,420,264 £194,023
Settlement date 6 November 2024 $18,001,273 £13,427,073 £13,420,565 £6,508
Contract to close out 2 October 2024 US Dollar
foreign currency contract ($18,001,273) (£13,426,773) (£13,420,264) (£6,509)
One Euro forward foreign currency contract:
Settlement date 2 October 2024 (€2,184,439) (£1,834,485) (£1,817,529) (£16,956)
Spot contract receivable £611
£7,385,530
Unrealised gains/(losses)
Contract Outstanding contracts Mark-to-market 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 date 29 April 2024 91,000,000 kr. £10,485,538 £10,440,444 £45,094
Three Euro forward foreign currency
contracts totalling:
Settlement date 29 April 2024 €510,373,983 £438,550,084 £436,669,844 £1,880,240
One US Dollar forward foreign currency contract:
Settlement date 29 April 2024 $18,001,273 £14,281,840 £14,248,231 £33,609
One Euro forward foreign currency contract:
Settlement date 29 April 2024 (€8,401,262) (£7,208,896) (£7,188,019) (£20,877)
£1,938,066
Contract values represent the contract’s notional value. Outstanding
contracts are the contract’s notional values, translated at the contracted
foreign exchange rate from foreign currencies to Sterling, or from Sterling to
foreign currencies.
As at 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% increase in Danish Krone (131,980) (49,200)
- 20% decrease in Danish Krone 237,759 99,327
As at As at
30.09.2024 31.03.2024
£ £
(Unaudited) (Audited)
Impact on Statement of Comprehensive Income and Statement of Changes in Equity in response to a:
- 20% increase in Euro 758,713 563,495
- 20% decrease in Euro 392,777 (29,071)
As at As at
30.09.2024 31.03.2024
£ £
(Unaudited) (Audited)
Impact on Statement of Comprehensive Income and Statement of Changes in Equity in response to a:
- 20% increase in US Dollar (178,708) (8,484)
- 20% decrease in US Dollar 268,813 8,381
(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 month 1-6 months 6-12 months Total
£ £ £ £
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
As at 30 September 2024
Financial liabilities
Repurchase agreements - (14,002,088) - (14,002,088)
Unrealised loss on derivative liabilities (287,672) - - (287,672)
Amounts due to broker (17,339,213) - - (17,339,213)
Other payables (1,505,214) (110,324) - (1,615,538)
Total (19,132,099) (14,112,412) - (33,244,511)
Up to 1 month 1-6 months 6-12 months Total
£ £ £ £
(Audited) (Audited) (Audited) (Audited)
As at 31 March 2024
Financial liabilities
Repurchase agreements - (14,090,507) - (14,090,507)
Unrealised loss on derivative liabilities (20,877) - - (20,877)
Amounts due to broker (10,596,437) - - (10,596,437)
Other payables (1,124,159) (156,000) - (1,280,159)
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 currency contracts - 7,673,202 - 7,673,202
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 currency contracts - 287,672 - 287,672
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 currency contracts - 1,958,943 - 1,958,943
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 currency contracts - 20,877 - 20,877
Total liabilities as at 31 March 2024 - 20,877 - 20,877
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 September 2024 Fair Value (£) Financial Assets/Liabilities Unobservable Input Sensitivity Used Effect on Fair Value (£)
(Unaudited)
Dutch RMBS 48,347,137 Financial Asset Discount Margin +5% / -5% 5,043,328 / (4,001,981)
(970 bps)
UK RMBS 43,684,694 Financial Asset Discount Margin +5% / -5% 3,062,793 / 411,951
(174 bps/ 950 bps/
1005 bps/ 1050 bps)
UK RMBS 31,660,748 Financial Asset Discount Margin +0.5% / -0.5% 362,486 / (356,162)
(149 bps)
UK RMBS (underlying risk - AAA) 34,967,339 Financial Asset Discount Margin +3% / -3% 1,814,659 / (1,713,125)
(303 bps/ 305 bps)
31 March 2024 Fair Value (£) Financial Assets/Liabilities Unobservable Input Sensitivity Used Effect on Fair Value (£)
(Audited)
Dutch RMBS 54,142,754 Financial Asset Discount Margin +5% / -5% 6,871,331 / (5,477,982)
(965 bps)
UK RMBS 64,557,878 Financial Asset Discount Margin +5% / -5% 5,712,626 / (4,538,301)
(179 bps/ 950 bps/
1025 bps/ 1060 bps)
UK RMBS (underlying risk - AAA) 36,853,297 Financial Asset Discount Margin +3% / -3% 3,338,550 / (2,880,236)
