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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Twentyfour Income Fund Limited | LSE:TFIF | London | Ordinary Share | GG00B90J5Z95 | ORD RED 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.40 | -0.39% | 102.20 | 102.00 | 102.80 | 102.80 | 102.00 | 102.40 | 1,451,531 | 16:35:20 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Finance Services | -1.38M | -22.6M | -0.0353 | -29.12 | 657.86M |
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TIDMTFIF
TWENTYFOUR INCOME FUND LIMITED
INTERIM MANAGEMENT REPORT AND UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
For the period from 1 April 2021 to 30 September 2021
LEI: 549300CCEV00IH2SU369
(Classified Regulated Information, under DTR 6 Annex 1 section 1.1)
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 2021. The Report will shortly be available via the
Company's Portfolio Manager's website www.twentyfouram.com and will shortly be
available for inspection online at www.morningstar.co.uk/uk/NSM website.
SUMMARY INFORMATION
The Company
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 were listed with a Premium Listing 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.
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 of
predominantly UK and European Asset Backed Securities.
The Company will maintain a Portfolio diversified by issuer, it being
anticipated that the Portfolio will comprise at least 50 Asset Backed
Securities at all times.
The Portfolio must comply, as at each date an investment is made, with the
following restrictions:
i. no more than 20 per cent. of the Portfolio value will be backed by
collateral in any single country (save that this restriction will not apply
to Northern European countries);
ii. no more than 10 per cent. of the Portfolio value will be exposed to any
single Asset Backed Security or issuer of Asset Backed Securities, but
provided that where more than 5 per cent. of the Portfolio value is exposed
to a single Asset Backed Security, these Asset Backed Securities in respect
of which more than 5 per cent. of the Portfolio value is exposed, may not,
in aggregate, make up more than 40 per cent. of the total Portfolio value
of the Company;
iii. no more than 15 per cent. of the Portfolio value will be exposed in
aggregate to instruments not deemed securities for the purposes of the
Financial Services and Markets Act (the "FSMA"), provided that no more than
3 per cent. of the Portfolio value will be exposed to any single such
instrument; and
iv. up to 10 per cent. of the Portfolio value may be exposed to Asset Backed
Securities backed by collateral from several countries where, in addition
to countries within the UK and Europe, one or more of the countries is
outside of the UK and Europe.
As an exception to the requirements set out above, TwentyFour Asset Management
LLP (the "Portfolio Manager") will be permitted to purchase new investments at
any time when the Portfolio does not comply with one or more of those
restrictions so long as, at the time of investment:
* the asset purchased would be compliant with the single country restriction
above (even where following the purchase more than 20 per cent. of the
Portfolio will be backed by collateral in another single country due to
market movements);
* the asset purchased would be compliant with the single Asset Backed
Security/issuer exposure restriction above (even where following the
purchase more than 10 per cent. of the Portfolio value will be exposed to
any single Asset Backed Security or issuer of Asset Backed Securities,
provided that Asset Backed Securities within the Portfolio to which more
than 5 per cent. of the Portfolio value is exposed, may not make up more
than 40 per cent. of the total Portfolio value of the Company); and
* such purchase does not make the Portfolio, in aggregate, less compliant
with any of (i), (ii), (iii) and (iv) above.
Uninvested cash or surplus capital or assets may be invested on a temporary
basis in:
* cash or cash equivalents, namely money market funds or short term money
market funds (as defined in the 'Guidelines on a Common Definition of
European Money Market Funds' published by the Committee of European
Securities Regulators (CESR) and adopted by the European Securities and
Markets Authority (ESMA)) and other money market instruments (including
certificates of deposit, floating rate notes and fixed rate commercial
paper of banks or other counterparties having a "single A" or higher credit
rating as determined by any internationally recognised rating agency
selected by the Board which, may or may not be registered in the EU); and
* any "government and public securities" as defined for the purposes of the
FCA Rules.
The Company may employ gearing or derivatives for investment purposes.
The Company may, from time to time, use borrowing for investment opportunities
and short-term liquidity purposes, which could be achieved through a loan
facility or other types of collateralised borrowing instruments including
repurchase transactions or stock lending. The Company may have more than one,
loan, repurchase or stock loan facility in place. The Company is permitted to
provide security to lenders in order to borrow money, which may be by way of
mortgages, charges or other security interests or by way of outright transfer
of title to the Company's assets. In this case, the Directors will restrict
borrowing to an amount not exceeding 25 per cent. of the Company's Net Asset
Value at the time of drawdown. Derivatives may be used for currency hedging
purposes as set out below and for efficient portfolio management.
In accordance with the Listing Rules, the Company can only make a material
change to its investment policy with the approval of its Shareholders by
Ordinary Resolution.
Target Returns
The Company has a target annual net total return on the Company's NAV of
between 6% and 9% per annum, which includes quarterly dividends with a target
yield each financial year of 6% (the equivalent of 6 pence per Ordinary Share)
or higher, of the Issue Price.*
Ongoing Charges
Ongoing charges for the period ended 30 September 2021 have been calculated in
accordance with the Association of Investment Companies (the "AIC") recommended
methodology. The ongoing charges for the period ended 30 September 2021 were
0.96% (30 September 2020: 0.97%).
* The Issue Price being £1.00. This is a target only and not a profit forecast.
There can be no assurance that this target will be met or that the Company pay
any dividends at all. This target return should not be taken as an indication
of the Company's expected or actual current or future results. The Company's
actual return will depend upon a number of factors, including the number of
Ordinary Shares outstanding and the Company's total expense ratio. Potential
investors should decide for themselves whether or not the return is reasonable
and achievable in deciding whether to invest in or retain or increase their
investment in the Company. Further details on the Company's financial risk
management can be found in note 16 of the Company's Annual Financial Statements
for the year ended 31 March 2021, which can be found on the Company's website
(www.twentyfourincomefund.com).
Shareholder Information
Northern Trust International Fund Administration Services (Guernsey) Limited
(the "Administrator") is responsible for calculating the NAV per share of the
Company. The unaudited NAV per ordinary redeemable 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.
Financial Highlights
For the For the
six month For the six month
period ending year ended period ending
30.09.21 31.03.21 30.09.20
Total Net Assets £579,141,878 £573,364,169 £550,226,766
Net Asset Value per share 113.89p 112.75p 108.20p
Share price 113.00p 108.00p 104.00p
Discount to Net Asset Value -0.78% -4.21% -3.88%
Dividends declared in respect of the period 3.00p 6.41p 3.00p
/year
As at 19 November 2021, the premium had moved to 0.72%. The estimated NAV per
share and mid-market share price stood at 113.18p and 114.00p respectively.
CHAIRMAN'S STATEMENT
for the period from 1 April 2021 to 30 September 2021
I am pleased to present my report on the Company's progress for the six months
ended 30 September 2021.
I would like to take the opportunity to welcome our two new Directors: John de
Garis; and John Le Poidevin, to the Board.
The Company's shares have typically traded at a premium since launch; however,
the market environment since the onset of COVID-19 pushed them to a discount
which has largely persisted. The average discount was 2.44% during the period,
and the Company ended the period at a discount of 0.78%.
If the shares return to trading at a premium, the Board is willing to continue
to authorise the issuance of further shares as a premium management mechanism,
while the Portfolio Manager can confirm that attractive investment
opportunities are available in the market.
The NAV per share total return since inception to 30 September 2021 was 90.18%
(including dividends paid). The NAV per share rose from 112.75 at the start of
the period to 113.89, for a total return of 4.11% (including dividends paid).
