Annual Financial Report
18 September 2020
CQS NEW CITY HIGH YIELD FUND LIMITED
Annual Results Announcement for the year ended 30 June 2020
A copy of the Company's Annual Report will shortly be available on the Company's website ( https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd ), on the National Storage Mechanism ( https://data.fca.org.uk/#/nsm/nationalstoragemechanism ) and will also be provided to those shareholders who have requested a printed or electronic copy
Financial Highlights
|
Total Return* |
Year to |
Year to |
|
|
|
|
|
|
|
|
|
Net asset value |
(6.22%) |
3.68%1 |
|
|
|
Ordinary share price |
(14.14%) |
4.66%1 |
|
|
|
|
|
|
|
|
|
Capital Values |
30 June 2020 |
30 June 2019 |
% change |
|
|
Total assets less current liabilities (with the exception of the bank loan facility) |
£236.7m |
£261.1m |
-9.36% |
|
|
Net asset value per ordinary share |
47.52p |
55.19p |
-13.90% |
|
|
Share price (bid)2 |
47.40p |
59.80p |
-20.74% |
|
|
|
|
|
|
|
|
Revenue and Dividends |
30 June 2020 |
30 June 2019 |
% change |
|
|
Revenue earnings per ordinary share* |
4.59p |
4.49p |
2.34% |
|
|
Annual dividends per ordinary share* |
4.46p |
4.45p |
0.22% |
|
|
Dividend cover* |
1.03x |
1.01x |
2.11% |
|
|
Revenue reserve per ordinary share (after recognition of annual dividends)* |
4.15p |
4.09p |
|
|
|
Dividend yield* |
9.41% |
7.44%3 |
|
|
|
(Discount)premium* |
(0.25%) |
8.35%3 |
|
|
|
Gearing* |
13.68% |
9.51% |
|
|
|
Ongoing charges ratio* |
1.19% |
1.20% |
|
|
|
|
|
|
|
|
|
Dividend History |
Rate |
xd date |
Record date |
Payment date |
|
First interim 2020 |
1.00p |
24 October 2019 |
25 October 2019 |
29 November 2019 |
|
Second interim 2020 |
1.00p |
23 January 2020 |
24 January 2020 |
28 February 2020 |
|
Third interim 2020 |
1.00p |
23 April 2020 |
24 April 2020 |
29 May 2020 |
|
Fourth interim 2020 |
1.46p |
23 July 2020 |
24 July 2020 |
28 August 2020 |
|
Annual dividend per ordinary share |
4.46p |
|
|
|
|
|
|
|
|
|
|
First interim 2019 |
1.00p |
25 October 2018 |
26 October 2018 |
30 November 2018 |
|
Second interim 2019 |
1.00p |
24 January 2019 |
25 January 2019 |
28 February 2019 |
|
Third interim 2019 |
1.00p |
25 April 2019 |
26 April 2019 |
31 May 2019 |
|
Fourth interim 2019 |
1.45p |
25 July 2019 |
26 July 2019 |
30 August 2019 |
|
Annual dividend per ordinary share |
4.45p |
|
|
|
1 Net asset value and ordinary share price total return have been restated from 3.79% and 6.71% respectively to reflect a correction to the underlying calculation.
2 Source: Bloomberg
3 The premium and dividend yield as at 30 June 2019 has been restated from 10.53% and 7.30% in order to be consistent with other financial highlights that reference bid share prices.
* A description of the Alternative Performance Measures used above and information on how they are calculated can be found below.
Statement from the Chair
Key points
• Net asset value total return of -6.22%
• Ordinary share price total return of -14.14%
• Dividend yield of 9.41%, based on dividends at an annualised rate of 4.46 pence
and a bid share price of 47.40 pence as at 30 June 2020
• Ordinary share price trading at a discount of 0.25% as at 30 June 2020
• £6.1m of equity raised during the year to 30 June 2020
Investment and Share Price Performance
I reported healthy performance for your Company at the interim stage of this financial year but the onset of the COVID-19 pandemic wrought havoc on the markets and the full year performance numbers have reversed this early gain and more. Most of the damage occurred in March 2020 when selling pressure peaked. There has since been some return of confidence, supported by massive Government intervention, which brought about a partial recovery in the share price. As at 30 June 2020, the net asset value per ordinary share was 47.52p and the share price 47.40p which were falls of 6.22% and 14.14% respectively on a total return basis for the financial year. Apart from the year just ended, your Company has had a positive total return from its net asset value in every year since 2009 so this year's results are naturally disappointing but it is instructive to note that the holdings in your Company's portfolio have, in the main, weathered the economic storm reasonably well and the price impact has been largely due to market re-rating.
A further unwelcome result of the pandemic has been the erosion of your Company's share price premium which explains the variance between the share price performance and that of the net asset value. The shares briefly slipped to a discount of 41.8% to net asset value at the height of the selling pressure in March 2020 but as at the end of June 2020 had recovered almost to parity. As I write this report, a premium has been reestablished (~6%) but this remains lower than the peak of 10% reached during the financial year.
The COVID-19 pandemic has obviously dominated global news and economic agendas for the last 6 months and this unprecedented event in modern times has given your Investment Manager a number of challenges to deal with. Nevertheless, other major issues continued: Brexit negotiations in the UK and the impending US Presidential election as well as US/China trade wars added additional tensions. The Investment Manager's review provides more details on these topics as well as a portfolio review.
Earnings and Dividends
The Company's revenue earnings per ordinary share were 4.59 pence for the financial year, 2.34% higher than the 4.49 pence earned last year.
The Company declared three interim dividends of 1.00 pence in respect of the period, and one interim dividend of 1.46 pence. The aggregate payment of 4.46 pence per share represents a 0.23% increase on the 4.45 pence paid last year and was fully covered by earnings. Based on an annualised rate of 4.46 pence and a share price of 47.40 pence as at 30 June 2020, this is a dividend yield of 9.41%.
The Board pays close attention to dividends and, since its launch in 2007, dividends paid by the Company have increased every year. This is illustrated by the graph on the inside front cover. The Board currently expects that the Company's aggregate dividend for the next financial year will be at a similar level to last year's and will again be covered by earnings. If the earnings trajectory changes, the Board is prepared to use reserves if it makes sense to do so.
Looking further out, the exceptionally low interest rate environment is reducing the universe of possible investments available to your Manager to maintain the Company's earnings. This makes the Manager's job harder but, as things stand, still possible. The Board recognises that it is not necessarily the case that the current level of dividends can be maintained in the longer term but it expects that in the immediate future, the dividend policy can continue.
Gearing
In December 2018 the Company replaced its existing one year £30m Scotiabank loan facility with a new two year £35m facility from the same bank at a current all-in rate of 1.26%. With the exception of its term, the facility is comparable to the one that it replaced. £31m was drawn down at 30 June 2020 and the Company had an effective gearing rate of 13.68%.
The Board believes that a modest but meaningful amount of gearing (one of the notable advantages of closed ended funds compared to open ended) is desirable and expects to maintain approximately this level of gearing during the next financial year.
Share Issuance
For most of the year to 30 June 2020, the market continued to attach a premium rating to your Company's shares, allowing us to issue new shares in a gradual manner and only when your Investment Manager was confident he could invest the additional funds favourably. £6.1m was raised from new and existing shareholders during the review period, with 10.5m ordinary shares issued from the block listing facility. The shares returned to a premium rating in July 2020 and a further £1.5m has been raised since 30 June 2020. As well as a modest increase in net asset value from any issue of shares, the Board expects that over time existing shareholders will benefit from lower ongoing charges and greater liquidity in the Company's shares, all other things being equal.
Regulations and Corporate Governance
In recent years there has been a substantial increase in the regulatory requirements of Boards including demonstrating compliance with 'Section 172' of the 2006 Companies Act through the requirements of the AIC Code. This is the first year your Company's Annual Report and Accounts has been required to do this. In summary, Section 172 concerns the 'duty to promote the success of the company' for the benefit of its members and details of how the Board acts in this regard. One element concerns the wider community and environment and the Board fully supports the growing importance placed on Environmental, Social and Governance ("ESG") factors when asking the Company's Investment Manager to deliver against the Company's objectives.
The composition of the Board has not changed this financial year and is unlikely to in the next year either. An external board evaluation was commissioned from Fletcher Jones Limited ("Fletcher Jones"), an experienced organisation in the investment companies sector and was carried out during June and July 2020. Fletcher Jones concluded that the Board 'operates well with skill and focus on all the areas of importance'. Further comment on this can be found on page 30 of the Company's Annual Financial Report and Financial Statements.
Service providers
During the financial year covered by this report, there have been some major changes to the service providers for your Company, in all cases following a competitive search process. Towards the end of 2019, BNP Paribas Securities Services S.C.A. Jersey Branch ("BNP Paribas") became Company Secretary, Administrator, Depositary and Custodian. I am not only very pleased with the smooth transfer of all these operations but also with the service we have since received. Both have been excellent.
More recently, we have appointed N+1 Singer as the Company's new corporate broker. This happened in May 2020 and once again, the transfer has been straightforward. We look forward to working with them.
Investment Management Fee
With effect from 18 September 2019, the Board agreed a revised fee schedule for the management of the Company's assets with the Investment Manager which lowered management fees charged on the Company's total assets (less current liabilities other than bank borrowings) over £300m from 0.7% to 0.6% per annum. As the Company grows in size over time, the new lower fee band will become effective, bringing benefit to the ongoing charges ratio.
Statement regarding COVID-19 Pandemic
The Board has been working closely with the Investment Manager and the Company's key suppliers to minimise the risk the virus poses to the health and wellbeing of all those working on the management and administration of the Company. We have received regular updates to ensure that normal operations of the Company are continuing to work effectively and have endeavoured to assess whether there are any additional risks to the Company's finances. I am pleased that the business continuity plans put in place have worked well in all cases and that we have been able to maintain every aspect of the Company's requirements with no diminution of service throughout the period of lockdown.
Outlook
If an effective vaccine for COVID-19 is discovered, the world will still take a while to return to pre-pandemic behaviour as the distribution and administration of such will be lengthy. In other words, a best case scenario has a virus impact for some time to come and your Company's portfolio needs to be ready for this.
It is already clear there are major winners (technology, health) and, at least for now, losers (hospitality, travel, retail) from the pandemic. It is a credit to the work of your Investment Manager that, to date, in the underlying investments held by your Company, the number of defaults or severe credit impairments triggered as far as can be judged by the pandemic has been low and I have confidence that their ongoing diligent analysis will see this continue. This is key to the strategy and therefore the outlook of your Company which is mainly to hold a diverse portfolio of high yielding fixed income instruments, preferably purchased at a price below their redemption value to generate some capital gain and with rigorous credit analysis to avoid 'blow ups'. Your Investment Manager, Ian 'Franco' Francis has been doing this successfully down the years and I see no reason why he will not continue to do so.
Notice of Annual General Meeting
The notice of the Annual General Meeting to be held at 11.00 a.m. at IFC1, The Esplanade, St. Helier, Jersey, JE1 4BP on 3 December 2020, including the proposed resolutions, will be included in the Company's Annual Financial Report and Financial Statements.
The Board considers that the passing of the resolutions to be proposed at the Annual General Meeting is in the best interests of the Company and its shareholders as a whole and is most likely to promote the success of the Company for the benefit of the shareholders as a whole. The Board unanimously recommends that all shareholders vote in favour of those resolutions.
Caroline Hitch
Chair
17 September 2020
Investment Manager's Review
Introduction
As I reflect over this unprecedented financial year to 30 June 2020, it seems that the COVID-19 pandemic has overshadowed all activities as it has had a massive impact on the health of many nations as it spreads across the globe and the economic ramifications will be with us for years to come. Nevertheless, companies have continued to trade and your Company with its focus on fixed interest securities has continued to trade and pay dividends to its shareholders. We have seen a sharp fall in its net asset value in the month of March 2020 and a steady recovery since then as some confidence has returned to the market.
The year under review can almost be divided neatly in two parts. The first part between July 2019 and January 2020 was fairly quiet for the Company with the net asset value rising modestly and the economic news in the UK dominated by the Brexit withdrawal from the EU. In the US, the on-off trade war with China was the main focus. The second part was the spread of the global reach of COVID-19 and the nearly total lockdown of countries and economies that started in Asia in January and February and then moved into Europe and the Americas over March and April.
