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Volta Finance Ltd.
Interim / Quarterly Report • Apr 23, 2025
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Interim / Quarterly Report
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VOLTA FINANCE LIMITED
INTERIM REPORT FOR THE PERIOD 1 AUGUST 2024 TO 31 JANUARY 2025
CONTENTS
| Volta at a Glance | 1 |
|---|---|
| Chair's Statement | 2 |
| Investment Manager's Report | 3 |
| Executive Summary | 12 |
| Statement of Directors' Responsibilities | 16 |
| Condensed Statement of Comprehensive Income | 17 |
| Condensed Statement of Financial Position | 18 |
| Condensed Statement of Changes in Shareholders' Equity | 19 |
| Condensed Statement of Cash Flows | 20 |
| Notes to the Condensed Financial Statements | 21 |
| Alternative Performance Measures Disclosures | 34 |
| Board of Directors | 36 |
| Company Information | 37 |
| Glossary | 38 |
VOLTA AT A GLANCE
The investment objectives of Volta are to seek to preserve its capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis. Volta currently seeks to achieve its investment objectives by pursuing exposure predominantly to CLOs and similar asset classes. Volta measures and reports its performance in Euro.
KEY PERFORMANCE INDICATORS as at 31 January 2025
SHAREHOLDER OVERVIEW PORTFOLIO OVERVIEW
| Share Price3 EUR 6.15 (31 July 2024: EUR 5.20) |
Dividend Yield1 9.8% (31 July 2024: 11.2%) |
Net Asset Value (NAV) EUR 279.0m (31 July 2024: EUR 260.9m) |
% of CLOs: 99.8% (31 July 2024: 98.5%) |
|---|---|---|---|
| X Share Price Total Return1,3 |
NAV Total Return1 11.3% (Six months ended 31 January 2024: 11.1%) |
# CLO Positions: 89 (31 July 2024: 94) |
|
| 24.5% (Six months ended 31 January 2024: 5.6%) X |
Discount to NAV1,2 -19.4% (31 July 2024: -27.1%) |
Projected Portfolio Yield1,4 12.4% (Six months ended 31 January 2024: 17.3%) |
# CLO Managers: 40 (31 July 2024: 40) |
NAV performance analysis for the six month periods ended 31 January 2025 and 31 July 2024 – contributions to NAV change (Euro per Ordinary share)
1 Refer to the glossary on pages 38 to 40 for an explanation of the terms used above and elsewhere within this report. The calculation methodology of each APM has been disclosed on pages 34 to 35.
2 Discount to NAV represents the difference between the share price and the NAV per Ordinary share.
3 Source: Bloomberg
4 Refer to the 'forward-looking statements' on page 33.
Volta Finance Limited Interim Report 2025 1
CHAIR'S STATEMENT
Dear Shareholders
I am pleased to report on a positive six months for Volta. In the first half of our financial year, the NAV per Ordinary share has risen from €7.13 at 31 July 2024 to €7.63 at 31 January 2025, a rise of 7.0%. The share price delivered strong improvement over the same period from €5.20 to €6.15 per Ordinary share, an increase of 18.3% and has continued to outperform post the period end. Volta's Board, Investment Manager and our research specialists, Hardman and Co, have been stating publicly for several months that we believed our share price was an anomaly and the large discount was not justified given the underlying performance of the assets, so it is a very welcome development to see some correction in value. There is still some way to go and the investment trust sector is suffering generally but the factors which are in Volta's control remain well managed and underlying asset performance is positive.
Cashflow from Volta's portfolio remains strong at 19% annualised. The portfolio assets are now almost exclusively (over 99%) in CLO investments as the Investment Manager has worked to simplify the portfolio for greater transparency. Those investments are across CLO equity and debt, US and Europe and we believe this allows the Investment Manager great flexibility to seek out value within the CLO investment universe. The CLO market has been extremely buoyant over the period with strong issuance, reducing liability costs (which improves the yield of equity tranches) and a number of new entrants as CLO managers. Strong demand for CLO paper has created some pressure on the availability of leveraged loan paper, as managers need more loans to populate their new CLOs and loan spreads have tightened over the period, however the balance between assets and liabilities remains favourable.
There can of course be no review of the period without commenting on the macro environment. Whilst President Trump's second term officially started in the last month of our half year period, his election and the expected effects started to show for many weeks before he returned to the Oval Office. The one predictable outcome currently is unpredictability. Heightened volatility in financial markets, trade wars, the threat of recession and unchartered US sentiment in global geopolitics all point to interesting and opaque times.
This macro uncertainty has impacted equity markets, particularly in the US and some of the Magnificent 7 tech stocks. The unstoppable march of the S&P 500 has been reversed in recent weeks and investor sentiment is looking for alternatives to equity. In times such as these, we maintain our belief in the attractive opportunity that Volta offers, with regular dividend income and generally uncorrelated to equity market activity. CLOs are complex instruments and display their own volatility but are supported by contracted cashflows and strong structural protections. Whilst economic factors invariably may impact some of Volta's underlying leveraged loan borrowers, the diversity by industry and geography helps to limit the challenges.
Turning to loan default rates, these remain at below average levels with 0.94% in the US and 0.17% in Europe. However, I would urge some caution when considering these headline rates due to the increasing use of Liability Management Exercises ('LMEs'). Like many trends in financial markets, this activity started in the US but is now established in Europe, with Altice France, one of Europe's largest leveraged finance borrowers and CLO portfolio companies in the midst of such an exercise. In an LME, the equity owner takes action to restructure its debt when a company is underperforming but ahead of a default. The debtholders agree to a write-down which is smaller than in a default, and for the equity it buys more time to recover the company's prospects. Whether LMEs are a longterm solution, or whether they are an exercise in kicking a default problem down the road for a later date remains to be seen, but as many LMEs are not caught in the rating agencies' default numbers, they are flattering the default statistics.
In summary, we find ourselves in volatile and unpredictable times. However, we remain cautiously optimistic about the coming months and Volta's ability to ride out any storms. As investors, you do not need to be reminded that NAVs can be subject to market whims in this asset class, but cashflow is strong and robust, the portfolio is well managed and our Investment Manager continues to find good opportunities to buy and trade.
I thank you for your continued support and please do not hesitate to contact me through the Company Secretary.
Dagmar Kershaw Chair 1 April 2025
INVESTMENT MANAGER'S REPORT
At the invitation of the Board, this commentary has been provided by AXA Investment Managers Paris S.A. ("AXA IM") as Investment Manager of Volta. This commentary is not intended to, nor should be construed as, providing investment advice. Potential investors in the Company should seek independent financial advice and should not rely on this communication in evaluating the merits of investing in the Company. The commentary 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
As the Investment Manager, we are glad to report that Volta achieved a performance of +11.3% over the first half of its financial year, on a non-annualised basis. As of end of January 2025, Volta's NAV was €279.0m, i.e. €7.63 per Ordinary share.
The half year 2025 performance is in line with the half year performance of 2024 (+11.1%) and reflects the strong performance of the vehicle in the context of a significant tightening momentum across Credit markets.
The cashflow generation of Volta remained healthy at c.19% of NAV as at 31 January 2025 while NAV per Ordinary share grew by over 7.0% from €7.13 as of 31 July 2024 to €7.63 as of 31 January 2025. Dividends of €0.295 per Ordinary share were distributed to the Shareholders through the half-year period.
Asset picking remained key to performance, although addressing Volta's asset maturities as well as supportive loan and CLO fundamentals played a decisive part. With almost 100% of its assets part of the CLO asset class family at the end of January 2025, we consider Volta a pure CLO fund. We believe this will simplify potential Shareholders' risk identification and will contribute to simplify Volta, ultimately increasing its appeal.
1. Macro views
FOMC, ECB, POTUS inauguration, ceasefire, DeepSeek, wildfires, tariffs… the last few months were eventful, to say the least. The global economy experienced contrasting developments characterised by fragile recoveries, adjustments in monetary policies and increased regional divergences. In the US economic resilience persists despite a gradual slowdown, while the Eurozone struggles to find a balance between stagnation and recovery, China shows robust growth but faces structural headwinds and Japan entered a monetary tightening phase.
The hawkish statements from FED's Chair Powell at the end of January 2025 dampened hopes for a rate cut in the US before summer, while markets were anticipating the easing cycle to resume in June 2025. The decision to hold interest rates unchanged marked the FED's first pause since it started its easing process in September 2024, despite the US economy missing expansion forecasts with readings coming in at 2.3% on an annual basis for Q4 2024, down from 3.1% in Q3 2024. This was explained by the persistence of inflationary risks linked to expansionary fiscal policies and geopolitical tensions. Household consumption remains the main pillar though, supported by a tight labour market and moderate inflation at 2.7% year-on-year in Q4 2024.