Meanwhile, the income component of investor returns remained strong and
consistent; the Company paid two dividends of 1.91p and 1.5p per share to cover
the pro-rata minimum return of 6p per share, with the former a final dividend
for the previous period covering all excess returns in respect of the year.
After the period ended, the Company declared a further dividend of 1.5p per
share for distribution, which was paid at the end of October in line with its
existing dividend policy.
The NAV performance of the Company was positive during the period, reflecting
an investment approach that seeks high quality income with a strong credit
bias. Fundamental performance of the asset pools and structures was strong,
continuing to display the characteristics consistent with the ongoing economic
recovery, low levels of unemployment and without any significant evident impact
from the unwind of consumer and business support. Indeed, the resilience of
pool performance to the ending of these government and central bank mechanisms
has, thus far, outstripped our expectations.
It is particularly noteworthy that other markets have not enjoyed such
consistent performance, and worth pointing out that the Company's lack of
negative exposure to rate rises has materially benefited investors.
Accordingly, speculation around the timing of Central Bank asset purchase
cessation and base rate moves have roiled those markets with high duration
exposures and those artificially supported by Central Bank aided purchases.
Meanwhile, the Company will benefit from any future increase in the Bank of
England rates, with markets currently pricing one increase before the end of
2021 and two further increases in the next 12 months.
I continue to believe that the Company's structure remains an appropriate way
for investors to invest for reliable income and remain confident of the
Company's ability to fulfil its objectives.
Trevor Ash
Chairman
29 November 2021
PORTFOLIO MANAGER'S REPORT
for the period from 1 April 2021 to 30 September 2021
In the six months to the end of September, the Portfolio Manager was able to
deploy inflows into primary and secondary issues. Secondary market liquidity
proved to be robust over the period despite a little volatility at certain
points in wider markets. The demand for Asset Backed Securities ("ABS") was
steady, after a very active pipeline in Q1 2021 primary issuance levelled off a
little in April and May; which saw spreads steadily moving tighter month on
month.
The majority of the trading volume in the Company was evenly split between the
Residential Mortgage-Backed Securities ("RMBS") and Collateralised Loan
Obligations ("CLO") market as the fund added some welcome diversification into
primary RMBS deals from the UK, Spain, Netherlands, France and Ireland. Around
80% of this allocation was deployed into Mezzanine bonds. This figure would
have been higher, but with very strong demand for this sector and new deals
being multiple times oversubscribed, this was probably the most challenging
asset allocation target to fulfil, although it has resulted in the largest
spread movement and the strongest performance in the market year to date. The
market also saw a pickup, paradoxically, in Auto ABS issuance across Europe
together with many full capital stack Consumer loan deals. These also saw very
high levels of investor demand and added some further geographical
diversification to the Company.
Around 50% of overall trading volume was allocated to the CLO market split,
between BB and B, taking the overall CLO exposure to 41%, which is also the
strongest performing market in the Company year to date. The level of CLO
issuance this year has been elevated, and the market is likely to set a new
record of issuance in the 2.0 Global Financial Crisis era. The BB and single B
spreads have also been fairly stable at around low 6% and low 9% yields,
respectively, which is testament to the depth of the market in the face of high
levels of supply, with the underlying pool performance being very strong in
terms of loan defaults; contrary to some expectations at the onset of COVID-19
pandemic and subsequent government actions. However, as we approached the
middle of Q3, some weakness was evident in the sector due to wider macro market
volatility.
The Commercial Mortgage-Backed Securities ("CMBS") market also continued its
resurgence, which started earlier in the year and seems likely to finish the
year with just under ?3bn of issuance. By nature, each deal tends to be unique
compared to other ABS asset classes and having already reduced the positioning
of the Company prior to COVID-19, the portfolio manager added 1% in a high
conviction deal, taking the exposure to 3.5% by the end of the period.
Market Commentary
The second quarter of 2021 started strongly for risk assets, as wider markets
stabilised after a weaker first quarter. Stronger economic data prevailed,
reflected through employment and retail sales with uneventful central bank
meetings followed by communications stating that higher inflation figures would
be transitory. Markets remained fairly resilient despite increasing concerns
over inflation and some surprising economic data from the US, including one of
the biggest misses to the downside in Non-Farm payrolls, in living memory,
where the forecast new job creation was 1 million, but the actual figure was
261,000. Concerns around labour shortages, wage inflation, pullbacks in central
bank stimulus and taper tantrums prevailed while the Bank of England kept
policy unchanged in May 2021, various officials acknowledged that strong growth
could lead to an earlier than expected revision in interest rate expectations.
Risk markets maintained their solid footing in June 2021 despite the Delta
variant of COVID-19 seeing a resurgence in many areas. The Fed acknowledged
that discussions on talking about tapering had happened, and dot plots were
revised, showing a slight shift in rate hike expectations with markets now
pricing in two rate hikes in the U.S. in 2023. The summer months remained
fairly muted in risk assets as market participants continued to interpret mixed
economic data culminating with the Jackson Hole summit at the end of August
2021. In the much-anticipated speech from Fed Chair Powell, he deviated little
from the rhetoric of recent Federal Open Market Committee ("FOMC") statements
and gave no further direction on the timing of a potential tapering of Fed
purchases, but he did maintain that inflation would be transitory. In the UK,
the Bank of England met early in the month and made no policy changes. However,
the Monetary Policy Committee did signal they were considering when to
implement tighter policy in the future.
September 2021 was a weak month for broader risk-on assets generally, as
inflation and tapering weighed heavily on sentiment, and the potential failure
of Evergrande added to investor angst. Fears of market contagion grew as
Evergrande edged closer to default, and the market grew concerned about the
fallout from a messy default and the form of any potential intervention from
the authorities. As was largely expected, the FOMC kept policy unchanged but
did signal that tapering could begin very soon "if progress continues broadly
as expected". The dot plots were updated to show that two more Fed members now
expect a first rate hike in 2022, leaving the FOMC split down the middle.
Equally, the Bank of England was also in the focus in the run-up to the end of
the quarter. The Monetary Policy Committee kept policy unchanged but made some
hawkish comments with regard to future possible rates increases.
As previously highlighted, the bond-buying stimulus by central banks supporting
many parts of the fixed income market such as corporate investment grade bonds,
high yield and covered bonds and US ABS did not extend to European ABS. As a
consequence, the spread performance was muted in the ABS market as it lagged
others in the latter quarters of last year. However, against this macro
backdrop European ABS also saw robust performance since the beginning of the
year and also over the current period as the market started to catch up with
other sectors. With a strong supply-demand technical still in play, all ABS
deals saw vigorous demand across all asset classes, with mezzanine bonds, in
particular, seeing multiple levels of oversubscription for new issues as the
sector continues to offer an attractive pickup. After a robust first quarter of
primary issuance, April and May got off to a slightly quieter start, thereby
further underpinning spreads with no supply indigestion, causing a tempering in
the trajectory of spreads.
The Primary European ABS market saw a sustained higher pace of issuance
throughout June and rounded off H1 2021 with a total supply of around ?52bn,
which is just below the post-Global Financial Crisis record seen in H1 2018 and
resulted in many analysts increasing their year-end forecasts accordingly.
Following steady primary supply through July 2021 and a typically quiet August
2021 summer lull, issuance bounced back strongly in September 2021,
contributing to the busiest quarter of the year so far. Gross YTD issuance now
stands at around ?81bn, including ?25bn of new issue CLOs. September 2021
itself saw ?13bn of placed bonds with RMBS across Europe accounting for the
largest sector, followed by CLOs, together with an increase in Auto and
consumer deals.
