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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Twentyfour Select Monthly Income Fund Limited | LSE:SMIF | London | Ordinary Share | GG00BJVDZ946 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| -0.20 | -0.24% | 82.00 | 81.80 | 82.80 | 82.80 | 82.80 | 82.80 | 266,630 | 16:35:16 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Investors, Nec | 0 | 26.94M | 0.0421 | 19.67 | 529.87M |
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TWENTYFOUR SELECT MONTHLY INCOME FUND LIMITED
Interim Management Report and Unaudited Condensed
Interim Financial Statements
For the period from 1 October 2017 to 31 March 2018
LEI: 549300P9Q5O2B3RDNF78
(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)
The Directors of TwentyFour Select Monthly Income Fund Limited announce the
results for the year ended 31 March 2018. 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.hemscott.com/nsm.do.
SUMMARY INFORMATION
The Company
TwentyFour Select Monthly Income Fund Limited (the "Company") was incorporated
with limited liability in Guernsey, as a closed-ended investment company on 12
February 2014. 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 ("LSE") on 10 March 2014.
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
credit securities.
The portfolio can be comprised of any category of credit security, including,
without prejudice to the generality of the foregoing, bank capital, corporate
bonds, high yield bonds, leveraged loans, payment-in kind notes and asset
backed securities. The portfolio will include securities of a less liquid
nature. The portfolio will be dynamically managed by TwentyFour Asset
Management LLP (the "Portfolio Manager") and, in particular, will not be
subject to any geographical restrictions.
The Company maintains a portfolio diversified by issuer; the portfolio
comprises at least 50 Credit Securities. No more than 5% of the portfolio value
will be invested in any single Credit Security or issuer of Credit Securities,
tested at the time of making or adding to an investment in the relevant Credit
Security. Uninvested cash, surplus capital or assets may be invested on a
temporary basis in:
* Cash or cash equivalents, money market instruments, bonds, commercial paper
or other debt obligations with banks or other counterparties having a
"single A" or higher credit rating as determined by any internationally
recognised rating agency which, may or may not be registered in the EU; and
* Any "government and public securities" as defined for the purposes of the
Financial Conduct Authority (the "FCA") Rules.
Efficient portfolio management techniques are employed by the Company, such as
currency hedging, interest rate hedging and the use of derivatives to manage
key risks such as interest rate sensitivity and to mitigate market volatility.
The Company's currency hedging policy will only be used for efficient portfolio
management and not to attempt to enhance investment returns.
The Company will not employ gearing or derivatives for investment purposes. The
Company may use borrowing for short-term liquidity purposes, which could be
achieved through its loan facility or other types of collateralised borrowing
instruments including repurchase transactions and stock lending. The Articles
restrict the borrowings of the Company to 10% of the Company's Net Asset Value
("NAV") at the time of drawdown.
At launch the Company had a target net total return on the original issue price
of between 8% and 10% per annum. This comprised a target dividend payment of 6p
and a target capital return of 2p-4p both based on the original issue amount of
100p. There is no guarantee that this can or will be achieved, particularly
given the recent low interest rate environment. As such the total return
generated has been lower than initially anticipated, although the 6p dividend
per annum has consistently been met and the Portfolio Manager is confident that
this dividend target will be maintained in the current year. Refer to note 18
to the Financial Statements for details of the Company's dividend policy.
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.
Shareholder Information
Maitland Institutional Services Limited ("Maitland") is responsible for
calculating the NAV per share of the Company. Maitland delegated this
responsibility to Northern Trust International Fund Administration Services
(Guernsey) Limited (the "Administrator") however Maitland still performs an
oversight function. The unaudited NAV per Ordinary Share will be calculated as
at the close of business on every Wednesday that is also a business day and the
last business day of every month and will be announced by a Regulatory
Information Service the following business day.
Financial Highlights
31.03.18 30.09.17 31.03.17
Total Net Assets GBP158,155,252 GBP155,207,957 GBP144,046,214
Net Asset Value per Share 95.89p 96.44p 93.19p
Share price 100.00p 99.50p 95.75p
Premium to NAV 4.29% 3.17% 2.75%
Dividends declared during the period 3.00p 6.56p 3.00p
Dividends paid during the period 3.56p 6.85p 3.85p
As at 17 May 2018, the premium had moved to 4.85%. The estimated NAV per share
and share price stood at 95.85p and 100.50p, respectively.
Ongoing Charges
Ongoing charges for the six month period ended have been calculated in
accordance with the Association of Investment Companies (the "AIC") recommended
methodology. The ongoing charges for the period ended 31 March 2018 were 1.17%
(31 March 2017: 1.20%) on an annualised basis.
CHAIRPERSON'S STATEMENT
For the period from 1 October 2017 to 31 March 2018
The six month period ending 31 March 2018, can only be described as two
distinct quarters. Q4 2017 ended the year in the same fashion as the previous
three with improving fundamentals supporting a strong technical backdrop to
credit markets. Credit spreads have narrowed to an extent that they are close
to historically tight levels. The huge fiscal stimulus package announced by the
Trump administration and the lack of inflationary signals justified the
positive sentiment through the end of year holiday period and into the start of
2018. However, the release of the January data for US average hourly earnings
gave the market a rude awakening as the sharp increase immediately turned into
investor fears that systematic inflation was building up. This, combined with
US-initiated trade tariff issues and a worsening in the geopolitical
environment in Syria, resulted in a rapid deterioration in market sentiment for
the second half of the period.
In the three month period from October to the end of 2017, while market
sentiment was buoyant and credit spreads tightened there were limited
opportunities for the Portfolio Managers ("PM") to source suitable assets
meaning no new shares were issued. However, with changing market conditions
seen after the end of the period, some investment opportunities were
identified, enabling some carefully managed issuance to take place. The income
generation of the Company continued to maintain the monthly 0.5p dividend and
the PMs remain satisfied that the amortisation profile of the portfolio doesn't
affect the ability of the Company to meet the monthly dividend in the medium
term.
As mentioned above, market sentiment changed in early February and the
resulting pick-up in volatility created a more fertile environment for the PMs
to source suitable assets for the portfolio. As a result an incremental amount
of new shares were issued to meet investor demand. While adhering to the strict
discipline of only accepting new share issuance with investment opportunities
in place, the PMs and the Company's Board of Directors agreed to issue 4m new
shares during March, increasing the total shares from 160,929,151 to
164,929,151.
