Volta Finance Ltd.

Annual Report • Oct 31, 2022

Volta Finance Limited VOLTA FINANCE LIMITED A NNU A L REPORT A ND AUDITED FINANCIAL STATEMENTS FOR THE YEA R ENDED 31 JULY 2022 CONTENTS Volta at a Glance 1 Chairman’s Statement 2 Investment Manager’s Report 3 Strategic Report 11 Report of the Depositary to the Shareholders 16 Report of the Directors 17 Principal and Emerging Risk Factors 19 Corporate Governance Report 23 Audit Committee Report 29 Directors’ Remuneration Report 31 Statement of Directors’ Responsibilities 33 Independent Auditor’s Report 34 Statement of Comprehensive Income 40 Statement of Financial Position 41 Statement of Changes in Shareholders’ Equity 42 Statement of Cash Flows 43 Notes to the Financial Statements 44 Alternative Performance Measures Disclosure 76 Legal and Regulatory Disclosures 78 Board of Directors 80 Company Information 82 Glossary 83 Notice of meeting 85 VOLTA A T A GLANC E Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 1 The investme nt o bjectives of t h e Company are to preserve its c apital across the credit cycle and to p rovide a stable stream o f income to its Shareholders through dividends that it e x pe cts to distribute on a qu arterly basis. Vol t a c urrently s e eks t o achieve its investment objectives by pursuing exposure predominantly to CLOs and similar asset classes. A more diversified strategy across structured finance assets may be pursued opportunistically. Volta measures and reports its performance in Euro.  NAV per share as at 31 July 2022: € 6.2232  Dividend per share for the twelve months to 31 July 2022: € 0.57  Share price as at 31 July 2022: € 5.24 Ke y performance ind icators (7.3)% (4.3)% 1.97% NAV Total Return 1 (with dividends re-invested at NAV) for the twelve months to 31 July 2022 Share Price Total Return 1 ,3 (with dividends re-invested at Share Price) for the twelve months to 31 July 2022 Ongoing charges 2 ratio for the twelve months to 31 July 2022 24.5% 9.9% (15.8 )% Projected Portfolio IRR 1 (under standard AXA IM scenarios) Dividend Yield 1 for the year ended 31 July 2022 based on the share price as at 31 July 2022 Discount 1 between share price and NAV per share as at 31 July 2022 NAV performance analysis for the years ended 31 July 2022 and 31 Jul y 2021 – c ontributions to NA V change (Euro per share) 1 Refer to the gloss ary on pages 83 and 84 for an explanation of t he terms used abov e and elsewhere withi n this report. The calcula tion methodolog y of each APM has been disclosed on pages 76 to 77. 2 The Company’s on going charges are c alculated according t o the methodology outli ned on page 76 and diff ers to the costs discl osed within the Comp any’s KIDs which follow the method ology prescribed by E U PRIIPs rules. The Comp any’s most current K IDs are available on the Com pany’s website. 3 Source: Bloomberg CHAIRMAN’S ST A TEMENT Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 2 Dear Shareholders In my first Chairman’s Statement to you, I would have liked to co nvey a more positive message bu t unfortunately the world – an d particularly Europe – finds itself in a challenging situation once again and Volta is not immune from those forces. For the year ended 31 July 2 022, Vo lt a’s N AV ha s fallen t o € 6. 22, a 15 .8% reduction of the half year n um ber ( € 7. 39) a nd a reduction of 14 .6% compared to a year ago ( € 7.28). The share price has fared somewhat b etter, with a reduction of 13.0% from € 6.02 a year ago to € 5.24 at the end of July 2022. W hilst a fall in value is never w elcome , Volta’s performance is c onsistent with moves seen in broader financial markets. Over the same period, the FTSE 25 0 fell 12.1%, the DAX fell by 13.3% and high yield bond sp r eads widened out by 45% from 332bp to 485bp. Looking back at financial markets over the last 12 months, it can be characterised as a year of two h alves: the excess liquidity an d buoyant markets of H1 recede d rapidly to w ar in Ukraine, volatility, inflation and energy in st a bility in H2. The term ‘unprec e dented’ is in danger of becom ing over-used , and it ha s certainly been an ap t description of the COVID-19 pandemic a nd measures taken to tackle it. M ark ets were b r aced for a certain range of outcomes in the post- COVID-19 era, but they did not anticip ate the invasion of Ukraine and the subsequent impact of Europe’s reliance on Russian energy. Most finance professionals today are fortunate to have never witnessed (at l ea st not in th eir adult lives) d ouble-digit in flation, re c ession a n d ra pidly rising inter est rates, how ever that lack of perhaps experience, certainly unfamiliarit y w ith dealing with a recession adds another dimension of uncertainty to the heady mix. Against this challenging backdrop, there are some rays of sunlight and I believe Volta is o ne of them. The performance of Vo lta’s underlying portfolio is strong and cashflows are at all-time h ighs with a portfolio total cash r eturn of 1 8 .0% in the pa s t year. You might wonder how that can be, but Volta’s fundamentals are sound: • The credit quality of corporate borrowers has been and – at leas t for the time being - continues to be stable with defaults at low levels. Europe leveraged loan defaults have been just 0.7% in the past year, with the US even lower at 0.3%; • CLOs hold floating rate assets which means that rate rises are passed through to the CLO investors as highe r returns; • The portfolios are highly diversified by g eography and i ndustry, which helps maintain portfolio quality when industries suffer downturns (e.g. travel, as we saw in the COVID pandemic); • CLOs are structured to w i thstand a certain n umber of defaults, typically 2% p.a. but actual default rates have been significantly lower in recent years, meaning that the funds have been able to generate better than antici pate d returns whilst building their reserves (“par value”) to create cushion for future downturns; and • CLO cashflows are generat ed from contractual debt interest, no t dividends m eaning that those payments are significantly more stable than equity dividends w h ich can be reduced or not paid by companies in more challenging times. CLOs a re a sophisticated asset cl ass with a num ber of moving parts, but history of over 20 years of CLO investing shows that in challenging markets, th e structure s function in the manner that they are p lanned to do. Sentiment may affect market pricing of the underlying assets and Volt a’s share price but the payment pr ioriti es and s tructural protections embedded in th e se funds hold firm and good fundamental credit investments will continue to perform. All of this depends on the investment skil ls of the man ager, and the ability to ide ntify and acti vely manage CLO in ve stments and opportunities. In the team at A XA IM , Volta has o ne of th e longest-established, m ost experien ced and high q uality teams in the CLO market globally. Their fi r st class tra c k record of ma naging C LOs through bu ll and bear m ark e ts m eans that they w il l n ot o nly manage Volta’s por t folio actively, b u t also be able to identify some o f the best op portunities t o create value in the more volatile markets ahead. Volta has a stated dividend policy of 8% of NAV, paid quarterly, and your Board has continued to implement this policy through the past year. Given the ongoing di scount of the share price to NAV, the dividend yield for the year ended 31 July 2022 equates to an attractive 9.9% based on the share p r ice of € 5.24 at 31 July 2022. Your Board recognises that high cash dividends are a valuable commodity in times of uncertainty. Paul Meader has stepped down as Chairman and from the Board on 31 July 202 2 following a tenure of almost 9 years an d I would like to thank him f or his service, h is excellent stewardship and leadership o f the Board. I would like to welcome Yedau Odoungele, who joine d the Board in June 2022. Yedau has over 25 years’ experience in fixed incom e and structured c redit, including as a CLO structurer and she will bring a very valua ble co ntribution and compleme ntary skill set to the Board. Alongside t he Board changes, the Risk Committee has been formally dissolved at the 31 J uly 2022 year end and the responsibilities of this Committee ha ve been subsumed into the Board. In closing, I am aware that we are in uncertain times and the road ahead is expected to be rockier than the one behind us. I am comforted that we have a first class investment manager in AXA IM, who will help us to not only navigate the b umps in the road, but actively s eek out opportunities and smooth the p ath for future growth. Ple ase do not he sit ate to contact me thro ugh the Company Secretary, and I thank you for your continued support. Dagmar Kershaw Chairman 28 October 2022 INVESTMENT MANA G ER’S REPORT Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 3 At the invita tion of the Board, this commentary has been p r ovided by AXA Investmen t Mana gers (“AXA IM”) Paris as Investment Manager of Volta. This commentary is not i ntended to, nor should be construed as, providing investmen t advice. Potential investors in the Compa ny should s eek independent financial advice and should not rely on this communication in evaluating the me rits of investing in the Company. The commenta ry is provided as a source of information for Shareholders of the Company but is not attributable to the Company. KEY MESSAGES FROM THE INVESTMENT MANAGER Since the invasion of Ukraine by Russia last February we hav e been evolving in a challenging environment causing some stress bu t also offering opportunities: • At the time of writing this report t here are no clear signs o f deterioration in CLO me trics: we s aw more up grades than downgrades both in the US and in the European loan market so fa r this year and since loans are trading at a discount for several months , CLO managers have been able to build some par, i.e. cushion for the future • Even th ough we e x pe ct to see a n increase i n default ra tes (mostly in 2023), acco rdin g t o our base case scenario we do not expect any interruption for Vol t a’s incoming cash flow s nor any significant de terioration in terms of projected yield (losses du e to default are expected to be roughl y c ompensated by reinvestments in loans traded at a discount) • Thanks to the very high dividend c overage for Volta w e have been generating excess cash w hich can be used to seize opportunities that are currently yielding far above Volta usual target return For i nstance, Volta i nvested the equivalent of € 5m in 3 new posi t ions i n July and August 2022: 1 EUR BB, 1 EUR B and 1 U SD Equity with an aggregated projected yield at 18%. More broadly, regarding overall macro parameters, it is crucial to have in mind that inflation cycles (a si tuat ion in which prices and wages s imultaneously increasing significantly above long term averag e levels) are positive fo r credit especially when re al inte res t rates stay in negative territory: companies’ turnovers are increasing at a significant pace and earnings are consequently able to absorb some of the margin pressure while the real value of debt is eroded quarter after quarter. Two examples to evidence this: • The longe st period with relati v e ly low defaults in high yield debt (bonds and loans) is from 1972 to 1985, the last period with significantly higher than average inflation • Although in put costs increased, Q2 2022 e arnings were significantly positive both in the US and in Eu rope due to inflated companies’ revenues Both the US and Europe exited from the 1970s w ith very low level of debt (thanks to erosion) a nd able to face unprecedent hikes in rates w it hout incurring material losses. As far a s we can see, t h e current cycle is fa r from t hat situation: centra l banks are taking steps in order to control i nflation but re al intere st rates are still s i gnificantly negative so t ha t d e bt is bein g er o ded w hil e the re a l c ost of debt is still acceptable (increasing but still manageable). Month after month the probability that the current crisis may be relatively short lived is increa sing, that would mean a minor increase in default rates as reinvestment opportunities would counterbalance the losses triggered by defaults. It is key to remember that the current crisi s is taking place just aft er a year (2021) in which we have b een able to reset (locking in a cheap cost of leverage and extending reinvestment p eriods) most of Volta’s CLO equity positions. As a result, most of Volta’s CLO equity positions a re taking advantage o f reinvestment opportunities (buy loans at a discount inside CLOs) and have bu ilt a cushion for future years when defaults materialize. Considering that, Volta continues to pivot to w ards p ure CLO investments and the strong c ash flows associa ted with a l arger CLO equity bucket. W e v iew this strategy also as a way to gain in simplicity and transparenc y for o ur Shareholders relative to an allocation mixing different and sometime less transparent asset classes. In this c hallenging environment in which inflation is a ke y factor, being invested in fl oating instruments is certainly a positive characteristic o f Volta’s i nvestment proposal, alt hough at some point in time adding s ome d uration (through ov erlay) m ay h elp reduce risk and increase performance. CASH FLOW GENERATION Volta’s assets generated € 42.9 million of i ntere st or coupons over t he year ended 31 July 2022 (an a nnualized 16.1% of the begi nning of period NAV) (31 July 2021: 20.1%). The s trategy aiming at focusing on CLO debt and equity risk has s uccessfully been generating hi gher cashflows despite so me volatility in terms of incoming cash flows due to COVID-19: INVESTMENT MANA G ER’S REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 4 W e also want to highlight that we are s tarting to se e the benefit of rate hikes when c onsidering the ca sh flows generated by CLO debt notes: cashflows have increased month by month since the b eginning of 2022 and that tr end should continue. Under market standard scenarios, Volta will receive a significant amount of interest and coupon income relative to its NAV in the upcoming year. As far as we can see w e do not anticipate any change in the current po s itioning betw ee n CLO de bt and C L O e quity. Having ci r ca one third in CLO deb t and two thirds i n CLO equity allows Vol ta to generate sol id cash flows and sei ze opportunitie s thanks to significant dividend cover. A significant portion of the non-CLO posi t ions are Bank Balance Sheet positions that are , for the vast m ajority, leveraged first loss positions, like CLO equity. AXA IM aims t o re place s uch leveraged credit p ositions with CLO eq uities that exhibits a more fron t-loaded cashflow profile but with the potential for higher volatility. TESTING PROJECTED IRR Our main view is that w e are going to see more downgrades t han upgrades both in th e US and the European loan markets from this summer and probably f or the next 18 months. This ma y increas e C LO CCC buckets (the w eig ht of C CC-rated loans inside CLO loan pools) and an increase in default rates by the end of 2022 but mostly in 2023. As at the end of August 2022, the last-12-month default rates were respectively 0.6% and 0.7% for US and European Loans. To put this in perspective, the average annual default rate for the la s t decade was aro und 2.8%: as such, we are still in a low de fault rate environment. Nonetheless, w e expect default rates to reach c irca 2% for US loans a nd 3% for European loans in 2023. We d o not expect default rates to increase significantly more than that for several reasons: - Infl ation is eroding debt and fav ouring debt refinancing; - There are billions available in PE funds to support companies issuing loans; - Real interest rates are still very negative; - Comp anies are still cash rich a nd EBITDA/profitability is still (at the time of writing this comment) far above normal standards; - Most loan s were refinanced in 2021 hence the maturity w a ll for US and European loans is in 2028/29; and - More than 90% of the loans are covenant-light loans, a te mporary stress in Interest Coverage or in Leverage do not ca use a default per se. 0 5 000 000 10 000 000 15 000 000 20 000 000 25 000 000 30 000 000 6-month rolling amount o f Interest and C oupons per sub-as set classes over the last 5 years Total Assets CLO Residual Synth Corp Credit CLO Debts ABS Cash Corp Credit INVESTMENT MANA G ER’S REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 5 See below illustrations on some of the statements made earlier: Starting with i nflation and using Moody’s data for default rates in the US, there i s solid evidence that debt e rosion is a powerful instrument t o a void defaults; from 1972 to 19 85, the US e conomy went through 3 recessions, and it was the l ongest period with modest default rates. Even when the FED tackled inflation in 1981/82 causing a significant recession by h iking rates to unprecedented positive real rates, d efault r ates only increased to 3-4% i n 1 982/83 ( due to s uch a solid track record high yield markets unr easonably developed which ul timately led to the wellknown J unkbond crisis in 1986 - at this point in tim e the situation had nothing to do with FED fighting inflation). See also a few c harts from Morgan Stanley’s research (published 12 Sept 2022) regarding US loa ns. In terms of l everage, gross leverage is near 10 year lows (thanks to double digit revenue/EBITDA growth for the last 2 years - one of t he benefit of inflation): Although cash in corporate balance s heets is decreasing from the re cord highs of the CO VID-19 crisis, it st ill represents almost 12% of debt, as companies continues to hold more cash than p r e- COVID-19 years: INVESTMENT MANA G ER’S REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 6 To reiterate, due to double d igi t increase in revenues and EBITDA during the last two years and despite rate increases, loan interest coverage is high compared to previous years: All the above metrics are going to deteriorate but it is i mportant to keep in mind t hat the st arting point (before EBITDA starts to feel the pain of the current situation) is favourable. In any ca se, we bel ieve that things are going to deteriorate but it is very clear that in our opinion the situa tion is not a desperate one. High in flation favours debt erosion an d revenue increases, this is powerful when having to face some margin pressure and interest increases. There are cushions and it is the reason why we de signed a “base c ase” scenario in which default rates i ncrease but re latively modestly: - Bas e Case: an overnight 2% increase i n CCC bucket and defaults to m aterialise in relation w ith s uch CCC bucket and current W A RF ( W eighted Average R isk Factor that measure the average rating of each l oan pool). On average for all positions (m ixing USD and EUR positions) it would cause 2.3% default rate every year for the next 3 years; - Stres s 1 : an overnight 4% incr ease in CCC bucket (some CLOs w il l then ex c eed the classic 7.5% authorised CCC bucke t) an d defaults to materialise in r e lation with such CCC bu cket and current W ARF. On av erage for all po sitions (mixing USD and EUR positions) it would cause 3.8% default rate every year; and - Stres s 2: an overnight 7% increase in CCC bucket (a ll CLOs will then exceed the classic 7.5% authorised CCC bucket) an d defaults to materialise in r e lation with such CCC bu cket and current W ARF. On av erage for all po sitions (mixing USD and EUR positions) it would cause 5.8% default rate every year. INVESTMENT MANA G ER’S REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 7 Please find hereafter the results we went t hrough in early September 20 22 using these 3 scenarios (for all positions we sta rt from their current situation and test them with the parameters on the previous page): Projected Yield (From NAV v alue) Base Case Stress 1 Stress 2 USD equity 26.0% 22.6% 15.2% EUR equity 2 8.0% 26.2% 21.3% USD debt 21.3% 21.4% 17.0% EUR debt 2 1.3% 18.7% 14.1% Average for CLOs 24.8% 22.8% 17.2% W it h the base c ase scen ario, no positions suffer fr o m a ny diversion of paymen ts and the projected IRR for Vo lta’ s CLO b ook is close to 25 % (from the end of August 2022 NAV). Considering the fa ct that th e share p r ice is trading a t a significant discount to NAV, the projected IRR for Shareholders is higher than 30%. W he n consi dering t he “ s tress 1” scenario, there are a f ew diversions of cashflows for s ome CLO equit y p ositions and the few EUR B rated CLO debts that Volta holds suffer some delay in their coupon payments. A s a result, the projected IRR decline, on av erage for the whole CLO book, is still a very attractive 22.8%. W e must consider very punitive assumpt ion s to fa ll below 20 % p rojected IRR. Un der “Stress 2” the level of def ault over the n ex t years is modelled to be greater than what happened during the GFC. Our base case scenario is confirmed by what loan prices are telling us. From the end of 2021, loan prices have retraced by 4 to 5 basis points (in line with 2 % to 3% default rates for t he next few years) and the percentage of below 80% price loans is still very modest (in the 6% area). As such, this sh ouldn’t significantly erode Vo l ta’s l o ng-term perfo rmance an d m a y i ndeed o ffer some reinvestment o pportunities. W e are e ntering a period of uncertainty (the length of the c ommodity crisis, the l evel of inflation, t he t rajectory for rates) that already resulted in higher c redit spreads (including loans) and which i s historically a positive outcome for CLO equity holders (th anks to reinvestments in the underlying loan pools). PORTFOLIO REBALANCING The main book adjustment so far this year consisted in repositioning part of the European e xposure from CLO equity to C LO debt in order to gain a more defensive position in Europe while constantly decreasing non-CLO positions: INVESTMENT MANA G ER’S REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 8 As at the end of July 2022, Volta’s portfolio breakdown is presented below: W e continue to prefer USD CLO de bt relative to EUR CLO debt as US l oan portfolios are more diversified a nd liquid so that on a long-term basis USD CLO debt tends to be of a high er quality than EUR CLO debt. We clearly s aw this during the COVI D-19 crisis: the ability of US CLO managers to rearrange portfolios, after the in itial shock, was superior to European CLO managers. Regarding CLO equity, the ar b itrage i s s lightly better in Eur ope so that t hi s l ower m anoeuvrability is roughly compensated by higher cash flows . Since the end of May 2 022, when US 10-year government bo nds reached circa 3%, we have been adding some duration to the portfolio using futu res and options on T-Notes. We al s o entered a short payer swaptions in Euro. These positions generated slightly more than 0.6% performance at the end of July 2022 al t hough they re presented less than 2 years of duration. We believe that what may really affect Volta’s performance isn’t inflation or rate increase but a recession and defaults materialization. If such a nega tive situation was to improve, we are convinced that central banks w o uld turn supportive at some point in time; being long duration will then he lp improving the performance o f credit p ortfolios. At certain levels (above 3% on 10-year rates, near 2 .5% on Euro p ean 5 year swaps) we are convinced it makes sense to start building dur ation positions into Volta’s port folio as an efficient hedge against w orse than expected economic deteri oration. Despite being relatively mod est, these po s itions w ere bene ficial a n d w e may add more. Volta has already entered into these kinds of positions (in Q4 2016 and in the second half of 2018), each time with a gain. As a long - term player in t he credit markets we do recognize the historical positive c ontribution of duration to credit portfolios and w e are convinced adding duration to Volta’s should help if and when the situation deteriorates on the credit front. CURRENCY EXPOSURE For m any years (since the GFC), we h ave limited ou r currency exposure to cover for a ny potential margin ca ll by hedging non-Eu r o currency risk. St r u cturally, we have been selling forw ard USD agai nst Euro to limit Volta’s USD exposure despite h aving circa 60% of our assets in USD. For years, Volta was roug hly hedging half of its c urrency exposure coming from USD assets. W e progressively increased the volume of our hedge through the second half of the year while the USD was a ppreciating against the Euro in ord er to rea lise part o f the performance Vol t a gained from b eing long USD from January 2022 to August 2022. Through the year ended 3 1 July 20 22, we estimated that being long USD contributed 4.8% to Volta’s annua l performance. If t he EUR appreciates in the future against the USD we would like to avoid losing all this gain, although we are conscious b eing fully hedged (having no more USD exposure) will b e too costly in terms of cash to be kept to cover potential margin calls. W e believe that we w ere right to accep t some volatility coming from the remaining currency exposure instead of suffering fro m the cash drag on a long-term basis. INVESTMENT MANA G ER’S REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 9 OVERALL OUTLOOK Our intention is clearly to continue simplif yi ng Volta’s portfolio by reinvesting in CLO debt and equity positions. W e have certainly entered a more volatile environment which is d ependent on t he m agnitude and the length of the ec onomic slowdown. Our view is that even th ough we ex pec t to s ee some defaults materializing in the com ing quarters we do no t e x pe ct default rates to be dramatically high. It is clear to us that m ost market part icipants undervalue the benefit of inflation (debt erosion in real terms) while we consider that the current environment offers man y opportunities. Historically, circa three quarter s of CLO equities performance depends on the o ngoing cashflows paid to the eq u ity position, and o nly a quarter on the last principal payments (by nature highl y dependent on cumulative losses). As a result, we continue to h ave a constructive view on CLO equity performance. ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) AXA IM has been engaged in Respo nsible Investment f or over two de cades, joining and being an active mem ber of various initiatives as outlined below: AXA I M is s till ah ead of responsible i nvestment practices according to PRI off icial report with an 84 /100 score for Investment & Stewardship Policy in 2021 (while the median score was 60/100). AXA IM re tains its position as th e number one asset m ana ger in Continental Europe committed to responsible in ve stment in the Hirschel & Kramer (H&K) Responsible Investment Brand I ndex 2021 (RIBI) due to continuous dedication to responsi ble investment topics and strategies. INVESTMENT MANA G ER’S REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 10 In relation to Volta’s investments, we continue to make good progress. In 2021, we i mposed a long list o f Industry Ex c lusions to all new CL O invest ments we sourced in the Primary market. In 2022, we complemented t h is approach by a system atic selecti on of CLO managers that implemen t critical ESG me asures to pursue being b oth a responsible i nve stor and a responsible employer. Du ring th e period we comm unicated with all CLO managers we worked with in 20 21 regarding ESG, and although we co nsider a broad range of criteria we favour CLO managers that have: - already si gned and implemented a recognised international s tandard regarding responsible investment (UNPRI o r UK Stewardship or equivalent); - in place a programme to limit their carbon foot print or are co mmitted to net-zero carbon initiative; - in place (a nd are a ble to dem onstrate that it has an impact) an active program t o develop inclusion and diversity amongst their employees; and - accepted to restrict their loan investments by excluding at least 7 o ut of the following 10 investment c ategories - (International norms a nd standards; Controversial wea pons; Non s ustainable palm oi l; Thermal coal; Artic oil; Soft commodities; Tobacco; Coal; Land use, Biodiversity and Forest; Oil and Gas). Managers that do not satisfy at least two of the first three criteria, and that do not re s trict their loan investments as m entioned above are considered as “laggards”. W e h ave made it clear to managers that w e expect them to improve the way the y op erate regarding ESG and that t hey will be excluded in two years ’ time if they do not s atisfy the above criteria. The majority of CLO managers have implemented ESG measures i n recent years and most CLO managers have signed for UNPRI in 2020/21. Additionally we have only identified three laggards. Volta’s exposure to these laggards is 6% of NAV as 31 July 2022 and consists of positions held from 2013 and 2015. As at 31 July 20 22, the Company does not hold an y non-CLO positions that finance an y restricted investments mentioned ab ove. W he n considering the CLO positions: - 55% do not incorporate any exclusions (it is mostly deals being issued prior 2019) - 15.5% incorporate between 1 and 4 ex clu sions - 3.5% incorporate between 5 and 9 e x c lusions - 20% incorporate between 10 and 14 exclusions - 6% incorporate more than 15 exclusions W e have recently contracted with a provider o f key performance in dicators for loa ns, which will co ver th e vast majority of the underlying loans in which the Company invests. W e w ill continue to pursue positive ESG outcomes from our investment approach and look forward to providing investors with future updates. AXA INVESTMENT MANAGERS PARIS 28 October 2022 STRATEGIC REPORT Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 11 Introduction This rep ort is designed to provide information about the Compa ny’s business and results for the year ended 31 July 2022. It should be read in conjunction with the Chairman’s Statement and the Investment Manager’s Report which gives a detailed review of investment activities for the year and an outlook for the future. Company Summary The Company is a limited liability company registered in Guernsey under t he Companies (Guernsey) Law 2008 (as amended) with registered number 4574 7. The registered office of the Company is BNP Paribas House, St J ulian’s Avenue, St Peter Port, Guerns ey , GY1 1 W A, Channe l Is lands. The Company is an authorised closed-ended collective investment scheme in Guernsey, pursuant to the Protection of Investors (Bailiwick of Gue r nsey) Law, 2020 (as amended). The Company’s Ordinary shares are l isted on Euronext Amsterd am and on the premium segment of the Official List of the UK Listing Authority and a re admitted to trading on the Main Market of the L ondon Stock Exchange. Volta’s home member state for the purposes of t he EU Trans parency Directive is the Netherlands. As such, Volta is subject to regulation and supervision by AFM, being the financial markets superviso r in the Netherlands. Purpose, investment objectives and strategy The Com pany exists to provide Sha r eholders w ith a ccess to a range of structured cre dit i nv estments actively managed by AXA I M . Harnessing AXA IM 's expertise, the Company currently in ve s ts i n predominantly CLOs and similar asset classes with the o bje ctive of prov i ding Shareholde rs with a regular a nd high l evel o f income and the pr o spect of modest ca pital g ains over the investment cycle. A more diversified strategy across structured finance assets may be pursued opportunistically. The Comp any’s in vestment objectives are to seek to preserve capital a cross the credit cyc le and to provide a s table stream of i ncome to its Shareholders through dividends that it expects to distribute on a quarterly basis. Subject to the risk fac tors that are described in the ‘Principal and Emerging Risk Factors’ section and i n Note 15, the Com pany currently seeks to attain its investment objectives a s described above. The Compan y’s investment strategy focus es on d irect and indirect investments in, and exposures to, a variety of assets selected for the purpose of generating cash flows for the Company. The assets that t he Company m ay invest in either directly or ind irectly include, but are no t limited t o, corporate credits; sovereign and quasi-sovereign debt; residential mortgage loans; commercial m ortgage loans; automobile loans; student loans; c redit card receivables; leases; and debt and equity interests in infrastructure projects. The Company’s approach to inves t ment is through vehicles a nd arrangements that essentially provide leveraged exposure to portfolios of such Underly ing Assets. In this regard, the Company review s the investment strategy adopted by AXA IM on a quarterly basis. The current investment strategy is to concentrate on CLO Investments (debt/equity/warehouses). There can be no assurance that the Company will achieve its investment objectives. Principal and Emerging risks and uncertainties The principal a nd emerging risks and uncertainties faced by the Company are described within the ‘Principal and Em erging Risk Factors’ section of the Annual Report on pages 19 to 22 and Note 15 in the financial statements. The Investment Manager AXA IM is a multi-expert a sset management company within the AXA Group, a global leader in financial protection an d wealth management, which has a team of experts concentrating on the structured finance markets. AXA IM is one of the largest Eu ropean- based asset managers with 2,460 professionals and € 887 billion in assets under management as at the end of December 2021. AXA IM is authorised by the A MF as an investment management company a nd its activities are gov erned by Article L. 532-9 o f the French Cod e Monétaire e t Financier. AXA I M was app ointed as th e Company’s AIFM in accordance with the EU AIFMD on 22 July 2014. Performance measurement and Ke y Performance Indicators The Directors meet regularly to review performance and risk agains t a number of key mea sures. Total return The Board re gularly reviews NAV and NAV total return, the performance of the portfolio as well as income rec eived and sha re price of t he Company. T he Directors regard the Co m pany’s NAV total return as being the overall measure o f value delivered to Shareholders over the long t erm. NAV total return is calculated based on NAV g rowth of the Company with dividends reinvested at NAV. NAV, on a to t al return ba s is, w as (7 . 