Market and economic review
Markets reacted in sheer panic in March 2020 with our own FTSE All Share Index falling over 18% having already had a weak February. Market liquidity disappeared as buyers were pretty much non-existent, combined with a tsunami like wave of selling from ETFs and open-ended funds . What was different to all previous crises was the speed, magnitude and coordination of the major global Governments who put in place a massive jobs protection and economic stimulus package. The ordinary shares in your Company fell by 28% in March with the net asset value falling by 19% as the shares traded at a discount.
April was the month in which the reality of COVID-19 and the subsequent lockdown really bit hard. In the UK the economic indicators fell sharply with an implied annual fall of 7% in GDP being forecast. Consumers started to be very careful with their spending and repaying debt. Europe, although ahead in terms of its emergence from lockdowns, showed unprecedented damage to the Eurozone economy with slumping global demand for products and services, staff shortages and supply line problems together with Southern Europe starting to take a massive hit to its tourism sector. The US had over 20 million new jobless claims in April as economic activity cratered and GDP was down 4.8% in the first quarter. Banks have essentially been forced to pass equity dividends, which effectively upgrades the debt instruments issued by them, and Property companies, which have been hit hard by markets, will partially recover when true asset values and income streams can be evaluated. There were of course sectors which have benefitted from the lockdown: Food retailers saw massive panic buying in the early stages and may well slowly be re-rated downwards as the new normal is reached. The share price of your Company bounced back strongly in April; rising by 15% and returning to trading at a premium.
In the UK, the rapid downturn in the private sector continued in May, albeit at a marginally slower rate than April. However, the fall in business activity was almost exclusively due to business shutdowns, cancellation of customer orders, and the overall slump in demand due to the COVID-19 pandemic. In Europe, the downturn started to show signs of easing as restrictions were lifted although worries remain that the demand side of the economy will remain weak for some time to come. For the US, the unemployment rate hit 14.7% in April up from 4.4% in March.
Sentiment in the real economy improved in June as lockdowns started to be loosened. In the UK, the private sector showed a rebound in confidence and hopes of a recovery over the next 12 months. Some of the sectors in the economy brought back some of their furloughed staff, the strongest of which was manufacturing which tipped into growth ending a 3-month period of decline. Despite this positivity, not all areas of manufacturing showed strength: aerospace and automotive sectors remained particularly weak. Despite all the efforts being made by the government and Bank of England to support the economy, many jobs are going to be lost and may not come back in areas that lose them for some time. Providing large infrastructure projects may not give opportunities for jobs lost in the arts, hotels and travel industries. On top of all of this, we still have to negotiate trade deals for all areas of the economy post Brexit, with governments keen to look after their own post the COVID-19 pandemic. In Europe, the Mediterranean states that rely to a great extent on tourism for revenue are now opening hotels, restaurants and bars to try to save the summer high season whilst their governments negotiate as to who can and who can't travel to their country. The US economy added 4.8 million jobs as a partial resumption to the economy got under way. This is still some 14.7 million, or 9.6%, below the February number; this shows some good news, but there is a long way to go.
All that the vast amounts of funds being injected by the seemingly unlimited amounts of QE are doing is to move the level of markets away from the real economy, trying to keep companies and markets afloat until the economy can recover. This is a high risk strategy but definitely in line with the 'whatever it takes' world of Central Banks.
Portfolio Review
We have continued to maintain a diversified portfolio across a range of sectors and have a good proportion of the portfolio in non-sterling currencies. Turnover within the portfolio has remained low and we have seen a number of investments redeem their bonds either at their scheduled repayment date or earlier if the opportunity arose. Examples are the Aldermore 11 7/8% bond which repaid £4 million at the end of April and the Balfour Beatty Convertible Preference Shares which repaid £4.12 million on 1 July. We have used this liquidity to selectively invest in interesting companies. New holdings in the top ten over the year are Just Group 8.125% 2029; a UK financial services group focussing on the retirement market, Ardonagh Midco Three 8.375% 2023; an insurance brokerage and Co-Operative Finance FRN; a UK financial services group.
Our diverse portfolio has provided some protection from the economic effects of COVID-19 but we have suffered in a few portfolio constituents. The most notable to date has been Matalan Finance where we hold the 9.5% 2024 bond. The company has been badly affected by the lockdown and its bond price fell from 87 in January to below 25 during March/April but has subsequently recovered to 41. Matalan, with the agreement of bondholders, has converted the second lien bond to PIK (payment in kind). Along with money from the government scheme and £50 million in fresh financing this allows the company to continue trading. The Company's net asset value reached a low of 43.3p on 1 April 2020 but has recovered gradually since then to reach 47.5p on 30 June 2020. The share price closed the year at 47.4p. We are monitoring closely how companies recover as we come out of COVID-19 restrictions and, as we did in the global financial crisis, look for any opportunities as they arise.
The revenue account has held up well during the year and the earnings of 4.59p per share are ahead of the 2019 earnings of 4.49p per share. In my regular discussions with shareholders the revenue and dividends are topics of crucial importance and the ability of any portfolio company to pay its coupon or expected dividend is one of the major indicators we follow.
With the inclusion of dividends paid the total net asset return for the year to 30 June 2020 was a decline of 6.22%.
Outlook
We do not expect the economic recovery to follow a classic V shape, there will be industries which will be changed forever, such as Airlines and Travel. There will be other sectors which have been hit hard in the lockdown, such as Pubs and Restaurants, which may take some time to adapt and recover, even with help from the government, and Retail, where the business model will be forced to evolve quickly to survive.
The initial months of the new financial year are usually a quieter and lower volume period; maybe not this year, with the ongoing pandemic and the US Presidential election coming in November and the ongoing trade wars between the USA and China.
I will be working as usual over the forthcoming months to carefully monitor your portfolio and ensure that it is in the best possible position to stand against whatever lies ahead.
Ian "Franco" Francis
New City Investment Managers
17 September 2020
Classification of Investment Portfolio
As at 30 June
|
By Currency |
2020 Total |
2019 Total |
|
Sterling |
73 |
73 |
|
US dollar |
19 |
19 |
|
Euro |
7 |
7 |
|
Norwegian krone |
1 |
1 |
|
Total investments |
100 |
100 |
|
|
|
|
|
By Asset Class |
2020 Total |
2019 Total |
|
Bonds |
82 |
82 |
|
Equity shares |
13 |
13 |
|
Convertible Bonds |
5 |
5 |
|
Total investments |
100 |
100 |
|
|
|
|
|
By Quotation |
2020 Total |
2019 Total |
|
Listed/Quoted on a recognised investment exchange |
96.2 |
95.9 |
|
Quoted via direct broker quotes |
3.8 |
4.1 |
|
Total investments |
100 |
100 |
Classification of Investment Portfolio by Sector
|
|
2020 Total |
2019 Total |
|
Financials |
48.6 |
47.4 |
|
Energy |
14.6 |
11.5 |
|
Industrials |
9.4 |
12.9 |
|
Consumer Discretionary |
7.5 |
11.5 |
|
Consumer Staples |
7.1 |
4.5 |
|
Real Estate |
6.2 |
3.2 |
|
Materials |
4.4 |
3.4 |
|
Information Technology |
2.2 |
5.6 |
|
Total Investments |
100 |
100 |
Investment Portfolio
As at 30 June 2020
|
Company |
Sector |
Valuation |
Total |
|
Galaxy Finco Ltd 9.25% 31/07/2027 |
Financials |
10,916 |
4.7 |
|
Punch Taverns 7.75% 30/12/2025 |
Consumer Discretionary |
10,427 |
4.5 |
|
Virgin Money 8% PERP |
Financials |
9,945 |
4.3 |
|
Shawbrook Group FRN PERP |
Financials |
7,556 |
3.3 |
|
Aggregated Micro 8% 17/10/2036 |
Energy |
7,081 |
3.1 |
|
Co-Operative Finance 25/04/2029 FRN |
Financials |
6,686 |
2.9 |
|
Just Group Plc 8.125% 26/10/2029 |
Financials |
6,597 |
2.9 |
|
Euronav Luxembourg SA 7.5% 31/05/2022 |
Energy |
6,247 |
2.7 |
|
Rea Finance 8.75% 31/08/2020 |
Consumer Staples |
6,214 |
2.7 |
|
Ardonagh Midco Three Plc 8.375% 15/07/2023 |
Financials |
6,112 |
2.6 |
|
Top ten investments |
|
77,781 |
33.7 |
|
American Tan 7.75% 02/07/2025 |
Industrials |
6,033 |
2.6 |
|
Iceland Bondco 6.75% 15/07/2024 |
Consumer Staples |
5,683 |
2.5 |
|
Garfunkelux Holdings 11% 01/11/2023 |
Financials |
5,673 |
2.5 |
|
Just Group Plc FRN PERP |
Financials |
5,480 |
2.4 |
|
OneSavings Bank FRN PERP |
Financials |
5,359 |
2.3 |
|
Raven Russia 12% PREF |
Real Estate |
4,513 |
2.0 |
|
Bracken Midco 8.875% 15/10/2023 |
Financials |
4,465 |
1.9 |
|
Virgin Money 8.75% PERP |
Financials |
4,203 |
1.8 |
|
Welltec A/S 9.5% 01/12/2022 |
Energy |
4,098 |
1.8 |
|
BICC Plc 9.675% 01/07/2020 CV PREF |
Industrials |
4,038 |
1.7 |
|
Top twenty investments |
|
127,326 |
55.2 |
|
Gran Colombia 8.25% 30/04/2024 |
Materials |
3,699 |
1.6 |
|
Barclays Plc FRN PERP |
Financials |
3,507 |
1.5 |
|
Euronav NV |
Energy |
3,371 |
1.5 |
|
Tizir Ltd 9.5% 19/07/2022 |
Materials |
3,370 |
1.5 |
|
Deutsche Bank AG FRN PERP |
Financials |
3,313 |
1.4 |
|
VPC Specialty Lending Investments Plc |
Financials |
3,300 |
1.4 |
|
Permanent TSB FRN PERP |
Financials |
3,169 |
1.4 |
|
Lloyds Banking FRN PERP |
Financials |
3,071 |
1.3 |
|
Unique Pub Finance 7.395% 28/03/2024 |
Financials |
2,942 |
1.3 |
|
Channel Islands Property Fund |
Financials |
2,788 |
1.2 |
|
Top thirty investments |
|
159,856 |
69.3 |
|
Diversified Gas & Oil Plc |
Energy |
2,782 |
1.2 |
|
Stobart Finance 2.75% 08/05/2024 CV |
Industrials |
2,760 |
1.2 |
|
Matalan Finance 31/01/2024 |
Consumer Discretionary |
2,742 |
1.2 |
|
Shamaran 12% 05/07/2023 |
Energy |
2,690 |
1.2 |
|
SB Holdco Plc FRN 13/07/2022 |
Consumer Discretionary |
2,636 |
1.1 |
|
Bombardier Inc 7.5% 15/03/2025 |
Industrials |
2,599 |
1.1 |
|
First Quantum 7.5% 01/04/2025 |
Materials |
2,598 |
1.1 |
|
SQN Secured Income Fund Plc |
Financials |
2,422 |
1.1 |
|
Yew Grove REIT Plc |
Real Estate |
2,371 |
1.0 |
|
Rea Holdings Plc PREF |
Consumer Staples |
2,359 |
1.0 |
|
Top forty investments |
|
185,815 |
80.5 |
|
Raven Russia 6.5% 07/07/2026 CV PREF |
Real Estate |
2,214 |
1.0 |
|
HDL Debenture 10.375% 31/07/2023 |
Financials |
2,140 |
0.9 |
|
Premier Oil Plc 5% 31/05/2021 |
Energy |
2,118 |
0.9 |
|
Lloyds Banking FRN PERP |
Financials |
1,996 |
0.9 |
|
Garfunkelux Holdco 8.5% 01/11/2022 |
Financials |
1,968 |
0.9 |
|
Borealis Finance 7.5% 16/11/2022 |
Industrials |
1,890 |
0.8 |
|
RM Secured Direct Lending Plc |
Financials |
1,875 |
0.8 |
|
OakNorth Bank 01/06/2028 FRN |
Financials |
1,800 |
0.8 |
|
Azerion Hldgs 17/03/2023 FRN |
Information Technology |
1,798 |
0.8 |
|
Doric Nimrod Air Three Ltd |
Industrials |
1,671 |
0.7 |
|
Top fifty investments |
|
205,285 |
89.0 |
|
Hurricane Energy 7.5% 24/07/2022 CV |
Energy |
1,471 |
0.6 |
|
Independent Oil 20/09/2024 FRN |
Energy |
1,415 |
0.6 |
|
Bluewater Hold 10% 28/11/2023 |
Industrials |
1,409 |
0.6 |
|
New Look Secured 12% 03/05/2024 |
Consumer Discretionary |
1,342 |
0.6 |
|
Otiga Group FRN 08/07/2022 |
Consumer Staples |
1,341 |
0.6 |
|
Veritas US/BM 7.5% 01/02/2023 |
Information Technology |
1,317 |
0.6 |
|
Altice Financing 7.5% 15/05/2026 |
Information Technology |
1,282 |
0.6 |
|
NT Rig Holdco 7.5% 19-20/12/2021 |
Financials |
1,176 |
0.5 |
|
Newriver REIT Plc |
Real Estate |
1,168 |
0.5 |
|
Aew UK REIT Plc |
Real Estate |
1,122 |
0.4 |
|
Top sixty investments |
|
218,328 |
94.6 |
|
Regional REIT Ltd |
Real Estate |
1,054 |
0.5 |
|
Urban Logistics REIT Plc |
Real Estate |
982 |
0.4 |
|
Tufton Oceanic Assets Ltd |
Financials |
974 |
0.4 |
|
Navigator Holdings 7.75% 10/02/2021 |
Energy |
948 |
0.4 |
|
Palace Capital Plc |
Real Estate |
799 |
0.3 |
|
JPI Media Group Senior Notes (Facility B) |
Industrials |
709 |
0.3 |
|
NT Rig Holdco 12% 20/12/2021 |
Financials |
694 |
0.3 |
|
Rea Holdings Plc 7.5% 30/06/2022 |
Consumer Staples |
693 |
0.3 |
|
Pension Ins 8% 23/11/2026 |
Financials |
636 |
0.3 |
|
Croma Security Solutions Group |
Information Technology |
625 |