Looking ahead to the medium term the PMs expect a supportive backdrop to the
credit market as the global economy continues to grow, inflation appears to be
increasing but not at an alarming rate and central banks remain guarded, albeit
with a tightening bias. While this should be a favourable backdrop, there are
considerable uncertainties that could weaken investor sentiment and see a
return of spikes in volatility; Brexit, a rise in populist parties in the
Eurozone, trade tariff disputes, Russian sanctions and Middle East tensions all
have the potential ability to destabilise markets in the near to medium term.
The PMs are of the opinion that the short interest rate duration of the Company
should help mitigate normal swings in mark-to-market volatility and any real
period of spread widening should be seen as a signal to add favoured credits at
more attractive levels.
The Company continues to demonstrate a strong NAV total return since its
launch.
Over the medium term, the PMs are confident that the portfolio will continue to
deliver its target of 0.5p per month and that the recent pick up in asset
volatility should help alleviate any reinvestment risk that may have been
building in an earlier period.
Claire Whittet
Chair
17 May 2018
PORTFOLIO MANAGER'S REPORT
For the period from 1 October 2017 to 31 March 2018
Economic Background
Sentiment in the last quarter of 2017 saw a continuation of risk markets being
supported by coordinated global growth, US fiscal stimulus and a strong
technical backdrop to markets. In the US, the Federal Open Market Committee
raised Federal Reserve ("the Fed") funds by 25bps close to the year-end, in
what was a highly anticipated move and therefore did little to move markets.
Meanwhile President Trump finally saw the Senate pass his long awaited fiscal
stimulus package, which gave a boost of longevity to the credit cycle, but
added some volatility to US Treasury markets as the reforms were considered to
have an inflationary bias.
In Europe the early part of the period was dominated by the European Central
Bank's ("ECB") announcement regarding the reduction of its Asset Purchase
Program ("APP"), although the decision taper to EUR30bn per month was offset by a
dovish extension of the programme until at least September 2018 and a
confirmation that euro interest rates would remain at least until after the
Quantitative Easing programme had ended. Elsewhere in the Eurozone the
independence referendum in Catalonia resulted in the Spanish government
arranging a snap election in the region, with the leader of the independence
movement absconding to Brussels. The 21st December election failed to produce a
definitive result, with the pro-Catalan independence parties winning the most
seats (70 out of 135) on a combined basis, but the largest single party was the
anti-independence Citizens Party, with 25.3% (36 seats). Either way, the
election was viewed by the markets as a favourable outcome as it kept Spain
unified, while allowing Catalonia some additional autonomy over local issues.
In the key Eurozone election, the so called 'Jamaica coalition' (a combination
of the Christian Democratic Union, Free Democratic Party, and the Green Party)
failed to reach a working agreement in Germany, briefly raising the prospect of
a second election. The market reacted in a surprisingly benign manner as Angela
Merkel ruled out any prospect of trying to rule with a minority government, but
ultimately a deal was struck and a weakened Merkel continued as Chancellor
after agreeing concessions with the socialists.
In early November, as expected, the Bank of England's ("BoE") Monetary Policy
Committee reversed the emergency rate cut that followed the UK referendum; but
the real surprise was the following rhetoric from Governor Carney saying that
"two more 25bps rate hikes will be needed over the next three years". This
shocked the market given the uncertainty ahead of the crucial Brexit
negotiations. More stabilising were the results from the BoE bank stress tests,
which were based on a scenario far more punitive than the global financial
crisis period. Despite that, all seven participating banks and building
societies passed the test without any need to strengthen their capital
positions. As expected, Carney confirmed the UK Countercyclical Capital Buffer
would be increased from 0.5% to 1%, in order to prepare the banks for a more
difficult operating environment.
The ECB president, Mario Draghi, also hit the headlines with a dovish speech,
highlighting that inflation was still subdued and labour market slack remained
significant despite strong economic recovery. He also cautioned that the
Non-Performing Loan problem in the EU had not been solved and that further work
was required.
The start to 2018 continued in the same strong vein which enabled credit
spreads across all sectors to tighten further. However, this was brought to an
abrupt end as higher than expected US average hourly earnings reared the
spectre of inflation concerns, resulting in a sharp widening of credit spreads.
Economic data continued to be strong in January and the Q4 earnings season
kicked off with a decent tone aided by a favourable global picture of upgrades
versus downgrades in the year to date.
However, the US wage data set a weak tone for the risk markets and February was
a turbulent month. In the US Jerome Powell was sworn in as the new Fed chairman
with his first address showing little deviation from his predecessor,
expressing his belief that while the economy was not showing signs of
overheating, there was a need for gradual tightening by the Fed. While comments
from US Treasury Secretary Mnuchin that he expects "wages to rise without
fuelling broader inflation" created a bit of a quandary for the market. Adding
to the uncertainty was a raft of trade tariffs announced by President Trump on
foreign imports, including steel, aluminium and autos, which ultimately
resulted in the resignation of White House chief economic advisor, Gary Cohn
and fuelled speculation of a full scale trade war. To cap all that President
Trump announced that the National Security Advisor, HR McMaster, would be
replaced by the hawkish John Bolton, which added to the nervous tone. Tech
stocks added to the malaise with a raft of negative stories including weakness
in Facebook shares due to user privacy concerns, weak demand for the new Apple
iPhone X, production problems at Tesla (and a fatal crash involving a prototype
driverless vehicle), and a personal attack on Amazon by President Trump.
In Europe the quarter ended in uncertainty as the Italian election on 4th March
proved to be a disaster for former prime ministers Silvio Berlusconi and Matteo
Renzi, opening the door for two anti-establishment and Euro-sceptic parties;
the Five Star Movement (led by Luigi Di Maio) and League (led by Matteo
Salvini).
In the UK, the Office for National Statistics revised down its estimate for UK
growth, although comments from Mark Carney suggested that domestic interest
rates may go up faster and higher than markets have been anticipating. BoE
chief economist Andy Haldane added to the uncertainty when he commented that
the strength of UK employment could be at risk if the central bank waits too
long before hiking rates. However, support for UK markets was forthcoming as
negotiations over Brexit appear to moving towards a workable agreement with the
EU and some form of equivalence was seen as being feasible by market
participants.