Over the whole period, pricing execution remained generally strong, which set
the tone for secondary markets too. The slight weakness in UK RMBS spreads at
the end of Q1, due to elevated levels of supply firmly retraced with spread
levels passing the tights of the year by the end of May 2021. Positive
sentiment prevailed, and the UK market shrugged off concerns around inflation
and volatility in wider markets, and any secondary supply in the form of bids
wanted in competition ("BWIC") auctions saw good levels of engagement by both
investors and bank trading desks. However, the resilience to wider market
concerns started to wane into the end of Q3, which saw a slight weakening in
secondary markets. CMBS and CLOs remain wider due to the more esoteric nature
and underlying structural risks for the former and a steady supply of the
latter. In general, however, spreads remain wider than similarly rated
corporate bonds, which trade through their pre-COVID-19 levels.
Performance of the underlying European and UK asset pools has been robust
throughout the period in both consumer and corporate-backed deals and generally
in line with pre-COVID-19 levels. The various different support measures played
a part in dampening volatility and maintaining confidence in ABS markets over
the period, but it is worth noting, for example, in the bridge-to-let loan
("BTL") sector, after an initial uptake in payment holidays, these reversed
very quickly and are now negligible across mortgage pools. Rising house prices
this year and better than expected data so far on unemployment have supported
the market fundamentals too, but it is likely there will be some increase in
arrears over time as measures start to roll off. However, we do not envisage
any material credit concerns for the ABS market as a result.
Market Outlook
Technicals in the ABS market are more balanced as we move into Q4, and we
expect issuance to flirt with the highs seen over the most recent five years,
almost ?100bn. This sustained but manageable supply, coupled with periods of
macro risk-off moves, is expected to preserve a spread premium by year end.
Whilst inflation and slowing growth remains a broad concern for fixed income
investors globally, closer to home, the Office for Budgetary Responsibility now
expects UK unemployment to peak at 5.2% in 2022, a far cry from the
Organisation for Economic Co-operation and Development's 9.7% tier 2 stress
test outlined in 2020. This expectation largely reflects how we also expect
other European labour markets will fare as they are seeing the tapering of
their respective COVID-19 support schemes too. The fundamental performance of
ABS pools have been assisted by these policies, so a move to a more normal
level of support for consumers and corporates as economies reopen will likely
see deterioration in loan performance on a longer-term-basis, but within our
base case scenarios.
The Bank of England is expected to be the first of the G7 central banks to
raise policy rates, with futures pricing in one hike by the end of 2021 and two
by the end of 2022. The fund having exposure to 47% floating rate GBP
denominated assets will see this passed through to coupons upon reset. Central
to our view for the rest of the year, is to take advantage of a more balanced
market to rotate to build longer-term income exposures; using the secondary
market and using pockets of value in the primary markets. That said, we expect
bank trading desks to have had a steady year and expect liquidity to fade in a
typical year-end fashion. Management of liquidity in the short term is a focus
as we expect a continued search for yield and shelter from rate volatility to
drive a positive start to 2022 for European and UK ABS.
TwentyFour Asset Management LLP
29 November 2021
TOP TWENTY HOLDINGS
as at 30 September 2021
Nominal/ Asset Backed Fair Value Percentage of
Security Shares Security £ Net Asset
Sector* Value
OPTIMUM THREE LTD '3 MEZ5' FRN 21,200,000 RMBS 21,200,000 3.66
23/04/2023
VSK HOLDINGS LTD VAR 31/7/2061 1,975,000 RMBS 20,371,418 3.52
TULPENHUIS 0.0% 18/04/2051 18,919,960 RMBS 15,245,917 2.63
TAURUS 2020-1 NL DAC 'NL1X E' 16,110,465 CMBS 13,808,687 2.38
FRN 20/02/2030
EQTY. RELEASE FNDG. NO 5 '5 B' 14,550,000 RMBS 12,766,814 2.20
FRN 14/07/2050
HABANERO LTD '6W B' VAR 5/4/2024 11,900,000 RMBS 11,900,000 2.05
SYON SECS. 2020-2 DAC '2 B' FRN 10,442,695 RMBS 11,020,853 1.90
17/12/2027
CHARLES STREET CONDUIT AST. B '1 10,500,000 RMBS 10,464,300 1.81
C' FRN 08/12/2065
SYON SECURITIES 19-1 B CLO FLT 9,819,234 RMBS 9,982,199 1.72
19/07/2026
VSK HLDGS. '1 C4-1' VAR 01/10/ 1,250,000 RMBS 9,137,470 1.58
2058
MAN GLG EURO CLO V DAC '5X E' 9,700,000 CLO 8,130,020 1.40
FRN 15/12/2031
AURORUS 2020 BV '1 G' FRN 13/08/ 8,300,000 Consumer ABS 7,383,810 1.27
2046
CHARLES STREET CONDUIT AST. B '1 6,500,000 RMBS 6,481,150 1.12
B' FRN 08/12/2065
SYON SECS. 0.00% 27/02/2027 6,709,644 RMBS 6,460,180 1.12
E-CARAT 11 '11 E' FRN 18/05/2028 6,358,216 Auto Loans 6,365,752 1.10
AUTOFLORENCE 1 SRL '1 F' 7.00% 7,032,497 Auto Loans 6,189,755 1.07
25/12/2042
SYON SECS. 19-1 Z FRN 19/07/2026 6,109,669 RMBS 6,088,957 1.05
ARMADA EURO CLO II DAC '2X F' 7,000,000 CLO 5,788,881 1.00
FRN 15/11/2031
DUTCH PROP. FIN. 2021-1 '1 D' 6,500,000 RMBS 5,741,686 0.99
FRN 28/07/2058
CAPITAL BRIDGE FINANCE NO1 '1 6,058,518 RMBS 5,604,129 0.97
MEZZ' FRN 08/11/2018
The full portfolio listing as at 30 September 2021 can be obtained from the
Administrator on request.
* Definition of Terms
'ABS' - Asset Backed Securities
'CLO' - Collateralised Loan Obligations
'CMBS' - Commercial Mortgage-Backed Securities
'RMBS'- Residential Mortgage-Backed Securities
BOARD MEMBERS
Biographical details of the Directors are as follows:
Trevor Ash - (Chairman)
Mr Ash is a resident of Guernsey and has over 30 years of investment
experience. He is a Fellow of the Chartered Institute for Securities and
Investment. He was formerly a managing director of Rothschild Asset Management
(CI) Limited. Mr Ash retired as a director of NM Rothschild & Sons (CI)
Limited, the banking arm of the Rothschild Group in the Channel Islands in
1999. Since retirement, he has acted as a director of a number of hedge funds,
fund of hedge funds, venture capital, derivative and other offshore funds
including several managed or advised by Insight, JP Morgan and Merrill Lynch.
Mr Ash was appointed to the Board on 11 January 2013.
Ian Burns - (Non-executive Director, Senior Independent Director and Chairman
of the Audit Committee)
Mr Burns is a resident of Guernsey and a fellow of the Institute of Chartered
Accountants in England and Wales and a member of the Society of Trust and
Estate Planners. He is a founder and Executive Director of Via Executive
Limited, a specialist management consulting company and managing director of
Regent Mercantile Holdings Limited, a privately owned investment company. Mr
Burns is currently Chairman of SEED Innovations Limited (AIM) and a number of
private investment funds. Mr Burns was appointed to the Board on 17 January
2013.
