Half Year Financial Report

TWENTYFOUR SELECT MONTHLY INCOME FUND LIMITED

INTERIM MANAGEMENT REPORT AND UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS

For the period from 1 October 2015 to 31 March 2016

The Directors of TwentyFour Select Monthly Income Fund Limited announce the results for the period from 1 October 2015 to 31 March 2016. The Interim Management 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 may 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 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.

The Company has a target net total return on the original issue price of between 8% and 10% per annum. This comprises 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. Refer to note 18 for details of the Company’s dividend policy.

Shareholder Information
Maitland Institutional Services Limited (“Maitland”)(formerly Phoenix Fund Services (UK) Limited) 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

				31.03.16		30.09.15	31.03.15
Total Net Assets				£128,390,508		£134,560,344	£136,943,952
Net Asset Value per share				85.97p		92.59p	96.62p
Share price				88.75p		96.63p	100.00p
Premium to Net Asset Value				3.23%		4.36%	3.50%
Dividends declared during the period				3.00p		6.53p	3.00p
Dividends paid during the period				3.53p		7.07p	4.07p

Ongoing Charges
Ongoing charges for the 6 month period ended 31 March 2016 have been calculated in accordance with the Association of Investment Companies (the "AIC") recommended methodology. The ongoing charges for the period ended 31 March 2016 were 1.21% (31 March 2015: 1.19%) on an annualised basis.

CHAIR’S STATEMENT
for the period from 1 October 2015 to 31 March 2016

The 6 months to 31 March 2016 saw a challenging period of elevated macro-economic and geopolitical uncertainty. This resulted in mostly benign market activity, with many investors retreating to hold cash. Given this background, it is encouraging that there was modest share issuance by the Company during the period, with the number of shares increasing from 145,335,881 to 149,335,881.

The challenging market conditions resulted in a period of high price volatility for the Company’s portfolio assets, with mark-to-market declines exacerbated by extremely poor liquidity in secondary markets. The Portfolio Manager has been particularly active in keeping investors informed about prevailing market conditions, the challenges faced and the underlying fundamental strength of the portfolio; as such there has been no requirement to liquidate any assets from the Company to meet liquidity needs. The investment composition of the Company continues to meet an acceptable level of diversity and target yield, and there have been no issues in achieving the pre-determined gross monthly dividend of 0.5p per share with any excess income paid out in the month following the Company’s year-end. The dividend policy is discussed in note 18.

The Portfolio Manager and the Company’s Board continue to adhere to a strict discipline of only accepting new share issuance to meet investor demand and only when there are suitable investment opportunities in the market place. In particular consideration is always given to the diversification benefits of new money and the opportunity to enhance yield without compromising portfolio risk. For the period in question the opportunities were limited in Q4-2015 (due to a lack of secondary market activity) but conditions changed in Q1-2016 which the Portfolio Manager recognised and which resulted in a number of meetings with potential investors during March.

Performance is expected to continue to be relatively volatile in 2016, with a number of economic and political uncertainties expected to weigh on market sentiment. A slowdown in Emerging Markets, concerns about global deflationary factors and the looming UK referendum on EU membership are all likely to create headwinds for the risk assets over the course of the year. However, continued support from the Central Banks, in particular the recent actions of the European Central Bank (“ECB”) (€80bn per month asset purchase programme, Targeted Longer Term Repo operations and negative deposit rates) are expected to be the catalyst to drive yields lower and credit spreads tighter from current traded levels.

With volatile market conditions, at times poor liquidity and shifting investor sentiment, valuations can move very fast increasing NAV volatility. Continued focus on testing the portfolio for liquidity and valuation risks is one of our main focuses.

The Board continues to work with the Portfolio Manager to monitor and stress test the portfolio to ensure that even with idiosyncratic events the Company is likely to be able to comply with its dividend policy. The annualised dividend for the period is currently on target.

Claire Whittet
Chair
12 May 2016

PORTFOLIO MANAGER’S REPORT
for the period from 1 October 2015 to 31 March 2016

Economic Background
The six month period to 31 March 2016 was dominated by weak sentiment across all risk markets, driven by a multitude of geo-political, macro-economic and technical concerns, but no over-riding catalyst. So far at least, it is a classic case-study of markets overshooting on expectation rather than on a realised event.

After a relatively weak third quarter of 2015, the market started Q4 with an upbeat tone, which was ironically started by a poor US non-farm payrolls number, interpreted by the market as being low enough to eliminate an October interest rate hike by the Federal Open Market Committee (“FOMC”). This led to some noticeable short-covering by trading desks and a pick-up in new supply, which in turn helped secondary market flow. The Q3-2015 earnings cycle confirmed the theme that the US cycle is more advanced than the UK and Europe, with corporates generally beating profit forecasts but falling short on revenues, with the stronger US Dollar (“$”) being widely referenced as the main cause for that miss.

In Europe, the ECB talk became markedly more dovish at the start of Q4-2015, leading to expectations of further support at the Governing Council meeting in December. However, the FOMC meeting on 28 October 2015 inferred that the Federal Reserve System (“Fed”) saw enough domestic consumer demand to potentially warrant its first rate hike and this reversed the relief rally and sent sentiment back into a negative mode as we approached the year end. Mid-way through November the markets were overshadowed by the awful terrorist attack in Paris, which added to the sombre mood. In the political arena, the recently appointed Portuguese government were ousted by a left-wing coalition led by Antonio Costa, leading to initial fears of anti-Eurozone policies and a reversal of austerity measures.     