(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 purchases during the Total sales during the period ended Realised gains on Realised losses on Level 3 Investments held during the period ended 30 September 2024 Unrealised gains for the period for Level 3 Investments held at 30 September 2024 Unrealised losses for the period for Level 3 Investments held at 30 September 2024 Transfer into Level 3 Transfer Closing
balance at period ended 30 September 2024 30 September 2024 Level 3 Investments out Level 3 balance at 30 September 2024
1 April 2024 held during the period ended
30 September 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 balance at Total purchases during the Total sales during the year ended Realised gains on Level 3 Investments held during the year ended 31 March 2024 Realised losses on Level 3 Investments held during the year ended 31 March 2024 Unrealised gains for the year for Level 3 Investments held at 31 March 2024 Unrealised losses for the year for Level 3 Investments held at 31 March 2024 Transfer into Level 3 Transfer Closing
1 April 2023 year ended 31 March 2024 out Level 3 balance at
31 March 2024 31 March 2024
£ £ £ £ £ £ £ £ £ £
(Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited) (Audited)
RMBS 207,207,308 68,388,091 (111,175,331) 2,023,664 (15,796,291) 36,159,879 (2,891,791) - - 183,915,529
207,207,308 68,388,091 (111,175,331) 2,023,664 (15,796,291) 36,159,879 (2,891,791) - - 183,915,529
All other financial assets and liabilities are carried at amortised cost.
Their carrying values are a reasonable approximation of fair value.
19. Dividend Policy
The Board intends to distribute an amount at least equal to the value of the
Company’s income available for distribution arising each quarter to the
holders of Ordinary Shares. For these purposes, the Company’s income will
include the interest payable by the ABS in the Portfolio and the amortisation
of any discount or premium to par at which an asset-backed security is
purchased over its remaining expected life, prior to its maturity. However,
there is no guarantee that the dividend target for future financial years will
be met or that the Company shall pay any dividends at all.
From 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 rate per Ordinary Share (£) Net dividend payable (£) Ex-dividend date Record date Pay date
31 March 2024 0.0396 29,614,332 18 April 2024 19 April 2024 3 May 2024
30 June 2024* 0.0200 14,956,733 18 July 2024 19 July 2024 2 August 2024
44,571,065
30 September 2024* 0.0200 14,956,733 17 October 2024 18 October 2024 1 November 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 payable under repurchase agreements (a) 14,002,088 14,090,507
Investments at fair value through profit or loss (b) 822,676,708 813,356,415
Repurchase agreement borrowing (a/b) 1.70% 1.73%
CORPORATE INFORMATION
Directors Bronwyn Curtis (Chair) John de Garis Joanne Fintzen (Senior Independent Director) Paul Le Page John Le Poidevin Registered Office PO Box 255 Trafalgar Court Les Banques St Peter Port Guernsey, GY1 3QL UK Legal Advisers to the Company Hogan Lovells International LLP Atlantic House Holborn Viaduct London, EC1A 2FG Eversheds Sutherland (International) LLP 1 Wood Street London, EC2V 7WS
Alternative Investment Fund Manager (“AIFM”) Effective 21 June 2024 Waystone Management Company (IE) Limited 35 Shelbourne Road Ballsbridge Dublin Ireland Administrator and Company Secretary Northern Trust International Fund Administration Services (Guernsey) Limited PO Box 255 Trafalgar Court Les Banques St Peter Port Guernsey, GY1 3QL
Up until 21 June 2024 Apex Fundrock Ltd Hamilton Centre Rodney Way Chelmsford, CM1 3BY Financial Adviser and Corporate Broker Deutsche Numis 45 Gresham Street London, EC2V 7BF
Portfolio Manager TwentyFour Asset Management LLP 8th Floor, The Monument Building 11 Monument Street London, EC3R 8AF Independent Auditor KPMG Channel Islands Limited Glategny Court Glategny Esplanade St Peter Port Guernsey, GY1 1WR
Custodian, Principal Banker and Depositary Northern Trust (Guernsey) Limited PO Box 71 Trafalgar Court Les Banques St Peter Port Guernsey, GY1 3DA Receiving Agent Computershare Investor Services PLC The Pavilions Bridgwater Road Bristol, BS13 8AE
Guernsey Legal Adviser to the Company Carey Olsen Carey House Les Banques St Peter Port Guernsey, GY1 4BZ Registrar Computershare Investor Services (Guernsey) Limited 1st Floor Tudor House Le Bordage St Peter Port Guernsey, GY1 1DB
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