In Europe, the eurozone economy stalled in the last quarter of 2024 with no growth to report despite anticipations of a 0.1pp expansion. The annual growth rate reached 0.7% for 2024, masking significant national disparities since bellwether countries such as Germany and France experienced marked slowdowns while Spain and Italy benefited from slight improvements in their employment indicators. The manufacturing sector remains under pressure, with manufacturing PMI indices stagnating around 45 points, indicating a persistent contraction in activity. In response to these tensions, Christine Lagarde did not surprise markets and delivered a well anticipated cut of 25 basis points on the three key ECB interest rates on 30 January 2025. The plan there is to adopt a gradual approach to support growth without reigniting inflationary pressures.
Although largely backed by the data divergence with the US, it is interesting to note the striking difference in terms of monetary path between the US and the European Union as we anticipate further cuts in the old continent.
In terms of politic headlines, Trump's administration started the new term with a bang, announcing a series of tariff hikes on Canada, Mexico and China whilst preparing ground for a similar deployment towards European goods. Trump is looking for fair trade agreements and clearly signals to the world and his historical business partners that the US is ready to face growing domestic inflation in order to achieve their ultimate goal. This is putting back in the spotlight the notion of Trump's trades, while we largely anticipate volatility to pick-up as policies and new announcements are implemented.
2. Loan asset class review
The US leveraged loan market concluded 2024 with several record-breaking milestones notably with a total of \$1.4 trillion in newissue market activity. Primary issuance surged to \$398bn in the fourth quarter of 2024 - just 2% shy of the \$405bn peak in Q2 2024 - marking it the second-highest quarterly total on record.
Exceptionally strong demand from CLOs and retail investors set against very little new issuance reignited the repricing wave in the 4th quarter of 2024. December 2024 alone, saw \$153bn worth of amendments to lower the spreads on existing term loans, the busiest month for such activity on record. 122 companies repriced their loans twice in 2024, shaving an average of 99 bps off the spread.
The repricing total for the year reached \$757bn, easily surpassing the previous record of \$432bn set in 2017, leading to a spread compression across the Morningstar LSTA US Leveraged Loan Index. Most importantly, borrowers benefited from the strong market momentum to significantly reduce upcoming maturity walls, slashing the 2025 maturity wall by 84% to just \$13.5bn and the 2026 maturity wall by 75% to \$44bn.
2. Loan asset class review (continued)
In terms of performance, the Morningstar LSTA US Leveraged Loan Index rose by 9.37% in 2024 from coupon-clipping alone making it the second-best performance in eight years just below the record 9.87% gain of 2023, but well above the 5.03% average from 2013 to 2022. While carry was still the primary driver of returns, its impact was slightly reduced compared to 2023, owing to tighter spreads on existing loans (following record repricing and refinancing activity) and three base rate cuts. By 31 January 2025, the three-month term SOFR had dropped to approximately 4.3%, down from just below 5% in mid-September 2024 and 5.3% at the start of 2025.
In Europe, appetite from CLOs for loans supported the return to volume levels close to pre-Russia's invasion of Ukraine ones. Institutional loan activity totalled €207bn, surpassing the 2017 record of €158bn while new institutional deals reached €127.6bn, exceeding the 2021 record of €114.3bn. Excluding extensions and repricing, loan volumes were €108bn, below the 2021 total of €130bn.
Despite this repricing wave, the Morningstar European Leveraged Loan Index ("ELLI") grew to over €300 billion in November 2024 for the first time in its history, tripling in 10 years. Net leveraged loan growth was helped by a doubling of M&A loan activity in 2024 (from €16.3bn in 2023 up to €37.7bn).
Spreads also moved tighter through the year: while resistance levels for B2-rated Loans had held around E+375 through H2 2024, January 2025 saw some issuers testing repricing at levels below E+350bps. In a similar fashion from what was observed in the US, this created an ideal environment for borrowers to push maturities back and relieve this pressure until 2028.
The average ELLI bid traded through the year within a 97.50-98px range for most of the year. Loan prices rose following a clear outcome in the US presidential election, mirroring trends seen across global financial markets. However, the move above 98px into the year-end was primarily fuelled by a surge in demand from European CLOs looking for assets, rather than a general post-election rally.
The start of 2025 saw a surge in secondary prices for US leveraged loans and a flurry of primary market activity as borrowers capitalized on favourable credit conditions. While opportunistic transactions remain prevalent, following the trend already observed in 2024, we noticed an increase in M&A activity. This development could potentially counterbalance the decrease in loan yields, which has been ongoing due to the sustained wave of repricing activity, if sustained.
In January 2025, the Morningstar LSTA US Leveraged Loan Index increased by 0.69%, marking a rise from December's 0.57%. However, this growth fell slightly short of the 12-month trailing average of 0.72%. The New Issue market saw a significant surge and broke records with a total activity of \$212 billion, which included \$138 billion worth of Refinancings. Furthermore, issuance not linked to Repricings or Refinancing climbed to approximately \$35 billion, making it the second-highest monthly volume in the past three years. Loans with higher ratings underperformed in January: Double-B rated loans had a total return of 0.66%, slightly lower than the 0.67% return for the single-B Loans, while CCC assets outperformed rising by 0.96% on the month.
The European leveraged loan market experienced a positive momentum in January 2025 as well, driven by a decrease in inflation worries which in turn fuelled a greater appetite for risk. As a result, triple-C risk saw its best monthly performance in the past two years at 3.47% while the European Leveraged Loan Index retuned +0.99%. We believe that the persistent technical supply shortage, coupled with a significant proportion of facilities priced above par, creates favourable conditions for more loan Repricings in the future.
In terms of Loan formation, issuers capitalised on strong demand, ongoing technical supply shortages and decreasing borrowing costs to refinance circa €9 billion of debt. This marks the most active start to a year for European loan refinancings on record, surpassing the previous high of €5.8 billion set in January 2024. It is also significantly above the average monthly volume of €2.6 billion over the past ten years.
Source: AXA IM / Bloomberg –January 2025
2. Loan asset class review (continued)
Source: AXA IM / Bloomberg –January 2025
3. CLO market review
In the US, 2024 saw a record \$164.2bn in BSL CLOs and \$37.75bn in middle-market/private credit CLOs. The BSL total narrowly missed the 2021 record of \$164.4 billion. CLO managers also priced a combined \$306 billion in refinancing and reset transactions (\$223bn with 450 Reset and \$ 83.5bn with 212 Refinancing), exceeding the 2021 total of \$251 billion.
A key driver for CLO investments came from banks, which needed to replace CLO assets that were redeemed from their portfolios due to a significant wave of CLO bond paydowns last year. A record \$139.7 billion in CLO notes were redeemed in 2024 and CLO bank holdings managed to remain steady at \$20bn thanks to their active buying approach. The record CLO issuance in Q4 was also supported by increased LBO/M&A loan activity, which bolstered CLO creation, as well as the Fed's rate cuts that started in September 2024, offering relief to corporate loan issuers with floating-rate debt obligations, ultimately a reflection of the credit risk taken by CLO investors.
The fast-growing segment of retail CLO ETFs also gained momentum, with 14 publicly traded CLO ETFs holding \$21 billion in assets (i.e. 2% of the US CLO market) as of December 2024. By 2025, we anticipate that the number of CLO ETF should be over 20, some including private-credit and middle-market CLO exposure.
In Europe, 2024's full-year CLO issuance reached €81.4bn. New-issue volumes alone totalled €48.1mn, a European CLO 2.0 record, while a revival in Reset and Refi activity further boosted supply, far outpacing 2023 and 2022's volumes. The key driver supporting this supply was the cash returned to investors from repayment and liquidation of older CLO structures, which kept net CLO issuance to just over half the €48.1bn gross figure.
AAA were well supported by European banks: €5.5bn of AAA paper was structured in loan format in 2024 across both new issues and resets/ refinancings, the preferred holding format of Bank institutions.
Activity picked up in H2, under the impulsion of Resets as Credit markets tightened significantly. There were €30.8bn of Resets and €3bn of Refinancings priced in 2024 - unsurprisingly, CLOs from 2022 and 2023 made up the lion's share of the reset volume in 2024 given their wide cost of debt.
