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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Uk Mortgages Limited | LSE:UKML | London | Ordinary Share | GG00BXDZMK63 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 78.90 | 78.20 | 79.60 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMUKML
UK MORTGAGES LIMITED
INTERIM REPORT AND UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
For the period from 1 July 2016 to 31 December 2016
SUMMARY INFORMATION
The Company
The Company was incorporated with limited liability in Guernsey, as a
closed-ended investment company on 10 June 2015. The Company's shares were
admitted to trading on the Specialist Fund Segment of the London Stock Exchange
on 7 July 2015.
The Company and affiliate structure has been designed by the Board of
Directors, the Portfolio Manager, the Corporate Broker and legal advisors to
ensure the most efficient structure for regulatory and tax purposes.
The Company established an Acquiring Entity, UK Mortgages Corporate Funding
Designated Activity Company ("DAC") for the purpose of acquiring and
securitising mortgages via Special Purpose Vehicles ("SPVs"). The Acquiring
Entity, the Issuer SPV and the Warehouse SPVs (collectively, "the Group") are
treated on a consolidated basis for the purpose of the Interim Condensed
Financial Statements.
Investment Objective
The Company's investment objective is to provide Shareholders with access to
stable income returns through the application of relatively conservative levels
of leverage to portfolios of UK mortgages.
The Company expects that income will constitute the vast majority of the return
to Shareholders and that the return to Shareholders will have relatively low
volatility and demonstrate a low level of correlation with broader markets.
Shareholders' Information
Northern Trust International Fund Administration Services (Guernsey) Limited
(the "Administrator") is responsible for calculating the Net Asset Value
("NAV") per share of the Company. The NAV per Ordinary Share is calculated as
at the last business day of every month by the Administrator and is announced
through a Regulatory Information Service on, or within 2 weeks following, the
last business day of the following month.
Financial Highlights
31.12.2016 30.06.2016 31.12.2015
Total Net Assets GBP GBP GBP
229,246,078 237,363,265 244,545,062
Net Asset Value per ordinary share 91.70p 94.95p 97.82p
Share price 95.25p 96.75p 101.00p
Premium to Net Asset Value 3.87% 1.90% 3.25%
Total dividends paid during the period 3.00p 1.50p 0.00p
Total dividends declared in relation to the 3.00p 3.00p 0.00p
period
Ongoing total expense ratio 1.06% 1.20% 0.95%
CHAIRMAN'S STATEMENT
for the period from 1 July 2016 to 31 December 2016
Review
I am pleased to present my report for the Company for the period from 1 July
2016 to 31 December 2016, a period of significant activity during which UKML
progressed towards full deployment of the capital raised at its IPO.
Following the successful launch of its inaugural securitisation, Malt Hill No.1
Plc, in May, work continued on the Company's second transaction, which was
announced in July. This work had in fact been ongoing for over six months, but
had been substantially delayed by the late withdrawal from the transaction of
the proposed loan financing counterparty, and their subsequent replacement by
the Royal Bank of Scotland. The transaction consists of an arrangement with
The Mortgage Lender ("TML") to purchase up to GBP250m of newly-originated
owner-occupied mortgages, thereby offering natural diversification to the first
transaction (which comprised Buy-to-Let loans), over an expected 12 to 14-month
period, having agreed a product set and borrower credit profile with TML.
TML launched its product offering through the mortgage broker market
immediately following the announcement and has since been receiving and
processing loan applications, making offers where applications meet the agreed
criteria and subsequently proceeding to completion as required. With some
seasonal variation, the pace of applications, offers and completions are
proceeding generally in line with expectations, and, as of the end of the
period, the portfolio contained fifty-two completed loans with a further
pipeline of GBP37.5m. The transaction is expected to utilise approx. GBP72m of the
Company's capital, with an initially estimated IRR over the life of the pool of
9.49%, based on the Portfolio Manager's assessment of the expected cash flows
and available financing rates having allowed for low revenue generation
initially as the loans are originated. The deal also offers the potential for
the Company to utilise further capital and acquire up to GBP1bn of mortgages over
a five-year period, which provides a significant incentive for TML to deliver a
mortgage pool in line with the first-year target. With securitisation spreads
having contracted since the deal was announced it is also possible that the
eventual yield may be higher than the initial estimate.
In November 2016, the Portfolio Manager undertook an extensive investor
roadshow, which included a webinar and both group and individual investor
meetings. The roadshow was designed to update investors on the Company's
investment progress and asset performance ahead of the Continuation Vote at the
Company's AGM in December, as the Company was yet to achieve its target of
fully committing its capital to mortgage portfolios. Following this update,
the vote was passed with no votes against.
Along with the result of the AGM, the Board announced that negotiations
regarding the purchase and financing of an existing pool of mortgages that
would deploy the Company's remaining available capital were at an advanced
stage. Terms for this, the Company's third transaction, were subsequently
agreed and signed just prior to the end of December 2016. Following this, the
finalisation of various pre-acquisition diligence, documentation and financing
arrangements allowed the transaction to be completed in mid-February 2017. The
transaction comprises the purchase of approximately GBP590.5m UK predominantly
Buy-to-Let Mortgages ("BTL"), originated primarily between 2004 and 2008 by
Capital Home Loans ("CHL"), then the UK specialist BTL mortgage lending arm of
Permanent TSB. CHL will continue to service the mortgages, resulting in a
seamless transaction for the mortgage borrowers. The pool comprises 4,896 loans
with an average balance of GBP120,610, and a weighted average indexed
loan-to-value of 69.65%. Given the age of the loans, which on a weighted
average basis have almost 10 years of payment history encompassing the
financial crisis, performance is very strong with just 0.92% of the loans more
than one month in arrears. The transaction has deployed the Company's remaining
investable capital.
As a result of the completion of this transaction, the second Continuation Vote
announced in November 2016, that was due to be triggered should substantially
all of the cash held at that time not have been deployed within six months of
the AGM, will no longer be required.
While the pace of investment has been slower than anticipated, it is again
worth reiterating the point made in previous reports; that the nature and
structure of the mortgage market meant that there could be no guarantee that
the Company would be able to gain exposure to appropriate mortgage portfolios
as quickly as desired. Buying mortgage portfolios can be a lengthy process,
requiring extensive and detailed work on the part of the Portfolio Manager to
complete due diligence and arrive at an appropriate structure. In addition,
specific factors have slowed progress in 2016, including poor market conditions
at the start of the year and uncertainty around the Brexit vote, which directly
contributed to the withdrawal of the initial financing counterparty to the TML
transaction. In addition, much time and effort has been expended on reviewing
potential transactions that were eventually rejected as unsuitable. However,
the attraction of deriving returns from such a historically stable and
uncorrelated asset class as UK residential mortgages remains clear. The
challenge continues to be delivering those returns through a conventional
investment company structure.
Dividend Distributions
When the Company was launched in July 2015, the Board anticipated paying at
least a 1.5p quarterly dividend from April 2016. This remains our policy,
although the slow pace of investment has meant that the dividend remains
uncovered to a greater extent than originally envisaged. This is partially due
to the timeframe required for the TML portfolio to become fully originated and
also because until the completion of the third transaction in February 2017
approximately half of the Company's capital was yet to be invested. Paying an
uncovered dividend is not a decision that the Board takes lightly, but it is
based on regular appraisals of the Portfolio Manager's cash flow models, which
continue to indicate that the high IRRs relative to the dividend target that
the mortgage pools offer should enable excess income to be produced over and
above the dividend in future financial years. Furthermore, any subsequent
investments that the Company makes are likely to be funded as new capital is
raised, which will minimise any future cash drag.
Outlook
Ongoing political uncertainty, whether in the UK with the imminent triggering
of Article 50 followed by up to two years of negotiations over the UK's exit
terms from the EU, the multiple radical measures likely to be proposed in the
US following President Trump's election, or the upcoming elections in Europe,
particularly in France and the Netherlands, where shock results in favour of
populist candidates are a distinct possibility, means that despite a generally
positive economic undertone markets remain vulnerable to shocks. However, we
believe the fundamental performance of the Company's portfolio of mortgages
will be largely uncorrelated to these events and will continue to perform in
line with expectations.
The Portfolio Manager is expected to complete its second securitisation, to
refinance the CHL portfolio later in 2017, with exact timing dependent on
market conditions. Similarly, a securitisation of the TML transaction is also
anticipated once the portfolio is fully originated. Meanwhile, now that the
initial transactions have been completed, the Portfolio Manager is seeing more
potential deal flow and we will further advise investors should these
opportunities become likely to proceed to future transactions.
Finally, I'd like to conclude by thanking the portfolio management team for
their hard work during this period and our shareholders for their continued
support.
Christopher Waldron
Chairman
21 March 2017
PORTFOLIO MANAGER'S REPORT
for the period from 1 July 2016 to 31 December 2016
Market Commentary
The summer and autumn of 2016 saw dramatic changes across the entire financial
and political landscape in the UK, Europe and the US. The UK's EU referendum
result in late June set the tone for a second half of surprises, initiating a
period of tension and political sparring between the re-formed and reshuffled
UK government under Theresa May. The government appeared determined not to
show its cards too early, and various UK Remain supporters and political
opposition, plus a host of European politicians were equally determined to
stand firm against any potential UK proposals for favourable exit treatment.