3)% fo r t h e y ear ended 31 July 2022. Please re fer t o page 1 for NAV and sh are p r ice total r eturn analysis. Ongoing charges The ongoing cha rges are a measure of the total recurr ing expenses in curred by the Company expressed as a percentage of the average S hareholders’ funds over the year. The Board regularly reviews the ongoing c harges and monitors all Compan y ex pe nses. Refer to page 76 for methodology of calculation. STRATEGIC REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 12 Performance measurement and Ke y Performance Indicators (Continued) Premium / discount The Direct ors review the trading p rices of the Company’s Ordinary shares and c ompare them against their NAV to assess quant um and volatility in the discount of the Ordi nary share prices to their NAVs during the year. Please refer to page 1 for further analysis. Environmental, social and governance issues The Company itself h as only a very small footprint in the local community and only a very small direct impact on the environment. However, the Board ackno w ledges that it is imperative that ev e ryone contributes to local and global sustainability. The nature o f the Company’s investments is such that they do no t provide a direct route to in fluence investees in ESG matters in many areas, but the Board and the Investment Manager work together to ensure that such factors are carefully considered and re flected in investment decisions, as outlined elsewhere in these financial statements. Board members do travel, partly to meetings in Guernsey, and partly elsewhere on Company business, including for the annual due diligence visits to AXA IM in Paris and to BNP Paribas in Jersey. The Board considers this essential in overseeing s ervice providers and sa feguarding stakeholder interests . Otherwise, t he Board see ks to mini mise travel b y the us e of c onference c alls whenever go od governance permits. For further information regarding the Company’s approach to environmental, social and go v e rnance issues, please refer to the ESG Section within the Investment Manager’s Report on pages 9 and 10. Life of the Company The Company has a perpetual life. Future strategy The Board continues to believe th at the investment s trategy and policy adopted is a ppropriate for, and is c apable of meeting, the Company’s objectives. The overall strat egy re mains unchanged and it is th e Board’s assessment that the I nvestment Manager’s resources are ap propriate to properly manage the C ompany’s investment po rtfolio in th e current and ant icipated investment environment. Refer to the Investment M anager’s report on pages 3 to 10 for details regarding performance to date of the i nv e stment portfolio and the main trends and factors likely to affect those investments. Going Concern Under the Listing Rules, the AIC Code and applicable regulation the Directors are required t o satisfy themselves that i t is reasonable to assume that the C ompany is a going concern and to identify an y material uncertainties to the Com pany’s ability to continue as a going concern for at least 12 months from the date of approving the financial year statements. The Directors hav e considered the s tate of financial market conditions at th e period end date and subsequently. Whilst the negati ve impacts on t h e m arket valu e of the Company’s u n derlying i nv estments arising fro m t h e gl ob a l CO VID-19 pandemic have now largely passed, the war in Ukra ine ha s added t o geopolitical an d macro-economic uncertainty to m arkets, a l though there has been v ery little direct i mpa ct o n the Company or its portfolio. Ho w ever, the impact on the Company’s cash flows is not expected to b e material and appropriate steps, as outlined in previous reports, can be taken to minimise cash out flow s . The incidence and i mpact of d e faults in t he U n derlying As sets is hard t o predict but are l i kely to rise, although it should b e noted that recent default levels are far b el o w tho se originally fo rec ast and also b elow those used in the Inves tment Managers’ models. However, the D irectors have c oncluded that any reasonably foreseeable fall in c ash i nflows would not have a m ateri al impac t on th e Compan y’ s ability to meet its liabilities a s they fall due. Therefore, after making appropriate enquiries, the Directors are of th e opinion that the Company remains a going concern and a re satisfied that it is appropriate to continue to adopt the going concern basis in preparing the Company’s financial statements. Viabilit y Sta tement In accordance with the provisions of the AIC Code, the Dire c tors have a ssessed the viability of th e Company o ver a p eriod of four years from the date of approval of this r e port. In making this assessment the Dire ctors have t aken into acco unt the impact t ha t various plausible adverse scenarios might be expected to have on the Company’s cash flows and its ability to meet i ts liabilities on a timely basis. The starting point for this analysis was the Company’s current f inan cial position; cu rrent market conditions; the princ ipal risks facing the Company, as described within the Principal Ri sk F actors s ection of the Annual Report on pages 19 to 22; an d the risks arising from the Company’s financial instruments set out in Note 15 to the financial statements, and their potential impact on the Company. A four year forecasting period was considered to b e appropriate, given th e li fe cycle of t he Company’s particular i nvestme n t un iverse and the structure and in vestm ent objectives of the Company, as it represents the time within w hich at l east 50% of the value of the portfolio might be reasonably expected to have realised naturally despi te u nfavourable market conditions. STRATEGIC REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 13 Viabilit y Sta tement (Continued) In making their assessment of the Company’s prospects, the Directors ha ve focused their attention on those risks impacting the carrying value and liquidity of the Company’s investment portfolio and the C ompany’s ability to generate cash from its activities, and thereby to enable it to meet its paymen t obligations as they fall due, including under de rivatives contracts, as well as to continue to pay a stream of dividends in ac cordance with its investment objectives. The Directors conside r th at the greatest risks to the Company’s ability to generate cash, and to t he ca rrying value of its investments, would be a combination of inter alia: a s ignificant and ra pid appreciation on the US Dolla r; a sustained increase in th e default rate of the credit investments and/or Unde r lying Asse t s of the p ortfolio; and/or any c hange i n market conditions w hi ch resu lted in severe, prolonged da mage t o the liquidity a nd market value of the investment portfolio. The Directors h ave considered in come, expenditu r e and NAV pro jections for th e Company, firstly u nder a base case that incorpo rat es the impact of the current economic d o w nturn and potential recession, t h en u nder v a r ious stress test scenarios that are considered to be severe but plausible and i ncluding scenarios where default levels were m odelled to peak at a level higher than those previously experienced by the Company d uring the GFC and to persist for longer than the heightened defa ult levels that were experienced by the Company at that time. Specific variables adju sted to account fo r the impact of the o ngoing economic dow n turn an d potential recession included: using S& P pessimistic forw ard 12 m onth default rates for speculative grade iss uers; eliminating any lag in the timing of the downturn; ma king n o distinction be tw een t he performance o f US and European CLO ma rkets; assuming o ne or two in dustry sectors become severely stressed; and modelling the impact of +/- 20% moves in the Euro US Dollar e x c hange rate. Under no plausible scenario modelled did the Company be come c ash flow i nsolvent bu t the modelling m ade two key as su mptions: firstly, it was assumed that th e portfolio would react to changes in underlying factors in a si m ilar way to that experienced in the past; and secondly, the Directors made the assumption that the Investment M ana ger would be a bl e to actively and conservati v e ly manage the portfolio during the downturn. The Direct ors noted that under various plausible adverse scenarios, while neither of the Company’s objectives of providing a stabl e income st ream and preserving capital across the credit cycle may be met, projected i ncome exceeded projected expenses over the period. The Di rectors note that the Company’s shares trade at a discount to NAV. They actively m onitor the discount and communicate regularly with Shareholders on this subject. In making their assessment of viability, the Directo r s have assumed that Shareholders will continue to recognise the value provided by the Company and will not petition to wind up the Company. The Directors have also assumed that no unforeseen change in, or change in interpre tation of, the regulations and laws to which the Company is subject w i ll have a materially negative impact upon its viability. The Directors therefore confirm tha t they have performed a robust assessmen t of the viability of the Company over the four-yea r period from the period ended 3 1 July 2022, taking into accou n t their a ssessment of the principal risks f a cing th e Company, including those risks that would threaten its business model, future performance, solvency or liquidity. The Direc tors, after due consideration a nd in the absence of any un foreseen circumstances, confirm that t hey have a reasonable expectation that the Company will be able to continue i n operation and meet it s liabilities as they fall due over the four-year p eriod of their assessment. STRATEGIC REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 14 Section 172(1) Statement Through adopting the AIC Code, the Board acknowledges its duty to comply with section 172 of the UK Companies Act 2006 and to act in a way that promotes t he success of the Company for the benef it of its Shareholders as a whole, having regard to (amongst other things): a) consequences of any decision in the long-term; b) the interests of the Company’s employees; c) the need to foster business relationships with suppliers, customers and others; d) impact on community and environment; e) maintaining reputation; and f) acting fairly as between members of the Company. The Board considers this duty to be inherent within the culture of the Compan y a nd a part of its decision-making process. The Comp any’s culture is one of openness, tra nsparency a nd inclusivity. Re spect for the opinions of its diverse stakeholders fe ature s foremost as does its desire to implement its operations in a sustainable way, conducive to the long term success of the Company. Information on how the Bo ard has engaged w i th its stakeholders and promoted the s ucces s of the Company, through the decisions it has taken during the year, whilst having regard to the above, is outlined belo w . The example outcomes below outline d ecisions taken during th e year which the Board believes has th e greatest impact on the Company’s long term s uccess. The Board considers the factors outlined under secti on 172 and the wider interests o f stakeholders as a whole in all decisions it takes on behalf of the Company. Stakeholder engagement The Company is an externally managed investment c ompany, has no employees, and as such is operationally qui te simple. The Board does not believe that the Company has an y m aterial stakeholders other than those set out in the following table. Issues that matter to them Investors Service providers Communit y a nd environment  Performan ce and liquidity of th e shares  Growth and l iquidity of the Company  Reput ation of the Company  Comp liance w ith Law and Regulation  Remu neration  Comp liance w ith law and regulation  Imp act of the Company and its activities on third parties Engagement process Investors Service providers Communit y a nd environment  Annu al General M e eting  Freq uent meetings w i th investors by brokers and the Investment Manager and subsequent reports to the Board  Monthly facts heets  Key Info rmation Document  Publ ication of paid for researc h  The ma in tw o service providers – AXA IM and BNPP – engage with the Board in face to face meetings quarterly, giving them direct input to Board discussions.  The Board also considers the interests of the Corporate Broker.  All service providers are asked to complete a questionnaire annually which includes feedback on their interaction with the Company, and the Board normally undertakes an annual visit to AXA IM in Paris and to BNPP in Jersey.  The Compa ny itself has only a very small footprint in the local community and only a very small direct impact on the environment.  However, the Boa rd acknowledges that it is imperative that everyone contributes to local and global sustainability. STRATEGIC REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 15 Stakeholder engagement (Continued) Rationale and example outcomes Investors Service providers Communit y a nd environment  Clearl y investors are the most important stakeholder for the Company. Most of our engagement with investors is about “business as usual” matters, but has also included discussions about the discount of the share price to the NAV. The major decisions arising from this have been for the Board to seek to ensure long term value (e.g. the inclusion of warehouses within the portfolio to give access to beneficial terms in subsequent investments) and to seek greater liquidity for the Company’s shares through increasing its profile.  In a ddition, the Board has focussed on valuation of assets, a key priority for Shareholders. As a result, we have adopted in recent years a more sophisticated valuation methodology for the CMV investment and to engage JP Morgan PricingDirect for all CLO valuations, thus ensuring a more robust and reliable methodology than previously. The Board also spent considerable time focused on the valuation of Fintake and REO during the year.  The Comp any relies on service providers entirely as it has no systems or employees of its own. During the year the Board held discussion with AXA IM regarding both the breadth of the mandate and fees. The Board believes that the Company dealt fairly and transparently with AXA IM and balanced the requirements of all stakeholders through constructive dialogue.  The Board alw a ys seeks to act fairly and transparently with all service providers, and this includes such aspects as prompt payment of invoices.  The natu re of the Company’s investments is such that they do not provide a direct route to influence investees in ESG matters in many areas, but the Board and the Investment Manager work together to ensure that such factors are carefully considered and reflected in investment decisions, as outlined elsewhere in the document.  Board membe rs do travel, partly to meetings in Guernsey, and partly elsewhere on Company business, including for the annual due diligence visits to AXA IM in Paris and to BNPP in Jersey. The Board considers this essential in overseeing service providers and safeguarding stakeholder interests. Otherwise, the Board seeks to minimise travel by the use of conference calls whenever good governance permits. Engagement processes are kept un der regular review. Invest ors an d other interested parties a re encoura ged to c ontact the Company via guernsey.bp2s.volta.cosec@bnpparibas.com on these or any othe r matters. The Strategic Report was approved by the Board of Directors on 28 October 2022 and signed on its behalf by: Dagmar Kershaw Stephen Le Page Chairman Chairman of the Audit Committee REPORT OF THE DEPOSITARY TO THE SHA REHOLDERS Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 16 As De positary, we are re spons ible fo r ca rryi ng out dut ies set out in Article 2 1 paragraphs (7) ( 8) and (9) of the AIFMD a nd can confi r m that monitoring has taken place to ensu r e that AXA IM (the AIFM) is compliant with Article 21 paragraphs (7) (8) and (9) for the year ended 31 July 2022, and that we have no matters of concern to report. BNP Paribas S.A., Guernse y Branch BNP Paribas House St Julian’s Avenue St Peter Port Guernsey GY1 1 W A 28 October 2022 REPORT OF THE DIRECTORS Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 17 The Directors present their Annual Report and the Audited Financial Statements for th e year ended 31 Ju ly 2022. In the opinion of the Di rectors, the Annual Report and Audited Financial Statements t aken as a whole are fair, b alanced and unders t andable and provide t he information necessary for Shareholders to assess the Company’s positi on and performance, business m odel and s trategy. Culture of the Company The Board recognises that its tone and culture are im portant and will greatly impact its i nte ractions with Shareholders and se rvice providers as well as the development of long-term shareholder value . The importance of sound ethical values and behaviours are crucial to the ability of the Company to achieve its corporate objectives successfully. The Board i ndividually and collectively seeks to act with diligence, honesty and integrity. I t encourages its members to express differences o f perspective a nd to c hallenge but always in a respectful, op en, c ooperat i ve an d collegiate fashion. The Board encourages diversity of thought and approach and chooses its members with this approach i n mind. The co rporate g ov ernance principles that t he Boa r d has adop ted are designed to ensure the Company delivers l ong term value to its Sha r eholders and treats all Shareholders equally. All Shareholders are encouraged to have an open dialogue with the Boa r d. Share capital The Com pany’s share c apital consists of an unlimited number of s hares. As at 31 July 2022, the Company’s issued share capital was 3 6,580,580 shares (31 J uly 2021: 36,580,580 sha r es). I n accordance with the p rovisions of the Articles of th e Company, there is in iss ue 1 Class B convertible Ordinary share of no par value which is issu ed to the Investment Manager an d gives them the right to elect (or remove) one member of the Board. Results and dividends During the financial year, the Com pany’s NAV decreased by € 38.7 million or € 1.058 per share. The net comprehensive loss for the year, amounted to € 17.9 million. During the year, the Directors d eclared the following quarterly dividends: € 0.14 per sha re paid i n September 2021; € 0.15 per share paid in January 2022; € 0.15 per share paid in April 2022; and € 0.13 per share paid in Jul y 2 022. Share repurchase programme At the 20 21 AGM, held on 8 December 2021, the Direc tors were g ranted authority to repurchase 5,483,429 shares (being equa l to 14.99% of the aggregate number of shares in issue at the date o f the 2021 AGM n otice). This a uthority, w h ich has not been used, will expire at the upcoming AGM. The Directors intend to seek annual rene w al of this authority from Shareholders. Authority to allot At the 2021 AGM, th e Directors were granted authority to allot, grant options over, or oth erw is e dispose of up to 3,658,058 s hares (being not more than 10% of the shares in issu e at the date of th e 2021 AGM notic e). This a uthority, which has no t been used, will expire at the 2022 AGM. The Directors intend to seek annual renewal of this authority from Shareholders. Alternative Investment Fund Managers Directive The AIFMD seeks to regulate managers of AIFs that are marketed or managed in the European Economic Area. In compliance with the AIFMD, the Company has appointed AXA IM to act as its AIFM and, BNP Paribas has been appointed to act as its Depositary. Refer to the legal and regulatory disclosures section on pages 78 and 79 for further information. Directors The Directors who held office during the financial year and up to the date of approval of this report are listed on page 80 and 81. Refer to the Directors’ remuneration report on pages 31 and 32 for the Directors’ i nterests in the Company’s s hare capital as at the current time and at the financial year end. Shareholders’ Interests As at 31 July 2022, so f ar as t he Directors are aw are, no pers o n ot her than tho se listed below an d those p art ies disc losed in Note 17 to the financial statements was interested, directly or indirectly, in 5% or more of the issued share capital in the Company: Number of Percentage of Ordinar y Ordinary Registered Shareholder s hares held s hares held AXA S.A Bank 7,955,720 21.75% BNP Paribas Wealth Management 5,812,620 15.89% BNP Paribas 3,843,042 10.51% AXA Framlington Investment Managers 3,009,988 8.23% None of the above Shareholders have Shareholder rights that are different from those of other holders of the Company’s Ordinary shares, except fo r the holder of the Class B share, an affiliate of AXA S.A., which has th e right to appoint a Di rector to the Board. This right is not currently being exercised. REPORT OF THE DIRECTORS (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 18 Disclosure of information to Auditor The Directors who held office at the date of approval of t his Directors’ Report confirm that, so far as they are each aw are , th ere is n o relevant audit information of which the Company’s Auditor is unaware and each Director has ta k en all the s teps that he ought to have taken as a Director to make hims elf aware of any re lev ant audi t information and to esta blis h that the Company’s Auditor is aware o f that information. Independent Auditor Following their re-appointment at the 2021 Annual General Meeting, KPMG s erved as Auditor during the financial year and has expressed its willingness to continue in office. Financial risk management objectives and policies The Bo ard is responsible for the Company’s system of risk m anagement and internal control and meets regularly i n the form of periodic Board meetings to assess the effectiveness of such controls in managing and mitigating risk. The Board confirms that it has reviewed the effectiveness of the Company’s system of risk management and internal control for the year ended 31 July 2022, and to the date of approval of this Annual Report. The key finan cial risks that the Directors believe the Company is e x po sed to include credit ris k , li quidity risk , market risk, i nterest rate risk, valuation risk and foreign currency risk. Please refer to Note 15 f or reference to financial risk management disclosures, w hich explains in further detail the above risk exposures a nd th e policies and procedures in place to monitor and mitigate these risks. The Administrator has established an in ternal control framework t o p r ovide r easonable, but not absolute, assurance on the effectiveness of the internal controls operated on behalf of its clients. The effectiveness of these controls is assessed by the Administrator’s compliance and ris k dep artments on a n on-going basis and by periodic re view b y external pa rties. The Administrator’s Fund Compliance Manager, acting on behalf of the Company, presents an assessment of the ir review to th e B oard in line with th e compliance monitoring programme on a quarterly basis which has revealed no matters of concern. Events after the Reporting Date The Directors are not aware of any dev elopments that might have a material effect on the operations of the Company in subs equent financial periods not already disclosed in this report or Note 19 of the attached financial statements. The Report of the Directors was approved by the Board of Directors on 28 October 2022 and signed on its behalf by: Dagmar Kershaw Stephen Le Page Chairman Chairman of the Audit Committee PRINCIPAL AND EMERGING RISK FA CTORS Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 19 Summary An i nvestment in t he Company’s shares is suitable on l y for so p histicated investors w h o a re capable of evaluating t h e merits and risks of such an investment and who have sufficient r es ources to be able to bear any lo sses (which may eq ual the whole amount invested) that may result. The Compa ny offers no assuranc e that its inves tment objectives will b e ac hieved. Prospective investors should carefully review and evaluate the descriptions of risk and the oth er information contained in this report, as well as their own personal circumstances, and consult with their financial and tax advisors before making a decision to invest in the shares. Prospective investors s hould be aware that the value of the shares ma y decrease, any dividend income f rom them may not reac h targeted levels or may decline, and investors may not get back their invested capital. In addition, the market price of the shares may be sign ificantly different from the underlying value o f the Company’s n et assets. The NAV o f the Co mpany as d etermined from time to time may be at a level higher than the amount that could be realised if the Company were liquidated. The fo llowing p rincipal and emerging risks and uncertainties are those that the Company believes are material, but these risks a nd uncertainties may not be t he only ones that t he C o mpany and its Shareholders m ay face. Additional risks and uncertainties, including those that the Company is not a w a re of or currentl y views as insignificant, may a lso result in de creased revenues, increased expenses or other events t ha t could res ult in a decline in the val ue o f the shares. A more c ompr ehensive list of the risks faced by the Company may be found in the Summary Document that is posted on the Company’s website. Strategic risks These are the investment risks the Company chooses to take in order to meet its performance objectives. The Board has defined limits for various metrics in order to monitor and control the following strategic risks, which are reviewed on at least a quart erly basis. The Board also reviews regularly the broad investment environment and receives detailed reports, including scenario analysis, from the Investment Manager on the economic outlook and potential impact on the Company’s performance. Principal risks Impact, tolerance, controls and mitigation Credit risk – The risk that the credit quality of the underlying loans or financial assets within the investment portfolio deteriorates, leading to defaults and/or investment losses, a reduction in cash flows receivable and a fall in the Company’s NAV. Depending on the severity of any decline in credit quality, particularly the duration of any such change, the impact of underlying asset credit and/or default risk could potentially be high. However, the Company is expected to be able to tolerate a short-term spike in defaults without any material impact on the Company. Credit risk is monito red and managed by the Investment Manager through active portfolio managemen t an d is mitigated by the Company’s broadly diversified investment portfolio. Individual and aggregated exposure limits and tolerances in relation to credit risk are set by the Company and reviewed regularly. Because most CLOs and some other investments in the Company’s portfolio are actively managed and the Company invests at various levels in the capital structure of CLOs, the aggregat e net credit exposure across the portfolio to underlying names cannot b e fully mitigated. However, the Investment Manager periodically provides granular impact analysis of credit exposure to the larger underlying obligors in order to allow the Board to be sa tisfied that the portfolio remains broadly diversified and that this risk remains at a tolerable level. The risk that a counterparty defaults leading to a financial loss for the Company. The Company has a moderate credit exposure to counterparties through inter alia: derivatives; repurchase agreements; and cash deposits. On rare occasions, there may be short-term exposure via settlement processes. Limits are set for individual counterparty exposures. The Investment Manager monitors these limits and pro vides compliance reports thereon to the Board. The Investment Manager also monitors the quality and appropriateness of counterparties, upon which it performs regular due diligence. Market risk – The impact of movements in market prices, interest rates and foreign exchange rates on cash flows receivable and the Company’s NAV. The impact of market risk on the Company’s ability to achieve its investment objectives could potentially be high. When repurchase agreements are in place, the market value of the collateral required to be posted by the Company, is significantly higher than the amount of the Repo, due to the application of haircuts. In the event of market disruption, the amount of collateral that would be required could inc rea s e significantly and a failure to provide such additional collateral may result in forced sales. Likewise, a combination of a sharp downturn in asset prices with sharp rise in the US Dollar would result in an FX margin call that might create a liquidity squeeze and result in assets being sold at distressed levels. Thus, both market and FX risk are monitored closely and these risks are managed and mitig ated as far as possible by the Investment Manager through active portfolio management, the maintenance of a diversified investment portfolio and use of the flexibility of the Compan y’ s investment policy, which permits the Investment Manager to switch between asset classes and levels of risk. PRINCIPAL AND EMERGING RISK FA CTORS (CONTINUED ) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 20 Preventable risks These are the risks that the Board believes should be substantially mitigated by the Company’s controls. The Board has defined limits for various metrics in order to monitor and control the following preventable risks, which are reviewed by the Board on at least a quarterly basis. Principal risks Impact, tolerance, controls and mitigation Liquidit y a nd going concern – The risk that the Company is unable to meet its payment obligations and is unable to continue as a going concern for the next twelve months. If the Company were to be unable to meet its obligations as they fell due, the impact on the Company would be severe, although this risk is remote. Consequently, the Company monitors this risk and the potential threats to the liquidit y of t he portfolio. The availability of liquid resources is a high priority for the Board. On a day-to-day basis, the Investment Manager monitors cash flow and payment obligations carefully and retains sufficient cash and/or liquid assets available to meet its obligations. The Investment Manager also monitors and reports to the Board on the market liquidity of the po r tfolio. Cash demands may arise from collateralisation and payment obligations under any Repo, FX margin calls and other payment obligations on hedging agreements and any other derivatives the Company might enter into, drawdowns on investment commitments and other paym ent obligations such as ongoing expenses. Operational Risk – The risk that the Company, through its service providers, fails to meet its contractual and/or legal or regulatory reporting obligations, resulting in sanctions, financial penalties and/or reputational damage. The Board has considered the potential impact of failure to meet its contractual, legal and regulatory obligations. To this end, the Board carries out annual due diligence vi s its with the Company’s Investment Manager and Administrator to discuss processes and identify areas for improvement. Strategic risks (continued) Principal risks Impact, tolerance, controls and mitigation Market risk (continued) – The impact of movements in market prices, interest rates and foreign exchange rates on cash flows receivable and the Company’s NAV (continued). -The risk that unhedged currency exposures may lead to volatility in the Company’s NAV; Given that the Company’s investments have floating interest rate characteristics, the direct risk arising from interest rate volatility is modest. The I nvestment Manager carefully manages the Company’s foreign exchange exposure hedging through derivatives to balance the partial mitigation of the impact of foreign exchange fluctuations upon the NAV with the need to ensure that any margin obligations can be met comfortably. The Board has set foreign exchange exposure tolerances and derivati ve margin tolerances. The Company invests in both EUR and USD markets, and maintains that flexibility to be able to access the full range of investment opportunities. However if the USD exposure is not fully hedged, this could lead to volatility in the Company’s NAV due to changes in FX rates. The Investment Manager mitigates this risk through hedging a significant portion of the FX risk, and monitors the unhedged exposure of the portfolio on a consistent basis. The risk of severe market disruption leading to impairment of the market value and/or liquidity of the Company’s investment portfolio. The Company is well positioned to be able to tolerate prolonged market disruption, as occurred in 2008/2009, due to the fact that the Company is currently financed by equity on which it is able to exercise discretion regarding dividend payments. The Compan y m ay utilise debt financing through entering into repurchase agreements. The Board monitors overall leverage levels and soft limits applicable to any Repo and associated collateralisation. Re-investment risk – The ability to re-invest in investments that maintain the targeted level of returns at an acceptable level of risk. The potential impact of this risk is considered to be moderate in that it would not be felt immediately, given the medium-term nature of the Company’s portfolio. The Company fully tolerates this risk in order to achieve its investment objectives. In the Board’s opinion, the ability of the Company and the Investment Manager to mitigate this risk is necessarily limited by external factors. Nevertheless, the Investment Manager is alert to the need to anticipate and respond to market and regulatory developments. Taking into account the reputation, size and presence in the market of the Investment Manager, which provide increased exposure to investment opportunities, and the Company’s fle x i ble investment mandate, the Board believes that this risk is mitigated as far as reasonably possible. The Board is aware of the risk of “creep” in risk tolerance in order to maintain r eturns in less favourable market environments and regularly challenges the Investment Manager o n this point. PRINCIPAL AND EMERGING RISK FA CTORS (CONTINUED ) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 21 Preventable risks (continued) Principal risks Impact, tolerance, controls and mitigation Operational Risk (continued) – The risk that service providers will be disrupted by factors outside of their control such as lockdowns, outages or other widespread unforeseen events. The impact of governments’ responses to the COVID-19 pandemic was an emerging risk but thus far has been successfully managed. Lockdown meant that service provide r s needed to invoke business recovery plans and adjust ways of working, but risks a ppear to have been mitigated without significant impact. This has been successfully achieved thus far by all service providers but it is an area of ongoing focus. Valuation of assets – The risk that the Company’s assets are incorrectly valued. W hi lst t here might be no immediate direct impact on the Company from incorrect valuation of the Company’s assets in its monthly NAV reports and annual and interim financial reports, this is considered to be a high risk area due to the potential impact on the Company’s share price and actions that could arise from the provision to the market of materially inaccurate valuation data. Any material valuation error is reported to investors. The Compan y’ s accounting policies for the valuation of its assets are described in Note 3 in the financial statements. The Company’s NAVs are calculated based on valuations provided independently by JP Morgan PricingDirect for the majority of positions. Investment Manager risks – The risk that the Investment Manager may execute its investment strategy poorly. This risk is mitigated by the fact that the Investment Manager is part of a very large organisation with deep resources. I t manag es a number of other funds in the same asset classes as the Company and has a strong track record over a long period in the Company’s asset classes. Key person risk – The risk that the Investment Manager resigns, goes out of business or exits the Company’s asset classes. The Investment Manager has large teams and deep resources of skills to replace ke y individuals. The Investment Manager must give three months’ notice before resigning which would help mitigate the disruption caused by any need to appoint a new Investment Manager. Legal and regulatory risk – The risk that changes in the legal and regulatory environment, including changes in tax rules or interpretation, might adversely affect the Company, such as changes in regulations governing asset classes that could impair the Company's ability to hold or re-invest in appropriate assets and lead to impairment in value and or performance of the Company. The impact of legal and regulatory change, including tax change, could potentially be high. The Investment Manager continuously monitors the legal and regulatory environment in which the Company operates in order to enable the Company to continue to adapt to any legal and regulatory changes by investing in new asset classes and/or new investment structures in response to such changes. The Investment Manager reports to the Board at least semi-annually regarding any relevant upcoming regulatory and tax changes and on an ad hoc basis if appropriate. The Company also has an agreement with Fidal who assist with tax items as a nd w he n required. Emerging Risks Impact, tolerance, controls and mitigation ESG Risks – Climate change may impact individual borrowers adversely and may also have adverse macroeconomic impacts such as higher inflation. There is also the possibility of distortions to capital flows. The consideration of such risks is embedded within the Investment Manager’s ESG policy. PRINCIPAL AND EMERGING RISK FA CTORS (CONTINUED ) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 22 Emerging Risks (continued) Impact, tolerance, controls and mitigation ESG Risks (continued) – The risk that the Company, through AXA IM, does not engage sufficiently with managers around ESG factors, and invests in managers and assets which fail to meet contractual, legal and/or reporting standards around ESG factors. Such assets could be deemed ineligible in their CLO funds, and suffer reductions in market value. The Company is exposed to the impact of a mismanagement or failure to recognise potential ESG issues at portfolio company level, industry level, service provider and Board level, w h ich could damage the reputation and standing of the Company and ultimately affect its investment performance. The Board has increased its oversight of service providers, particularly the Investment Manager. The Investment Manager has ESG policies in place and actively engages with underlying managers to assess their ESG credentials. The Board will con t inue its close oversight of these processes to ensure that they are adequate and continue to be developed in accordance with regulation and best practice. LIBOR transition to SOFR – The transition from LIBOR to SOFR raises potential risks around asset pricing and cash flows. The impact on valuation is expected to be modest and transitory. Sanctions Risk – The risk that the Company’s assets will be in scope of international sanctions. The Board and the Investment Manager have considered the potential impact of sanctions on the Company and do not believe that current sanctions would have a material impact on the Company. The Investment Manager has confirmed to the Board that no underlyin g investments are directly subject to sanctions. The Investment Manager also considered stress tests, in relation to the impact of sanctions, on underlying investments and believes that the overall effect will not be notable. CORPORATE GOVERNANCE REPORT Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 23 The Company is a member of the AIC and has elected to follow the AIC Code of Corporate Governance 