The weighted average cost of capital was unsurprisingly tighter in both Europe and the US, driven by lower AAA spread: T1 US AAAs printed in the +135bps context in early December 2024 and achieved +113bps the following month. We noticed a collapse in terms of Managers Tiering as well as the discount applied to Reset transactions vs. New Issue ones, which gave fuel – to some extent – to the tightening momentum. In terms of Equity distribution, 2024 remained a very strong year with Reinvesting CLO Equity payments globally about 15% annualized. Lower benchmark rates and the impact of Loan repricings contributed to some excess spread compression, as a result Equity interest payments were slightly lower in Q4 2024/January 2025 vs. the previous quarter, although still very attractive with mid-teens returns.
In terms of CLO risk positioning, we noticed a slight decrease of CCC exposure in both US and European CLO collateral pools. The median CCC-rated assets exposure in US CLOs established at 4.8% end of Jan. 25, it was 3.8% in Euro CLOs. Loan Recovery rates, which we use to model transactions' cashflows and bond prices, continued to recover from local lows of Dec. 2023 and reached 62% in the US, significantly higher than Corporate Bonds ones at 48% (MS Research).
3. CLO market review (continued)
Source: AXA IM Alts as of January 2025
4. Portfolio review
After a +7.7% NAV performance over the semi-annual period from 1 February 2024 to 31 July 2024, Volta delivered +11.3% performance from 1 August 2024 to 31 January 2025.
We attribute this strong performance to a few management axis developed and/or reinforced over the last couple of years:
- Simplifying Volta by reducing its investment scope to CLOs only. Moving from a multi-product portfolio towards a quasi CLO-only vehicle not only meant more focus from portfolio managers on one unique asset class that AXA IM is expert in but it also increased PMs ability to optimise Volta's positioning since CLOs are liquid instruments.
At the end of January 2025, 99+% of Volta's assets belong to the CLO asset class. 32% of Volta's CLO portfolio is exposed to rated CLO debt tranches, 59% is exposed to Equity investments - which are CLO Equity tranches and CLO Warehouses investments – and close to 9% is held in cash. A handful of Bank Balance Sheet transactions, cash Corporate Credit Equity and ABS represent under 1% of Volta's assets.
In terms of CLO exposure, Volta holds 31 individual debt tranches and 58 individual equity notes (including fee notes). Through those investments, Volta has gained exposure to 42 individual CLO managers.
- Actively addressing the maturity of the CLO holdings. We believe this to be a key driver of performance, CLOs are a managed product with a limited pool management lifespan: after the expiry of the reinvestment period, CLO managers are constrained in terms of the tools they can use to keep the cashflow generation from decreasing. By shifting from vintaged CLOs that have passed their Reinvestment period towards newer vintages that can reinvest actively both scheduled and unscheduled prepayments, Volta is optimising both cash flow generation and collateral health metrics.
4. Portfolio review (continued)
- Keeping a Warehouse business open through the year, which gives Volta the ability to gain exposure to the loan market and tap into market weakness to create revenues that will ultimately be distributed back to Volta when the CLO is launched.
GENERATION OF CASH FLOWS AND PROJECTED YIELD
Volta's assets generated €28.1 million of interest or coupons from 31 July 2024 to 31 January 2025 corresponding to an annualised c.19% of the January 2025 NAV. For reference, the cash-flow generation reached €29.9 million over the previous semi-annual period.
Source: AXA IM Alts / IntexCalc – January 2025
Although the cashflow generation slightly reduced, it must be put in context of the massive repricing wave operated in the loan markets as well as the reduction in base rates across both the US and European markets. Both the CLO debt tranches investments and the CLO Equity book behaved in line with expectations in terms of Credit risk with notably low defaults in the collateral assets Volta CLOs are exposed to (0.4% globally). Mezzanine debt tranches offered the fund a floating rate exposure while CLO Equities maintained double digit distributions over the period.
In terms of projected yield, based on end of January 2025 prices, the gross projected yield in EUR of Volta's invested assets is 12.4%: - c.15% for Volta's CLO Equities investments
- c.11% for Volta's CLO debt investments
CHANGE IN ALLOCATION
Over the last six months, the Company invested c. €45.0m in:
- 2 warehouses open and slowly ramping assets mostly from the primary market in order to take advantage of the volatility in Loan prices. Around \$3.0m was newly committed in the US CLO warehouse while one European warehouse was converted into a CLO and was replaced.
- 5 EUR CLO Equity: €16m nominal split in 6 investments
- 4 US CLO debt tranches for a total amount of c. \$11.0m, from the Primary market
- 4 US CLO Equity tranches for a total amount of c. \$15.0m
4. Portfolio review (continued) CHANGE IN ALLOCATION (CONTINUED)
Source: AXA IM Alts / IntexCalc – January 2025
In addition to those purchases, the fund sold over USD 24m of risk (nominal), mainly from BB-rated tranches but also from vintaged CLO Equity. There were also around EUR 9m and USD 12m worth of amortisations in the portfolio, reinvested as stated above.
GENERATION OF CASH FLOWS AND PROJECTED YIELD
The sale of specific assets was implemented to crystallise gains on bonds valued much above par and consequently avoid an aggressive pull-to-par or - worst case - a sudden early redemption at par. Sales were also implemented to reduce risk positioning on specific assets for which the credit performance was below average but saw a lift in terms of valuation as global markets tightened and investors were looking for yield. Achieving this enabled the Portfolio Management team to protect the fund. Lastly, as mentioned in the previous section, we continued to sell positions that had a low call probability and purchase CLOs with longer reinvestment periods in order to increase income and secure cleaner pools, which we believe is key to preserve above par liquidity.
RATE EXPOSURE
Regarding the rate environment, we are long a floating-to-fixed rate swap maturing in October 2027. This position had a positive contribution of +0.4% to performance through the period. It represents c. 0.3 years of duration. Fundamentally, we believe that what may really affect Volta's performance is a global recession coupled with a spike in corporate defaults. If such a scenario was to play out, we believe that our rates position should perform and provide the Company with cash to invest.
CURRENCY EXPOSURE
Our currency strategy is unchanged vs. the previous semi-annual period: we aim to limit our currency exposure whilst minimising any potential margin call by hedging non-Euro currency risk. To achieve this goal, we sold forwards USD against Euro to keep Volta's USD exposure within a corridor despite 47% of our assets being invested in dollar. Through the financial year, our residual exposure to USD assets was slightly down and settled at 21.3% at the end of January 2025. We are conscious that being fully hedged (no USD exposure) would be too costly in terms of cash to be kept covering potential margin calls. We believe that we were right to accept some volatility coming from the remaining currency exposure instead of suffering from the cash drag on a long-term basis.
5. Stress scenarios
Looking at potential stress scenario for our CLO portfolio, we have run the following scenarios to understand the level of risk inside Volta's CLO book:
- Base case: an instantaneous 2% increase in CCC rated assets and defaults to materialise in relation with such CCC bucket and current WARF (Weighted Average Risk Factor that measures the average rating of each loan pool). On average for all positions (mixing USD and EUR positions) this showed an average 2.0% default rate every year for the next 3 years
- Stress 1: an instantaneous 3% increase in CCC rated assets (some CLOs will then exceed the classic 7.5% authorised CCC bucket) and defaults to materialise in relation with such CCC bucket and current WARF. On average for all positions (mixing USD and EUR positions) this showed an average 3.7% default rate over the next 2 years
- Stress 2: an instantaneous 6% increase in CCC rated assets (all CLOs will then exceed the classic 7.5% authorised CCC bucket) and defaults to materialise in relation with such CCC bucket and current WARF. On average for all positions (mixing USD and EUR positions) this showed an average 5.4.% default rate over the next 2 years
5. Stress scenarios (continued)
Below are the results of the tests that we carried out in January 2025 using these 3 scenarios (for all positions we start from their current situation and shock them with the above parameters):
| Projected Yield (From NAV value) | |||
|---|---|---|---|
| Base Case | Stress 1 | Stress 2 | |
| USD CLO Equity | 14.8% | 8.1% | 0.3% |
| EUR CLO Equity | 14.2% | 5.0% | 0.4% |
| USD CLO Debt | 10.7% | 10.6% | 10.0% |
| EUR CLO Debt | 10.7% | 10.8% | 10.8% |
| Average for CLOs | 12.3% | 9.1% | 6.2% |
Source: AXA IM Alts / IntexCalc – January 2025
With the base case scenario, only 2 pre-Covid US positions are suffering a diversion of cashflow and the projected IRR for Volta CLO book is north of 12% (from the end of January 2025 NAV). Since the share price is trading at a significant discount from the NAV, the projected IRR for shareholders is close to 15%.
Taking "stress 1" into account, there is a little diversion of cashflows for some CLO Equity positions and a few B rated CLO debt tranches that Volta holds are suffering some delay in their coupon payments so that the projected IRR declines, on average, for the whole CLO book, to a still attractive 9.1%. Under "Stress 2" the level of default over the next 2 years would be greater than what was seen during the GFC. In this scenario, the IRR will be dependent on the reinvestment opportunities and the level of discount associated.