Populist movements gained ground, with Mario Renzi effectively being ousted in
Italy in what became a highly personal vote of no confidence for his policy
implementation referendum, plus the shock election of Donald Trump as the new
US President in November.
The UK's situation in particular, led initially to concerns about the economic
damage Brexit might herald and in August the Bank of England reacted with a
raft of economic policy easing measures including an expected 25bp base rate
cut, but coupled with further QE measures including the reintroduction of a QE
bond buying programme and the inclusion of corporate bond purchases for the
first time. The programme also included a newly initiated four-year Term
Funding Scheme ("TFS") providing secured funds at the new base rate, designed
to help banks to pass on the rate cut to borrowers. This certainly seemed to be
the case as mortgage and other consumer borrowing rates were tightened but it
also led to something of a repeat of the effect seen in 2012 following the
introduction of the Funding for Lending Scheme, when banks substantially
withdrew from issuance in wholesale funding markets in favour of cheap central
bank subsidies.
The short and medium term effects of this were to tighten issuance spreads
across all wholesale funding markets as the expectation of reduced issuance
from the banking sector was borne out. In RMBS markets however, some of the
slack was taken up by independent non-bank issuers, but the cost of funding
continued to tighten nonetheless and this trend extended into 2017, with
spreads now trading at record post-crisis tight levels. This may prompt some of
the bank issuers back to the market.
In broader mortgage and housing markets, signals have been very mixed, with
conflicting data from source to source and from month to month but, for the
main part, the market has continued to show growth over the period. Whilst
regional data is available less frequently, subjective evidence from wider
sources suggests that even though much of the London market has been suffering
something of a slowdown in response to Brexit uncertainty, other parts of the
country that had lagged behind are beginning to catch up.
In early 2017, the political focus has shifted away from the UK somewhat
towards the imminent elections in Europe, with real concerns about further
shock populist victories. In the US, President Trump continues to push forward
with his many signalled radical policies, which continue to attract news
headlines and prompt potential volatility. However, the UK will come sharply
back into focus once the government finally triggers Article 50 as promised
before the end of March.
Portfolio Review
Having closed the Company's inaugural securitisation, Malt Hill No.1 plc, in
May, securing the senior funding for the next three years, the Company was able
to announce its second transaction with a new market entrant, The Mortgage
Lender ("TML"), in early July. As described in more detail in previous
reports, this transaction had been in the making for about six months but had
taken longer to complete than would normally be the case, due to the newness of
TML as an originator and a delay caused by a late change in the warehouse
provider.
TML opened their doors for business immediately and began to take applications.
These were followed shortly afterwards with the first offers being made (as
well as the first declinations) and, as would be expected with a lag of about
2-3 months, the first completions. Applications, offers and completions have
continued to grow broadly in line with initial expectations, and at the time of
writing the pipeline totalled approximately GBP85m. We expect to move into the
first securitisation phase for these loans towards the end of 2017.
Work continued throughout the summer to secure a third transaction, and a
number of portfolios and opportunities were considered but rejected for either
quality or incompatibility reasons. Two opportunities stood out however and
both of these were pursued. With broader markets evolving quickly following
the Brexit vote, it was difficult to gauge which might come first and the
opportunities swapped places as frontrunner several times. This was
particularly difficult to manage, especially in the light of the impending
continuation vote at the Company's upcoming AGM. The Portfolio Manager engaged
with investors prior to this via a webinar and a roadshow of investor meetings,
but was unable to announce a transaction prior to the vote, which was passed
with no votes against. Shortly afterwards, we were able to announce that
commercial terms had been agreed and following extensive work throughout
December a term-sheet was signed at the end of the year for a portfolio of
existing loans which would deploy the remainder of the Company's investable
capital. In February, the transaction was completed, after the finalisation of
various pre-acquisition diligence, documentation and financing arrangements.
The pool comprises 4,896 loans with a value of approx. GBP590m predominantly
Buy-to-Let Mortgages ("BTL"), an average balance of GBP120,610, and a weighted
average indexed loan-to-value of 69.65%.
The loans were originated primarily between 2004 and 2008 by Capital Home Loans
("CHL"), then the UK specialist BTL mortgage lending arm of Permanent TSB. CHL
was sold to an affiliate of Cerberus Capital Management, L.P. ("Cerberus") in
July 2015. The pool was purchased from another Cerberus affiliate. Following
the transaction CHL will continue to service the mortgages, resulting in a
seamless transaction for the mortgage borrowers. Given the age of the loans,
which on a weighted average basis have almost 10 years of payment history
encompassing the financial crisis, performance is very strong with just 0.92%
of the loans more than one month in arrears.
The purchase has been financed with aid of a funding facility from Bank of
America Merrill Lynch for up to 18 months, although work began immediately on
the intended securitisation to provide longer term financing.
Portfolio Performance Review
The table below shows the major contributors to the performance of the NAV
since launch. In particular, the longer time taken for the portfolio to become
fully invested and the increase in the dividend to 6p per annum in the second
year of operation have been the major drivers of NAV performance, along with
the 1.1p mark-to-market movement in swap valuation.
NAV to end Dec-2016
Start NAV 98.0
Net Interest 2.4
Dividend -4.5
Costs (Servicing, Operating, -3.2
Warehouse)
Swap MTM -1.1
Fund NAV 91.6
As highlighted in previous reports, the first portfolio consists of mostly
fixed rate mortgages, of which a majority should revert to floating rate loans
after two years and is financed by Senior AAA rated Notes that pay a floating
rate coupon. To deal with this short term mismatch between the coupon rate of
the assets and liabilities, an interest rate swap is in place that converts the
underlying fixed rate income into floating rate income. This swap valuation is
the present value of the expected receipts and payments to maturity and the
profit or loss from this valuation feeds directly into the NAV calculation. The
mortgage portfolio is valued in accordance with industry standard at amortised
cost less any impairment provisions as required. In practice, whilst the value
of the mortgage pool is very stable as there have been no impairments to date,
the value of the swap is subject to mark to market volatility and will vary due
to changes in the absolute level and relative shape of the UK government yield
curve. This volatile component of the NAV is expected to diminish over time as
the payment profile of the fixed rate mortgages revert to floating rate.
Coventry Portfolio Outlook (Malt Hill No. 1 Plc)
The portfolio continues to exhibit strong performance, in line with
expectations at the time of purchase. At the time of writing, just one of the
loans is currently marked as in arrears, being on a payment holiday, all other
loans have been paid on time and there are no arrears, bearing out the strong
credit quality of the borrowers in the pool and the conservative lending
guidelines on the loans. There has been a minor pick-up in prepayments,
however, as expected with this type of loan, overall prepayments remain
relatively low during the initial fixed rate period. The first resets from
this are expected to begin in the spring of 2017 and given the regulatory
changes to interest coverage ratios and stress rates for BTL loans introduced
at the beginning of 2017, the number of loans which refinance out of the pool
may be lower than originally expected, as this portfolio was originated before
the rule changes were announced, which would be positive for maintaining
leverage within pool.
TML Portfolio Outlook (Cornhill No 2 Limited)
Mortgage applications and completions received so far are broadly in line with
initial expectations. This portfolio is expected to be securitised after
reaching the initial commitment of GBP250m of origination, subject to market
conditions.
CHL Portfolio Outlook
The portfolio acquisition was agreed just before the 31 December period end and
it is not shown in these financial statements as the transaction settled on 21
February 2017. It is expected to be securitised as soon as practically possible
subject to market conditions.
Market Outlook
Following the CHL acquisition, the remaining investable capital for the Company
has now been deployed. The immediate challenge will be to complete the
securitisation and then to build upon this with potential further transactions,
with the initial aim of paying dividends from income and capital gain and over
the medium term rebuilding the capital previously used to pay dividends.
The market backdrop and technicals remain strong over the short term with the
mortgage lending market resilient and robust primary funding markets. We remain
positive but cautious on the outlook and we continue to discuss further
opportunities, including both secondary portfolios and primary origination flow
opportunities and have a varied pipeline of potential investments for 2017.
TwentyFour Asset Management LLP
21 March 2017
PORTFOLIO OF INVESTMENTS
As at 31 December 2016
Value at amortised cost
31.12.2016 30.06.2016
GBP GBP
Cornhill Mortgages No. 2 Limited -
11,560,981
Malt Hill No.1 Plc
296,150,665 303,585,700
307,711,646 303,585,700
Portfolio Summary as at 31 December 2016
Outstanding Balance of the Mortgage Portfolio 290,959,909
Number of Mortgage Accounts 1,643
Average Mortgage Size 177,091
Weighted Average Current LTV 64.66%
Weighted Average Interest Rate 3.36%
Weighted Average Remaining Term (months) 231.64
Weighted Average Seasoning (months) 17.49
BOARD MEMBERS
Biographical details of the Directors are as follows:
Christopher Waldron (Chairman) - Independent Non-Executive Director - Guernsey
resident
Mr Waldron is the Chairman of Ranger Direct Lending Fund Plc and a director of
a number of listed companies, including DW Catalyst Fund Limited, Crystal Amber
Fund Limited and JZ Capital Partners Limited. He has over 30 years' experience
as an investment manager, specialising in fixed income, hedging strategies and
alternative investment mandates and until 2013 was Chief Executive of the
Edmond de Rothschild Group in the Channel Islands. Prior to joining the Edmond
de Rothschild Group in 1999, Mr Waldron held investment management positions
with Bank of Bermuda, the Jardine Matheson Group and Fortis. Mr Waldron is also
a member of the States of Guernsey's Policy and Resources Investment and Bond
Sub-Committee and a Fellow of the Chartered Institute of Securities and
Investment.