0.3 |
|
Top seventy investments |
|
226,442 |
98.1 |
|
Other investments (21) |
|
4,299 |
1.9 |
|
Total investments |
|
230,741 |
100.0 |
|
Notes: |
|
|
CV - Convertible Bond |
PREF - Preference Shares |
|
FRN - Floating Rate Note |
REIT - Real Estate Investment Trust |
|
PERP - Perpetual |
|
Top Ten Largest Holdings
|
|
Valuation |
Purchases |
Sales |
(Depreciation)/ |
Valuation
2020 |
|
Galaxy Finco Ltd 9.25% 31/07/2027 A specialist provider of warranties for consumer electric products. |
- |
11,031 |
- |
(115) |
10,916 |
|
|
|
|
|
|
|
|
Punch Taverns 7.75% 30/12/2025 A public house operator in the United Kingdom. |
10,424 |
139 |
- |
(136) |
10,427 |
|
|
|
|
|
|
|
|
Virgin Money FRN PERP A British banking company concentrating on UK Retail and SME regional banking services. |
8,709 |
1,942 |
- |
(706) |
9,945 |
|
|
|
|
|
|
|
|
Shawbrook Group 7.875% FRN PERP A British multinational banking and financial services company. |
8,365 |
2,243 |
- |
(3,052) |
7,556 |
|
|
|
|
|
|
|
|
Aggregated Micro 8% 17/10/2036 A British company using small scale, established technologies to convert wood and waste into energy in the form of heat and electricity. |
5,267 |
2,000 |
- |
(186) |
7,081 |
|
|
|
|
|
|
|
|
Co-Operative Finance 25/04/2029 FRN A retail and commercial bank in the United Kingdom. |
- |
6,980 |
- |
(294) |
6,686 |
|
|
|
|
|
|
|
|
Just Group plc 8.125% 26/10/2029 A British company specialising in retirement products and services. |
- |
6,500 |
- |
97 |
6,597 |
|
|
|
|
|
|
|
|
Euronav Luxembourg SA 7.5% 31/05/2022 An international shipping enterprise focussing on crude oil transport. |
6,031 |
- |
- |
216 |
6,247 |
|
|
|
|
|
|
|
|
Rea Finance 8.75% 31/08/2020 Cultivator of oil palms and production of crude palm oil and palm products. |
6,275 |
- |
- |
(61) |
6,214 |
|
|
|
|
|
|
|
|
Ardonagh Midco Three Plc 8.375% 15/07/2023 An insurance brokerage services company from the United Kingdom. |
4,477 |
957 |
- |
678 |
6,112 |
|
|
|
|
|
|
|
|
|
49,548 |
31,792 |
- |
(3,559) |
77,781 |
Strategic Review
Introduction
This review is part of a Strategic Report being presented by the Company and is designed to provide information primarily about the Company's business and results for the year ended 30 June 2020. It should be read in conjunction with the Statement from the Chair and the Investment Manager's Review, which give a detailed review of the investment activities for the year and look to the future.
Principal Activity and Status
The Company is a closed-ended investment company and was incorporated with limited liability in Jersey under the Companies (Jersey) Law 1991 on 17 January 2007, with registered number 95691. In addition, the Company constitutes and is regulated as a collective investment fund under the Collective Investment Funds (Jersey) Law 1988 ("the Law").
The Company's ordinary shares are listed on the Official List of the UK Listing Authority and admitted to trading on the Main Market of the London Stock Exchange.
Purpose and Strategy
The Company's purpose is stated on the inside front cover of this report.
Investment Policy
The Company invests predominantly in fixed income securities, including, but not limited to, preference shares, loan stocks, corporate bonds (convertible and/or redeemable) and government stocks. The Company also invests in equities and other income yielding securities.
Exposure to higher yielding securities may also be obtained by investing in other closed-ended investment companies and open ended collective investment schemes.
There are no defined limits on securities and accordingly the Company may invest up to 100% of total assets in any particular type of security.
There are no defined limits on countries, size or sectors, therefore the Company may invest in companies regardless of country, size or sector and, accordingly, the Company's portfolio is constructed without reference to the composition of any stock market index or benchmark.
The Company may, but is not obliged to, invest in derivatives, financial instruments, money market instruments and currencies for the purpose of efficient portfolio management. The Company may acquire securities that are unlisted or unquoted at the time of investment but which are about to be convertible, at the option of the Company, into securities which are listed or traded on a stock exchange. The Company may continue to hold securities that cease to be listed or traded if the Investment Manager considers this appropriate. The Board has established a maximum investment limit in this regard of 10% (calculated at the time of any relevant investment) of the Company's total assets. In addition, the Company may invest up to 10% (calculated at the time of any relevant investment) of its total assets in other securities that are neither listed nor traded at the time of investment.
The Company will not invest more than 10% (calculated at the time of any relevant investment) of its total assets in other collective investment undertakings (open-ended or closed-ended).
The Board had previously established a maximum limit whereby, at the time of investment, the Company may not invest more than 5% of its total investments in the same investee company.
On 30 April 2020, the Company announced that it had amended the maximum investment limit whereby, at the time of investment, the Company may not invest more than 7.5% of its total investments in the same investee company and that this be limited to no more than 3 investee companies with a maximum investment limit of 5% thereafter. In addition, there is a maximum investment limit whereby, at the time of investment, the Company may not invest more than 5% of its total investments in any one security.
The Company uses gearing and the Board has set a current limit that gearing will not exceed 25% of shareholders' funds at the time of borrowing. This limit is reviewed from time to time by the Board.
The Investment Manager expects that the Company's assets will normally be fully invested. However, during periods in which changes in economic circumstances, market conditions or other factors so warrant, the Company may reduce its exposure to securities and increase its positions in cash, money market instruments and derivative instruments in order to seek protection from stock market falls or volatility.
Investment Approach
Investments are typically made in securities which the Investment Manager has identified as undervalued by the market and which it believes will generate above average income returns relative to their risk, thereby also generating the scope for capital appreciation. In particular, the Investment Manager seeks to generate capital growth by exploiting the opportunities presented by the fluctuating yield base of the market and from redemptions, conversions, reconstructions and take-overs.
Performance Measurement and Key Performance Indicators (KPIs)
The Board uses a number of performance measures to monitor and assess the Company's success in meeting its objectives and to measure its progress and performance. The key performance indicators are as follows:
· Dividend Yield and Dividend Cover
It is intended that the Company will pay four quarterly dividends each year and accordingly the Board reviews the Company's dividend yield and dividend cover on a quarterly basis. For the year ended 30 June 2020, the Company's dividend yield was 9.41% (30 June 2019: 7.44%) based upon a share price of 47.40 pence (bid price) as at 30 June 2020 (30 June 2019: 59.80 pence) and its dividend cover was 1.03x (30 June 2019: 1.01x).
· Revenue Earnings and Dividends per share
The Company has opted to follow the AIC's Statement of Recommended Practice: Financial Statements of Investment Trusts and Venture Capital Trusts (the "AIC SORP") and, in accordance with the provisions of the AIC SORP, distinguishes its profits derived from revenue and capital items. The Company declares and pays its dividend out of only the revenue profits of the Company. The revenue earnings represents the total available funds that the Directors are able to make a dividend payment from. The Board reviews revenue forecasts on a quarterly basis in order to determine the quarterly dividend. In respect of the current financial year, the Company declared dividends of 4.46 pence per ordinary share out of revenue earnings per share of 4.59 pence per share.
· Ongoing Charges
The ongoing charges ratio represents the Company's management fee and all other operating expenses incurred by the Company expressed as a percentage of the average shareholders' funds over the year. The Board regularly reviews the ongoing charges and monitors all Company expenses. The ongoing charges ratio for the year ended 30 June 2020 was 1.19% (2019: 1.20%).
The Board measures the Company's performance by reviewing the KPIs against their expectations of performance from their knowledge of the industry sector.
These KPIs fall within the definition of 'Alternative Performance Measures' (APMs) under guidance issued by the European Securities and Markets Authority. Additional information explaining how these are calculated is set out in the Glossary.
Going Concern
The Company does not have a fixed winding-up date and, therefore, unless shareholders vote to wind-up the Company, shareholders will only be able to realise their investment through the secondary market.
At each Annual General Meeting of the Company, shareholders are given the opportunity to vote on an ordinary resolution to continue the Company as an investment company. If any such resolution is not passed, the Board will put forward proposals at an extraordinary general meeting to liquidate or otherwise reconstruct or reorganise the Company. Given the performance of the Company, input from the Company's major shareholders and its broker, the Board considers it likely that shareholders will vote in favour of continuation at the forthcoming Annual General Meeting.
The Company's existing loan facility as detailed below is due to expire on 18 December 2020 after which it is anticipated the Company will take out a new facility on comparable terms. After making enquiries of the Investment Manager, and having considered the Company's investment objective, nature of the investment portfolio, loan facility, expenditure projections and impact of COVID-19 on the Company, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. For this reason the Directors continue to adopt the going concern basis in preparing the financial statements, notwithstanding that the Company is subject to an annual continuation vote as described above.
Viability Statement
In accordance with the provisions of the AIC Code, the Directors have assessed the viability of the Company over a period longer than the 12 months required by the 'Going Concern' provision. The Board conducted this viability review for a period of three years. The Board continues to consider that this period reflects the long term objectives of the Company, being a Company with no fixed life, whilst taking into account the impact of uncertainties in the markets.
Whilst the Directors do not expect there to be any significant changes to the current principal and emerging risks facing the Company, certain risks have increased as a result of COVID-19. Despite these increased risks, the Directors believe that the Company has sufficient controls in place to mitigate those risks. Furthermore, the Directors do not envisage any change in strategy which would prevent the Company from operating over the three year period. This is based on the assumption that there are no significant changes in market conditions or the tax and regulatory environment that could not reasonably have been foreseen. The Board also considers the annual continuation vote should not be a factor to affect the three year period given the strong demand seen for the Company's shares.
In making this statement the Board: (i) considered the continuation vote to be proposed at the Annual General Meeting which the Board considers will be voted in favour of by shareholders; and (ii) carried out a robust assessment of the principal and emerging risks facing the Company. These risks and their mitigations are set out under Principal Risks and Uncertainties and Risk Mitigation section of the Company's Annual Financial Report and Financial Statements.
The principal risks identified as most relevant to the assessment of the viability of the Company were those relating to potential under-performance of the portfolio and its effect on the ability to pay dividends. When assessing these risks the Directors have considered the risks and uncertainties facing the Company in severe but reasonable scenarios, taking into account the controls in place and mitigating actions that could be taken.
When considering the risk of under-performance, a series of stress tests was carried out including in particular the effects of any substantial future falls in investment value on the ability to re-pay and re-negotiate borrowings, potential breaches of loan covenants and the maintenance of dividend payments.