4. ESG considerations
AXA IM emphasises the active consideration of ESG risks and opportunities as a crucial element in delivering long-term investment returns for its clients. We believe that responsible investment is relevant across different asset classes and have built our approach around robustly integrating ESG assessment into investment analysis and portfolio construction.
AXA IM aims to create sustainable investment outcomes for our clients by considering sustainability factors throughout the investment process. We believe that this approach will lead to broader societal and economic benefits over the long-term. Responsible investment has been a part of AXA IM's DNA since its founding in 1994, with the first dedicated responsible investment mandate dating back to 1998.
As a leading actor in the financial services industry, AXA IM believes that integrating ESG factors into financial decision-making is necessary for multiple reasons. Firstly, it is instrumental in removing investments or underlying assets from portfolios when they cause exposure to high levels of ESG risks, which could ultimately affect financial performance. Secondly, it focuses on investing in assets and companies that have implemented best practices regarding the management of their environmental impacts, social and governance practices, and whose responsible practices leave them better prepared to meet the major challenges of the future. Thirdly, it supports long-term performance through active dialogue with investee companies on managing ESG concerns around investments and limiting clients' exposure to ESG-related reputational risks, as well as through dialogue with other key stakeholders related to their investment activities to embed them in their ESG strategy.
AXA IM advocates for the incorporation of ESG factors and the development of a range of innovative responsible and ESG-integrated, sustainable, and impact products. Their responsible investment framework covers all these efforts and is structured around three pillars: ESG quantitative and qualitative research, exclusion policies, and stewardship policies.
AXA IM also aligns its commitments as a responsible investor with the way it embeds responsibility as a firm. Decisions go through the Corporate Responsibility ("CR") framework, which brings to life AXA IM's commitment to ESG through their corporate behaviours. This framework is aligned with the UN SDGs and includes ambitious quantitative targets and qualitative commitments such as reducing their carbon footprint, protecting human rights, fostering a culture of inclusion and diversity, and upholding privacy.
AXA IM's Responsible Investment policy is framed by the expectations set in the UN-backed Principles for Responsible Investment ("PRI"), the UK and Japanese Stewardship Codes, and other industry initiatives such as the Taskforce for Climate-related Financial Disclosure ("TCFD"). TCFD's recommendations specifically state that organisations consider a set of scenarios, including a "2°C or lower" scenario, in reference to the 2015 Paris Agreement. We have committed to reducing greenhouse gas emissions across all assets to net zero by 2050 or sooner. This forms a part of our membership of the Net Zero Asset Managers Initiative – an industry collaboration that supports global efforts to limit warming to 1.5°C. This means we will be working closely with our parent company, AXA Group, whose assets we manage, and in partnership with asset-owner clients on analysis, reporting and changes to investment portfolios.
In relation to Volta's investments, a similar statement can be made as progress on that front has been steady over the last few years. Two main axes have been actioned to achieve a better ESG coverage in Volta's investment landscape: implementing relevant and comprehensive Industry Exclusions as well as encouraging CLO Managers to adopt best practices.
6. ESG considerations (continued)
AXA IM is systematically pushing for industry exclusions when investing in new CLO positions. To have a pragmatic approach, we separated our exclusion list in two. The first part of the list references our mandatory exclusions which we impose to all Primary investments: Controversial Weapons, Thermal Coal, Oil & Gas (sands/shale and tight reservoirs), Arctic Oil, Non-Sustainable Palm oil, Soft-Commodity trading, Land Use Biodiversity & Forests, UNGC violations, Tobacco and Coal mining. If those exclusions are not met, no investment will take place. The second part of the exclusion list – although not mandatory - is highly recommended and deals with Endangered Wildlife, Animal Welfare, Private Prisons, Gambling, Predatory/Pay-Day Lending, Opioid, Banned Pesticides/hazardous Chemicals, Pornography & Prostitution and Civilian Weapons. It is fair to recognise that we have successfully managed to impose the first exclusion list and a significant portion of the second list to European CLO managers although it is still challenging to replicate this in the US.
Since the beginning of 2021, all new CLOs we invested in through the primary market have incorporated most of the above exclusions. AXA IM's exclusion list evolved over the years with newer investments scoring much better than older ones as they have more substantial exclusion wordings.
In parallel, we are conducting meetings with CLO managers to update our understanding of their practices regarding ESG/Responsible Investment. Since 2023, we have covered 100% of our overall CLO AUMs. Through these meetings and the pressure we exert on third-party CLO managers, not only do we promote what we consider best practices, but we are also trying to limit downside risks for our investors. While there are some disagreements regarding what should be considered as 'best practices' we can testify that all the CLO managers that we work with share our view that we should steer away from companies that are likely to face sustainability risks. Lending money to companies that will struggle to raise capital in the coming years because of sustainabilityrelated matters should also be avoided. On top of the traditional financial measures of profitability/growth, CLO managers have developed tools and processes to avoid lending to companies that may be at the centre of future controversies. This is now fully part of our risk-management processes. All investments made in 2024/25 prevent CLO Managers from investing in specific industries as well as their engagement regarding ESG considerations.
The ESG rating of the overall CLO book invested by Volta stands at 6.55, up from 6.09 as per last annual report. The score notably benefited from newly invested CLOs from the primary market that all scored well above the fund's average, since legal documentation was tailor-made to fit the requested industry exclusions.
7. Outlook and investment strategy
As expressed in our last annual report, we believe that volatility will rise in the near term, notably due to the weakening politic backdrop and the consequences of a new global trade order following potential tariffs from the US administration, and retaliative measures from their commercial partners. The global momentum of tightening across Credit markets and CLOs led to the lowest spread levels observed in the post-GFC era and was fuelled by still favourable all-in yield in the context of higher base rates compared to the 2010s era. While Loan fundamentals remain strong and data points such as low unemployment, decent GDP growth and the outlook for higher rates for longer are supportive to US investments, the credit premium offered by CLO debt instruments appears too low for a substantial allocation in that risk bracket. Lower growth forecasts in Europe and rate cuts from the ECB reinforce the view that downside risk may be on the rise in Europe, and we expect spreads to adjust slightly wider.
7. Outlook and investment strategy (continued)
As a result, we see 2025 as a favourable year to active portfolio management strategies. Trump tariffs and the potential trade wars arising from the US administration policies may induce periods of market volatility which we will see as entry-points. We note that the market rally in January 2025 was fuelled by ETF inflows which may have a dual effect: while they lower the barrier to entry for new institutional investors, they also introduce a volatility element given the liquidity they offer to their investors. In that context and given that we see Secondary market levels much tighter than primary levels on both an absolute and historical basis, we will be happy to selectively take profits on specific profiles.
Regarding CLO equity investments, we saw decent sell volumes over the course of January, mainly in lower tier & short profiles that have limited reinvestment optionality. January 2025 equity distributions reached an average of 4.2% in Europe, with 2020/2021 vintages top performers due to their tight cost of debt. This level of distributions is historically high, although the tightening in asset prices will likely impact them going forward. In that risk bracket, we believe that our ability to invest in warehouses and drive the timing of the CLO execution brings a lot of value. US loans have started to reprice from the second part of January and will enable us to increase the carry in our warehouse portfolios. Main benefits of this strategy are to extract a profit margin via trading gains, it will also improve our economics should the CLO new issue arbitrage gets challenged in the medium term. We shall keep on favouring Primary markets over Secondary since they give exposure to fresh collateral portfolios that have no default and limited CCCs, and therefore generate attractive risk adjusted cashflows. This also organically contributes to the current efforts in maintaining the portion of reinvesting CLOs in the portfolio, which we believe is key to limit black-swan type of events. Deep mezzanine tranches from top tier managers may make sense although we need to see softer prints in that segment to consider them.
AXA INVESTMENT MANAGERS PARIS S.A. 1 April 2025
EXECUTIVE SUMMARY
Introduction
This report is designed to provide information about the Company's business and results for the six month period ended 31 January 2025. It should be read in conjunction with the Chair's Statement and the Investment Manager's Report which give a detailed review of investment activities for the period and an outlook for the future.
Company Summary
The Company is a limited liability company registered in Guernsey under the Companies (Guernsey) Law 2008 (as amended) with registered number CMP45747. The registered office of the Company is BNP Paribas House, St Julian's Avenue, St Peter Port, Guernsey, GY1 1WA, Channel Islands.
