17/05/2018 15:38:00

Half Yearly Financial Report

TwentyFour Select Monthly Income Fund - Half Yearly Financial Report

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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£158,155,252£155,207,957£144,046,214
Net Asset Value per Share95.89p96.44p93.19p
Share price100.00p99.50p95.75p
Premium to NAV4.29%3.17%2.75%
Dividends declared during the period3.00p6.56p3.00p
Dividends paid during the period3.56p6.85p3.85p

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 €30bn 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

£ 

Value

Nationwide Bldg Society 10.25 29/06/2049        37,160Banks    5,821,1143.68
Bracken Midco1 10.50 15/11/2021    3,875,000High Yield European    3,995,0932.53
Shawbrook Group 7.875 31/12/2049    3,770,000Banks    3,690,1472.33
Coventry Bldg Society 6.375 29/12/2049    3,540,000Banks    3,663,4582.32
Santander Uk    2,000,000Banks    3,435,8102.17
Aldermore Group 11.875 31/12/2049    2,700,000Banks    2,944,3291.86
Arbour Clo 2 15/05/2030    3,000,000ABS    2,679,6111.69
Barclays PLC 7.875 31/12/2049    2,365,000Banks    2,580,3961.63
Capital Bridging Finance 1 MEZZ 05/07/2018    2,500,000ABS    2,512,5001.59
Shawbrook Group 8.50 28/10/2025    2,300,000Banks    2,471,7851.56
St Pauls Clo 25/04/2030    2,835,000ABS    2,423,3381.53
SC Germany Consumer 2015-1 E 13/12/2028    2,500,000ABS    2,411,7271.52
Paragon Group of Companies 7.25 09/09/2026    2,200,000Banks    2,391,5541.51
Onesavings Bank 9.125 31/12/2049    2,200,000Banks    2,366,9321.50
Cabot Financial 7.50 01/10/2023    2,240,000High Yield European    2,349,4001.49
Credit Suisse Group 7.5 31/12/2049    3,000,000Banks    2,319,9271.47
Opium Three MEZZ 25/10/2053    2,300,000ABS    2,300,0001.45
Banco Bilbao Vizcaya Argentaria 8.875 29/12/2049    2,200,000Banks    2,287,6761.45
Societe Generale 7.375 31/12/2049    2,960,000Banks    2,249,8571.42
Garfunkelux Holdco 8.50 01/11/2022    2,150,000High Yield European    2,184,3881.38
Total  57,079,04236.08

* 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

INDEPENDENT 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 period from 01.10.17 to 31.03.18

For the period from 01.10.16 to 31.03.17

Notes

£

£

Income

(Unaudited)

(Unaudited)

Interest income5,635,6435,473,583
Net foreign currency gains71,430,518565,827
Net (loss)/gain on financial assets
at fair value through profit or loss8(1,383,743)5,712,973

Total income

5,682,41811,752,383

Expenses

Portfolio management fees13(579,549)(525,291)
Directors' fees13(55,500)(75,337)
Administration fees14(55,992)(52,471)
AIFM management fees14(38,059)(35,971)
Audit fee(24,892)(25,516)
Custody fees14(7,727)(8,029)
Broker fees(24,705)(24,932)
Depositary fees14(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 period4,775,03710,911,794

Earnings per Ordinary Share -

Basic & Diluted

30.0300.071

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

£

£

Current assets

(Unaudited)

(Audited)

Financial assets at fair value through profit and loss
 - Investments8151,088,373148,499,775
 - Derivative assets: Forward currency contracts162,24677,788
Other receivables93,013,4612,762,950
Cash and cash equivalents6,607,8438,169,355

Total current assets

160,711,923159,509,868

Liabilities

Current liabilities

Amounts due to broker1,862,6453,676,479
Other payables10359,693442,699
Financial liabilities at fair value through profit and loss
 - Derivative liabilities: Forward currency contracts16334,333182,733

Total current liabilities

2,556,6714,301,911

Total net assets

158,155,252155,207,957

Equity

Share capital account11160,863,274157,001,121
Other reserves(2,708,022)(1,793,164)

Total equity

158,155,252155,207,957
Ordinary Shares in issue11164,929,151160,929,151
Net Asset Value per Ordinary Share (pence)595.8996.44

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 capital

Other 

account

reserves

Total

Notes

£

£

£

(Unaudited)

(Unaudited)

(Unaudited)

Balance at 1 October 2017

157,001,121(1,793,164)155,207,957
Issue of shares3,950,000-3,950,000
Share issue costs(46,413)-(46,413)
Income equalisation on new issues4(41,434)41,434-
Distributions paid-(5,731,329)(5,731,329)
Total comprehensive income for the period-4,775,0374,775,037

Balance at 31 March 2018

160,863,274(2,708,022)158,155,252

Share capital

Other 

account

reserves

Total

£

£

£

(Unaudited)