At the micro level, the US high yield (“HY”) sector weakened due to a combination of lower oil prices and the prospect of higher Federal Funds Rate (“FFR”) which increased the expectation of a spike in the default rate. In the US, Veritas (a large telecom operator) cancelled $2.45bn & €760m of new debt issuance and in Europe, Abengoa (a leading Spanish engineering/infrastructure group) announced it was filing for creditor protection while it looked to secure additional capital.

Unusually December turned out to be a dramatic month and very challenging for investors to navigate. As expected the ECB cut the depo-rate to minus 30bp and extended the asset purchase programme out to May 2017, and agreed to reinvest maturing bonds. However, this was deemed insufficient by market participants and this set the tone for a miserable end to the year for risk assets. In line with consensus the FOMC hiked FRR to 0.25-0.50%. Although the following rhetoric from Janet Yellen was relatively dovish, the large outflows from US high yield bond funds prior to the announcement gathered pace leading to some managers being unable to meet these outflow requests (due to poor market liquidity). The result was the US HY sector recording only its third negative year in the last 2 decades, with a total return of minus 5%. The downward spiral continued to the year-end with commodity prices at the core of the action, with Brent crude down a further 17% in the month, taking 2015 losses to a huge 44%.

In Europe the political turmoil continued with Spanish elections providing an inconclusive result and the individual political parties seemingly unable to agree on a workable coalition, leading to the likelihood of re-elections in Q2-2016. Then, just as the market was looking forward to a quiet Christmas break, there was one last surprise as the Bank of Portugal (“BOP”) astonishingly decided that Novo Banco should have a bail-in of senior debt. Astoundingly the debt was not bailed in to the existing bank, but instead removed as a liability and passed to a bad bank, with the BOP selecting just 5 of the 52 available bonds, thereby ignoring the key concept of pari passu. Legal action was therefore inevitable and the reputation of Portugal was severely impaired.

The weak sentiment continued into January and 2016 had the most sombre start to a year that we can recall. The weakness in oil prices continued as Iran, free from 37 years of international sanctions, prepared to add supply into a market reeling from weak demand and high inventory levels, resulting in West Texas Intermediate (“WTI”) crude testing new lows of $28.50 a barrel.  To add to the melee, China released Q4-2015 Gross Domestic Product numbers of 6.8% which, even though this was only 0.1% below consensus, sent the market bears a late Christmas present. At the first FOMC of 2016, Janet Yellen signalled that the Fed had concerns about the global economic outlook and left FFR on hold at 0.25-0.5%. The Bank of Japan then shocked the market by moving domestic rates into negative territory – only 8 days after stating it was “not seriously considering” a negative rate. In Europe, Mario Draghi announced the ECB were keeping rates on hold at the January meeting but would ‘review and possibly reconsider’ their policy stance in March. In the UK, Mark Carney added to the dovish central bank rhetoric and ruled out any imminent rise in UK rates saying “the World is weaker and UK growth has slowed”.

The negative tone that had weighed down the previous 6 months reached a low point in early February as the ‘rolling bear’ sentiment switched its attention to the banking sector. Credit Suisse announced a sobering set of results a week after Deutsche Bank had released poor Fiscal Year 2015 numbers, leading markets to question the solvency of the banking system. Speculation was rife that Deutsche Bank would be the first bank not to pay coupons on their contingent capital bonds, and despite this being rebuked by the bank, the rumour was enough to result in contagion spreading through the whole bank hybrid sector, regardless of the credit quality of the borrower. Asset-backed securities (“ABS”), particularly Collateralised Loan Obligations (“CLO”), also endured sharp price declines in the month as comments from a couple of investment banks announced their departure from the sector, leading to a strong technical headwind for the ABS sector. The Company had a significant holding in ABS at the end of the month (29 February 2016: 34% / 31 March 2016: 35%) which contributed to the poor performance during February.

Slowly but surely, a combination of relative value stock-pickers and short-covering halted the generic selling pressure, helped by a reasonable 2015 results season, where broadly speaking top line growth was benign but the bottom line generally beat expectations. European corporates also fared better than the US in the results season and there were few hints of the upcoming recession that markets have been increasingly pricing in, and certainly no hints of a solvency crisis in European banking.

The political bandwagon continued with David Cameron announcing the UK referendum on EU membership would take place on 23 June 2016 which had an immediate negative impact on Sterling and Sterling assets. The elections in Ireland continued the Eurozone trend as voters rejected the austerity policies that had pulled the country out of economic insecurity and left Ireland trying to form a workable coalition government.

At the end of Q1-2016 the market received a welcome boost with the ECB announcing a raft of stimuli that exceeded all expectations. A 10bp cut in the deposit facility to -40bp was in line with consensus but a €20bn per month increase in the asset purchase programme, including investment grade non-bank corporation, and a new series of four Targeted Longer Term Refinancing Operations (“TLTRO”) each with a 4-year maturity (the initial operation to be conducted in June and the final one in March-2017) was viewed as a major surprise to the upside for Eurozone risk markets.  The fact that the banks have been offered unlimited liquidity support through to March 2021, with borrowing rates potentially as low as the deposit facility rate, was met, unsurprisingly, with a significant relief rally in subordinated bank paper across the Euro-region.

On the other side of the Atlantic the FOMC decided to keep FFR on hold at 0.25-0.50%, which was in line with consensus although the comments were slightly more dovish as Yellen highlighted that “global economic and financial developments continue to pose risks”. Overall the market feels more balanced than at the start of the year but remains vulnerable to periods of stress with the forthcoming UK referendum and continued concerns about Emerging Market slowdown and deflationary pressures. Thankfully continued Central Bank support looks likely to remain for the foreseeable future.