The Company is an authorised closed-ended collective investment scheme in Guernsey, pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 2020 (as amended). The Company's Ordinary shares are listed on Euronext Amsterdam and on the Equity Share (Commercial Companies) segment (previously the 'Premium segment') of the Official List of the UK Listing Authority and are admitted to trading on the Main Market of the LSE. Volta's home member state for the purposes of the EU Transparency Directive is the Netherlands. As such, Volta is subject to regulation and supervision by the AFM, being the financial markets supervisor in the Netherlands.
Purpose, principal activities, investment objectives and strategy
The Company exists to provide Shareholders with access to a broad range of structured credit investments actively managed by AXA IM. Harnessing AXA IM's expertise, the Company currently invests predominantly in CLOs and similar asset classes with the objective of providing Shareholders with a regular and high level of income and the prospect of modest capital gains over the investment cycle. A more diversified strategy across structured finance assets may be pursued opportunistically.
The Company's investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis.
Subject to the risk factors described in the 'Principal and Emerging Risk Factors' section on page 20 and in Note 16 of the Company's Annual Report and Audited Financial Statements for the year ended 31 July 2024, the Company currently seeks to attain its investment objectives as described above. The Company's investment strategy focuses on direct 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 the Company may invest in either directly or indirectly include, but are not limited to, corporate credits; sovereign and quasi-sovereign debt; residential mortgage loans; commercial mortgage loans; automobile loans; student loans; credit card receivables; leases; and debt and equity interests in infrastructure projects.
The Company's approach to investment is through vehicles and arrangements that essentially provide leveraged exposure to portfolios of such Underlying Assets. In this regard, the Company reviews 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.
The full 'investment strategy' can be found in the Company's Prospectus which is available on the Company's website.
Directors' interests
The Board comprises four independent Directors: Stephen Le Page, Yedau Ogoundele, Dagmar Kershaw and Joanne Peacegood.
All the Directors are members of the Nomination and Remuneration Committee and Management Engagement Committee. All of the Directors, with the exception of Ms Dagmar Kershaw, are members of the Audit Committee.
As at 31 January 2025, the Directors held the following number of Ordinary shares in the Company:
| Director | Director holdings in the Company's Ordinary shares |
|---|---|
| Stephen Le Page | 51,295 |
| Dagmar Kershaw | 32,885 |
| Yedau Ogoundele | 7,595 |
| Joanne Peacegood | 4,395 |
No Director has any other material interest in any contract to which the Company is a party. Information on each Director is shown on page 36
EXECUTIVE SUMMARY (CONTINUED)
Directors' interests (Continued)
Table of Directors' remuneration
| Component | Director | Fee entitlement for the financial year ending 31 July 2025 (€) |
Purpose of reward |
|---|---|---|---|
| Annual fee | Chair of the Board | €100,000 | For commitments as non executive Directors |
| All other Directors | €70,000 | ||
| Additional | Chair of the Audit Committee | €15,000 | For additional responsibilities |
| annual fee | Chair of the Nomination and Remuneration | and time commitment | |
| Committee | None | ||
| Chair of the Management Engagement Committee | None | ||
| Senior Independent Director | None |
Further information on the Directors' remuneration is detailed in Note 6.
Principal and Emerging risks and uncertainties
When considering the total return of the Company, the Directors take account of the risks that have been taken in order to achieve that return. The Directors have carried out a robust assessment of the principal and emerging risks facing the Company including those which would threaten its business model, future performance, solvency or liquidity.
The following risk factors have been identified:
Strategic risks
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; and
- The risk of a counterparty defaults leading to a financial loss for the Company.
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 risk that unhedged currency exposures may lead to volatility in the Company's NAV; and
- The risk of severe market disruption leading to impairment of the market value and/or liquidity of the Company's investment portfolio.
Re-investment risk
- The ability to re-invest in investments that maintain the targeted level of returns at an acceptable level of risk.
Preventable risks
Valuation of assets
- The risk that the Company's assets are incorrectly valued.
Investment Manager risk
- The risk that the Investment Manager may execute its investment strategy poorly.
Key person risk
- The risk that the Investment Manager resigns, goes out of business or exits the Company's asset classes.
Emerging risk
ESG risk
- 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; and
- 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 Investment Manager
AXA IM is a multi-expert asset management company within the AXA Group, a global leader in financial protection and wealth management, which has a team of experts concentrating on the structured finance markets. AXA IM is one of the largest Europeanbased asset managers with 2,800 professionals and €859bn in assets under management as at the end of June 2024.
AXA IM is authorised by the AFM as an investment management company and its activities are governed by Article L. 532-9 of the French Code Monétaire et Financier. AXA IM was appointed as the Company's AIFM in accordance with the EU AIFMD on 22 July 2014.
EXECUTIVE SUMMARY (CONTINUED)
The Investment Manager (Continued)
In August 2024, the AXA Group announced it has entered into exclusive negotiations for the potential sale of AXA IM to BNP Paribas Group. The combination with BNP Paribas Asset Management (BNPP AM) would create one of the largest asset managers in Europe with over €1.5 trillion of AUM. In order to materialise, the proposed transaction requires the completion of the relevant works council information and consultation process, and regulatory approvals. In December 2024, the AXA Group announced it has entered into a Share Purchase Agreement with BNP Paribas Cardiff for the sale of AXA IM, following exclusive negotiations initiated in August 2024. The completion of the transaction is expected to be finalised by the second quarter of 2025.
Performance measurement and Key Performance Indicators
The Directors meet regularly to review performance and risk against a number of key measures.
Total return
The Board regularly reviews the NAV and NAV total return, the performance of the portfolio as well as income received and the share price of the Company. The Directors regard the Company's NAV total return as being the overall measure of value delivered to Shareholders over the long term. NAV total return is calculated based on NAV growth of the Company with dividends reinvested at NAV at the time of each dividend payment.
Total return, expressed as a percentage of NAV, was 11.3% for the six month period ended 31 January 2025 (31 January 2024: 11.1%). Refer to page 1 for NAV and share price total return analyses.
Annualised ongoing charges
The annualised ongoing charges are a measure of the annualised total recurring expenses incurred by the Company expressed as a percentage of the average Shareholders' funds over the period. The Board regularly reviews the ongoing charges and monitors all Company expenses. Refer to page 34 for the methodology of the calculation.
Premium / discount
The Directors review the trading prices of the Company's Ordinary shares and compare them against their NAVs to assess quantum and volatility in the discount of the Ordinary share prices to their NAVs during the period. Refer to page 34 for further analysis.
ESG issues
The Company itself has only a very small footprint in the local community and only a very small direct impact on the environment. However, the Board acknowledges that it is imperative that everyone contributes to local and global sustainability. The nature 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 these condensed 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 service providers and safeguarding stakeholder interests. Otherwise, the Board seeks to minimise travel by the use of video conferences whenever good governance permits.
For further information regarding the Company's approach to ESG issues, please refer to the ESG section within the Investment Manager's Report on page 9 and 10.
Life of the Company
The Company has a perpetual life.
Future strategy
The Board continues to believe that the investment strategy and policy adopted is appropriate for and is capable of meeting the Company's objectives. The overall strategy remains unchanged and it is the Board's assessment that the Investment Manager's resources are appropriate to properly manage the Company's investment portfolio in the current and anticipated investment environment. Refer to the Investment Manager's report for details regarding performance to date of the investment 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 to satisfy themselves that it is reasonable to assume that the Company is a going concern and to identify any material uncertainties to the Company's ability to continue as a going concern for at least 12 months from the date of approving the condensed financial statements.
The incidence and impact of defaults in the Underlying Assets is hard to predict but are likely to rise, although it should be noted that recent default levels are below those originally forecast. However, the Directors have concluded that any reasonably foreseeable fall in cash inflows would not have a material impact on the Company's ability to meet its liabilities as they fall due. Having also considered the Company's investment objective, nature of the investment portfolio, commitments and expenditure projections, impact of the current geo-political and market uncertainty on the Company and its principal and emerging risks, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future.
EXECUTIVE SUMMARY (CONTINUED)
Going concern (continued)
Therefore, after making appropriate enquiries, the Directors are of the opinion that the Company remains a going concern and are satisfied that it is appropriate to continue to adopt the going concern basis in preparing the Company's condensed financial statements.
Related parties
Refer to Note 17 for information on related party transactions.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors confirm that to the best of their knowledge:
the unaudited condensed financial statements contained within the Interim Report have been prepared in accordance with IAS 34 - Interim Financial Reporting as required by the Financial Conduct Authority ("FCA") through the Disclosure Guidance and Transparency Rule ("DTR") 4.2.4R;
the combination of the Chair's Statement, Investment Manager's Report, the Executive Summary and notes to the condensed financial statements includes a fair review of the information required by:
(a) Section 5:25d of the Financial Supervision Act of the Netherlands;
(b) DTR 4.2.7R of the DTR, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed financial statements and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
(c) DTR 4.2.8R of the DTR, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or the performance of the Company during that period; and any changes in the related party transactions described in the last Annual Report and Audited Financial Report that could do so.