Richard Burrows - Senior Independent Non-Executive Director - UK resident
Mr Burrows works as Head of Treasury for Bank of China, London Branch following
a role as Senior Regulatory Policy Adviser to Bank of China UK Ltd. He
previously worked as a Capital and Liquidity Risk Consultant at Grant Thornton
and before that at the Co-operative Bank plc, taking the role of Chief of Staff
to the CEO appointed to lead the process of recapitalisation. Before
Co-operative Bank plc Mr Burrows worked in the Technical Specialist Prudential
Risk Division - Liquidity and ALM of the Financial Services Authority and led
the on-site review of BIPRU firms' Supervisory Liquidity Review Process and
subsequent panel submission to agree Individual Liquidity Guidance. In 2009 -
2010, before joining the Financial Services Authority Mr Burrows worked at
Northern Rock plc as Assistant Director, Marketing and Liquidity Risk as the
firm prepared for and completed its formal split of the balance sheet into core
banking and non-core assets. From 1994 to 2008, Mr Burrows was Director, Head
of Funding at Citi Alternative Investments and was responsible for efficient
funding via debt issuance from Euro and US domestic programmes and hedging of
all market risk via derivatives.
Paul Le Page (Audit Committee Chairman) - Independent Non-Executive Director-
Guernsey resident
Mr Le Page is a director of Man Fund Management Guernsey Limited, Man Group
Japan Limited and FRM Investment Management Limited which are subsidiaries of
Man Group Plc. He is responsible for managing hedge fund portfolios, and is a
director of a number of FRM and GLG funds. Mr Le Page is currently the Audit
Committee Chairman for Bluefield Solar Income Fund Limited and was formerly the
Audit Committee Chairman for Cazenove Absolute Equity Limited and Thames River
Multi Hedge PCC Limited. He has extensive knowledge of, and experience in, the
fund management and the hedge fund industry. Prior to joining FRM, he was an
Associate Director at Collins Stewart Asset Management from January 1999 to
July 2005, where he was responsible for managing the firm's hedge fund
portfolios and reviewing fund managers. He joined Collins Stewart in January
1999 where he completed his MBA in July 1999. He originally qualified as a
Chartered Electrical Engineer after a 12-year career in industrial research and
development, latterly as the Research and Development Director for Dynex
Technologies (Guernsey) Limited, having graduated from University College
London in Electrical and Electronic Engineering in 1987.
Helen Green - Independent Non-Executive Director - Guernsey resident
Mrs Green is a chartered accountant and has been employed by Saffery Champness,
a top 20 ?rm of chartered accountants, since 1984. She quali?ed as a chartered
accountant in 1987 and became a partner in the London office in 1997. Since
2000 she has been based in the Guernsey office where she is client liaison
director responsible for trust and company administration. Mrs Green serves as
a Non-Executive Director on the boards of a number of companies in various
jurisdictions, including Aberdeen Emerging Markets Investment Company Limited,
Landore Resources Limited, John Laing Infrastructure Fund Limited, City Natural
Resources High Yield Trust plc and Acorn Income Fund Limited, of which she is
Chairman.
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
Principal Risks and Uncertainties
In respect to the Company's system of Internal Controls and reviewing its
effectiveness, the Directors:
* are satisfied that they have reviewed the principal risks facing the
Company, including those that would threaten its business model, future
performance, solvency or liquidity; and
* have reviewed the effectiveness of the risk management and Internal Control
systems including material financial, operational and compliance controls
(including those relating to the financial reporting process) and no
significant failings or weaknesses were identified.
When considering the total return of the Group, the Board takes account of the
risk which has been taken in order to achieve that return. The Board considers
the following principal risks to be relevant for the next six month period
ending June 30 2017:
1. The risk of failing to securitise purchased mortgage portfolios. If there
is any significant delay in the ability to securitise a portfolio, the interest
rates payable by the Warehouse SPV to third party providers of loan finance are
likely to increase over time leading to falls in the value and/or yield of the
instruments held by the Acquiring Entity, the value of which will impact the
yield of the Group. In addition the underlying portfolios will need to be
re-financed periodically in order to maintain optimal levels of leverage.
Failure to re-securitise at a suitable rate and/or reinvest the proceeds of
subsequent securitisations may also adversely impact the yield of the Group.
The risk has been mitigated by the Portfolio being engaged with the UK RMBS
market and service providers. This enables the Company to optimise the timing
of its securitisation transactions.
2. The risk of the default of the counterparty with which the Warehouse or
Issuer SPVs transacts the derivative trades for hedging purposes, or to gain,
increase or decrease exposure to mortgages. Default by any hedging counterparty
in the performance of its obligations could subject the investments to unwanted
credit and market risks. The risk is mitigated by the Portfolio Manager
employing due diligence in its choice of swap counterparty and engaging with
robust and financially sound counterparties, with continuous monitoring of the
counterparty through credit analysis and ratings monitoring over the lifetime
of the trade.
3. The risk of the Company being unable to pay target dividends to investors
due to a shortfall in income received on the portfolio. The risk is mitigated
by the Portfolio Manager monitoring the Group's cash flow and income position,
in conjunction with the Company's Administrator, and reporting to the Board on
a quarterly basis. The Company can also pay dividends from capital if
necessary.
4. The risk of the Group being unable to invest or reinvest proceeds of
capital repaid from mortgage loans to purchase additional mortgage portfolios
in a timely manner. The risk is mitigated by the Board monitoring the portfolio
pipeline in regular communication with the Portfolio Manager, and in quarterly
and ad hoc board meetings.
5. The risk of investor dissatisfaction leading to a weaker share price,
causing the Company to trade at a discount to its underlying asset value.
Going Concern
Under the 2014 UK Corporate Governance Code (effective for periods beginning on
or after 1 October 2014), the Directors are required to satisfy themselves that
it is reasonable to assume that the Group is a going concern and to identify
any material uncertainties to the Group's ability to continue as a going
concern for at least 12 months from the date of approving the financial
statements.
Having reviewed the Group's current portfolio and pipeline of investment
transactions the Board of Directors believe that it is appropriate to adopt a
going concern basis in preparing the Unaudited Condensed Consolidated Interim
Financial Statements given the Group's holdings of cash and cash equivalents
and the income deriving from those investments, meaning the Group has adequate
financial resources to meet its liabilities as they fall due for the
foreseeable future being no less than 12 months from the statement of financial
position date.
Related Parties
Other than fees payable in the ordinary course of business, there have been no
material transactions with related parties, which have affected the financial
position or performance of the Group in the financial period. Please refer to
note 10 for further details.
RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
* these Unaudited Condensed Consolidated 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, financial position and profit or loss of the Group as required by
the UK Listing Authority's Disclosure and Transparency Rule ("DTR") 4.2.4R.
* the interim report meets the requirements of an interim management
report and 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 July 2016 to 31
December 2016 and their impact on the Unaudited Condensed Consolidated 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 July 2016 to 31
December 2016 and that have materially affected the financial position or
performance of the Company during that period.
By order of the Board,
Signed on behalf of the Board of Directors on 21 March 2017 by:
Christopher Waldron
Chairman
Paul Le Page
Director
Independent review report to UK Mortgages Limited
Our conclusion
We have reviewed the accompanying unaudited condensed consolidated interim
financial information of UK Mortgages Limited and its subsidiaries (the
'Group') as at 31 December 2016. Based on our review, nothing has come to our
attention that causes us to believe that the accompanying unaudited condensed
consolidated interim financial information is not prepared, in all material
respects, in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The accompanying unaudited condensed consolidated interim financial information
comprises:
* the Unaudited Condensed Consolidated Statement of Financial Position as at
31 December 2016;
* the Unaudited Condensed Consolidated Statement of Comprehensive Income for
the six-month period then ended;
* the Unaudited Condensed Consolidated Statement of Changes in Equity for the
six-month period then ended;
* the Unaudited Condensed Consolidated Statement of Cash Flows for the
six-month period then ended; and
* the Notes to the Unaudited Condensed Consolidated Interim Financial
Statements, comprising a summary of significant accounting policies and
other explanatory information.
The unaudited condensed consolidated interim financial information has been
prepared in accordance with International Accounting Standard 34, 'Interim
Financial Reporting', and the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority.
Our responsibilities and those of the directors
The Directors are responsible for the preparation and presentation of this
unaudited condensed consolidated interim financial information in accordance
with the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibility is to express a conclusion on this unaudited condensed
consolidated interim financial information based on our review. This report,
including the conclusion, has been prepared for and only for the Group for the
purpose of complying with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is shown or
into whose hands it may come save where expressly agreed by our prior consent
in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements 2410, 'Review of interim financial information performed by the
independent auditor of the entity' issued by the International Auditing and
Assurance Standards Board. A review of interim financial information consists
of making inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing 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.