(Unaudited)

(Unaudited)

Balance at 1 October 2016

148,691,163(11,869,322)136,821,841
Issue of shares2,294,500-2,294,500
Share issue costs(27,665)-(27,665)
Income equalisation on new issues4(2,561)2,561-
Distributions paid-(5,954,256)(5,954,256)
Total comprehensive income for the period-10,911,79410,911,794

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 period from 01.10.17 to 31.03.18

For the period from 01.10.16 to 31.03.17

Notes

£

£

Cash flows used in operating activities

(Unaudited)

(Unaudited)

Total comprehensive income for the period4,775,03710,911,794
Adjustments for:
Net loss/(gain) on financial assets at fair value through profit or loss1,383,743(5,712,973)
Amortisation adjustment under effective interest rate method8(359,323)(568,212)
Unrealised loss/(gain) on derivatives7227,142(1,106,193)
Increase in other receivables9(250,511)(392,494)
Decrease in other payables10(83,006)(25)
Purchase of investments8(34,284,953)(72,658,129)
Sale of investments828,858,10168,388,978
Net cash generated from/(used in) operating activities266,230(1,137,254)

Cash flows from financing activities

Proceeds from issue of ordinary shares113,950,000-
Proceeds from re-issuance of treasury shares11-2,294,500
Share issue costs11(46,413)(27,665)
Dividend distribution18(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 period8,169,3558,039,495

Cash and cash equivalents at end of period

6,607,8433,214,820

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 £4,775,037 (31 March 2017: £10,911,794).

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 £41,434 (31 March 2017: £2,561).

5.    Net Asset Value per Ordinary Share

The net asset value of each Share of 95.89p (30 September 2017: £96.44p) is determined by dividing the net assets of the Company attributed to the Shares of £158,155,252 (30 September 2017: £155,207,957) 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 £1,200 (30 September 2017: £1,200).

7.    Net foreign currency gains

For the period from 01.10.17 to 31.03.18

For the period from 01.10.16 to 31.03.17

(Unaudited)

(Unaudited)

£

£

Movement in net unrealised (loss)/gain on forward currency contracts(227,142)1,106,193
Movement in unrealised gain on spot currency contracts705-
Realised gain on forward currency contracts2,936,419107,294
Realised currency loss on receivables/payables(1,229,065)(599,092)
Unrealised currency loss on receivables/payables(50,399)(48,568)
1,430,518565,827

8.    Investments

For the period from 01.10.17 to 31.03.18

For the year ended 30.09.17

(Unaudited)

(Audited)

£

£

Financial assets at fair value through profit and loss:

Unlisted Investments:

Opening amortised cost137,736,071128,103,985
Purchases at cost32,471,119121,111,167
Proceeds on sale/principal repayment(28,858,101)(112,873,124)
Amortisation adjustment under effective interest rate method359,3231,180,151
Realised gain on sale/principal repayment3,449,5059,282,593
Realised loss on sale/principal repayment(1,523,159)(9,068,701)
Closing amortised cost143,634,758137,736,071
Unrealised gain on investments9,566,00412,539,146
Unrealised loss on investments(2,112,389)(1,775,442)

Fair value

151,088,373148,499,775

   

For the period from 01.10.17 to 31.03.18

For the period from 01.10.16 to 31.03.17

(Unaudited)

(Unaudited)

£

£

Realised gain on sale/principal repayment3,449,5055,399,707
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 or loss

(1,383,743)5,712,973

The Company does not experience any seasonality or cyclicality in its investing activities.

9.    Other receivables

As at

31.03.18

As at

30.09.17

(Unaudited)

(Audited)

£

£

Interest income receivable 2,888,3472,635,034
Prepaid expenses24,71614,833
Dividends receivable99,190112,580
Spot currency contracts1,208503
3,013,4612,762,950

10.  Other payables

As at

31.03.18

As at

30.09.17

(Unaudited)

(Audited)

£

£

Portfolio management fees payable182,991290,302
Directors' fees payable29,87531,350
Administration fees payable23,31828,004
AIFM management fees payable17,98118,528
Audit fees payable35,34250,000
Other expenses payable66,80021,301
Depositary fees payable2,0572,054
Custody fees payable1,3291,160
359,693442,699

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

31.03.18

As at

30.09.17

£

£

Ordinary Shares

Share Capital at the beginning of the period/year 157,001,121148,691,163
Issue of shares3,950,0004,746,518
Share issue costs(46,413)(100,022)
Re-issuance of treasury shares-3,705,827
Income equalisation on new  issues(41,434)(42,365)
Total Share Capital at the end of the period/year 160,863,274157,001,121

   

31.03.18

30.09.17

£

£

Treasury Shares

Share Capital at the beginning of the period/year -3,705,827
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 160,929,151152,079,151
Issue of shares4,000,0005,019,383
Re-issuance of treasury shares -3,830,617
Total Shares in issue at the end of the period/year 164,929,151160,929,151

 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/year-3,830,617
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 £0.01 each, to be classed as Treasury Shares and may cancel those Shares or hold any such Shares as Treasury Shares, provided that the number of Shares held as Treasury Shares shall not at any time exceed 10% of the total number of Shares of that class in issue at that time or such amount as provided in the Companies Law.