2019. The AIC Code has been endorsed by the FRC as an alte r native mea ns for their members to meet their o bl i gations in relation to the UK Code. The Company is not required to apply the Dutch Corporate Governance Code. The Board The Board and its responsibilities The Board is responsible for the determination of the Company’s investment obj ectives, investment g uidelines and dividend policy and has overall responsibility for overseeing th e Company’s activities. The Investment Manager has full discretion to m ake and implement decisions concerning the in vestments an d o th er a ssets held by the Company within the g u idelines and policies set by the Prospectus and amplified by the Board. During the year under review the membe r s of the Board consisted of f our or five Directors. Refer to pages 80 and 81 for the biographies of each Director, as at year end, which demonstrates their professional knowledge and experience. The Co mpany’s da y-to- day activities are delegated to third part ies, including the Investment Manager, the Administrator and the Depositary. The Company has ente red into formal agreements with each of its service providers . Under the terms of the Investment Management Agr eement, t he Investment Manager is respons ible f o r the m anagement of the Comp any’s investment p ort foli o, s ubject to th e Company’s investment gu idelines and th e overall supervision of the Board. The respon sibilities of BNP Pa ribas, in res pect of its duties as the Administrator, including it s d uties as Company Secre t ary, are g overned by an Admin istration Ag reement and its duties as current Depositary are set out in a Depositary Agreement. The Board has e s tablished th e Management Engagement Comm ittee which m onitors the performance of each of it s service providers on a regular bas is and reviews the ir performance on a formal basis at least annually (See Managem ent Engagement Comm ittee section o n page 25). The Directors h ave also reviewed the ef fectiveness of the risk management an d internal con trol syst ems, including material financial, operational a nd complianc e controls (including those relating to th e financial reporting process) and no significant failings or weaknesses were identified. Board diversity At the year e nd, the Board comprised two female (one of whom is of Black (African) ethnicity) and three male Directo r s. The Board has due regard for the b enefits of experience and diversity in its membership, including g ender, and strives to achieve the right balance of individuals w ho have th e knowledge and skillset to aid the effective functioning of t he Boa r d and m aximise S h areholder return while mitigating the r isk ex po sure of the Company. T he Board is committed to ensuring that any vacancies a rising are filled by the most qualified candidates who have complementary skills or who possess the s kills and experience which fill any gaps in the Board’s knowledge or experience irrespective of ge nder, race or creed. The Company has no employees and th erefore there is nothing further to report in respect of gender representation within the Company. During the year under review, t he Board chose to participate in the Board Apprentice Sc heme, which aims to give a ppropriate individuals first hand board experience through o b servation of t he w ork ings and dynamics o f boards. The Board selected o ne board apprentice, who has attended the Co mpany’s meetings and received rele va n t documentation. The Board views this as a valuable exercise in mentoring accomplished individuals to be future directors, fostering equality and developing board culture. Board independence, composition and tenure All of the Directors are non-executive. Mr Meader acted as Cha irman of the Board until his retirement on 31 J uly 2022 and Mr Le Page acts as the Senior In de p endent Director. Ms Kershaw was ap pointed as the new Chairman of the Boa r d subsequent to Mr Meader’s retirement. Each o f the Directors are independent from the Investment Manager and satisfy the independence criteria as set out in the AIC Code and as adopted by the Board as follows:  the i ndependent Board m embers may no t be Di r ectors, employees , partners, office r s or professional advisors to the Investment Manager or any AXA Group c ompanies or any other funds that are managed by the Investment Manager or managed by any other company in the AXA Group;  the independent Board members may not ha ve a busine s s rel atio nship with the Investment Manager o r any AXA Group companies that is material to the members (although they may acquire and hold AXA Group insurance, investment and other products on the same terms as those available to other parties unaffiliated with AXA Group); and  the independent Boa rd members may not receive remun eration from the Investment Manager or any AXA Group companies (although they ma y acquire and hold AXA Group insurance, investment a nd othe r products on t he sam e terms as t h ose avail abl e to other parties unaffiliated with the AXA Group and they may accept commissions o r other payments from parties e ntering into transactions with AXA Group co mpanies as long as those commissions an d payments are on market terms and are not material to the members). Mr Va rotsis had served on the Board f o r over 15.5 yea rs. I n the Board’s opinion, Mr Varotsis continued to d emonstrate objective and independent thought p rocesses during his dealings with the rest of the Board and with the Investment Manager, and was therefore considered to be i ndependent, no tw ithstanding h is long service. Mr Varotsis st epped down as Dire ctor at the Annual G eneral Meeting on 8 December 2021. The Board reviews at least annua lly whether there are other factors that potentially affect the independence of Directors or involve meaningful conflicts of interest for them with the Company. CORPORATE GOVERNANCE REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 24 Committees of the Board Audit, Ris k, Nomination, Management Engagement and Remuneration Committees have been established b y t he Board. Each Committee has f ormally delegated duties, responsibilities and terms of reference, which are pu blished on the Company’s website . The Risk Committee was dissolved effective at 31 July 2022, and its responsibilities were take n on by the Board. Audit Committee Refer to the Audit Committee’s separate report on pages 29 to 30 for details of its composition, responsibilities and acti vit ies. Risk Committee The Risk Committee was dissolved effective at 31 July 2022, and last comprised of, Mrs Kershaw (Chairman), Mr L e Page, Mr Meader, Mr Harrison, and Mrs Ogoun dele. Only Independent Dire ctors were permitted to s erve on the Risk Committee. The Ris k Committee met at least four times each year. The Risk Co mmittee had no full-time employees as all day-to-day op erational functions, including i nvestment management, risk management and internal control, were outsourced to v a rious service providers. However, t he Ri sk Co m mittee retained full responsibility for the oversight of such service providers. During the financial year ended 31 July 20 22 the Risk Committee met on five occasions. The d ue diligence visit to the Investment Manager took place on 8 July 2022. The Ri sk Committee reviewed both quan titat ive and qualitative metrics in relation to the categories of risk which are relevant to t he Company’s overall activities, the particular characteristics of th e Company’s investments and the Company’s investment objectives. These metrics were generally pro vided to th e Risk Committee by the Inve s tment Manager but, fro m ti me to time, the Ri sk C ommittee was provided with information by its Company Secretary or its Corp orate Broker. The R isk Committee const r u ctiv e ly ch allenged the Investment Manager in re lation to matters of investment risk. The Risk Comm ittee ensured that the risk matrix is kept up to date in response to the evolving strategy and risk environment of the Company. Following the dissolution of the Risk Committee, the responsibilities of the Risk Committee were assumed by the B oard. Nomination Committee The Nomination Committee currently comprises M r Harris on, Ms Kershaw (Chairman), Mr Le Page, and Mrs Ogoundele. Only Independent Directors may serve on the Nomination Commi ttee. The Committee meets at l east once each year and considers the size, s tructure, skills and composition o f the Board. The Committee c onsiders retirements, re-appointments a nd appointments of additional or replacement Directors. The No mination Committee has considered the question of Boa rd tenure and has concluded that there should not be a specific maximum time in position for a directo r or chairman. Instead, the Committee ke eps unde r review the balance of s kills of the Bo ard and the knowledge, ex p erience, length of service a n d perfor m ance of th e Directors and foc u ses on m a intaining the ri ght mix of skil ls and a balance between bri ng ing in new Directors with fresh i deas a nd preserving corporate knowledge a nd experience. W hen recommending new Directors for appointment t o the Board, d i versity of gender, age, ethnicity a nd cultural back ground a re taken into consideration in accordance with the Company’s diversity policy. In compliance w ith the AIC Co de each Directo r stands for annual re-election. During the year, Mr Meader conducted f ormal performance evalua tions with each member of the Board and the Board as a whole and Mr Varotsis , as Senior Independent Director, conducted a formal performance evaluatio n on t he Chairman. The evaluations included a discussion and eval uation of any training or deve lopment requirements. These performance evaluations were reported to the Committee and i t was concluded that each such Board m ember h ad demonstrated during their cu rrent terms of office that they continued to demonstrate satisfactory independence; positively added to the balance of skills of the Board; had current and relevant expertise; effectively contributed to the Board; an d demonstrated commitment to the Comp any’s business. Accordingly the Nomination Committee has recommended t hat the Boa rd should propose each Director for re -election to the Board at th e forthcoming AGM, aside from Mr Meader who stepped down as a director on 31 July 2022. Following the retirement of Mr Varo tsis as a director in on 8 December 2 021, and t he imminent reti rement of M r Meader on 31 J uly 2022, the se arch fo r a ne w director was c ommenced in the first half of 2022. The Committee pro duced a role description, taking account of v a rious c ompany poli cies such as diversity and the ne e d f o r t he ca ndidates to have deep tech nical ex p ertise in s tructured finance, especially CLOs. The Committee noted that several s trong candidates had b een iden tified in t he last recruitment process, and it was agreed to approach said candidates in the first instance. Following an initial re view of the candidates, a short list of two candidates was drawn up by the committee for interviews. The Nomination Committee recommended to the Board the appointment of Ms Yedau Ogoundele with effect from 1 July 2022. CORPORATE GOVERNANCE REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 25 The Board agreed that the following cha nges to the c ommittee chairs would take effect immediate ly after the 20 21 AGM which was held on 8 December 2021: Mr Harrison will take on the chairmanship of the Remuneration Commi t tee and the Management Engagement Committee Ms Kershaw will take on chairmanship of the Risk Committee from Mr Harrison Mr Le Page will become Senior Independent Director from Mr Varotsis and will remain Chairman of the Audit Committee Mr Meader will remain as Chairman of the Board and of the Nominations Committee At a Nomination Committee mee ting held on 6 Ju ne 2022, in anticipation of Mr Meader’s retirement at 3 1 July 202 2, a recommendation was made to the Board regarding the chair manship of the v a rious c ommittees of the Board. T h e Board agreed t ha t the following changes to the committee chairs would take effect immediately after the financial year e nded 31 July 2022: Ms Kershaw will take on Chairman of the Board and of the Nominations C ommittee Management Engagement Committee The Manageme nt Engagement Committee currently c omprises Mr Harrison (Chairman) , Ms Kersh aw, Mr Le Page, and M rs Ogoundele. Only Independent Directors ma y serve on the Manageme nt Engagement Committee. The Committee m ee ts at l east once each year and th e primary purp ose of the Committee is to review the performance o f , and contractual arrangements with, the Investment M ana ger and other th ird party service providers of the Company (other than the external auditor) on a periodic basis, w ith the aim of evaluating performance, identifying any weaknesses and ensu ring value for mon ey for the Company’s Shareholders. The Management Engagement Committee held one meeting during the year ended 31 July 2022. Remuneration Committee The Remuneration Committee currently comprises Mr Harrison (Chairman), Ms Kershaw, Mr Le Page, an d Mrs Ogoundele . Only Independent Dir e ctors may s erv e on the Rem uneration Committee. The Committee meets at least once each calendar y ear to review the remuneration of the Directors and make recommendations to the Board in this respect. The Committee held 2 meetings during the year ended 31 July 2022 Committee composition and terms of reference The composition o f the aforementioned Committees and their t erms of reference a re kept under periodic review. The terms of reference of each of the Committees require that appointments to the Comm ittee s hall be for as long as t hat person remains as a Director or until otherwise removed, subject always to the satisfactory demonstration of independence as a Board member. Attendance at scheduled meetings of the Board and its committees Number of attendances / number of meetings held during the year (where applicable, i.e. where the relevant Director was a Committee member as at the date of the meeting) Board meetings Audit Committee Risk Committee Nomination Committee Remuneration Committee Management Engagement Committee G Harrison 7/7 5/6 4/5 4/4 1/2 1/1 D Kershaw 7/7 6/6 5/5 4/4 2/2 1/1 S Le Page 7/7 6/6 5/5 4/4 2/2 1/1 Y Ogoundele 1/1 - - - - - P Meader 7/7 - 5/5 4/4 2/2 1/1 P Varotsis 2/2 2/2 2/2 1/1 1/1 1/1 Directors’ professional development The Board b elieves that keeping up-to-date with key credit industry developments is essenti al for the Directors to m ai n tain and enhance their e ffectiveness. The Chairman is responsible for ag reeing and reviewing with each Director their training a nd development needs and all Directors receive other relevant training as necessary. W he n a new Director is a ppointed to the Board, they are provided with all relevant information regardi ng the Company and their duties and responsibilities as a Di rector. In addi tion , a new Direc tor will also spend time with representatives of the Investment Manager, Administrator and Company Secretary in order to learn about their processes and procedures, as deemed applicable. The Board i s confident that all its members have the knowled ge, abi lity a nd experience to perform the f un ctions required o f a Director of the Company. CORPORATE GOVERNANCE REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 26 Relationship with the Investment Manager Under the terms of th e Investment Management Ag r eement, the Investment Manager is responsible for the m anagement of the Company’s investment portfolio, subject to the Company’s investment g uidelines and the ov erall supervision of the Board. The Investment M anagement Agreement states that t he Co m pany m ay engage in portfolio transactions (e. g . the purchase or sale of securities) with t he Investment Manager acting on a principal basis and cross-trades be tw een the Company and accounts o r funds for which the In vestment Manager acts as discretiona ry Investment Manager and are authorised provided they comply with the policies and procedures devel op ed by the Investment M an ager in ord e r to eliminate or mitig ate conflicts of interest a n d to ensure that the Company is treated in an equitable manner. In order to iden t ify, prevent or manage and follow up an y conflict of interest, the Investment Manager has set up a conflict of interest policy that is available on the follow in g w eb site: www . axa-im.fr . The Company publishes its portfolio composition on its website on a monthly basis. The Board receives and considers reports regularly from th e Invest ment M an ager, with ad hoc reports and information supplied to the Board as required. The Investment Manager reports against the C ompany’s investment guidelines and has systems in plac e to monitor cash flow and the liquidity risk of the Co mpany. T h e Inves tment Manager and the Administrator also e nsure t hat all Directors receive, in a timely manner, all relevant management, regulatory and financial informa t ion. Representatives of the Investment Manager and Administrator attend each Board meeting as require d, enabling the Directors t o probe further on matters of concern. The Board, the Investment Manager and the Administrator operate in a supportive, co-operative and open environment. Performance of the Investment Manager The Board revie w s the perfo r mance of the Investment Manager on a regular basis and con siders whether or not the c ontinued appointment of the Investment Manager is in the best interests of t he Company. The c ontinued appointment of the Investment Manager w as most recently reviewed a nd agreed by the Managem ent Engagement Committee on 19 September 2022. If the Company elects to terminate the ap pointment of the Investment Manager without cause and without giving the I nve stment Manager two years’ advance no tice, the Compan y may do so up on not less than 60 days’ pri or written notice, but will be required to pay a termination fe e to the In vestment Manager. The termination fee shall be to compensate t h e Investment M anag er for t h e Management Fees and Incentive Fees that the Inv estment Manager might have earned h ad the appointment of the Investment M a nager not been terminated prior to the end of the two-year notice period. The Board believes that the investment m anagement fees are c ompetitive with othe r investment companies with similar investment mandates. The key terms of the Investment Management Agreement and the investment management fe e charged by the Investment Manager are set out in Note 17. Board meetings Primary focus The Board meets regularly throughout the year and a representative of the I nvestment M an ager i s in a ttendance at all times when the Board meets to review the performance of the Company’s investments. The Chairman with assistance from the Investment Manager is responsible for ensuring that the Directors receive accurate, ti mely and clear information which is discussed at Board meetings. The Chairman encourages open debate to foster a supporti ve and co-operative a pproach for all participants. The Board applies its primary focus on the following: - investment performance, ensuring that investment objectives and strategy of the Company are met; - ensuring investment holdings are in line with the Company’s investment guidelines; - reviewing and monitoring financial risk management, operating cash flows and budgets of the Company; - reviewing share buyback and treasury share policy; and - reviewing and monitoring of the key risks to which the Company is exposed as set out in the Strategic Report. At each relevant meeting the Board undertakes reviews of k ey investmen t and financial d ata, transactions and performance comparisons, share price and NAV performance, marketing and Shareholde r co mmunication strategies, peer group information and industry issues. Overall strategy The Board meets regularly to discuss the investment objective, policy and approach of the Company to ensure sufficient attention is given to the overall s tr ategy of the Company. The Board cons iders the Company’s in ve s tment objectives, their continuing relevance and whethe r the investment policy continues to meet those Company’s investment objectives. In pa rt icular the Bo ard considered ways to attract more investors to help reduce the leve l of discount. The Board and the M anag er have begun simplifying the structure of the Company by pursuing exposure predominantly through investment in CLOs and similar asset classes. CORPORATE GOVERNANCE REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 27 Monitoring and evaluation of performance of and contractual arrangements with service provid ers The Board, with support f r om the Management Engagement Committee, is responsible for reviewing on a regular basis t he performance of the Investment Manager and the Company’s other third party service providers. The Managem ent Engagement Committee ensures al l s ervice providers c omply with the Bribery Ac t 2010 an d the Prevention of Corruption (Bailiwick of Guernsey) Law, 2003. They a l so ensure t hat service providers’ cyber security arr angements are sufficient to ensure their continued c ompeti tiveness and effectiveness and t hat p erformance i s sa tisfactory and in accordance w i th the terms and conditions of the respective appointments. As part of the Board’s evaluation it reviews on an annual basis the contractual arrangements with the Inves tme nt M ana ger and major service suppliers. During this revie w , no mate r ial weaknesses were identified and overall the Bo ard con firmed its satisfaction with the services a nd advice received. The Di rectors have adopted a procedure whereby they are required to report any potential acts o f bribery and corruption in resp ect of the Company to BNP Paribas as the designated manager for GFSC purposes. Shareholder communications The main m ethod of communication with Shareholders is throug h the Half-Yearly Report and Annual Report which aim to give Shareholders a c lear and transparent understanding of the Company’s objectives, strategy and results. This information is supplemented by the publication of the monthly NAVs of the Company’s Ordinary shares on Euronext Amsterdam and the LSE. The Company’s w ebs ite i s regularly updated w ith mo nthly reports and provides fu rther in formation ab out the Company, including the Company’s financial reports and announcements. The maintenance and integrity of the Company website is the responsibility of the Directors, which h as been delegated to the Administrator. Legislation in Guernsey governing the p reparation and dissemination of financial statements may differ from legislation in other jurisdictions. Information published on the internet is a c cessible i n many countries w i th different legal requirements relating to t he preparation and dissemination o f financial statements an d users of the Compa ny’s website are responsible for informing t hem selves of how the requirements in their own countries may differ from those of Guernse y. Shareholders are able to contact the Board directl y v ia the dedicated e-mail address ( guernsey.bp2s.volta.cosec@bnppariba s.com ) of the Company or by po st via the Company Secretary. Alternatively, Shareholders are ab le to contact the Investment Manager directly via the contact details as published in th e Company’s monthly reports. I n addition, regular meetings are conducted by the Company’s Broker and Investment Manager with Shareholders and o ther interested parties. As a consequence, the Board receives appropriate updates from the Company Secretary and from the Investment M ana ger to keep it informed of Shareholders’ sentiment and analysts’ views. Statement of Compliance with the AIC Code of Corporate Governance The Directors place a hi gh degree of importance on ensuring that high standards of corporate governance are maintained and h ave therefore chosen to comply with the provisions of the AIC Code of Corporate Governance published in February 2019. The Board h as considered the principles and pro vi sions of the AIC Code. The AIC C o de addresses all the p rinciples and provisions set out in the UK Co rporate Gov ernance Code, as well as setting o ut additional provisions on is sues that are of specific r el evance t o Investment Companies. The Board conside rs that reporting ag ainst th e principles and provisions of the AIC Code provides more relevant in f ormation to stakeholders. The AIC Code is available on the AIC website www.theaic.co.uk. The Company has complied with all the principles and provisions of the AIC Code during the year ended 31 J uly 2022 except as set out below:  Director Independence (provision 13)  New companies (provision 21) Director Independence (provision 13) This provision relates t o the independence of the non -ex ecutive directors. This provision w as n ot compl ied w ith fully in r espect of Mr Varotsis tenure, as explained on page 23. CORPORATE GOVERNANCE REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 28 Statement of Compliance with the AIC Code of Corporate Governance (continued) New Companies (provision 21) This provision relates to the ap po intment of the chair and of the boa r d of a new company. As the Company w as incorporated during 2006, this provision is not applicable to the Company. Set out below is where stakeholders can find fu rther information within the Annual R eport about how the Company h a s complied with the various principles and provisions of the AIC Code. 1. Board l eadership and p urpose Purpose On page 11 Strategy On page 11 Values and culture O n page 14 Shareholder Engagement Shareholder communications on page 27 Stakeholder Engagement Section 172 statement on page 14 2. Division of responsibilities Director Independence On page 23 Board meetings Board and Committee Meetings with Director Attendance on page 25 Relationship with Investment Manager Investment Manager and Investment Manager Review on page 26 Management Engagement Committee Managem ent Engagement Committee on page 25. 3. Composition, succession and evaluation Nomination Committee Nomination Committee on page 24 Director re-election Board Composition on page 24 Board evaluation Board Evaluation on page 24 4. Audit, risk and internal control Audit Committee Audit Committee on page 29 and 30 Emerging and principal risks Principal Risks and Uncertainties on pages 19 to 22 Risk management and internal control systems Inte rnal Controls on page 29 Going concern statement Going Concern on page 12 Viability statement Viability Statement on pages 12 and 13 5. Remuneration Directors’ Remuneration Report on pages 31 and 32 A U DIT COMMITT EE REPORT Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 29 The Audit Committee presents its report for the year ended 31 July 2022. Terms of reference The Board has established terms of referen ce for the Audit Committee governing its re s ponsibilities, auth orities and composition (as stated in the Corporate Gover n ance Report, the Company applies the AIC Code and accor dingly the terms of reference of the Audit Committee comply with the AIC Code). Those terms of reference are available on the Company’s website. Delegation of duties The Company has no employees as all day-to-day operational functions, including investment management, fina ncial reporting, risk management and i nternal control, h ave been outsourced t o various service p roviders. However, the Audit Committee retains full responsibility for the oversight of the control processes of those service providers. Composition The Audi t Committee c urrently co mprises Mr Harris on, Mr Le Page (Chairman) and Mrs Ogo undele. Only Independent Directors m ay serve on t h e A u dit Committee a nd m embers o f the Audit Co m mittee s h all have no links with the Compa ny’s Auditor. M r Le Page h a s recent and relevant financial experience , having been a partner with Pri cewaterhouseCoopers in the Chann el I slands from 1994 until September 2013, and having served on the Audit Committees of several companies since then and to date, thereby enabling him t o fulfil his role as Chairman of the Audit Committee. The other m embers of the Audit Committee have the knowledge and experience necessary to discharge their duties. Activities During the financial year ended 31 July 2 022, the Audit Com m ittee met on six occasions and met with the Auditor on three o f those occasions. In addition, t he Chairman of th e Audit Committee has m et separately with t h e Audit Partner r e sponsible for the C o mpany’s audit on a number of further occasions. The Aud it Committee also conducted due diligence visits to BNP Paribas S.A, in Jersey, where the Company’s day to day administration and accounting is carried out and to the Investment Manager in Paris. Financial reporting risk area The Audit Co m mittee receives and reviews the Company’s annual an d interim re ports and financial statements, including the report s of the Investment M a nager an d Auditor (Annual Financial statements o nly) contained ther e in. In the Audit Committee’s opinion, the principal risk of m isstatement in the Company’s financial reporting arises from the valu ation of its investments. In order to mitigate this risk, the Company’s Administrator, overseen by the Committee:  obtains a copy o f the prices su pplied by a third party for the purposes of valuing the interim a nd year end holdings of investments in CLO debt and CLO equity, and ensures that such prices agree to prices used by the Company to value its investments;  compares th e fund valuations used in the Company’s financial reporting to net asset value reports re ceived f rom the relevant fund administrators and, when aud ited annual financial statements are available for each fund, compares the relevant net asset value reports to such audited financial statements; and  in addition, the Committee supported by BNP Paribas, reviews the Investment Manager’s determination of the value of the Company’s holdings in other components of the portfolio to ensure that such valuations are reas onable, consistent w i th their knowledge of the investments concerned and appropriate for inclusion in the financial statements. The Au dit Committee reviews these items an d the Investment Manager’s valuation assumpt ions prior to the publication of the Company’s annual and interim reports. In ca rrying out the re view of the valuations included in this report the Board discussed, in detail, the valuation sources and process with relevant staff me mbers at th e Investment Manager by video conference, and during the due diligence visit in July 2022. The results of th ese activities were satisfactory and the Audit Committee has conclude d that the investment valuations in this report are fairly stated in accordance with the Company’s accounting policies. Other financial reporting areas The Audit Committee has also revie w e d the Company’s accounting policies applied i n the preparation of its annual and interim reports together w ith the relevant cr itical judgements, es timates and assumptions a nd has determined that the se are i n c omplianc e with IFRS and are appropriate to the Company’s circumstances. The Audit Committee has reviewed and challenged the materiality levels applied by the Au ditor to both the financial statements as a whole and to individual items and is satisfied that these mater ia lity levels are appropriate. Internal control The Audit Committee focuses on ensuring that effective systems of internal f inan cial and non-financial control a re maintained and works closely with the Co mpa ny’s third-party service p rov iders in this regard . As the Company’s accounting functions are delegated to t hird parties, t he Company does not have an in ternal audit f unction. The inter nal control e nvironment of t he Company is the product of control systems operated by its third - party service providers, together with the oversight exercised by the Audit Committee . To help satisfy itself as to the existence and efficacy o f material controls affecting the Company, the Audit Committee requests i ts key third-party service providers to complete an annual questionnaire and revie w s the responses provided to th e questions contained therein. The Aud it Co m mittee has also obtained the latest IS AE 3402 T ype II con trols reports o n the Company’s Investment M ana ger and on its Administrator. A U DIT COMMITT EE REPORT (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 30 External Audit The Auditor, KPMG, presents its a udit plan to the Audit Committee prior to each audit. KPMG provided the Audit Committee w ith an overview of thei r audit strategy and plan for the year ended 31 Ju ly 2022 at a meeting on 6 Ju ly 2 022. KPMG advised that it considered the valuation of investments to be a significant audit risk due to the risks inherent in this area, as in previous year s. After c arrying out a detailed assessment of KPMG’s performance, service level and qualit y during the 2 021 financial year, the Audit Committee concluded that KPMG’s p erformance con tin u ed to be highly satisfactory. Con sequently, the Audit Committee recommended the reappointment of KPM G as the Company’s auditor. The Audit Committee and KPMG have w ork ed together to ensure tha t th e independenc e and obje ctivity of the Auditor and the quality of the audit ar e m aintained. In its formal communications with the Audit Committee, KPM G confirms its co mplian ce w ith all a pplicable quality, independence and ethical requirements, including, among other things, ensuring periodic rotation of the lead audit partner, who is subject to rotation after five years o f service. The Audit Com mittee has formally reviewed this confirmation, which includes a summary of KPMG’s controls to ensure c ompliance w i th pro fessional and regulatory s tandards, and has a l so noted that no n on-audit services have been provi d ed durin g th e y ear. The Audit Committee has co ncluded fr o m th is review, and in light of its knowledge and experience gaine d throu gh the ac tual p erformance of KPMG’s work, that the Au ditor remains ind ependent and objective a nd the audit remains of high quality. Non-audit services polic y It is the Board’s int ention th at se rvices other than a udit will not b e obtained from the external a udit f irm, unless there would be considerable advantage to the Company or its Shareholders by so doing. Suitable safeguards against any possible impairment of independence of the Auditor would be implemented in t he unlikely e vent they were retaine d for such work. The Board has in any event adopted a policy in respect of non-audit services which closely fol low s that recommended by the AIC. Conclusion on Annual Report The Audit Committee has re view ed th e Company’s financial reports as a whole to ensure that they appropriately describe the Company’s activities and to ensure that all statements contain ed in them are consistent with the Compan y’s financial results and their expectati ons. Acco rdingly , the Audit Committee was able to advise the Board that the Annual Report a nd Audited Financial Statements are fair, balanced and understandable and provide the information necessary for Shareholders t o assess the Comp any’s performance, business model and strategy. Stephen Le Page Chairman of the Audit Committee 28 October 2022 DIRECTORS’ REMUNERATION REPORT Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 31 This report describes how the Board has applied the principles of the AIC Code relating to Directo rs’ rem uneration. There were three changes to the Board during the financial y ea r ended 31 July 2022: - Mr Paul Varotsis retired as a Director on 8 December 2021 - Ms Yedau Ogoundele was appointed as a Director on 1 July 2022 - Mr Paul Meader retired as a Director on 31 July 2022 The following changes to the Committee Chairs took effect imm ediately after the 2021 AG M held o n 8 December 2021: - Steve Le Page became Senior Independent Director (SID). He did not receive an additional fee for this role. - Graham Harrison became Ch air of the Remuneration Committee a nd Chair of the Management Engagement Committee. He did not receive an additional fee for these roles. - Dagmar Kershaw became Chair of the Risk Committe e and received an additional annual fee of € 5,000 as compensation for the additional responsibilities and time commitments involved. The following changes to the Committee Chairs took effect imm ediately after 31 July 2022: - Ms Kershaw took on the role as Chairman of the Board and Chair of the Nominations Committ ee - The Risk Committee dissolved. All Directors, will stand for reappointment at the forthcoming AGM to be held on the 7 December 2022. Table of Directors Remuneration Component Director Fee entitlement for financial y e ar ended 31 J uly 2022 ( € ) Purpose of reward Annual fee Chairman of the Board All other Directors € 100,000 € 70,000 For commitments as non- executive Directors Additional annual fee Chairman of the Audit Committee Chairman of the Risk Committee Chairman of the Remuneration Committee Chairman of the Nominations Committee Chairman of the Management Engagement Committee Senior Independent Director € 15,000 € 5,000 None None None None For additional responsibilities and time commitment Each D ire ctor c ontinues to receive 30 % of their Director’s fee in the forms o f shares. The rem aining 70 % o f th e fees are p a id quarterly in cash. As previously reported the Directors’ remuneration shares are purchased in the secondary market. Thus a t current levels of discount between the NAV p er sh are and the share price, the true c ost to the Company is ap proximately 5% less than the amount quoted above. Should the shares trade at a premi um to NAV in th e future, the Directors m ay s eek to amend the policy. These f ee arrangements will be next reviewed in June 2023. The Directors are required to retai n t h eir s hares for at le ast one year from th eir r espective dates of i ssuance. D uring fiscal year 2022 no Director sold any of their shares. In addition to these fees, the Com pany reimburses all reasonable travel an d othe r incidental expenses incurred by the Directors in the performance of their duties. The total amounts of Directors’ remuneration for the financial year ended 31 July 2022 are shown in the table below. Cash Shares 1 Total Director € € € G Harrison 50,236 21,530 71,766 S Le Page 59,500 25,500 85,000 D Kershaw 51,273 21,974 73,247 Y Ogoundele 4,128 1,769 5,897 P Meader 70,000 30,000 100,000 P Varotsis 17,310 7,419 24,728 Total Directors’ remuneration (note 5 ) 252,4 4 7 108,192 360,639 Settlement of Directors fees share based payment 2 - (14,934) (14,934) True cost of Director’s remuneration for the year 252, 447 93, 258 345,705 1 Director remuneration (equity settlement) based on NAV per share. 