We have read the other information contained in the Interim Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the unaudited condensed consolidated
interim financial statements.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
21 March 2017
(a) The maintenance and integrity of the Group's website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the Interim Report and
Unaudited Condensed Consolidated Interim Financial Statements since they were
initially presented on the website.
(b) Legislation in Guernsey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the period from 1 July 2016 to 31 December 2016
For the For the
period from period from
01.07.2016 10.06.2015 to
to 31.12.2015
31.12.2016
(Unaudited) (Unaudited)
Note GBP GBP
Income
Interest income on mortgage 4,602,222 1,576,557
loans
Interest income on cash and cash 10,009 219,234
equivalents
Net interest expense on (1,149,012) -
financial liabilities at fair
value through profit and loss
Unrealised gain/(loss) on 1,249,700 (689,335)
financial liabilities at fair
value through profit and loss
Total income 4,712,919 1,106,456
Interest expense on loan notes 15 2,384,147 -
Portfolio management fees 10 881,648 897,278
Commitment facility fees 11 654,658 -
Amortisation of loan note issue 487,117 -
costs
Mortgage loans servicing fees 385,253 103,317
General expenses 11 97,918 34,489
Administration & secretarial 11 89,241 42,664
fees
Audit fees 78,126 32,865
Legal & professional fees 72,603 90,809
Directors' fees 10 53,750 40,063
AIFM fees 11 48,582 50,474
Depositary fees 11 40,858 37,200
Custody fees 11 31,058 11,684
Corporate broker fees 11 25,147 24,054
Interest expense on borrowings - 196,497
Total expenses 5,330,106 1,561,394
Total comprehensive loss for (617,187) (454,938)
the period
Loss per ordinary share - (0.002) (0.002)
basic & diluted 3
All items in the above statement derive from continuing operations.
The notes form an integral part of these Unaudited Condensed Consolidated
Interim Financial Statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 December 2016
31.12.2016 30.06.2016
(Unaudited) (Audited)
Assets Note GBP GBP
Non-current assets
Mortgage loans 5 306,061,483 302,251,423
Reserve fund 6 4,739,400 4,739,400
Total non-current assets 310,800,883 306,990,823
Current assets
Mortgage loans 5 1,650,163 1,334,277
Trade and other receivables 7 2,486,605 4,792,524
Cash and cash equivalents 8 171,863,352 194,218,249
Total current assets 176,000,120 200,345,050
Total assets 486,801,003 507,335,873
Liabilities
Non-current liabilities
Loan notes 15 252,702,008 261,784,493
Total non-current liabilities 252,702,008 261,784,493
Current liabilities
Financial liabilities at fair value through 2,828,275 4,077,975
profit and loss
Trade and other payables 9 2,024,642 4,110,140
Total current liabilities 4,852,917 8,188,115
Total liabilities 257,554,925 269,972,608
Net assets 229,246,078 237,363,265
Equity
Share capital account 245,000,000 245,000,000
Other reserves (15,753,922) (7,636,735)
Total equity 229,246,078 237,363,265
Ordinary shares in issue 250,000,000 250,000,000
Net Asset Value per ordinary share 4 0.9170 0.9495
The Unaudited Condensed Consolidated Interim Financial Statements were approved
and authorised for issue by the Board of Directors on 21 March 2017 and signed
on its behalf by:
Christopher Waldron
Chairman
Paul Le Page
Director
The notes form an integral part of these Unaudited Condensed Consolidated
Interim Financial Statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period from 1 July 2016 to 31 December 2016
Share Other Total
capital
account reserves equity
(Unaudited) (Unaudited) (Unaudited)
GBP GBP GBP
Balance at 1 July 2016 245,000,000 (7,636,735) 237,363,265
Dividend paid - (7,500,000) (7,500,000)
Total comprehensive loss for the - (617,187) (617,187)
period
Balance at 31 December 2016 245,000,000 (15,753,922) 229,246,078
Share Other Total
capital
account reserves equity
(Unaudited) (Unaudited) (Unaudited)
GBP GBP GBP
Balance at 10 June 2015 - - -
Issue of shares 250,000,000 - 250,000,000
Share issue costs (5,000,000) - (5,000,000)
Total comprehensive loss for the - (454,938) (454,938)
period
Balance at 31 December 2015 245,000,000 (454,938) 244,545,062
The notes form an integral part of these Unaudited Condensed Consolidated
Interim Financial Statements.
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the period from 1 July 2016 to 31 December 2016
For the For the
period from period from
01.07.2016 to 10.06.2015 to
31.12.2016 31.12.2015
(Unaudited) (Unaudited)
Note GBP GBP
Cash flows from operating activities
Total comprehensive loss for the (617,187) (454,938)
period
Adjustments for:
Amortisation adjustment under 5 436,019 186,514
effective interest rate method
Decrease/(increase) in trade and other 2,305,919 (891,968)
receivables
Unrealised (gain)/loss on financial (1,249,700) 689,335
liabilities at fair value through
profit and loss
Increase in margin account - (3,000,000)
(Decrease)/increase in trade and other (2,085,498) 1,634,219
payables
Amortised borrowing charges released 5 19,825 13,971
Purchase of mortgage loans 5 (11,563,225) (316,395,593)
Mortgage loans repaid 5 6,981,435 2,109,320
Net cash outflow from operating (5,772,412) (316,109,140)
activities
Cash flows from financing activities
Proceeds from issue of ordinary shares - 246,153,156
Share issue costs - (1,098,538)
Proceeds from borrowings - 94,762,500
Increase in issue fees amortised 326,825 -
Repayments of loan notes (9,409,310) -
Dividend paid (7,500,000) -
Net cash (outflow)/inflow from (16,582,485) 339,817,118
financing activities
(Decrease)/increase in cash and cash (22,354,897) 23,707,978
equivalents
Cash and cash equivalents at beginning of 194,218,249 -
period
Cash and cash equivalents at end of 171,863,352 23,707,978
period
The notes form an integral part of these Unaudited Condensed Consolidated
Interim Financial Statements.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
for the period from 1 July 2016 to 31 December 2016
1. General Information
The Company was incorporated with limited liability in Guernsey, as a
closed-ended investment company on 10 June 2015. The Company's Shares were
listed with the UK Listing Authority and admitted to trading on the Specialist
Fund Segment of the London Stock Exchange on 7 July 2015.
The Unaudited Condensed Consolidated Interim Financial Statements comprise the
financial statements of UK Mortgages Limited, UK Mortgages Corporate Funding
Designated Activity Company, Malt Hill No.1 Plc (UK based company), and
Cornhill Mortgages No.1 Limited (UK based company currently in liquidation) and
Cornhill Mortgages No.2 Limited (UK based company) as at 31 December 2016,
together referred to as the "Group".
The Group's investment objective is to provide Shareholders with access to
stable income returns through the application of relatively conservative levels
of leverage to portfolios of UK mortgages.
The Group expects that income will constitute the vast majority of the return
to Shareholders and that the return to Shareholders will have relatively low
volatility and demonstrate a low level of correlation with broader markets.
The Portfolio Manager to the Company and Portfolio Adviser to the UK Mortgages
Corporate Funding Designated Activity Company is TwentyFour Asset Management
LLP.
2. Accounting Policies
a) Statement of compliance
The Unaudited Condensed Consolidated Interim Financial Statements for the
period from 1 July 2016 to 31 December 2016 have been prepared on a going
concern basis in accordance with IAS 34 "Interim Financial Reporting", the
Listing Rules of the London Stock Exchange and applicable legal and regulatory
requirements.
The Unaudited Condensed Consolidated Interim Financial Statements should be
read in conjunction with the Annual Consolidated Financial Statements for the
period ended 30 June 2016 which were prepared in accordance with International
Financial Reporting Standards ("IFRS") and which received an unqualified audit
report.
b) Changes in accounting policy
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) Critical judgements and estimates
In the current financial period, there have been no changes to the significant
critical accounting judgements, estimates and assumptions from those applied in
the most recent audited annual financial statements.
3. Loss per Ordinary Share - basic & diluted
The loss per Ordinary Share of GBP0.002 (31 December 2015: GBP0.002) - basic and
diluted has been calculated based on the weighted average number of Ordinary
Shares of 250,000,000 (31 December 2015: 217,073,171) and a net loss of GBP
617,187 (31 December 2015: GBP454,938).
4. Net Asset Value per Ordinary Share
The Net Asset Value of each share of GBP0.9170 (30 June 2016: GBP0.9495) is
determined by dividing the net assets of the Company GBP229,246,078 (30 June
2016: GBP237,363,265) by the number of shares in issue at 31 December 2016 of
250,000,000 (30 June 2016: 250,000,000).