Richard Burwood - (Non-executive Director)
Mr Burwood is a resident of Guernsey with over 25 years' experience in banking
and investment management. During 18 years with Citibank London, Mr Burwood
spent 11 years as a fixed income portfolio manager spanning both banks/finance
investments and Asset Backed Securities. Mr Burwood has lived in Guernsey since
2010, initially working as a portfolio manager for EFG Financial Products,
managing the treasury department's ALCO Fixed Income portfolio. From 2011 to
2013, Mr Burwood worked as the Business and Investment Manager for Man
Investments, Guernsey. In January 2014, Mr Burwood joined the board of
RoundShield Fund, a Guernsey private equity fund, focused on European small to
mid-cap opportunities. In August 2015, he became a Board Member of SME Credit
Realisation Fund Limited, which provides investors access to a diversified pool
of SME loans originated through Funding Circle's marketplaces in the UK, US and
Europe. Mr Burwood also serves on the boards of Habrok, a hedge fund
specialising in Indian equities, and EFG International Finance, a structured
note issuance company based in Guernsey. Mr Burwood was appointed to the Board
on 17 January 2013.
John de Garis (Non-executive Director)
Mr de Garis is a resident of Guernsey with over 30 years of experience in
investment management. He is a Director and the 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.
Joanne Fintzen - (Non-executive 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
across asset-backed securities as well as hedge funds investing in various
different strategies in addition to private equity and venture capital funds.
Ms Fintzen was appointed to the Board on 7 January 2019.
John Le Poidevin (Non-executive Director)
Mr Le Poidevin is a resident of Guernsey and a Fellow of the Institute of
Chartered Accountants in England and Wales. He was formerly an audit partner at
BDO LLP in London where he developed an extensive breadth of experience and
knowledge across a broad range of business sectors in the UK, European and
global markets during over twenty years in practice, including in corporate
governance, audit, risk management and financial reporting. Since 2013 he has
acted as a non-executive, including as audit committee chair, on the boards of
a number of listed and private groups. Mr Le Poidevin is currently a
non-executive director of International Public Partnerships, BH Macro Limited,
and a number of other private companies and investment funds. Mr Le Poidevin
was appointed to the Board on 9 July 2021.
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
The Company's assets are mainly comprised of Asset Backed Securities 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 and uncertainties assessed by the Board relating to the
Company were disclosed in the Annual Report and Audited Financial Statements
for the year ended 31 March 2021. The principal risks disclosed can be divided
into the various areas as follows:
* Market Risk
Market risk is the risk associated with changes in market prices, including
spreads, interest rates, economic uncertainty, changes in laws and political
(national and international) circumstances.
Under extreme market conditions the portfolio may not benefit from
diversification.
* Liquidity Risk
Investments made by the Company may be relatively illiquid and this may limit
the ability of the Company to realise its investments and in turn pay
dividends.
* Credit Risk
The investment portfolio is comprised of Asset Backed Securities which expose
the Company to credit risk, being the risk that a counterparty will default on
its contractual obligations resulting in financial loss to the Company.
* 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 is exposed to
foreign currency risk through its investment in predominately Euro denominated
assets although mitigates this risk through hedging.
* 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 as
much as possible.
* 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,
Custodian and the Depositary amongst others.
* 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.
* Income Recognition Risk
The Board considers income recognition to be a principal risk and uncertainty
of the Company as the Portfolio Manager estimates the remaining expected life
of the security and its likely terminal value, which has an impact on the
effective interest rate of the Asset Backed Securities which in turn impacts
the calculation of interest income.
* Cyber Security Risks
The Company is exposed to risk arising from a successful cyber-attack through
its service providers.
* Coronavirus Risk (COVID-19)
Coronavirus risk is the risk of business interruption caused by the COVID-19
pandemic, along with the potential negative impact it has on the valuation of
investments.
* 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
portfolio has on the environment.
* Environmental, Social, and Governance ("ESG") Risk
ESG factors are assessed for every transaction as part of the investment
process. Specifically for ABS, for every transaction an ESG assessment is
produced and an ESG score is assigned. External ESG factors are factors
related to the debt issuers of ABS transactions and they are assessed through a
combination of internal and third party data. Climate risks are incorporated in
the ESG analysis under environmental factors and taken into consideration in
the final investment decision. CO2 emissions are tracked at issuer and deal
level where information is available. Given the bankruptcy-remoteness feature
of securitisation transactions the climate risks which the manager considers
more relevant and that are able to potentially impact the value of the
investment are the ones related to the underlying collateral which include
physical and transitional risks. Those risks are also assessed and considered
as environmental factors in the ESG analysis.
A detailed explanation of these can be found in note 17 of the Annual Report
for the year ended 31 March 2021, which can be found on the Company's website
(www.twentyfourincomefund.com). 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 in the Directors' Report of the Annual Report for the year ended 31
March 2021.
Related Parties
Related party balances and transactions are disclosed in note 14 of these
Unaudited Condensed Interim Financial Statements.
Going Concern
Under the 2018 UK Corporate Governance Code and applicable regulations, the
Directors are required to satisfy themselves that it is reasonable to assume
that the Company is a going concern and to identify any material uncertainties
to the Company's ability to continue as a going concern for at least 12 months
from the date of approving these Unaudited Condensed Interim Financial
Statements.
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 under which
Shareholders may elect to realise some or all of their holdings of Ordinary
Shares at each third Annual General Meeting, with the next realisation
opportunity being in September 2022.
Although there remains uncertainty concerning the outcome of the Realisation
Opportunity, having assessed these uncertainties, the Directors consider it
appropriate to adopt the going concern basis of accounting in preparing the
Interim Report and Unaudited Condensed Interim Financial Statements.
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 2021 to 30
September 2021 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 2021 to 30
September 2021 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
Trevor Ash
Chairman
Ian Burns
Director
29 November 2021
INDEPENT REVIEW REPORT
TO TWENTYFOUR INCOME FUND LIMITED
Report on the unaudited condensed interim financial statements
______________________________________________________________________________________
Our conclusion
We have reviewed TwentyFour Income Fund Limited's unaudited condensed interim
financial statements (the "interim financial statements") in the Interim
Management Report and Unaudited Condensed Interim Financial Statements of
TwentyFour Income Fund Limited for the 6-month period ended 30 September 2021.
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are 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 interim financial statements comprise:
* the condensed statement of financial position as at 30 September 2021;
* the condensed statement of comprehensive income for the period then ended;
* the condensed statement of cash flows for the period then ended;
* the condensed statement of changes in equity for the period then ended; and
* the explanatory notes to the interim financial statements.
The interim financial statements included in the Interim Management Report and
Unaudited Condensed Interim Financial Statements have 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.
As disclosed in note 2 to the interim financial statements, the financial
reporting framework that has been applied in the preparation of the full annual
financial statements of the Company is The Companies (Guernsey) Law, 2008 and
International Financial Reporting Standards (IFRSs).
______________________________________________________________________________________
Responsibilities for the interim financial statements and the review
______________________________________________________________________________________
Our responsibilities and those of the directors
The Interim Management Report and Unaudited Condensed Interim Financial
Statements, including the interim financial statements, is the responsibility
of, and has been approved by, the directors. The directors are responsible for
preparing the Interim Management Report and Unaudited Condensed Interim
Financial Statements 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 responsibility is to express a conclusion on the interim financial
statements in the Interim Management Report and Unaudited Condensed Interim
Financial Statements based on our review. This report, including the
conclusion, has been prepared for and only for the Company 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.