2 During the year ended 31 July 2022, the settlement of Directors fees share based payment was € 14,934 being made up of € 14,859 Net settlement of Directors fees share based payment (refer to note 14) and € 75 transaction fee which forms part of “Other operating expenses” in the Statement of Comprehensive Income (page 40). DIRECTORS’ REMUNERATION REPORT (CONTINUED) Volta Finance Limi ted annual report and accounts 2022 32 The Directors’ interests in the Company’s share capital are as follows: Number of Shares Shares Number of Shares purchased on secondary Number of shares at purchased on p urchased shares at market * after shares at 31 Jul y 20 21 secondary market * directly 31 Jul y 20 22 y e ar end 2 8 October 20 2 2 G Harrison 21,787 3,037 none 24,824 863 25,687 S Le Page 38,153 3,537 none 41,690 1,049 42,739 D Kershaw Nil 2,526 none 2,526 925 3,451 Y Ogoundele 1 Nil Nil none Nil 291 291 P Meader 2 44,015 ** 4,160 none 48,175 ** 1,234 n/a P Varotsis 3 209,923 1,744 none 211,667 Nil n/a * Shares purchased on the secondary m arket represent the s hares purchased by the Compa ny on the secon dary market a nd transferred to the Directors as part payment of the Directors’ fees . ** 10,200 a nd 34,845 Ordinary shares are held by persons clo sely associated to Paul Meader. 1 Yedau Ogoundele was appointed as Director on 1 July 202 2 . 2 Paul Meader retired as Director on 31 Jul y 20 22. 3 Paul Varotsis retired as D i rector on 8 December 2021. The c urrent Directors continue to hold these shares a nd no disposals of s hares have been made by them to date. All remuneration of the Directors is set out abov e and there was no performance related compensation. None of t he Directors is subject to a service contract under which any compensation would be payable upon loss of office. Graham Harrison Chairman of the Remuneration Committee 28 October 2022 ST A TEMENT OF DIRECTORS’ RESPONSIBILITIES Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 33 The Directo rs a re re sponsible for preparing the Annual Report, including the Directors’ Report, and the financial statements in accordance with applicable law and regulations. The Compa nies (Guernsey) Law, 200 8 (as amended) requires the Directors to prepare fin ancial s tatements for each financial year. Under that law they have el ect ed to prepare the financial s tat e ments in accordance with IFRS as issued by the IASB and appl icable law. The financial s ta tements are required by l aw to give a true a nd fa ir vie w of the state of affa irs of the Company an d o f the profit or los s of the Company for that period. In preparing these financial statements, the Directors are r equired to:  select suitable accounting policies a nd then apply them cons istently;  make judgements and estimates that are reasonable, releva nt and reliable;  state whethe r applicable accounting s tand ards have been followed, subject to any material departures disclos ed and explained in the financial statements;  assess t he Company’s ability to continue as a going concern, disclosing, as ap plicable, matte rs related to going concern; and  use the going c oncern basis of a ccounting unless they e ither intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. The Directors are responsible for k eeping pro per accounting records th at are sufficient to show and ex pla in the Compan y’ s transactions and disclose w i th reasonable accuracy at any time the financial position of the Co mpany and enable them to ensure that its financial statements comply with the Companies (Guernsey) L aw, 2 008 (as ame nded). They are res ponsible for such internal control as they determine is necessary to enable the preparation of fi nancial statements that are free from m aterial misstatement, whether due to fraud o r error, and have general re sponsibility for taking such ste ps a s are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities. The Directors confirm th at t hey have complied with the a bove re quirements in preparing the financial statements and tha t to the best of their knowledge and belief:  this Annual Report includes a fair review of the development a nd performance of the business an d the position of the Company together with a description of the principal risks and uncertainties that the Company faces;  the Fin ancial Statements, prepared in accordance with IFRS adopted by the IASB and interpretations issue d by the IFRIC, give a true and fair view of the assets, liabilities, financial position and results of the Company; and  the Annual Report and Financial Statements, taken as a whole, provid es the information necessary to assess the Company’s position and performance, business model and strategy and is fair, balanced and understandable. This Statement of Directors’ Resp onsibilities was app roved by the Bo ard of Directors on 28 October 2022 and was signed on its behalf by: Dagmar Kershaw Stephen Le Page Chairman Chairman of the Audit Committee 28 October 2022 Footnote: The D irectors are re s ponsible for the maintenance and integrity of the corporate and financia l information included on the Company’s website, and for the preparation and dissemi nation of the Company’s financial statements. L egislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in othe r jurisdictions. INDEPENDENT A UDITOR’S REPORT TO THE MEMBERS OF VOLTA FINANCE LIMITED Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 34 Report on the audit o f the financial statem ents Our opinion is unmo dified W e ha ve audited the financial statements of Volta Finance Limite d (the “Company”), which com prise the statement of financial position as at 31 July 2022, the statements of c omprehensiv e income, changes in shareholders’ e quity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information. In our opinion, the accompanying financial statements:  give a true and fair vi ew of the financial position of the Compa n y as at 31 July 2022, and of t he Co mpany’s f inancial performance and cash flows for the year then ended;  are prepared in accordance with International Financial Reporting Standards (“IFRS”); and  comply with the Companies (Guernsey) Law, 2008. Basis for opinion W e conducted ou r a udit i n accordance with Inter national Standa rds on Auditing (UK) (“ISAs (UK)”) and applicable l aw. Our responsibilities are described b elow. W e have fulfilled our ethical resp onsibilities under, and are independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard as required by the Crown Dependencies ' Audit Rules and Guidance. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Key audit matters: ou r assessment of t he risks of material misstat ement Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including t hose which h ad the greatest effect on : the overall audit s trategy; the allocation of re sources in the audit; a nd directing the efforts of the engagement team. These matters were addressed in the context of o ur audit of the financial statements as a whole, and in forming our opinion t h ereon, and we d o not provide a separate opinion on these m atters. In arriving at our audit opinion a b ove, the key audit matter was as follows (unchanged from 2021): The risk Our response Financial assets at fair value through profit or loss (“Investments”) Valuation of Investments: Our audit procedures included: € 214,055,782; (2021: € 259,049,217) Refer to the Audit C ommittee Report on page 29, note 2.4 accounting policies and n ote s 3 Determination of fair va lues and 9 Financial assets at fair v alue through profit or loss. Basis: The Company invests in a portfolio of Investments representing 94.0% (2021: 97.3%) of the Company’s net asset value. These Investments are valued usi ng recognised v aluation methodologies including:  reference prices (“Price Quotes”) obtained by the Company’s Investment M anag er from an independent valuation agent (th e “Valuation Agent”);  discounted cash flow models generated by the In v e stment Manager; and  the most recent net asset values or capital accounts pr o vided by the underlying third party administrator of such funds and adjusted by th e Investment M an ager, as deem ed necessary, for funds w ith no n coterminous period ends. Control evaluation: W e assessed the design and implementation of the control over the valuation o f the Company’s Investments. Involvement of the Valuation Agent: W e obtained the Valuation Ag ent’s pricing report. We:  assessed the objectivity, capabilities and competence of the Valuation Agent to provide Price Quotes; and  assessed the a ppropriateness of the methodology applied by the Valuation Agent in developing fair value Price Quotes. INDEPENDENT A UDITOR’S REPORT TO THE MEMBERS OF VOLTA FINANCE LIMITED (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 35 Risk: The valuation of the Company’s Investments is c onsidered a significant area of our audit, given that it re presents the majority of the net assets of the Company. For those Investments whose fair value is derived b y the Investment Manager there is also a potential risk of fraud. Challenging managem ent s’ Investments valuation, in c luding the use of our KPM G valuation specialist as applicable: In performing our tests of detail we:  performed retrospective testing on realised positions to assess the reliability and accuracy o f management’s valuation and for any evidence of valuation bias;  held discussions with t he Investment Manager to understand and assess the appropriateness of the valuation methodologies applied;  agreed the Valuation Agent’s Price Quotes to t he valuations utilised b y the Company for directly held CLO Debt and Equity positions;  determined, with the support o f our valuation specialists, independent reference prices for all CLO de bt and a risk based se lection o f CL O equity positions, including those h eld within the Capitalised Manager Veh icle, through the use of fundamental cash flow modelling, sourcing key inputs and assumptions used, s uch as the default rates, discount margins and prepayment rates, from observable market data;  considered, for disconfirming eviden ce on the valuation of CLO equity posi tion s, the Investment Manager’s own ass essment of their de rived prices to those available through their Valuation Agent;  for a valu e driven sample of s ynthetic corporate credits, with the support of our valuation sp ecialist, we utilised market accepted mo delling techniques sourcing key inputs, such as credit default spreads and recovery ra tes, from observable market data to d etermine independent reference prices;  tested the disc ounted cash flow mode ls on a valu e driven s ample of fee rebates and the SSC REO asset for integrity, logic and material formula errors. W e assessed the key a ssumptions based on availa ble market information and corroborated k ey inputs to supporting documentation; and  obtained independent confirmations from third party administrators of the ne t asset value of the Company’s fund investments as at 31 July 2022 (or la test a vailable date). W he re non coterminous confirmations are received, we c onsidered whether further adjustments, s uch as c alls and distributions, were required to be made. INDEPENDENT A UDITOR’S REPORT TO THE MEMBERS OF VOLTA FINANCE LIMITED (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 36 Our application of m ateriality and an ove rview of the scope of our audit Materiality for the financial statements as a w hole was set at € 4,552,000, determined w i th reference to a benchmark of net assets of € 227,647,775, of which it represents approximately 2.0% (2021: 2.0%). In li ne with our au dit methodology, ou r procedures on i ndiv i dual account balances and di sclosures were perfo r med to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial m isstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality for the Company was s et at 75 % (20 21: 75 %) of materiality for the financial statements as a whole, which equates t o € 3,414,000. W e applied this percentage i n our determination of p erformance materiality because w e did not i dentif y any factors indicating an elevated level of risk. W e r ep orted to the Audit Committee any corrected or uncorrected identified misstatements exceeding € 227,000, in addition to other identified misstatements that warranted reporting on qualitative grounds. Our audit o f the Company was u ndertaken t o the materiality level specified above, which ha s informed our identification of significant risks of material misstatement and the associated audit procedures perform ed in those areas as detailed above. Going concern The d irectors have prepared the financial statements on the going c oncern basis as they d o not intend to liquidate the Company or to cease i ts operations, and a s th ey have concluded that th e Compan y's financial position me ans that this is realistic. They have als o concluded th at t here are no material u ncertainties that could h ave cast signif icant doubt o ve r its ab ility to continue as a going concern for at least a year from the date of approval of the financial statements (the “going concern period"). In our eval uation of t h e di rectors' conclusions, we con sidered the in herent risks t o t he C ompany's business model and analy sed how those risks m ight affect the Company's financial resources or ability to co ntinue operations over the going concern p eriod. T h e risks that we considered most likely to affe ct the Company's financial resources or ability to con t inue operations over this period was the availability of capital to meet operating costs and other financial commitments. W e considered whether this risk could plausibly a ff ect the liquidity in the going concern period by comparing severe, but plausible downside scena rios that c ould arise from t his risk individually and co llectively a gainst the level of available financial resources indicated by the Company’s financial forecasts. W e considered whether the going concern disclosure in note 2.2 to the financial statements gives a full and accu rate description of the directors' assessment of going concern. Our conclusions based on this work:  we consi der that the d irectors' use of the going co ncern basis of accounting in the preparation of the financial statements is appropriate;  we have not iden tified, and concur with the directors' assessment t hat there is n ot, a material uncertainty related to events or conditions that, individually o r col lectively, ma y cast significant doubt on the Company's ability to continu e as a going concern for the going concern period; and  we h ave not hing m a terial to a dd or draw attention t o in relation to the di rect ors' statement in the notes to t he financial sta te m ents on the use of the going concern basis of a ccounting with no material uncert ainties that m ay c ast significant doubt over the Company's use of that basis for the going concern period, and that statement is materially consistent with the financial statemen ts and our audit knowledge. However, a s we cannot pre dict al l future events o r conditions and as subsequent events may result in outcomes tha t are inconsistent with judgements that were reasonable at the time they were ma de, the above conclusions are n ot a guarantee that the Com pany will continue in operation. Assessing disclosures: W e also c onsidered the Company’s accounting policy (see note 2.1 d) i n relation to the use of estimates and judgements in d etermining th e fair value of Investments, the Company’s Investment valuation policies an d fair value disclosures (see no tes 2.4, 3 and 9) for compliance with IFRS. INDEPENDENT A UDITOR’S REPORT TO THE MEMBERS OF VOLTA FINANCE LIMITED (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 37 Fraud and breaches o f laws and regulati ons – ability to detec t Identifying and r esponding to risk s of material misstatem ent due to fraud To identify ri sks of ma terial misstatement du e to fraud (“fraud risks”) we as sessed events or condi t ions that co uld indicate an inc entive or pressure to commit fraud or provide an opportuni ty t o commit fraud. Our risk assessment procedures included:  enquiring of management as to the Compan y’s policies and procedures to prevent and detect fraud as well as enquiring whether management have knowledge of any actual, suspected or alleged fraud;  reading minutes of meetings of those charged with go ver n ance; and  using analytical procedures to identify any unusual or unexpected relationships. As required by auditing standards, and taking into account possible incentives or pressu res to misstate performance and our overall knowledge of the control environment, we perform procedures to address th e risk of management override of controls, in particular the risk that managemen t ma y be in a po s ition to make in app ropriate accounting entries, and the risk o f b i as in a ccounting estimates such as valuation of unquoted investments. On thi s audit we do not believe there is a fraud risk related to revenue recognition b ecause the Company’s revenue streams are simple in nature with respect to accounting policy choice, and are easily verifiable to external data sources or agreements with little or no requirement for estimation from management. W e did not identify any additional fraud risks. W e pe rform ed procedures including:  identifying journal entries and other adjustments t o test based on risk criteria and comparing any identified entries to supporting documentation;  incorporating an element of unpredictability in our audit procedures; and  assessing significant accounting estimates for bias. Further detail in respect of valuation of unquoted investments is set out in the key audit matter section of in this report. Identifying and r esponding to risk s of material misstatem ent due to non-co mpliance with laws and regulations W e identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our sector experienc e and through discussion w i th man agement (as required by auditing standards), and fr o m i nspection of the Company’s regulatory and legal correspondence, if any, and discussed with management the policies and procedures rega rding compliance with laws and regulations. As the Compan y is regulated, our assessment of risks involved gaining an understanding o f the control environment including the entity’s procedures for complying with regulatory requirements. The Company is s ubject to laws and regulations that directly affect the financia l statements including financial reporting legislation and taxation le gislation and we assessed the extent of compliance with these laws and re gulations as part of ou r procedures on th e related financial statement items. The Com pany is subject to other laws and regulations where the consequences of non-comp liance could have a mate ri a l effect on amounts or disclosures in the financial statements, f or instance th rough the imposi tion of fi nes o r liti gation o r impacts on t he Company’s ability to operate. W e identified financial services regulation as being the a r e a most likely to h ave such a n effect, recognising the regulated nature of the C ompany’s ac tivities and its legal form. Auditing s t andards l i mit the required a udit procedures to identify non-complia nce with these laws an d regulations to enquiry of m anagement and inspection of regulatory a nd legal correspondence, if any. Therefore if a breach o f operational regulations is not disclosed to us or evident from relevan t correspondence, an audit will not detect that breach. Context of th e ability of the audit to det ect fraud or breaches of law or regulation Owing t o the inherent limi tation s of an a u dit, there is a n unavoidable risk th a t we may not have detected some m aterial m isstatements in the financial statements, even tho ugh we have pro perly planned and performed our audit in accordance with au diting standards. For example, th e further removed n on-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any aud it, t here remains a higher risk of n on-detection of fraud, as thi s may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are desig ned to detect material misstatement. W e are not responsible for pr even ting non-compliance or fraud a nd cannot be expected t o detect non - compliance with all laws and regulations. INDEPENDENT A UDITOR’S REPORT TO THE MEMBERS OF VOLTA FINANCE LIMITED (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 38 Other information The directors are responsible for the ot her information. The other information comp r ises the in formation inc luded in the annual report but does n ot include the financial statements an d our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon. In connection with our audi t of the financial statements, ou r resp onsibility is to read the other information and, in doing so, consider whether the other information is mate r ially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based o n the work we have performed, we con clude th at there is a mate r ial misstatement of this other information, we are requi r ed to report that fact. We have nothing to report in this regard. Disclosures of eme rging and principa l risks and longer term viability W e are required to perform procedures to ide ntify whethe r there i s a material inconsistency between the directors’ disclosures in respect of emerging and principal risks and the viability statement, and the financial statements and our audit k now l edge. w e have nothing material to add or draw attention to in relation to:  the di r ectors’ confirmation within the Viability Stat ement (pages 12 and 13 ) that they have ca rried out a robust assessment of the emerging and p rincipal risks facing the Company, including those that would t hreaten its business mo del, future pe r formance, solvency or liquidity;  the emerging and principal risks disclosures describing these risks and explaining how they are being managed or mitigated;  the directors’ explanation in the Viability Sta tement (pages 12 and 13) as to how they ha ve assessed the p rospects of th e Company, over what period they have done so an d why they consider that period to be appropriate, and their statement a s t o whether t hey have a reasonable expectation that th e Company will be able to continue in ope ration and m eet its liabilities as they f all due over the p eriod of t heir assessment, including a ny related d i sclosures drawing a ttention to any necessary qualifications or assumptions. W e are also required t o review th e Vi ability St atem ent, set o ut on pages 12 and 13 under the Listing Rules. Based on the above procedures, we have concluded tha t the above disclosures are m aterially c onsistent with the financial sta tements and ou r audit knowledge. Corporate govern ance disclosures W e are required to perform pro cedures to identify whether t here is a mate r ial inconsistency b etween the directors’ corporate governance disclosures and the financial statements and our audit knowledge. Based on those procedures, we have concluded that each of the following is m aterially consistent with the financial statements and our audit knowledge:  the directors’ statement that they c onsider that the annual r eport and financial statements t a ken as a whole is fair, b a lanced an d understandable, and p rovides the information necessary f or sh areholders to assess the Company’s position and performance, business model and strategy;  the section of the annual report describing th e work of the Audit Committee, including the significant issues that the audit committee considered in relation to the financial statements, and how these issues were addressed; and  the section o f the annual report th at describes the review of the effectiveness of the Company’s risk management an d internal control systems. W e are required to review the part of Corporate Governance Statement relating to the Com p any’s compliance with the provisions of the UK Corporate Governance Code specified by the Listing Rules for our review. W e h ave nothing to report in this respect. We have nothing to report on ot her matters on which we are r equired to report by ex ception W e have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:  the Company has not kept proper accounting records; or  the financial statements are not in agreement with the ac counting records; or  we have not received all the information and explanations, which to the best of our know ledge and belief are necessary for the purpose of our audit. INDEPENDENT A UDITOR’S REPORT TO THE MEMBERS OF VOLTA FINANCE LIMITED (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 39 Respective respons ibilities Directors' responsibil ities As explained more ful ly in their s tatement set out on page 33, the directors are responsible for: the preparation of the financial statements including being satisfied that they g ive a true and fair view; such internal c o ntrol as they determine is necessary to enable the preparation of financial statements that are free from mate r ial misstatement, whether due to fraud or error; assessing the Company’s ability to continue as a going concern, disclosing, as ap plicable, m atters related to going concern; and using the going concern b a sis of a ccounting u nless they either intend t o liquidate th e Company or to cease o pe rations, or have no r ealis t ic al ternative but to do so. Auditor's respon sibilities Our obje ctives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether d ue to fraud or error, and to issue our opinion i n an auditor’s report. Reasonable assurance is a high l evel of assurance, but does not guarantee th a t an audit conducted in a ccordance with ISAs (UK) w i ll always d etect a material m isstatement when it exists. Misstatements can arise from fraud or error and are co nsidered material i f, individually o r in aggregate, they cou ld reasonably be expected to influence the economic decisions of users ta ken on the basis of the financial statements. A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities . The purpose of this report and restrictions on its use by persons other than the Co mpany's members as a body This report is m a de solely to the Company’s members, as a body, in acc ordance with s ection 26 2 of the Companies (Guer n sey) Law, 2008. Our audit work has been und ertaken so th a t we mi ght state to t he Company’s members those matters w e are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by l aw, we do not accept or assume responsibility to anyone other tha n the Company and the Company’s members, as a body, for o ur audit work, for this report, or for the opinions we have formed. Report on Regul atory Requirements European Singl e Electronic Format (“E SEF”) The Company has prepared its annual re port in ESEF. The req uirements for this format are set out in th e Commission Delegated Regulation (EU) 2019/815 with regard to regulatory technical standards o n the specification of a single electro nic reporting format (these requirements are hereinafter referred to as: the RT S on ESEF). In o ur opinion, the an nual report prepared in the XHTM L f ormat, in cluding the f inan cial statements as included in the reporting package by the Company, has been prepared in all material respects in accordance with the RTS on ESEF. The dire ctors are responsible for p reparing the annual report i n cluding the financial statements i n accordance w ith the RT S on ESEF, whereby the directors combine the various components into a single reporting packa ge. Our responsibili ty is to obtain reasonable assurance for our opinion whether the annual report in this reporti ng package, is in accordance with the RTS on ESEF. Our procedures included amongst others:  obtaining an understanding of the Com pany' s financial reporting process, includi ng the preparation of the annual report in XHTML format;  examining whether the annual report in XHTML format is in a c cordance with the RTS on ESEF. Dermot Dempsey For and on behalf of KPMG Channel Islands Limited Chartered Accountants and Recognised Auditors Guernsey 28 October 2022 ST A TEMENT OF COMPREHENSIVE INCOME FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 40 Notes 1 August 202 1 to 31 July 2022 € 1 A ugust 20 20 to 31 July 2021 € Operating (loss)/ income and financing charges Net (loss)/gain on financial assets at fair value through profit or loss 4 (4,655,709) 91,588,417 Net foreign exchange (loss)/gain, including net (loss)/gain on foreign exchange derivatives, but excluding net foreign exchange (loss)/gain on financial assets at fair value through profit or loss (8,581,270) 887,450 Net gain/(loss) on interest rate derivatives 497,784 (336 ,687) Net bank interest expense (28,273) (36,370) (12,767,468) 92,102,810 Operating expenditure Investment Manager management fees 17 (3,914,867) (3,308,384) Investment Manager performance fees 17 - (10,899,550) Operating expenses 5 (1,165,838 ) (1,116,981) (5,080,705) (15,324,915) Comprehensive (loss)/income (17,848,173) 76,777,895 Basic and diluted (loss)/earnings per Ordinary sha r e 7 ( € 0.4879) € 2.0989 Other comprehensive income There were no items of other comprehensive income in either the current year or prior year. The Notes on pages 44 to 75 form part of these financial statements. ST A TEMENT OF FIN A NCI AL POSITION AS AT 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 41 Notes 31 July 20 2 2 € 31 Jul y 202 1 € ASSETS Financial assets at fair value through profit or loss 9 214,055,782 259,049,217 Derivatives at fair value through profit or loss 2,983,580 2,848,528 Trade and other receivables 10 90,415 2,468,082 Cash and cash equivalents 16,785,254 18,219,413 Balances due from broker - margin accounts 8,995,192 - TOTAL ASSETS 242,910,223 282,585,240 EQUITY AND LIABILITIES Capital and reserves Share capital 12 - - Share premium 13 35,808,120 35,808,120 Other distributable reserves 14 19,7 75,011 40,611,183 Accumulated gain 14 172,064,644 189 ,912,817 TOTAL SHAREHOLDERS’ EQUITY 227,647,775 266 ,332,120 LIABILITIES Derivatives at fair value through profit or loss 9,323,607 1,369,125 Trade and other payables 11 5,938,841 14,883,995 TOTAL LIABILITIES 15,262,448 16,253,120 TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES 242,910,223 282 ,585,240 NAV per Ordinary share 8 € 6.2232 € 7.2807 These financial statements on pag es 40 to 75 w ere approved and authorised f or i ssue b y the Board of Directors on 28 O ctober 2022 and were signed on its behalf by: Dagmar Kershaw Stephen Le Page Chairman Chairman of the Audit Committee 28 October 2022 The Notes on pages 44 to 75 form part of these financial statements. ST A TEMENT OF CH A NGES IN SH A RE HOLDERS’ EQUITY FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 42 Notes Share premium € Other distributable reserves € Accumulated gain € Total € Balance at 31 Jul y 2020 35,808,120 59,253,288 113 ,134,922 208,196,330 Total comprehensive income for the year - - 76,777,895 76,777,895 Net settlement of Directors fees share based payment 14 - 22,4 42 - 22,442 at a discount to NAV Dividends paid in cash 6,14 - (18,664,547) - (18,664,547) Balance at 31 Jul y 2021 35,808,120 40,611,183 189,912,81 7 266,332,1 20 Comprehensive loss for the year - - (17,848,173) (17,848,173) Net settlement of Directors fees share based payment 14 - 14,8 59 - 14,859 at a discount to NAV Dividends paid in cash 6,14 - (20,851,031) - (20,851,031) Balance at 31 Jul y 202 2 35,808,120 19,775,011 172,064,644 227,647,775 The Notes on pages 44 to 75 form part of these financial statements. ST A TEMENT OF C A SH FLOW S FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 43 Notes 1 August 20 2 1 to 31 July 2022 € 1 August 20 20 to 31 July 2021 € Cash flows generated from operating activities Comprehensive (loss)/income (17,848,173) 76,777,895 Adjustments for: - Net loss/(gain) on financial assets at fair value through profit or loss 4 4,655,709 (91 ,588,417) - Net foreign exchange loss/ (gain) on re va l uation of derivatives 8,581 , 270 (1,541,319) - Net (gain) on revaluation of interest rate derivatives (497,784) - - Net settlement of Directors fees share based payment 14 14,859 22,442 Coupons and dividends received 44,267,998 40,410,952 Increase in trade and other receivables, e x c luding amounts due from brokers and interest receivable 10 (13,287) (2,990) (Decrease)/increase in trade and other payables, excluding amounts due to brokers 11 (10,505,154) 10,735,570 Net cash generated from operating activities 28,655,438 34 ,814,133 Cash flows generated from investing activities Purchases of financial assets at fair value through profit or loss (51,232,837) (36,792,070) Proceeds from sales and redemptions of financial assets at fair valu e through profit or loss 51,253,519 29,127,265 Net settlement on derivative instruments (9,259,248) - Net cash generated from/(used in) investing activities (9,238,566) (7,664,805) Cash flows used in financing activities Dividends paid to Shareholders (20,851,031) (18,664,547) Net cash used in financing activities (20,851,031) (18,664,547) Net ( decrease )/increase in cash and cash equivalents (1,434,159) 8,484,782 Cash and cash equivalents at the beginning of the year 18,219,413 9,734,631 Cash and cash equivalents at the end of the y e ar 16,785,254 18,219,413 The Notes on pages 44 to 75 form part of these financial statements. NOTES TO THE FINANCIA L ST A TEMENTS FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 44 1. GENERAL INFORMATION Information regarding the Company and its activities is provided in the Strategic Report on page 11. 2. ACCOUNTING POLICIES The principal accounting policies applied i n t h e preparation of these finan c ial statements are set out below. T he se polic ies ha ve been consistently applied to the years presented. 2.1 Basis of preparation a) Statement of compliance The financial statements of th e Company, which g ive a true and fair view, and c omply w ith the Companies (G uernsey) Law, 2008 (as amended) and have be en prepared in accordance with IFRS issued by the I ASB and interpretations issued by th e IFRS Interpretations Committee and applicable law. b) Basis of measurement These financial statements have be en prepared on a h istorical cos t conven t ion basis, except for the r eval uation of fi nancial instruments classified at fair value through profit or loss. The methods used to measure fair value are further disclosed in Note 3 . c) Functional and presentation currency These financial statements are presented in Euro (ro unded to the nearest whole Euro), which is the Company’s functional and presentation currency. In the D i rectors’ opinion, the Euro is the Co mpany’s functional currency as the Co m pany has issued its share capital d enominated i n Euro and the Company partially hedges the principal of its US Dolla r investments such that its principal exposure is to the Euro. d) Use of estimates and judgements The prep aration of financial s tatements in ac cordance with IFRS re quires the Board to m ake j udgements, estimates and as sumptions that affect the application of policies and the reporte d amounts of assets and liabilities and income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are b elieved to be reas onable under the circumstances, the results of which f orm the basis of m aking the judgements about carrying values of asse ts and liabilities t hat are not readily apparent from other sources. Actual results may diffe r from these est imates. The estimates and un derlying assumptions are reviewed on an ongoing basis , and incl ude consideration of t he imp act of COVID-19, if an y, and the war i n Ukraine. Revisions to accounting estimates are recognised in the pe riod in which the estimate is revised i f the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. In particular, information about significant are as of e stimation uncertainty and c ritical ju dge m ents in a pplying acco unting pol icies t ha t have the most significant effect on the amounts recognised in the financial statements include th e determination of the fair value as described in:  Note 3 – Determination of fair values; and  Note 15 – Financial risk management. (e) New standards, amendments and interpretations Interest Rate Benchmark Reform – Phase 2 These amendments a ddress issues that might affect financial reporting a s a result of t he refo rm of an interes t rate benchmark, including the effects of changes to contractual cash flows or hedging re lationships arising from the replacement of a n interest rate benchmark with an alte r n ative benchmark rate. The amendments provid e practical relief from certain requirements in IFRS 9, IAS 39, IF RS 7, IFRS 4 and IFRS 16 relat ing to changes in the basis for determining co ntractu al cash flow s of financial a ssets, financial liabilities and lease liabilities and hedge accounting. Change in basis for determining cash flows The amendments re quire a n entity to ac count for a change in the ba sis fo r determining the contractual cash flows of a financial asset or financial liabili ty that is req uired by interest ra te benchmark reform b y updating the effective interest rate of the financial asse t or financial liability. As at 31 July 2022, the Company held financial assets at fair value through profit or loss th at are subject to IBOR reforms. The maj ority o f these p osition s ref erence LIBOR and the Comp any expects them, a nd o ther IBORs, to be replaced by SOFR o r SONIA by the next financial year end, or other alternative benchmark rates, as applicable. The Board does not believe that the above will have a material impact on the fai r value of financial instruments. A number of amendments and interpretations to existing standards have been issued during the year ended 31 July 2022 that are not relevant to the Company’s operations and therefore have no impact on the Company’s financial statement s. (f) Standards, amendments and interpretations issued but not yet effective There are no ot her standards, amendments to standards and in terpretations that a re effective, that will a f fect th e Company’s financial statements. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 45 2. ACCOUNTING POLICIES (CONTINUED) 2.2 Going concern Statement of going concern The Directors hav e considered the s tate of financial market conditions at th e period end date and subsequently. Whilst the negati ve impacts on t h e m arket valu e of the Company’s u n derlying i nv estments arising fro m t h e gl ob a l CO VID-19 pandemic have now largely passed, the war in Ukra ine ha s added t o geopolitical an d macro-economic uncertainty to m arkets, a l though there has been v ery little direct i mpa ct o n the Company or its portfolio. Ho w ever, the impact on the Company’s cash flows is not expected to b e material and appropriate steps, as outlined in previous reports, can be taken to minimise cash out flow s . The incidence and i mpact of d e faults in t he U n derlying As sets is hard t o predict but are l i kely to rise, although it should b e noted that recent default levels are far b el o w tho se originally fo rec ast and also b elow those used in the Inves tment Managers’ models. However, the D irectors have c oncluded that any reasonably foreseeable fall in c ash i nflows would not have a m ateri al impac t on th e Compan y’ s ability to meet its liabilities a s they fall due. Therefore, after making appropriate enquiries, the Directors are of th e opinion that the Company remains a going concern and a re satisfied that it is appropriate to continue to adopt the going concern basis in preparing the Company’s financial statements. 2.3 Foreign currencies Transactions in foreign c urren cies are i nitially tra nslated at the foreign c urrency ex change rate ruling a t the date of the tr an saction. Monetary assets and monetar y liabilities denominated in foreign currencies are retranslated to Euro at the foreign currency c losing exchange rate ruling at the reporting date. Foreign cur rency exchange diff erences ar ising on retranslation of mon etary i tems are recognised in the Statement of Comprehensive Income under t he heading of “Net foreign ex ch ange l oss, i ncl uding net g ain/(loss) on foreign e x c hange derivative s, but e xcluding net foreign exchange gain/(loss) on financial assets at fair value through profit or loss”. For the purposes of foreign currency retranslation, a ll of the Company’s investments are considered to represent monetary items as all such investments are considered to be readily convertible into money, or money’s w o rth. 2.4 Financial instruments Financial assets (a) Classification The Company classifies its inv estments and derivative financial instruments (as applicable – refer below) a s financial assets at fair value through p rofit or loss. Financial a ssets also include cash and cash equivalents as well as trade and other receivables which are measured at amortised cost. (b) Recognition, measurement and derecognition Financial assets at fair value through profit or loss W hi l e the Company holds the majority o f it s in vestments fo r long periods in order to collect the contractual cash fl ow s arising therefrom, it will not necessarily h old its investments until maturity. Instead the Company will sell such i nvestments if other investments with better risk/reward profiles are identified. In addition, debt investments may be purchase d at a significant discount or pr e mium to par. Therefore, in the opinion of the Directors, th e Company’s business model as defined by I FRS 9 is to manage its investments on a fair value b a sis. C o nsequently, th e Company is required to classify its investments as f in ancial a s sets at fair value th rou g h profit o r loss. Upon initi al recognition, attributable transaction costs a re reco gni sed in the St atement of Com prehensive Income when i ncurred. Financial a ssets at fair value t hrough profit or loss are me as ured a t fair val ue and c hanges therein are recognised in the Statement of Comprehensive Income. Derivatives The Company holds derivative financial instruments t o minimise its exposure to foreign ex change risks and from time to time may also hold de r ivative financial instruments to m anage its exposure to interest rate risks or for ec ono m ic leveraging. Derivatives are classified as financial assets or financial liabilities at fair value through profit or loss and are i nitially rec ognised at fair value; attributable transaction costs are rec ognised in the Statement of Comprehensive Income when incurred. Subsequ ent t o initial recognition, derivatives are measured at fair value and changes therein are recognised in the Statement of Comprehensive Income. The fair values of derivative transactions are measured at their market prices at the r eporting date. Financial assets are initially recognised in the Company’s Statement of Financial Position when the Company becomes party to the contractual provisions of a given instrument. Routine purchases and sales of f inancial instruments are recognised on the trade date. Gains an d losses are recognised from that date. Interest accrued as a t the date of acquisition is included within the co st of an investment and interest accrued as at the date of sale is included within the sale proceeds for an investment. Financial assets a re derecognised when the contractual rights to cas h flows fro m the assets expire or the Company transfers the financial assets and substantially all of the risks and rewards of ownership have been transferred. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 46 2. ACCOUNTING POLICIES (CONTINUED) 2.4 Financial Instruments (Continued) Financial Liabilities (a) Classification The Compa ny classifi es its loan financing received under the repurchase agreement at am ortised cost and d erivative financial instruments (as ap plicable – refer above) as f inancial lia bilit i es at fair value through profit or loss. Financial liabilities also include interest payable on loan financing and trade and other payables which are measured at amortised cos t. (b) Recognition, measurement and derecognition Financial liabilities a re recognised initially at fair value plus any directly attributable incremental c osts of acquisition or issue and are subsequently c arried at amortised c ost. Fi nancial liabilities are d erecognised when the o bligation specified in the contract i s discharged, cancelled or expires. 2.5 Share capital Ordinary shares, Class B Ordinary share and Class C Ordinary shares (together the “Ordinary shares”) The Com pany’s Ordinary shares a r e classified as equity. Incremental costs di rect ly a ttributable to the issue of Ordinary shares and share options a r e recognised as a deduction in equity and are charged to the share premium account. The initial set-up costs of the Company were charged to the share premium account. 2.6 Cash and cash equivalents Cash and cash equivalents include cash in h and, money market f und s and deposits h eld at call with banks. Cash equivalents are short term, h ighly liquid investments with original maturities of th ree months or less that are read ily convertible to know n amounts o f cash and are subject to an insignificant risk of changes in value. Cash collateral provided in respect of derivatives is not included in cash and cash equivalents but disclosed as “Balances due from broker - margin accounts” in the Statement of Financial Position. 2.7 Net (loss)/gain on financial assets at fair value through profit or loss The net (loss)/gain on financial assets at fa ir value th roug h profit or loss comprises in te res t income on funds invested, dividend income, net rea lised gains and/or l osses on disposal of financial asse ts, net positive and /or neg ative cha nge s i n t he fair value of financial assets at fair value through profit or loss and fo r eign exchange retranslation gains and/or losses. Income from CLOs is recognised on an accruals basis and form part of Financial assets at fair value through profit or loss balance. The net realised (losses )/gain s on f inancial assets at fair value through profi t or loss are calculated as the difference be t ween the total sa le or redemption proceeds received, including accrued in terest if applicable, and the fai r value of the relevant financial asset as at the beginning of the financial year or its cost including accrued interest if purchased duri ng the financial year. Interest income is recognised on the due date o f such income. Di vid end in come is recognised in the Statement of Comprehensive Income on the date the Company’s right to receive payments is established, which is usually the ex-dividend date. 2.8 Operating expenses Operating expenses are recognised on an accruals basis and are recognised in the Statement o f Comprehensive Income. 2.9 Taxation The Com pany has applied for and been granted exemption from liabilit y to i ncome tax in Guernsey under the I ncome Tax (Exempt Bodies) (Guernsey) Ordinance, 19 89 as amended by t he Directo r of Income Tax in Guernsey for the current period. Exemption m ust be applied for annually and will be granted, subject to the payment of an annual fee, which is currently fixed at £1,200 per applicant, provided the Company qualifies under the applicable legislation for exemption. It is the in tention of the Directors to conduct the a ffairs of the C omp any s o as to ensure that i t continues to qualify for exempt c ompany status for the purposes of Guernsey taxation. 2.10 Dividends payable Dividends to Sha r eholders are recorded through the Statement of Chan ges in Shareholders ’ Equity when the y are decl ared to Shareholders. 2.11 Segment reporting The D irectors view the op erations of the Company a s o ne operating segment, being in ve s tment in a diversified portf olio of structured finance assets. All significant opera ting decisions are based u pon anal ys is of the Company’s investments as one segment. The financial results fr om this segment are equivalent to the financial results o f the Company as a whole, which are evaluated regularly by the chief operating decision-maker (the Board with insight from the Investment Manager). NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 47 2. ACCOUNTING POLICIES (CONTINUED) 2.12 Share-based payment transactions The Directors of the Company each receive 30% of their Director's fee for any year in the form of Ordinary shares. The share-based payment awards vest immediately as the Directors are not required to satisfy a specified vesting period before becoming unconditionally entitled to the instruments granted. W hi lst the Company’s Ordi nary shares c ontinue to trade at a di scount to th e m ost recently avail able NAV, t he Directors received 30% of their f e es in respect of a ny year in the form of Ordinary sh ares pu rchased on the secondary mark et. The number of Ordinary share s purchased o n the secondary market is determined using t he most recently avai lable NAV. These are recognised as a Directors' fee within Opera ting Expenses w i th a corresponding increase in e quity. The Directors may s eek to amend the policy, s hould the Ordinary shares trade at a premium to NAV in the future, resulting in a loss to the Company. 2.13 Earnings per Share The Company presents basic and diluted EPS dat a for its O rdinary Shares. Ba sic and diluted EPS is calculated by dividing the pr o fit or loss attributable to Ordinary Shareholders b y t h e weighted average number of Ordinary Shares outstanding during the year. 2.14 Offsetting Financial assets an d liabilities are offset and th e net amount is rep orted within ass ets and liabilities where there is a legally enforceable right to set-o ff the recognised amounts and the r e is an i nten tion to settle on a net b asis, or realise the asset and settle the liability simultaneously. 3. DETERMINATION OF FAIR VALUES A numbe r of the Compan y’ s accounting policies an d disclosures require the determination of fa ir values for financial assets which have been determined based on the f ollowing methods. W here applicable, further information about the assumptions made in determining fair values is disclosed in Note 15. The valuati on methodologies applied, which includes the consi deration of the impa ct of COVID-19,if any, and the war in Ukraine on valuations as applicable, to the Company’s financial assets ot her than recently purchased securities fo r which up-t o-date market prices are unavailable are as follows:  CLO equ ity and debt se curitie s are valued using prices obtained from an independent pricing source, J P Morgan Pri cingDirect. The pric es obtained from JP Morgan PricingDirect are derived from observed t raded prices where these are available, but m ay be based upon non-binding quoted p rices received b y JP Morgan PricingDirect from arranging banks or other market p artici p ants, or a combination thereof, where observed traded prices are unavailable.  Fund investments a r e valued at NAV as of the year end.  W ar e house transactions are v al ued at the lower of: ( i) the pri ncipal amount invested p l us accrued inco me net of financin g cos t s; and (ii) the mark-to-market value of the relevant proportion of the underlying portfolio, taking into account the buffer provided by the gross arranger fee compared to the net arranger fee c ommonly paid in the market, plus accrued income net of financing costs.  The majority of other investme nts including the CM V are valued on a m a rk-to-model basis u s ing discounted p rojected cas h flow valuations. W he re securities have been purchased less t han one month p rior to the relevant reporting date and up-to-date market pri ces are otherwise unavailable, such securities will be valued at c ost plus accrued interest, if applicable. Regarding non-binding quoted prices, i t i s likely that t he arranging bank or market participant de termines the valuation ba sed on pricing models, which m ay or may not produce values that c orrespond to the prices that the Company could obtain if it so ught to liquidate s uch positions. Such valuations generally involve s ubjective judgements on key model inputs, particularly default and recovery rates, a n d m ay not be uniform. Banks and other market participants may be unwilling to d isclose all or any of the key model inputs or discount r a tes that have b een used t o pro duce s uch valu ations and it is curre ntly s tandard m arket practice to w ithh old su ch information. In s uch circ umsta nces, the valu ation con tinues to be sourced from s uch arrangi ng bank, or other market participant, despite the lack of information on valuation assumptions. The Invest ment Manager rev iews the prices received fr om t hird parties for r easonableness against its ow n val uation models and may adjust the prices where such prices are not considered to represent a reliable estimation of fair value. Such adjustments are very rare, are only made after investigating the reasons underlying any differences identified a nd are also s ubject to approval by the Investment Manager’s i nternal risk function. No such adjustments were made to prices as at 31 July 2022 (31 July 2021: one such adjustment was made to a residual tranche price representing 0.5% of NAV). The Investment Manager’s fair value calculations for the residual an d d ebt tranche inves tments in securitisation vehicles are sensiti ve to the f ollowing key model inputs: defaul t ra te s; recovery rates; prepayment rates; and reinvestment profiles. The Investment Manager’s initial model assumptions are reviewed o n a regular ba sis with ref erence to both current a nd projected d ata. In t he cas e of a material chang e in the actual key model inputs, the model assumptions w ill be adjusted accordi ngly. The discount rate used by the Investment M anag er w he n review i ng t he f air value of the Company’s portfolio is subject to similar review and adjustment in light of actual experience. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 48 3. DETERMINATION OF FAIR VALUES (CONTINUED) For certain investments targeted b y the Company, the secondary t rading market may be illiquid or may sometimes become illiquid. As a result , at such times there m ay be no regularly reported market prices for these investments. In addition, there may not be an agreed industry standard methodology fo r valuing the investments (e.g. in the c ase of residual in come positions of asset-backed securitisations). I n the absence of an active market for an i nves tment and w here a financial as set does no t i nvolve an a rranging bank, or another market participant that is willing to provide valuations on a monthly basis, or if an arranging bank is unwilling to provide valuations, a mark-to-model a pproach has been adopted b y the Investment Manager to determine the valuation. Such pri cing m odels generally involve a number of valuation assumptions, many of which are based on subjective judg eme nts. Key model inputs include (but are not limit ed to): asset spreads; expected defaults; expected recovery rat es; an d the price of uncertainty or liquidity through the interest rate at which ex p ected cash flows are discounted. These inpu t s are derived by reference t o a variety of market sources. The method of valuation depends on the nature of the asset. JP Morgan PricingDirect, provide pricing for directly held CLO debt and CLO equity tranches, which in aggregate represent 82.7% as at 31 July 2022 (31 July 2021: 81.7%) of the Compan y’ s financial assets at fair value through profit or loss. The Company’s policy is to publish its NAV on a timely b asis in order to provide Shareholders with appropriately up-to-date NAV information. However, the underlying NAVs as at the relevant month-end date for the fund investments held by the Company are normally available only after the Company’s NAV has already bee n published. Co nsequently, such i nvestments are v alued using th e most recently available NAV. As at t he date of publication of the Company’s NAV as at 31 July 2022, approximately 7 .5% (31 July 2021: 2.8%) of the Company’s financial assets a t fair value th r ough profit or loss c omprised investments for which the re levant NAVs as a t the month-end da te were not yet available. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 49 3. DETERMINATION OF FAIR VALUES (CONTINUED) In accordance with Volta’s v a luation policy, the Company’s fi na ncial assets at fair v a lue through profit o r loss as at 31 Jul y 2022 was calculated using prices rece iv e d from J P Morgan PricingDirect or other m arket participants for all assets except for those assets noted below: Asset classes % of financial assets at fair value through profit or loss as at 31 July 2022 % of financial assets at fair value through profit or loss as at 31 Jul y 2021 Valuation methodolog y SCC BBS 4.7% 4.8 % Discounted pro jected cash flow mode l-based valuation using discount rates w ithin a range of 8 .0% to 12.0% (31 July 2021: 8.0% to 12.0%) constant default rates within a range of 0.3% to 3.0% (31 July 2021: 0.3% to 3.0%), prepayment rates within a range o f 0.0% to 25.0% (31 July 2021: 0.0% to 25.0%) and recovery rates within a range of 51.0% to 63.0% (31 July 2021: 51.0% to 63.0%). Investments in funds (includes ABS debt, CCC equity and SCC BBS positions) 1.6% 2.8% Va lued usi ng the most recent valuation statements, o r capital account s tate ments where applicable, pro vided by the respect ive underlying fund administrators, as adjusted for any cash flows received/paid between th at date an d 31 July 2022 in respect of distributions/calls respectively. SSC REO 1.5% 1.7% Discounted projec ted cash-flow model-based valua t ion using a yield of 19.0% (31 July 2021 : 13.0%). Each month, forward cash-flows are updated , sold pro perties and promissory s ales are forced to their sa les prices, a ll based on the latest investor reports and internal hypothesis. The hypothesis used includes (i) HPI cu rve is limited to the assets (<10% o f the remaining p ortfolio) viewed by th e servicer as the mo st l ikely to benef it f rom market price increase. These assets are modelled as b enefiting from 2% HPI app r eciation pe r annum for residen t ial assets & 1% for non-residential. All other assets have no Home Price Index appreciation (ie fla t valuation compared to t h e original valu ation of the asset) (ii) Timing (31 July 2 022 and 31 July 20 21: Initial Business Plan timing plus s ix - month additional delay for properties not s old, but that should have been, under initial Business Plan). Recently purchased assets 1.6% 0.8% Being p urchased within less than on e month of the relevant reporting date, these assets were valued at cost which is considered the most appropriate fair value fo r newly acquired assets. CLO W arehouse 0.0% 0.0% W areho use transactions are valued at the lower of: (i) the principal amount inve s ted p lus accru ed income net of financing costs; and (ii) the mark-t o-market value of the relevant p roportion of the underlying portfolio, t aking into account the buf fer provided by th e gross arranger fee compared to the net arranger fee commonly paid in the market, plus accrued income net of financing costs. ABS Residual 1.5% 1.3% Dis counted projected cash fl o w mo del-based valuation using a discount rate of 9.0% on the weighted average life of contractual cash flows (31 July 2021: 9.0%) for Fintake European Leasing DAC. CLO – CMV 5.9% 5.9% C M V is valued using a Di s counted Cash Flow model based on cash flow projection consid ering market and comparable transactions parameters. Fee Rebates 0.5% 1.0% Fee Rebates are valued using a Discounted Cash F low model based on cash flow proj ection considering market and comparable transactions parameters. Total as a percentage of NAV 17.3% 18.3% NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 50 4. NAV PERFORMANCE ANALYSIS The following table r eprese nts the net gain on financial assets at fair value through profit or loss by asset class for the y e ar en ded 3 1 July 2022: Realised gain/ ( loss ) on sales and redemptions on financial assets at fair value through profit or loss Unrealised (loss)/gain on financial assets at fair value through profit or loss Coupon and dividend income Net (loss)/gain on financial assets at fair value through profit or loss € € € € CLO – USD equity (763,226) (10,203,581) 16,9 70,092 6,003,285 CLO – EUR equity 382,272 (33,492,593) 16,3 30,561 (16,779,760) CLO – USD debt (665,484 ) 1,300,684 4,140,111 4,775,311 CLO – EUR debt 248,100 (5,160,354 ) 1,349,568 (3,562,686) CLO – CMV - (2,065,602) 2,067,992 2,390 CLO Warehouse 152,662 - 311,528 464,190 SCC BBS (575,787) 3,181,916 1,437,430 4,043,559 CCC equity (34,929) 284,134 319,997 569,202 ABS Residual - (171 ,200) - (171,200) (1,256,392) (46,3 26,596) 42,927,279 (4, 655,709) The following table represents the net loss on financial assets at fair value through profit or loss by asset class for the year ended 31 July 2021: Realised gain /(loss) on sales and redemptions on financial assets at fair value through profit or loss Unrealised gain/(loss) on financial assets at fair value through profit or loss Coupon and dividend income Net gain/(loss) on financial assets at fair value through profit or loss € € € € CLO – USD equity 1,701,822 15,099,843 17,507,873 34,309,538 CLO – EUR equity 236,015 16,423,094 16,287,024 32,946,133 CLO – USD debt - 12 ,026,329 3,568,124 15,594,453 CLO – EUR debt 330,600 56,032 345,131 731,763 CLO – CMV - 4,273,685 1,606,294 5,879,979 CLO Warehouse 575,467 (30,043) 82,606 628,030 SCC BBS (465,478) (1,279,183) 2,037,983 293,322 CCC equity (22,582) 1,669,084 331,818 1,978,320 ABS Residual - (941,600) - (941,600) ABS debt 351,133 (203,364) 2 0,710 168,479 2,706,977 47,093,877 41,787,563 91,588,417 NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 51 5. OPERATING EXPENSES Notes 1 August 202 1 to 31 July 2022 € 1 August 20 20 to 31 July 2021 € Directors’ remuneration and expenses 5.1 (3 61,862) (336,087) Legal fees (26,116) (21 ,410) Administration fees 5.2 (276, 341) (27 9,829) Audit fees, audit related and non-audit related fees 5.3 (15 7,415) (170,699) Insurance fees (41,758) (10 ,185) Depositary fees (53,654) (59 ,128) Other operating expenses (248,692) (239,643) (1,165,838) (1,116,981) 5.1 Directors’ remuneration and expenses 1 August 2021 to 31 July 2022 € 1 August 2 0 20 to 31 July 2021 € Directors’ fees (cash element, settled during the year) 248,319 235,261 Directors’ fees (cash element, settled after the year end) 4,128 - Directors’ fees (equity element, settled during the year) 81,672 74,250 Directors’ fees (equity element, settled after the year end) 26,520 26,576 Directors’ expenses (settled during the year) 1,223 - 361,862 336,087 Each Director con tinues to receive 3 0% of t h eir Director’s fe e i n the form of share s. T he remaining 7 0% of the fees are paid quarterly in cash. As previously reported the Directors’ remuneration shares are purchased in the secondary market. Thus a t current levels of discount between the NAV p er sh are and the share price, the true c ost to the Company is ap proximately 5% less than the amount quoted above. By a pplying this approach the Board have relinquished t heir right to Director’s rem uneration of € 14,859 (31 July 2021: € 22,442). Refer to note 14 for “Net settlement of Directors fees share based payment”. Should the s hares trade at a premium to NAV in t he future, the Directors may s eek to amend the policy. T hese fee arrangeme nts w ill be next reviewed in June 2023. Refer to the Directors Remuneration Report on page 31 for more de tail regarding annual rates. 5.2 Administration fees On 3 1 October 2018, the Company s igned an agreemen t with BNP Paribas (the “Administrator”) to provide administrative, compliance oversight and comp any s ecretarial services to the Company. Under the administration agreement, the Administrator w i ll be entitled to a minimum annual fi x e d fee for fund administration services and c ompany secretarial and comp liance services. These fees are paid mo nthly in arrears. Ad hoc other administration services are chargeable o n a time cos t basis. In addition, the Company will reimburse the Administrator for any out of pocket e x pe nses. During the year ended 31 July 2022, administration fees incurred were € 276,341 (31 July 2021: € 279,829). 5.3 Audit fees, audit related and non-audit related fees The audit fee expensed for the financial year ended 31 July 2022 is € 157,415 (31 July 2021: € 170,699). There were no non-audit services provided to the Company by the Auditor or its affiliates during the ye ar (31 July 2021: £nil). NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 52 6. DIVIDENDS The following dividends were declared and paid during the year ended 31 July 2022 and durin g the prior year ended 31 July 2021: Paid and declared during the year ended 31 July 2022: Date Declared Ex-dividend Date Pa y ment Date Amount per Ordinary Share € Total amount paid € 07/07/2022 14/ 07/2022 28/07 /2022 0.13 4,755,587 16/03/2022 24/ 03/2022 28/04 /2022 0.15 5,487,917 09/12/2021 16/12/2021 27/01 /2022 0.15 5,487,531 15/09/2021 23/ 09/2021 30/09 /2021 0.14 5,119,996 20,851,031 Paid and declared during the year ended 31 July 2021: Date Declared Ex-dividend Date Pa y ment Date Amount per Ordinary Share € Total amount paid € 01/07/2021 15/07/2021 29/07 /2021 0.14 5,122,330 17/03/2021 01/04/2021 29/04/2021 0.14 5,122,767 08/12/2020 17/12/2020 22/01/2021 0.12 4,391,074 21/09/2020 01/10/2020 29/10/2020 0.11 4,028,376 18,664,547 The Directors consider recommendation of a dividend having regard to various considerations, including the financial position of the Company and the solvency test as required by the Companies (Gue rnsey) Law 200 8 (as am ended). Subject to compliance with Section 304 of that law, the Board may at any time declare and pay dividends. 7. BASIC AND DILUTED (LOSS)/EARNINGS PER ORDINARY SHARE 1 August 202 1 to 31 Jul y 2 022 € 1 August 20 20 to 31 Jul y 2 021 € Total comprehensive (loss)/income for the year (17,848,173) 76,777,895 Basic and diluted (loss)/earnings per Ordinary share (0.4879) 2.0989 Number Number W ei g hted average number of Ordinary shares during the year 36,580,580 36,580,580 8. NAV PER ORDINARY SHARE 31 Jul y 20 2 2 € 31 Jul y 20 2 1 € Net asset value 227,647,775 266,332,120 Net asset value per Ordinary share 6.2232 7.2807 Number Numbe r Number of Ordinary shares at year end 36,580,580 36,580,580 NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 53 9. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS Financial assets at fair value through profit or loss are measured at fair value and changes therein are recognised in Stateme nt of Comprehensive Income. 31 Jul y 2022 € 31 Jul y 2021 € F air value brought forward 259,049,217 201,660,400 Purchases 52,792,837 37,782,070 Sale and redemption proceeds (50,203,284) (30,194,107) Net (loss)/gain on financial assets at fair value through profit or loss (47,582,988) 4 9,800,854 Fair value carried forward 214,055,782 259,049,217 31 Jul y 2022 € 31 Jul y 2021 € Realised gain on sales and redemptions on financial assets at fair value through profit or loss 1,992,578 3,549,817 Realised loss on sales and redemptions on financial assets at fai r value through profit or los s (3,248 ,970) (842,840) Unrealised gain on financial assets at fair value th r ough profit or loss 9,244,099 51,988,285 Unrealised loss on financial assets at fair value through profit or loss (55,570,695) (4,8 94,408) Net (loss)/gain on financial assets at fair value through profit or loss (47,582,988) 49,800,854 Fair value hierarchy IFRS 13 - Fair Value Measuremen t requires an analysis of investments valued at fair value based on the reliability an d significance of information used to measure their fair value. The Company classifies fair valu e measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:  Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities. Investments, whose values are based on quoted market prices in active markets and are therefore clas s ified w i thin Level 1 , include active listed equities. The quoted price for these instruments is not adjusted;  Level 2 – inputs o ther than quoted prices included within Lev el 1 that are ob servable for the a sset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). F inancial i nstrume nts that trade i n markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported b y observable inputs a re cla ssified within Level 2. As Level 2 investments include p ositions that are n ot tra ded in active markets and/or are subject to t r ansfer restrictions, valuations ma y be adjusted t o r efl ect illiqui dity and/or non-transferability, which are generally based on available market information; and  Level 3 – inputs for the asset or lia bility that are not based on observable market data (that is, unobservable inputs). The level in the fair val ue hierarchy within which the fair value measurement is categorised in its enti r ety is d etermined on the basi s of the lowest level input that is signi ficant to the f air value meas urement in it s entirety. Fo r this pu r pose, the significance of an input is assessed ag ain st the fair value measurement in i ts entirety. If a fair value me asur ement u ses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurem ent. Assessing the significance of a particular input to the fair value measu rement in its entirety requi res judgement, considering factors specific to the asset or liability. The determination of what constitutes “observable” requires sig nificant judgement b y the Compan y. The Compan y considers observable data to be m arket data that is readily available, regularly distributed or updated, reliable and veri fiable, not proprieta ry and provided by independent sources that are actively involved in the relevant market. Transfers between levels are determined based on changes to the significant inputs used in the fair value estimation. The Company recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which t he change has occurred. Further information about the fair value hierarchy is disclosed belo w . NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 54 9. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) Fair value hierarchy (Continued) The follo w ing t ables analyse, within the fai r value hierarchy, th e Company’s financial assets an d liabilities (b y class, excluding cash and cash equivalents, trade an d other re c eivables and tra de and other payables) m e asured at fair value at 31 July 2022 and 31 July 2021: 31 July 202 2 Level 1 Level 2 Level 3 Total € € € € Financial assets at fair value through profit or loss: – Securities - - 214,055,782 214,055,782 Financial assets at fair value through profit or loss: – Derivatives 372,505 2,611,075 - 2,983,580 Financial liabilities at fair value through profit or loss: – Derivatives (410,660) (8,912,947) - (9 ,323,607) (38,155) (6,3 01 , 8 7 2 ) 214,055,782 2 07 ,71 5 , 755 31 Jul y 20 2 1 Level 1 Level 2 Level 3 Total € € € € Financial assets at fair value through profit or loss: – Securities - 16,002,501 243,046,716 2 59,049,217 Financial assets at fair value through profit or loss: – Derivatives 1,173,064 1,675,464 - 2,848,528 Financial liabilities at fair value through profit or loss: – Derivatives (252,973) (1,116,152) - (1 ,369,125) 920,091 16,561,813 243,046,716 260 , 528 , 62 0 All of the Company’s investments are c lassified within Level 3 as they h ave significant unobservab le inputs and they ma y trade infrequently. The sourc es of these fair values are not considered to be publicly available i nf orm ation. The Company has determined the f air values o f its investments as described i n Note 3. The Company’s foreign exchange de rivatives held as at the reporting date (open foreign exchange swaps and options positions) are classified within Level 2 as their prices a re not publicly available, b ut are derived from information that is publicly a vailable, such as quoted forward exchange rates. The Compa ny’s interest ra te derivatives held as at 31 July 2 022 (open futures and op tions positions) are classified within L evel 1 as their prices are publicly a vai lable and they are exchange traded. Financial assets at fair value through profit or loss reconciliation The following table represents the movement in Level 3 instruments for the year ended 31 July 2022: € Fair value at 1 August 2021 243,046,716 Purchases 52,550,337 Sale and redemption proceeds (43,900,122) Realised loss on sales and redemptions on financial assets at fai r value through profit or loss (904,812) Unrealised loss on financial assets at fair value through profit or loss (46,486,792) Transfer of assets from level 2 to level 3 9,750,455 Fair value at 31 July 2022 214,055,782 The following table represents the movement in Level 3 instruments for the year ended 31 July 2021: € Fair value at 1 August 2020 201,660,400 Purchases 37,782,070 Sale and redemption proceeds (30,194,107) Realised gain on sales and redemptions on financial assets at fair value through profit or loss 2,70 6,977 Unrealised gain on financial assets at fair value th rough profit or loss 47,093,877 Assets transferred out from level 3 to level 2 (16,002,501) Fair value at 31 July 2021 243,046,716 NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 55 9. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) Financial Assets at fair value through profit or loss reconciliation (Continued) The appropriate fair value classification level is reviewed for ea ch of th e Compa ny’s investments at e ach year end. Any transfers i nto or out of a particular fair value classification level are recognised at the beginning o f the year following such re-classification at the fair value as at the date of re-classification. D uring the year ende d 31 July 2022 th ere were 3 CLO debt positions w hich transferred from level 2 to level 3. The trans f er was co nsidered appropriat e because the input parameters within these valuations are not considered to be observable (31 July 2021 there were 6 CLO debt positions which t r ansferred from level 3 to le ve l 2. The transfer was considered appropriate because the unobservable input paramete r s within these valuations are not considered to be material). In the opinion of the Dir ectors, the following a n alysis g ives a n a pproximation of th e s ens itivity of the d if ferent asse t c lasses to m a rket risk as a t 31 Ju ly 2022 th at is reasonable considering the c urrent m arket en vironment a nd the nature of the main risks underlying t he Company’s assets. This sensitivity analysis presents an approximation of the potential effects of events that could have been reasonably ex pected to occur a s at t he reporting da te. Where val uations w e re based upon prices received from arranging banks o r other ma rket participants, or on a NAV provided by the underlying fund administrator, the sensitivity analysis are not necessaril y based upon the assumptions used by such sources as these are no t made available to the Co mpany, as ex p lained in Note 3. The sensitivity of the f air values of most of the assets he ld by the Company to the traditional ri sk variables is no t th e mo st relevant in the current environment. For ex a mple, the sensitivity to interest r a tes is interdependent with o ther, more significant, market variables. This analysis reflects the sensitivity to some of the most relevant d eterminants of the risks assoc iated with each asset c la ss. W hile every effort has been made to assess the pertinent risk factors, there is no assurance that all the risk factors have been considered. Other risk factors could become large determinants of the fair value. CLO tranches Two of the main risks associated with CLO tranches a r e the occurrence of defaults and prepayments in the underlying portfolio. The Directors believe it is re asonable to test t h e sensitivity o f the se as sets to the fo l lowing r e asonably plausible changes to the bas e case scenarios, which have been derived from historically observed default rates and prepayment rates: The rate of occurrence of defaults at the underlying loan portfolio level . The base c ase scena r io is to project the rate o f occurrence of defaults at the underlying loan portfolio level at 2.0% per year which was as sumed to approximate the market consensus projected default rate as a t 31 Jul y 2022, with an exceptio n for newly iss ued (less than 12 months) deals for which a default rate at zero is set (base case scenario as at 31 July 2021: 2. 0% per year, with an exception for newly issued (less than 12 months) deals for which a default rate w as set at zero). A reasonably plausible ch ange in the default rate is conside red to be an increase to 1.5 times the base c ase default rate (a decrease to 0.5 times the base case default rate would have approximately an eq ual and o p posite impact, so this is not presen ted in the table below). For further information, the projected impact of a change in the default rate to 2.0 times the base case default rate is also presented in the table below . The rate of occurrence of prepayments is measured by the CPR at the underlying loan po rtf ol io level. The base c ase s cenario is to project a CPR at circa 2 0% per year for the US and Europe. The Dire ctors consider that reasonably plausible c hanges in the CPR would be a decrease i n the CPR o f the underlying loan portfolios from 20% to 10% for the US and Europe. The impact of the CPR is approximately linear, so the impact of an opposite test would be likely to result in an equal a nd opposite impact. The projected impact of a decrease in CPR from 20% to 10% for the US and Europe is detailed in the below table. The increase in default rate a nd the decrease in C PR is combined w ith an increase in discount mar gin (DM) a t which projected cash flows might be discounted in such scenario. In t he below table DM (both for CLO debt and CLO equity positions) h as been widened by 300 bps for the first scenario & 50 0 bps for the s econd scenario, while a s hock was cause in te r ms of s tress (increase in CCC bucket combined with an increase in defaults) in order to generate a scenario in line a 1.5 and a 2 time “bas e case scenario” default rate. W e also stress a decrease of the CPR from 20% to 10% c oupled with a 150bps DM increase to i l lustrate sensitivity t o this s imple assumption. As at 31 Jul y 2 022 Impact of an increase in default rate to 1.5x base case scenario Impact of an increase in default rate to 2.0x base case scenario Decrease in CPR from 20% to 10% for US and Europe Asset class % of NAV Price impact Impact on NAV Price impact Impact on NAV Price impact Impact on NAV USD CLO equity 27.7% (15.0)% (4 .2)% (35.6)% (9.9)% (10.3)% (2.9)% EUR CLO equity 22.1% (12.4)% (2 .8)% (29.6)% (6.5)% (8.0)% (1.8)% USD CLO debt 19.3% (18.4)% (3 .5)% (25.6)% (4.9)% (6.4)% (1.2)% EUR CLO debt 10.0% (17.2)% (1 .7)% (25.6)% (2.6)% (7.9)% (0.8)% All CLO tranches 7 9.1% (12.2) % (23.9) % (6.7)% NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 56 9. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) CLO tranches (Continued) As at 31 Jul y 2 021 Impact of an increase in default rate to 1.5x base case scenario Impact of an increase in default rate to 2.0x base case scenario Decrease in CPR from 20% to 10% for US and Europe Asset class % of NAV Price impact Impact on NAV Price impact Impact on NAV Price impact Impact on NAV USD CLO equity 27.1% (23.2)% (6.3)% (2 7.9)% (7.5)% (4.3 )% (1. 2)% EUR CLO equity 30.1% (25.1)% (7.6)% (2 9.0)% (8.7)% (3.6 )% (1. 1)% USD CLO debt 20.3% (7.8)% (1.6)% (18 .1)% (3.7)% (4.0)% (0.8)% EUR CLO debt 2.2% (14.9)% (0.3)% (2 2.1)% (0.5)% (6.3 )% (0. 1)% All CLO tranches 7 9.7% (15.8) % (20.4) % (3.2)% As p resented a bove, a reasonably plausible increase in the default rat e in t he underlying loan por tfolios would have a n e gative impact on both the d ebt and equity tranches of CLOs. A d ecrease in the C PR would have a n egative impact on the debt tranches (as p rincipal payment will occur later) and would negatively impact equity tranches as shown above (in such an event excess cash flows to the equity tranches would last longer). Sensitivity of the CMV position should be inferred from US and European CLO equity sensitivity analysis. Synthetic Corporate Credit Bank Balance Sheet transactions The investments within this asset class (representing 5.1% (31 July 2 021: 5 .4%) of the NAV) are first-loss exposures to diversified portfolios of investment grade and sub-investment grade corporate credits. The Directors consider a reasonably plausible change in then currently assumed d efault rate to be a decrease to 0 .5 times or an increase of 1.5 times. Such a c hange in defaults would be likely to lead to a 2.0% increase or (5.9)% decrease respectively in the average prices of these assets, th ereby leading to a 0.1% increase or (0.4)% decrease respectively in the NAV (31 July 2021: decrease in historical defa ult rate to 0.5x with a p rice impact of 7.1% with a 0.4% increase in the NAV; increase in default rate to 1.5x w ith a price impact of (7.7)% with a (0.4)% de cre ase in the NAV). As at 31 Jul y 2 022 Impact of a de crease in assumed default rate to 0.5x Impact of a n in crease in assumed default rate to 1.5x Asset class % of NAV Price impact Impact on NAV Price impact Impact on NAV SCC – BBS 5.1 % 1.9 % 0.1% (7.1)% (0 .4)% As at 31 Jul y 2 021 Impact of a de crease in assumed default rate to 0.5x Impact of an in crease in assumed default rate to 1.5x Asset class % of NAV Price impact Impact on NAV Price impact Impact on NAV SCC – BBS 5.4 % 7.1 % 0.4% (7.7)% (0 .4)% Synthetic Credit – Real Estate Owned Transactions The Portu guese REO investment comprises re s idential properties throughout th e c ountry, gathered by the bank t hrough the resolution o f its NPL processes a nd then sold on a portfolio basis. The investment is l evered through a financing facility. Should the Portuguese HPI drop by 5%, the NAV of the Company would decrease by 10bps (31 July 2021: 16bps). Should the HPI increase by 5%, the NAV of the Company would increase by 10bps (31 July 2021: 16bps). Cash Corporate Credit Equity transactions As at 31 July 2022, the Company hel d two inves tme nts in this asset cl ass (Tennenbaum Opportunities Fund V and Crescent European Specialty Lending Fund, representing 0.3% and 0.5% of the NAV, respectively) (31 July 2021: Tennenbaum Opportunities Fund V and Crescent European Specialty Len ding Fund, representing 1.1% a nd 1.0% of the NAV, respecti vely). These assets have exposures to diversified portfolios of investment grade and sub-investment grade co rporate credits. The Dire ctors consider t hat the main risks associated with these assets a re t he occurrence of defaults in t he underlyin g po rtfolio a nd/or s everity of any such defaults as well as change in enterprise value regarding any equity derived from any restructu ring event. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 57 9. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED) Cash Corporate Credit Equity transactions (Continued) Tennenbaum Opportunities Fund V has a short remaining li fe , given tha t the fund is due t o mature during October 2023. More th an 97.0% of its current portfolio c omprises unlisted equities (the l arge st equity representing 45.0% of the fu nd) while the rem ainder comprises corporate debt positions. A s ensitivity analysis is difficult to model as m ost of th e valu e may be derived from the e xit p rice the Tennenbaum O pportunities Fund V investment manager may be ab le to a c hieve for the Underlying Assets. A s such, the v a lue of this investment is principally depe ndent on revenue and EBITDA multi ples applied to the equity asse ts. A d ecrease in revenue a nd EBITDA multiples would decrease the value of the investment. Crescent Eur opean Specialty Le nding Fund is fu lly drawn down and i n its amortisation peri od. As the largest investment represents circa 2 4.6% of its current portfolio (31 July 2021: 12.7%), a default of this investment with a 6 0% recovery rate (31 July 2021: 60%) would lead to a 5 basis points drop (31 July 2021: 5 basis points) in the Company’s NAV. ABS Residual positions As at 31 July 2022, the Company held one investment in this asset cla ss (Fintake European Leasing DAC, representing 1.4% of the NAV) (31 July 2021: representing 1.2% of the NAV). For Fintake European Le asing DAC, the main risk associ ate d with this position at this point i n time is considered to be the level of credit losses in the underlying French leases collateral. A W AL extension of 6 months would result in a drop by 100bps (31 July 2021: 2bps). An opposite WAL reduction would have a symmetrical impact. 10. TRADE AND OTHER RECEIVABLES 31 July 20 2 2 € 31 Jul y 20 2 1 € Prepayments and other receivables 37,917 24,630 Interest receivable 35,892 1,376,611 Amounts due from brokers 16,606 1,066,841 90,415 2,468,082 11. TRADE AND OTHER PAYABLES 31 July 20 2 2 € 31 Jul y 20 2 1 € Investment Manager management fees 1,957,675 1,827,248 Investment Manager performance fees - 10,899,550 Directors’ fees (cash payable) 4,128 - Directors’ fees (shares payable) 26,520 26,576 Amounts due to brokers 3,500,000 1,940,000 Accrued expenses and other payables 450,518 190,621 5,938,84 1 14,883,995 NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 58 12. SHARE CAPITAL 31 Jul y 2 022 Number of shares 31 Jul y 2021 Number of shares Ordinary shares of no par value each Unlimited Unlimited Class B convertible Ordinary share of no par value 1 1 Class C non-voting convertible Ordinary shares of no par value each Unlimited Unlimited W it h respect to voting rights at general meetings of the Company, the Ordinary shares and Class B share confer on the holder o f such s hares the righ t to one vote for each share held, while the holders of Cl ass C sh ares do not have the ri ght to vote. Each class of share ranks pari passu with each other with respect to participation in the profits and losses of the C ompany. The C lass B share i s identical in all re s pects to the Co mpany’s O rd inary s hares, except that i t en titles the holder of the Class B share (an affiliate of AXA S.A.) to e lect a single Director to the Company’s Board of Directors. At s uch time as the holdings of the AXA Group investors decline to less than 5% of the Company’s e quity ca pitalisation (with the Class B share and the o ther issued and outstanding Ordinary shares and Class C shares taken together), the Class B share shall be converted to an Ordinary share. There are no Class C shares currently in issue and there is curre ntly no mec hanism by w hich any Class C shares can be issued in the future (31 July 2021: Nil Class C shares held). Issued and fully paid Number of Ordinar y s hares in issue Number of Class B shares in issue Number of Class C shares in issue Total number of shares in issue Balance at 31 Jul y 2020 36,580,580 1 - 36,580,581 Issued to Directors during the year - - - - Balance at 31 Jul y 2021 36,580,580 1 - 36,580,581 Issued to Directors during the year - - - - Balance at 31 Jul y 202 2 36,580,580 1 - 36,580,581 The Di rectors of the Company rec eive 30 percent of his or he r Director's fee in the form o f shares purchased on t he s econdary market. The Company purchased the following Ordinary shares on the secondary market during the year ended 31 July 2022: - 2 August 2021: 3,651 Ordinary Shares at an average p ric e of € 6.17 per share. - 1 November 2021: 4,144 Ordinary Shares at an average price of € 6.38 per share. - 31 January 2022: 3,703 Ordinary Shares at an average price of € 6.28 per share. - 3 May 2022: 3,506 Ordinary Shares at an average price of € 6.00 per share. Ordinary shares purchased on the secondary market during the year ended 31 July 2021: - 4 August 2020: 6,407 Ordinary shares at an average price of € 4.65 per share. - 4 November 2020: 4,071 Ordinary shares at an average price of € 4.05 per share. - 3 February 2021: 3,710 Ordinary shares at an average price of € 5.88 per share. - 7 May 2021: 3,495 Ordinary shares at an average price of € 6.06 per share. As at 31 July 2022 and 31 July 2021, the Company held no tr easury shares. Refer to page 32 for i nformation on Director holdings in the Company’s Ordinary shares. 13. SHARE PREMIUM ACCOUNT Ordinar y s hares € Class B share € Class C shares € Total € Balance at 31 Jul y 2020 35,808,120 - - 35,808,120 Issued to Directors during the year - - - - Balance at 31 Jul y 2021 35,808,120 - - 35,808,120 Issued to Directors during the year - - - - Balance at 31 Jul y 202 2 35,808,120 - - 35,808,120 The share premium account represents the issue proceeds received from, or value attributed to, the issue of share capital, except for the share premium amount of € 285,001,174 arising from the Compa ny’s initial issue o f share capital upon its IPO, which was transferred to other distributable reserves on 26 January 2007, following approval by the Royal Court of Guernsey (see Note 14). NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 59 14. RESERVES Other distributable reserves € Accumulated gain € At 31 July 2020 59,253,288 1 13,134,922 Total comprehensive gain for the year - 76, 777,895 Net settlement of Directors fees share based payment 22,442 - Dividends paid in cash (18,664,547) - At 31 July 2021 40,611,183 189,912,81 7 Total comprehensive loss for the year - (17 ,848,173) Net settlement of Directors fees share based payment 14,859 - Dividends paid in cash (20,851,031) - At 31 July 202 2 19,775,011 172,064,64 4 Other distributable reserves represent the balance transferred from the share premium account on 26 Ja nuary 2007, less dividends paid. The i nitial purpose of th i s rese rve was to c reate a reserve from which dividend payments c ould be paid under the law prevailing at that t ime and the Company’s Articles . However, the Companies (Guernsey) Law 2008 (as am ended) became ef fective from 1 July 2008. Under t his law, dividends m ay now be p aid f rom any source, p rovided that a company satis fies the relevant solvency test as prescribed under the law and the Directors make the appropriate solvency declaration. The ac c umulated gain reserve represents all profits and losses recognised through the Statement of Comprehensive Incom e to date. 15. FINANCIAL RISK MANAGEMENT The main r i sks a r ising from t he Company’s financial i nstruments are market risk, v a luation risk, interest rate risk , currency risk, credit risk, counterparty risk, concentration risk and liquidity risk. Market risk Market ri sk is the risk of changes in ma rket p rices, such as foreign exchange rates, interest rates, credit spreads and equity prices, affecting the Company’s income and/or the value of its holdings in financi al instr uments. The Company’s exposure to market risk is reflected through movements in the value of its investments. The objecti ve of m arket risk management is to manage and control ma rket risk exposures within acceptable p arameters while optimising return. The Company ’ s s trategy for the management of market risk is driven by its investment objective to preserve capital across th e credit cycle and to pro vide a stable stream of i ncome to i ts Shareholders through dividends by inves ting in a variety of assets selected for the purpose of generating overall stable and predictable cash flow s . The Company’s exposure to market risk is managed on a frequent basis by the Investment Manager. The C ompany seeks t o mitigate market risk by pursuin g where possible a diver s ified investment s trategy invol ving d irect and indirect investments in a number of asset types that naturally tend to involve a di ver sification of underlying market risk. The C ompany uses derivatives to manage its exposure to foreign currency risks and m ay also use derivatives from time to time to manage its exposure to in terest ra te a nd c redit risks. The instruments used include interest rate swaps, forward contracts, f utures a nd o ptions. The Company does not apply hedge accounting. The Compan y’ s market positions are reviewed on a qua r terly basis by the Board o f Directors. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 60 15. FINANCIAL RISK MANAGEMENT (CONTINUED) Valuation risk Valuation risk is the risk that the i nvestments are i ncorrectly v a lued and d o not reflect the true value of t h e inve stments. The markets for many of the Compan y’ s investments, including residual income positions, are illiquid. Accordingly, m any of th e Com pany’s investments are or will be i lliquid. In periods of market uncertainty or distress, the markets for the Company’s in ve stments may become increasingly illiquid or even cease to function effectively for a period o f ti me. In addi tion, investments that th e Company may purchase in privately negotiated (also called “over-the-counter” or “OTC”) transactions may not be registered under relevant securi ties laws or otherwise may not be freely tradable, rendering them less liquid than other investments. Tax or othe r attributes of se curities or loans in which the Company invests may make them attr active to only a limited range of investors. There may also be contractual or other restricti ons on transfers of the Company’s investments. As a result of these and other factors, the Company’s ability to vary its portfolio in a timely fashion and to recei ve a fair price in response to changes in economic and other c onditions ma y be l imited and the Company may be forced to hold investments for an indefinit e period of time or until their maturity or early redemption. Furthermore, where the Company acquires investments for which there is not a readily available market, the Company’s ability to obtain reliable in form ation about the resale value of such investments or the risks to which such investments are exposed m ay b e limited. Illiquidity co ntributes t o uncert ainty about the values ascribed to inv estments when NAV determinations a re made, w hich can cause those determinations to vary from amo unts that could b e realised if the Company were to s eek to liquid ate its investments. The Compa ny could also face so me difficulties when c ollecting reliable information ab out the value of its assets if s ome or all o f the participants in the relevant market w e re to ex perience significant business difficulties or w e re to suspend their market activities. This could affect both the timing and the process for assessing the value of the Company’s investments. Although the Company and its agents are able to refer to reported OTC tra ding prices and p r ices from brokers when valu ing its investments, for most investments the Company’s p ricing sou rce s frequently need to rely on f inancial pricing models based on assumptions concerning a number of variables, some of which involve subjective judgements and may not be uniform. If the Company were unabl e to col lect reliable information about the value of its assets the Investment Manager has agree d to p rovide a monthly valuation based on p ricing m odels. T he Company engages an i ndependent t hird p arty t o review semi-annually the main assumptions employed by the Investment Manager and to repo r t the fairness and reasonableness of those assumptions and valuations to the Board. Interest rate risk Changes in i ntere st rates can aff ect the Company’s net interest income, which is the difference between the interest income ea rned on interest earning i n vestments an d the in terest expense in curred on i nterest bearing liabilities. Changes in the level of i n terest ra tes can also affect, among o ther things, the Company’s ability to acquire l oans and investments, the valu e of its investments and t he Company’s ability to realise gains from the settlement of such assets. The CLO equity tranches held by the Company would be negatively i mpacted by an increase in i nterest rates due to a mismatch between the assets and liabilities base rate fix in g da te. In addition, Companies can elect at each reset of base rate, to use either 1 month, 3 month or 6 month option depending on the lo an documentation. Co nversely, any increase in such interest rates would generally benefit the Company’s floating rate assets. The Company may en ter into hedging transactions fo r the purposes of efficient portfolio manag eme nt, where approp r iate, to prote c t its investment portfolio from interes t rate fluctuations. These in struments may be used to hedge as m uch of the interest rate risk as the Investment M anager determines is in t he best interests of the Company, given the cost of su ch hedges. The Company may bear a level of interest rate risk that could othe rw ise be hedged w hen the Investment Manager believes, based on all re lev ant f acts, that bearing such risk is advisable. Interest rate risk is analysed by the Investment Manager o n a frequent basis and is communi cated to and monitored by the Board through the quarterly business report. It should be noted that the Compa ny does not p resent an effective interest figure for its investm ents held and therefore doe s not calculate the effective interest ra tes ap plicable to its investments. I n the D irectors’ opinion, it is no t feasible to accurately estimate the effective interest rates applicable to many of the Co m pany’s financial assets. In the Director s’ opinion, market interest rate risk on the Company’s i nvestments is no t considered to be material when compared to the risk factors tha t are con sidered to be significant, as described in the sensitivity analyses given earlier. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 61 15. FINANCIAL RISK MANAGEMENT (CONTINUED) Currency risk Currency risk is the risk that the values o f the Company’s assets a nd liabilities are adversely affected by changes in the values of foreign currencies by reference to the Company’s functional currency. The Company’s accounts are presented in Euro, the Company’s functional and reporting curren cy, while investments are made and realised in both Euro and other currencies. Changes i n rates of exchange may have an adverse effect on the reported value, price or i ncome of th e investments. A change in fo reign c urrency exchange rates m ay adversely impact reported returns o n the Com pany’s non-Euro denominated investments. The Compa ny’s principal non-Euro currency exposure is the US Dollar, b ut this may c hange over time. The Company’s policy is to partially hedge its currency risk on an overall portfolio basis. The Com pany may bear a level of currency risk that could otherwise be hedge d where the Investment Manager c onsiders that bearing s uch risk i s advisable or is in the best interest of the Company considering the liquidity risk that i s attached to any derivative c ontracts that c ould be u s ed (e .g. marg in calls on those contracts). The Invest ment Manager had put into place arrangements to hedge into Eu ro part of the US Dollar exposure associated w i th the US Dolla r-denominated assets. I n order to reduce the risk of having to post a potentially unlim ited amount o f c ash with res pect to forward Euro/US Dollar foreign e x c hange swaps, the Investment Manager has c apped and floored th os e amounts using sh ort to mid-term options. Consequently, there is no guarantee th at hedging the currency exposure generated by US Dollar assets can continue to be performed in the future if volatility in the US Dollar/Euro cross rate is very high. Currency risk, and a ny associated liquidity risk, is analysed by the Investment Manager on a frequent b asi s and is communicated to and monitored by the Board through the quarterly business report. Currency risk profile as at 31 Jul y 2 022 Denominated in EUR € Denominated in USD € Denominated in GBP € Denominated in CHF € Total € Financial assets at fair value through profit or loss 84,6 43,438 1 29,412,344 - - 214, 055,782 Derivative contracts - assets 2,611,075 372,505 - - 2,983,580 Derivative contracts - liabilities (8,912,947) (410,660) - - (9,323,607) Trade and other receivables 44,689 31,507 14,219 - 90,415 Cash and cash equivalents 5,609,056 11,012,991 163,207 - 16,785,254 Balances due from broker – margin accounts 6,650,000 2,345,192 - - 8,995,192 Trade and other payables (5,778,753) - (160 ,088) - (5,9 38,841) 84,866,558 142,763,879 17,338 - 227,647,775 The following foreign exchange swaps and opti ons w ere unsettled as at 31 July 2022: Description of open positions Nominal amount USD Average strike price $/ € Forward foreign exchange contracts (USD sold forward vs. EUR) 125,000,000 1.11 Forward foreign exchange contracts (EUR sold forward vs. USD) - - Long position – USD calls vs. EUR 80,000,000 1.03 Short position – USD puts vs. EUR 80,000,000 1.18 Valuation of foreign exchange derivative positions € Aggregate revaluation loss (6,340,027) Balances due from broker – margin accounts 8,995,192 Unsettled amount receivable 2,655,165 NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 62 15. FINANCIAL RISK MANAGEMENT (CONTINUED) Currency risk (Continued) The i mpact of an appreciation or depreciation i n foreign e x c hange rates on the NAV has be en measured at the underlying portfolio level, hedging effect excluded. The Directo r s consider a change in foreign exchange rates by 10% to be a reasonably plau sible change. Currency rate sensitivity as at 31 Jul y 2022 Impact of an appreciation in foreign exchange rates by 10% vs € Impact of a depreciation in foreign exchange rates by 10% vs € Price impact on NAV Percentage impact on NAV Price impact on NAV Percentag e impact on NAV USD/EUR 14,289,662 6.28% (1 4,289,662) (6. 28)% Currency risk profile as at 31 Jul y 2 021 Denominated in EUR € Denominated in USD € Denominated in GBP € Denominated in CHF € Total € Financial assets at fair value through profit or loss 101,168,975 157,880,242 - - 259,049,217 Derivative contracts - assets 1,675,464 1,173,064 - - 2,848,528 Derivative contracts - liabilities (1,3 69,125) - - - (1,369,125) Trade and other receivables 2,447,084 - 20,998 - 2,468,082 Cash and cash equivalents 5,197,231 12,987,673 34,004 505 18,219,413 Trade and other payables (14,724,172) - (159,823) - (14,883,995) 94,395,457 1 72,040,979 (104, 821) 505 26 6,332,120 The following foreign exchange swaps and opti ons w ere unsettled as at 31 July 2021: Description of open positions Nominal amount USD Average strike price $/ € Forward foreign exchange contracts (USD sold forward vs. EUR) 125,000, 000 1.11 Forward foreign exchange contracts (EUR sold forward vs. USD) - - Long position – USD calls vs. EUR 80,000,000 1.03 Short position – USD puts vs. EUR 80,000,000 1.18 Valuation of foreign exchange derivative positions € Aggregate revaluation loss (903,661) Margin accounts balance – amounts paid 2,383,064 Unsettled amount receivable 1,479,403 The i mpact of an appreciation or depreciation i n foreign e x c hange rates on the NAV has be en measured at the underlying portfolio level, hedging effect excluded. The Directo r s consider a change in foreign exchange rates by 10% to be a reasonably plau sible change. Currency rate sensitivity as at 31 Jul y 2021 Impact of an appreciation in foreign exchange rates by 10% Impact of a depreciation in foreign exchange rates b y 1 0% Price impact on NAV Percentage impact on NAV Price impact on NAV Percentage impact on NAV USD/EUR 17,181,425 6.45% (17,181,425) (6.45)% NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 63 15. FINANCIAL RISK MANAGEMENT (CONTINUED) Credit counterparty risk Credit and counterparty risk is the risk of financial loss to the Company if the counterparty to a financial i nstrument fa ils to meet its contractual obligations. The carrying amounts of financial assets best represent the max imum credit risk e x p osure at the reporting date. At the reporting date, the Co mpany’s financial assets exposed to c redit risk are financi al asse ts at fair value through profit or loss, open foreign exchange contracts, interest rate derivatives and cash and cash equival ents. The positions in the CLO asset c lass a re residual or mezzanine d ebt t r anches of CLOs, which may suffer losses dependin g upon the level of losses t hat occur in the underlying loan port folio and the rate at which such losses might occur. Residual tranches are the first tranche in a CLO c apital structure that would suffer losses, f ollowed by mezzanine tranches according to their relative levels of seniority. However, be ing term leveraged structures at a fixed marg in, it is possible f or residual tranches to generate more excess payments through re-investments when markets are under stress for relatively short periods than under no r mal circumstances. A residual position on a CLO also gives access to the amount that remains in the structure once the debt tranches are paid back (at maturity if th e normal process of dele veraging the structure takes p l ace, soone r if the deal is called by t he r esidu al holders). It can be possible to measure the principal amount of the underlying loan portfolios (defaulted loans are valued at their market value) against the principal amount of the outstanding CLO debt tranches at any point in time. CLO residual positions are negatively exposed to an increase in default rates, to an increase in the percentage of assets rated CCC or below and to a significant d ecrease in underlying loan prices. Nonetheless, the spread tigh teni ng impact can also be m itigated through a refinancing or reset of the C L O liabilities at any point in time after the end of the CLO non-call period. As at 31 July 2022, the Company d irectly held 20 positions in debt tranches of CLOs (31 July 2021: 19) accounting for 2 9.5% of Volta’s end-of-year NAV (31 Jul y 2021: 22.6%). The in ve stments in debt tranches of CLOs have bee n in tranches initially rated between BB (second lo ss position) a nd BBB (generally third loss position). These positions, as for the residual holdings, have cash flows tha t are sensitive to the level of defaults and the percentage of assets rated CCC or lo w er in the underlying loan portfolio. Nevertheless, these tranches are structured to be a ble to absorb a higher l evel of defaults in the underlying loans portfolio than residual holdings, given their second, third and even higher loss ranking. Each CLO de bt asset held by the Company, at the time of purchase, was expected to repay it s princi pal in full at matu r ity and was expected to be able to sustain a certain level of stress. Depending on the ability to find opportunities in the market and on the timing of the purchases, the Company has been able to purchase assets with different levels of initial subordination and IRR. As at the year ended 31 July 2022, the Company held nil (31 July 2021: nil) CL O W arehouse investments. The Company is also exposed to a global Capitalised M anage r V ehicle which is exposed to similar risks as CLO equi ty a nd W ar eh ouse exposures. The targeted return from the investment is in the mid to high-teens fo r a six to nine-year weighted average life. In addition to the first-loss W arehouse and CLO equity risks defined above, it is also exposed to liquidity risk and to regul ation risk gi ven that a change in regulation i n the US or in Europe could alter the business purpose of the entity and i mply either a limited drawing of the Company’s committed capital or even certain levels of restructuring costs. As it is capitalising a single entity , it is also incorporating correlation risks between the various sub-investments as w ell as a strong re li a nce on key people and processes in side each CLO manager’s entity. The ABS positions comprise of one (31 July 2021: one) i nvestment: French le ases ABS Residual position (Fintake European L easing DAC), representing 100.0% (31 July 2021: 100.0%) of the fair value of this asset class and 1.4% ( 31 July 2021: 1.2%) of the NAV. The Cas h Corporate Credit assets include two p ositions: one loan fund (Tennenbaum) a nd one pri vate debt fund (Crescent). The Synthetic Corporate Credit buck et comprises first-loss positions in credit portfolios, representing 6.5% (31 J uly 2021: 7.0%) of the NAV. There have not been any credit event on loan fund positions during the year. As previously stated, the C ompa ny is subject to cred it risk with res pect to its i nvestments. The Company an d its Investment Manager seek to m itigate credit risk by acti vely m onitoring the Company’s po rtfolio of investmen ts an d the underlying credit qual ity of its holdings. The C ompany’s investment s trategy i s designed to divers ify credit risk by pursuing investments i n assets that are ex pected to generate cash f lows from un derlying portfolios that h ave, i n aggregate at the t i me of purchase, di verse c h aracteristics such as low historical default rates and/or high expected recovery rates in the ev ent of default and/or significant granularity. On 1 Au gust 2018, th e Company appointed BNP as Depositary and, subsequently, all of th e Company’s cash is held with BNP. Bankruptcy or in solvency by BNP may cause the Company’s rights with respect to th e cash held there to be delayed or limite d. In order to li mit the Com pany’s exposure to any sin gle counterparty, the Board h as requested that the Investment Manager should avoid holding cash balances in excess of 6% of GAV at BNP, o r in excess of 3% of GAV at any othe r single counterparty, o the r than on a short-term basis if necessary. Ca sh in excess of this level for any sig nificant length of time is invested in short-term money market funds, short-term government treasury bills o r other cash equivalents. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 64 15. FINANCIAL RISK MANAGEMENT (CONTINUED) Credit counterparty risk (Continued) The Company may invest in forward foreign currency transactions, foreign currency options, total return sw aps, credit default swaps and other derivatives with various financial institution counterparties for the purposes of h edging or securing investment ex posure to portfolios of d iverse underlying reference ob l igations. The ta b le belo w shows an a nalysis of derivative a s sets and derivative liabilities outstanding at 31 July. Derivative assets Derivative liabilities Fair Value / EUR Equivalent Notional amount € Fair Value / EUR Equivalent Notional amount € 31 Jul y 2022 Foreign exchange forward derivatives 155,885 31,125,081 (7,992,472) (81,651,082) Foreign exchange option derivatives 2,455,190 78 ,454,447 (3 78,700) (78,454,447) Swaptions - - (5 41,775) (65,000,000) Foreign exchange interest rate derivatives 372,505 16,943 (410, 660) (47,300) 2,983,580 1 09 , 596 , 47 1 ( 9,323,607 ) (225,152,829) Derivative assets Derivative liabilities Fair Value / EUR Equivalent Notional amount € Fair Value / EUR Equivalent Notional amount € 31 Jul y 2021 Foreign exchange forward derivatives 275,464 49,687,853 (95 2,205) (38,950,412) Foreign exchange option derivatives 101,832 67,459,314 (10 2,778) (67,459,314) Foreign exchange interest rate derivatives - - (252,972) (13,352) 377,296 117,147,167 (1,280,956) (106,423,078) The Company has not off set any financial assets and financial liabilities in t he Statement of F inancial Position. T he derivative a ssets and liabilities are not subject to an enforceable master netting agreement. The Company is exposed to c ounterparty cre dit risk in respect o f these transactions. The I nvestment Manager em ploy s various techniques to limit a ctual counterparty credit risk, in cluding t he requirement for cash margin payme nts or receipts f or foreign c urrency derivative transactions on a w eekly basis, or more frequently d uring years of high volatility. As at and during the financial year end, the Company’s derivative counterparties were Crédit Agricole Corpo rate, Barclay s Bank Plc and Citi Bank. The Company monitors its counterparty risk by monitoring the credit ratings of Crédit Agricole, Barclays Bank, Citi Bank, Goldman Sachs, and BNP Pa r ibas S.A. as reported by Standard & Poor’s, Moody’s or Fitch, and analyses any information that coul d imply deterioration in the financial position of its coun t erparties. The current long-term issuer credit ratings assigned to each of these counterparties as at 31 July 2022 are as follows: Counterparties Moody’s Standard & Poor’s Fitch Crédit Agricole Aa3 (stable) A+ (stable) A+ (stable) Barclays Bank Plc Baa2 (positive) BBB (positive) A (stable) Citibank A3 (stable) BBB+ (st able) A (stable) Goldman Sachs A2 (stable) BBB+ (stable) A (st able) BNP Paribas S.A. Aa3 (stable) A+ (stable) A+ (stable) The Company’s investment guidelines e stablish criteria for c ertain investment exposures a nd synthetic arrangements entered into by t he Company that are intended to limit the investment risk of th e Company. Shareholders should, however, be prepared to b ear the risks of direct and indirect investment i n special purpose structured finance vehicles and arrangements, which of ten involve reliance on techniques i ntended to a chieve bank ruptcy remoteness an d protection through security arran gements that m ay not function as intended in unexpected scenarios. Risk relating derivatives The Company’s tran sactions using derivative instruments and any cre dit d ef ault o r total return sw ap arrangements or other synthetic investments entered into by the Company or any of its funding vehicles may involve certain additional risks, i ncluding c ounterparty credit risk. Moreover, as referred to in the preced ing paragraph, the Company has established criteria for synthe tic arrangements that are intended to limit its investment ri sk. Certain derivative transactions into which the C o mpany may enter m ay be sophisticated and innovative and as a consequence may involve tax or other risks that may be misjudged. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 65 15. FINANCIAL RISK MANAGEMENT (CONTINUED) Concentration risk Concentration risk is risk of loss in val ue of an investment portfolio if an individual o r group of exposures move together in an unfavourable direction. The Comp any may be exposed at any given time to any one co r porate credit, counterparty, industry, region , country or asset class or to par tic ular s ervices or a sset managers (in addition t o the Investment Manager). As a re sult it m ay the refore be exposed to a degree of conce ntration risk. However, the Board considers that the Company i s, in general, very di versified and that concentration risk is therefore not significant. Nevertheless, the Company monitors the concentration of its portfolio and from t im e to time an d, as long a s market opportunities a n d liquidity permit, might rebalance its investment portfolio accordingly, although there can b e no assurance that it w i ll succeed. This is because in a stressed s ituation, which may be characterised by high volatility in the val ue of the Company’s assets an d/or significant changes in the market expectation of default rates and/or significant changes in the liq uidity of its assets, the ability of the Company to mitigate its concentration risk could be significantly affected. As the Company invests primarily in structured finance assets, it i s exposed to concentration risks at two levels: direct concentration risk from the Company’s positions in particular deals/transactions a nd indirect conce ntration risk arising from the ex po sures underlying those positions. A measure of the direct exposure to certain asset types as at the reporting date is given below: As at 31 Jul y 2 022 As at 31 Jul y 2021 Main asset class Detailed classification % (based on N AV) % (based on N AV) CLO USD CLO equity 28.1 28.0 EUR CLO equity 22. 3 30.6 USD CLO debt 19.4 20.4 EUR CLO debt 10.1 2.2 CMV 5.6 5.8 CLO W arehouse - - Synthetic Corporate Credit Bank Balance S heet transactions 6.5 7.0 Cash Corporate Credit Cash Corporate Credit Equity 0.8 2.1 ABS ABS Residual 1.4 1.2 ABS debt - - Net position (includes cash, other liquid assets and trade payables) 5.8 2.7 NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 66 15. FINANCIAL RISK MANAGEMENT (CONTINUED) Concentration risk (Continued) Indirect exposures t o underlying concentrations can be complex and will vary by asset type and factors such as subordination. In general, the Company’s investment portfolio is well diversified. The Company’s principal concentration exposures are derived from its positions in CLO equity tranch es. Based on reports provided to the Investment Manager, the largest 20 un derlying exposures aggregated across all the Compa ny’s CLO equity tra nches are listed in th e table below. Thes e exposures are sta ted as the gross exposure to the individual iss uers listed below of the underlying CLO collateral pool before taking in t o account the effect of leverage due to the relative subordination of the CLO tranche held by the Compan y: As at 31 Jul y 2 022 Issuer name Industry group Average exposure to individual issuers in the underlying CLO equity sub- portfolios as a % of Volta’s NAV Average exposure to individual issuers in the underlying CLO equity sub- portfolios as a % of Volta’s total CLO e quity positions Altice France SA/France Telecommu nications 1.01% 2.0% Carestream Health Inc Healthcare-Products 0.77% 1.5% EG Group Ltd Retail 0.70 % 1.4% Virgin Media Secured Finance PLC Media 0 .61% 1.2% Clarios Global LP Auto Parts&Equipment 0.52% 1.0% Nidda Healthcare Holding GmbH Pharmaceuticals 0. 52% 1.0% Masmovil Holdphone SA T el ecommunications 0.5 0% 1.0% Froneri International Ltd Food 0. 50% 1.0% Philadelphia Energy Solutions Refining and Marketing LLC Oil&Gas 0 .49% 1.0% BMC Software Inc Software 0.48% 1.0 % Asurion LLC Insurance 0.44 % 0.9% McAfee LLC Computers 0.43% 0.9% Upfield BV Food 0.41% 0.8% Magic Newco LLC Software 0.41% 0.8% Verisure Holding AB Commercial Services 0.40% 0.8% Telenet International Finance Luxembourg SA Telecommunications 0.37% 0.7% Ziggo Bond Co BV Media 0 .35% 0.7% Laboratoire Cerba Healthcare-Services 0 .35% 0.7% Amer Sports Oy Leisure Time 0 .35% 0.7% United Group BV Internet 0. 34% 0.7% NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 67 15. FINANCIAL RISK MANAGEMENT (CONTINUED) Concentration risk (Continued) As at 31 Jul y 2 021 Issuer name Industry group Average exposure to individual issuers in the underlying CLO equity sub- portfolios as a % of Volta’s NAV Average exposure to individual issuers in the underlying CLO equity sub- portfolios as a % of Volta’s total CLO e quity positions Altice SFRFP Diversified Telecommunication Services 0.64% 0.99% Virgin Media Media 0.43% 0.66% EG Group Limited Retail 0.43% 0.66% Asurion Banking, Finance, Insurance & Real Estate 0.39% 0.60% Froneri International Be verage, Food & Tobacco 0.35% 0.55% Panther BF Aggregator 2 LP Auto Parts & Equipment 0.33% 0.51% Centurylink Diversified Telecommunication Services 0.29% 0.44% W hi te Birc h Paper Forest Products 0.28% 0.43% Transdigm Aerospace and Defense 0.27% 0.42% Flora Food Group Food Products 0.27% 0.42% Ineos Group Chemicals 0.27% 0.42% Bmc Software Software 0.27% 0.41% Calpine Independent Power and Renewable Electricity Producers 0.25% 0.39% Lorca Finco Diversified Telecommunication Services 0.25% 0.38% Telenet Financing USD Diversified Telecommunication Services 0.25% 0.38% GTT Communications Diversified Telecommunication Services 0.24% 0.38% Cablevision Systems Media 0.24% 0.38% Starfruit Finco B.V. Chemicals 0.24% 0.37% Magic Newco IT Services 0.23% 0.36% Action Holdings Retail 0.23% 0.35% Based on the curre nt w e ighting of CLO equity posi t ions 57.9% of NAV (31 July 2021: 64.4% of NAV), the de faul t as at 31 J uly 2022 of o ne underlying l o an representing f o r example 1 % (31 J uly 2 021: 1%) of all the CLO equity underl ying portfolios would have caused a decli ne of approximately 2.0% (31 July 2021: 1.8% ) of NAV on a ma r k-to-market basis, a ssuming: liquidation of the relevant CLO equity tranches rather than th e continuation of ongoing cash flow rece ipts from such CLO equity tranches; a standard recovery rat e on th e defaulted loan of 65% (31 July 2021: 65%); and, th at CLO equity positions represent, on average, a pprox im ately a ten times leverage o n t he underlying loan port folios. In pr a ctice, at the ti me of such default, it is likely that the impact on NAV would be mitigated by the fact that CLO equity valuations take into account the ongoi ng payments from these positions as well as the liquidation value. As a result, the Co mpany h as limited ex posure to indi r ect concentration risk. Accumulation of defaults at the l evel of the underl yi n g credit portfolios represents a greater risk to the Company. Re-investment risk A majorit y o f the Company’s dire ctly held investments (CLO d ebt, most of the Bank Balance Sheet transactions an d CL O equity positions) may be sensitive to spre ad compression. Spread compression in the loa n market might increase the prepayment rate of loans causing the underlying loan portfolio of C LOs t o carry a lower spread and then leading to lower ongoing c ash flow s for the CLO equity positions. This may b e counter-balanced by the ab ility of CLOs to refinance and/or reset the cost of their liabilities in order to re-establish better terms for the CLO equ ity position. CL O debt a nd Bank Balance Sheet transactions are issued with a non-call period (usually between two a nd three years), after such non -call period, in the event of spread compression in these markets, Volta might experien ce these assets be ing called and might face the challenge of reinvesting in a context of a lower spread environment. One virtue of having a multi-asset-class strategy is that flexibility exists to re-allocate between asset classes in such cases. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 68 15. FINANCIAL RISK MANAGEMENT (CONTINUED) Liquidit y risk Liquidity r isk is the ris k that the Company will not be able to meet its financial obligations as they fall due. Many of th e assets in which the Company invests a re illiquid. Changes in market sentiment ma y make significant portions of the Company’s investment portfolio rapidly m ore illiquid, particularly with regard to types of assets for w hi ch there is not a broad well-e stablished trading m arket or f or which such a market is linked to a fewer number of market participants. Portfolio iss uers and borrowers m ay experience changes in circumstance tha t adversely affect their liquidi ty, leadin g to interruptions in ca sh flows. The Company can seek to ma nage l iquidity needs b y borrowing, but turns i n m arket sentiment may make c redit expensive or unavailable. Liquidity m ay al so be addressed by selling assets in the Company’s p ortfolio, but selling assets may in some circumstances be sig nificantly disadvantageous for the Company or even almost impossible if liquidity were to disappear for the Company’s assets. In th e event of such ad v e rse liquidity conditions the Company might be unable to fund margin calls on its derivative positions and might consequently be unable to fund the payment of di vidends. Liquidity risk is analysed by the Investment Manager o n a frequent basis and is communicated to and mo nitored by the Board through the quarterly business report. All liabilities of the Company are due w i thin one financial year. Risks relating to leveraged exposure The C ompany’s inve s tment strategy involves a high degree o f exposure to t he risks of leverage. Investors in the Company must accept and be able to be ar the risk of investment in a highly leveraged investment portfolio. Predominantly the leverag e is provided through investment i n s tructured leveraged ins truments (e mbedded leverage) with no recourse to the Com pany’s assets, b ut the Company m ay also participate in di rect leverage t r ansactions with recourse and consequent increased liquidity needs such as the loan financi ng received under the Repo in prior years. Capital risk management The Board’s policy is to mainta i n a strong capit al base so as to maintain investor, creditor and ma rket c o nfidence and to sustain future development of the Company. The Company’s capital is repres ented by the shares, share premium account, other distributable reserves and accumulated gai n res erve. The capital of the Company is m anaged in accordance with its inves tment policy, in pursuit of its investment objectives. The Company seeks to attain its i nvestment objectives by pursu ing a multi-asset-class investment strategy. The investment strategy fo cuses on direct and indirect inve stments in, and ex po sures to, a variety of assets s elected for th e purpose of ge nerating c ash flows for th e Company. The Board of Directors al so monitors the level of d ivid ends to Ordina ry Shareholders. There were no changes in the Company’s approach to capital management during the year. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 69 16. INTERESTS IN OTHER ENTITIES Interests in unconsolidated structured entities IFRS 12 defines a structured entity as an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the ent ity, such as when any v o ting rights relate to th e a d ministrative tasks only and the relevant activities are directed by means of contractual agreements. A structured entity often has some of the following features or attributes: A) restricted activities; B) a narrow and well defined objective; C) insufficient equity to permit the structured entity to finance its activities without subordinated financial support; and D) financing in the form of multiple contractually linked instruments that create concentrations of credit or other risks. Involvement with unconsolidated structured entities The Company has concluded tha t positions in which it invests, tha t are not subsidiaries for financial re porting purposes, meet the definition of unconsolidated structured entities because: - the voting rights in the p ositio ns are not the dominant rights in deciding who contro ls them, as they relate to administrative tasks only; - each of the positions activities are restricted by its prospectus; and - the positions have narrow and well-defined objectives to provide investment opportunities to investors. The Company’s purpose is to provide access to various forms of underlying credit assets and it d oes this by investing in various entities which are structured in s uch a way as to enable the Com pany to obtain access to a diversified pool of s uch assets. These entities are created a nd p romo ted by various p arties ( a nd s ometimes by the Company’s own investment man ager), to facilitate such access by various investors, but never solely for the Company’s benefit. The Company’s ma x i mum n otional holding out of all the notional holdings of any sing le entity is 33.3%. Other than uncalled commitmen ts totalling € 5.1m, the Company has no contingent liabilities to a ny o f these entities o r to other participants in them, nor does it provide financial support, or intend to provide financial support, to any party. The Company fair values all such structured entities and so the maximum loss it can suffer is capped at the current carrying value plus uncalled commitments. IFRS 12 requires certain information to be disclosed in respect of “unconsolidated structured en tities” to enable users of its financial statements to evaluate:  the nature of, and risks associated with, its interests in an unconsolidated structured entity; and  the effects of those interests on its financial position, financial performance and cash flow s . The Directors believe that such information is provided in various places in these financial statements, a nd in the paragraph above, but the following table s ummar i ses the information required by IFRS 12 in res pect of the principal classes of structured entities held by the Company. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 70 16. INTERESTS IN OTHER ENTITIES (CONTINUED) Interests in unconsolidated structured entities (Continued) Below is a summary of the Company’s holdings in non-subsidiary unconsolidated structured entities as a t 31 July 2022: Structured Entity (“ SE”) Line item in the statement of financial position Nature No of Investments Range of the size of SEs Notional in € m A verage Notional of SEs in € m Company’s Holding Fair Value in € m % of Total Financial A ssets at Fair Value through Profit or Loss Maximum exposure to losses and commitments in € m Other Mezzanine Note CLOs Nor th Am eric a Cou nt ry o f I nco rpo rat ion : Cay man Is lan ds Fin anci al as sets at FVTPL Broadly Syndicated sub- Investment Grade Secured Loans 12 401 -60 8 49 2 44.1 20. 6% 44. 1 Non -re co urse Eu rope Cou nt ry o f I nco rpo rat ion : Ir elan d Fin anci al as sets at FVTPL Broadly Syndicated sub- Investment Grade Secured Loans 8 3 90-5 05 4 40 2 2.9 10. 7% 22. 9 Non -rec ou rse Total Mezzanine Note CLOs Fin anci al as sets at FVTPL 20 67. 1 3 1.3% 67 .1 No n-re cou rse Income Note CLOs Nor th Am eric a Cou nt ry o f I nco rpo rat ion : Cay man Is lan ds Fin anci al as sets at FVTPL Broadly Syndicated sub- Investment Grade Secured Loans 15 36-6 02 415 54. 1 2 5.3% 54 .1 Non -re co urse Cou nt ry o f I nco rpo rat ion : Cay man Is lan ds Fin anci al as sets at FVTPL Middle Market sub- Investment Grade Secured Loans 1 442 44 2 3. 6 1 .7% 3 .6 No n-re co urs e Eu rope Cou nt ry o f I nco rpo rat ion : Je rsey Fin anci al as sets at FVTPL Middle Market sub- Investment Grade Secured Loans 1 395 39 5 5. 6 2 .6% 5 .6 No n-re co urs e Cou nt ry o f I nco rpo rat ion : Ir elan d Fin anci al as sets at FVTPL Broadly Syndicated sub- Investment Grade Secured Loans 18 65-5 49 396 46. 6 2 1.8% 46 .6 Non -re co urse Cou nt ry o f I nco rpo rat ion : Lu xem bour g Fin anci al as sets at FVTPL Real Estate properties 1 1 4.8 1 4.8 3 .2 1. 5% 3. 2 Non -rec our se NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 71 Structured Entity (“ SE”) Line item in the statement of financial position Nature No of Investments Range of the size of SEs Notional in € m A verage Notional of SEs in € m Company’s Holding Fair Value in € m % of Total Financial A ssets at Fair Value through Profit or Loss Maximum exposure to losses and commitments in € m Other Cou nt ry o f I nco rpo rat ion : Net he rlan ds Fin anci al as sets at FVTPL Broadly Syndicated sub- Investment Grade Secured Loans 3 3 61-4 17 3 96 3. 7 1 .7% 3 .7 No n-r eco urs e Total Income Note CLOs Fina nc ial a ss ets at FVTPL 39 116 .8 54.6 % 116 .8 Non -re cou rse Investment Funds Nor th Am eric a Cou nt ry o f I nco rpo rat ion : Uni ted St ate s Fin anci al as sets at FVTPL Directly originated sub- Investment Grade Secured Loans and Residential Mortgage Backed Securities 1 268 .6 26 8.6 0. 6 0 .3% 0 .6 No n-re co urs e Cou nt ry o f I nco rpo rat ion : Cay man Is lan ds Fin anci al as sets at FVTPL Directly originated sub- Investment Grade Secured Loans and Residential Mortgage Backed Securities 1 1 6.7 1 6.7 1 .3 0.6 % 1.3 Non- rec our se Eu rope Cou nt ry o f I nco rpo rat ion : Fra nce Fin anci al as sets at FVTPL Leases to corporates 1 36. 8 36. 8 3. 1 1.5% 3 .1 Non -re co urse Cou nt ry o f I nco rpo rat ion : Je rsey Fin anci al as sets at FVTPL Subordinated Notes 1 5 88 58 8 12 .7 5. 9% 12. 7 N on- rec ours e Total Investment Funds Fina ncial ass et s at FVTPL 4 17. 6 8.2 % 1 7.6 No n-r eco urs e Total 63 201 .5 94.1 % 201 .5 As at 31 July 2022, the Company did not hold any subsidiaries. The Company has a percentage range of 0.01% - 33.3% notional holding out of the entire outstanding notional balances of the structured entities as at 31 July 2022. During the financial year ended 31 Jul y 2 0 22, the Company did not provide financial support to the unconsolidated structured entities and has no intention of providing financial or other support. The assessment was done for the Company as a whole. * The investments are non- rec ours e securitie s with no contingent l iabilities, w here the Company’s maximum loss is capped a t the c urren t carrying value. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 72 16. INTERESTS IN OTHER ENTITIES (CONTINUED) Interests in unconsolidated structured entities (Continued) Below is a summary of the Company’s holdings in non-subsidiary unconsolidated structured entities as a t 31 July 2021: Structured Entity (“ SE”) Line item in the statement of financial position Nature No of Investments Range of the size of SEs Notional in € m A verage Notional of SEs in € m Company’s Holding Fair Value in € m % of Total Financial A ssets at Fair Value through Profit or Loss Maximum exposure to losses and commitments in € m Other Mezzanine Note CLOs Nor th Am eric a Cou nt ry o f I nco rpo rat ion : Cay man Is lan ds Fin anci al as sets at FVTPL Broadly Syndicated sub- Investment Grade Secured Loans 16 255 -52 5 40 8 54 .2 20.9 % 5 4.2 No n-r eco urs e Eu rope Cou nt ry o f I nco rpo rat ion : Ir elan d Fin anci al as sets at FVTPL Broadly Syndicated sub- Investment Grade Secured Loans 3 2 52-2 95 3 22 5. 9 2 .3% 5 .9 No n-r eco urs e Total Mezzanine Note CLOs Fin anci al as sets at FVTPL 19 60. 1 2 3.2% 60 .1 No n-re cou rse Income Note CLOs Nor th Am eric a Cou nt ry o f I nco rpo rat ion : Cay man Is lan ds Fin anci al as sets at FVTPL Broadly Syndicated sub- Investment Grade Secured Loans 16 36-6 14 355 70. 1 2 7.1% 70 .1 Non -re co urse Cou nt ry o f I nco rpo rat ion : Cay man Is lan ds Fin anci al as sets at FVTPL Middle Market sub- Investment Grade Secured Loans 1 381 38 1 2. 9 1 .1% 2 .9 No n-re co urs e Eu rope Cou nt ry o f I nco rpo rat ion : Ir elan d Fin anci al as sets at FVTPL Broadly Syndicated sub- Investment Grade Secured Loans 17 295 -45 4 39 9 74 .2 28.7 % 7 4.2 No n-r eco urs e Cou nt ry o f I nco rpo rat ion : Lu xem bour g Fin anci al as sets at FVTPL Real Estate properties 1 44 4 4 4. 3 1 .6% 4 .3 No n-re co urs e Cou nt ry o f I nco rpo rat ion : Net he rlan ds Fin anci al as sets at FVTPL Broadly Syndicated sub- Investment Grade Secured Loans 3 3 61-4 17 3 96 6. 0 2 .3% 6 .0 No n-r eco urs e Total Income Note CLOs Fina nc ial a ss ets at FVTPL 38 157 .5 60.8 % 157 .5 Non -re cou rse NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 73 Structured Entity (“SE”) Line item in the statement of financial position Nature No of Investments Range of the size of SEs Notional in € m Average Notional of SEs in € m Company’s Holding Fair Value in € m % of Total Financial Assets at Fair Value through Profit or Loss Maximum exposure to losses and commitments in € m Other Investment Funds Nor th Am eric a Cou nt ry o f I nco rpo rat ion : Uni ted St ate s Fin anci al as sets at FVTPL Directly originated sub- Investment Grade Secured Loans Residential Mortgage Backed Securities 2 2 08-2 24 2 16 5. 5 2 .1% 7 .7 No n-r eco urs e Eu rope Cou nt ry o f I nco rpo rat ion : Fra nce Fin anci al as sets at FVTPL Leases to corporates 1 3 7 37 3.3 1.3 % 3. 3 Non -rec our se Cou nt ry o f I nco rpo rat ion : Je rsey Fin anci al as sets at FVTPL Subordinated Notes 1 4 60 46 0 15 .4 6. 0% 15. 4 N on- rec ours e Total Investment Funds Fina ncial ass et s at FVTPL 4 24. 3 9.4 % 2 4.3 No n-r eco urs e Total 61 241 .9 93.4 % 244 .1 As at 3 1 J ul y 20 21 , th e Co mp an y di d no t ho ld a ny s ub sid ia ri e s. The Co mpa n y ha s a p erc en ta ge ran ge of 0. 01% - 33 .3 % n oti on al ho ldi ng ou t o f t he en tir e o uts ta ndi ng no tio nal b ala nc es of th e s tru ctu re d e nti ti es as at 31 Ju ly 20 21. During the financial year ended 31 July 202 1, the Com pany did no t p rovide financial support to the unconsolidated structured entities and has no i ntention of p roviding financial or other support. The assessment was done for the Company as a whole. * The investments are non- rec ours e securitie s with no contingent l iabilities, w here the Company’s maximum loss is capped a t the c urren t carrying value. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 74 17. RELATED PARTIES Transactions with Directors For disclosure of Directors’ remuneration, refer to Note 5. As at the year ende d 31 July 2022, Directors’ fees to be paid in cash of € 4,128 (31 July 2021: € nil) had been accrued but not paid. Directors’ fees to be paid in shares of € 26,520 (31 July 2021: € 26,576) had been accrued but not paid and Directors’ expenses of € nil (31 July 2021: € nil) had been accrued but not paid. As at 31 July 2022, the Directors of the Company owned 0.32% (31 July 2021: 0.86%) of the voting shares of the Company. Transactions with the Investment Manager AXA IM is entitled to receive from the Company an investment manager fee equal to the aggrega te of: a) an amount equal to 1.5% of the lower of NAV and € 300 million; and b) if the NAV is gre ater than € 300 m illion, an a m ount equal to 1.0% of the amount by which the NAV of the Company ex ceeds € 300 million. The investment management fee is calculated for each six-month p eri od ending on 31 July a nd 3 1 January of each year o n the basis of the Co m pany's NAV as of the end of t h e p receding pe riod and pa yable semi-annually in arrears. T h e in vestment ma na g ement f e e payable to AXA IM is s ubject to reduction for investments in AXA IM Managed Pro ducts as set out in the Company’s Investment Guidelines. During the year, the investment management fees earned were € 3,914,867 (year ended 31 July 2021: € 3,308,384). Investment management fees accrued but unpaid as at 31 July 2022 were € 1,957,675 (year ended 31 July 2021: € 1,822,883). The Investment M a nager is also entitled to receive a performance fee of 20% of any NAV outperformance over an 8% hurdle on an annualised basis, subject to a high-water mark and adjustments for dividends paid, share issua nce s, redemptions and buybacks. The performance f ee will be calc ulated and paid annually in respect of each tw elve-month month period en ding on 31 July (each an “Incentive Pe r iod”). Notwithstanding t he foregoing, performance fee s payable to AXA IM in res pect of any Incent ive Period shall no t exceed 4.99% of the NAV at the end of such Incentive Period. The performance fees accrued for the year ended 31 July 2022 were € nil (year ended 31 July 2021: € 10,899,550). The Investment Manager also acts as investment manager for the following of the Company’s investments held as at the year-end which together rep r esented 3.67% of NAV as at 31 J uly 2022: Adagio V CL O DAC Subordinated Notes; Adagio VI CLO DAC Subordinated Not e s; Adagio VII CLO DAC Subordinated Notes; Adagio VIII C L O DAC Subo r dinated Not es ; Bank Capital O ppo rtunity Fund and Bank Deleveraging Opportu nity Fund (31 July 2021: 4.8% of NAV - Adagio V CLO DAC Subordinated Notes; Adagio VI CLO DAC Subordinated Not es ; Adagio VII CLO DAC Subordinated No t es; Adagio VIII CLO DAC Subordinated Notes; Ban k Capital Opportunity Fund and Bank Deleveraging Opportunity Fund). The investmen t s in Bank Capital Opportunity Fund and Bank Deleveraging Opportunity Fund a re c lassified as AXA IM Managed Products and the investments in Adagio V CLO DAC Subordinated Notes, Adagio VI CLO DAC Subordinated Note s, Adagio VII CLO DAC Subordinated Notes and Adagio VIII CLO DAC Subordinated N otes are classified as Restricted AXA IM Managed Products. The Investme nt M a nager earns i nvestment management fees, i ncluding incentive fees where applicable, di rectly from each of the above investment vehicles, in a ddition to its investment management fees e arned from the Com pany. How ever, with respect to AXA IM Managed Products, there is no du plication o f investment management fees as adjustment for these investments is mad e in the calculation of th e investment management fees pa yable by the Com pany such that AXA IM earns investment ma nagement fees only at the level of the Company. Due to the fact that the Company’s investments in Ad agio V CLO DAC Subord inated Notes, Adagio VI CLO DAC Subordinated Notes, Adagio VII CL O DAC Subordinated No tes and Ad a gio VIII CLO DAC Subordinated N o tes are classified as Restricted AXA IM Managed Products, AXA IM earns investment management fees at the level of the Restricted AXA IM Managed Product rather than at the Company level. It is, ho wever possib le for AXA I M to earn incentive fees at the level of both t he Restricted AXA I M Managed Product and the Company. Except for the Company’s Restricte d AXA IM Managed Products and AXA IM Managed Products, (as detailed above), all o ther investments in products managed by t he Investment Manager were made by way of secondary market purchases on a bo na fide arm’s length basis fro m parties una ffiliated with th e I nvestment Manager. There fore, the Com pany p ays investmen t management fees with respect to these investments c alculated in t he same way as if the in ve s tment manager of thes e deals w ere an independent third party. AXA Group held 29.98% (31 July 2021: 30.23%) of the voting shares in the Co mpany as at 31 July 2022 a nd 29.98% (31 July 2021: 30.23%) as at the date of approval of this report. NOTES TO THE FINANCIA L ST A TEMENTS (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 75 18. COMM ITMENTS As at 31 July 2022, the Company had the following uncalled commitments outstanding: a) Crescent European Speci alty Lending Fund (a Cash Corporate Credit Equity tran saction exposed to sub -inv estment grade corporate credits) – € 1,994,698 (31 July 2021: € 2,219,381) remaining commitment from an original commitment of € 7,500,000; 19. SUBSEQUENT EVENTS Management has evaluated subsequent events for the Company from 1 August 2022 t o 2 8 October 20 22, the date t he financial statements were a vailable to be issued. No particular event has mat erially affected the Company. However, the following points are pertinent: On 1 August 2022, the Co mpa ny purchased 4,362 Ordinary s h ares of no par value in the C ompany at an average pri ce of € 5.24 per share. These Ordinary sha r es purchased in the secon dary marke t were tra nsferred to th e Directors as part pa yment of their Di rectors’ fees, as allocated below: Graham Harrison - 863 Ordinary shares Stephen Le Page – 1,049 Ordinary shares Paul Meader – 1,234 Ordinary shares Dagmar Kershaw – 925 Ordinary shares Yedau Ogoundele - 291 Ordinary shares The Compa ny entered into a new warehouse t r ansactions (Apidos 41) on 10 August 2022 with $ 5 million c ommitment. As at 2 8 October 2022 the remaining uncalled commitment outstanding was $3,023,750. On 20 September 2022, the Co mpany de clared a quarterly interim dividend of € 0.13 per share, which was paid on the 20 October 2022, amounting to € 4.75 million. A L TERN A TIVE PERFO RMANC E ME A SURES DISCLOSURE FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 76 Alternative performance measures disclosure In accordance with ESMA Guidel ines on APM s the Board has considered what APMs are included in th e Annual Financial Report and f inancial statements which require further clarification. An APM i s defined as a fi nancial measure o f historical or future financial performance, financial posi tion , or cash flows, o ther than a fin ancial measure defined or s pe cified in the applicable f inancial reporting framework. APMs inc luded in the financial st atements, which are u naudited and outside the s cope of IFRS, are de emed to be as follows: NAV to market price discount / premium The N AV per share i s t he value of all the Company’s assets, less any liabilities it has, divided by the total number of Ordinary Shares. However, because the Company’s Ordinary shares are traded on the Eu ronex t Amsterdam and Lon don Stock Exchange, the sha r e price m ay be higher or lower tha n the NAV. The difference is known as a discount or premium. The Company’s d iscou n t / pre mium to NAV is cal culated by ex p ressing the difference between the sha r e price (closing price) 1 and the NAV per sha r e on the same day compared to the NAV per share on the same day. The d iscount or premium per Ordinary s hare is a key indicator of the discrepancy between the market valu e and the i ntri n sic value of the Company. At 31 July 2022, the Company's Ordinary shares traded at € 5.24 on the Euronext Ams terdam (31 July 2021: € 6.02). The Ordin ary shares traded at a discount of 15.8% (31 July 2021: discount of 1 7.3%) to the NAV per Ordi nary share o f € 6 .2232 (31 July 2021: € 7.2807). Ongoing charges The ongoing c harges ratio f or the year en ded 31 July 2 022 was 1.9 7% (31 July 2021: 1.7 8%). T he AIC’s methodology for calculating an ongoing charges figure is b ased on annualised ongoing c harges of € 5 ,042,648 (31 July 2021: € 4,390,240) divided by average NAV in the period of € 255,788,186 (31 July 2021: € 246,625,779). Calculating ongoing charges The ong oing charges a r e based on actual costs incurred in the year excluding any non-recurring fees in accordance wit h the AIC methodology. Ex p ense items have be en excluded in the ca lculation o f the ong oing charges fi gure w hen they a re no t deemed to meet the following AIC definition: “Ongoing charges a re t hose expenses of a type which are likely to recu r in the fo reseeable future, whether charged to ca pital or revenue, and which relate to the operation of t he investment company as a c ollective fund, e xcludin g the costs of acquisition/disposal of investments, financing charges and gains/losses arising on investments. Ongoing cha rges are based on costs incurred in the year as being the best estimate of future costs.” Please refer below for ongoing charges reconciliation for the years ended 31 July 2022 and 31 July 2021: 31 Jul y 2022 € 31 Jul y 2021 € Expenses included in the calculation of ongoing charges figures, in accordance with AIC’s methodology: Management fees (3,914,867) (3,308 , 384) Legal and professional fees (228 ,264) (251,453) Administration fees (638,203) (615, 916) Sundry expenses (261,314) (214,487) Total ongoing charges for the year ( 5,042,648 ) (4, 390,240 ) Calculating an average NAV The AIC’s m ethodology for calculating average NAV for the purposes of the ongoing cha r ges figure is to use the average of NAV at each NAV calculation date. On this basis t he averag e NAV figure has been calculated using the monthly published NAVs over the years ended 31 July 2022 and 31 July 2021. Internal Rate of Return The Internal R ate of Return is calculated as the gross p r ojected future return on Volta’s investment portfolio as at 3 1 Ju ly 2022 under standard AXA IM assumptions. As at 31 July 2022 the IRR is 24.5% (31 July 2021: 12.7%). The IRR is calculated using projected cash flows and a DCF model from the investment po rtfolio, which are consis tent with the Company’s accounting policies. 1 - Source: Bloomber g A L TERN A TIVE PERFO RMANC E ME A SURES DISCLOSURE (CONTINUED) FOR THE Y EA R ENDED 31 JULY 2022 Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 77 Dividend Yield Dividend y ield i s calculated by annualising the last dividend paid du r ing th e financial p eriod, divided by t he share p rice as a t year end. Dividend yield is calculated to measure the Company’s distribution of dividends to the Company’s Ordi nary Shareholders relative to share price to allow comparability to other companies in the market. Dividend yield is calculated as follows: 31 Jul y 2022 Last Dividends declared and paid for the year ended 31 July 2022 0.13 Annualised Dividend for the y ear ende d 31 July 202 2 0.52 Share price as at 31 July 2022 5.24 Dividend Yield 9. 9 % 31 Jul y 2021 Last Dividends declared and paid for the year ended 31 July 2021 0.14 Annualised Dividend for the y ear ende d 31 July 2021 0.56 Share price as at 31 July 2021 6.02 Dividend Yield 9 . 3 % NAV total return NAV total return per share is ca lculated as the movement in the NAV per share plus the tota l dividends paid p er share during the financial year, with such dividends paid being re-invested at NAV, as a percentage of the NAV per share as at year end. The one year NAV total return is calculated over the period 1 August 2021 to 31 July 2022. NAV total return summarises the Company’s true growth over time while taking into account both capital appreciation and divide nd yield. NAV total return per share has been calculated as follows: 1 August 2021 to 31 July 2022 € 1 August 2020 to 31 July 2021 € Opening NAV per share as disclosed in the SOFP 7.2807 5.6914 Closing NAV per share as disclosed in the SOFP 6.2232 7.2807 (1.0575) 1.5893 Capital return per share ( % ) ( 14.5 % ) 27 . 