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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.40 | 0.49% | 82.20 | 81.60 | 82.60 | 82.60 | 82.60 | 82.60 | 371,951 | 16:35:18 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Investors, Nec | 0 | 26.94M | 0.0421 | 19.62 | 528.59M |
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TIDMSMIF
TWENTYFOUR SELECT MONTHLY INCOME FUND LIMITED
Interim Management Report and Unaudited Condensed Interim Financial Statements
For the period from 1 October 2019 to 31 March 2020
LEI: 549300P9Q5O2B3RDNF78
(Classified Regulated Information, under DTR 6 Annex 1 section 1.2)
The Directors of TwentyFour Select Monthly Income Fund Limited (the "Company")
announce the results for the period ended 31 March 2020. 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
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,
including currency and 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 arranging a 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 current 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,
based on the current outlook, that this dividend target will be maintained in
the current year. Refer to note 19 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
For the For the year For the
period from ended period from
01.10.19 to 30.09.19 01.10.18 to
31.03.20 31.03.19
Total Net Assets GBP149,206,696 GBP167,827,286 GBP166,654,883
Net Asset Value per Share 72.40p 90.63p 90.00p
Share price 78.00p 93.00p 91.40p
Premium to NAV 7.73% 2.62% 1.56%
Dividends declared during the period/ 3.00p 6.34p 3.00p
year
Dividends paid during the period/year 3.34p 6.55p 3.55p
As at 20 May 2020, the premium had moved to 5.99%. The estimated NAV per share
and share price stood at 76.61p and 81.20p, 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 six month period ended 31 March 2020
were 1.09% (31 March 2019: 1.13%) on an annualised basis.
CHAIRPERSON'S STATEMENT
For the period from 1 October 2019 to 31 March 2020
Not in living memory have risk assets seen such a dramatic sell-off, over such
a short period of time, as they did in March 2020. This was obviously the
dominant factor for the six-month period ended 31 March 2020. In the proceeding
five months, market sentiment was driven by a strong technical backdrop,
driving credit spreads ever tighter as yield became an ever more scarce
commodity. The Portfolio Managers' main concern going into 2020 was
reinvestment risk, with approximately 9% of the underlying Company assets
expected to either redeem in or amortise over the year ahead.
This all changed in early March, when it became clear that the COVID-19
epidemic had spread beyond China and new epicentres had formed in South Korea
and Italy; the realisation that the world was facing a pandemic shock
immediately reverberated through markets. Liquidity evaporated from credit
markets and prices gapped lower as indiscriminate selling from ETFs sparked a
wave of forced selling from leveraged accounts that breached margin calls. The
result was two to three weeks of a self-fulfilling spiral of falling prices.
The impact on the Company was considerable given many leveraged accounts are
invested in AT1 and CLOs, two sectors to which the Company is exposed for
relative value reasons. The Company showed a 17.41% decline over the six month
period to 31 March 2020, with -20.94% derived from March alone. CLOs (26%
average allocation over the period) contributed to 10.4% of the total decline
and AT1s (27% average allocation over the period) accounted for 3.4% of the
total decline over the period.
Despite the dramatic change in asset valuations, the Portfolio Managers'
concerns regarding reinvestment risk have been alleviated and market
opportunities have become more abundant now than at any time since the
inception of the Company. As a result of this, 20.9 million new shares were
issued (raising GBP15.2m for the Company) before period end, and a further 2.2
million between period end and the date of this report, both at a premium to
the NAV, as investors have been attracted by the opportunity of the Company's
gross expected yield increasing to over 13%, the highest level it has been.
As regards the impact on the business, the UK government has implemented
unprecedented measures to restrict the possibility of transmission of the
COVID-19 virus by limiting personal contact and international travel. The
impact on the portfolio management team has been relatively muted, with "work
from home" ("WFH") systems all operating very well and investment committee
meetings taking place virtually, twice a week, rather than monthly. Trading has
also operated smoothly, although with most of the investment bank trading desks
also working from home, liquidity has been further negatively impacted. As
regards operational resilience, the functioning of front and back office
systems have been tested under Business Continuity Plans and have performed
well. Both the Portfolio Manager and the Administrator as well as other service
providers continue to meet all business requirements.
Whilst the ultimate scope and duration of the COVID-19 measures are currently
unclear, they are likely to have a severe impact on the UK Economy, which the
government and the Bank of England are attempting to offset with both
traditional and unconventional fiscal and monetary policy measures. The assets
in the portfolio will undoubtedly be impacted by this, although many sectors
have probably already seen the highs, in terms of spreads, and have begun the
recovery process, with many banks and insurance bonds having recovered 50-60%
of the price moves already. As rating agencies begin to analyse corporates for
the new economic reality, ratings will ultimately be cut, but it's too early
currently to say what the impact will have, but high yields in particular will
probably lag the recovery, and this includes CLOs, which holds high yield rated
leveraged loans. The structured nature of the CLOs will mean that further
analysis is required to gauge how each deal and tranche will ultimately
perform, but the Portfolio Manager does not currently expect any losses on the
bonds held by the Company.
The Company experienced a challenging final month of the period, which resulted
in a -17.41% total return for the period, with all the decline occurring in
March. The Portfolio Managers utilised some of the new share inflow to enhance
the overall credit quality of the portfolio, extend the credit spread duration
and increase the overall yield, which should be seen as an attractive medium to
long term strategy for investors; particularly as the outlook for rates is
likely to keep yield as a scarce commodity over the long term.