______________________________________________________________________________________
What a review of interim financial statements involves
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 enquiries, 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 Management Report
and Unaudited Condensed Interim Financial Statements and considered whether it
contains any apparent misstatements or material inconsistencies with the
information in the interim financial statements.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
29 November 2021
a. The maintenance and integrity of the TwentyFour Income Fund Limited website
is the responsibility of the directors; the work carried out by the auditor
does not involve consideration of these matters and, accordingly, the
auditor accepts no responsibility for any changes that may have occurred to
the 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.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the period from 1 April 2021 to 30 September 2021
For the For the
period from period from
01.04.21 to 01.04.20 to
30.09.21 30.09.20
Note £ £
(Unaudited) (Unaudited)
Income
Interest income on financial assets at 21,982,991 18,128,568
fair value through profit and loss
Net foreign currency losses 7 (1,838,120) (6,331,464)
Net gains on financial assets
at fair value through profit or loss 8 5,709,383 79,316,762
Total income 25,854,254 91,113,866
Expenses
Portfolio management fees 14 (2,158,716) (1,925,622)
Directors' fees 14 (89,468) (73,750)
Administration and secretarial fees 15 (142,707) (130,275)
Audit fees (36,208) (37,400)
Custody fees 15 (28,783) (25,675)
Broker fees (25,299) (25,482)
AIFM management fees 15 (101,390) (92,066)
Depositary fees 15 (39,739) (35,854)
Legal and professional fees (31,624) (18,654)
Listing fees (18,082) (48,661)
Registration fees (14,886) (18,401)
Other expenses (49,288) (73,879)
Total expenses (2,736,190) (2,505,719)
Total comprehensive income for the 23,118,064 88,608,147
period
Earnings per Ordinary Redeemable Share -
Basic & Diluted 3 0.0455 0.1744
All items in the above statement derive from continuing operations.
The notes form an integral part of these Unaudited Condensed Interim Financial
Statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
as at 30 September 2021
30.09.2021 31.03.2021
Note £ £
Assets (Unaudited) (Audited)
Current assets
Financial assets at fair value through profit
and loss
- Investments 8 590,637,052 586,853,917
- Derivative assets: Forward currency contracts 17 - 1,591,666
Amounts due from broker 7,579,363 -
Other receivables 9 3,881,523 3,501,933
Cash and cash equivalents 8,285,233 11,515,643
Total assets 610,383,171 603,463,159
Liabilities
Current liabilities
Financial liabilities at fair value through
profit and loss
- Derivative liabilities: Forward currency 17 2,041,691 1,465
contracts
Amounts payable under repurchase agreements 11 25,329,306 27,234,524
Amounts due to broker 2,292,802 1,635,556
Other payables 10 1,577,494 1,227,445
Total liabilities 31,241,293 30,098,990
Net assets 579,141,878 573,364,169
Equity
Share capital account 12 533,945,321 533,945,321
Retained earnings 45,196,557 39,418,848
Total equity 579,141,878 573,364,169
Ordinary Redeemable Shares in issue 12 508,514,809 508,514,809
Net Asset Value per Ordinary Redeemable Share 5 113.89 112.75
(pence)
The Unaudited Condensed Interim Financial Statements were approved by the Board
of Directors on 29 November 2021 and signed on its behalf by:
Trevor Ash
Chairman
Ian Burns
Director
The notes form an integral part of these Unaudited Condensed Interim Financial
Statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the period from 1 April 2021 to 30 September 2021
Share Retained Total
capital earnings
Account
Note £ £ £
Balances at 1 April 2021 533,945,321 39,418,848 573,364,169
Dividends paid - (17,340,355) (17,340,355)
Total comprehensive income for - 23,118,064 23,118,064
the period
Balances at 30 September 2021 533,945,321 45,196,557 579,141,878
(Unaudited)
Share Retained
capital
account earnings Total
£ £ £
Balances at 1 April 2020 530,491,915 (55,122,059) 475,369,856
Issue of shares 12 3,506,390 - 3,506,390
Share issue costs 12 (40,323) - (40,323)
Dividends paid - (17,217,304) (17,217,304)
Income equalisation on new issues 4 (12,661) 12,661 -
Total comprehensive income for - 88,608,147 88,608,147
the period
Balances at 30 September 2020 533,945,321 16,281,445 550,226,766
(Unaudited)
The notes on form an integral part of these Unaudited Condensed Interim
Financial Statements.
CONDENSED STATEMENT OF CASH FLOWS
for the period from 1 April 2021 to 30 September 2021
For the For the period
period from 01.04.20
from to 30.09.20
01.04.21 to
Note 30.09.21
£ £
(Unaudited) (Unaudited)
Cash flows from operating activities
Total comprehensive income for the period 23,118,064 88,608,147
Adjustments for:
Net gains on investments 8 (5,709,383) (79,316,762)
Amortisation adjustment under effective 8 (4,376,031) (3,318,968)
interest rate method
Unrealised losses on forward currency 7 3,631,893 18,846,166
contracts
Exchange (gains)/losses on cash and cash (18,019) 74,930
equivalents
(Increase)/decrease in other receivables (379,590) 60,574
Increase in other payables 350,049 131,415
Purchase of investments (93,243,579) (97,728,834)
Sale of investments/principal repayments 92,623,740 92,127,083
Net cash generated from operating activities 15,997,144 19,483,751
Cash flows from financing activities
Proceeds from issue of Ordinary Redeemable - 3,506,390
Shares
Share issue costs - (40,323)
Dividend paid (17,340,355) (17,217,304)
(Decrease)/increase in amounts payable under (1,905,368) 14,419,361
repurchase agreements
Net cash (outflow)/inflow from financing (19,245,723) 668,124
activities
(Decrease)/increase in cash and cash (3,248,429) 20,151,875
equivalents
Cash and cash equivalents at beginning of the 11,515,643 1,409,267
period
Exchange gains/(losses) on cash and cash 18,019 (74,930)
equivalents
Cash and cash equivalents at end of the period 8,285,233 21,486,212
The 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 2021 to 30 September 2021
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 were listed with a Premium Listing 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.
The Company's investment objective and policy is set out in the Summary
Information above.
The Portfolio Manager of the Company is TwentyFour Asset Management LLP (the
"Portfolio Manager").
2. Principal Accounting Policies
a) Statement of Compliance
The Unaudited Condensed Interim Financial Statements for the period 1 April
2021 to 30 September 2021 have been prepared on a going concern basis in
accordance with IAS 34 "Interim Financial Reporting", the Disclosure Guidance
and Transparency Rules Sourcebook of the United Kingdom's Financial Conduct
Authority ("FCA") and applicable legal and regulatory requirements.
The Unaudited Condensed Interim Financial Statements should be read in
conjunction with the annual audited financial statements for the year ended 31
March 2021, 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
In the current financial period, 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
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:
* Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16.
The Directors anticipate that the adoption of Interest Rate Benchmark Reform -
Phase 2, effective, does not have a material impact on the financial statements
of the Company.
e) Standards, Amendments and Interpretations Issued but not yet Effective
At the reporting date of these Financial Statements, the following standards,
interpretations and amendments, which have not been applied in these Financial
Statements, were in issue but not yet effective:
* IFRS 17 Insurance Contracts (Effective 1 January 2023)
* Definition of Accounting Estimates (Amendments to IAS 8) (Effective 1
January 2023)
* Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice
Statement 2) (Effective 1 January 2023)
The Directors anticipate that the adoption of the above standards, effective in
future periods, will not have a material impact on the financial statements of
the Company.