Performance Review
From a purely economic fundamental standpoint the backdrop remained supportive
for risk assets during the period and the Fed decision to raise rates for a
sixth time to 1.5-1.75% endorsed this view. That said, there were a
considerable number of uncertainties that weakened market participant
sentiment. Volatility was rife in the second quarter of the period,
particularly in the rates market, as investors alternated between whether their
greater fear was inflation or geopolitical events, resulting in a classic
flight to safety, resulting in 10-yr UST yields fluctuating in a 16bp range
during the month. That said, the increased uncertainty created opportunity for
the PMs to add favoured assets at more attractive levels and the latter part of
the period was no exception allowing for the issuance of 4m new shares.
Helping source new assets was the introduction of the first 'Restricted Tier 1'
("RT1") bond in euro. This RT1 structure is a new Solvency II compliant
structure, somewhat similar to the banking sector 'Additional Tier 1' ("AT1")
bonds, and similarly requires a high degree of due diligence, offering
investors an attractive complexity premium (at least until the structure
becomes more familiar). Elsewhere the UK challenger bank sector continues to
offer the PMs attractive opportunities, and a new AT1 issue from Shawbrook Bank
continues this theme, with an attractive coupon of 7.875% in Sterling being an
ideal investment for the Company.
The Company's aim is to produce an attractive level of income, generating a
target monthly income of 0.5p, with any excess income annually distributed to
investors. This is a high conviction strategy based on relative value bonds in
the credit markets, with an emphasis on securities that exhibit a degree of
liquidity premium assets that are primarily buy-to-hold. The performance over
the 6 month period of review continued to meet the target set by the Company's
mandate.
In terms of total return the Company generated 3.16% for the 6 month period.
Foreign Exchange Accounting
The Company's policy is to hedge foreign exchange currency risk. Any movements
in foreign exchange rates are monitored daily and the hedge is adjusted when
necessary to ensure that currency exposure remains within strict limits.
The net foreign currency loss on the portfolio (recorded within net (loss)/gain
on financial assets at fair value through profit or loss) and the net foreign
currency gains on the forward currency contracts (included within net foreign
currency gains) are recognised in accordance with the hedging policy and IFRS,
within the condensed Statement of Comprehensive Income.
Investment Outlook
The Company was established to take advantage of the liquidity premium that
exists in the non-government sectors of the fixed income universe. When
necessary the PMs may determine it to be prudent to manage excessive duration
risk with the use of interest rate swap derivatives, but with the natural
duration of the Company currently below 3yrs there are no hedges applied,
despite the imminent threat of a hike to UK rates.
The PMs consider the portfolio to be well positioned to benefit from a benign
backdrop for credit markets and should be able to take advantage of periods of
increased volatility to increase the yield of the Company for the longer term
benefit.
Since the Company's launch in early 2014, the PMs have favoured exposure to
CLOs and subordinated bank debt. Both these sectors have performed well over
the period being reported on and the PMs still recognise the relative value
imbedded in these sectors compared to their peers in the wider fixed income
spectrum. As such these two sectors are expected to remain the favoured
allocations over the medium term.
TwentyFour Asset Management LLP
17 May 2018
TOP TWENTY HOLDINGS
As at 31 March 2018
Credit Percentage
of
Nominal/ Security Fair Value Net Asset
*
Shares Sector GBP Value
Nationwide Bldg Society 10.25 29/06/ Banks 3.68
2049 37,160 5,821,114
Bracken Midco1 10.50 15/11/2021 High Yield 2.53
3,875,000 European 3,995,093
Shawbrook Group 7.875 31/12/2049 Banks 2.33
3,770,000 3,690,147
Coventry Bldg Society 6.375 29/12/ Banks 2.32
2049 3,540,000 3,663,458
Santander Uk Banks 2.17
2,000,000 3,435,810
Aldermore Group 11.875 31/12/2049 Banks 1.86
2,700,000 2,944,329
Arbour Clo 2 15/05/2030 ABS 1.69
3,000,000 2,679,611
Barclays PLC 7.875 31/12/2049 Banks 1.63
2,365,000 2,580,396
Capital Bridging Finance 1 MEZZ 05/ ABS 1.59
07/2018 2,500,000 2,512,500
Shawbrook Group 8.50 28/10/2025 Banks 1.56
2,300,000 2,471,785
St Pauls Clo 25/04/2030 ABS 1.53
2,835,000 2,423,338
SC Germany Consumer 2015-1 E 13/12/ ABS 1.52
2028 2,500,000 2,411,727
Paragon Group of Companies 7.25 09/ Banks 1.51
09/2026 2,200,000 2,391,554
Onesavings Bank 9.125 31/12/2049 Banks 1.50
2,200,000 2,366,932
Cabot Financial 7.50 01/10/2023 High Yield 1.49
2,240,000 European 2,349,400
Credit Suisse Group 7.5 31/12/2049 Banks 1.47
3,000,000 2,319,927
Opium Three MEZZ 25/10/2053 ABS 1.45
2,300,000 2,300,000
Banco Bilbao Vizcaya Argentaria Banks 1.45
8.875 29/12/2049 2,200,000 2,287,676
Societe Generale 7.375 31/12/2049 Banks 1.42
2,960,000 2,249,857
Garfunkelux Holdco 8.50 01/11/2022 High Yield 1.38
2,150,000 European 2,184,388
Total 36.08
57,079,042
* Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date.
The full portfolio listing as at 31 March 2018 can be obtained from the
Administrator on request.
BOARD MEMBERS
Biographical details of the Directors are as follows:
Claire Whittet - (Chair) (age 63)
Ms Whittet is a resident of Guernsey and has 40 years' experience in the
banking industry. She joined Rothschild Bank International Ltd in 2003 as a
Director and was latterly Managing Director and Co-Head before becoming a
Non-Executive Director on her retirement in 2016. She began her career at the
Bank of Scotland where she was for 19 years in a variety of personal and
corporate finance roles. Subsequently, Ms Whittet joined Bank of Bermuda and
was Global Head of Private Client Credit before joining Rothschild.
Ms Whittet is a Non-Executive Director of 5 other listed, Guernsey registered
funds.
Ms Whittet holds an MA from Edinburgh University, is a member of the Chartered
Institute of Bankers in Scotland, a member of the Chartered Insurance
Institute, a Chartered Banker, a member of the Institute of Directors and holds
the Institute of Directors Diploma in Company Direction. Ms Whittet was
appointed to the Board on 12 February 2014.