The Company was not exempt from the market turmoil, the share price briefly
trading at a 35% discount to NAV. This share price discount was brief and
corrected as additional information on the market was provided by the Portfolio
Manager, an updated NAV was published and buyers of the stock returned. The
return of the share price premium and ongoing demand for the shares, allowed
the issuance of 20% of the issued share capital at a premium of 3% to NAV. The
Board also considered buying back shares when the shares recently traded,
albeit briefly, at a discount.
In addition to the usual communication activities, the Company broker and
Portfolio Manager were active in providing investors with updates on the market
and portfolio during the recent market disruptions. This included various
investor meetings or calls, a webinar and various written comments.
The Company's ability to pay, and the applicability of paying, the ongoing
dividend is reviewed by a Committee of the Board at a monthly meeting when the
Company's solvency and cash available to meet its liabilities are considered.
In addition, the Portfolio Manager analyses future income and sustainability of
the dividend and this is reviewed by the Board on a quarterly basis.
On behalf of the Board, I would like to thank the shareholders for their
continued support.
Claire Whittet
Chair
26 May 2020
PORTFOLIO MANAGER'S REPORT
For the period from 1 October 2019 to 31 March 2020
The last three months of 2019 produced very strong performance for credit
assets as the two main geopolitical risks that dominated investor thinking last
year, namely the trade war between the US and China and the Brexit
negotiations, both de-escalated as the year-end approached.
The period actually started on an uncertain footing as tensions increased
between the US and China, with the Trump administration imposing more tariffs
on the Chinese economy before the 13th round of trade talks. However, as the
quarter progressed, confidence grew that a 'phase one' agreement could be
reached and this led to spreads tightening in credit and US equity indices
reaching new all-time highs.
Tensions elsewhere still remained, however, with the US imposing $7.5bn of
tariffs on the European Union, following a WTO ruling of unfair state subsidies
given to Airbus Industries. In addition, US ISM manufacturing data hit a
10-year low and the IMF cut global growth forecasts. This led to high
expectations of a cut to the Fed Funds rate, which the FOMC delivered on 30
October 2020. A Turkish offensive in Syria, attacking the Kurdish held region,
also impaired sentiment in the emerging markets sector.
The other major geopolitical risk was that of a 'hard' Brexit. This dominated
the quarter for UK investors and culminated in the 12 December 2019 general
election, with a high degree of investor relief evident as Boris Johnson
secured a strong working majority for the Conservative government. While there
remains a high degree of uncertainty regarding the bilateral deal with the EU
and how long it might take to be negotiated, the election did guarantee a
functioning government, which quickly passed the last deal negotiated by the
Johnson-led government, and sterling credit spreads enjoyed a strong run into
the year-end.
2020 started with sentiment remaining very positive and credit performed well,
even though investors were reminded very early on that risks could quickly
arise when a senior commander of the Iranian Revolutionary Guard Corps was
killed in a US drone strike , causing tensions in the Middle East to escalate
and giving support once again to risk-off rates products. As the risks of an
Iranian retaliation dissipated, investors quickly discounted the risk of a
widespread conflict and risk-on assets resumed their rally with US equities
reaching record highs again towards the end of January.
News of a novel coronavirus outbreak in China impacted sentiment once more,
though the initial mood was one of caution rather than fear, particularly as
the unprecedented (at that stage at least) lockdown of the Wuhan province,
where the virus originated, seemed initially to give Chinese authorities some
control over the situation.
However, as the number of reported cases in Italy spiked higher, sentiment
deteriorated dramatically as it became clear we were dealing with a worldwide
pandemic. This led to some extraordinary moves across asset classes, with the S
&P 500 suffering its worst day since the global financial crisis in 2008 and US
Treasuries, the ultimate safe haven for many investors, trading inside 1%
across the curve - something never previously seen with the 30-year bond
reaching an all-time tight of 0.997%. Credit markets were frozen as investors
scrambled for cash, causing bond prices to fall regardless of quality or
maturity in the fastest sell-off ever that we can recall.
The pandemic had many consequences; international borders being shut, central
banks stepping up easing measures and governments launching fiscal stimulus
packages. Some governments also took steps to restrict movement of citizens
within their countries with lockdowns and curfews, led by Italy as it extended
the lockdown from its northern region to the entire country. The effect was a
near shutdown of large parts of the global economy as the economic cycle ended
and a deep recession was opened. While the tenor of this recession is expected
to be relatively short, the magnitude is expected to be very large in the first
instance.
The US Federal Reserve announced an emergency interest rate cut of 50bp on
March 3, taking the Fed Funds rate to 1-1.25%. This was the first time the Fed
had cut interest rates outside of a scheduled meeting since August 2008 after
the fall of Lehman Brothers. Unfortunately, this did little to alleviate
concerns and risk assets continued to fall with expectations of fiscal stimulus
increasing.
The UK was the first country to announce coordinated fiscal and monetary
action, cutting interest rates by 50bp to 25bp, and importantly for the banking
sector also reducing the countercyclical capital buffer to 0%, freeing up
capital equivalent to a capacity of GBP290bn, to support and encourage banks to
lend through the uncertainty and downturn ahead. The central bank meeting was
quickly followed by Chancellor of the Exchequer, Rishi Sunak, announcing
several fiscal measures to support the economy and country during the pandemic.
The European Central Bank ("ECB") held its policy meeting as scheduled and
although it did not cut interest rates (already at -0.5%), it did announce an
increase in its asset purchase program and also reduced capital requirements
for banks. However, the market was underwhelmed at the conference and the
response was muted.