5. Mortgage loans
For the For the
period from period from
01.07.2016 to 10.06.2015 to
31.12.2016 30.06.2016
(Unaudited) (Audited)
GBP GBP
Mortgage loans at start of the period 303,585,700 -
Mortgage loans purchased 11,563,225 316,395,593
Amortisation adjustment under effective interest rate (436,019) (669,501)
method
Mortgage loans repaid (6,981,435) (12,411,333)
Borrowings charges amortised - 297,374
Amortised borrowing charges released (19,825) (26,433)
Mortgage loans at end of the period 307,711,646 303,585,700
Amounts falling due after more than one year 306,061,483 302,251,423
Amounts falling due within one year 1,650,163 1,334,277
307,711,646 303,585,700
Mortgage loans at 31 December 2016 comprise of one securitised mortgage
portfolio legally held in Malt Hill No.1 Plc and one mortgage portfolio held
with Cornhill Mortgages No. 2 Limited. Please refer to the Portfolio of
Investments for breakdown of both portfolios.
Note 12 sets out the liquidity and credit risk profile of the mortgage loans.
6. Reserve fund
As at As at
31.12.2016 30.06.2016
(Unaudited) (Audited)
GBP GBP
Reserve fund 4,739,400 4,739,400
4,739,400 4,739,400
The reserve fund is held with Citibank N.A. London Branch within the
securitisation structure. The Group is required to maintain this reserve and it
is not readily available to the Group and may only be used in accordance with
the Issue and Programme Documentation.
7. Trade and other receivables
As at As at
31.12.2016 30.06.2016
(Unaudited) (Audited)
GBP GBP
Collateral due from BNP Paribas - 3,000,000
Interest receivable on mortgage loans 821,469 834,356
Capitalised expenses 1,319,489 621,517
Other receivables and prepayments 345,180 332,123
Interest receivable on cash and cash equivalents 467 4,528
2,486,605 4,792,524
Capitalised expenses are the set up costs of Cornhill Mortgages No. 2 Limited,
which are being amortised over 3 years.
8. Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise
the following balances with original maturity of less than 90 days.
As at As at
31.12.2016 30.06.2016
(Unaudited) (Audited)
GBP GBP
Cash at bank 169,938,915 182,970,882
Short-term deposits 1,924,437 11,247,367
171,863,352 194,218,249
The short-term deposits are investments into a BlackRock-managed institutional
money-market fund - "Institutional Cash Series Plc - Institutional Sterling
Liquidity Fund".
9. Trade and other payables
As at As at
31.12.2016 30.06.2016
(Unaudited) (Audited)
GBP GBP
Portfolio management fees payable 881,648 1,348,312
Interest expense on loan notes payable 429,012 390,507
Loan notes issue costs payable 280,914 1,975,461
Audit fees payable 133,126 85,000
Mortgage loans servicing fees 70,942 55,441
payable
Legal & professional fees payable 53,112 74,508
General expenses payable 52,744 29,304
Administration & secretarial fees payable 42,427 27,389
Directors' fees payable 26,875 20,568
AIFM fees payable 24,914 25,804
Commitment facility fees payable 13,564 -
Depositary fees payable 11,514 51,362
Custody fees payable 3,850 26,484
2,024,642 4,110,140
10. Related Parties
a) Directors' Remuneration & Expenses
The Directors of the Company are remunerated for their services at such a rate
as the Directors determine. The aggregate fees of the Directors will not exceed
GBP200,000.
The annual Directors' fees comprise GBP30,000 payable to Mr Waldron, the
Chairman, GBP27,500 to Mr Le Page as Chairman of the Audit Committee, and GBP25,000
each to Mrs Green and Mr Burrows. During the period ended 31 December 2016,
Directors' fees of GBP53,750 (31 December 2015: GBP40,063) were charged to the
Company, of which GBP26,875 remained payable at the end of the period (30 June
2016: GBP20,568).
b) Shares held by related parties
As at 31 December 2016, Directors of the Company held the following shares in
the Company beneficially:-
Directors' and Other Interests
Number of
Shares
31.12.2016
Christopher Waldron 5,000
Richard Burrows 5,000
Paul Le Page 20,000
Helen Green -
As at 31 December 2016, the Portfolio Manager held Nil shares (30 June 2016:
Nil) and partners and employees of the Portfolio Manager held 8,040,076 shares
(30 June 2016: 8,040,076), which is 3.22% of the issued share capital (30 June
2016: 3.22%).
c) Portfolio Manager
The portfolio management fee is payable to the Portfolio Manager quarterly on
the last business day of the quarter at a rate of 0.75% per annum of the lower
of NAV, which is calculated monthly on each valuation day, or market
capitalisation of each class of shares. For the period beginning six months
after admission and ending when at least 75% of the net proceeds have been
contractually exposed to mortgage portfolios, the amount of the net proceeds
which have not been contractually exposed to mortgage portfolios will be
deducted from the NAV and the market capitalisation for the purposes of
calculating the fee payable to the Portfolio Manager.
The Company has also agreed to pay a marketing fee equal to 12.5% of the
Placing commission calculated and payable to Numis Securities Limited ("Numis")
in respect of the issue and each Placing whether under the Placing Programme or
otherwise, to the Portfolio Manager in respect of its marketing activities.
Total portfolio management fees for the period amounted to GBP881,648 (31
December 2015: GBP897,278) of which GBP881,648 (30 June 2016: GBP1,348,312) remained
payable at the period end. The Portfolio Management Agreement dated 23 June
2015 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 are entitled to
immediately terminate the agreement in writing.
11. Material Agreements
a) Alternative Investment Fund Manager
The Company's Alternative Investment Fund Manager (the "AIFM") is Maitland
Institutional Services Limited. In consideration for the services provided by
the AIFM under the AIFM Agreement the AIFM is entitled to receive from the
Company a minimum fee of GBP20,000 per annum and fees payable quarterly in
arrears at a rate of 0.07% of the NAV of the Company below GBP50 million, 0.05%
on Net Assets between GBP50 million and GBP100 million and 0.03% on Net Assets in
excess of GBP100 million. During the period ended 31 December 2016, AIFM fees of
GBP48,582 (31 December 2015: GBP50,474) were charged to the Company, of which GBP
24,914 (30 June 2016: GBP25,804) 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 GBP100 million, 0.05% on net assets between
GBP100 million and GBP200 million and 0.04% on net assets in excess of GBP200 million
as at the last business day of the month subject to a minimum GBP75,000 per
annum. These NAV based fees commenced from 19 November 2015 being the date the
Company acquired its initial investment.
In addition, an annual fee of GBP45,000 will be charged for corporate governance
and company secretarial services and accounting services. Total administration
and secretarial fees for the period amounted to GBP89,241 (31 December 2015: GBP
42,664) of which GBP42,427 (30 June 2016: GBP27,389) remained payable at the period
end.
c) Depositary and Custodian
Depositary fees are payable to Northern Trust (Guernsey) Limited, monthly in
arrears, at a rate of 0.03% of the NAV of the Company as at the last business
day of the month subject to a minimum GBP40,000 per annum. Total depositary fees
and charges for the period amounted to GBP40,858 (31 December 2015: GBP37,200) of
which GBP11,514 (30 June 2016: GBP51,362) remained payable at the period end.
The Depositary will charge an additional fee of GBP20,000 for performing due
diligence on each service provider/administrator employed.
The Depositary is also entitled to a custody fee at a rate of 0.03% of the NAV
of the Company as at the last business day of the month subject to a minimum of
GBP8,500 per annum. These NAV based fees commenced on 19 November 2015 being the
date Company acquired its initial investment. Total custody fees for the period
amounted to GBP31,058 (31 December 2015: GBP11,684) of which GBP3,850 (30 June 2016:
GBP26,484) remained payable at the period end.
d) Commitment facility fee
The commitment facility fee is an undrawn fee on the loan facility between
Cornhill No 2 Limited and the Royal Bank of Scotland plc. This is charged at
90bps on the initial warehouse size of GBP150m. The drawn costs are 180bps over
1 month LIBOR initially, changing to 280bps over 1 month LIBOR from 1 January
2017.
e) IPO Sponsor's and Placing Agreement
In connection with the Company's IPO, the Company engaged the services of Numis
to act as corporate broker, co-ordinators, placement agents, arrangers and
sponsors in connection with the issue of the Ordinary Shares ("the Issue") and
the application for Admission.
The Company agreed to pay Numis:
- a corporate finance fee of GBP200,000, and
- a Placing commission equal to 2% of the gross proceeds of the Issue less (i)
an amount equal to reasonably and properly incurred costs payable by the
Company in respect of the Issue, Placing Programme and the Trading Applications
and agreed in advance with Numis and (ii) an amount equal to the marketing fee
payable to the Portfolio Manager. Total Issue fees amounted to GBP5,000,000 of
which GBPNil (30 June 2016: GBP54,618) is due and payable at the period end. The
Sponsor and Placing agreement is governed by the laws of England. The Company
also agreed to pay Numis an annual retainer fee of GBP50,000 of which nil
remained payable at the period end. The charge for the period was GBP25,147 (30
June 2016: GBP48,907).
12. Financial Risk Management
The Group's objective in managing risk is the creation and protection of
shareholder value. Risk is inherent in the Group's activities, but it is
managed through an ongoing process of identification, measurement and
monitoring.
The Group's financial instruments include financial assets or liabilities at
fair value through profit and loss, loans and receivables, and cash and cash
equivalents. The main risks arising from the Group's financial instruments are
market risk, liquidity risk, and credit risk. The techniques and instruments
utilised for the purposes of portfolio management are those which are
reasonably believed by the Board to be economically appropriate to the
efficient management of the Group.