Christopher F. L. Legge - (Non-executive Director) (age 62)
Mr Legge is a Guernsey resident and worked for Ernst & Young in Guernsey from
1983 to 2003. Having joined the firm as an audit manager in 1983, he was
appointed a partner in 1986 and managing partner in 1998. From 1990 to 1998, he
was head of Audit and Accountancy and was responsible for the audits of a
number of banking, insurance, investment fund, property fund and other
financial services clients. He also had responsibility for the firm's training,
quality control and compliance functions. He was appointed managing partner for
the Channel Islands region in 2000 and merged the business with Ernst & Young
LLP in the United Kingdom. He retired from Ernst & Young in 2003.
Mr Legge currently holds a number of non-executive directorships in the
financial services sector and also chairs the Audit Committees of several UK
listed companies. He is an FCA and holds a BA (Hons) in Economics from the
University of Manchester. Mr Legge was appointed to the Board on 12 February
2014.
Ian Martin - (Non-executive Director) (age 54)
Ian Martin has over 30 years' experience in finance gathered in a variety of
multi asset investment focused roles in the UK, Hong Kong, Switzerland and
Uruguay. More recently he was the CIO and Head of Asset Management and Research
at Lloyds Bank in Geneva and then Head of Bespoke Portfolio Management and
Advisory for key clients in UBP Bank in Geneva. Previous roles have included
senior roles in equity derivatives and trading as well as CIO and Managing
Director of a Fund of Hedge funds company in the UK. Currently he is a Director
of Bedlam Family Office. Mr Martin was appointed to the Board on 15 July 2014.
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
The Company's assets are comprised of Bonds and 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 assessed by the Board relating to the Company were
disclosed in the Annual Report and Audited Financial Statements for the year
ended 30 September 2017. The principal risks disclosed include market risk,
liquidity risk, credit risk, foreign currency risk and reinvestment risk. A
detailed explanation of these can be found in the annual report. The Board and
Portfolio Manager do not consider these risks to have changed and remain
relevant for the remaining six months of the financial year.
* Market risk
Market risk is risk associated with changes in market prices including spreads,
interest rates, economic uncertainty, changes in laws and national and
international political circumstances.
* Reinvestment risk
Reinvestment risk is the risk that any monies resulting from principal and
income payments from a bond will not be reinvested at the prevailing interest
rate when the bond was initially purchased.
* Credit risk
The investment portfolio is comprised of Asset Backed Securities and Bonds
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.
* Liquidity risk
Liquidity risk is that the Company does not have sufficient cash resources to
meet obligations, including the dividend target as they fall due or can only do
so on terms that are materially disadvantageous.
* 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 is in predominately Euro
denominated assets although mitigates this risk through hedging.
Related Parties
Related party balances and transactions are disclosed in note 13 of these
unaudited condensed interim financial statements.
Going Concern
Under the 2016 UK Corporate Governance Code (effective for periods beginning on
or after 17 June 2016) 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 the financial statements.
The Board believes that it is appropriate to adopt the going concern basis in
preparing the Unaudited Condensed Interim Financial Statements in view of its
holding in cash and cash equivalents and certain more liquid investments within
the portfolio and the income deriving from those investments, meaning the
Company has adequate financial resources to meet its liabilities as they fall
due.
RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their 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,
financial position and profit or loss of the Company as required by the UK
Listing Authority's Disclosure and Transparency Rule ("DTR") 4.2.4R.
* This 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 October 2017 to
31 March 2018 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 October 2017 to 31
March 2018 and that have materially affected the financial position or
performance of the Company during that period as included in note 13.
By order of the Board,
Claire Whittet Christopher
Legge
Chair Director
17 May 2018
INDEPENT INTERIM REVIEW REPORT
TO TWENTYFOUR SELECT MONTHLY INCOME FUND LIMITED
Our conclusion
We have reviewed the accompanying condensed interim financial information of
TwentyFour Select Monthly Income Fund Limited (the "Company") as of 31 March
2018. Based on our review, nothing has come to our attention that causes us to
believe that the accompanying condensed 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 condensed interim financial information comprises:
* the Unaudited Condensed Statement of Financial Position as of 31 March
2018;
* the Unaudited Condensed Statement of Comprehensive Income for the six-month
period then ended;
* the Unaudited Condensed Statement of Changes in Equity for the six-month
period then ended;
* the Unaudited Condensed Statement of Cash Flows for the six-month period
then ended; and
* the notes, comprising a summary of significant accounting policies and
other explanatory information.
The condensed 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
condensed interim financial information in accordance with Disclosure Guidance
and Transparency Rules sourcebook of the United Kingdom's Financial Conduct
Authority.
Our responsibility is to express a conclusion on this condensed interim
financial information 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.
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 management report
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
17 May 2018
(a) The maintenance and integrity of the TwentyFour Select Monthly Income
Fund Limited 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 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 STATEMENT OF COMPREHENSIVE INCOME
for the period from 1 October 2017 to 31 March 2018
For the For the
period from period from
01.10.17 to 01.10.16 to
31.03.18 31.03.17
Notes GBP GBP
Income (Unaudited) (Unaudited)
Interest income 5,635,643 5,473,583
Net foreign currency gains 7 1,430,518 565,827
Net (loss)/gain on financial
assets
at fair value through profit 8 (1,383,743) 5,712,973
or loss
Total income 5,682,418 11,752,383
Expenses
Portfolio management fees 13 (579,549) (525,291)
Directors' fees 13 (55,500) (75,337)
Administration fees 14 (55,992) (52,471)
AIFM management fees 14 (38,059) (35,971)
Audit fee (24,892) (25,516)
Custody fees 14 (7,727) (8,029)
Broker fees (24,705) (24,932)
Depositary fees 14 (12,831) (12,466)
Legal fees (30,422) (17,041)
Other expenses (77,704) (63,535)
Total expenses (907,381) (840,589)
Total comprehensive income for the period 4,775,037 10,911,794
Earnings per Ordinary Share
-
Basic & Diluted 3 0.030 0.071
All items in the above statement derive from continuing operations.
The accompanying notes are an integral part of these Financial Statements.