With risk-on assets continuing to slide rapidly the Fed stepped back in with
several measures. Firstly, another emergency rate cut of 100bp took the range
to 0-0.25% and more importantly, a liquidity programme that included buying
government bonds, mortgage-backed securities and, for the first time in the
central bank's history, corporate debt and ETFs. Supporting this, a $2tr
package of spending and tax breaks passed a vote in the Senate (after a couple
of delays in the process as politicians reached agreement), which improved
sentiment and led to a bounce in asset prices. Across the globe major economies
announced very large scale supportive packages, with aid for businesses, tax
breaks and support for the unemployed. The central banks continued with rate
cuts, including one more from the Bank of England, as well as almost unlimited
liquidity packages to assist markets and encourage the banks to keep lending.
The IMF also signalled it was ready with $1tr to support struggling countries.
Adding fuel to the fire, another major headwind for markets was the collapse of
Russia's alliance with OPEC and Saudi Arabia's subsequent response to open the
taps, which led to the biggest fall in the price of oil since the Gulf War in
1991. The price fell by more than 50% to under $25 a barrel, adding to already
heightened market volatility, especially in the US high yield market where
there are a large number of energy companies. There was little recovery as the
price war goes on and oil finished Q1 2020 close to its lows.
As we moved into Q2, the price fell further to $20 a barrel, however as we
approached the expiry of the May contract on the 20 April, the inability of
contract holders to take physical delivery of the oil, saw the oil price stray
into negative territory. Prices quickly recovered to towards $20 again for the
June contract, and as we approached mid-May, prices had recovered to $30 as
OPEC agreed to supply cuts and on news that demand from China was remaining
robust. However price volatility is expect to remain for the foreseeable
future.
Portfolio Commentary
The aggressive sell-off and total evaporation of market liquidity was felt
through all sectors and risk asset prices gapped lower in a vacuum, with the
added headwinds of forced ETF and margin selling and investment banks being
reluctant to position the risk. Correlations broke down early in March, which
only fuelled a further dash for liquidity which lasted about two weeks, but
left asset prices extremely dislocated, with even fundamentally strong bonds
trading down by over 40 points.
The global economic shut down will have dire consequences for many companies,
particularly those cyclical in nature and those operating in industries such as
energy, commodities, autos, travel and retail, to name a few, and wholesale
downgrades are also expected. The portfolio is expected to be negatively
impacted, in due course, by downgrades, however the Portfolio Manager has
avoided many of the weaker sectors and overall held less than 5% combined in
the Euro, UK and US HY corporate bond sectors, as at the end of March.
The CLO portion of the portfolio, 20.8% as at the end of March, will so be
negatively impacted by the global pandemic and the subsequent economic shut
downs. These contain portfolios of mainly high yielding, European, leverage
loans. The ratings of these leverage loans are expected to be lowered by the
rating agencies over time and this could result in automatic actions being
taking by the CLO managers, depending on what triggers are hit. Dividends to
equity holders (the Company does not hold equity tranches) and subordinated
management fees could be turned off to protect the debt holders in the CLOs,
and if leverage loan losses are severe enough, coupons to the lower rated
tranches could also be suspended - which would have to be repaid at a later
date upon the recovery of the deal. The Portfolio Management team do not
currently expect any losses to the CLO holdings.
The Portfolio Managers were active in investing the liquidity available in the
Company and the issue of shares at the end of March allowed them to source
fundamentally sound bonds at cheap valuations, adding significant value to the
portfolio. The new capital issued has been mostly invested in the Bank and
Insurance sectors, which the Portfolio Managers feel are best positioned to
prosper in the post-pandemic environment. The average ratings of the purchases
have also been higher, with over 40% of new investments made (covering the last
3 months) having an investment grade rating and almost 50% being rated BB.
As would be expected, the strong performance accumulated over the first four
months of the period was quickly wiped out by the sharp moves in March. Credit
indices posted negative returns across the board in March, with the Coco Bond
Market index falling 12.7%, Euro HY falling by 12.8%, sterling HY by 10.8% and
US HY by 11.9% - all in GBP terms.
Over the period, the Company declined -17.41% (NAV per Share, total return)
during the six months.
Market Outlook and Strategy
The team will be paying very close attention to coronavirus developments; signs
that it is plateauing in the current hotspots, how China recovers as it reopens
its economy, and any progress towards mass testing and vaccines. These are
currently the key drivers of sentiment and will be a big factor in determining
market direction.
Key data releases will be important as the Portfolio Managers look for early
signs of how the virus shutdown is impacting economies. There was the first
sign of this in March with the US jobless claims number, which came in at an
all-time high of 3.28m.
In addition, the Portfolio Managers will be paying very close attention to the
credit environment, as the number of downgrades is expected to increase
substantially, particularly in the cyclical industries, which will also be the
areas that are likely to suffer from an increasing insolvency rate. Given that
the Portfolio Managers were focused on end of cycle risks, the portfolio does
not have significant risk to cyclical sectors. Knowing that the world is still
in the very early stages of recession, the focus for the managers will be on
adding high quality, resilient credit from the most robust sectors, staying
away from the bottom end of the credit spectrum, where defaults will be
concentrated. Given the very high yields available in strong corporates and
financials, the team will focus on extending the portfolio's maturity profile
to lock into these yields for longer. Volatility is likely to remain elevated
and the Portfolio Managers will put money to work in a very cautious manner.