The Board considered the Company's portfolio and concluded that the diverse nature of investments held contributes to the stability and liquidity along with flexibility to be able to react positively to market and political forces beyond the Board's control.
The Board also considered the impact of potential regulatory changes and the control environment of significant third party providers, including the Investment Manager.
The Scotiabank loan facility is due to expire on 18 December 2020. It is anticipated a new facility on comparable terms will be negotiated prior to this date.
Based on the Company's processes for monitoring revenue and costs, with the use of frequent revenue forecasts, and the Investment Manager's compliance with the investment objective and policies, the Directors have concluded that there is a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of three years from the date of approval of this Report.
Social, Community, Human Rights, Employee Responsibilities and Environmental Policy
The Directors recognise that their first duty is to act in the best financial interests of the Company's shareholders and to achieve good financial returns against acceptable levels of risk, in accordance with the objectives of the Company.
In asking the Company's Investment Manager to deliver against these objectives, they have also requested that the Investment Manager take into account the broader social, ethical and environmental issues of companies within the Company's portfolio, acknowledging that companies failing to manage these issues adequately run a long term risk to the sustainability of their businesses.
Greenhouse Gas Emissions
As the Company is a closed-ended investment company, which has no employees, its own impact of the environment is minimal and therefore the Company has no Greenhouse Gas Emissions to report from its operations for the year ended 30 June 2020 and prior year, nor does it have responsibility for any other emissions producing sources (including those within the underlying investment portfolio).
However, the Board recognises its impact on the environment, including greenhouse gas emissions, through the underlying portfolio companies which it invests in. The Board has requested that ESG factors are incorporated into the Company's investment strategy as detailed on page 15 of the Company's Annual Financial Report and Financial Statements.
Modern slavery
The Company would not fall into the scope of the UK Modern Slavery Act 2015 (as the Company does not have any turnover derived from goods and services) if it was incorporated in the UK. Furthermore, as a closed-ended investment company, the Company has a non-complex structure, no employees and its supply chain is considered to be low risk given that suppliers are typically professional advisers based in either the Channel Islands or the UK. Based on these factors, the Board have considered that it is not necessary for the Company to make a slavery and human trafficking statement.
By Order of the Board
Caroline Hitch
Chair
17 September 2020
Statement of Directors' Responsibilities in respect of the Annual Report and Financial Statements
The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the EU and applicable law.
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period. In preparing these financial statements, the Directors are required to:
· select suitable accounting policies and then apply them consistently;
· make judgements and estimates that are reasonable, relevant and reliable;
· state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
· assess the Company's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern; and
· use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with Companies (Jersey) Law, 1991. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. The financial statements are published on the www.ncim.co.uk website, which is a website maintained by the Company's Investment Manager. Legislation in Jersey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in respect of the annual financial report.
We confirm that to the best of our knowledge:
· the financial statements, prepared in accordance with IFRS as adopted by the EU, give a true and fair and balanced view of the assets, liabilities, financial position and profit or loss of the Company; and
· the Strategic Report and Directors' Report of the Company's Annual Financial Report and Financial Statements include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.
We consider the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
On behalf of the Board
Caroline Hitch
Chair
17 September 2020
Statement of Comprehensive Income
For the year ended 30 June 2020
|
|
|
Year ended 30 June 2020 |
Year ended 30 June 2019 |
||||
|
|
Notes |
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
Net capital gains/(losses) |
|
|
|
|
|
|
|
|
Losses on financial assets designated at fair value |
9 |
|
(33,398) |
(33,398) |
- |
(10,195) |
(10,195) |
|
Foreign exchange (loss)/gain |
|
|
(97) |
(97) |
- |
127 |
127 |
|
Revenue |
|
|
|
|
|
|
|
|
Income |
2 |
22,625 |
- |
22,625 |
21,024 |
- |
21,024 |
|
Total Income |
|
22,625 |
(33,495) |
(10,870) |
21,024 |
(10,068) |
10,956 |
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
Investment management fee |
3 |
(1,477) |
(492) |
(1,969) |
(1,490) |
(496) |
(1,986) |
|
Other expenses |
4 |
(745) |
(40) |
(785) |
(716) |
(99) |
(815) |
|
Total expenses |
|
(2,222) |
(532) |
(2,754) |
(2,206) |
(595) |
(2,801) |
|
Profit/(loss) before finance costs and taxation |
|
20,403 |
(34,027) |
(13,624) |
18,818 |
(10,663) |
8,155 |
|
Finance costs |
|
|
|
|
|
|
|
|
Interest income |
|
12 |
- |
12 |
11 |
- |
11 |
|
Interest expense |
5 |
(418) |
(139) |
(557) |
(390) |
(131) |
(521) |
|
Profit/(loss) before taxation |
|
19,997 |
(34,166) |
(14,169) |
18,439 |
(10,794) |
7,645 |
|
Irrecoverable withholding tax |
6 |
(331) |
- |
(331) |
(76) |
- |
(76) |
|
Profit/(loss) after taxation and total comprehensive income/(loss) |
|
19,666 |
(34,166) |
(14,500) |
18,363 |
(10,794) |
7,569 |
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per ordinary share (pence) |
8 |
4.59 |
(7.98) |
(3.39) |
4.49 |
(2.64) |
1.85 |
The total column of this statement represents the Company's Statement of Comprehensive Income, prepared in accordance with IFRS as adopted by the EU (refer to note 1). The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies.
There is no other comprehensive income as all income is recorded in the Statement of Comprehensive Income above.
All revenue and capital items in the above statement are derived from continuing operations.
No operations were acquired or discontinued in the year.
The accompanying notes below are an integral part of these financial statements.
Statement of Financial Position
As at 30 June 2020
|
|
Notes |
As at 30 June 2020 £'000 |
As at 30 June 2019 £'000 |
|
Non-current assets |
|
|
|
|
Financial assets |
9 |
230,741 |
253,034 |
|
Current assets |
|
|
|
|
Debtors and other receivables |
10 |
9,882 |
6,150 |
|
Cash and cash equivalents |
|
2,853 |
5,837 |
|
|
|
12,735 |
11,987 |
|
Total assets |
|
243,476 |
265,021 |
|
Current liabilities |
|
|
|
|
Bank loan |
11 |
(31,000) |
(28,000) |
|
Creditors and other payables |
12 |
(6,797) |
(3,894) |
|
Total liabilities |
|
(37,797) |
(31,894) |
|
Net asset value |
|
205,679 |
233,127 |
|
Stated capital and reserves |
|
|
|
|
Stated capital account |
13 |
197,037 |
191,007 |
|
Special distributable reserve |
|
50,385 |
50,385 |
|
Capital reserve |
|
(59,725) |
(25,559) |
|
Revenue reserve |
|
17,982 |
17,294 |
|
Equity shareholders' funds |
|
205,679 |
233,127 |
|
Net asset value per ordinary share (pence) |
15 |
47.52p |
55.19p |
The financial statements were approved by the Board of Directors and authorised for issue on 17 September 2020 and were signed on its behalf by:
Caroline Hitch
Chair
The accompanying notes below are an integral part of these financial statements.
Statement of Changes in Equity
For the year ended 30 June 2020
|
|
Notes |
Stated capital account* £'000 |
Special distributable reserve‡ |
Capital reserve* £'000 |
Revenue reserve† £'000 |
Total
£'000 |
|
At 1 July 2019 |
|
191,007 |
50,385 |
(25,559) |
17,294 |
233,127 |
|
Total comprehensive (loss)/ income for the year: |
|
|
|
|
|
|
|
(Loss)/profit for the year |
|
- |
- |
(34,166) |
19,666 |
(14,500) |
|
Transactions with owners recognised directly in equity: |
|
|
|
|
|
|
|
Dividends paid |
7 |
- |
- |
- |
(18,978) |
(18,978) |
|
Net proceeds from issue of shares |
13 |
6,030 |
- |
- |
- |
6,030 |
|
At 30 June 2020 |
|
197,037 |
50,385 |
(59,725) |
17,982 |
205,679 |
For the year ended 30 June 2019
|
|
Notes |
Stated capital account* £'000 |
Special distributable reserve‡ |
Capital reserve* £'000 |
Revenue reserve† £'000 |
Total
£'000 |
|
At 1 July 2018 |
|
178,424 |
50,385 |
(14,765) |
17,024 |
231,068 |
|
Total comprehensive (loss)/ income for the year: |
|
|
|
|
|
|
|
(Loss)/profit for the year |
|
- |
- |
(10,794) |
18,363 |
7,569 |
|
Transactions with owners recognised directly in equity: |
|
|
|
|
|
|
|
Dividends paid |
7 |
- |
- |
- |
(18,093) |
(18,093) |
|
Net proceeds from issue of shares |
13 |
12,583 |
- |
- |
- |
12,583 |
|
At 30 June 2019 |
|
191,007 |
50,385 |
(25,559) |
17,294 |
233,127 |
The accompanying notes below are an integral part of these financial statements.
* Following a change in Jersey Company Law effective 27 June 2008, dividends can be paid out of any capital account of the Company subject to certain solvency restrictions. However, it is the Company's policy to account for revenue items and pay dividends, drawing where necessary from a separate revenue reserve.
‡ The balance on the special distributable reserve of £50,385,000 (2019: £50,385,000) is treated as distributable profits available to be used for all purposes permitted by Jersey Company Law including the buying back of ordinary shares, the payment of dividends and the payment of preliminary expenses.
† The balance on the revenue reserve of £17,982,000 (2019: £17,294,000) is available for paying dividends.
Cash Flow Statement
For the year ended 30 June 2020
|
|
Notes |
Year ended |
Year ended |
|
Operating activities |
|
|
|
|
(Loss)/profit before finance cost and taxation |
|
(13,624) |
8,155 |
|
|
|
|
|
|
Adjustments to reconcile (loss)/profit before tax to net cash flows: |
|
|
|
|
Realised loss on financial assets designated at fair value through profit or loss. |
9 |
2,766 |
7,001 |
|
Unrealised loss on financial assets designated at fair value through profit or loss |
9 |
30,632 |
3,194 |
|
Effective interest adjustment |
9 |
(162) |
(464) |
|
Foreign exchange loss/(gain) |
|
97 |
(127) |
|
|
|
|
|
|
Purchase of financial assets designated at fair value through profit or loss1 |
|
(86,268) |
(49,071) |
|
Proceeds from sale of financial assets designated at fair value through profit or loss2 |
|
73,197 |
39,151 |
|
|
|
|
|
|
Changes in working capital |
|
|
|
|
Decrease in other receivables |
|
824 |
112 |
|
Increase in other payables |
|
478 |
5 |
|
Irrecoverable withholding tax paid |
|
(331) |
(76) |
|
Net cash inflow from operating activities |
|
7,609 |
7,880 |
|
|
|
|
|
|
Financing activities |
|
|
|
|
Dividends paid |
7 |
(18,978) |
(18,093) |
|
Drawdown of bank loan |
11 |
3,000 |
- |
|
Finance costs |
|
(548) |
(510) |
|
Net proceeds from issuance of ordinary shares |
13 |
6,030 |
12,583 |
|
Net cash outflow from financing |
|
(10,496) |
(6,020) |
|
|
|
|
|
|
(Decrease)/increase in cash and cash equivalents |
|
(2,887) |
1,860 |
|
Cash and cash equivalents at the start of the year |
|
5,837 |
3,850 |
|
Exchange gains |
|
(97) |
127 |
|
Cash and cash equivalents at the end of the year |
|
2,853 |
5,837 |
1 - Amounts due to brokers as at 30 June 2020 relating to purchases of financial assets designated at fair value through profit amounted to £6,059,000 (30 June 2019: £3,631,000).
2 - Amounts due from brokers as at 30 June 2020 relating to sales of financial assets designated at fair value through profit amounted to £6,520,000 (30 June 2019: £1,964,000).
The accompanying notes below are an integral part of these financial statements.
Notes to the Financial Statements
1 Accounting Policies
(a) Basis of accounting
These financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and in accordance with the guidance set out in the Statement of Recommended Practice ("SORP"): Financial Statements of Investment Trust Companies and Venture Capital Trusts issued by the AIC in November 2014 and updated most recently in October 2019 with consequential amendments. Notwithstanding that CQS New City High Yield Fund Limited (the "Company") is not an investment trust company, given the purpose of the Company and certain similar characteristics, the Company has chosen to follow the guidance set out in the SORP where it is consistent with the requirements of IFRS.