UNAUDITED CONDENSED STATEMENT OF FINANCIAL POSITION
as at 31 March 2018
31.03.18 30.09.17
Assets Notes GBP GBP
Current assets (Unaudited) (Audited)
Financial assets at fair value through profit
and loss
- Investments 8 151,088,373 148,499,775
- Derivative assets: Forward currency 16 2,246 77,788
contracts
Other receivables 9 3,013,461 2,762,950
Cash and cash equivalents 6,607,843 8,169,355
Total current assets 160,711,923 159,509,868
Liabilities
Current liabilities
Amounts due to broker 1,862,645 3,676,479
Other payables 10 359,693 442,699
Financial liabilities at fair value through
profit and loss
- Derivative liabilities: Forward currency 16 334,333 182,733
contracts
Total current liabilities 2,556,671 4,301,911
Total net assets 158,155,252 155,207,957
Equity
Share capital account 11 160,863,274 157,001,121
Other reserves (2,708,022) (1,793,164)
Total equity 158,155,252 155,207,957
Ordinary Shares in issue 11 164,929,151 160,929,151
Net Asset Value per Ordinary Share (pence) 5 95.89 96.44
The Financial Statements were approved by the Board of Directors on 17 May 2018
and signed on its behalf by:
Claire Whittet Christopher
Legge
Chair Director
The accompanying notes are an integral part of these Financial Statements.
UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY
for the period from 1 October 2017 to 31 March 2018
Share Other
capital
account reserves Total
Notes GBP GBP GBP
(Unaudited) (Unaudited) (Unaudited)
Balance at 1 October 2017 157,001,121 (1,793,164) 155,207,957
Issue of shares 3,950,000 - 3,950,000
Share issue costs (46,413) - (46,413)
Income equalisation on new issues 4 (41,434) 41,434 -
Distributions paid - (5,731,329) (5,731,329)
Total comprehensive income for the - 4,775,037 4,775,037
period
Balance at 31 March 2018 160,863,274 (2,708,022) 158,155,252
Share Other
capital
account reserves Total
GBP GBP GBP
(Unaudited) (Unaudited) (Unaudited)
Balance at 1 October 2016 148,691,163 (11,869,322) 136,821,841
Issue of shares 2,294,500 - 2,294,500
Share issue costs (27,665) - (27,665)
Income equalisation on new issues 4 (2,561) 2,561 -
Distributions paid - (5,954,256) (5,954,256)
Total comprehensive income for the - 10,911,794 10,911,794
period
Balance at 31 March 2017 150,955,437 (6,909,223) 144,046,214
The accompanying notes are an integral part of these Financial Statements.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
for the period from 1 October 2017 to 31 March 2018
For the For the period
period from from 01.10.16
01.10.17 to to 31.03.17
31.03.18
Notes GBP GBP
Cash flows used in operating activities (Unaudited) (Unaudited)
Total comprehensive income for the period 4,775,037 10,911,794
Adjustments for:
Net loss/(gain) on financial assets at fair value through 1,383,743 (5,712,973)
profit or loss
Amortisation adjustment under effective interest 8 (359,323) (568,212)
rate method
Unrealised loss/(gain) on derivatives 7 227,142 (1,106,193)
Increase in other receivables 9 (250,511) (392,494)
Decrease in other payables 10 (83,006) (25)
Purchase of investments 8 (34,284,953) (72,658,129)
Sale of investments 8 28,858,101 68,388,978
Net cash generated from/(used in) operating activities 266,230 (1,137,254)
Cash flows from financing activities
Proceeds from issue of ordinary shares 11 3,950,000 -
Proceeds from re-issuance of treasury shares 11 - 2,294,500
Share issue costs 11 (46,413) (27,665)
Dividend distribution 18 (5,731,329) (5,954,256)
Net cash outflow from financing activities (1,827,742) (3,687,421)
Decrease in cash and cash equivalents (1,561,512) (4,824,675)
Cash and cash equivalents at beginning of period 8,169,355 8,039,495
Cash and cash equivalents at end of period 6,607,843 3,214,820
The accompanying notes are an integral part of these Financial Statements.
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
for the period from 1 October 2017 to 31 March 2018
1. General Information
TwentyFour Select Monthly Income Fund Limited (the "Company") was incorporated
with limited liability in Guernsey, as a closed-ended investment company on 12
February 2014. 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 ("LSE") on 10 March 2014.
The investment objective and policy is set out in the Summary Information.
The Portfolio Manager of the Company is TwentyFour Asset Management LLP (the
"Portfolio Manager").
2. Principal Accounting Policies
a) Basis of preparation and Statement of compliance
The Unaudited Condensed Interim Financial Statements for the period from 1
October 2017 to 31 March 2018 have been prepared on a going concern basis in
accordance with IAS 34, the Listing Rules of the LSE and applicable legal and
regulatory requirements.
The Unaudited Condensed Interim Financial Statements should be read in
conjunction with the audited annual financial statements for the year ended 30
September 2017, which were prepared in accordance with International Financial
Reporting Standards ("IFRS") and which received an unqualified audit 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.
3. Earnings per Ordinary Share - Basic & Diluted
The earnings per Ordinary Share - Basic and Diluted of 3.0p (31 March 2017:
7.1p) has been calculated based on the weighted average number of Ordinary
Shares of 160,995,817 (31 March 2017: 154,496,733) and a net gain for the
period of GBP4,775,037 (31 March 2017: GBP10,911,794).
4. Income on equalisation of new issues
In order to ensure there were no dilutive effects on earnings per share for
current shareholders when issuing new shares, earnings have been calculated in
respect of the accrued income at the time of purchase and a transfer has been
made from share capital to income to reflect this. The transfer for the period
amounted to GBP41,434 (31 March 2017: GBP2,561).
5. Net Asset Value per Ordinary Share
The net asset value of each Share of 95.89p (30 September 2017: GBP96.44p) is
determined by dividing the net assets of the Company attributed to the Shares
of GBP158,155,252 (30 September 2017: GBP155,207,957) by the number of Shares in
issue at 31 March 2018 of 164,929,151 (30 September 2017: 160,929,151).
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 GBP1,200 (30
September 2017: GBP1,200).