On 8 July 2016, the Group agreed an arrangement with The Mortgage Lender to
purchase up to GBP250m of newly-originated owner-occupied mortgages over an
expected 12 to 14 month period. The Company has the option to purchase up to GBP
1bn of mortgages over a 5 year period.
Market risk
Market risk embodies the potential for both losses and gains and includes
interest rate risk, price risk and currency risk. The Group's strategy on the
management of market risk is driven by the Group's investment objective. The
Group's investment objective is to provide investors with access to stable
income returns through the application of relatively conservative levels of
leverage to portfolios of UK mortgage loans.
In July 2016, the Group agreed upon a second transaction, which was with The
Mortgage Lender, to purchase up to GBP250m of newly-originated mortgages over an
expected 12 to 14 month period. Once purchased by the Warehouse SPV, the Group
intends to securitise this second mortgage portfolio.
1.1 Interest rate risk: Interest rate risk is the risk that the value of
financial instruments will fluctuate due to changes in market interest rates.
The current underlying mortgage portfolios are payable on fixed rates, meaning
the current exposure to interest rate fluctuations on the portfolios are
limited. However, floating rate interest is payable on loan notes. In order to
hedge this differential, interest rate swaps were transacted by the Warehouse
SPVs with a market counterparty to pay the fixed rate and receive the floating
rate payments. On 2 June 2016, the interest rate swap transacted by Cornhill
No. 1 plc was novated to the Issuer SPV on securitisation of the mortgage
portfolio.
The below tables show exposure to interest rate risk:
Non Total as at
interest
Floating rate Fixed rate bearing 31.12.2016
GBP GBP GBP GBP
Assets (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Mortgage loans - 307,711,646 - 307,711,646
Reserve fund 4,739,400 - - 4,739,400
Trade and other 821,936 - 1,664,669 2,486,605
receivables
Cash and cash 171,863,352 - - 171,863,352
equivalents
Total assets 177,424,688 307,711,646 1,664,669 486,801,003
Liabilities
Financial liabilities at (2,828,275) - - (2,828,275)
fair value through
profit and loss
Trade and other payables - - (2,024,642) (2,024,642)
Loan notes (252,702,008) - - (252,702,008)
Total liabilities (255,530,283) - (2,024,642) (257,554,925)
Total interest (78,105,595) 307,711,646 (359,973) 229,246,078
sensitivity gap
Non Total as at
interest
Floating rate Fixed rate bearing 30.06.2016
GBP GBP GBP GBP
Assets (Audited) (Audited) (Audited) (Audited)
Mortgage loans - 303,585,700 - 303,585,700
Reserve fund 4,739,400 - - 4,739,400
Trade and other 838,884 - 3,953,640 4,792,524
receivables
Cash and cash 194,218,249 - - 194,218,249
equivalents
Total assets 199,796,533 303,585,700 3,953,640 507,335,873
Liabilities
Financial liabilities at (4,077,975) - - (4,077,975)
fair value through
profit and loss
Trade and other payables - - (4,110,140) (4,110,140)
Loan notes (261,784,493) - - (261,784,493)
Total liabilities (265,862,468) - (4,110,140) (269,972,608)
Total interest (66,065,935) 303,585,700 (156,500) 237,363,265
sensitivity gap
If interest rates were to change by 50 basis points, with all other variables
remaining constant, the effect on the net profit and equity would have been as
shown in the table below. The movement has been calculated on the notional
amount of the swaps of GBP301,920,272 which is not shown in the table above.
These percentages have been determined based on potential volatility and are
deemed reasonable by the Directors.
31.12.2016
GBP
Increase of 50 basis 1,119,073
points
Decrease of 50 basis (1,119,073)
points
30.06.2016
GBP
Increase of 50 basis 1,175,104
points
Decrease of 50 basis (1,175,104)
points
1.2 Price risk: An active market does not exist in the underlying instruments
based on the illiquidity of the mortgage loans, and for this reason the
mortgage portfolios are accounted for on an amortised cost basis by an
independent third party valuation provider. Any such valuation may therefore
differ from the actual realisable market value of the relevant mortgage
portfolio.
The interest rate swap hedge trade is valued on a fair value mark-to-market
basis by the swap counterparty, using the observable information on swap rates.
The difference in fair value of the interest rate swap and amortised cost
valuation of the mortgage loans could lead to volatility in the Group's NAV.
1.3 Currency risk: As at 31 December 2016, the Group had no material exposure
to foreign exchange fluctuations or changes in foreign currency interest rates.
Consequently there is no material movement in assets and liabilities arising
from foreign exchange fluctuations.
Liquidity Risk
Liquidity risk is the risk that the Group will not have sufficient resources
available to meet its liabilities as and when they fall due. The company makes
its investments by purchasing Profit Participating Notes issued by the
Acquiring Entity. The Acquiring Entity is bound by EU securities law and will
be unable to fully liquidate, sell, hedge or otherwise mitigate its credit risk
under or associated with the Retention Notes issued by the Warehouse SPV or
Issuer SPV until such time as the securities of the relevant Issuer SPV have
been redeemed in full (whether at final maturity or early redemption). This
places limitations on the Group's ability to redeem the Profit Participating
Notes issued by the Acquiring Entity. It is not expected that any party will
make a secondary market in relation to the Retention Notes, and that there will
usually be a limited market for the Retention Notes. Any partial sales of
Retention notes would need to be negotiated on a private counterparty to
counterparty basis and could result in a liquidity discount being
applied. There may be additional restrictions on divestment in the terms and
conditions of the underlying investments. The illiquidity of the Retention
Notes may therefore adversely affect the value of the Profit Participating
Notes in the event of a forced sale which would, in turn, adversely affect the
Group's business, business prospects, financial condition, returns to
Shareholders including dividends, NAV and/or the market price of the shares.
During the warehousing phase the Group's mortgage loans advanced are illiquid
and may be difficult or impossible to realise for cash at short notice. At the
period end, the TML mortgage portfolio was in the warehousing phase.
The Group manages its liquidity risk through short term and long term cash flow
forecasts to ensure it is able to meet its obligations. In addition, the Group
is permitted to borrow up to 10% of NAV for short term liquidity purposes,
including financing share repurchases or redemptions, making investments or
satisfying working capital requirements. This can be either through a loan
facility or other types of collateralised borrowing instruments including stock
lending or repurchase transactions.
Less than More than Total as at
one year one year 31.12.2016
GBP GBP GBP
Assets (Unaudited) (Unaudited) (Unaudited)
Mortgage loans 1,650,163 306,061,483 307,711,646
Reserve fund - 4,739,400 4,739,400
Trade and other receivables 2,486,605 - 2,486,605
Cash and cash equivalents 171,863,352 - 171,863,352
Total assets 176,000,120 310,800,883 486,801,003
Liabilities
Financial liabilities at fair value through 2,828,275 - 2,828,275
profit and loss
Trade and other 2,024,642 - 2,024,642
payables
Loan notes - 252,702,008 252,702,008
Total liabilities 4,852,917 252,702,008 257,554,925
Less than More than Total as at
one year one year 30.06.2016
GBP GBP GBP
Assets (Audited) (Audited) (Audited)
Mortgage loans 1,334,277 302,251,423 303,585,700
Reserve fund - 4,739,400 4,739,400
Trade and other receivables 4,792,524 - 4,792,524
Cash and cash equivalents 194,218,249 - 194,218,249
Total assets 200,345,050 306,990,823 507,335,873
Liabilities
Financial liabilities at fair value through 4,077,975 - 4,077,975
profit and loss
Trade and other payables 4,110,140 - 4,110,140
Loan notes - 261,784,493 261,784,493
Total liabilities 8,188,115 261,784,493 269,972,608
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail
to discharge an obligation or commitment that it has entered into with the
Group.
The Group's primary fundamental credit risk exposure is to borrowers of the
underlying mortgages, with the risk of borrowers defaulting on interest and
principal payments. The Portfolio Manager manages the reduction of borrower
credit risk with extensive due diligence on portfolios conducted by internal
and external analysts and stress testing.
The Group also has credit risk to the counterparty with which the Warehouse or
Issuer SPV transacts the derivative trades for hedging purposes, or to gain,
increase or decrease exposure to mortgages. Default by any hedging counterparty
in the performance of its obligations could subject the investments to unwanted
credit risks. The Portfolio Manager manages the reduction of credit risk
exposure to the derivative counterparty through ongoing credit analysis of the
counterparty in addition to implementing clauses into derivative transactions
whereby collateral is required to be posted upon a downgrade of the
counterparty's credit rating. The current credit rating of the counterparty is
A+.
The Group's exposure to the credit risk of cash and deposit holders defaulting
is managed through the use of investments into money market funds, to diversify
cash holdings away from single custodians. Money market fund vehicles are
chosen after extensive due diligence focusing on manager performance, controls
and track record. Currently the cash is held with Northern Trust London (credit
rating A+ per Standards and Poor). The money market fund is held in a
BlackRock-managed institutional money-market fund - "Institutional Cash Series
Plc - Institutional Sterling Liquidity Fund" and their current rating is AAAm
from Standards and Poor. The reserve fund is held with Citibank N.A. London
Branch (credit rating A+ per Standards and Poor).