In terms of performance the total return for the Euro HY sector over the period was 3.03% and the HY Coco index posted a 0.84% return. Currency markets experienced significant volatility during the period due in part to the market events mentioned above, with the EUR vs. GBP and USD vs. GBP both experiencing moves in the range of 14% and 13% respectively. Swiss franc and Swedish Krona both moved 7% and 9% versus Sterling by the end of the period, which the Company had exposure to through its assets, however the Company hedges its currency risk as part of the investment policy.

Performance Review
The Company’s objective is to produce an attractive level of income, with an aim of generating a minimum monthly income of 0.5p, with any excess income annually distributed to investors. This is a high conviction strategy based on bonds providing relative value in the credit markets, with an emphasis on the securities that exhibit a degree of liquidity premium and assets that are primarily buy-to-hold.

As mentioned above, there has been some significant volatility in the underlying mark-to-market prices across the asset sectors held in the Company, in particular the Company’s weighting to ABS as mentioned and exposure to the banking sector (25% as at 31 March 2016). In addition there has been a notable idiosyncratic event surrounding the Nova Banco credit, which has yet to be resolved and that the Company has exposure to. 

The six months in question have been very challenging for higher beta credit, particularly in the period of mid-Dec to mid-Feb and as a result the Company’s NAV per Share decreased by 6.62p. In the six month period the Company paid dividends totalling 3.53p.

Foreign Exchange Accounting
The Company’s policy is to hedge foreign exchange currency risk. The Company hedges this risk by using “rolling forwards” for each currency pair with a one month maturity, selling forward a notional amount equivalent to the market value of the assets. 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 Company operates to a tolerance of +/-0.50% exposure to the NAV on each non-GBP currency.

The hedging policy is designed to only be used to manage the portfolio efficiently and not to enhance investment returns.

The net foreign currency loss is recorded in accordance with the hedging policy and IFRS. However, within the net loss on financial assets at fair value through profit or loss there is a corresponding foreign currency gain.

Investment Outlook
The Company was established to take advantage of creditworthy bonds that exhibit a degree of liquidity premium, and hedging out any excessive duration risk. However, with the change in interest rate expectations, the interest rate swap position has been a drag on the Company’s performance and so has been removed as the Portfolio Manager (“PM”) team feel that hedging is no longer necessary, given the relative short maturities of the underlying assets.

Credit risk has become markedly cheaper as markets rapidly positioned themselves given current uncertainty and increased talk of a global slowdown and a challenge to corporate earnings. The PM sees this as a material opportunity and whilst already positioned for credit exposure, the team has tried to optimise the portfolio to ensure a harder bounce back and have held a number of select investor meetings to highlight the benefits of a small capital increase to exploit the opportunities that currently exist in secondary markets. 

The PM views the current economic and sentiment weakness as driven by potential earnings downgrades rather than a solvency issue or one that is expected to lead to a material pick up in the default rates (outside of the troubled energy and commodity sectors). However, the team also believe that the current volatility will continue to affect markets and asset price moves will continue to be exacerbated by poor liquidity and political uncertainty such as the forthcoming UK referendum on EU membership and the stalemate in the recent Spanish and Irish elections. Overall though, the team believes that Central Bank support will ultimately result in lower yields in Europe and tighter credit spreads which should drive the opportunity for deriving yield plus capital gains from current levels over the course of 2016.

TwentyFour Asset Management LLP
12 May 2016

TOP TWENTY HOLDINGS
As at 31 March 2016

						Percentage
	Nominal/	Credit Security	Fair Value *			of Net Asset
	Shares	Sector	£			Value
Barclays PLC 7.875 29/12/2049	5,000,000	Banks	4,500,000		3.50
Nationwide Bldg Society 10.25 29/06/2049	35,000	Banks	4,388,140		3.42
Coventry Bldg Society 6.375 29/12/2049	4,240,000	Banks	3,787,829		2.95
Santander UK Group 10.375 31/12/2049	2,000,000	Banks	3,029,343		2.36
Shawbrook Group 8.5 28/10/2025	2,800,000	Banks	2,856,000		2.22
Herbert Park BV Series 1X E 20/10/2026	4,600,000	ABS	2,751,107		2.14
Aareal Bank AG 7.625 29/11/2049	3,600,000	Banks	2,709,830		2.11
Bank of Ireland 7.375 29/12/2049	3,400,000	Banks	2,600,925		2.03
Carlyle Global Mkts Strategies Euro 2015-2X E 21/09/2029	4,000,000	ABS	2,600,518		2.03
Avoca CLO 11X F 15/07/2027	4,000,000	ABS	2,568,804		2.00
Capital Bridging Finance 1 MEZZ 05/07/2018	2,500,000	ABS	2,475,000		1.93
New Look 8 01/07/2023	2,450,000	High Yield	2,389,158		1.86
Ardagh Finance Holdings 8.375 15/06/2019	2,978,398	High Yield	2,371,092		1.85
Intralot Capital Luxembourg SA 6 15/05/2021	3,300,000	High Yield	2,362,583		1.84
Jubilee CDO BV 2014-12X F 15/07/2027	3,950,000	ABS	2,327,652		1.81
Voyage Care BondCo PLC 11 01/02/2019	2,250,000	High Yield	2,261,250		1.76
Keystone Financing 9.5 15/10/2019	2,100,000	High Yield	2,181,743		1.70
esure Group PLC 6.75 19/12/2024	2,200,000	Insurance	2,070,322		1.61
Aldermore Group 11.875 29/12/2049	1,900,000	Banks	2,047,250		1.59
SC Germany Consumer 2015-1 E 13/12/2028	2,500,000	ABS	1,984,299		1.55
Total			54,262,845		42.26

* 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 2016 can be obtained from the Administrator on request.