3. Earnings per Ordinary Redeemable Share - Basic & Diluted
The earnings per Ordinary Redeemable Share - Basic and Diluted has been
calculated based on the weighted average number of Ordinary Redeemable Shares
of 508,514,809 (30 September 2020: 508,083,661) and a net gain of £23,118,064
(30 September 2020 : net gain of £88,608,147).
4. Income Equalisation on New Issues
In order to ensure there are no dilutive effects on earnings per share for
current Shareholders when issuing new 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 2020: £12,661).
5. Net Asset Value per Ordinary Redeemable Share
The net asset value of each Share of £1.14 (31 March 2021: £1.13) is determined
by dividing the net assets of the Company attributed to the Shares of £
579,141,878 (31 March 2021: £550,226,766) by the number of Shares in issue at
30 September 2021 of 508,514,809 (31 March 2021: 508,514,809).
6. Taxation
The Company has been granted Exempt Status under the terms of The Income Tax
(Exempt Bodies) (Guernsey) Ordinance, 1989 to income tax in Guernsey. Its
liability for Guernsey taxation is limited to an annual fee of £1,200 (2020: £
1,200).
7. Net Foreign Currency Losses
For the period For the period
from 01.04.21 from 01.04.20
to 30.09.21 to 30.09.20
£ £
Movement on unrealised loss on forward currency (3,631,893) (18,846,166)
contracts
Realised gain on foreign currency contracts 1,708,856 12,630,371
Unrealised foreign currency loss on receivables/ (13,097) -
payables
Unrealised foreign currency exchange gain/(loss) on 98,014 (115,669)
interest receivable
(1,838,120) (6,331,464)
8. Investments
For the period For the year
from 01.04.21 to from 01.04.20 to
30.09.21 31.03.21
Financial assets at fair value through profit or £ £
loss:
Unlisted Investments:
Opening book cost 588,285,142 580,142,186
Purchases at cost 93,900,824 195,132,184
Proceeds on sale/principal repayment (100,203,103) (175,724,172)
Amortisation adjustment under effective interest 4,376,031 7,167,468
rate method
Realised gains on sale/principal repayment 7,771,336 26,823,017
Realised losses on sale/principal repayment (7,274,578) (45,255,541)
Closing book cost 586,855,652 588,285,142
Unrealised gains on investments 14,578,274 11,562,713
Unrealised losses on investments (10,796,874) (12,993,938)
Fair value 590,637,052 586,853,917
For the period For the period
from 01.04.21 to from 01.04.20 to
30.09.21 30.09.20
£ £
Realised gains on sales/principal repayment 7,771,336 8,142,811
Realised losses on sales/principal repayment (7,274,578) (15,246,370)
Movement in unrealised gains 3,015,561 13,794,179
Movement in unrealised losses 2,197,064 72,626,142
Net gain on financial assets at fair value through 5,709,383 79,316,762
profit or loss
9. Other Receivables
As at As at
30.09.21 31.03.21
£ £
Coupon interest receivable 3,789,885 3,420,226
Prepaid expenses 91,638 81,707
3,881,523 3,501,933
10. Other Payables
As at As at
30.09.21 31.03.21
£ £
Portfolio management fees payable 1,295,672 895,035
Custody fees payable 4,005 3,923
Administration and secretarial fees 71,371 138,326
payable
Audit fees payable 89,969 70,262
AIFM management fees payable 46,466 45,510
Depositary fees payable 9,374 9,975
General expenses payable 60,637 64,414
1,577,494 1,227,445
11. Amounts payable under repurchase agreements
Following the publication of the latest prospectus on 12 April 2019, the
Company, as part of its investment strategy, is now authorised to enter into
repurchase agreements. A repurchase agreement (Repo) is a short-term loan where
both parties agree to the sale and future repurchase of assets within a
specified contract period. Repurchase agreements may be entered into in respect
of securities owned by the Company which are sold to and repurchased from
counterparties on contractually agreed dates and the cash generated from this
arrangement can be used to purchase new securities, effectively creating
leverage. The Company still benefits from any income received, attributable to
the security.
Finance costs on repurchase agreements, netted off against interest income in
the Condensed Statement of Comprehensive Income, amounted to £78,674. As at 30
September 2021, finance cost liabilities on open repurchase agreements amounted
to £23,257.
At the end of the period, the Company had 5 securities on repo, which consisted
of 3 investment grade RMBS and 2 investment grade auto loans. The total
exposure was -4.37% of the Company's NAV. The contracts were across two repo
counterparties, and were all rolling agreements with a maturity between 3 and 6
months.
12. Share Capital
Authorised Share Capital
Unlimited number of Ordinary Redeemable Shares at no par value.
Issued Share Capital
As at As at
30.09.21 31.03.21
£ £
Share Capital at the beginning of the period/ 533,945,321 530,491,915
year
Issued Share Capital - 3,506,390
Share issue costs - (40,323)
Income equalisation on new issues - (12,661)
Total Share Capital at the end of the period/ 533,945,321 533,945,321
year
As at As at
30.09.21 31.03.21
Shares Shares
Ordinary Redeemable Shares
Shares at the beginning of the period/year 508,514,809 504,714,809
Issue of Shares - 3,800,000
Total Shares in issue at the end of the period 508,514,809 508,514,809
/year
As at As at
30.09.21 31.03.21
£ £
Treasury Shares
Treasury Share capital at the beginning of the period/year 43,083,300 43,083,300
Total Treasury Share capital at the end of the 43,083,300 43,083,300
period/year
As at As at
30.09.21 31.03.21
Shares Shares
Treasury Shares
Treasury Shares at the beginning of the period/year 39,000,000 39,000,000
Total Shares at the end of the period/ 39,000,000 39,000,000
year
The Share Capital of the Company consists of an unlimited number of Shares with
or without par value which, upon issue, the Directors may designate as:
Ordinary Redeemable Shares; Realisation Shares or such other class as the Board
shall determine and denominated in such currencies as shall be determined at
the discretion of the Board.
As at 30 September 2021, one share class has been issued, being the Ordinary
Redeemable Shares of the Company.
The Ordinary Redeemable Shares carry the following rights:
a) The Ordinary Redeemable Shares carry the right to receive all income of
the Company attributable to the Ordinary Redeemable Shares.
b) The Shareholders present in person or by proxy or present by a duly
authorised representative at a general meeting has, on a show of hands, one
vote and, on a poll, one vote for each Share held.
c) 56 days before the annual general meeting date of the Company in each
third year (the "Reorganisation Date"), the Shareholders are entitled to serve
a written notice (a "Realisation Election") requesting that all or a part of
the Ordinary Redeemable Shares held by them be redesignated to Realisation
Shares, subject to the aggregate NAV of the continuing Ordinary Redeemable
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 Redeemable Shares on the last
business day before the Reorganisation Date is less than £100 million, the
Realisation 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
next realisation opportunity is due to occur at the end of the next three year
term, at the date of the AGM in September 2022.
The Company has the right to issue and purchase up to 14.99% of the total
number of its own shares at £0.01 each, to be classed as Treasury Shares and
may cancel those Shares or hold any such Shares as Treasury Shares, provided
that the number of Shares held as Treasury Shares shall not at any time exceed
10% of the total number of Shares of that class in issue at that time or such
amount as provided in the Companies (Guernsey) Law, 2008.
On 24 January 2017, the Company issued and purchased 39,000,000 Ordinary Shares
of £0.01 at a price of 110.47p, to be held in treasury. The total amount paid
to purchase these shares was £43,083,300 and has been deducted from the
Shareholders' equity. The Company has the right to re-issue these shares at a
later date. All shares issued were fully paid.