This Statement of Directors' Responsibilities was approved by the Board of Directors on 1 April 2025 and was signed on its behalf by:
Dagmar Kershaw Joanne Peacegood Chair Chair of the Audit Committee
Note:
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website and for the preparation and dissemination of the Company's condensed interim and annual financial statements. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdiction.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 31 January 2025
| 1 August 2024 to 31 January 2025 (Unaudited) |
1 August 2023 to 31 January 2024 (Unaudited) |
||
|---|---|---|---|
| Notes | € | € | |
| Operating income | |||
| Net gain (including net foreign exchange gain/loss) on financial assets at fair value through profit or loss |
5 | 36,042,090 | 31,554,132 |
| Other net foreign exchange loss, including loss/gain on foreign exchange derivatives |
(2,998,137) | (492,675) | |
| Net (loss)/gain on interest rate derivatives | (88,226) | 712,469 | |
| Net bank interest income | 454,755 | 432,669 | |
| 33,410,482 | 32,206,595 | ||
| Operating expenditure | |||
| Investment Manager management fees | 17 | (1,907,362) | (1,762,696) |
| Investment Manager performance fees | 17 | (2,011,347) | (4,185,013) |
| Operating expenses | 6 | (588,195) | (640,403) |
| (4,506,904) | (6,588,112) | ||
| Profit for the period and total comprehensive income | 28,903,578 | 25,618,483 | |
| Basic and diluted earnings per Ordinary share | 8 | €0.7901 | €0.7003 |
Other comprehensive income
There were no items of other comprehensive income in the current period or prior period.
CONDENSED STATEMENT OF FINANCIAL POSITION
AS AT 31 JANUARY 2025
| 31 January 2025 | 31 July 2024 | ||
|---|---|---|---|
| Notes | (Unaudited) € |
(Audited) € |
|
| ASSETS | |||
| Financial assets at fair value through profit or loss | 10 | 258,385,861 | 252,599,259 |
| Derivatives at fair value through profit or loss | 2,990,369 | 2,624,718 | |
| Trade and other receivables | 11 | 94,213 | 35,529 |
| Cash and cash equivalents | 24,884,974 | 28,155,809 | |
| Balances due from broker - margin accounts | 1,550,000 | - | |
| TOTAL ASSETS | 287,905,417 | 283,415,315 | |
| EQUITY AND LIABILITIES | |||
| Capital and reserves | |||
| Share capital | 13 | - | - |
| Share premium | 14 | 35,808,120 | 35,808,120 |
| Retained earnings | 15 | 243,171,141 | 225,046,724 |
| TOTAL SHAREHOLDERS' EQUITY | 278,979,261 | 260,854,844 | |
| LIABILITIES | |||
| Derivatives at fair value through profit or loss | 4,851,410 | 1,753,881 | |
| Trade and other payables | 12 | 4,074,746 | 20,386,590 |
| Balances due to broker – margin accounts | - | 420,000 | |
| TOTAL LIABILITIES | 8,926,156 | 22,560,471 | |
| TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES | 287,905,417 | 283,415,315 | |
| NAV per Ordinary share | 9 | €7.6264 | €7.1310 |
These condensed financial statements on pages 17 to 33 were approved and authorised for issue by the Board of Directors on 1 April 2025 and were signed on its behalf by:
Dagmar Kershaw Joanne Peacegood Chair Chair of the Audit Committee
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE PERIOD ENDED 31 JANUARY 2025
| Notes | Share premium € |
Other distributable reserves € |
Retained earnings € |
Total € |
|
|---|---|---|---|---|---|
| Balance at 31 July 2024 (Audited) | 35,808,120 | - | 225,046,724 | 260,854,844 | |
| Profit for the period and total comprehensive income |
- | 28,903,578 | 28,903,578 | ||
| Net settlement of Directors' fees share based payments at a discount to NAV |
15 | - | 12,398 | - | 12,398 |
| Dividends paid in cash | 7,15 | - | (12,398) | (10,779,161) | (10,791,559) |
| Balance at 31 January 2025 (Unaudited) | 35,808,120 | - | 243,171,141 | 278,979,261 |
| Notes | Share premium € |
Other distributable reserves € |
Retained earnings € |
Total € |
|
|---|---|---|---|---|---|
| Balance at 31 July 2023 (Audited) | 35,808,120 | 1,136,348 | 199,038,620 | 235,983,088 | |
| Profit for the period and total comprehensive income |
- | 25,618,483 | 25,618,483 | ||
| Net settlement of Directors' fees share based payments at a discount to NAV |
- | 11,344 | - | 11,344 | |
| Dividends paid in cash | 7,15 | - | (1,147,692) | (8,545,137) | (9,692,829) |
| Balance at 31 January 2024 (Unaudited) | 35,808,120 | - | 216,111,966 | 251,920,086 |
CONDENSED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 31 JANUARY 2025
| 1 August 2024 to 31 January 2025 (Unaudited) |
1 August 2023 to 31 January 2024 (Unaudited) |
||
|---|---|---|---|
| Notes | € | € | |
| Cash flows from operating activities | |||
| Profit for the period and total comprehensive income | 28,903,578 | 25,618,483 | |
| Adjustments for: | |||
| Net gain on financial assets at fair value through profit or loss | 5 | (36,042,090) | (31,554,132) |
| Net foreign exchange gain on revaluation of derivatives | 2,998,137 | 492,675 | |
| Net loss/(gain) on revaluation of interest rate derivatives | 88,226 | (712,469) | |
| Net settlement of Directors' fees share based payment | 12,397 | 11,344 | |
| Coupon received | 28,013,820 | 27,393,129 | |
| Increase in trade and other receivables, excluding amounts due from brokers and interest receivable |
(21,086) | (30,747) | |
| (Decrease)/increase in trade and other payables, excluding amounts due | |||
| to brokers | (4,721,844) | 4,186,485 | |
| Net cash generated from operating activities | 19,231,138 | 25,404,768 | |
| Cash flows from investing activities | |||
| Purchases of financial assets at fair value through profit or loss | (55,072,085) | (48,775,304) | |
| Proceeds from sales and redemptions of financial assets at fair value through profit or loss |
45,686,155 | 35,242,839 | |
| Net (settlement)/income on derivative instruments | (2,324,485) | 56,812 | |
| Net cash used in investing activities | (11,710,415) | (13,475,653) | |
| Cash flows used in financing activities | |||
| Dividends paid to Shareholders | 7 | (10,791,559) | (9,692,829) |
| Net cash used in financing activities | (10,791,559) | (9,692,829) | |
| Net (decrease)/increase in cash and cash equivalents | (3,270,836) | 2,236,286 | |
| Cash and cash equivalents at the beginning of the period | 28,155,809 | 22,577,210 | |
| Cash and cash equivalents at the end of the period | 24,884,973 | 24,813,496 |
NOTES TO THE CONDENSED FINANCIAL STATEMENTS FOR THE PERIOD ENDED 31 JANUARY 2025
1. GENERAL INFORMATION
Information regarding the Company and its activities is provided in the Executive Summary section on page 12.
2. MATERIAL ACCOUNTING POLICIES
2.1 Basis of preparation
The Interim Report has been prepared in accordance with Section 5.25d of the Financial Supervision Act of the Netherlands, the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority and IAS 34 – Interim Financial Reporting. The Interim Report has also been prepared using the same accounting policies applied for the Annual Accounts and Audited Financial Statements for the year ended 31 July 2024, which was prepared in accordance with IFRS issued by the International Accounting Standards Board and interpretations issued by the International Financial Reporting Standards Interpretations Committee and applicable law. The Company has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.
Statement of going concern
The Directors have considered the state of financial market conditions at the interim date and subsequently and have concluded that any reasonably foreseeable fall in cash inflows would not have a material impact on the Company's ability to meet its liabilities as they fall due. After making appropriate enquiries, the Directors are therefore of the opinion that the Company remains a going concern and are satisfied that it is appropriate to continue to adopt the going concern basis in preparing the Company's condensed financial statements.
There have been no changes in accounting policies during the period.
2.2 Accounting standards
(a) New standards, amendments and interpretations
A number of amendments and interpretations to existing standards have come into effect during the six month period ended 31 January 2025. The Directors believe that the application of these would have no significant impact on the Company's condensed financial statements.