BOARD MEMBERS

Biographical details of the Directors are as follows:

Claire Whittet – (Chair) (age 60)
Ms Whittet is a resident of Guernsey and has over 38 years’ experience in the banking industry and since 2003 has been a Director and, more recently, Managing Director and Co-Head of Rothschild Bank International Ltd and a Director of Rothschild Bank (CI) Ltd. Ms Whittet is also a non-executive director of a number of listed funds. Ms Whittet 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 taking up her current position at Rothschild.

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 60)
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 including BH Macro Limited (FTSE 250) where he is Senior Independent Director. He 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.

Thomas H. Emch – (Non-executive Director) (age 72)
Mr Emch is an independent Board member and consultant. He graduated from the University of Zurich (lic.oec.publ.) and IMD (PED) in Lausanne. During his professional career he successively was European Treasurer of Litton International, SVP of Banque Paribas Suisse, EVP of Lombard Odier & Co. and CEO of Royal Bank of Canada (Suisse), a position he held for 11 years until his retirement in 1999. Throughout his banking career, he served on the Boards of numerous companies and professional associations in Switzerland and abroad. Mr Emch was appointed to the Board on
12 February 2014.

Ian Martin - (Non-executive Director) (age 52)
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 fund 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 2015. The principal risks disclosed include market risk, liquidity risk, credit risk, foreign currency risk, operational risk, accounting, legal and regulatory risk, income recognition 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.

Going Concern
Under the 2014 UK Corporate Governance Code (effective for periods beginning on or after 1 October 2014) 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

We confirm that to the best of our knowledge:

•          these Unaudited Condensed Interim Financial Statements have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company as required by DTR 4.2.4.

•          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 2015 to 31 March 2016 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 2015 to 31 March 2016 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
Chair

12 May 2016

INDEPENDENT INTERIM REVIEW REPORT
TO TWENTYFOUR SELECT MONTHLY INCOME FUND LIMITED

Introduction
We have been engaged by the Company to review the Condensed Interim Financial Statements in the Interim Report for the six months ended 31 March 2016, which comprises the Condensed Statement of Comprehensive Income, the Condensed Statement of Financial Position as at
31 March 2016, the Condensed Statement of Changes in Equity, the Condensed Statement of Cash Flows and related notes. We have read the other information contained in the Interim Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the Condensed Interim Financial Statements.

Directors' responsibilities
The Interim Report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Interim Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2 a), the Annual Financial Statements of the Company are prepared in accordance with International Financial Reporting Standards. The Condensed Interim Financial Statements included in this Interim Report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting".

Our responsibility
Our responsibility is to express to the Company a conclusion on the Condensed Interim Financial Statements in the Interim Report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. We do not, in producing this report, 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 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.

Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the Condensed Interim Financial Statements in the Interim Report for the six months ended
31 March 2016 are not prepared, in all material respects, in accordance with International Accounting Standard 34 and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
12 May 2016

Publication of Interim Financial Report
(a)        The maintenance and integrity of the Company’s website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Interim Report and Unaudited Condensed Interim Financial Statements since they were initially presented on the website.

(b)   Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

UNAUDITED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the period from 1 October 2015 to 31 March 2016

							For the period from 01.10.15 to 31.03.16		For the period from 01.10.14 to 31.03.15
			Notes				£		£
Income							(Unaudited)		(Unaudited)
Interest income							5,188,581		4,628,160
Net foreign currency (loss)/gain			7				(4,937,731)		4,242,345
Net loss on financial assets
at fair value through profit or loss			8				(4,105,583)		(4,766,611)
Total (loss)/income							(3,854,733)		4,103,894
Expenses
Portfolio management fee			13				(497,284)		(476,739)
Directors' fees			13				(63,750)		(59,092)
Administration fees			14				(50,907)		(49,269)
AIFM management fee			14				(33,353)		(39,752)
Audit fee							(34,613)		(39,110)
Custody fees			14				(8,015)		(7,709)
Broker fees							(25,000)		(25,137)
Depositary fees			14				(12,500)		(10,781)
Other expenses							(79,250)		(77,569)
Total expenses							(804,672)		(785,158)
Total comprehensive (loss)/income for the period							(4,659,405)		3,318,736
(Loss)/earnings per Ordinary Share -
Basic & Diluted			3				(0.031)		0.025

All items in the above statement derive from continuing operations.

The notes form an integral part of these Unaudited Condensed Interim Financial Statements.

UNAUDITED CONDENSED STATEMENT OF FINANCIAL POSITION
as at 31 March 2016

			31.03.16		30.09.15
Assets	Notes		£		£
Current assets			(Unaudited)		(Audited)
Investments	8		124,613,800		128,802,069
Derivative assets	16		76,247		480,209
Amounts due from broker			971,291		1,233,420
Other receivables	9		3,056,569		2,794,811
Cash and cash equivalents			1,228,287		4,532,345
Total current assets			129,946,194		137,842,854
Liabilities
Current liabilities
Amounts due to broker			-		1,889,571
Other payables	10		209,644		245,140
Derivative liabilities	16		1,346,042		1,147,799
Total current liabilities			1,555,686		3,282,510
Total net assets			128,390,508		134,560,344
Equity
Share capital account	11		146,308,285		142,609,447
Other reserves			(17,917,777)		(8,049,103)
Total equity			128,390,508		134,560,344
Ordinary Shares in issue	11		149,335,881		145,335,881
Net Asset Value per Ordinary Share	5		85.97		92.59

The Unaudited Condensed Interim Financial Statements were approved by the Board of Directors on 12 May 2016 and signed on its behalf by:

Claire Whittet                                                   Christopher Legge
Chair                                                                Director

The notes form an integral part of these Unaudited Condensed Interim Financial Statements.

UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY
for the period from 1 October 2015 to 31 March 2016

		Share Capital		Other
		Account		Reserves		Total
		£		£		£
		(Unaudited)		(Unaudited)		(Unaudited)
Balance at 1 October 2015		142,609,447		(8,049,103)		134,560,344
Reissue of treasury shares		3,761,380		-		3,761,380
Share issue costs		(45,711)		-		(45,711)
Income equalisation on new issues		(16,831)		16,831		-
Distributions paid		-		(5,226,100)		(5,226,100)
Total comprehensive loss for the period		-		(4,659,405)		(4,659,405)
Balance at 31 March 2016		146,308,285		(17,917,777)		128,390,508

		Share Capital		Other
		Account		Reserves		Total
		£		£		£
		(Unaudited)		(Unaudited)		(Unaudited)
Balance at 1 October 2014		123,434,794		(240,328)		123,194,466
Issue of shares		29,527,004		-		29,527,004
Purchase of own shares to hold in treasury		(13,451,019)				(13,451,019)
Share issue costs		(285,777)		-		(285,777)
Income equalisation on new issues		(89,571)		89,571		-
Distributions paid		-		(5,359,458)		(5,359,458)
Total comprehensive income for the period		-		3,318,736		3,318,736
Balance at 31 March 2015		139,135,431		(2,191,479)		136,943,952

The notes form an integral part of these Unaudited Condensed Interim Financial Statements.

UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
for the period from 1 October 2015 to 31 March 2016

		For the period from 01.10.15 to 31.03.16		For the period from 01.10.14 to 31.03.15
	Notes	£		£
Cash flows used in operating activities		(Unaudited)		(Unaudited)
Total comprehensive (loss)/income for the period		(4,659,405)		3,318,736
Adjustments for:
Net loss on investments	8	4,105,583		4,766,611
Amortisation adjustment under effective interest rate method	8	(399,818)		(340,390)
Unrealised loss on derivatives		602,205		1,699,455
Increase in other receivables	9	(261,758)		(290,150)
Decrease in other payables	10	(35,496)		(24,447)
Purchase of investments		(40,851,930)		(47,111,121)
Sale of investments	8,9	39,706,992		24,125,695
Net cash used in operating activities		(1,793,627)		(13,855,611)
Cash flows from financing activities
Proceeds from issue of ordinary shares	11	-		29,527,004
Payment for shares redeemed to hold in treasury	11	-		(13,451,019)
Proceeds from re-issuance of treasury shares	11	3,761,380		-
Share issue costs	11	(45,711)		(285,777)
Dividend distribution	18	(5,226,100)		(5,359,458)
Net cash (outflow)/inflow from financing activities		(1,510,431)		10,430,750
Decrease in cash and cash equivalents		(3,304,058)		(3,424,861)
Cash and cash equivalents at beginning of period		4,532,345		4,912,175
Cash and cash equivalents at end of period		1,228,287		1,487,314

The notes form an integral part of these Unaudited Condensed Interim Financial Statements.

NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
for the period from 1 October 2015 to 31 March 2016

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 on
10 March 2014.

The investment objective and policy is set out in the Summary Information section.

The Portfolio Manager of the Company is TwentyFour Asset Management.

2.   Principal Accounting Policies

      a) Basis of preparation and Statement of compliance

The Unaudited Condensed Interim Financial Statements for the period from 1 October 2015 to 31 March 2016 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 annual financial statements for the year ended 30 September 2015, which were prepared in accordance with International Financial Reporting Standards (“IFRS”) and which received an unqualified audit report.

b) Changes in presentation

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.    (Loss)/earnings per Ordinary Share - Basic & Diluted

The earnings per Ordinary Share - Basic and Diluted has been calculated based on the weighted average number of Ordinary Shares of 148,517,847 (31 March 2015: 133,872,894) and a net loss for the period of £4,659,405 (31 March 2015: net gain of £3,318,736).

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 £16,831 (31 March 2015: £89,571).

5.    Net Asset Value per Ordinary Share

The net asset value of each Share of 85.97p (31 March 2015: 96.62p) is determined by dividing the net assets of the Company attributed to the Shares of £128,390,508 (31 March 2015: £136,943,952) by the number of Shares in issue at 31 March 2016 of 149,335,881 (31 March 2015: 141,735,881).

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 (31 March 2015: £1,200).

7.    Net foreign currency (losses)/gains

							For the period from 01.10.15 to 31.03.16		For the period from 01.10.14 to 31.03.15
							£		£
							(Unaudited)		(Unaudited)
Movement in net unrealised loss on forward currency contracts							(602,206)		(1,699,455)
Realised (loss)/gain on forward currency contracts							(6,322,220)		5,626,185
Realised currency gain							1,955,702		304,360
Unrealised income exchange gain							30,993		11,255
							(4,937,731)		4,242,345