TwentyFour Asset Management LLP
26 May 2020
TOP TWENTY HOLDINGS
As at 31 March 2020
Credit Percentage
of
Nominal/ Security Fair Value Net Asset
*
Shares Sector GBP Value
Nationwide Bldg Society 10.25 29/06/ 40,960 Financial - Banks 5,447,680 3.65
2049
Coventry Bldg Society 6.875 31/12/ 4,560,000 Financial - Banks 4,149,600 2.78
2049
Aldermore Group 11.875 31/12/2049 3,350,000 Financial - Banks 3,350,000 2.25
Oaknorth Bank 7.75 01/06/2028 2,500,000 Financial - Banks 2,543,750 1.70
Santander UK 2,000,000 Financial - Banks 2,535,888 1.70
Bracken Midco1 8.875 15/10/2023 2,960,000 High Yield - 2,372,643 1.59
European
Capital Bridging Finance 1 MEZZ 12/ 2,500,000 ABS 2,362,500 1.58
11/2018
Phoenix Group 5.75 31/12/2049 2,780,000 Financial - 2,355,425 1.58
Insurance
Paragon Group of Companies 7.25 09/ 2,200,000 Financial - Banks 2,312,858 1.55
09/2026
Societe Generale 7.375 31/12/2049 2,960,000 Financial - Banks 2,219,390 1.49
Armada Euro Clo 15/07/33 4,000,000 ABS 2,126,242 1.43
Investec 6.75 FRN 31/12/2049 2,500,000 Financial - Banks 2,082,567 1.40
Rothesay Life 6.875 31/12/2049 2,500,000 Financial - 2,074,246 1.39
Insurance
Barclays PLC 7.875 31/12/2049 2,365,000 Financial - Banks 2,066,123 1.38
Charles Street Conduit FRN 08/12/ 2,000,000 ABS 2,020,000 1.35
2065
Pension Insurance 6.5 03/07/2024 1,780,000 Financial - 1,960,727 1.31
Insurance
Banco Bilbao Vizcaya Argentaria 2,200,000 Financial - Banks 1,909,857 1.28
8.875 29/12/2049
Banco de Sabadell 6.5 31/12/2049 2,800,000 Financial - Banks 1,848,649 1.24
Virgin Money UK 8.75 FRN 31/12/2049 2,050,000 Financial - Banks 1,839,875 1.23
Onesavings Bank 9.125 31/12/2049 2,200,000 Financial - Banks 1,804,000 1.21
Total 49,382,020 33.09
* 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 of bonds and asset backed securities ("ABS") as at
31 March 2020 can be obtained from the Administrator on request.
BOARD MEMBERS
Biographical details of the Directors are as follows:
Claire Whittet - (Chair) (age 65)
Ms Whittet is a resident of Guernsey and has 40 years' experience in the
banking industry. She joined Rothschild Bank International Ltd as a Director in
2003 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 and subsequently, joined Bank of Bermuda as Global Head
of Private Client Credit before joining Rothschild.
Ms Whittet is a Non-Executive Director of a number of listed investment funds
and PE entities which invest in a wide range of assets.
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 64)
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 56)
Mr Martin has over 36 years' experience in finance gathered in a variety of
multi asset investment focused roles in the UK, Asia, Switzerland and South
America. More recently he was the Chief Investment Officer (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 multi asset
trading as well as CIO and Managing Director of a Fund of Hedge funds company.
He has an MSc, is a Fellow of the Institute of Directors (IOD) holding the
Chartered Director qualification as well as being a Chartered Member of the
Chartered Institute of Securities and Investment (CISI). 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 2019. 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. Whilst the
Board and Portfolio Manager do not consider these risks to have changed, and
they remain relevant for the remaining six months of the year, the COVID-19
pandemic has had a very significant negative effect on capital markets. This
has increased volatility and the current crisis has engendered market
disruptions which have the potential to affect market liquidity. The majority
of the employees of all the Company's service providers are currently working
remotely .The Board have received assurances from these service providers that
their business continuity plans moved into operation and that all essential
services are being provided on a timely basis but there is a risk of potential
disruption from these services should the situation deteriorate further
* 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 are reinvested at a lower interest
rate than that captured 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 and tenders 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 predominantly
Euro denominated assets although mitigates this risk through hedging.
* COVID-19
The UK government in common with its European neighbours has
implemented unprecedented measures to restrict the possibility of transmission
of the COVID-19 virus by limiting personal contact and international travel.
Whilst the ultimate scope and duration of these measures is currently unclear,
they are likely to have a severe impact on the UK Economy, which both the
government and the Bank of England are attempting to offset with both
traditional and unconventional fiscal and monetary policy measures. The
Company's portfolio will be impacted by any risks emerging from changes in the
macroeconomic environment. The Company intends to mitigate the risk of this
uncertainty on the liquidity of its shares by providing regular shareholder
updates. In making this assessment, the Board has considered and continues to
monitor the impact of COVID-19 on the current and future operations of the
Company, including when considering tap issues.
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 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 2019 to
31 March 2020 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 2019 to 31
March 2020 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,
Claire Whittet
Chair
Christopher Legge
Director
26 May 2020
INDEPENT REVIEW REPORT
TO TWENTYFOUR SELECT MONTHLY INCOME FUND LIMITED
Report on the unaudited condensed interim financial statements
_______________________________________________________________________________________________
Our conclusion
We have reviewed TwentyFour Select Monthly 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 Select Monthly Income Fund Limited for the 6-month
period ended 31 March 2020. 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 31 March 2020;
* 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
26 May 2020
(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.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the period from 1 October 2019 to 31 March 2020
For the For the period
period from from 01.10.18
01.10.19 to to 31.03.19
31.03.20
Notes GBP GBP
Income (Unaudited) (Unaudited)
Interest income on financial 6,953,324 6,024,029
assets at fair value through
profit and loss
Net foreign currency (losses)/ 7 (348,703) 2,765,645
gains
Net losses on financial assets at 8 (33,334,098) (7,190,770)
fair value through profit or loss
Total (loss)/income (26,729,477) 1,598,904
Expenses
Portfolio management fees 14 (628,844) (624,367)
Directors' fees 14 (58,000) (55,500)
Administration fees 15 (59,457) (59,210)
AIFM management fees 15 (40,154) (39,934)
Audit fee (27,940) (25,049)
Custody fees 15 (9,796) (9,086)
Broker fees (24,944) (23,185)
Depositary fees 15 (13,923) (13,768)
Legal fees (8,813) (36,128)
Other expenses (47,537) (57,322)
Total expenses (919,408) (943,549)
Total comprehensive (loss)/income for the period (27,648,885) 655,355
(Loss)/earnings per Ordinary
Share -
Basic & Diluted 3 (0.149) 0.004
All items in the above statement derive from continuing operations.