The functional and reporting currency of the Company is pounds sterling because that is the primary economic environment in which the Company operates. The notes and financial statements are presented in pounds sterling and are rounded to the nearest thousand except where otherwise indicated.
The financial statements of the Company have been prepared on a going concern basis, on the assumption the continuation vote is passed by Shareholders at the forthcoming Annual General Meeting. Given the performance of the Company, input from the Company's major shareholders and its broker, the Board considers it likely that shareholders will vote in favour of continuation at the forthcoming Annual General Meeting.
The financial statements have been prepared on the historical cost basis, except that investments are stated at fair value and categorised as financial assets at fair value through profit or loss.
Accounting Developments
The following IFRS were adopted during the financial year:
The Company applies for the first time IFRS 16 - Leases and IFRIC 23 - Uncertainty over Income Tax Treatments, which became effective on 1 January 2019. The Company does not participate in leasing arrangements and the Directors have determined that, as at 30 June 2020, the Company has no uncertain tax positions that would be disclosed under IFRIC 23 - Uncertainty over Income Tax Treatments. Accordingly, the application of IFRS 16 - Leases and IFRIC 23 - Uncertainty over Income Tax Treatments, respectively, do not have an impact on the Company's financial statements.
The following accounting standards and their amendments were in issue at the year end but will not be in effect until after this financial year
|
International Financial Reporting Standards |
Effective date* |
|
IFRS 3 Business Combinations (amendment) |
1 January 2020** |
|
Definition of Material (Amendments to IAS 1 and IAS 8) |
1 January 2020 |
|
Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7) |
1 January 2020 |
*Years beginning on or after
**Not yet endorsed for use in the EU
The Directors do not expect that the adoption of other standards listed above will have a material impact on the financial statements of the Company in future periods.
Critical accounting estimates and judgements
The preparation of the financial statements necessarily requires the exercise of judgement both in application of accounting policies which are set out below and in the selection of assumptions used in the calculation of estimates. These estimates and judgements are reviewed on an ongoing basis and are continually evaluated based on historical experience and other factors. However, actual results may differ from these estimates.
The valuation of financial assets involves estimation and judgements. The major part of the Company's financial assets is its financial assets held at fair value through profit or loss which is valued by reference to listed and quoted bid prices, however some of these financial assets are thinly traded. Such financial assets are best valued by reference to current market price quotes provided by independent brokers. The Directors may overlay such prices with situation specific adjustments including (a) taking a second independent opinion on a specific investment, or (ii) reducing the value to a net present value, to reflect the likely time to be taken to realise a stock which the Company is actively looking to sell. The outturn is reflected in the valuations of investments as set out in note 22 to the financial statements.
Financial assets which are not listed or where trading in the securities of an investee company is suspended are valued at the Board's estimate of fair value in accordance with International Private Equity and Venture Capital (IPEV) valuation guidance. Unquoted financial assets are valued by the Directors on the basis of all the information available to them at the time of valuation. This includes a review of the financial and trading information of the investee company, covenant compliance, ability to pay the interest due and cash held. For convertible bonds this also includes consideration of their discounted cash flows and underlying equity value based on information provided by the Investment Manager.
As outlined above, the Directors have applied judgement and determined that the Company's presentation and functional currency is pounds sterling.
There were no other significant accounting estimates or significant judgements in the current or previous year.
A summary of the principal accounting policies which have been applied to all periods presented in these financial statements is set out below.
(b) Financial assets
Financial assets which comprise equity shares, convertible bonds and fixed income securities, are classified as held at fair value through profit or loss as the financial assets are managed and their performance evaluated on a fair value basis in accordance with the Company's investment strategy and this is also the basis on which information about investments is provided internally to the Board.
Purchases or sales of financial assets are recognised/derecognised on the date the Company trades the investments. On initial recognition investments are measured at fair value and classified as fair value through profit or loss with any subsequent gain or loss, including any gain or loss arising from a change in exchange rates, recognised in the Statement of Comprehensive Income.
Financial assets held at fair value through profit or loss are valued in accordance with the policies described in the critical accounting estimates and judgements section above .
Financial assets also include the Company's cash and cash equivalents (comprising of cash held in current accounts and overdraft balances) and debtors and other receivables which are held at amortised cost.
(c) Income
Dividends receivable on equity shares (including preference shares) are recognised as income on the date that the related investments are marked ex-dividend. Dividends receivable on equity shares where no ex-dividend date is quoted are recognised as income when the Company's right to receive payment is established.
Dividends from overseas companies are shown gross of any non-recoverable withholding taxes which are disclosed separately in the Statement of Comprehensive Income.
Fixed returns on non-equity shares and debt securities (including preference shares) are recognised on a time apportioned basis so as to reflect the effective interest rate on those instruments. Other returns on non-equity shares are recognised when the right to the return is established.
Income from deposit interest is recognised on an accruals basis.
Where the Company has elected to receive its dividends in the form of additional shares rather than cash, an amount equal to the cash dividend is recognised as income. Any excess in the value of the shares received over the amount of the cash dividend is recognised in the capital reserve.
(d) Expenses, including finance charges
All expenses are accounted for on an accruals basis. Expenses are charged through the revenue account except as follows:
- expenses which are incidental to the acquisition of an investment are charged to the capital reserve.
- expenses which are incidental to the disposal of an investment charged to the capital reserve;
- the Company charges 25% of investment management fees and interest costs to capital, in line with the Board's expected long term return in the form of capital gains and income respectively from the investment portfolio of the Company. For further details refer to notes 3 and 5; and
- expenses incurred in connection with the maintenance or enhancement of the value of the investments or for the long term benefit of the Company are charged to capital.
(e) Foreign currencies
Transactions denominated in foreign currencies are recorded in the functional currency at actual exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the period end are reported in sterling at the rates of exchange prevailing at the period end. Any gain or loss arising from a change in exchange rates subsequent to the date of a transaction is included as an exchange gain or loss in the Statement of Comprehensive Income.
(f) Bank loan
Interest bearing bank loans are recorded at amortised cost.
(g) Reserves
(a) Capital reserve. Following a change in Jersey Company law effective 27 June 2008, dividends can be paid out of any capital account of the Company subject to certain solvency restrictions. It is the Company's policy however to account for revenue items and pay dividends through a separate revenue reserve. The following are accounted for in the capital reserve:
- gains and losses on the realisation of investments;
- realised and unrealised exchange differences of a capital nature;
- expenses and finance costs charged in accordance with the policies above; and
- increases and decreases in the valuation of investments held at the period end.
(b) Special distributable reserve. This reserve is treated as distributable profits available to be used for all purposes permitted by Jersey company law including the buying back of ordinary shares, the payment of dividends (see note 7) and the payment of preliminary expenses.
(c) Revenue reserve. The net profit/(loss) and total comprehensive income/(loss) arising in the revenue column of the Statement of Comprehensive Income is added to or deducted from this reserve and is available for paying dividends.
(h) Treasury shares
When the Company purchases its ordinary shares to be held in treasury, the amount of the consideration paid, which includes directly attributable costs is recognised as a deduction from the stated capital account. When these shares are sold subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to or from the stated capital account.
(i) Segmental information
No segmented reporting is provided as the Directors, as the Chief Operator Decision Maker (with advice from the Investment Manager), are of the opinion that the Company is engaged in a single segment of business of investing in debt and, to a significantly lesser extent, equity securities.
2 Income
|
|
2020 |
2019 |
|
Income from investments* |
|
|
|
Dividend income |
2,668 |
1,604 |
|
Interest on fixed interest securities† |
19,957 |
19,420 |
|
Total income |
22,625 |
21,024 |
|
Income from investments |
|
|
|
Listed/Quoted on a recognised investment exchange |
21,657 |
19,929 |
|
Quoted via direct broker quotes |
968 |
1,095 |
|
|
22,625 |
21,024 |
*All investment income arises on financial assets valued at fair value through profit or loss.
†Fixed interest securities include both fixed and floating rate securities.
3 Investment Management Fee
|
|
2020 |
2020 |
2020 |
2019 |
2019 |
2019 |
|
Investment management fee |
1,477 |
492 |
1,969 |
1,490 |
496 |
1,986 |
Previously under the terms of an investment advisory agreement dated 22 July 2014 and a novation agreement dated 1 October 2015, the Company had appointed CQS Cayman Limited Partnership as its Investment Manager and CQS Cayman Limited Partnership had, with the agreement of the Board, delegated that function to CQS (UK) LLP.
The Company has, with effect from 18 September 2019, entered into a new Investment Management Agreement to appoint CQS (UK) LLP as its Investment Manager and the previous investment advisory agreement with CQS Cayman Limited partnership has been terminated.
The management fee has previously been charged at a rate of 0.80% per annum on the Company's total assets (less current liabilities other than bank borrowings), paid monthly in arrears, up to £200 million and 0.70% per annum thereafter.
With effect from 18 September 2019, the management fee was amended to being charged at a rate of 0.80% per annum on the Company's total assets (being total assets less current liabilities (other than bank borrowings and ignoring any taxation which is or may be payable by the Company)) up to £200 million, 0.70% per annum of Assets in excess of £200 million and up to and including £300 million and 0.60% per annum thereafter. The payment of the management fee monthly in arrears remains unchanged.
The contract between the Company and CQS (UK) LLP may be terminated by either party giving not less than 12 months' notice of termination.
During the year ended 30 June 2020, investment management fees of £1,969,000 were incurred (year ended 30 June 2019: £1,986,000), of which £602,000 was payable at the period end (year ended 30 June 2019: £165,000). Investment management fees have been allocated 75% to revenue and 25% to capital.
4 Other Expenses
|
|
2020 |
2020 |
2020 |
2019 |
2019 |
2019 |
|
Secretarial and administration fees |
202 |
- |
202 |
168 |
- |
168 |
|
Directors' fees |
157 |
- |
157 |
158 |
- |
158 |
|
Auditors' remuneration for: |
|
|
|
|
|
|
|
- audit services |
45 |
- |
45 |
36 |
- |
36 |
|
Broker fees |
29 |
- |
29 |
39 |
- |
39 |
|
Printing |
10 |
- |
10 |
16 |
- |
16 |
|
Bank and custody charges |
56 |
- |
56 |
53 |
- |
53 |
|
Registrars' fees |
34 |
- |
34 |
31 |
- |
31 |
|
Depositary fees |
52 |
- |
52 |
50 |
- |
50 |
|
Legal & professional fees |
71 |
- |
71 |
62 |
- |
62 |
|
Other |
89 |
40 |
129 |
103 |
99 |
202 |
|
|
745 |
40 |
785 |
716 |
99 |
815 |
Secretarial and administration fees
Until the 27 November 2019, R&H Fund Services (Jersey) Limited provided company secretarial and administration services to the Company with certain elements of the Company's administration being delegated by R&H Fund Services (Jersey) Limited to Maitland Administration Services (Scotland) Limited.
With effect from 28 November 2019, BNP Paribas Securities Services S.C.A., Jersey Branch ("BNPP") were appointed as the Company Secretary and Administrator in place of R&H Fund Services (Jersey) Limited and Maitland Administration Services (Scotland) Limited; and appointed as the Company's custodian, bankers and depositary in place of HSBC Bank PLC.
Secretarial and administration fees were £202,000 during the year ended 30 June 2020 (year ended 30 June 2019: £168,000). During the year ended 30 June 2020, a one-off set-up fee of £20,000 was incurred for changing the administrator, company secretary and custodian.
Directors' fees
On 22 May 2019, the Board approved an increased level of remuneration for the Directors with effect from 1 July 2019 with an annual effect of £157,000 as follows:
Chair £40,000
Audit Chair £34,000
Other £27,500
Further details are provided in the Directors' Remuneration Report in the Company's Annual Report and Financial Statements.
No pension contributions were payable in respect of any of the Directors and the Company does not have any employees.
Non-audit fees paid to the auditor
There were no non-audit fees paid to the auditor during the year ended 30 June 2020 (year ended 30 June 2019: £nil).
5 Interest expense
|
|
2020 |
2020 |
2020 |
2019 |
2019 |
2019 |
|
Interest expense |
418 |
139 |
557 |
390 |
131 |
521 |
Interest expense and similar charges has been allocated 25% to capital and 75% to revenue as explained in note 1(d).