8.    Investments

							31.03.16		30.09.15
							£		£
Financial assets at fair value through profit and loss:							(Unaudited)		(Audited)
Unlisted Investments:
Opening book cost							139,639,982		122,539,767
Purchases at cost							38,962,359		88,769,362
Proceeds on sale/principal repayment							(39,444,863)		(68,000,998)
Amortisation adjustment under effective interest rate method							399,818		639,168
Realised gain on sale/principal repayment							1,488,248		1,461,103
Realised loss on sale/principal repayment							(2,876,883)		(5,768,420)
Closing book cost							138,168,661		139,639,982
Unrealised gain on investments							2,343,300		1,659,469
Unrealised loss on investments							(15,898,161)		(12,497,382)
Fair value							124,613,800		128,802,069
Realised gain on sale/principal repayment							1,488,248		1,461,103
Realised loss on sale/principal repayment							(2,876,883)		(5,768,420)
Increase in unrealised gain							4,330,645		3,550,064
Increase in unrealised loss							(7,047,593)		(9,156,808)
Net loss on financial assets at fair value through profit or loss							(4,105,583)		(9,914,061)

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

9.    Other receivables

							31.03.16		30.09.15
							£		£
							(Unaudited)		(Audited)
Interest income receivable and accrued income							2,921,290		2,672,409
Prepaid expenses							31,247		15,175
Dividends receivable							104,032		107,227
							3,056,569		2,794,811

10.  Other payables

							31.03.16		30.09.15
							£		£
							(Unaudited)		(Audited)
Portfolio Management fees payable							81,253		92,094
Directors' fee payable							31,875		26,875
Administration fee payable							24,788		26,050
AIFM management fee payable							17,046		18,369
Audit fee payable							22,913		45,700
General expenses payable							27,425		32,838
Depositary fee payable							2,117		2,260
Custody fee payable							2,227		954
							209,644		245,140

11.  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

							31.03.16		30.09.15
							£		£
Ordinary Shares							(Unaudited)		(Audited)
Share Capital at the beginning of the period/year							142,609,447		123,434,794
Issue of shares							-		29,527,004
Share issue costs							(45,711)		(339,085)
Purchase of own shares into treasury							-		(13,451,019)
Re-issuance of treasury shares							3,761,380		3,551,432
Income equalisation on new  issues							(16,831)		(113,679)
Total Share Capital at the end of the period/year							146,308,285		142,609,447
							31.03.16		30.09.15
							£		£
Treasury Shares							(Unaudited)		(Audited)
Share Capital at the beginning of the period/year							9,899,587		-
Purchased shares							-		13,451,019
Sold shares							(3,761,380)		(3,551,432)
Total Share Capital at the end of the period/year							6,138,207		9,899,587

Reconciliation of number of Shares

							31.03.16		30.09.15
							Shares		Shares
Ordinary Shares							(Unaudited)		(Audited)
Shares at the beginning of the period/year							145,335,881		125,185,881
Issue of shares							-		30,723,887
Purchase of own shares into treasury							-		(14,173,887)
Re-issuance of treasury shares							4,000,000		3,600,000
Total Shares in issue at the end of the period/year							149,335,881		145,335,881

 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

							31.03.16		30.09.15
							Shares		Shares
Treasury Shares							(Unaudited)		(Audited)
Shares at the beginning of the period/year							10,573,887		-
Purchase of own shares to hold in treasury							-		14,173,887
Reissue of treasury shares							(4,000,000)		(3,600,000)
Total Shares held in treasury at the end of the period/year							6,573,887		10,573,887

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.

On 13 February 2015 the Company purchased 14,173,887 Ordinary Shares of £0.01 at a price of 94.90p to be held in treasury. The total amount paid to purchase these shares was £13,451,019 and has been deducted from the shareholders’ equity. The Company has the right to reissue these shares at a later date. All shares issued were fully paid. During the period ended
31 March 2016, 4,000,000 treasury shares were reissued for a total consideration of £3,761,380 (year ended 30 September 2015, 3,600,000 treasury shares were reissued for a total consideration of £3,551,432).

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

								Financial
								Assets at fair
								value through		Loans and
								profit and loss		receivables		Total
								£		£		£
31 March 2016 (Unaudited)
Financial Assets as per Statement of Financial Position
Investments at fair value through profit or loss:
-Bonds								81,802,043		-		81,802,043
-Asset backed securities								42,811,757		-		42,811,757
Derivative assets (see note 16)								76,247		-		76,247
Amounts due from broker								-		971,291		971,291
Other receivables								-		3,056,569		3,056,569
Cash and cash equivalents								-		1,228,287		1,228,287
								124,690,047		5,256,147		129,946,194
								Financial
								Liabilities at fair		Other
								value through		financial
								profit and loss		liabilities		Total
								£		£		£
31 March 2016 (Unaudited)
Financial Liabilities as per Statement of Financial Position
Other payables								-		209,644		209,644
Derivative liabilities (see note 16)								1,346,042		-		1,346,042
								1,346,042		209,644		1,555,686
								Financial
								Assets at fair
								value through		Loans and
								profit and loss		receivables		Total
								£		£		£
30 September 2015 (Audited)
Financial Assets as per Statement of Financial Position
Investments at fair value through profit or loss:
-Bonds								94,262,743		-		94,262,743
-Asset backed securities								35,378,946		-		35,378,946
-Interest rate swaps								(839,620)		-		(839,620)
Derivative assets (see note 16)								480,209		-		480,209
Amounts due from broker								-		1,233,420		1,233,420
Other receivables								-		2,794,811		2,794,811
Cash and cash equivalents								-		4,532,345		4,532,345
								129,282,278		8,560,576		137,842,854
								Financial
								Liabilities at fair		Other
								value through		financial
								profit and loss		liabilities		Total
								£		£		£
30 September 2015 (Audited)
Financial Liabilities as per Statement of Financial Position
Amounts due to brokers								-		1,889,571		1,889,571
Other payables								-		245,140		245,140
Derivative liabilities (see note 16)								1,147,799		-		1,147,799
								1,147,799		2,134,711		3,282,510