(b) Standards, amendments and interpretations issued, but not yet effective
There are no other standards, amendments to standards and interpretations that are issued but not yet effective, that would have significant impact on the Company's condensed financial statements.
3. SEGMENT REPORTING
The Directors view the operations of the Company as one operating segment, being investment in a diversified portfolio of structured finance assets. All significant operating decisions are based upon analysis of the Company's investments as one segment. The financial results from this segment are equivalent to the financial results of the Company as a whole, which are evaluated regularly by the chief operating decision-maker (the Board with insight from the Investment Manager).
4. DETERMINATION OF FAIR VALUES
A number of the Company's accounting policies and disclosures require the determination of fair values for financial assets which have been determined based on the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in Note 10.
The valuation methodologies applied to the Company's financial assets (other than recently purchased securities for which up-todate market prices are unavailable) are as follows:
- CLO Equity and debt securities are valued using prices obtained from an independent pricing source, JP Morgan PricingDirect. The prices obtained from JP Morgan PricingDirect are derived from observed traded prices where these are available, but may be based upon non-binding quoted prices received by JP Morgan PricingDirect from arranging banks or other market participants, or a combination thereof, where observed traded prices are unavailable.
- Fund investments are valued at NAV as of the year-end, except the CMV which is valued under a sum-of-the parts method with all CLO Equity investments valued based on JP Morgan PricingDirect (in line with CLO Equities directly held by the Company).
- Warehouse transactions are valued at the lower of: (i) the principal amount invested plus accrued income net of financing costs; 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 commonly paid in the market, plus accrued income net of financing costs.
- The majority of other investments are valued on a mark-to-model basis using discounted projected cash flow valuations.
Where securities have been purchased less than one month prior to the relevant reporting date and up-to-date market prices are otherwise unavailable, such securities will be valued at cost plus accrued interest, if applicable.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED) FOR THE PERIOD ENDED 31 JANUARY 2025
4. DETERMINATION OF FAIR VALUES (CONTINUED)
Regarding non-binding quoted prices, it is likely that the arranging bank or market participant determines the valuation based on pricing models, which may or may not produce values that correspond to the prices that the Company could obtain if it sought to liquidate such positions. Such valuations generally involve subjective judgements on key model inputs, particularly default and recovery rates and may not be uniform. Banks and other market participants may be unwilling to disclose all or any of the key model inputs or discount rates that have been used to produce such valuations and it is currently standard market practice to withhold such information. In such circumstances, the valuation continues to be sourced from such arranging bank, or other market participant, despite the lack of information on valuation assumptions.
The Investment Manager reviews the prices received from third parties for reasonableness against its own valuation 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 and are also subject to approval by the Investment Manager's internal risk function. No such adjustments were made to prices as at 31 January 2025 (31 July 2024: no such adjustment were made to prices). The Investment Manager's fair value calculations for the residual and debt tranche investments in securitisation vehicles are sensitive to the following key model inputs: default rates; recovery rates; prepayment rates; and reinvestment profiles. The Investment Manager's initial model assumptions are reviewed on a regular basis with reference to both current and projected data. In the case of a material change in the actual key model inputs, the model assumptions will be adjusted accordingly. The discount rate used by the Investment Manager when reviewing the fair value of the Company's portfolio is subject to similar review and adjustment in light of actual experience.
For certain investments targeted by the Company, the secondary trading market may be illiquid or may sometimes become illiquid. As a result, at such times there may be no regularly reported market prices for these investments. In addition, there may not be an agreed industry standard methodology for valuing the investments (e.g. in the case of residual income positions of asset-backed securitisations). In the absence of an active market for an investment and where a financial asset does not involve an arranging 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 approach has been adopted by the Investment Manager to determine the valuation. Such pricing models generally involve a number of valuation assumptions, many of which are based on subjective judgements. Key model inputs include (but are not limited to): asset spreads; expected defaults; expected recovery rates; and the price of uncertainty or liquidity through the interest rate at which expected cash flows are discounted. These inputs are derived by reference to 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 represented 87.8% as at 31 January 2025 (31 July 2024: 84.8%) of the Company's financial assets at fair value through profit or loss.
The Company's policy is to publish its NAV on a timely basis 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 been published. Consequently, such investments are valued using the most recently available NAV, as adjusted for any cash flows received/paid between that date and 31 January 2025 in respect of distributions/calls respectively.
As at the date of publication of the Company's NAV as at 31 January 2025, approximately 0.2% (31 July 2024: 0.27%) of the Company's financial assets at fair value through profit or loss comprised investments for which the relevant NAVs as at the monthend date were not yet available.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS (CONTINUED) FOR THE PERIOD ENDED 31 JANUARY 2025
4. DETERMINATION OF FAIR VALUES (CONTINUED)
In accordance with the Company's valuation policy, the Company's financial assets at fair value through profit or loss as at 31 January 2025 were valued using prices received from JP Morgan PricingDirect for all assets except for those assets noted below:
| Asset classes | % of financial assets at fair value through profit or loss as at 31 January 2025 (Unaudited) |
% of financial assets at fair value through profit or loss as at 31 July 2024 (Audited) |
Valuation methodology |
|---|---|---|---|
| SCC BBS | 0.1% | 0.8% As at 31 January 2025, the Company's exposure in SCC BSS was only made up of a few defaulted underlying credits. |
|
| As at 31 July 2024: Discounted projected cash flow model based valuation using discount rates within a range of 8.0% to 12.0% constant default rates within a range of 0.3% to 3.0% prepayment rates within a range of 0.0% to 25.0% and recovery rates within a range of 51.0% to 63.0%. |
|||
| Investments in funds (includes CCC Equity and SCC BBS positions) |
0.2% | 0.5% | Valued using the most recent valuation statements, or capital account statements where applicable, provided by the respective underlying fund administrators, as adjusted for any cash flows received/paid between that date and 31 January 2025 in respect of distributions/calls respectively. |
| Recently purchased assets |
3.3% | 4.6% As at 31 July 2024: Being purchased within less than one month of the relevant reporting date, these assets were valued at cost which is considered the most appropriate fair value for newly acquired assets. |
|
| CLO Warehouse | 3.6% | 4.1% | Warehouse transactions are valued at the lower of: (i) the principal amount invested plus accrued income net of financing costs; 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 commonly paid in the market, plus accrued income net of financing costs. |
| ABS Residual | - | 0.2% As at 31 July 2024: Discounted projected cash flow model based valuation using a discount rate of 8.96% on the weighted average life of contractual cash flows for Fintake European Leasing DAC. |
|
| CLO – CMV | 4.9% | 4.8% Valued under a sum-of-the parts method with all CLO Equity investments valued based on JP Morgan PricingDirect (in line with CLO Equities directly held by the Company). |
|
| Fee Rebates | 0.1% | 0.2% Fee rebates are valued using a Discounted Cash Flow model based on cash flow projection considering market and comparable transactions parameters. |
|
| Total as a percentage of FAFVTPL |
12.2% | 15.2% |
FOR THE PERIOD ENDED 31 JANUARY 2025
5. NAV PERFORMANCE ANALYSIS
The following table represents the net gain on financial assets at fair value through profit or loss by asset class for the period from 1 August 2024 to 31 January 2025:
| Net realised (loss)/gain on sales and redemptions on financial assets at fair value through profit or loss € (Unaudited) |
Net unrealised gain/(loss) on financial assets at fair value through profit or loss € (Unaudited) |