During the prior year all 3,830,617 remaining treasury shares were re-issued for a total consideration of £3,705,827.

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 loss

Loans and receivables

Total

£

£

£

31 March 2018 (Unaudited)

Financial Assets

Financial assets at fair value through profit and loss
-Investments
  -Bonds102,785,877-102,785,877
  -Asset backed securities48,302,498-48,302,498
  -Derivative assets: Forward currency contracts2,246-2,246
Other receivables (excluding prepaid expenses)-2,988,7452,988,745
Cash and cash equivalents-6,607,8436,607,843
151,090,6219,596,588160,687,209

   

Financial

 liabilities at fair

Other

value through

financial

profit and loss

liabilities

Total

£

£

£

31 March 2018 (Unaudited)

Financial Liabilities

Amounts due to broker-1,862,6451,862,645
Other payables-359,693359,693
Financial liabilities at fair value through profit and loss
-Derivative liabilities: Forward currency contracts334,333-334,333
334,3332,222,3382,556,671

   

Financial

assets at fair

 value through

Loans and

 profit and loss

receivables

Total

£

£

£

30 September 2017 (Audited)

Financial Assets

Financial assets at fair value through profit and loss
-Investments
  -Bonds101,672,047-101,672,047
  -Asset backed securities46,827,728-46,827,728
 -Derivative assets: Forward currency contracts77,788-77,788
Other receivables (excluding prepaid expenses)-2,748,1172,748,117
Cash and cash equivalents-8,169,3558,169,355
148,577,56310,917,472159,495,035

   

Financial

 liabilities at fair

Other

value through

financial

profit and loss

liabilities

Total

£

£

£

30 September 2017 (Audited)

Financial Liabilities

Amounts due to broker-3,676,4793,676,479
Other payables-442,699442,699
Financial liabilities at fair value through profit and loss
-Derivative liabilities: Forward currency contracts182,733-182,733
182,7334,119,1784,301,911

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 £150,000.

The annual Directors’ fees comprise £42,000 (2017: £35,000) payable to Ms Whittet, the Chair, £37,000 (2017: £32,500) to Mr Legge as Chair of the Audit Committee and £32,000 (2017: £30,000) to Mr Martin, the Chair of Management Engagement Committee. During the period, Directors’ fees of £55,500 (31 March 2017: £75,337) were charged to the Company, of which £29,875 (30 September 2017: £43,482) remained payable at the end of the period. Directors’ expenses for the period were £8,769 (31 March 2017: £5,633).

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 Whittet25,00025,000
Christopher Legge  50,00050,000
Ian Martin35,00035,000

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 £579,549 (31 March 2017: £525,291) of which £182,991 (30 September 2017: £290,302) 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 £6,913 (30 September 2017: £841) 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 £20,000 per annum and fees payable quarterly in arrears at a rate of 0.07% of the Net Asset Value of the Company below £50 million, 0.05% on Net Assets between £50 million and £100 million and 0.03% on Net Assets in excess of £100 million. During the period, AIFM fees of £38,059 (31 March 2017: £35,971) were charged to the Company, of which £17,981 (30 September 2017: £18,528) 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 £100 million, 0.05% on Net Assets between £100 million and £200 million and 0.04% on Net Assets in excess of £200 million as at the last business day of the month subject to a minimum of £75,000 for each year. In addition, an annual fee of £25,000 will be charged for corporate governance and company secretarial services. During the period, administration and secretarial fees of £55,992 (31 March 2017: £52,471) were charged to the Company, of which £23,318 (30 September 2017: £28,004) 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 £100 million, 0.0150% on Net Assets between £100 million and £200 million and 0.0125% on Net Assets in excess of £200 million as at the last business day of the month subject to a minimum of £25,000 for each year. During the period, depositary fees of £12,831 (31 March 2017: £12,466) were charged to the Company, of which £2,057 (30 September 2017: £2,054) remained payable at the end of the period.