6 Taxation
The taxation charge for the year is comprised of:
|
|
2020 |
2020 |
2020 |
2019 |
2019 |
2019 |
|
Irrecoverable withholding tax suffered |
331 |
- |
331 |
76 |
- |
76 |
The taxation on profit differs from the theoretical expense that would apply on the Company's profit before taxation using the applicable tax rate in Jersey of 0% (2019: 0%) as follows:
|
|
2020 |
2019 |
|
(Loss)/profit on ordinary activities before taxation |
(14,169) |
7,645 |
|
Theoretical tax expense at 0% (2019: 0%) |
- |
- |
|
Effects of: |
|
|
|
Foreign withholding tax |
331 |
76 |
|
Current year revenue tax charge |
331 |
76 |
7 Dividends
|
|
2020 |
2019 |
|
Amounts recognised as distributions to equity holders in the year: |
|
|
|
Dividends in respect of the year ended 30 June 2019 |
|
|
|
- Fourth interim of 1.45p (2018: 1.45p) per ordinary share |
6,125 |
5,814 |
|
Dividends in respect of the year ended 30 June 2020 |
|
|
|
- First interim of 1.00p (2019: 1.00p) per ordinary share |
4,256 |
4,045 |
|
- Second interim of 1.00p (2019: 1.00p) per ordinary share |
4,276 |
4,065 |
|
- Third interim of 1.00p (2019: 1.00p) per ordinary share |
4,321 |
4,169 |
|
|
18,978 |
18,093 |
A fourth interim dividend in respect of the year ending 30 June 2020 of 1.46p per ordinary share was paid on 28 August 2020 to shareholders on the register on 24 July 2020, having an ex-dividend date of 23 July 2020.
In accordance with IFRS, dividends paid to the Company's shareholders are recognised when they become payable on the ex-dividend date, consequently the fourth interim dividend has not been included as a liability in these financial statements and will be recognised in the period in which it is paid.
8 Basic and diluted earnings per Ordinary Share
|
|
2020 |
2020 |
2020 |
2019 |
2019 |
2019 |
|
Basic and diluted earnings per ordinary share |
4.59p |
(7.98)p |
(3.39)p |
4.49p |
(2.64)p |
1.85p |
The revenue earnings per ordinary share is based on the net profit after taxation of £19,666,000 (year ended 30 June 2019: £18,363,000) and the capital return per ordinary share is based on a net capital loss of £34,166,000 (year ended 30 June 2019: a net capital loss of £10,794,000). Both the revenue and capital earnings per share is based on a weighted average of 428,002,951 (year ended 30 June 2019: 408,895,008) ordinary shares in issue throughout the year.
Total earnings per share reflects both revenue earnings and capital returns per ordinary share. The Company has not issued any instruments that could potentially dilute basic earnings per share in the future. Therefore, the Company's basic earnings per share is equivalent to its diluted earnings per share.
There have been no transactions involving the Company's ordinary shares between 30 June 2020 and 17 September 2020 other than those disclosed in note 24, which were issued at a premium to the 30 June 2020 NAV.
9 Financial assets designated at fair value through profit or loss
All financial assets are valued at fair value through profit or loss. Gains or losses arising from changes in the fair value of investments are included in the Statement of Comprehensive Income.
|
|
2020 |
2019 |
|
Listed/Quoted on a recognised investment exchange |
221,877 |
242,644 |
|
Quoted via direct broker quotes |
8,864 |
10,390 |
|
|
230,741 |
253,034 |
|
Equity shares |
31,409 |
33,725 |
|
Fixed income securities |
188,849 |
206,873 |
|
Convertible bonds |
10,483 |
12,436 |
|
|
230,741 |
253,034 |
|
|
2020 |
2019 |
|
Opening valuation |
253,034 |
253,081 |
|
Purchases at cost |
88,696 |
50,799 |
|
Sales proceeds |
(77,753) |
(41,115) |
|
Realised losses on sales |
(2,766) |
(7,001) |
|
Effective interest adjustment |
162 |
464 |
|
Unrealised losses |
(30,632) |
(3,194) |
|
Closing valuation |
230,741 |
253,034 |
|
Losses on investments |
2020 |
2019 |
|
Realised losses1 |
(2,766) |
(7,001) |
|
Unrealised losses2 |
(30,632) |
(3,194) |
|
Losses on investments |
(33,398) |
(10,195) |
1 Realised losses on financial assets designated at fair value through profit or loss is made up of gains of £3,620,000 and losses of £6,386,000.
2 Unrealised losses on financial assets designated at fair value through profit or loss is made up of gains of £9,564,000 and losses of £40,196,000.
10 Debtors and Other Receivables
|
|
2020 |
2019 |
|
Amounts due from brokers |
6,520 |
1,964 |
|
Accrued income |
3,356 |
4,182 |
|
Prepayments and other debtors |
6 |
4 |
|
|
9,882 |
6,150 |
11 Bank Loan Facility
|
|
2020 |
2019 |
|
Bank loan facility- opening balance |
28,000 |
28,000 |
|
Drawdowns |
3,000 |
0 |
|
Bank loan facility - closing balance |
31,000 |
28,000 |
The Company has a short term unsecured loan facility with Scotiabank Europe Plc ("Scotiabank"). As at the year end the unsecured loan facility had a limit of £35 million of which £31 million was drawn down at the year-end at an interest rate of 1.25838%.
The current loan facility was renewed on 18 December 2018 on the same terms as applied to the previous facility. During the year the covenants of the loan facility have been meet. The following are the covenants for the facility:
· the borrower shall not permit the adjusted asset coverage to be less than 4 to 1
· the borrower shall not permit the net asset value to be less than £95,000,000 at any time
· the borrower shall maintain an additional adjusted asset coverage of at least 1.5 to 1 at all times
· the loan facility is rolled over every three months and can be cancelled at any time
The Company's existing loan facility as detailed above is due to expire on 18 December 2020 after which it is anticipated the Company will take out a new facility on comparable terms.
The bank loan facility is a financial liability held at amortised cost.
12 Creditors and Other Payables
|
|
2020 |
2019 |
|
Amounts due to brokers |
6,059 |
3,631 |
|
Interest on bank loan facility |
13 |
16 |
|
Other creditors |
725 |
247 |
|
|
6,797 |
3,894 |
13 Stated Capital Account
Authorised
The authorised share capital of the Company is represented by an unlimited number of ordinary shares of no par value.
Allotted, called up and fully-paid
|
|
Number of |
Amount received £'000 |
Share Issue Costs £'000 |
Share capital £'000 |
|
Total as at 1 July 2019 |
422,401,858 |
|
|
191,007 |
|
1,500,000 ordinary shares of no par value allotted on 2 August 2019 at 58.40p |
1,500,000 |
876 |
7 |
869 |
|
700,000 ordinary shares of no par value allotted on 16 August 2019 at 58.40p |
700,000 |
409 |
3 |
406 |
|
1,000,000 ordinary shares of no par value allotted on 10 September 2019 at 59.0p |
1,000,000 |
590 |
4 |
586 |
|
1,000,000 ordinary shares of no par value allotted on 17 December 2019 at 59.0p |
1,000,000 |
590 |
6 |
584 |
|
1,000,000 ordinary shares of no par value allotted on 14 January 2020 at 60.0p |
1,000,000 |
600 |
5 |
595 |
|
1,000,000 ordinary shares of no par value allotted on 29 January 2020 at 59.1p |
1,000,000 |
591 |
4 |
587 |
|
1,000,000 ordinary shares of no par value allotted on 06 February 2020 at 58.7p |
1,000,000 |
587 |
4 |
583 |
|
1,500,000 ordinary shares of no par value allotted on 13 February 2020 at 59.0p |
1,500,000 |
885 |
7 |
878 |
|
1,000,000 ordinary shares of no par value allotted on 19 February 2020 at 59.3p |
1,000,000 |
593 |
4 |
589 |
|
750,000 ordinary shares of no par value allotted on 1 June 2020 at 47.5p |
750,000 |
356 |
3 |
353 |
|
Total as at 30 June 2020 |
432,851,858 |
6,077 |
47 |
197,037 |
The balance of shares left in Treasury at the year-end was nil (2019: nil shares).
On 15 May 2018, a block listing facility for 40,000,000 new shares was approved by the UK Listing Authority. This facility is used for the purposes of satisfying market demand.
Since 30 June 2020, a further 3,050,000 ordinary shares have been issued for consideration of £1.5 million.
Because the criteria in paragraphs 16c and 16d of IAS 32 Financial Instruments: Presentation have been met, the stated capital of the Company is classified as equity even though there is an annual continuation vote.
14 Reserves
The capital of the Company is managed in accordance with its investment policy, in pursuit of its investment objective.
On 24 May 2007, the Royal Court of the Island of Jersey confirmed that the amount standing to the credit of the Company's stated capital account be reduced by 75% and was used to create the special distributable reserve in the Company's accounts. This reserve is treated as distributable profits available to be used for all purposes permitted by Jersey company law including the buying back of ordinary shares, the payment of dividends and the payment of preliminary expenses.
Capital management policies and procedures
The Company's capital management objectives are:
- to ensure that the Company will be able to continue as a going concern; and
- to maximise the capital return to its equity shareholders through an appropriate balance of equity capital and debt.
The Board normally seeks to limit gearing to 25% of shareholders' funds at any given time. The Board monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes the nature and planned level of gearing, which takes account of the Investment Manager's views on the market, and the extent to which revenue in excess of that which is required to be distributed should be retained. The Company has no externally imposed capital requirements.
The capital of the Company is managed in accordance with its investment policy detailed in the Strategic Review above.
15 Net Asset Value per Ordinary Share
The net asset value per ordinary share and the net asset value attributable to the ordinary shares at the year-end calculated in accordance with their entitlements in the Articles of Association were as follows:
|
|
2020 |
2019 |
|
Net Asset Value (£'000) |
205,679 |
233,127 |
|
Net Asset per share (pence) |
47.52p |
55.19p |
NAV per share has been calculated based on the share capital in issue as at year end. The issued share capital as at 30 June 2020 comprised of 432,851,858 (30 June 2019: 422,401,858).
16 Financial Instruments
The Company's financial instruments comprise its investment portfolio, cash balances, bank loan and debtors and creditors that arise directly from its operations. As an investment company, the Company holds a portfolio of financial assets and financial liabilities in pursuit of its investment objective. The Company uses flexible borrowings for short term purposes, and to seek to enhance the returns to shareholders, when considered appropriate by the Investment Manager.
Financial assets designated at fair value through profit or loss (see note 9) are held at fair value. For listed securities trading actively, fair value is considered to be equivalent to the most available recent bid price. Where listed securities are not trading actively, independent broker quotes are referenced to estimate fair value. For unlisted securities, fair value is determined by the Board using valuation techniques based on unobservable inputs, mainly using broker quotes. The fair value of other receivables, cash and cash equivalents and other payables is represented by their carrying value in the S tatement of Financial Position above . These are short term financial assets and liabilities whose carrying value approximate fair value.
The main risks that the Company faces arising from its financial instruments are:
(i) market price risk, being the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices and comprises currency risk, interest rate risk and other price risk;
(ii) interest rate risk, being the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates;
(iii) foreign currency risk, being the risk that the value of investment holdings, investment purchases, investment sales and income will fluctuate because of movements in currency exchange rates;
(iv) credit risk, being the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company; and
(v) liquidity risk, being the risk that the bank may demand repayment of the loan and/or that the Company may not be able to liquidate quickly its investments.
The Company held the following categories of financial instruments as at 30 June 2020 all of which are held at fair value, other than the bank loan, other receivables and other payables which are held at amortised cost.
|
|
2020 |
2019 |
|
Financial assets |
|
|
|
Financial assets designated at fair value through profit or loss |
230,741 |
253,034 |
|
Cash and cash equivalents |
2,853 |
5,837 |
|
Amounts due from brokers |
6,520 |
1,964 |
|
Accrued income |
3,356 |
4,182 |
|
Prepayments and other debtors |
6 |
4 |
|
Financial liabilities |
|
|
|
Amount due to brokers |
6,059 |
3,631 |
|
Bank loan |
31,000 |
28,000 |
|
Interest on bank loan facility |
13 |
16 |
|
Other creditors |
725 |
247 |
17 Market Price Risk
Market price risk (including other price risk) arises mainly from uncertainty about future prices of financial instruments held. It represents the potential loss the Company might suffer through holding market positions in the face of price movements. To mitigate the risk the Board's investment strategy is to select investments for their fundamental value. Stock selection is therefore based on disciplined accounting, market and sector analysis, with the emphasis on long term investments. An appropriate spread of investments is held in the portfolio in order to reduce both the statistical risk and the risk arising from factors specific to a country or sector. The Investment Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to consider investment strategy.