7. Net foreign currency gains
For the For the
period from period from
01.10.17 to 01.10.16 to
31.03.18 31.03.17
(Unaudited) (Unaudited)
GBP GBP
Movement in net unrealised (loss)/gain on forward currency (227,142) 1,106,193
contracts
Movement in unrealised gain on spot currency contracts 705 -
Realised gain on forward currency contracts 2,936,419 107,294
Realised currency loss on receivables/payables (1,229,065) (599,092)
Unrealised currency loss on receivables/payables (50,399) (48,568)
1,430,518 565,827
8. Investments
For the For the year
period from ended
01.10.17 to 30.09.17
31.03.18
(Unaudited) (Audited)
GBP GBP
Financial assets at fair value through profit and loss:
Unlisted Investments:
Opening amortised cost 137,736,071 128,103,985
Purchases at 32,471,119 121,111,167
cost
Proceeds on sale/principal repayment (28,858,101) (112,873,124)
Amortisation adjustment under effective interest rate method 359,323 1,180,151
Realised gain on sale/principal repayment 3,449,505 9,282,593
Realised loss on sale/principal repayment (1,523,159) (9,068,701)
Closing amortised cost 143,634,758 137,736,071
Unrealised gain on investments 9,566,004 12,539,146
Unrealised loss on investments (2,112,389) (1,775,442)
Fair value 151,088,373 148,499,775
For the For the
period from period from
01.10.17 to 01.10.16 to
31.03.18 31.03.17
(Unaudited) (Unaudited)
GBP GBP
Realised gain on sale/principal repayment 3,449,505 5,399,707
Realised loss on sale/principal repayment (1,523,159) (8,270,180)
(Decrease)/increase in unrealised gain (2,973,142) 1,520,149
(Increase)/decrease in unrealised loss (336,947) 7,063,297
Net (loss)/gain on financial assets at fair value through profit (1,383,743) 5,712,973
or loss
The Company does not experience any seasonality or cyclicality in its investing
activities.
9. Other receivables
As at As at
31.03.18 30.09.17
(Unaudited) (Audited)
GBP GBP
Interest income receivable 2,888,347 2,635,034
Prepaid expenses 24,716 14,833
Dividends receivable 99,190 112,580
Spot currency contracts 1,208 503
3,013,461 2,762,950
10. Other payables
As at As at
31.03.18 30.09.17
(Unaudited) (Audited)
GBP GBP
Portfolio management fees payable 182,991 290,302
Directors' fees payable 29,875 31,350
Administration fees payable 23,318 28,004
AIFM management fees payable 17,981 18,528
Audit fees payable 35,342 50,000
Other expenses payable 66,800 21,301
Depositary fees payable 2,057 2,054
Custody fees payable 1,329 1,160
359,693 442,699
Authorised Share Capital
The Directors may issue an unlimited number of Ordinary Shares at no par value
and an unlimited number of Ordinary Shares with a par value.
Issued Share Capital
As at As at
31.03.18 30.09.17
GBP GBP
Ordinary Shares
Share Capital at the beginning of the period/ 157,001,121 148,691,163
year
Issue of shares 3,950,000 4,746,518
Share issue costs (46,413) (100,022)
Re-issuance of treasury - 3,705,827
shares
Income equalisation on new issues (41,434) (42,365)
Total Share Capital at the end of the period/ 160,863,274 157,001,121
year
31.03.18 30.09.17
GBP GBP
Treasury Shares
Share Capital at the beginning of the period/ - 3,705,827
year
Re-issued shares - (3,705,827)
Total Treasury Shares at the end of the period - -
/year
Reconciliation of number of Shares
31.03.18 30.09.17
Shares Shares
Ordinary Shares
Shares at the beginning of the period/year 160,929,151 152,079,151
Issue of shares 4,000,000 5,019,383
Re-issuance of treasury - 3,830,617
shares
Total Shares in issue at the end of the 164,929,151 160,929,151
period/year
The Ordinary Shares carry the following rights:
a) the Ordinary Shares carry the right to receive all income of the Company
attributable to the Ordinary 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.
Reconciliation of number of Treasury Shares
31.03.18 30.09.17
Shares Shares
Treasury Shares
Shares at the beginning of the period - 3,830,617
/year
Reissue of treasury shares - (3,830,617)
Total Shares held in treasury at the end of the period/year - -
The Company has the right to issue and purchase up to 14.99% of the total
number of its own shares at GBP0.01 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 Law.
During the prior year all 3,830,617 remaining treasury shares were re-issued
for a total consideration of GBP3,705,827.
Shares held in Treasury are excluded from calculations when determining
Earnings per Ordinary Share or Net Asset Value per Ordinary Share as detailed
in notes 3 and 5.
12. Analysis of Financial Assets and Liabilities by Measurement Basis as per
Statement of Financial Position
Financial
assets at
fair
value
through
profit and Loans and Total
loss receivables
GBP GBP GBP
31 March 2018 (Unaudited)
Financial Assets
Financial assets at fair value through profit
and loss
-Investments
-Bonds 102,785,877 - 102,785,877
-Asset backed 48,302,498 - 48,302,498
securities
-Derivative assets: Forward currency 2,246 - 2,246
contracts
Other receivables (excluding prepaid expenses) - 2,988,745 2,988,745
Cash and cash - 6,607,843 6,607,843
equivalents
151,090,621 9,596,588 160,687,209
Financial
liabilities at Other
fair
value through financial
profit and liabilities Total
loss
GBP GBP GBP
31 March 2018 (Unaudited)
Financial Liabilities
Amounts due to broker - 1,862,645 1,862,645
Other payables - 359,693 359,693
Financial liabilities at fair value through profit
and loss
-Derivative liabilities: Forward currency 334,333 - 334,333
contracts
334,333 2,222,338 2,556,671
Financial
assets at
fair
value through Loans and
profit and receivables Total
loss
GBP GBP GBP
30 September 2017 (Audited)
Financial Assets
Financial assets at fair value through profit
and loss
-Investments
-Bonds 101,672,047 - 101,672,047
-Asset backed 46,827,728 - 46,827,728
securities
-Derivative assets: Forward currency 77,788 - 77,788
contracts
Other receivables (excluding prepaid - 2,748,117 2,748,117
expenses)
Cash and cash - 8,169,355 8,169,355
equivalents
148,577,563 10,917,472 159,495,035
Financial
liabilities at Other
fair
value through financial
profit and liabilities Total
loss
GBP GBP GBP
30 September 2017 (Audited)
Financial Liabilities
Amounts due to broker - 3,676,479 3,676,479
Other payables - 442,699 442,699
Financial liabilities at fair value through profit
and loss
-Derivative liabilities: Forward currency 182,733 - 182,733
contracts
182,733 4,119,178 4,301,911
13. 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
GBP150,000.