There are no past due or impaired loans. The current indexed loan to value
ratio in order to give an indication of credit quality is as follows:
As at As at
31.12.2016 30.06.2016
Loan to value GBP GBP
0-49% 24,451,295 23,144,367
50-75% 222,694,021 224,149,399
75-100% 55,197,663 49,944,688
Premium on purchase less EIR 5,368,667 6,347,246
adjustment
307,711,646 303,585,700
13. Analysis of Financial Assets and Liabilities by Measurement Basis
Financial Assets at Financial
Assets
fair value through at amortised
profit and loss cost Total
GBP GBP GBP
31 December 2016 (Unaudited) (Unaudited) (Unaudited)
Financial Assets as per Unaudited
Condensed Consolidated Statement of
Financial Position
Mortgage loans - 307,711,646 307,711,646
Reserve fund - 4,739,400 4,739,400
Cash and cash equivalents - 171,863,352 171,863,352
Trade and other receivables - 2,486,605 2,486,605
- 486,801,003 486,801,003
Financial Financial
Liabilities at
fair value through Liabilities at
profit and loss amortised cost Total
Financial Liabilities as per GBP GBP GBP
Unaudited Condensed Consolidated
Statement of Financial Position (Unaudited) (Unaudited) (Unaudited)
Financial liabilities at fair value 2,828,275 - 2,828,275
through profit and loss
Trade and other payables - 2,024,642 2,024,642
Loan notes - 252,702,008 252,702,008
2,828,275 254,726,650 257,554,925
Financial Assets at Financial
Assets
fair value through at amortised
profit and loss cost Total
GBP GBP GBP
30 June 2016 (Audited) (Audited) (Audited)
Financial Assets as per Audited
Consolidated Statement of Financial
Position
Mortgage loans - 303,585,700 303,585,700
Reserve fund - 4,739,400 4,739,400
Cash and cash equivalents - 194,218,249 194,218,249
Trade and other receivables - 4,792,524 4,792,524
- 507,335,873 507,335,873
Financial Financial
Liabilities at
fair value through Liabilities at
profit and loss amortised cost Total
Financial Liabilities as per Audited GBP GBP GBP
Consolidated Statement of Financial
Position (Audited) (Audited) (Audited)
Financial liabilities at fair value 4,077,975 - 4,077,975
through profit and loss
Trade and other payables - 4,110,140 4,110,140
Loan notes - 261,784,493 261,784,493
4,077,975 265,894,633 269,972,608
14. Fair Value Measurement
IFRS 13 requires the Group 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 Group's
financial assets and liabilities (by class) measured at fair value for the
period ended 31 December 2016 and the period ended 30 June 2016.
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Liabilities (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Financial liabilities at - (2,828,275) - (2,828,275)
fair value through
profit and loss
Total liabilities as at
31 December 2016 - (2,828,275) - (2,828,275)
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Liabilities (Audited) (Audited) (Audited) (Audited)
Financial liabilities at - (4,077,975) - (4,077,975)
fair value through
profit and loss
Total liabilities as at
30 June 2016 - (4,077,975) - (4,077,975)
The following table analyses within the fair value hierarchy the Group's assets
and liabilities not measured at fair value at 31 December 2016 but for which
fair value is disclosed.
Level 1 Level 2 Level 3 Total
31.12.2016 31.12.2016 31.12.2016 31.12.2016
GBP GBP GBP GBP
Assets (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Mortgage loans - - 303,830,413 303,830,413
Reserve fund - 4,739,400 - 4,739,400
Cash and cash equivalents - 171,863,352 - 171,863,352
Trade and other - 2,486,605 - 2,486,605
receivables
Total - 179,089,357 303,830,413 482,919,769
Liabilities
Trade and other payables - 2,024,642 - 2,024,642
Loan notes - 252,702,008 - 252,702,008
Total - 254,726,650 - 254,726,650
Level 1 Level 2 Level 3 Total
30.06.2016 30.06.2016 30.06.2016 30.06.2016
GBP GBP GBP GBP
Assets (Audited) (Audited) (Audited) (Audited)
Mortgage loans - - 303,314,760 303,314,760
Reserve fund - 4,739,400 - 4,739,400
Cash and cash equivalents - 194,218,249 - 194,218,249
Trade and other - 4,792,524 - 4,792,524
receivables
Total - 203,750,173 303,314,760 507,064,933
Liabilities
Trade and other payables - 4,110,140 - 4,110,140
Loan notes - 261,784,493 - 261,784,493
Total - 265,894,633 - 265,894,633
The value of the mortgage loans is calculated through a shadow securitisation
structure based on existing deals with current and transparent pricing.
The other assets and liabilities included in the above table are carried at
amortised cost; their carrying values are a reasonable approximation of fair
value. Cash and cash equivalents include cash in hand and short-term deposits
with original maturities of three months or less.
15. Loan notes
The Malt Hill No.1 Plc mortgage portfolio acquisition is partially financed by
the issue of notes. The notes are repaid as the underlying mortgage loans
repay. The terms and conditions of the notes provide that the note holders will
receive interest and principal only to the extent that sufficient funds are
generated from the underlying mortgage loans. The priority and amount of claims
on the portfolio proceeds are determined in accordance with strict priority of
payments. Note holders have no recourse to the Company in any form.
The Malt Hill No.1 Plc completed the public sale of GBP263.3m of AAA-rated bonds
on 26 May 2016. The AAA notes were issued with a coupon of 3 month LIBOR plus
1.35% which is payable quarterly and are listed on the Irish Stock Exchange.
The issue fees on loan notes will be amortised over the expected life of the
loan notes, which is 3 years, being the call date.
As at As at
31.12.2016 30.06.2016
(Unaudited) (Audited)
GBP GBP
Loan notes due 27 Aug 2053 253,890,690 263,300,000
Issue fees amortised (1,188,682) (1,515,507)
252,702,008 261,784,493
Interest expense on loan notes for the period amounted to GBP2,384,147.
16. Dividend Policy
The Company has declared the following interim dividends in relation to the
period to 31 December 2016:
Period to Dividend Net Record date Ex-dividend Pay date
rate per dividend date
Share payable
(pence) (GBP)
30 September 1.5 3,750,000 21 October 20 October 31 October
2016 2016 2016 2016
31 December 2016 1.5 3,750,000 20 January 19 January 31 January
2017 2017 2017
For the 2017 financial year and onwards, it is intended that dividends on the
Ordinary Shares will be payable quarterly, all in the form of interim dividends
(the Company does not intend to pay any final dividends). It is intended that
the first three interim dividends of each financial year will be paid at a
minimum of 1.5p per Ordinary Share with the fourth interim dividend of each
financial year including an additional amount such that a significant majority
of the Company's net income for that financial year is distributed to
Shareholders.
The Board reserves the right to retain within a revenue reserve a proportion of
the Company's net income in any financial year, such reserve then being
available at the Board's absolute discretion for subsequent distribution to
Shareholders. The Company may offer Shareholders the opportunity to elect to
receive dividends in the form of further Ordinary Shares.
Under Guernsey law, companies can pay dividends in excess of accounting profit
provided they satisfy the solvency test prescribed by The Companies (Guernsey)
Law, 2008. The 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
solvency test for each dividend paid.
17. Ultimate Controlling Party
In the opinion of the Directors on the basis of shareholdings advised to them,
the Company has
no ultimate controlling party.
18. Subsequent Events
The second interim dividend for year ending 30 June 2017 of 1.5p per Ordinary
Share was declared on 11 January 2017 and paid from the capital of the Company
on 31 January 2017.
Cornhill Mortgage No.1 Limited is currently in liquidation as the mortgage
portfolio held has been securitised. At the date of approval of the Unaudited
Condensed Consolidated Interim Financial Statements, this entity has not yet
been fully liquidated.
On 21 Feb 2017 the Company purchased a pool of approximately GBP590.5m UK
predominantly Buy-to-Let Mortgages.
These Unaudited Condensed Consolidated Interim Financial Statements were
approved for issuance by the Board on 21 March 2017. There were no subsequent
events, apart from those mentioned above until this date.
GLOSSARY OF TERMS
Acquiring Entity means UK Mortgages Corporate Funding
Designated Activity Company, a
designated activity company incorporated
in Ireland qualifying within the meaning
of section 110 of the Taxes
Consolidation Act 1997 to acquire
mortgage portfolios for on-selling to
Warehouse SPVs and issuing PPNs
Administrator Northern Trust International Fund
Administration Services (Guernsey)
Limited (a non-cellular company limited
by shares incorporated in the Island of
Guernsey with registered number 15532)
AIC Association of Investment Companies
AIC Code the AIC Code of Corporate Governance for
companies incorporated in Guernsey
AIC Guide the AIC Guide to Corporate Governance
AIFM or Maitland Maitland Institutional Services Limited,
the Company's alternative investment
fund manager for the purposes of
regulation 4 of the AIFM Regulations
Amortised Cost Accounting The process by which mortgages in the
Company's portfolio are valued at cost
less capital repayments and any
provisions required for impairment.