The Depositary is also entitled to a Global Custody fee of a minimum of £8,500 per annum plus transaction fees. Total Global Custody fees and charges for the period amounted to £7,727 (31 March 2017: £8,029) of which £1,329 (30 September 2017: £1,160) 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

£

£

£

£

Assets

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

Financial assets at fair value through profit or loss 
-Investments
   -Bonds-39,490,79663,295,080102,785,876
   -Asset backed securities-38,709,9409,592,55748,302,497
-Derivative assets: Forward currency contracts-2,246-2,246

Total assets as at 31 March 2018

Total assets as at 31 March 2018

-78,202,98272,887,637151,090,619

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

£

£

£

£

Assets

(Audited)

(Audited)

(Audited)

(Audited)

Financial assets at fair value
through profit or loss
   -Bonds-27,770,15473,901,893101,672,047
   -Asset backed securities-38,465,9778,361,75146,827,728
 -Derivative assets: Forward currency contracts-77,788-77,788

Total assets as at 30 September 2017

-66,313,91982,263,644148,577,563

Liabilities

Financial liabilities at fair value
through profit or loss
 -Derivative liabilities: Forward currency contracts-182,733-182,733

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 securities

Total 

31 March 2018 (Unaudited)

£

£

£

Opening balance73,901,8938,361,75182,263,644
Net (sales)/purchases(1,335,252)3,334,7931,999,541
Net realised (loss)/gain for the year(1,043,962)695,376(348,586)
Net unrealised loss for the year(544,748)(196,706)(741,454)
Transfer into Level 35,980,1903,526,4969,506,686
Transfer out of Level 3(13,663,042)(6,129,152)(19,792,194)
Closing balance63,295,0799,592,55872,887,637

   

Bonds

Asset backed securities

Total 

30 September 2017 (Audited)

£

£

£

Opening balance44,956,10910,789,77155,745,880
Net purchases24,355,5631,607,33925,962,902
Net loss for the year(3,997,181)(412,036)(4,409,217)
Net unrealised gain for the year6,126,981441,8426,568,823
Transfer into Level 39,127,401-9,127,401
Transfer out of Level 3(6,666,980)(4,065,165)(10,732,145)
Closing balance73,901,8938,361,75182,263,644

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

£

£

£

£

Assets

Other receivables-3,013,461-3,013,461
Cash and cash equivalents6,607,843--6,607,843

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

£

£

£

£

Assets

Amounts due from broker----
Other receivables-2,762,950-2,762,950
Cash and cash equivalents8,169,355--8,169,355

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 rate per Share (pence)

Net dividend paid Income         (£)

Ex-dividend date

Record date

Pay date

31 October 20170.50804,64616 November 201717 November 201730 November 2017
30 November 20170.50804,64614 December 201715 December 201729 December 2017
31 December 20170.50804,64618 January 201819 January 201831 January 2018
31 January 20180.50804,64615 February 201816 February 201828 February 2018
28 February 20180.50804,64615 March 201816 March 201829 March 2018
31 March 20180.50824,64619 April 201820 April 201830 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 £990,000.

On 16 April 2018, 1,000,000 shares issued from the block listing for a total consideration of £993,300.

On 24 April 2018, 1,000,000 shares issued from the block listing for a total consideration of £990,300.

On 2 May 2018, 1,000,000 shares issued from the block listing for a total consideration of £990,000.

On 8 May 2018, 1,000,000 shares issued from the block listing for a total consideration of £990,000.

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

Claire Whittet (Chair)

Receiving Agent

Computershare Investor Services PLC

Christopher LeggeThe Pavillions
Ian MartinBridgewater Road
Bristol, BS13 8AE

Registered Office

UK Legal Advisers to the Company

PO Box 255Eversheds LLP
Trafalgar CourtOne Wood Street
Les BanquesLondon, EC2V 7WS
St Peter Port
Guernsey, GY1 3QL

Portfolio Manager

Guernsey Legal Advisers to the Company

TwentyFour Asset Management LLPCarey Olsen
8th Floor The Monument BuildingCarey House
11 Monument StreetLes Banques
London, EC3R 8AFSt Peter Port
Guernsey, GY1 4BZ

Alternative Investment Fund Manager

Independent Auditor

Maitland Institutional Services LimitedPricewaterhouseCoopers CI LLP
Springfield LodgePO Box 321
Colchester RoadRoyal Bank Place
Chelmsford, CM2 5PWGlategny Esplanade
St Peter Port
Guernsey, GY1 4ND

Custodian, Principal Banker and Depositary

Registrar

Northern Trust (Guernsey) Limited

PO Box 71

Computershare Investor Services (Guernsey) Limited
Trafalgar Court1st Floor
Les BanquesTudor House
St Peter PortLe Bordage
Guernsey, GY1 3DASt Peter Port
Guernsey, GY1 1DB

Administrator and Company Secretary

Broker and Financial Adviser

Northern Trust International Fund Administration

Services (Guernsey) Limited

Numis Securities Limited

The London Stock Exchange Building

PO Box 25510 Paternoster Square
Trafalgar CourtLondon, EC4M 7LT
Les Banques
St Peter Port
Guernsey, GY1 3QL

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