The accompanying notes are an integral part of these Unaudited Condensed
Interim Financial Statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
as at 31 March 2020
31.03.20 30.09.19
Assets Notes GBP GBP
Current assets (Unaudited) (Audited)
Financial assets at fair value through profit and
loss
- Investments 8 135,286,801 158,334,767
- Derivative assets: Forward currency contracts 22,901 686,397
Shares issued receivable 9 15,372,431 -
Amounts due from broker - 629,488
Other receivables 10 3,022,787 2,717,968
Cash and cash equivalents 2,113,544 7,197,759
Total current assets 155,818,464 169,566,379
Liabilities
Current liabilities
Amounts due to broker 3,787,540 444,938
Other payables 11 596,835 282,609
Financial liabilities at fair value through
profit and loss
- Derivative liabilities: Forward currency 2,009,928 34,760
contracts
Interest income received in advance 217,465 976,786
Total current liabilities 6,611,768 1,739,093
Total net assets 149,206,696 167,827,286
Equity
Share capital account 12 195,330,097 180,201,379
Retained earnings (46,123,401) (12,374,093)
Total equity 149,206,696 167,827,286
Ordinary Shares in issue 12 206,079,151 185,179,151
Net Asset Value per Ordinary Share (pence) 5 72.40 90.63
The Unaudited Condensed Interim Financial Statements were approved by the Board
of Directors on 26 May 2020 and signed on its behalf by:
Claire Whittet
Chair
Christopher Legge
Director
The accompanying notes are an integral part of these Unaudited Condensed
Interim Financial Statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the period from 1 October 2019 to 31 March 2020
Share Retained
capital
account earnings Total
Notes GBP GBP GBP
(Unaudited) (Unaudited) (Unaudited)
Balance at 1 October 2019 180,201,379 (12,374,093) 167,827,286
Issue of shares 15,372,431 - 15,372,431
Share issue costs (153,724) - (153,724)
Income equalisation on new issues 4 (89,989) 89,989 -
Distributions paid - (6,190,412) (6,190,412)
Total comprehensive (loss)/income for the - (27,648,885) (27,648,885)
period
Balance at 31 March 2020 195,330,097 (46,123,401) 149,206,696
Share Retained
capital
account earnings Total
GBP GBP GBP
(Unaudited) (Unaudited) (Unaudited)
Balance at 1 October 2018 177,393,446 (7,650,356) 169,743,090
Issue of shares 2,847,700 - 2,847,700
Share issue costs (33,602) - (33,602)
Income equalisation on new issues 4 (6,165) 6,165 -
Distributions paid - (6,557,660) (6,557,660)
Total comprehensive (loss)/income for the - 655,355 655,355
period
Balance at 31 March 2019 180,201,379 (13,546,496) 166,654,883
The accompanying notes are an integral part of these Unaudited Condensed
Interim Financial Statements.
CONDENSED STATEMENT OF CASH FLOWS
for the period from 1 October 2019 to 31 March 2020
For the period For the period
from 01.10.19 from 01.10.18
to 31.03.20 to 31.03.19
Notes GBP GBP
Cash flows from operating activities (Unaudited) (Unaudited)
Total comprehensive (loss)/income for the (27,648,885) 655,355
period
Adjustments for:
Net losses on financial assets at fair value 8 33,334,098 7,190,770
through
profit or loss
Amortisation adjustment under effective 8 (358,965) (207,918)
interest rate
method
Unrealised losses on derivatives 7 2,638,665 104,432
Exchange (gain)/loss on cash and cash (2,451) 2,765,910
equivalents
Increase in other receivables 10 (304,819) (142,388)
Decrease in other payables 11 (598,819) (50,095)
Purchase of investments 8 (25,666,097) (33,797,696)
Sale of investments 8 19,711,019 31,115,946
Net cash generated from operating activities 1,103,746 7,634,316
Cash flows used in financing activities
Proceeds from issue of ordinary shares 12 - 2,847,700
Share issue costs 12 - (33,602)
Dividend distribution 19 (6,190,412) (6,557,660)
Net cash outflow from financing activities (6,190,412) (3,743,562)
(Decrease)/increase in cash and cash (5,086,666) 3,890,754
equivalents
Cash and cash equivalents at beginning of 7,197,759 6,834,535
period
Exchange gain/(loss) on cash and cash 2,451 (2,765,910)
equivalents
Cash and cash equivalents at end of period 2,113,544 7,959,379
The accompanying notes are an integral part of these Unaudited Condensed
Interim Financial Statements.