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 £35,000 (2015: £30,000) payable to Ms Whittet, the Chair, £32,500 (2015: £27,500) to Mr Legge as Chair of the Audit Committee and £30,000 (2015: £25,000) each to Mr Emch and Mr Martin. During the period, Directors’ fees of £63,750 (31 March 2015: £59,092) were charged to the Company, of which £31,875 (30 September 2015: £26,875) remained payable at the end of the period. Directors’ expenses for the period were £5,354 (31 March 2015: £4,807).

       b) Shares held by related parties

The Directors of the Company held the following shares beneficially:

								Number of Shares
								31.03.16	30.09.15
Claire Whittet								25,000	25,000
Christopher Legge								50,000	50,000
Thomas Emch								25,000	25,000
Ian Martin								35,000	25,000

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 2016, the Portfolio Manager held no Shares (30 September 2015: no Shares) of the Issued Share Capital. Partners and employees of the Portfolio Manager increased their holdings during the period, and held 1,669,668 (30 September 2015: 883,227), which is 1.12% (30 September 2015: 0.61%) 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 investment management fees for the period amounted to £497,284 (31 March 2015: £476,739) of which £81,253 (30 September 2015: £92,094) 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 £6,582 (31 March 2015: £28,133) in commission.

The Portfolio Manager entered into a strategic partnership with Vontobel Asset Management (“Vontobel”) in April 2015, the multi-boutique asset manager and subsidiary of the Vontobel Group. Vontobel acquired a 60 percent stake in TwentyFour Asset Management LLP. The strategic partnership has had no impact on the Portfolio Manager’s activities and fees.

14.  Material Agreements

a) Alternative Investment Fund Manager

The Company’s AIFM is Maitland Institutional Services Limited (formerly Phoenix Fund Services (UK) 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 £33,353 (31 March 2015: £39,752) were charged to the Company, of which £17,046 (30 September 2015: £18,369) 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 £50,907 (31 March 2015: £49,269) were charged to the Company, of which £24,788 (30 September 2015: £26,050) remained payable at the end of the period.

c) Broker

For its services as the Company’s broker pursuant to an engagement letter dated 13 February 2014, Numis Securites Limited (the “Broker”) is entitled to receive a retainer fee of £50,000 per annum and also a commission of 1% on all tap issues. During the period the Broker received £37,614 (31 March 2015: £160,760) 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 Net Asset Value 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 £12,500 (31 March 2015: £10,781) were charged to the Company, of which £2,117 (30 September 2015: £2,260) 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 £8,015     (31 March 2015: £7,709) of which £2,227 (30 September 2015: £954) 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 and reinvestment risk), interest rate risk, credit risk, liquidity risk, foreign currency 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 2015.

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 2016.

			Level 1		Level 2		Level 3		Total
			£		£		£		£
Assets			(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Financial assets at fair value
through profit and loss:
	-Bonds		-		5,843,998		75,958,045		81,802,043
	-Asset backed securities		-		7,184,507		35,627,250		42,811,757
	Derivative assets		-		76,247		-		76,247
Total assets as at 31 March 2016			-		13,104,752		111,585,295		124,690,047
Liabilities
	Derivative liabilities		-		1,346,042		-		1,346,042
Total liabilities as at 31 March 2016
			-		1,346,042		-		1,346,042

The following table analyses within the fair value hierarchy the Company’s financial assets and liabilities (by class) measured at fair value as 30 September 2015.

			Level 1		Level 2		Level 3		Total
			£		£		£		£
Assets			(Audited)		(Audited)		(Audited)		(Audited)
Financial assets at fair value
through profit and loss:
	-Bonds		-		2,452,088		91,810,655		94,262,743
	-Interest rate swaps		-		-		(839,620)		(839,620)
	-Asset backed securities		-		4,024,690		31,354,256		35,378,946
	Derivative assets		-		480,209		-		480,209
Total assets as at 30 September 2015			-		6,956,987		122,325,291		129,282,278
Liabilities
	Derivative liabilities		-		1,147,799		-		1,147,799
Total liabilities as at 30 September 2015
			-		1,147,799		-		1,147,799

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/year, 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. 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 firm tradable price, the Credit Security is classified in level 2.

Credit Securities that are priced based on prices obtained from an independent price vendor or where no third party verifiable price is available are classified in level 3. The valuation of these Credit Securities, where no third party verifiable price is available will be determined based on the Portfolio Manager's valuation policy, which may include the use of a comparable arm’s length transaction, reference to other securities that are substantially the same, discounted cash flow analysis and other valuation techniques. Where the Portfolio Manager sources prices from a third party broker or dealer quotes and these prices are indicative rather than tradable, the Credit Security is classified in level 3. Due to the inputs into the valuation of the Credit Securities classified in level 3 not being available or visible to the Company, no sensitivity on inputs can be performed.

There were no transfers between level 1 and 2 during the period/year, however transfers between level 2 and 3 occurred based on the Portfolio Manager’s ability to obtain a firm tradable price as detailed above.

There were no changes in valuation techniques during the period/year.

The following table presents the movement in level 3 instruments for the period ended
31 March 2016 by class of financial instrument.