Audit Committee an operating committee of the Board of
Directors charged with oversight of
financial reporting and disclosure
Audited Consolidated Financial Audited Consolidated Financial
Statements Statements of the Group
BoAML the Bank of America Merrill Lynch
Board of Directors or Board or the Directors of the Company
Directors
Class A Notes means the Class A Mortgage Backed
Floating Rate Notes issued by the Issuer
and admitted to trading on the Irish
Stock Exchange
Company UK Mortgages Limited
Company's Articles or Articles the articles of incorporation of the
Company
Continuation Vote An ordinary resolution that gives
shareholders the ability to instruct the
board to prepare a proposal to
restructure or wind up a company by
means of a simple majority vote.
Corporate Broker Numis Securities Limited
CRS The Common Reporting Standard, a global
standard for the automatic exchange of
financial account information developed
by OECD
Custodian and Depositary Northern Trust (Guernsey) Limited (a
non-cellular company limited by shares
incorporated in the Island of Guernsey
with registered number 2651)
Derivative Instruments means instruments used to gain leveraged
exposure to mortgage portfolios,
including but not limited to Credit
Linked Notes and Credit Default Swaps
DAC UK Mortgages Corporate Funding
Designated Activity Company an
independently managed, Dublin based,
section 110 designated activity company
that is responsible for the warehousing
and securitisation of mortgage
portfolios under the supervision of TFAM
the investment adviser. DAC is wholly
financed by the Company via Profit
Participating Notes and distributes
substantially all of its profits to the
Company thereby qualifying for a reduced
rate of taxation, commonly known as a
Eurobond exemption. From a financial
reporting perspective DAC is
consolidated with the Company as it
provides its services exclusively to the
Company
FFI Foreign Financial Institution
FRC the Financial Reporting Council
GFSC Code Code of Corporate Governance issued by
the Guernsey Financial Services
Commission
Government and Public Securities means per the FCA definition, the
investment, specified in article 78 of
the Regulated Activities Order
(Government and public securities),
which is in summary: a loan stock, bond
government and public security FCA PRA
or other instrument creating or
acknowledging indebtedness, issued by or
on behalf of:
(a) the government of the United
Kingdom; or
(b) the Scottish Administration; or
(c) the Executive Committee of the
Northern Ireland Assembly; or
(d) the National Assembly of Wales; or
(e) the government of any country or
territory outside the United Kingdom; or
(f) a local authority in the United
Kingdom or elsewhere; or
(g) a body the members of which
comprise: (i) States including the
United Kingdom or another EEA State; or
(ii) bodies whose members comprise
States including the United Kingdom or
another EEA State; but excluding: (A)
the instruments specified in article 77
(2)(a) to (d) of the Regulated
Activities Order; (B) any instrument
creating or acknowledging indebtedness
in respect of: (I) money received by the
Director of Savings as deposits or
otherwise in connection with the
business of the National Savings Bank;
or (II) money raised under the National
Loans Act 1968 under the auspices of the
Director of Savings or treated as so
raised under section 11(3) o
Group means the Company, Acquiring Entity,
Issuer SPV and Warehouse SPVs
IFRS International Financial Reporting
Standards
Investment Company a company whose main business is holding
securities for investment purposes
Internal Control a process for assuring achievement of an
organisation's objectives in operational
effectiveness and efficiency, reliable
financial reporting, and compliance with
laws, regulations and policies
IPO, Initial Public Offering means the initial public offering of
shares in the Company on the specialist
fund segment of the London Stock
Exchange
IPD Interest Payment Date
IRR internal rate of return: the annualised
return generated by the expected
interest and principal cash-flows over
the life of the investment
IRS the US Internal Revenue Service
Issue means together the Placing and the Offer
(or as the context requires both of them
Issuer SPVs means special purpose vehicles
established for the specific purpose of
securitisation and issuing Retention
Notes for purchase by the Acquiring
Entity
Junior Note These notes have the lowest priority
claim on capital and income from the
securitisation SPV and offer the highest
potential returns in exchange for
bearing the first loss experienced by
the SPV.
Loan Financing Facility means a facility in terms of which
ongoing finance is provided by Bank of
America Merrill Lynch International
Limited for a period of up to 2 years
LSE London Stock Exchange plc (a company
registered in England and Wales with
registered number 2075721)
LTV means Loan to Value
Mortgage Pool/ Mortgage Portfolio The underlying mortgage loans that
produce the income for the securitised
portfolios.
NAV means net asset value
OECD the Organisation for Economic
Co-operation and Development
Offer means the offer for subscription of
Ordinary Shares at 1 pence each to the
public in the United Kingdom on the
terms and conditions set out in Part 12
of the Prospectus and the Application
Form
Official List in reference to DAC and Issuer SPV
refers to the official list of the Irish
Stock Exchange p.l.c
In reference to the Company refers to
the official list of the London Stock
Exchange
Ordinary Shares ordinary shares of 100p each in the
capital of the Company
Placing means the conditional placing by the
Corporate Broker, as agent for the
Company, of up to 250 million ordinary
shares at 1 pence each on the terms and
conditions set out or referred to in the
placing documents, being the Prospectus,
the Presentation, the P Proof, the
flyer, the press announcements, the
contract note, any other document
prepared in connection with the
pre-marketing of the issue or the
placing programme
Portfolio Manager TwentyFour Asset Management LLP (a
limited liability partnership
incorporated in England and Wales with
registered number OC335015)
Profit Participating Notes/PPN these are Eurobond notes issued by DAC
to the Company. The capital paid by the
Company to DAC to buy the notes is
invested in mortgage pools and DAC in
turn pays income to the Company via
coupon payments on the notes
Rating Agency companies that assess the
creditworthiness of both debt securities
and their issuers, for these purposes
Standard and Poor's, Moody's and Fitch
Retention Notes means a Subordinated tranche of
securities which as part of the
securitisation issuance structure are
issued for purchase by the Acquiring
Entity
RMBS Residential Mortgage-Backed Security
Section 110 Section 110 of the Irish Taxes
Consolidation Act 1997 (as amended). A
Section 110 company is an Irish resident
special purpose vehicle ("SPV") which
holds and/or manages "qualifying assets"
and usually distributes substantially
all of its income net of a fixed annual
tax payment.
Securitisation Vehicle special purpose vehicle incorporated in
the UK established for the purpose of
issuing notes collateralised by
underlying mortgage pool
Senior Note Senior note holders receive first
priority with respect to income and
capital distributions and effectively
provide long term leverage finance to
the Junior note holders.
Servicer Means the entity that maintains the
relationship with the underlying
mortgage borrower to answer questions,
collect payments and refinance existing
loans if required.
Share Buyback the Company purchases it's own shares in
the market
Shareholders holders of Shares
Specialist Fund Segment the Specialist Fund Segment of the
London Stock Exchange
SPV means a special purpose vehicle
TML The Mortgage Lender Limited. The firm
originates mortgages which are currently
being warehoused by Cornhill No 2
Limited. TML is authorised and
regulated by the Financial Conduct
Authority (Financial Services Firm
Reference Number 707058).
UK Code The UK Corporate Governance Code (July
2016)
Valuation Agent Kinson Advisors LLP
Warehousing the process by which mortgages are
acquired in a portfolio prior to
securitisation. The portfolio is
typically leveraged by borrowing from a
warehouse credit facility. Two warehouse
SPVs; Cornhill Mortgages No. 1 Limited
and Cornhill Mortgages No. 2 Limited,
have been established for the purpose of
warehousing the first and second
transactions of the company
respectively. Cornhill No 1 Limited was
closed when the company completed its
first securitisation.
Warehouse SPV a special purpose vehicle, incorporated
in the UK, established for the purpose
of warehousing the first mortgage
portfolio
CORPORATE INFORMATION
Directors Custodian, Principal Banker and
Christopher Waldron - Chairman Depositary
Richard Burrows Northern Trust (Guernsey) Limited
Paul Le Page PO Box 71
Helen Green Trafalgar Court
Les Banques
St Peter Port
Guernsey, GY1 3DA
Registered Office Secretary and Administrator
PO Box 255 Northern Trust International Fund
Trafalgar Court Administration
Les Banques Services (Guernsey) Limited
St Peter Port PO Box 255
Guernsey, GY1 3QL Trafalgar Court
Les Banques
St Peter Port
Guernsey, GY1 3QL
Alternative Investment Fund Manager Corporate Broker
Maitland Institutional Services Limited Numis Securities Limited
Springfield Lodge The London Stock Exchange Building
Colchester Road 10 Paternoster Square
Chelmsford, CM2 5PW London, EC4M 7LT
Portfolio Manager Independent Auditors
TwentyFour Asset Management LLP PricewaterhouseCoopers CI LLP
8th Floor PO Box 321
The Monument Building Royal Bank Place
11 Monument Street 1 Glategny Esplanade
London, EC3R 8AF St Peter Port
Guernsey, GY1 4ND
UK Legal Advisers to the Company Receiving Agent
Eversheds LLP Computershare Investor Services plc
One Wood Street The Pavilions
London, EC2V 7WS Bridgwater Road
Bristol, BS13 8AE
Guernsey Legal Advisers to the Company
Carey Olsen Registrar
Carey House Computershare Investor Services
Les Banques (Guernsey) Limited
St Peter Port 1st Floor
Guernsey, GY1 4BZ Tudor House
Le Bordage
St Peter Port
Guernsey, GY1 1DB
END
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