The annual Directors' fees comprise GBP42,000 (2017: GBP35,000) payable to Ms
Whittet, the Chair, GBP37,000 (2017: GBP32,500) to Mr Legge as Chair of the Audit
Committee and GBP32,000 (2017: GBP30,000) to Mr Martin, the Chair of Management
Engagement Committee. During the period, Directors' fees of GBP55,500 (31 March
2017: GBP75,337) were charged to the Company, of which GBP29,875 (30 September
2017: GBP43,482) remained payable at the end of the period. Directors' expenses
for the period were GBP8,769 (31 March 2017: GBP5,633).
b) Shares held by related parties
The Directors of the Company held the following shares beneficially:
31.03.18 30.09.17
Shares Shares
Claire Whittet 25,000 25,000
Christopher Legge 50,000 50,000
Ian Martin 35,000 35,000
Directors are entitled to receive the dividends on any shares held by them
during the period. Dividends declared by the Company are set out in note 18.
As at 31 March 2018, the Portfolio Manager held no Shares (30 September 2017:
no Shares) of the Issued Share Capital. Partners and employees of the Portfolio
Manager decreased their holdings during the period, and held 985,778 (30
September 2017: 1,031,766), which is 0.60% (30 September 2017: 0.64%) 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 GBP579,549 (31 March 2017: GBP525,291) of which GBP182,991 (30
September 2017: GBP290,302) is payable at period end. The Portfolio Management
Agreement dated 17 February 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 0.175% 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 GBP6,913 (30 September 2017: GBP841) in commission.
14. Material Agreements
a) Alternative Investment Fund Manager ("AIFM")
The Company's 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 Net Asset Value 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,
AIFM fees of GBP38,059 (31 March 2017: GBP35,971) were charged to the Company, of
which GBP17,981 (30 September 2017: GBP18,528) 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 Net Asset Value 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
of GBP75,000 for each year. In addition, an annual fee of GBP25,000 will be charged
for corporate governance and company secretarial services. During the period,
administration and secretarial fees of GBP55,992 (31 March 2017: GBP52,471) were
charged to the Company, of which GBP23,318 (30 September 2017: GBP28,004) remained
payable at the end of the period.
c) Depositary and Custody
Depositary's fees are payable to Northern Trust (Guernsey) Limited monthly in
arrears at a rate of 0.0175% of the NAV of the Company below GBP100 million,
0.0150% on Net Assets between GBP100 million and GBP200 million and 0.0125% on Net
Assets in excess of GBP200 million as at the last business day of the month
subject to a minimum of GBP25,000 for each year. During the period, depositary
fees of GBP12,831 (31 March 2017: GBP12,466) were charged to the Company, of which
GBP2,057 (30 September 2017: GBP2,054) remained payable at the end of the period.
The Depositary is also entitled to a Global Custody fee of a minimum of GBP8,500
per annum plus transaction fees. Total Global Custody fees and charges for the
period amounted to GBP7,727 (31 March 2017: GBP8,029) of which GBP1,329 (30 September
2017: GBP1,160) is due and payable at the end of the period.
15. Financial Risk Management
The Company's activities expose it to a variety of financial risks: Market risk
(including price risk, reinvestment risk, interest rate risk and foreign
currency risk), credit risk, liquidity risk and capital risk.
These Unaudited Condensed Interim Financial Statements do not include all
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 year ended 30 September 2017.
16. 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 table analyses within the fair value hierarchy the Company's
financial assets and liabilities (by class) measured at fair value as at 31
March 2018.
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Assets (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Financial assets at fair value through
profit or loss
-Investments
-Bonds - 39,490,796 63,295,080 102,785,876
-Asset backed securities - 38,709,940 9,592,557 48,302,497
-Derivative assets: Forward currency - 2,246 - 2,246
contracts
Total assets as at 31 March
2018
Total assets as at 31 March 2018 - 78,202,982 72,887,637 151,090,619
Liabilities
Financial liabilities at fair value through profit or
loss
-Derivative liabilities: Forward currency contracts 334,333 - 334,333
-
Total liabilities as at 31 March
2018 - 334,333 - 334,333
The following table analyses within the fair value hierarchy the Company's
financial assets and liabilities (by class) measured at fair value as at 30
September 2017.
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Assets (Audited) (Audited) (Audited) (Audited)
Financial assets at fair value
through profit or loss
-Bonds - 27,770,154 73,901,893 101,672,047
-Asset backed securities - 38,465,977 8,361,751 46,827,728
-Derivative assets: Forward currency - 77,788 - 77,788
contracts
Total assets as at 30 September 2017 - 66,313,919 82,263,644 148,577,563
Liabilities
Financial liabilities at fair value
through profit or loss
-Derivative liabilities: Forward - 182,733 - 182,733
currency contracts
Total liabilities as at 30 September 2017 - 182,733 - 182,733
Credit 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 Credit
Securities held by the Company are classified as level 1.
Credit Securities which are not traded or dealt on organised markets or
exchanges are classified in level 2 or level 3. Credit securities priced at
cost are classified as level 3. Credit 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.
Credit 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 Credit 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 Credit Security is classified in level 2. Any broker
quote that is over 20 days old is considered stale and is classified as level
3.
There were no transfers between level 1 and 2 during the year, however
transfers from level 3 to level 2 occurred based on the Portfolio Manager's
ability to obtain a more observable price as detailed above.
Due to the inputs into the valuation of Credit Securities classified as level 3
not being available or visible to the Company, no meaningful sensitivity on
inputs can be performed.
The following table presents the movement in level 3 instruments for the period
ended 31 March 2018 by class of financial instrument.