Investment and portfolio performance are discussed in the Investment Manager's Review and further information on the investment portfolio is provided above. The Investment Manager' Review, Classification of Investment Portfolio and the Investment Portfolio sections do not form part of the audited financial statements.
If the investment portfolio valuation fell 5% at 30 June 2020, the impact on the profit or loss and the net asset value would have been negative £11.5 million (2019: a fall of 5% would have impacted the profit or loss and the net asset value by negative £12.6 million). Due to the effect of gearing, the impact on the net asset value per share would have been a decrease of 5.6% (2019: decrease of 5.5%). If the investment portfolio valuation rose by the same amount, the effect would have been equal and opposite. The calculations are based on the portfolio valuation at the Statement of Financial Position date and is not representative of the period as a whole, and may not be reflective of future market conditions.
The Directors believe 5% is a relevant percentage based on average market volatility in recent years.
18 Interest Rate Risk
The Company's financial assets and liabilities, with the exception of cash and cash equivalents (see below), that are subject to interest rate risk are detailed below.
|
|
2020 |
2020 |
2020 |
2019 |
2019 |
2019 |
|
|
£'000 |
Weighted average interest rate (%) |
Weighted average period for which the rate is fixed (years) |
£'000 |
Weighted average interest rate (%) |
Weighted average period for which the rate is fixed (years) |
|
Financial assets: |
|
|
|
|
|
|
|
Fixed income & convertible securities |
123,926 |
6.87 |
4.26 |
150,907 |
7.33 |
5.34 |
|
Floating rate notes |
64,641 |
6.68 |
n/a |
61,866 |
5.72 |
n/a |
|
Preference shares |
13,235 |
7.13 |
n/a |
11,214 |
9.9 |
n/a |
|
Financial liabilities: |
|
|
|
|
|
|
|
Bank Loan |
31,000 |
1.26 |
n/a |
28,000 |
1.89 |
n/a |
Financial assets
Fixed, floating rate and preference share yields, and their prices, are determined by market perception as to the appropriate level of yields given the economic background. Key determinants include economic growth prospects, inflation, the Government's fiscal position, short term interest rates and international market comparisons. The Investment Manager takes all these factors into account when making any investment decisions as well as considering the financial standing of the potential investee company.
Interest rates on fixed income instruments are fixed at the time of purchase, as the fixed coupon payments are known, as are the final redemption proceeds. Consequentially, if a fixed income instrument is held until its redemption date, the total return achieved is unaltered from its purchase date. However, over the life of a fixed income instrument the market price at any given time will depend on the market environment at that time. Therefore, a fixed income instrument sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred.
Interest rates on floating rate instruments vary throughout the life of the instrument based on movements in the applicable underlying base rate. Consequentially, the total return achieved on these positions changes throughout the life of position. In addition, over the life of the financial instrument, the market price of such instruments will depend on the market environment at that time. Therefore, a floating rate instrument sold before its redemption date is likely to have a different price to its purchase level and a profit or loss may be incurred.
Cash and cash equivalents
When the Company retains cash balances they are held in floating rate deposit accounts. Cash held in sterling was £2,419,000. The benchmark rate which determines the interest payments received on sterling interest bearing cash balances is the UK bank base rate, which was 0.1% at 30 June 2020 (2019: 0.75%). The Company also holds an immaterial amount of cash in a range of other currencies, amounting to £434,000.
Financial liabilities
The Company has borrowed in sterling at a variable rate of interest based on the UK bank base rate. If the bank base rate increased by 0.50%, the impact on the profit or loss would have been a loss of £155,000 (2019: £111,000). If the bank base rate had decreased by 0.50%, the impact on the profit or loss would have been equal and opposite. The calculations are based on borrowings as at the respective Statement of Financial Position dates and are not representative of the year as a whole.
The Directors believe 0.50% is relevant based on observed interest rate adjustments in recent years.
At year end, the Company held bank loans of £31 million from Scotiabank, details of which are contained in note 11.
19 Foreign Currency Risk
The Company invests in overseas securities and may hold foreign currency cash balances which give rise to currency risks. It is not the Company's policy to hedge this risk on a continuing basis but it may do so from time to time.
Foreign currency exposure at 30 June 2020 was as follows:
|
|
2020 |
2020 |
2020 |
2020 |
2019 |
2019 |
2019 |
2019 |
|
Euro |
16,514 |
304 |
187 |
17,005 |
16,978 |
1,760 |
338 |
19,076 |
|
Australian dollar |
364 |
4 |
- |
368 |
491 |
- |
- |
491 |
|
US dollar |
43,854 |
123 |
818 |
44,795 |
47,011 |
20 |
923 |
47,954 |
|
Norwegian krone |
1,363 |
- |
38 |
1,401 |
2,742 |
55 |
12 |
2,809 |
|
Canadian dollar |
322 |
4 |
3 |
329 |
1,340 |
5 |
2 |
1,347 |
|
|
62,417 |
435 |
1,046 |
63,898 |
68,562 |
1,840 |
1,275 |
71,677 |
If the value of sterling had weakened against each of the currencies in the portfolio by 5% (2019: 5%), the impact on the profit or loss and the net asset value would have been positive £3.3 million (2019: positive £3.7 million).
If the value of sterling had strengthened by the same amount the impact on the profit or loss and the net asset value would have been negative £3.0 million (2019: negative £3.3 million).
The calculations are based on the portfolio valuation and accrued income balances at the balance sheet date and are not representative of the period as a whole and may not be reflective of future market conditions.
The Directors believe 5% is relevant based on the average market volatility in exchange rates in recent years.
20 Credit Risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The Investment Manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets best represents the maximum risk exposure at the balance sheet date.
At the reporting date, the Company's financial assets exposed to credit risk amounted to the following:
|
|
2020 |
2019 |
|
Fixed income securities |
184,336 |
211,158 |
|
Convertible bonds |
4,231 |
8,151 |
|
Cash and cash equivalents |
2,853 |
5,837 |
|
Amounts due from brokers |
6,520 |
1,964 |
|
Accrued income |
3,356 |
4,182 |
|
|
201,296 |
231,292 |
Credit risk on fixed income securities and convertible bonds instruments is considered to be part of market price. The credit ratings for the fixed income securities held by the Company as at 30 June have been listed below:
|
Rating of fixed income securities |
2020 |
2019 |
|
BB |
- |
0.4 |
|
BB- |
2.7 |
5.9 |
|
B+ |
7.1 |
21.8 |
|
B |
13.6 |
12.8 |
|
B- |
5.2 |
12.5 |
|
CC |
1.5 |
- |
|
CCC+ |
8.6 |
- |
|
CCC- |
- |
0.3 |
|
Not rated |
61.3 |
46.3 |
|
|
100.0 |
100.0 |
Source: 2020: S&P, 2019: S&P and Moodys (lowest ratings)
The percentage above represents the value of fixed income securities of £188,567,000 (2019: £211,000,000) included in the Statement of Financial Position which are exposed to credit and counterparty risk by credit rating.
Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the acceptable credit quality of the brokers used. The Board monitors the quality of service provided by the brokers used to further mitigate this risk.
The Company's cash and most of the assets are held by BNPP and were previously held by HSBC Bank plc ("HSBC"). The Company still holds a residual cash balance with HSBC of £142,000. The rating agency Moody's assigns a rating of Aa3 to HSBC and A1 to BNPP. New Look Senior Notes are held by the brokers, Lucid. These are valued at nil and therefore there is no significant credit risk exposure to the Company in respect of these notes. JPI Media Senior Notes are held by JPI Media with an overall value of £708,000 and therefore do not present a material credit risk to the Company. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to the cash and securities held by the custodian to be delayed or limited. The Board monitors the Company's risk by reviewing the custodian's internal control reports.
Should the credit quality or the financial position of BNPP or HSBC deteriorate significantly the Investment Manager will move the cash holdings to another bank.
There were no contingencies or guarantees outstanding at the balance sheet date.
21 Liquidity Risk
The Company's financial instruments include investments in unquoted investments which are not traded in an organised public market and which generally may be illiquid. As a result, the Company may not be able to liquidate these investments at an amount close to their fair value.
The Company's listed securities are considered to be readily realisable.
At the reporting date, the Company's investments were categorised as follows:
|
|
2020 |
2019 |
|
Listed/Quoted on a recognised investment exchange |
221,877 |
242,644 |
|
Quoted via direct broker quotes |
8,864 |
10,390 |
|
Total financial assets |
230,741 |
253,034 |
The Company's liquidity risk is managed on an ongoing basis by the Investment Manager in accordance with policies and procedures in place as described in the Directors' Report of the Company's Annual Report and Financial Statements. The Company's overall liquidity risks are monitored on a quarterly basis by the Board.
The Company maintains sufficient cash, has a short term bank loan facility and readily realisable securities to pay accounts payable and accrued expenses. The Company also maintains sufficient cash and readily realisable securities to meet any demand repayment on its overdraft facility.
All the Company's financial liabilities are due in one year or less.
22 Fair Value Hierarchy
International Financial Reporting Standard ("IFRS") 13 Fair Value Measurement requires an analysis of investments valued at fair value based on the reliability and significance of information used to measure their fair value. The level is determined by the lowest (that is the least reliable or independently observable) level of input that is significant to the fair value measurement for the individual investment in its entirety as follows:
· Level 1 - investments quoted in an active market;
· Level 2 - investments whose fair value is based directly on observable current market prices or indirectly being derived from market prices;
· Level 3 - investments whose fair value is determined using a valuation technique based on assumptions that are not supported by observable current market prices or based on observable market data.
Transfers in and out of the levels have been deemed to have occurred at the end of the reporting period.
Investments valued using stock market active prices are disclosed as Level 1 and this is the case for the quoted equity investments that the Company holds. Securities in Level 2 are priced using evaluated prices from a third party vendor, together with a price comparison made to evaluated secondary and tertiary third party sources, including broker quotes and benchmarks. As a result, these investments are disclosed as Level 2 - recognising that the fair values of these investments are not as visible as quoted investments and their higher inherent pricing risk.
Investments included as Level 3 are priced using a valuation technique reviewed by the Board taking into account, where appropriate, latest dealing prices, broker statements, valuation information and other relevant factors.
|
Financial assets at fair value |
Level 1 |
Level 2 |
Level 3 |
Total |
|
Fixed income securities |
4,512 |
175,853 |
8,484 |
188,849 |
|
Equity shares |
31,029 |
- |
380 |
31,409 |
|
Convertible bonds |
4,038 |
6,445 |
- |
10,483 |
|
As at 30 June 2020 |
39,579 |
182,298 |
8,864 |
230,741 |
|
Financial assets at fair value |
Level 1 |
Level 2 |
Level 3 |
Total |
|
Fixed income securities |
3,974 |
193,043 |
9,856 |
206,873 |
|
Equity shares |
32,732 |
459 |
534 |
33,725 |
|
Convertible bonds |
4,285 |
8,151 |
- |
12,436 |
|
As at 30 June 2019 |
40,991 |
201,653 |
10,390 |
253,034 |
If the market value of the Level 3 investments fell by 5% (2019: 5%), the impact on the profit or loss and the net asset value would have been negative £0.44 million (2019: negative £0.52 million). If the value of the Level 3 investments rose by the same amount, the effect would have been equal and opposite.
IFRS 13 requires disclosure, by class of financial instrument, if the effect of changing one or more input to reasonably possible alternative assumptions would result in a significant change to the fair value measurement. The information used in determination of the fair value of Level 3 investments is chosen with reference to the specific underlying circumstances and position of the investee company. On that basis the Board believe that the impact of changing one or more of the inputs to reasonably possible alternative assumptions would not change the fair value significantly. The following shows a reconciliation from the beginning to the end of the year for fair value measurements in Level 3 of the fair value hierarchy.
|
Level 3 Financial Assets |
2020 |
2019 |
|
Opening valuation |
10,390 |
9,325 |
|
Purchases and corporate actions |
2,866 |
4,817 |
|
Sales |
(1,812) |
(28) |
|
Unrealised gains/(losses) |
562 |
(558) |
|
Realised losses |
(1,632) |
- |
|
Transfers out of Level 3 |
(1,970) |
(3,166) |
|
Transfers in to Level 3 |
460 |
- |
|
|
8,864 |
10,390 |
The fair value of Level 3 financial assets has been determined by reference to valuation techniques described in note 1(b) of these financial statements. The Level 3 investments at the year-end are:
|
|
2020 |
|
2019 |
|
|
Aggregated Micro 8% 17/10/2036 |
7,081 |
(1) |
5,267 |
(1) |
|
OakNorth Bank Variable 01/06/2028 |
- |
(1) |
1,970 |
(1) |
|
JPI Media Group Senior Notes (Facility B) |
709 |
(1) |
1,731 |
(1) |
|
JPI Media Group Super Senior Notes (Facility A) |
- |
(1) |
644 |
(1) |
|
Oro SG PTE Ltd 12% 08/07/2020 |
- |
(1) |
244 |
(1) |
|
Fara Holdco Limited NPV |
161 |
(1) |
336 |
(1) |
|
JPI Media Group Equity |
14 |
(1) |
198 |
(1) |
|
NT Rig Holdco 12% 20/12/2021 |
694 |
(1) |
- |
|
|
R.E.A Holdings Plc CW 15/07/2025 |
205 |
(2) |
- |
|
|
Others |
- |
|
- |
|
|
|
8,864 |
|
10,390 |
|
(1) Single broker quote, low liquidity
(2) Multiple broker quotes
All Level 3 financial assets above have been valued using a single broker quote with the exception of R.E.A Holdings plc CW 15/07/2025 which was valued using multiple broker quotes to determine their fair value.