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
for the period from 1 October 2019 to 31 March 2020
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 2019 to 31 March 2020 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 2019, which were prepared in accordance with International Financial
Reporting Standards ("IFRS") and for which an unqualified audit report was
issued by the independent auditor.
b) Changes in accounting policy
In the current financial period, there have been no changes to the accounting
policies from those applied in the most recent audited annual financial
statements.
c) 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
At the reporting date of these Unaudited Condensed Interim Financial
Statements, there were no new standards, interpretations and amendments
applicable to the Company for the period ended 31 March 2020.
3. Loss/(earnings) per Ordinary Share - Basic & Diluted
The loss per Ordinary Share - Basic and Diluted of 14.9p (31 March 2019: 0.4p
earnings) has been calculated based on the weighted average number of Ordinary
Shares of 185,635,981 (31 March 2019: 184,832,997) and a net loss for the
period of GBP27,648,885 (31 March 2019: GBP655,355 gain).
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 GBP89,989 (31 March 2019: GBP6,165).
5. Net Asset Value per Ordinary Share
The net asset value of each Share of 72.40p (30 September 2019: 90.63p) is
determined by dividing the net assets of the Company attributed to the Shares
of GBP149,206,696 (30 September 2019: GBP167,827,286) by the number of Shares in
issue at 31 March 2020 of 206,079,151 (30 September 2019: 185,179,151).
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 GBP
1,200 (30 September 2019: GBP1,200).
7. Net foreign currency (losses)/gains
For the For the
period from period from
01.10.19 to 01.10.18 to
31.03.20 31.03.19
(Unaudited) (Unaudited)
GBP GBP
Movement in net unrealised losses on forward currency (2,638,665) (104,432)
contracts
Movement in unrealised gains on spot currency contracts 601 14,463
Realised gains on forward currency contracts 596,276 2,955,715
Realised currency gains/(losses) on receivables/payables 1,652,529 (76,092)
Unrealised currency gains/(losses) on receivables/payables 40,556 (24,009)
(348,703) 2,765,645
8. Investments
As at As at
31.03.20 30.09.19
(Unaudited) (Audited)
GBP GBP
Financial assets at fair value through profit and loss:
Unlisted Investments:
Opening amortised cost 156,072,167 158,413,688
Purchases at 29,008,699 61,344,183
cost
Proceeds on sale/principal repayment (19,081,532) (63,383,538)
Amortisation adjustment under effective interest rate method 358,965 511,152
Realised gain on sale/principal repayment 804,168 4,595,217
Realised loss on sale/principal repayment (1,458,910) (5,408,535)
Closing amortised cost 165,703,557 156,072,167
Unrealised gain on investments 633,873 5,579,321
Unrealised loss on investments (31,050,629) (3,316,721)
Fair value 135,286,801 158,334,767
As at For the
31.03.20 period from
01.10.18 to
31.03.19
(Unaudited) (Unaudited)
GBP GBP
Realised gain on sale/principal repayment 804,168 2,068,463
Realised loss on sale/principal repayment (1,458,910) (4,220,041)
Decrease in unrealised gain (4,945,448) (3,190,931)
Increase in unrealised loss (27,733,908) (1,848,261)
Net loss on financial assets at fair value through profit or (33,334,098) (7,190,770)
loss
The Company does not experience any seasonality or cyclicality in its investing
activities.
9. Shares issued receivable
As at 31 March 2020, GBP15,372,431 was receivable relating to shares issued. All
amounts are short term and have been received post period end. Therefore, there
is no impairment to be recognised.
10. Other receivables
As at As at
31.03.20 30.09.19
(Unaudited) (Audited)
GBP GBP
Interest income receivable 2,873,128 2,479,801
Prepaid 52,149 28,904
expenses
Dividends receivable 96,909 209,263
Foreign currency receivable 601 -
3,022,787 2,717,968
11. Other payables
As at As at
31.03.20 30.09.19
(Unaudited) (Audited)
GBP GBP
Portfolio management fees payable 299,448 107,716
Administration fees payable 28,454 23,322
AIFM management fees payable 15,183 16,138
Audit fees payable 24,845 54,000
Other expenses payable 69,417 76,953
Depositary fees payable 2,150 2,239
Custody fees payable 3,614 2,241
Share issue costs payable 153,724 -
596,835 282,609
12. Share Capital
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
31.03.20 30.09.19
GBP GBP
Ordinary Shares
Share Capital at the beginning of the 180,201,379 177,393,446
period/year
Issue of shares 15,372,431 2,847,700
Share issue costs (153,724) (33,602)
Income equalisation on new issues (89,989) (6,165)
Total Share Capital at the end of the 195,330,097 180,201,379
period/year
Reconciliation of number of Shares
31.03.20 30.09.19
Shares Shares
Ordinary Shares
Shares at the beginning of the period/year 185,179,151 182,179,151
Issue of shares 20,900,000 3,000,000
Total Shares in issue at the end of the 206,079,151 185,179,151
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.
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.
The Company held no Treasury as at 31 March 2020 (30 September 2019: Nil).