Bonds Asset backed Total
securities
31 March 2018 (Unaudited) GBP GBP GBP
Opening balance 73,901,893 8,361,751 82,263,644
Net (sales)/purchases (1,335,252) 3,334,793 1,999,541
Net realised (loss)/gain for (1,043,962) 695,376 (348,586)
the year
Net unrealised loss for the (544,748) (196,706) (741,454)
year
Transfer into Level 3 5,980,190 3,526,496 9,506,686
Transfer out of Level 3 (13,663,042) (6,129,152) (19,792,194)
Closing balance 63,295,079 9,592,558 72,887,637
Bonds Asset backed Total
securities
30 September 2017 GBP GBP GBP
(Audited)
Opening balance 44,956,109 10,789,771 55,745,880
Net purchases 24,355,563 1,607,339 25,962,902
Net loss for the year (3,997,181) (412,036) (4,409,217)
Net unrealised gain for 6,126,981 441,842 6,568,823
the year
Transfer into Level 3 9,127,401 - 9,127,401
Transfer out of Level 3 (6,666,980) (4,065,165) (10,732,145)
Closing balance 73,901,893 8,361,751 82,263,644
The following table analyses within the fair value hierarchy the Company's
assets and liabilities not measured at fair value at 30 September 2017 but for
which fair value is disclosed.
Level 1 Level 2 Level 3 Total
31 March 2018 GBP GBP GBP GBP
Assets
Other receivables - 3,013,461 - 3,013,461
Cash and cash 6,607,843 - - 6,607,843
equivalents
Total 6,607,843 3,013,461 - 9,621,304
Liabilities
Amounts due to broker - 1,862,645 - 1,862,645
Other payables - 359,693 - 359,693
Total - 2,222,338 - 2,222,338
Level 1 Level 2 Level 3 Total
30 September 2017 GBP GBP GBP GBP
Assets
Amounts due from broker - - - -
Other receivables - 2,762,950 - 2,762,950
Cash and cash 8,169,355 - - 8,169,355
equivalents
Total 8,169,355 2,762,950 - 10,932,305
Liabilities
Amounts due to broker - 3,676,479 - 3,676,479
Other payables - 442,699 - 442,699
Total - 4,119,178 - 4,119,178
The assets and liabilities included in the above tables are carried at
amortised cost; their carrying values are a reasonable approximation of fair
value.
Cash and cash equivalents include 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.
17. 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 Credit 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 Unaudited Condensed
Statement of Comprehensive Income as investment income being interest income
received from Credit Securities.
18. Dividend Policy
The Board intends to distribute an amount at least equal to the value of the
Company's net income arising each financial year to the holders of Ordinary
Shares. However, there is no guarantee that the dividend target of 6.0 pence
per Ordinary Share for each financial year will be met or that the Company will
make any distributions at all.
Distributions made with respect to any income period comprise (a) the accrued
income of the portfolio for the period (for these purposes, the Company's
income will include the interest payable by the Credit Securities in the
Portfolio and amortisation of any discount or premium to par at which a Credit
Security is purchased over its remaining expected life), 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 gain / (loss) on
the foreign exchange contracts caused by the libor differentials between each
foreign exchange currency pair.
The Board expects that dividends will constitute the principal element of the
return to the holders of Ordinary Shares.
The Company declared the following dividends in respect of the profit for the
period ended 31 March 2018:
Period to Dividend Net dividend Ex-dividend Record date Pay date
rate per paid date
Share Income
(pence) (GBP)
31 October 2017 0.50 804,646 16 November 17 November 30 November
2017 2017 2017
30 November 0.50 804,646 14 December 15 December 29 December
2017 2017 2017 2017
31 December 0.50 804,646 18 January 2018 19 January 2018 31 January 2018
2017
31 January 2018 0.50 804,646 15 February 16 February 28 February
2018 2018 2018
28 February 0.50 804,646 15 March 2018 16 March 2018 29 March 2018
2018
31 March 2018 0.50 824,646 19 April 2018 20 April 2018 30 April 2018
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.
19. Ultimate Controlling Party
In the opinion of the Directors on the basis of shareholdings advised to them,
the Company has no ultimate controlling party.
20. Subsequent Events
These Unaudited Condensed Interim Financial Statements were approved for
issuance by the Board on 17 May 2018. Subsequent events have been evaluated to
this date.
On 10 April 2018, 1,000,000 shares issued from the block listing for a total
consideration of GBP990,000.
On 16 April 2018, 1,000,000 shares issued from the block listing for a total
consideration of GBP993,300.
On 24 April 2018, 1,000,000 shares issued from the block listing for a total
consideration of GBP990,300.
On 2 May 2018, 1,000,000 shares issued from the block listing for a total
consideration of GBP990,000.
On 8 May 2018, 1,000,000 shares issued from the block listing for a total
consideration of GBP990,000.
On 12 April 2018, the Company declared a dividend of 0.5 pence per share.
On 10 May 2018, the Company declared a dividend of 0.5 pence per share.
CORPORATE INFORMATION
Directors Receiving Agent
Claire Whittet (Chair) Computershare Investor Services PLC
Christopher Legge The Pavillions
Ian Martin Bridgewater Road
Bristol, BS13 8AE
Registered Office UK Legal Advisers to the Company
PO Box 255 Eversheds LLP
Trafalgar Court One Wood Street
Les Banques London, EC2V 7WS
St Peter Port
Guernsey, GY1 3QL
Portfolio Manager Guernsey Legal Advisers to the
Company
TwentyFour Asset Management LLP Carey Olsen
8th Floor The Monument Building Carey House
11 Monument Street Les Banques
London, EC3R 8AF St Peter Port
Guernsey, GY1 4BZ
Alternative Investment Fund Manager Independent Auditor
Maitland Institutional Services Limited PricewaterhouseCoopers CI LLP
Springfield Lodge PO Box 321
Colchester Road Royal Bank Place
Chelmsford, CM2 5PW Glategny Esplanade
St Peter Port
Guernsey, GY1 4ND
Custodian, Principal Banker and Registrar
Depositary
Northern Trust (Guernsey) Limited Computershare Investor Services
PO Box 71 (Guernsey) Limited
Trafalgar Court 1st Floor
Les Banques Tudor House
St Peter Port Le Bordage
Guernsey, GY1 3DA St Peter Port
Guernsey, GY1 1DB
Administrator and Company Secretary Broker and Financial Adviser
Northern Trust International Fund Numis Securities Limited
Administration The London Stock Exchange Building
Services (Guernsey) Limited
PO Box 255 10 Paternoster Square
Trafalgar Court London, EC4M 7LT
Les Banques
St Peter Port
Guernsey, GY1 3QL
END
(END) Dow Jones Newswires
May 17, 2018 10:38 ET (14:38 GMT)
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