The Company also holds a number of other Level 3 assets with a value of £nil.
During the year New Look TopCo Shares amounting to £460,000 were transferred into Level 3 due to a decrease in observable data. As at 30 June 2020, New Look TopCo shares were valued at £nil (30 June 2019: £460,000).
OakNorth Bank Variable 01/06/2028 amounting to £1,970,000 was transferred out of Level 3 to Level 2 due to an increase in observable data. As at 30 June 2020, OakNorth Bank Variable 01/06/2028 was valued at £1,800,000 (30 June 2019: £1,970,000).
23 Transaction with the Manager and Related Parties
The Board are considered related parties.
All transactions with related parties are carried out at an arm's length basis.
There are no other transactions with the Board other than aggregated remuneration for services as Directors as disclosed in the Directors' Remuneration Report section of the Company's Annual Financial Report and Financial Statements and as set out in note 4 to the financial statements. The beneficial interests of the Directors in the shares of the Company are disclosed in the Directors' Report section of the Company's Annual Financial Report and Financial Statements. There are no outstanding balances to the Board at the year end.
Details of the fee arrangement with the Investment Manager is disclosed in note 3.
24 Subsequent Events
The Board have evaluated subsequent events for the Company through to 17 September 2020, the date the financial statements were available to be issued, and has concluded that the material events listed below do not require adjustment of the financial statements.
Share Issues
Following the year end the Company undertook a further three issues of shares issuing, in total, an additional 3,050,000 ordinary shares of no par value for total consideration of £1.5 million. As at the date of this report the issued share capital of the Company was 435,901,858 ordinary share of no par value.
Dividend declaration
The fourth interim dividend of 1.46 pence per share was announced on 16 July 2020 and paid on 28 August 2020 to shareholders on the register on 24 July 2020, having an ex-dividend date of 23 July 2020.
Glossary of Terms and Definitions
|
AIC Code |
Association of Investment Companies of Corporate Governance published in February 2019. |
|
Alternative Performance Measures ("APMs") |
Alternative performance measures are numerical measures of the Company's current, historical or future performance, financial position or cash flows, other than financial measures defined or specified in the applicable financial framework. The Company's applicable financial framework includes IFRS and the AIC SORP. |
|
Annual dividend per ordinary share |
The total amount of dividends declared for every issued ordinary share over the Company's financial year. |
|
Company |
CQS New City High Yield Fund Limited |
|
Dividend cover |
Earnings per share divided by dividends per ordinary share expressed as a ratio. |
|
Dividend yield |
The annual dividend per share expressed as a percentage of the share price (bid price). |
|
FRN |
Floating Rate Note. |
|
Gearing |
The level of borrowing that the Company has undertaken. Represented by total assets (being total assets less current liabilities (excluding borrowings)) less all cash, expressed as a percentage of shareholders' funds (being the Net Asset Value of the Company) minus 100. |
|
Net Asset Value or NAV and NAV per ordinary share |
The value of total assets less total liabilities. Liabilities for this purpose included current and long-term liabilities. To calculate the net asset value per ordinary share, the net asset value divided by the number of shares in issue produces the net asset value per share. |
|
Ongoing charges ratio
( calculated using AIC guidance) |
A measure of all operating costs incurred in the reporting period, calculated as a percentage of average net assets in that year. Operating costs exclude costs suffered within underlying investee funds, costs of buying and selling investments, interest costs, taxation and the costs of buying back or issuing ordinary shares.
|
|
Premium or discount |
The amount by which the market price per share of an investment company is higher or lower than the net asset value per share. The discount or premium is expressed as a percentage of the net asset value per share. |
|
Prior charges |
The name given to all borrowings including debentures, loan and short term loans and overdrafts that are to be used for investment purposes, reciprocal foreign currency loans, currency facilities to the extent that they are drawn down, index-linked securities, and all types of preference or preferred capital and the income shares of split capital trusts, irrespective of the time until repayment. |
|
Revenue earnings per ordinary share |
Revenue earnings (which includes dividends paid out during the year) divided by the weighted average number of ordinary shares in issue during the financial year, expressed as a percentage. |
|
Revenue reserve per ordinary share (after recognition of annual dividends) |
Revenue reserve (which includes dividends paid out during the year) divided by the number of ordinary shares at the balance sheet date, expressed as a percentage. |
|
SME |
Small and medium-sized enterprises. |
|
Total Return |
The return to shareholders calculated on a per share basis by adding dividends paid and declared in the period to the increase or decrease in the share price (bid) or net asset value. The dividends are assumed to have been reinvested in the form of ordinary shares or net assets. |
Alternative Performance Measures
In accordance with ESMA Guidelines on APMs the Board has considered what APMs are included in the Company's Annual Financial Report and Financial Statements which require further clarification.
The Company uses the following APMs (as described below) to present a measure of profitability which is aligned with the requirements of our investors and potential investors, to draw out meaningful data around revenues and earnings, and to provide additional information not required for disclosure under accounting standards:
· Premium or discount
· Annual dividend per ordinary share
· Dividend yield
· Dividend cover
· Revenue earnings per ordinary share
· Revenue reserves per ordinary share
· NAV total return
· Ordinary share price total return
· Ongoing charges ratio
· Gearing
All APMs relate to past performance. The following tables detail the methodology of the Company's APMs.
Premium or discount
The amount by which the market price per share of an investment company is higher or lower than the net asset value per share. The discount or premium is expressed as a percentage of the net asset value per share.
|
|
|
2020 |
2019 |
|
Share price (bid price) |
a |
47.40p |
59.80p |
|
NAV per share |
b |
47.52p |
55.19p |
|
(Discount)/Premium |
(a-b)/b |
(0.25%) |
8.35% |
Annual dividend per ordinary share
The total amount of dividends declared for every issued ordinary share over the Company's financial year.
|
Dividend History |
Rate |
xd date |
Record date |
Payment date |
|
First interim 2020 |
1.00p |
24 October 2019 |
25 October 2019 |
29 November 2019 |
|
Second interim 2020 |
1.00p |
23 January 2020 |
24 January 2020 |
28 February 2020 |
|
Third interim 2020 |
1.00p |
23 April 2020 |
24 April 2020 |
29 May 2020 |
|
Fourth interim 2020 |
1.46p |
23 July 2020 |
24 July 2020 |
28 August 2020 |
|
Annual dividend per ordinary share |
4.46p |
|
|
|
|
|
|
|
|
|
|
First interim 2019 |
1.00p |
25 October 2018 |
26 October 2018 |
30 November 2018 |
|
Second interim 2019 |
1.00p |
24 January 2019 |
25 January 2019 |
28 February 2019 |
|
Third interim 2019 |
1.00p |
25 April 2019 |
26 April 2019 |
31 May 2019 |
|
Fourth interim 2019 |
1.45p |
25 July 2019 |
26 July 2019 |
30 August 2019 |
|
Annual dividend per ordinary share |
4.45p |
|
|
|
Dividend yield
The annual dividend per ordinary share expressed as a percentage of the share price (bid price).
|
|
|
2020 |
2019 |
|
Annual dividend per ordinary share |
a |
4.46p |
4.45p |
|
Share price (bid price) |
b |
47.40p |
59.80p |
|
Dividend yield |
a/b |
9.41% |
7.44% |
Dividend cover
Earnings per share divided by the annual dividend per ordinary share expressed as a ratio.
|
|
|
2020 |
2019 |
|
Earnings per ordinary share |
a |
4.59p |
4.49p |
|
Annual dividend per ordinary share |
b |
4.46p |
4.45p |
|
Dividend cover |
a/b |
1.03x |
1.01x |
Revenue earnings per ordinary share
Revenue earnings (which includes dividends paid out during the year) divided by the weighted average number of ordinary shares in issue during the financial year, expressed as a percentage.
|
|
|
2020 |
2019 |
|
Revenue earnings per ordinary share |
a |
£19,666,000 |
£18,363,000 |
|
Ordinary shares in issue |
b |
428,002,951 |
408,895,008 |
|
Revenue earnings per ordinary share |
(a/b)*100 |
4.59p |
4.49p |
Revenue reserves per ordinary share
Revenue reserve (which includes dividends paid out during the year) divided by the number of ordinary shares at the balance sheet date, expressed as a percentage.
|
|
|
2020 |
2019 |
|
Revenue reserve per ordinary share |
a |
£17,982,000 |
£17,294,000 |
|
Ordinary shares in issue |
b |
432,851,858 |
422,401,858 |
|
Revenue reserves per ordinary share |
(a/b)*100 |
4.15p |
4.09p |
NAV and ordinary share price total return
The return to shareholders calculated on a per share basis by adding dividends paid and declared in the period to the increase or decrease in the share price (bid) or net asset value. The dividends are assumed to have been reinvested in the form of ordinary shares or net assets.
|
2020 |
Annual dividend per share |
NAV |
Share |
|
30 June 2019 |
N/A |
55.19 |
59.80 |
|
30 June 2020 |
4.46p |
47.52 |
47.40 |
|
Capital return |
|
(13.89)% |
(20.74)% |
|
Effect of dividend reinvestment |
|
7.67% |
6.60% |
|
Total return |
|
(6.22)% |
(14.14)% |
|
2019 |
Annual dividend per share |
NAV |
Share |
|
30 June 2018 |
N/A |
57.63 |
61.60 |
|
30 June 2019 |
4.45p |
55.19 |
59.80 |
|
Capital return |
|
(4.23)% |
(2.92)% |
|
Effect of dividend reinvestment |
|
7.91% |
7.58% |
|
Total return |
|
3.68% |
4.66% |
Ongoing charges ratio
A measure of all operating costs incurred in the reporting period, calculated as a percentage of average net assets in that year. Operating costs exclude costs suffered within underlying investee funds, costs of buying and selling investments, interest costs, taxation and the costs of buying back or issuing ordinary shares.
|
|
|
2020 |
2019 |
|
Average NAV |
a |
223,518,807 |
226,064,325 |
|
Operating expenses per Statement of Comprehensive Income |
|
2,754,552 |
2,801,067 |
|
Ineligible expenses |
|
(101,813) |
(98,844) |
|
Operating expenses |
b |
2,652,739 |
2,702,223 |
|
Ongoing charges figure (calculated using the AIC methodology) |
b/a |
1.19% |
1.20% |
Gearing
The level of borrowing that the Company has undertaken. Represented by total assets (being total assets less current liabilities (excluding borrowings)) less all cash, expressed as a percentage of shareholders' funds (being the Net Asset Value of the Company) minus 100.
|
|
|
2020 £'000 |
2019 £'000 |
|
Total assets |
|
243,476 |
265,021 |
|
Current liabilities (excluding borrowings) |
|
(6,797) |
(3,894) |
|
Cash and cash equivalents |
|
(2,853) |
(5,837) |
|
Total |
a |
233,826 |
255,290 |
|
|
|
|
|
|
Net Asset Value |
b |
205,679 |
233,127 |
|
Gearing |
((a/b)-1)*100 |
13.68% |
9.51% |
A copy of the Company's Annual Report will be available shortly from the Company Secretary, (BNP Paribas Securities Services S.C.A., Jersey Branch, IFC 1, The Esplanade, St Helier, Jersey, JE1 4BP), or will be circulated on the Company's website (https://ncim.co.uk/cqs-new-city-high-yield-fund-ltd).
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