Shares held in Treasury are excluded from calculations when determining
Earnings per Ordinary Redeemable Share or NAV per Ordinary Redeemable Share, as
detailed in notes 3 and 5.
13. Analysis of Financial Assets and Liabilities by Measurement Basis
Assets at fair
value through Amortised
profit and cost Total
loss
£ £ £
30 September 2021
Financial Assets as per Statement of
Financial Position
Financial assets at fair value
through profit or loss:
- Investments 590,637,052 - 590,637,052
Amounts due from broker - 7,579,363 7,579,363
Other receivables (excluding - 3,789,885 3,787,885
prepayments)
Cash and cash equivalents - 8,285,233 8,285,233
590,637,052 19,654,481 610,291,533
Liabilities at
fair Amortised
value through cost Total
profit and loss
£ £ £
Financial Liabilities as per
Statement of Financial Position
Financial liabilities at fair
value through profit or loss:
- Derivative liabilities: 2,041,691 - 2,041,691
Forward currency contracts
Amounts payable under repurchase - 25,329,306 25,329,306
agreements
Amounts due to brokers - 2,292,802 2,292,802
Other payables - 1,577,494 1,577,494
2,041,691 29,199,602 31,241,293
Assets at fair
value through Amortised
profit and cost Total
loss
£ £ £
31 March 2021
Financial Assets as per Statement of
Financial Position
Financial assets at fair value
through profit or loss:
- Investments 586,853,917 - 586,853,917
- Derivative assets: Forward 1,591,666 - 1,591,666
currency contracts
Other receivables (excluding - 3,420,226 3,420,226
prepayments)
Cash and cash equivalents - 11,515,643 11,515,643
588,445,583 14,935,869 603,381,452
Liabilities at
fair Amortised
value through cost Total
profit and loss
£ £ £
Financial Liabilities as per
Statement of Financial Position
Financial liabilities at fair value
through profit or loss:
- Derivative liabilities: Forward 1,465 - 1,465
currency contracts
Amounts payable under repurchase - 27,234,524 27,234,524
agreements
Amounts due to brokers - 1,635,556 1,635,556
Other payables - 1,227,445 1,227,445
1,465 30,097,525 30,098,990
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. The aggregate fees of the Directors will not exceed
£225,000 per annum.
The annual fees are £40,000 for the Chairman, £37,500 for Chairman of the Audit
Committee, and £35,000 for all other Directors.
During the period ended 30 September 2021, Directors fees of £89,468 (30
September 2020: £73,750) were charged to the Company, of which £Nil (31 March
2021: £Nil) remained payable at the end of the period.
b) Shares Held by Related Parties
As at 30 September 2021, Directors of the Company held the following shares
beneficially:
Number of Number of
Shares Shares
30.09.21 31.03.21
Trevor Ash 108,734 58,734
Ian Burns 29,242 29,242
Richard Burwood 22,476 22,476
John de Garis - N/A
Joanne Fintzen 17,476 17,476
John Le Poidevin - N/A
On 14 April 2021, Trevor Ash purchased 50,000 Ordinary Redeemable Shares at a
price of 109.892 pence per share.
As at 30 September 2021, the Portfolio Manager held Nil Shares (31 March 2021:
Nil Shares) and partners and employees of the Portfolio Manager held 4,976,468
Shares (31 March 2021: 3,076,407 Shares), which is 0.98% (31 March 2021: 0.60%)
of the Issued Share Capital.
c) Portfolio Manager
The portfolio management fee is payable to the Portfolio Manager, TwentyFour
Asset Management LLP, 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 £2,158,716 (30 September 2020: £1,925,622) of which £
1,295,672 (31 March 2021: £895,035) 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 2020: £ 5,260) in commission.
15. 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 £20,000 per annum and fees payable quarterly in
arrears at a rate of 0.07% of the NAV of the Company below £50 million, 0.05%
on Net Assets between £50 million and £100 million and 0.03% on Net Assets in
excess of £100 million. During the period ended 30 September 2021, AIFM fees of
£101,390 (30 September 2020: £92,066) were charged to the Company, of which £
46,466 (31 March 2021: £45,510) 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 £142,707 (30 September 2021: £130,275) of which £71,371
(31 March 2021: £138,326) is due and payable at end of the period.
c) Depositary
Depositary fees are payable to Northern Trust (Guernsey) Limited, monthly in
arrears, at a rate of 0.0175% of the Net Asset Value 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 £39,739, (30 September 2020: £35,854) of
which £9,374 (31 March 2021: £9,975) is due and payable at the period end.
The Depositary is also entitled to a Global Custody fee of a minimum of £8,500
per annum plus transaction fees. Total Global Custody fees and charges for the
period amounted to £28,783 (30 September 2020: £25,675) of which £4,005 (31
March 2021: £3,923) is due and payable at the period end.
16. Financial Risk Management
The Company's activities expose it to a variety of financial risks: market risk
(including price risk, interest rate risk, foreign currency risk and
reinvestment risk), credit risk, liquidity risk, and capital risk.
These Unaudited Condensed Interim Financial Statements do not include the
financial risk management information and disclosures required in the Annual
Financial Statements; they should be read in conjunction with the Company's
Annual Financial Statements for the period ended 31 March 2021.
17. Fair Value Measurement
All assets and liabilities are carried at fair value or at carrying value 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 2021 and year ended 31 March 2021.
Level 1 Level 2 Level 3 Total
£ £ £ £
Assets
Financial assets at fair
value through profit or
loss:
Asset Backed Securities:
Auto Loans - 30,975,443 - 30,975,443
CLO - 227,717,454 - 227,717,454
CMBS - 19,552,203 - 19,552,203
Consumer ABS - 17,182,848 - 17,182,848
CRE ABS - 5,935,660 - 5,935,660
RMBS - 191,200,554 93,189,550 284,390,104
Student Loans - 4,883,340 - 4,883,340
Total assets as at 30
September 2021 - 497,447,502 93,189,550 590,637,052
Liabilities
Financial liabilities at
fair value through profit or
loss:
Forward currency contracts - 2,041,691 - 2,041,691
Total liabilities as at 30
September 2021 - 2,041,691 - 2,041,691
Level 1 Level 2 Level 3 Total
£ £ £ £
Assets
Financial assets at fair value
through profit or loss:
Asset Backed Securities:
Auto Loans - 32,644,755 - 32,644,755
CLO - 203,783,174 - 203,783,174
CMBS - 22,591,565 - 22,591,565
Consumer ABS - 25,368,516 - 25,368,516
CRE ABS - 6,857,076 - 6,857,076
RMBS - 205,504,939 85,525,761 291,030,700
Student Loans - 4,578,131 - 4,578,131
Forward currency contracts - 1,591,666 - 1,591,666
Total assets as at 31 March
2021 - 502,919,822 85,525,761 588,445,583
Liabilities
Financial liabilities at fair
value through profit or loss:
Forward currency contracts - 1,465 - 1,465
Total liabilities as at 31 - 1,465 - 1,465
March 2021
Asset Backed Securities which have a value based on quoted market prices
in active markets are classified in Level 1. At the end of the period, no Asset
Backed Securities held by the Company are classified as Level 1.
Asset Backed Securities which are not traded or dealt on organised markets or
exchanges are classified in Level 2 or Level 3. Asset Backed securities priced
at cost are classified as Level 3. Asset Backed securities 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.