13. Analysis of Financial Assets and Liabilities by Measurement Basis as per
Statement of Financial Position
Financial
assets at
fair
value Amortised
through
profit and Cost Total
loss
GBP GBP GBP
31 March 2020 (Unaudited)
Financial Assets
Financial assets at fair value through profit
and loss
-Investments
-Bonds 76,733,189 - 76,733,189
-Asset backed 58,553,612 - 58,553,612
securities
-Derivative assets: Forward currency 22,901 - 22,901
contracts
Shares issued 15,372,431 - 15,372,431
receivable
Other receivables (excluding prepaid expenses) - 2,970,638 2,970,638
Cash and cash equivalents - 2,113,544 2,113,544
150,682,133 5,084,182 155,766,315
Financial
liabilities Other
at fair
value financial
through
profit and liabilities Total
loss
GBP GBP GBP
31 March 2020 (Unaudited)
Financial Liabilities
Amounts due to broker - 3,787,540 3,787,540
Other payables - 596,835 596,835
Financial liabilities at fair value through profit
and loss
-Derivative liabilities: Forward currency 2,009,928 - 2,009,928
contracts
2,009,928 4,384,375 6,394,303
Financial
assets at
fair
value Amortised
through
profit and Cost Total
loss
GBP GBP GBP
30 September 2019 (Audited)
Financial Assets
Financial assets at fair value through profit
and loss
-Investments
-Bonds 97,230,422 - 97,230,422
-Asset backed 61,104,345 - 61,104,345
securities
-Derivative assets: Forward currency 686,397 - 686,397
contracts
Amounts due from - 629,488 629,488
broker
Other receivables (excluding prepaid expenses) - 2,689,064 2,689,064
Cash and cash equivalents - 7,197,759 7,197,759
159,021,164 10,516,311 169,537,475
Financial
liabilities Other
at fair
value financial
through
profit and liabilities Total
loss
GBP GBP GBP
30 September 2019 (Audited)
Financial Liabilities
Amounts due to broker - 444,938 444,938
Other payables - 282,609 282,609
Financial liabilities at fair value through profit
and loss
-Derivative liabilities: Forward currency 34,760 - 34,760
contracts
34,760 727,547 762,307
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
GBP150,000.
The Directors' fees for the period/year and the outstanding fees at period/year
end are as follows.
31.03.20 30.09.19
GBP GBP
Claire Whittet (Chair of the Board) 22,000 42,000
Christopher Legge (Audit Committee Chairman) 19,250 37,000
Ian Martin (MEC Chairman) 16,750 32,000
Total Directors' 58,000 111,000
fees
Directors fees were increased as follows effective 1 October 2019: Chair: GBP
44,000 (4.8% increase), Audit Committee Chair: GBP38,500 (4.1% increase), MEC
Chair GBP33,500 (4.7% increase) and an ordinary Director GBP31,500 (5% increase).
No Directors fees were outstanding as at 31 March 2020 (30 September 2019: GBP
Nil)
b) Shares held by related parties
The Directors of the Company held the following shares beneficially:
31.03.20 30.09.19
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 19.
As at 31 March 2020, the Portfolio Manager held no Shares (30 September 2019:
no Shares) of the Issued Share Capital. Partners and employees of the Portfolio
Manager increased their holdings during the period, and held 1,151,594 (30
September 2019: 1,010,642), which is 0.68% (30 September 2019: 0.55%) of the
Issued Share Capital.
c) Portfolio Manager
The portfolio management fee is payable to the Portfolio Manager, monthly in
arrears at a rate of 0.75% per annum of the lower of NAV, which is calculated
weekly on each valuation day, or market capitalisation of each class of shares.
Total portfolio management fees for the period amounted to GBP628,844 (31 March
2019: GBP624,367) of which GBP299,448 (30 September 2019: GBP107,716) 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 GBP10,297 (31 March 2019: GBP5,145) in commission.
15. 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 GBP40,154
(31 March 2019: GBP39,934) were charged to the Company, of which GBP15,183 (30
September 2019: GBP16,138) 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 GBP59,457 (31 March 2019: GBP59,210) were
charged to the Company, of which GBP28,454 (30 September 2019: GBP23,322) remained
payable at the end of the period.
c) Broker
For its services as the Company's broker, Numis Securities Limited (the
"Broker") is entitled to receive a retainer fee of GBP50,000 per annum and also a
commission of 1% on all tap issues. During the period, the Broker received GBP
143,427 (31 March 2019: GBP28,477) in commission, which is charged as a cost of
issuance.
d) Depositary
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 GBP13,923 (31 March 2019: GBP13,768) were charged to the Company, of which
GBP2,150 (30 September 2019: GBP2,239) 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 GBP9,796
(31 March 2019: GBP9,086) of which GBP3,614 (30 September 2019: GBP2,241) is due and
payable at the end of the period.
16. 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 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 year ended 30 September 2019.
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 table analyses within the fair value hierarchy the Company's
financial assets and liabilities (by class) measured at fair value as at 31
March 2020.
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 - 66,319,552 10,413,637 76,733,189
-Asset backed securities - 58,553,612 - 58,553,612
-Derivative assets: Forward - 22,901 - 22,901
currency contracts
Total assets as at 31 March - 124,896,065 10,413,637 135,309,702
2020
Liabilities
Financial liabilities at fair
value
through profit or loss
-Derivative liabilities: - 2,009,928 - 2,009,928
Forward
currency contracts
- 2,009,928 - 2,009,928
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 2019.
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 - 89,863,362 7,367,060 97,230,422
-Asset backed securities - 61,104,345 - 61,104,345
-Derivative assets: Forward - 686,397 - 686,397
currency contracts
Total assets as at - 151,654,104 7,367,060 159,021,164
30 September 2019
Liabilities
Financial liabilities at fair
value
through profit or loss
-Derivative liabilities: - 34,760 - 34,760
Forward
currency contracts
Total liabilities as at - 34,760 - 34,760
30 September 2019
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
dealer quotes and if the price represents a reliable and an observable price,
the Credit Security is classified in level 2. Any dealer quote that is over 20
days old is considered stale and is classified as level 3.
There were no transfers between levels during the period.
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 2020 by class of financial instrument.