		Preferred Stock		Bonds		Interest Rate Swaps		Asset backed securities		Total
		£		£		£		£		£
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Opening balance		-		91,810,656		(839,620)		31,354,255		122,325,291
Net (sales)/purchases				(11,774,668)		1,076,632		9,846,085		(851,951)
Investment reclassification		-		-		-		-		-
Net realised gain loss for the year included in the Statement of Comprehensive Income for level 3 Investments		-		586,282		(1,076,632)		(616,637)		(1,106,987)
Net unrealised gain/(loss) for the year included in the Statement of Comprehensive Income for level 3 Investments held at 31 March 2016		-		(2,496,099)		839,620		(875,698)		(2,532,177)
Transfer into Level 3		-		2,452,087		-		2,608,698		5,060,785
Transfer out of Level 3		-		(4,620,213)		-		(6,689,453)		(11,309,666)
Closing balance		-		75,958,045		-		35,627,250		111,585,295

The following table presents the movement in level 3 instruments for the year ended
30 September 2015 by class of financial instrument.

		Preferred Stock		Bonds		Interest Rate Swaps		Asset backed securities		Total
		£		£		£		£		£
		(Audited)		(Audited)		(Audited)		(Audited)		(Audited)
Opening balance		2,895,000		76,681,142		(252,574)		20,443,918		99,767,486
Net purchases				18,279,930				7,892,798		26,172,728
Investment reclassification		(2,895,000)		2,895,000		-		-		-
Net realised gain loss for the year included in the Statement of Comprehensive Income for level 3 Investments		-		(2,455,922)		-		(728,036)		(3,183,958)
Net unrealised gain/(loss) for the year included in the Statement of Comprehensive Income for level 3 Investments held at 30 September 2015		-		(990,085)		(587,046)		(2,032,042)		(3,609,173)
Transfer into Level 3		-		2,545,025		-		8,637,135		11,182,160
Transfer out of Level 3		-		(5,144,434)		-		(2,859,518)		(8,003,952)
Closing balance		-		91,810,656		(839,620)		31,354,255		122,325,291

       The following table analyses within the fair value hierarchy the Company’s assets and liabilities not measured at fair value at 31 March 2016 but for which fair value is disclosed.

			Level 1		Level 2		Level 3		Total
31 March 2016 (Unaudited)			£		£		£		£
Assets
Amounts due from broker			-		971,291		-		971,291
Other receivables			-		3,056,569		-		3,056,569
Cash and cash equivalents			1,228,287		-		-		1,228,287
Total			1,228,287		4,027,860		-		5,256,147
Liabilities
Other payables			-		209,644		-		209,644
Total			-		209,644		-		209,644

The following table analyses within the fair value hierarchy the Company’s assets and liabilities not measured at fair value at 30 September 2015 but for which fair value is disclosed.

		Level 1		Level 2		Level 3		Total
30 September 2015 (Audited)		£		£		£		£
Assets
Amounts due from broker		-		1,233,420		-		1,233,420
Other receivables		-		2,794,811				2,794,811
Cash and cash equivalents		4,532,345		-		-		4,532,345
Total		4,532,345		4,028,231		-		8,560,576
Liabilities
Amounts due to brokers		-		1,889,571		-		1,889,571
Other payables		-		245,140		-		245,140
Total		-		2,134,711		-		2,134,711

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.

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 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 income 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 2016:

Period to	Dividend rate per Share (pence)		Net dividend paid -Income         (£)		Ex-dividend date		Record date		Pay date
31 October 2015	0.50		744,179		19 November 2015		20 November 2015		30 November 2015
30 November 2015	0.50		744,179		17 December 2015		18 December 2015		31 December 2015
31 December 2015	0.50		744,179		21 January 2016		22 January 2016		29 January 2016
31 January 2016	0.50		744,179		18 February 2016		19 February 2016		29 February 2016
29 February 2016	0.50		746,679		17 March 2016		18 March 2016		31 March 2016
31 March 2016	0.50		746,679		16 April 2016		17 April 2016		30 April 2016

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 12 May 2016. Subsequent events have been evaluated until this date.

On 4 April 2016 the Company announced that pursuant to the quarterly tender for the period ending 31 March 2016, all of the 2,588,206 tendered shares were placed for 86.03 pence per Ordinary share.

On 11 April 2016, 1,493,270 treasury shares were re-issued for a total consideration of £1,285,705.

As at the date of the Unaudited Condensed Interim Financial Statements the Company had 150,829,151 shares in use of which 5,080,617 were held in treasury.

On 14 April 2016, the Company declared a dividend of 0.05p per share.

On 12 May 2016, the Company declared a dividend of 0.05p per share.

CORPORATE INFORMATION

Directors Claire Whittet (Chair)		Receiving Agent Computershare Investor Services PLC
Christopher Legge		The Pavillions
Thomas Emch		Bridgewater Road
Ian Martin		Bristol, BS13 8AE
Registered Office		UK Legal Advisers to the Company
PO Box 255		Eversheds LLP
Trafalgar Court		One Wood Street
Les Banques		London, EC2V 7WS
St Peter Port
Guernsey, GY1 3QL
Portfolio Manager		Guernsey Legal Advisers to the Company
TwentyFour Asset Management LLP		Carey Olsen
24 Cornhill		Carey House
London, EC3V 3ND		Les Banques
		St Peter Port
		Guernsey, GY1 4BZ
Alternative Investment Fund Manager		Independent Auditor
Maitland Institutional Services Limited		PricewaterhouseCoopers CI LLP
(formerly Phoenix Fund Services (UK) Limited)		PO Box 321
Springfield Lodge		Royal Bank Place
Colchester Road		1 Glategny Esplanade
Chelmsford, CM2 5PW		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 Court		3rd Floor
Les Banques		NatWest House
St Peter Port		Le Truchot
Guernsey, GY1 3DA		St Peter Port
		Guernsey, GY1 1WD
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 255		10 Paternoster Square
Trafalgar Court		London, EC4M 7LT
Les Banques
St Peter Port
Guernsey, GY1 3QL