9 % Dividends paid during the year as disclosed above 0.5700 0.5100 Impact of dividend re - investment (%) 7.2 % 9.9% NAV total return per share (0.4875) 2.0993 NAV total return per share (%) (7.3 % ) 37.8% Share Price total return Share p rice total return is calculated as the movement in the share price plus the total dividends paid per share during the financial year, with such dividends paid being re-invested at the share price, as a percentage of the share price as at year end. Share Price Total Return per share has been calculated as follows: 1 August 2021 to 31 July 2022 € 1 August 2020 to 31 July 2021 € Opening share price per Euronext 6.02 4.38 Closing share price per Euronext 5.24 6.02 (0.78) 1.64 Share price movement (%) (13 .0 % ) 37.4% Dividends paid during the year as disclosed above 0.57 0.51 Impact of dividend re - investment (%) 8.7 % 14 .0 % Share Price total return (0.21) 2.15 Share Price total return (%) (4.3 % ) 51.4% LEG A L AND REGUL A TORY DISCLOSURES Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 78 Alternative Investment Fund Managers Directive The AIF M Directive seeks to regulate managers of AIFs that are marketed or managed in the Europ ean Economic Area. In comp liance with the AIFMD, the Company has appointed AXA IM to act as its AIFM and appointed BNP to act as its Depositary. AXA IM is authorised to act as the Company’s AIFM by the AMF in Fra nce. In order to maintain such authorisation and t o be able to continue to un dertake this role, AXA IM i s re quired to comply with variou s o bligations presc ribed un der the AIFMD. In conformity with Article 53 of the Commission delegated re gulation (EU) No. 231/2013, AXA IM has established appropriate policies and procedures regarding the credit risk of each of the structured credit positions (positions arising from the securitisation of underlying e x p osures) held by Volta, in ord er to m onitor information re g arding the pe rformance of the u n derlying exposures o n a timely basis and to manage such c redit risk where applicable and possible. Such policies and procedu r es a re considered as being a ppropriate to the risk/return profile of these positions. AXA IM also regularly implements stress tests on these positions. Information on the investment strategy, geographic and sector in vestment focus, and principal exposures is included in the Investment Manager’s R epo rt a nd Note 15 to the financial s tatements. None of t h e Co mpany’s assets are subject to specia l a rrangements a risin g from their illiquid nat ure, w here “special arrangements” refers to arrangements such as side pockets, gates or other similar arrangements, whereby the rights of some investo r s, usually over certain assets, d iffer from those o f other investors. Note 15 to the financial statements and the Principal Risk F actors se ction commencing on page 19 of this rep ort describe the risk profile and risk management systems in place. Certain regulatory changes have a risen from the i mplementation of the AIFM D that may, in some circumstances, impair the ability of the Investment Manager to m anage the investments of the Company and th is may adversely affect the Company’s ability t o ca rry out its investment s trategy and achieve its investment objectives. In addition, the AIFM D may limit the Company’s abili ty to mark et fu ture issuances of its shares in some EU jurisdictions. Certain EU member sta tes may impo se stricter rules or interpretations o f the AIFM Directive on the AIFM i n re spect o f the marketing o f shares than those eith er required under the AIFMD or as interpreted by othe r EU member states, as th e Company is a non-EU AIF . The Board a nd th e Compa ny’s adviso r s w i ll continue to m o nitor im plications of the AIFM Directive. Staffing and remuneration disclosures regarding the AIFM Remuneration paid for the calendar year 2021 and 2020 to all AXA Investment Managers Group personnel, split into fixed and variable remuneration paid (1) 20 2 1 Total 20 2 0 Total Fixed remuneration (2) ( € million) 234.9 236.1 Variable remuneration (3) ( € million) 274.8 263.2 Number of staff (4) 2,537 2,516 Aggregate remuneration p aid and/or awarded (1) for th e calenda r year 2021 an d 2020 to senior management and members of staff whose actions have a material impact on the risk profile of Volta Managers and other employees having a direct impact on the risk profile of Volta Other senior executives 2021 Total Fixed remuneration (2) and variable (3) remuneration ( € million) 120.8 96.0 216.8 Number of staff (4) 258 79 33 7 Managers and other employees having a direct impact on the risk profile of Volta Other senior executives 2020 Total Fixed remuneration (2) and variable (3) remuneration ( € million) 107.9 99.8 207.7 Number of staff (4) 224 88 31 2 Notes: (1) Information on remuneration does n ot include employer c ontributions. (2) Fixed remune ration comprises the b ase salary and all other components of fixed remu neration paid in the cal endar year. (3) Variable rem uneration comprises di scretionary, immediate a nd deferred elements of vari able pay and includ es: - amounts allocat ed on account of the p erformance of the pr evious year and paid o ut in full during the calen dar year (variable, non- deferred remuneratio n); - amounts allocat ed on account of the p erformance of previou s years and the c alendar year and paid ou t in instalments subject to m aintaining the perfo rmance over several years (va riable deferred remun eration); and - long term incentive bonuses awarded by the AXA Group. (4) The total num ber of employees include s permanent and tempo rary contracts other than internships at calendar year. LEG A L AND REGUL A TORY DISCLOSURES (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 79 FORWARD-LOOK ING STATEMEN TS This repor t includ es statements that are , or m ay b e considered, “f orw ard-looking statemen ts”. The se forw ard-looking sta tements can be identifie d by t he use of forward-looking terminology, including the terms “believes” , “estimates”, “anticipate s”, “plans”, “expects” , “targets”, “aims”, “intends”, “may”, “w ill”, “can”, “can achieve”, “would” or “should” or, in e ach case, t hei r negative or other v a riations or comparable t erm inology. These forward-looking statement s include all matters that are no t historical f act s. They a ppear in a number of places t hro ughout this rep ort, incl uding in t he Chairman’s Statement. They include st a tements regarding the intentions, belie fs or expectation s of the Compa ny or the Investmen t Manager concerning, a mong other thing s , the in vestment objectives and inve stment policies, fin a ncing st rate gies, i nvestment perfo rmance, results of operati ons, financial c ondi tion, liquidity pros p ect s, dividend policy and t argete d dividend levels of the Company, the de velopment of its financing strategie s and the development of the market s in w hich it, directly and through special purpose vehicles, will invest and issue securi ties and other instru ments. By their nature, forward-looking s t ate m ent s invol v e r isks and uncertainties be cause they r elate to events and depend on c ircu mstances that ma y or may not occur in t he future . Forw ar d-looking statement s are not guarantees o f future performance . T he Com pany’s actual investment performance, results of operations, financial condition, liquidity, dividend policy and dividend payments and the development of its financing strategies may di ffer materially f ro m the i mpression created by the forward-looking statements contained in this document. In addition , even if the invest ment performance , results of operations, financial condition, liquidity, dividend policy and dividend pay ments of the Company and the develop m en t of its f inan cing strategies are consistent w it h the f o rward-looking statemen ts contained in this docume nt, those result s or developments may not be indicative of results or development s in subsequen t periods. Impo rtant factor s that may cau se differences include, but are not limited to: changes in economi c conditions general ly and in the s tru c tured finance and c redit markets particularly; f luc t uation s in interest and currency exchange rates, as w ell as the degree of success of the Company’s hedging strategie s in relation to such changes and fluctuations; change s in the liquidi ty or volatility of the mar kets for the Co m pany ’s in v estments; declines in the value or quality of t he collateral supporting any of the Co m pany’s investments; legisla tive and regulatory change s and ju d icial interpre t ation s; changes in taxation; the Company ’s continued ability to invest its c a sh in suitable investments on a timely basis; the availability and cost of capital for future investment s; the availability o f suitable f inanc ing; t he continued provision of services by the I nvestment Man ager an d the Inve s tment Manag er’s ability t o attract and retain suit ably qualified per s onn el; and compe tition w ithin the mar kets relevan t to the Co m pany . These forw ard-looking statements speak only as at the date of this report. Subject to its legal and regulatory obligation s (includin g under the rules of Euronex t Amsterdam, the FCA and the London Stock Exchange) t he Co mpany ex p ressly disclaims any obligations t o update or revise any forw ard-look ing statement (whether attributed to it or any other person) contained herein to reflect any change in expectations with regard thereto or any change in events, conditions or circumstan ces on w hich any stateme nt is based. The Company qualifies all such forw ard-looking statements by these cautionary statement s. Please keep these cautionary statements in m in d while reading this report. BOARD OF DIRECTORS Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 80 Direc tors retired during 31 July 2022 year end: BOARD OF DIRECTORS (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 81 01. Dagmar Kent Kershaw Independent Director – appointed 30 June 2021 Ms Kent Kers haw has over 25 years ’ experien ce in financial ma rkets, lea ding and developing fund management and al ternative debt businesses. She headed Prudential M&G's deb t private placement activities, and launched its Structured Credit business i n 1998, which she led for ten years. In 2 008, sh e j oined Intermediate Capital Group to head its European and Australian c r edit business including institutional funds, CLO s, direct lending and he dge funds . Since 2017, she has held n on-executive po sitions and is curre ntly a d irector of Brooks Macdonald plc a nd Aberdeen Smaller Com panies Income Trust Plc, and a Senior Advisor to Strategic Value Partners. Ms Kent Kershaw holds a BA in Economics and Economic History from York Universi ty. 02. Stephen Le Page Independent Director – appointed 16 October 2014 Mr Le Page has served as a non -ex ecutive director on a num ber of boards since his re t irement from his role as Senior Partner (equivalent to Executive Chairman) of PwC in the Channel Isl an ds in 20 13. T hro ughout his thirty y ear career with that firm h e worked with many different types of financial organisation as both auditor and advisor, particularly with both listed and unlisted investmen t companies. He i s c urrently the Audit C ommittee Chair of five London listed funds. M r Le Page is a Fellow of t he Institute of Chartere d Accountants in England and Wales an d a Chartered Tax Advisor. He is a past president of the Guernsey Society of Chartered and Certified Accountants and a past Chairman of the Guernsey International Business Association. 03. Yedau Ogoundele – appointed 1 July 2022 Ms Ogound ele has over 25 years’ experience in financial m arkets, developing fixed inc ome activities and leading financial se rvice s businesses. She was Europe, the Middle East an d Africa ’s Head of Market Specialists at Bloomberg, then headed an e nterprise sales department. Previously, s he w o rked for over 17 years in investment banking at Credit Ag ricole CIB an d Natix is in v ariou s r o les including head of cr e dit st r ucturing where she s pecialised in CLO s tructuring and secondary loan trading. Since 2021, she has w ork ed as a senior advisor for financial institutions and advises investors, asset managers, and corporates on fundraising a nd risk management solutions. She i s currently an independent director of a pan-African fi nancial i nstitution. Ms Ogoundele holds a Master’s degree in Management & Finance from EM Lyon Business School. 04. Graham Harrison Independent Director - appointed 19 October 2015 Mr Harrison is co-founder and Group Managing Director of ARC Group Limited, a specialist in vestment advisory and research company. ARC was established in 1995 and provides investment advice to u ltra-high net worth families, complex trust structures, charities and simi lar institutions. Mr Harrison has fund Board experience spanning a wide range of asset c lasse s including hedge funds, commodities, property, structured finance, equities, bonds and money market fu nds . Prior to setting up ARC, he worked for HSBC in its corporate finance division , specialising in financial engin eering. Mr Harrison is a Chartered W ealth Manager and a Chartered Fe llow of the Chartered Institute of Securities and In vestment. He holds a BA in Econ omi cs from the University of Ex e ter and an MSc in Economics from the London S chool of Economics. Directors retired during 31 July 2022 y ear end: 05. Paul Meader Chairman and Independent Director – appointed 15 Ma y 201 4, retired 31 July 20 22 Mr Meader is an independent director of investment companies, insurers and i nve stment funds. Until 2012 he was Head of Portfo lio Management for Canaccord Genuity, based in Guernsey, prior to w h ich he was Chief Executive of Corazon Capital. He has over 35 years’ experienc e in financial m arkets in London , Dublin and Guernse y, ho lding senior positions i n p ortfolio management and tradin g. Prior to joining Corazon Capita l he was Managing Director of Rothschild’s Sw is s private b anking subsidiary in Guernsey. Mr Meader is a Chartered Fellow of the Cha rtered Institute of Securities & In vestments, a past Commissioner of the GFSC and past Chairman of the Guernsey International Business Association. He is a graduate of Hertfo r d College, Oxford. 06. Paul Varotsis Senior Independent Director – appointed 9 November 2006, retired 8 December 2021 Mr Varotsi s was a partner a t Reoch Credit Partners LLP until March 2011 where he w o rked as a consultant for financial institutions and advised inves t ors, asset manag ers, intermediaries and software vend ors o n structured credit solutions. Mr Varotsis w a s Director of CDOs at Barclays Capital from 2002 to 2004. Prior to that, he was Executive Dire ctor , Structured Credit Trading , at Lehman Brothers from 2000 to 2002 and spent approximately ten years (1991 to 2000) a t Chase Manhattan Bank and its prede cessors; h is last position at Chase was Head of Credit and Capital Management (Europe, Africa, Middle East). He was European Chairm an of the I SDA committee that participated in the drafting of the 20 0 3 Credit Derivatives Def initio n s and advised the Bank of England and other regulators on the ap prop riate framework for the mark et’ s development. Mr Varotsis holds an MBA from the Stan ford G ra duate School of Business, a diplôme from the Institut d’Études Politiques de Paris and a diplôme from the Institut Supérieur de Gestion. COMPANY INFORMATION Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 82 Volta Finance Limited Company registration number: 45747 (Guernsey, Channel Islands) Registered office BNP Paribas House St Julian’s Avenue St Peter Port Guernsey GY1 1 W A Channel Islands W eb site: w ww.voltafinance.com Investment Manager AXA Investment Managers Paris S.A. Tour Majunga La Défense 6 Place de la Pyramide 92800 Puteaux France Administrator and Compan y Sec retary BNP Paribas S.A., Guernsey Branch 1 BNP Paribas House St Julian’s Avenue St Peter Port Guernsey GY1 1 W A Channel Islands Corporate Broker and Corporate Finance Advisor Cenkos Securities plc 6.7.8 Tokenhouse Yard London EC2R 7AS United Kingdom Depositary BNP Paribas S.A., Guernsey Branch 1 BNP Paribas House St Julian’s Avenue St Peter Port Guernsey GY1 1 W A Channel Islands Independent Auditor KPMG Channel Islands Limited Glategny Court Glategny Esplanade St Peter Port Guernsey GY1 1 W R Channel Islands Legal advisors as to English Law Herbert Smith Freehills LLP Exchange House Primrose Street London EC2A 2EG United Kingdom Listing agent (Euronext Amsterdam) ING Bank N.V. Bijlmerplein 888 1102 MG Amsterdam The Netherlands Legal advisors as to Dutch Law De Brauw Blackstone Westbroek N.V. Claude Debussylaan 80 PO Box 75084 1070 AB Amsterdam The Netherlands Registrar Computershare Investor Services (Guernsey) Limited C/o Queensway House Hilgrove Street St Helier Jersey JE1 1ES Channel Islands Legal advisors as to Guernsey Law Mourant Ozannes Royal Chambers St Julian's Avenue St Peter Port Guernsey GY1 4HP Channel Islands 1 BNP Paribas S.A., Guernsey Branch is regulated by the GFSC Listing Information The Company’s Ordinary shares are listed on Euronext Amsterdam and the premium segment of the Londo n Stock Exchange’s Main Market for listed securi tie s. The ISIN number of the Company’s listed shares is GG00B1GHHH78 and the tickers for the relevant markets are listed below: - Euronex t Amsterdam Stock Exchange, Euro quote: VTA.NA - London Stock Exchange, Euro quote: VTA.LN - London Stock Exchange, Sterling quote: VTAS.LN GLOSSARY Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 83 Definitions and exp lanations of methodolo gies used: Terms Definitions ABS Asset-backed securities. AGM Annual General Meeting. ABS Residual position s Residual income positions , which are a sub-clas sification of ABS, be ing backed by any of the following: residential mor t gage loa ns ; commerc i al mor tgage loans; auto m obile loans; student loans; credit card receivables; or leases. AIC the A ssociation of Inve stment Companies, of w hic h the Co m pany i s a member. AIC Code the AIC Code of Corp orate Governance effective from 1 January 2019. AFM the Netherlands Authority f or the Financial Markets (the “ Aut orite it Financiële Markten” or “AF M” ), being the financial mar kets supervisor in the Ne therlands. AIF Alternative Invest ment Fund AIFM Alternative Invest ment Fund Manag er, appointed in accordance w it h the AIFMD. AIFMD the Alternative Investmen t Fund Ma nagers Directive. AMF The Autorité des Marché s Finan ciers is the stock market regulator in France. Annualised cash flow yield Cal c ulated as sum of coupons over the last financial ye ar divided by opening NAV. APM Alternative performance m easure. We as s ess our perfor m ance using a var i ety of m easures that are not specifically defined under IFRS as adopted by the EU and are ther efore termed alternative performance measures. The APMs that we use may not be dire c tly comparable with those used by other companies. The APMs disclosed in the A nnual Rep ort and Audited Finan c ial Statements reflect those measure s used by m anage ment to measure perfor m ance. These APMs prov ide readers with important add itional infor m ation and w ill enable co m par ability of performance in future periods. The calculation methodolog y of each APM ha s been dis c losed on pa ges 76 to 77. Articles the Articles of Incorporation of the Company. Auditors KPMG Channel Islands L imited AXA IM, Investment Man ager or Manag er AXA Investment Manager s Paris S.A. BBS Bank Balance Sheet transa c tions: S yntheti c transactions that pe rmit banks to trans f er part o f their exposures such as ex posures to corporate loans, mortgage loans , co unterparty risks, trade finance loans or any classic and re current r isks banks take in conduc t ing thei r c ore bu s iness. BNP Paribas B NP Paribas S.A., Guernsey Branch. Board the Board of Director s of the Co mpany. CCC or Cash Corpora te Credit Deals structured credit positions predominantly ex posed to corporate credit risks by direct investments in cash in struments (loan s and/or bonds). CCC Equity Cash Corporate Credit Equity . Cenkos, Corporate Bro k er or Brok er Cenkos Securities plc. CLOs or CLO Collateralised Loan Obligat ions. Company or Volta Volta Finance Limited, a l imited liability co mpany registered in Guern sey under the Compan ies (Guernsey) Law 2008 (as amended) with registered number 45747. CMV or Capitalised Man ager Vehicle a CMV is a long- term closed-ended structure wh ich is established to ac t as a CLO manag er and to also provide capital in order to meet risk retention obligation s when issuing a CLO and also to provide w a rehousing capabilities. CPR Constant prepaymen t rate. CRS Common Reporting Standar d. Discount - APM Calculated as the NAV per share a s at 31 July 2022 les s Volta’s closing share price on Euronex t Amsterdam as at that date , divide d by the NAV per share as at that date. Dividend Yield - APM Last quarter divide nd paid during the financial perio d 31 July 2022 annuali s ed, divid ed by the shar e price as at 31 July 2022. DM Dis count Margin. ECB European Central Bank. Enterprise value a Measure o f the company' s total value. EPS Earnings per share. Euronex t Amsterdam Euronex t in Amsterdam, a regulated market of Euronex t Amsterdam N.V. EU The European Union. EU PRIIPs rules The Europea n Union rules in re lation to packaged re tail and insurance- ba s ed inve s tment products. FAFVTPL Financial asset s at fair value through profit and los s. FATCA United States of America Foreign Ac count Tax Compliance Act. FED United States’ Federal Reserve Fidal Largest leading independen t business law firm in Fran ce. Financial year The period from 1 Augus t 2021 to 31 J uly 2022. FRC Financial Reporting Counc il (United Kingdom) . GAV Gross Asset Value includes: all of the assets in the Co m pany’ s port folio revalued to the m onth-e nd fair value, as adjusted for any amounts due to/fro m brokers/ c ounterpar ties; all of the Company ’s cash; all open derivative po si tions revalued to the month-end fair val ue, net of any m argin a m ounts paid or received. GFC Glob al Financial Crisis 2008. GFSC Guernsey Financial Ser vices Commission. HPI H ouse price index . IGA Intergovernmental Agree ment. IASB Int erna tional Accounting Standards Board . IFRIC Internation al Financial Repor ting Interpretations Co m mittee. IFRS Int erna tional Financial Repor ting Standards. IFRS 9 International Financial Repo rting Standar ds 9, “Financial Instru m ents” . IMA Investment Manage m ent Agree ment. IRR Internal rate of return. JP Morgan Pricing Direc t An independent valuat i on service wh ich is a wholly-owned subsidiary of JPMorgan Chase & Co . KPMG KPMG Channe l Islands Li mited. GLOSSARY (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 84 LSE London Stock Exchang e. Memorandum the Memorandum of In corporation of the Co m pany. N/a Not applicable. NAV Net asset value. NAV Total Return - APM NAV total return per share is calculated as the m ove ment i n the N AV per share plus the total dividends paid per share dur ing the financial year, w ith such dividends paid being re-invested at NAV, as a percentage o f the NA V per share as at yea r end. NPL Non-performing loan. Ordinary shares Ordinary shares of no par value in the share c api tal of the Company. Projected portfolio IRR Calculated as the gross projected f uture return on V ol ta’s investment portfolio as at 31 July 2022 under standard AX A IM assu m ption s. Prospectus Final prospectus dated 4 De c embe r 2006. Refi Consist in refinancing part or all of the debt tranches of a CLO w hile operating ver y modest changes in the CLO do c u mentation. REO Real Estate Ow ned. Repo Repurchase agree m ent entered in t o w ith Société Générale. Reset Consist in calling all the de bt tranches of a CLO , re- m arketing a ful l new debt package, with new CLO documentation, al most as if it is a new CLO. RMBS Residential mortgage-bac k ed se curities, which are a sub-classificatio n of ABS. SCC BBS Synthetic Corporate Credit Bank B alance Sheet. SG Société Générale S.A. Share or Shares All classes of the shares of the Co m pany in issue. Shareholder Any Ordinary Shareholde r. Share price Total Return - A PM The percentage increase or de c rease in the s hare pri c e on Euro next Amsterda m plus the total dividends paid per share dur ing the reference period, w ith such dividends re-invested in the s hares. Obtained from Bloo m berg using the TRA fun ction. SME Small and medium-sized enterp rises. SOFP State m ent of Finan c ia l Position. SSC or Synthetic Corp orate Credit Structured credit positions predo minantly exposed to corporate credit risks by synthetic contra c ts. Underlying Assets The as sets that the Compan y may invest in ei ther directly or indire ctly include, but are not limited to, corporate credits; sover eign and quasi-sover eign debt; residential mortgage loans; commercial mortgage loans; auto m obile loans ; student loans; credi t card rece ivables; leases; and debt and equity interests in infra s tructure pr ojects. UK code UK Corp orate Governance Code 2 018, effective from 1 January 2019. US United States of America. USD United States Dollar. Warehouse a Warehou s e is a short- t er m structure put in place before a CLO happens in order t o accu mulate assets in order to facilita t e the i ssue of the CLO. A W arehouse is leverag ed and can be marked to market. WAL Weighted average life . NOTICE OF MEETING Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 85 Volta Finance Limited A closed-ended limited l iability comp any registered in Guernsey under the Companies (Guernsey) Law , 2008 (as amended ) with registered number 45747 and registered with the Netherlands Authority for the Financial Markets pursuant to Section 1:107 of the Dutch Fina ncial Markets Supervision Act (the “Company ”). Notice of the fifteenth An nual General Meeting of the Company In accordance wit h the Compa ny’s Ar tic les of Inc orpo ration (the “Articles”), notice is hereby given that the f iftee nth Annual General Meeting of the Co m pany will be held at the Company's reg i stered office, B NP Pa ribas Ho use, St Julian’s Avenue, St Peter Port, Guernsey G W 1 1W A, Channel Islands, at 14:00hrs GMT on W ednesday 7 December 2022. Agenda Ordinary business To consider and, if thought fit, pas s t he following as Ordinary Resolutions : (1) To adopt the audited financial statements of the Company f or t he yea r ended 31 July 2022, including the reports of the Board of Directors of the Company (the “Boa r d”) and the Auditor (together the “Accounts”). (2) To re-appoint KPMG Channel Islands Limited of Glategny Court, Glategny Esplanade , St Peter Port, Guernsey GY1 1WR as the Company’s Auditor to hold office until the conclusion of the nex t AGM. (3) To authorise the Board to ne gotiate and fix the remuneration of the Auditor in respect of the yea r ending 31 July 2022. (4) To re-elect Graham Harrison as an Ind ependent Director of the Company. (5) To re-elect Dagmar Kershaw as an Ind ependent Director of the Company. (6) To re-elect Stephen Le Page as an Independent Director of the Company. (7) To elect Yedau Ogo undele as an Independent Director of the Comp any. (8) To approve the quarterly dividend policy of paying approximately 8% of NAV per annum, absent of a no table change i n circumstances, with a dividend payment date in January, April, July and October. Special Business To consider and, if thought fit, pas s t he following as Special Bus iness: Special Resolution (9) THAT in accordance with Article 5(7) of the Articles, the Board be and is hereby authorised to iss ue equ ity securities (within the meaning of the Articles) as if Arti cle 5(2) of the Articles did no t apply to any such iss ue, prov i ded that this power shall be limited to the is sue of up to a maximum number of 3,658,058 Ordinary shares (being not more than 10% of the number of Ordinary shares in issue as at the date of this notice) or such other number being not more than 10% of the Ordinary shares in issue at the date o f the AGM, whether in respect of the sale of shares held as treasury shares, t he issue of newly created shares or the grant of rights to subscribe fo r, or convert securities into, s hares which, in accordance with the Listing Rules, co uld only be issued at or abo ve net asset value per share (unless offered pro rata t o ex isting Shareholders or pursuant to further authorisation by Shareholders). This authority will expire on the conc lusion of the next AGM of the Company unless previously renewed, varied or revoked by the Company at a g eneral meeting , save that the Company shall be entitled to make offers or agreements before th e e xp iry of such power which would or might require e quity s e c urities to be allotted after such expiry and the Dir ect ors shall be entitled t o allot e quity securities pursuant to any such o ff er or ag reement as if the powe r c on ferred h ereby had not e xpired. For further information, p lease see Note 9. NOTICE OF MEETING (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 86 Ordinary Resolutions (10) That the Com pany be generally and unconditionally authorised to make market purchases, for the purposes of Section 315 of the Companies (Guernsey) L aw, 2008 (as amended), of Ordinary shares in the Company on such terms and in such manner as the Directors may from time to time determine , provided that: (a) the ma x i mum nu mber of Ordinary sha res hereby autho rised to be a c quired is 5,4 83,429, representing not more tha n 14.99% of the issued Ordinary share capital of the Com pany as at the date of this notice; (b) the minimum price ( exclud ing e xpenses) payable by t he Comp any for each Ordinary share is € 0.01. The ma ximum pric e (excluding e xpe ns es) which may be paid for any such Ordinary share is the higher of (i) an amount equal to 105% of the average o f the middle ma rket quotations for an Ordinary share in the Company as derived from The Lo ndon Stock E xchange Daily Official List for the five business days immediately preceding the d ay on which su ch s hare is contracted to be purchased; and (ii) the amount stipulated by Article 3(2) of the EU Buy-back a nd Stabilisation Regulation ( 2016/1052/EU) being the hig her of t he price of t he last independent trade and the highest c urrent independent bid for an Ordinar y share in the Company on the trading v enues where the market purchases by the Company pursuant to t he a uthority conferred by this resolution will be carried out (provided that (ii) shall not apply where the p urchases would not b ear the ris k of breaching th e pro hibition on market abuse); (c) the authority hereby c on ferred shall expire at the end of the ne x t Annual General Meeting of the Comp any unless previously renewed, varied or revoked by the Company in general meeting; and (d) the Company may make a contract to purchase the Or dinary sh ares under the authori ty hereby conferred pr ior to the e xpiry of such au thority, whi ch contract wil l or may be executed wholly or partly after the ex pir y of such authority, and may purc hase its Ordinary shares in pursuance of any such contract. (11) That, in accordan ce with Se ction 16 0 of the Comp a nies (Gue rnsey) Law, 2008 ( as a mended), the c han ge to the b asis of Director’s remuneration agreed b y the Board in 2017 and a pplied s ubsequently, be ratified. It s hou ld be noted that this change in basis did not result in an increase in remuneration for any individual director. (12) That, in accordan ce with Article 20(2 ) of the Articles, the i nd ividual Director’s remune r ation s pecified in such article be am ended to 'not exceed € 100,000' per annum. Such amen dment is ratified, effective from 1 February 2017. Special Resolution (13) That, in accordan c e wit h Section 42 of the Com panies (Guernsey) Law , 2008 (as amen ded), the d raft form of articles o f incorporation, available on t he Company’s website (https://www.voltafinance.com/investors/oth er-documents), be approved and adopted as t he new artic les of incorporation of the Company (the “New Articles”) in substitution for and to the entire exclusion of the existing articles of incorporation. In addition, a copy of the proposed New Articles of t he Company, together with a copy of the ex is ting Articles marked to show the changes being proposed, will also be available for inspection on request at the Company's registered o ffice from 31 October 2022 until the conclusion of the meeting . * See directors’ biographies on pa ge 81. Notes 1. The Company’s Accounts were pu blished on 31 October 2022. 2. Copies of th e Company’s Memorandum and Arti cles of Incorporation an d its 2 021 Accounts a r e available for inspection at the Co mpany’s registered office during normal business hours and are availab l e on r equ es t free of charge from the Company Secretary, BNP Paribas S.A., Guernsey Branch, BNP Paribas House, St Julian’s Avenue, St Peter Port, Guernsey GY1 1WA, Channel Islands ( guernsey.bp2s.volta.cosec@bnppa ribas.com ) an d from the Listing Agent, ING Ban k N.V., Bijlme rplein 888, 1102 MG Amsterdam, The Netherlands, or from the Company’s website ( www.voltafinan c e.com ). 3. Only those investors holding Ordinary shares as at 14:00 hrs GMT on 5 December 2021 shall be entitled to attend and/or exercise their voting rights attached to such shares at the AGM. 4. Investors holding Ordinary shares via a broker/nominee who wish to at tend or to ex erc ise the voting rights at t ached to the sh ares at the AGM should contact their broker/nomine e as soon as possible. 5. Should the Class B Shareholder being entitled to vote wish to attend or exercise the voting rights attached to the share at the AGM they should contact the Company Secretary as soon a s possible. 6. A Shareholder who is entitled to attend, speak and vote at the AGM is entitled to appoint one or more proxies to attend, speak and vote instead of him or her. A proxy n eed not be a member of the Company. 7. More than one proxy may be appointed provided each proxy is appointed to exercise the rights attached to different shares. 8. The quorum requirements for the conduct of Ordinary Business and Sp ecial Business are set out und er Article 17 of the Articles. 9. In accordance with the Articles, the notice period for an AGM of the Company is 21 clear calendar days (plus 24 hours deemed service of notice). 10. Article 5 of the Articles requires t hat where Ordinary shares are iss ued , or rights t o subscribe for, or convert any s ecurities into, Ordinary shares are grante d, wholly for cash, or where Ordinary shares are sold out of treasury wholly for c ash, either Sha reholder approval must be sought to make a no n-pre-emptive offer or a pre-emptive offer must be made to all existing Sha reholders. NOTICE OF MEETING (CONTINUED) Volta Finance Limi ted Annual Report and Audited Financial Statem ents 2022 87 11. Electronic receipt of proxies: CREST members who wish to a ppoint and/or give instructions to a proxy or proxies t hroug h the CREST electronic proxy appointment service may d o so for the Annual Gene r al Meeting and any adjournment(s) thereof by us ing t he procedures described in the CREST Manual. CREST persona l members or other C REST sponsored me mbers and tho s e C REST members who have a ppointed a vot ing service provider(s), shou l d refer to the ir CREST sponsor or voting service provid er(s), who will be a ble to take the ap propriate action on their behalf. In order for a proxy appointment or inst ru ction made usi ng the CREST service to be valid, the appropriate CREST message ( the CREST Proxy Instruction) must be properly authen t icated in accordance with Euroclea r UK & I reland Limited's ("Euroclear') specifications and must contain the information required for such i nstructions, as desc ribe d in the CREST Manual. The message, regardless of whethe r it constitutes the app ointment of a proxy or an amendment t o the instr uc tion given to a previously appointed proxy must, in order to be valid, be transmitted s o as t o be received by Computershare Investor S ervices (Guernsey) Limited (CREST participant 3RA50) by no later than 14:00hrs GMT on Monday 5 December 2022. For this purpose, the time of receipt will be taken to b e the t ime (as determined by the timestamp app l ied to the mes sage by the C REST A pplications Ho s t) from which Computershare Investor Services (Guernsey ) Limit ed i s able t o retrieve the m essage by enqu iry to CREST in t he ma nner presc ribed by CREST. A fter this time, any change of i nstruction s to proxie s appointed through CREST should be c ommu nicated to the appointee through oth er means. CREST members an d, where applicable, the ir CREST s po nsors or vo ting service providers should note that Eu roclear does no t make available special procedures in CREST for a ny particular messages. Normal system timings and limitations will therefore apply in relation to t he in pu t of CREST Proxy Instr uctions, it is the responsibility of the CREST member concerned to take (or, i f the CREST member is a CREST personal member or sponsored m ember or has a ppointed a voting service provider(s) to procure tha t his o r h er CREST sponsor o r v oting service p r ovider(s) take(s)) su ch action as is necessary to ensure th at a message is transmitted b y means of the CREST s ystem by an y particular time. In this regard, CRES T members and, where applicable, th eir CRE ST s pon sors or voting service providers are r eferred, in particular, to those secti ons of the CREST Manual concerning practical limitations of the CREST system and timings. The Company may treat a s i nva l id a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) or the Uncertified Securities Regulations 200 1. For and on behalf of BNP Paribas S.A., Guernsey Branch Company Secretary 31 October 2022