Bonds Asset backed Total
securities
31 March 2020 (Unaudited) GBP GBP GBP
Opening balance - 7,367,060 7,367,060
Net purchases - 3,498,673 3,498,673
Net realised gain for the - 19,511 19,511
period
Net unrealised loss for the period - (471,607) (471,607)
Closing balance - 10,413,637 10,413,637
The following table presents the movement in level 3 instruments for the year
ended
30 September 2019 by class of financial instrument.
Bonds Asset backed Total
securities
30 September 2019 (Audited) GBP GBP GBP
Opening balance 65,597,915 9,709,398 75,307,313
Net purchases (11,225,449) 792,964 (10,432,485)
Net loss for the year (1,517,620) (1,091,307) (2,608,927)
Net unrealised gain/(loss) for 289,073 (34,597) 254,476
the year
Transfer into Level 3 - 2,500,000 2,500,000
Transfer out of Level 3 (53,143,919) (4,509,398) (57,653,317)
Closing balance - 7,367,060 7,367,060
The following table analyses within the fair value hierarchy the Company's
assets and liabilities not measured at fair value at 31 March 2020 but for
which fair value is disclosed.
Level 1 Level 2 Level 3 Total
31 March 2020 GBP GBP GBP GBP
Assets
Other - 3,022,787 - 3,022,787
receivables
Cash and cash 2,113,544 - - 2,113,544
equivalents
Total 2,113,544 3,022,787 - 5,136,331
Liabilities
Amounts due to broker - 3,787,540 - 3,787,540
Other payables - 596,835 - 596,835
Total - 4,384,375 - 4,384,375
The following table analyses within the fair value hierarchy the Company's
assets and liabilities not measured at fair value at 30 September 2019 but for
which fair value is disclosed.
Level 1 Level 2 Level 3 Total
30 September 2019 GBP GBP GBP GBP
Assets
Amounts due from broker - 629,488 - 629,488
Other - 2,717,968 - 2,717,968
receivables
Cash and cash 7,197,759 - - 7,197,759
equivalents
Total 7,197,759 3,347,456 - 10,545,215
Liabilities
Amounts due to broker - 444,938 - 444,938
Other payables - 282,609 - 282,609
Total - 727,547 - 727,547
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.
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 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 Condensed Statement of
Comprehensive Income as interest income on financial assets at fair value
through profit and loss being interest income received from Credit Securities.
19. Dividend Policy
The Board intends to distribute an amount at least equal to the value of the
Company's excess income, as defined below, 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.
Excess income is defined as the distributions made with respect to any income
period, which 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.
This definition differs from the IFRS "net income" definition which also
recognises gains and losses on financial assets.
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 2020:
Period to Dividend Net Ex-dividend date Record date Pay date
rate per dividend
Share paid
(pence) Income
(GBP)
31 October 2019 0.50 925,896 14 November 2019 15 November 2019 29 November 2019
30 November 2019 0.50 925,896 19 December 2019 20 December 2019 31 December 2019
31 December 2019 0.50 925,896 16 January 2020 17 January 2020 31 January 2020
31 January 2020 0.50 925,896 13 February 2020 14 February 2020 28 February 2020
28 February 2020 0.50 925,896 19 March 2020 20 March 2020 31 March 2020
31 March 2020 0.50 1,100,396 23 April 2020 24 April 2020 4 May 2020
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.
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. Subsequent Events
These Unaudited Condensed Interim Financial Statements were approved for
issuance by the Board on 26 May 2020. Subsequent events have been evaluated to
this date.
Subsequent to the period end and up to the date of signing of the Unaudited
Condensed Interim Financial Statements, the following events took place:
Dividend declarations
Declaration Dividend
date rate per
Share
(pence)
16 April 2020 0.50
7 May 2020 0.50
Share issues
On 15 April 2020, 500,000 shares issued from the block listing for a total
consideration of GBP378,350.
On 17 April 2020, 1,635,830 shares issued from the block listing for a total
consideration of GBP1,273,330.
COVID-19
The UK government in common with its European neighbours has implemented
unprecedented measures to restrict the possibility of transmission of the
COVID-19 virus by limiting personal contact and international travel. Whilst
the ultimate scope and duration of these measures is currently unclear, they
are likely to have a severe impact on the UK Economy, which both the government
and the Bank of England are attempting to offset with both traditional and
unconventional fiscal and monetary policy measures. The Company's portfolio
will be impacted by any risks emerging from changes in the macroeconomic
environment.
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 Sutherland
Trafalgar Court One Wood Street
Les Banques London, EC2V 7WS
St Peter Port
Guernsey, GY1 3QL
Portfolio Manager Guernsey Legal Advisers to the
TwentyFour Asset Management LLP Company
8th Floor The Monument Building Carey Olsen
11 Monument Street Carey House
London, EC3R 8AF Les Banques
St Peter Port
Guernsey, GY1 4BZ
Alternative Investment Fund Manager Independent Auditor
Maitland Institutional Services Limited PricewaterhouseCoopers CI LLP
Hamilton Centre PO Box 321
Rodney Way Royal Bank Place
Chelmsford, CM1 3BY Glategny Esplanade
St Peter Port
Guernsey, GY1 4ND
Custodian, Principal Banker and Registrar
Depositary Computershare Investor Services
Northern Trust (Guernsey) Limited (Guernsey) Limited
PO Box 71 1st Floor
Trafalgar Court Tudor House
Les Banques Le Bordage
St Peter Port St Peter Port
Guernsey, GY1 3DA 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 10 Paternoster Square
PO Box 255 London, EC4M 7LT
Trafalgar Court
Les Banques
St Peter Port
Guernsey, GY1 3QL
END
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