Asset Backed Securities 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 in Level 2. Any
broker quote that is over 20 days old is considered stale and is classified as
Level 3.
During the period, there was one transfer from Level 2 to Level 3. There were
no other transfers between levels.
Due to the inputs into the valuation of Asset Backed Securities classified as
Level 3 not being available or visible to the Company, no meaningful
sensitivity on inputs can be performed.
The following tables present the movement in Level 3 instruments for the period
ended 30 September 2021 and year ended 31 March 2021 by class of financial
instrument.
Opening Net Net realised Net Transfer Transfer out Closing
balance sales loss for the unrealised into Level 3 balance
year included gain for the Level 3
in the year included
Statement of in the
Comprehensive Statement of
Income for Comprehensive
Level 3 Income for
Investments Level 3
held at 30 Investments
September held at 30
2021 September
2021
£ £ £ £ £ £ £
RMBS 85,525,761 67,838 (2,890,351) 2,556,137 7,930,165 - 93,189,550
Total at 30 85,525,761 67,838 (2,890,351) 2,556,137 7,930,165 - 93,189,550
September 2021
Opening Net Net realised Net Transfer Transfer out Closing
balance purchases loss for the unrealised into Level 3 balance
year included gain for the Level 3
in the year included
Statement of in the
Comprehensive Statement of
Income for Comprehensive
Level 3 Income for
Investments Level 3
held at 31 Investments
March 2021 held at 31
March 2021
£ £ £ £ £ £ £
RMBS 99,687,304 5,661,666 (7,772,892) 1,180,453 - (13,230,770) 85,525,761
Total at 31 99,687,304 5,661,666 (7,772,892) 1,180,453 - (13,230,770) 85,525,761
March 2021
The tables below analyse within the fair value hierarchy the Company's assets
and liabilities not measured at fair value at 30 September 2021 and 31 March
2021 but for which fair value is disclosed.
The assets and liabilities included in the below 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 deposits held with banks.
Amounts due to brokers and other payables represent the contractual amounts and
obligations due by the Company for settlement of trades and expenses. Amounts
due from brokers and other receivables represent the contractual amounts and
rights due to the Company for settlement of trades and income.
Level 1 Level 2 Level 3 Total
£ £ £ £
Assets
Cash and cash equivalents 8,285,233 - - 8,285,233
Amounts due from broker - 7,579,363 - 7,579,363
Other receivables - 3,789,885 - 3,789,885
Total assets as at 30 8,285,233 11,369,248 - 19,654,481
September 2021
Liabilities
Amounts due to broker - 2,292,802 - 2,292,802
Other payables - 1,577,494 - 1,577,494
Total liabilities as at 30 - 3,870,296 - 3,870,296
September 2021
Level 1 Level 2 Level 3 Total
£ £ £ £
Assets
Cash and cash equivalents 11,515,643 - - 11,515,643
Other receivables - 3,420,226 - 3,420,226
Total assets as at 31 March 11,515,643 3,420,226 - 14,935,869
2021
Liabilities
Amounts due to brokers - 1,635,556 - 1,635,556
Other payables - 1,227,445 - 1,227,445
Total liabilities as at 31 - 2,863,001 - 2,863,001
March 2021
18. Segmental Reporting
The Board is responsible for reviewing the Company's entire
portfolio and considers the business to have a single operating segment. The
Board's asset allocation decisions are based on a single, integrated investment
strategy, and the Company's performance is evaluated on an overall basis.
The Company invests in a diversified portfolio of Asset Backed Securities. The
fair value of the major financial instruments held by the Company and the
equivalent percentages of the total value of the Company, are reported in the
Top Twenty Holdings.
Revenue earned is reported separately on the face of the Condensed Statement of
Comprehensive Income as investment income being interest income received from
Asset Backed Securities.
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 Redeemable Shares. For these purposes, the Company's income will
include the interest payable by the Asset Backed Securities 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 will pay any dividends at all.
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 LIBOR 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 Redeemable Shares.
Under The Companies (Guernsey) Law, 2008, the Company can distribute dividends
from capital and revenue reserves, subject to the net asset and solvency test.
The net asset and solvency test considers whether a company is able to pay its
debts when they fall due, and whether the value of a company's assets is
greater than its liabilities. The Board confirms that the Company passed the
net asset and solvency test for each dividend paid.
The Company declared the following dividends in respect of distributable profit
for the period ended 30 September 2021:
Period to Dividend Net Ex-dividend Record Date Pay date
rate per dividend date
Share payable
(£) (£)
30 June 2021 0.0150 7,627,722 15 July 2021 16 July 2021 30 July 2021
30 September 0.0150 7,627,722 21 October 2021 22 October 5 November
2021 2021 2021
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
Throughout the period, the COVID-19 outbreak adversely impacted global
commercial activities. The fluidity of the situation precludes any prediction,
however, while it is foreseen that the pandemic will continue to have an
adverse impact on the global economic situation, the market's focus is now on
the reopening of global economies, the potential inflationary impact of,
amongst other factors, supply chain disruption, ability to source labour, and
stimulus packages, and the potential for a policy error in normalising monetary
conditions. The Directors continue to monitor the situation and its impact on
the Company.
During the period asset managers within the UK and Europe have seen a
significantly increased pressure from stakeholders to assess and disclose the
impact of climate change on investment portfolios. The Portfolio Manager has a
formalised approach to this risk integrated within a robust ESG framework which
is a major factor in the Portfolio Manager's investment analysis. The Board
will evaluate what aspects that the Company will consider reporting, based on
the regulatory requirements of the Company.
22. Subsequent Events
Unaudited Condensed Interim Financial Statements were approved for issuance by
the Board on 29 November 2021. Subsequent events have been evaluated until this
date.
As at 19 November 2021, the published NAV per Ordinary Share for the Company
was 113.18p. This represents a decrease of 0.62% (NAV as at 30 September 2021:
113.89p).
CORPORATE INFORMATION
Directors Custodian, Principal Banker and
Trevor Ash (Chairman) Depositary
Ian Burns (Senior Independent Director) Northern Trust (Guernsey) Limited
Richard Burwood PO Box 71
John de Garis (appointed 9 July 2021) Trafalgar Court
Joanne Fintzen Les Banques
John Le Poidevin (appointed 9 July St Peter Port
2021) Guernsey, GY1 3DA
Registered Office Administrator and Company Secretary
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 Broker and Financial Adviser
("AIFM") Numis Securities Limited
Maitland Institutional Services Limited The London Stock Exchange Building
Hamilton Centre 10 Paternoster Square
Rodney Way London, EC4M 7LT
Chelmsford, CM1 3BY
Portfolio Manager Independent Auditor
TwentyFour Asset Management LLP PricewaterhouseCoopers CI LLP
8th Floor, The Monument Building PO Box 321
11 Monument Street Royal Bank Place
London, EC3R 8AF 1 Glategny Esplanade
St Peter Port
Guernsey, GY1 4ND
UK Legal Advisers to the Company Receiving Agent
Eversheds Sutherland (International) Computershare Investor Services PLC
LLP The Pavilions
1 Wood Street Bridgwater Road
London, EC2V 7WS Bristol, BS13 8AE
Guernsey Legal Advisers to the Company Registrars
Carey Olsen Computershare Investor Services
Carey House (Guernsey) Limited
Les Banques 1st Floor
St Peter Port Tudor House
Guernsey, GY1 4BZ Le Bordage
St Peter Port
Guernsey, GY1 1DB
END
(END) Dow Jones Newswires
November 29, 2021 11:27 ET (16:27 GMT)
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