Coupon income € (Unaudited) |
Net gain/(loss) on financial assets at fair value through profit or loss € (Unaudited) |
|
|---|---|---|---|---|
| CLO – USD Equity | (5,278,864) | 6,084,794 | 9,099,580 | 9,905,510 |
| CLO – EUR Equity | (5,184,367) | 7,152,331 | 10,331,041 | 12,299,005 |
| CLO – USD Debt | 1,839,273 | 1,751,818 | 2,840,318 | 6,431,409 |
| CLO – EUR Debt | 658,168 | 258,673 | 3,286,272 | 4,203,113 |
| CLO – CMV | - | 1,135,817 | 1,175,364 | 2,311,181 |
| CLO Warehouse | - | 646,363 | 1,249,098 | 1,895,461 |
| SCC BBS | (14,524,435) | 14,507,037 | 69,745 | 52,347 |
| CCC Equity | - | (788,436) | - | (788,436) |
| ABS Residual | (7,708,280) | 7,440,780 | - | (267,500) |
| (30,198,505) | 38,189,177 | 28,051,418 | 36,042,090 |
The following table represents the net gain on financial assets at fair value through profit or loss by asset class for the period from 1 August 2023 to 31 January 2024:
| Net realised gain/(loss) on sales and redemptions on financial assets at fair value through profit or loss € (Unaudited) |
Net unrealised gain/(loss) on financial assets at fair value through profit or loss € (Unaudited) |
Coupon income € (Unaudited) |
Net gain/(loss) on financial assets at fair value through profit or loss € (Unaudited) |
|
|---|---|---|---|---|
| CLO – USD Equity | - | (7,540,701) | 9,229,508 | 1,688,807 |
| CLO – EUR Equity | 281,022 | 4,976,856 | 9,289,532 | 14,547,410 |
| CLO – USD Debt | (4,763,522) | 7,345,248 | 3,106,129 | 5,687,855 |
| CLO – EUR Debt | - | 3,848,675 | 2,481,438 | 6,330,113 |
| CLO – CMV | - | 2,055,492 | 1,119,630 | 3,175,122 |
| CLO Warehouse | - | (652,338) | 1,017,166 | 364,828 |
| SCC BBS | (2,076,758) | 1,758,916 | 478,600 | 160,758 |
| CCC Equity | (6,680) | (115,667) | 19,456 | (102,891) |
| ABS Residual | - | (856,000) | 558,130 | (297,870) |
| (6,565,938) | 10,820,481 | 27,299,589 | 31,554,132 |
FOR THE PERIOD ENDED 31 JANUARY 2025
6. OPERATING EXPENSES
| 1 August 2023 to 31 January 2024 € |
|||
|---|---|---|---|
| Notes | € (Unaudited) |
(Unaudited) | |
| Directors' remuneration and expenses | 6.1 | (162,500) | (186,957) |
| Legal fees | - | (28,807) | |
| Administration fees | 6.2 | (141,546) | (127,154) |
| Audit fees, audit related and non-audit related fees | (90,628) | (84,234) | |
| Insurance fees | (19,281) | (25,799) | |
| Depositary fees | (27,317) | (32,757) | |
| Other operating expenses | (146,923) | (154,695) | |
| Total | (588,195) | (640,403) |
6.1 Directors' remuneration and expenses
| 1 August 2024 to1 31 January 2025 € |
1 August 2023 to 31 January 2024 € |
||
|---|---|---|---|
| (Unaudited) | (Unaudited) | ||
| Directors' fees (cash element, paid during the period) | (113,750) | (130,660) | |
| Directors' fees (equity element, paid during the period) | (24,375) | (29,625) | |
| Directors' fees (equity element, paid after the period-end) | (24,375) | (26,372) | |
| Directors' expenses (paid during the period) | - | (300) | |
| Total | (162,500) | (186,957) |
Each Director receives 30% of their Director's fee in the form of shares. The remaining 70% of the fees are paid quarterly in cash. The Directors' remuneration shares are purchased in the secondary market. Thus, at current levels of discount between the NAV per Ordinary share and the share price, the true cost to the Company is approximately 8% less than the amount quoted above. By applying this approach, the Board have relinquished their right to Director's remuneration of €12,398 during the six month period ended 31 January 2025 (31 January 2024: €11,344).
Should the Ordinary shares trade at a premium to NAV in the future, the Directors may seek to amend the policy.
Refer to Note 15 for net settlement of Director fees share based payment.
6.2 Administration fees
On 31 October 2018, the Company signed an agreement with BNP Paribas (the "Administrator") to provide administrative, compliance oversight and company secretarial services to the Company. Under the administration agreement, the Administrator is entitled to a minimum annual fixed fee for fund administration services, company secretarial and compliance services. These fees are paid monthly in arrears. Ad hoc other administration services are chargeable on a time cost basis. In addition, the Company will reimburse the Administrator for any out of pocket expenses.
During the six month period ended 31 January 2025, administration fees incurred were €141,546 (31 January 2024: €127,154).
FOR THE PERIOD ENDED 31 JANUARY 2025
7. DIVIDENDS
The following dividends have been declared and paid during the six month period ended 31 January 2025 and during the prior year ended 31 July 2024:
| Date declared | Amount per Ordinary share € |
Total amount paid € |
|---|---|---|
| 19/09/2024 | 0.1450 | 5,304,472 |
| 05/12/2024 | 0.1500 | 5,487,087 |
| Dividend for the six month period ended 31 January 2025 | 10,791,559 |
| Date declared | Amount per Ordinary share € |
Total amount paid € |
|---|---|---|
| 20/09/2023 | 0.1300 | 4,755,475 |
| 07/12/2023 | 0.1350 | 4,937,354 |
| Dividend for six month period ended 31 January 2024 | 9,692,829 | |
| 21/03/2024 | 0.1400 | 5,121,281 |
| 08/07/2024 | 0.1450 | 5,304,426 |
| Total dividend for the year ended 31 July 2024 | 20,118,536 |
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 (Guernsey) Law 2008 (as amended). Subject to compliance with Section 304 of that law, the Board may at any time declare and pay dividends.
8. BASIC AND DILUTED EARNINGS PER ORDINARY SHARE
| 1 August 2024 to 31 January 2025 € |
1 August 2023 to 31 January 2024 € |
|
|---|---|---|
| (Unaudited) | (Unaudited) | |
| Profit for the period and total comprehensive income | 28,903,578 | 25,618,483 |
| Basic and diluted earnings per Ordinary share | 0.7901 | 0.7003 |
| Number | Number | |
| Weighted average number of Ordinary shares during the period | 36,580,580 | 36,580,580 |
| 9. NAV PER ORDINARY SHARE |
||
| 31 January 2025 | 31 July 2024 | |
| € | € | |
| (Unaudited) | (Audited) | |
| NAV | 278,979,261 | 260,854,644 |
| NAV per Ordinary share | 7.6264 | 7.1310 |
| Number | Number | |
| Number of Ordinary shares at period/year-end | 36,580,580 | 36,580,580 |
10. 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 the Condensed Statement of Comprehensive Income.
| 31 January 2025 | 31 July 2024 € |
||
|---|---|---|---|
| € | |||
| (Unaudited) | (Audited) | ||
| Fair value brought forward | 252,599,259 | 220,300,413 | |
| Purchases | 43,482,085 | 91,517,965 | |
| Sale and redemption proceeds | (45,686,155) | (58,194,349) | |
| Net gain/(loss) on FAFVTPL | 7,990,672 | (1,024,770) | |
| Fair value carried forward | 258,385,861 | 252,599,259 |
FOR THE PERIOD ENDED 31 JANUARY 2025
10. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
| 31 January 2025 | 31 July 2024 € |
||
|---|---|---|---|
| € | |||
| (Unaudited) | (Audited) | ||
| Realised gain on sale and redemption on FAFVTPL | 2,538,320 | 2,006,139 | |
| Realised loss on sale and redemption on FAFVTPL | (32,736,825) | (8,762,001) | |
| Unrealised gain on FAFVTPL | 46,198,249 | 26,150,367 | |
| Unrealised loss on FAFVTPL | (8,009,072) | (20,419,275) | |
| Net gain/(loss) on FAFVTPL | 7,990,672 | (1,024,770) |
Fair value hierarchy
IFRS 13 – Fair Value Measurement requires an analysis of investments valued at fair value based on the reliability and significance of information used to measure their fair value.
The Company classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
- 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 classified within Level 1, include active listed equities. The quoted price for these instruments is not adjusted;
- Level 2 inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices). Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. As Level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information; and
- Level 3 inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs).
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a Level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. The determination of what constitutes "observable" requires significant judgement by the Company. The Company considers observable data to be market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary 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 beginning of the reporting period during which the change has occurred. Further information about the fair value hierarchy is disclosed below.
The following tables analyse, within the fair value hierarchy, the Company's financial assets and liabilities (by class, excluding cash and cash equivalents, balances due from broker - margin accounts, trade and other receivables, trade and other payables and balances due to broker - margin accounts) measured at fair value at 31 January 2025 and 31 July 2024:
| 31 January 2025 | ||||
|---|---|---|---|---|
| Level 1 € (Unaudited) |
Level 2 € (Unaudited) |
Level 3 € (Unaudited) |
Total € (Unaudited) |
|
| Financial assets at fair value through profit or loss: – Securities |
- | - | 258,385,861 | 258,385,861 |
| Financial assets at fair value through profit or loss: – Derivatives |
- | 2,990,369 | - | 2,990,369 |
| Financial liabilities at fair value through profit or loss: – Derivatives |
- (4,851,410) - |
(4,851,410) | ||
| - | (1,861,041) | 258,385,861 | 256,524,820 |
FOR THE PERIOD ENDED 31 JANUARY 2025
10. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
Fair value hierarchy (Continued)
| 31 July 2024 | ||||
|---|---|---|---|---|
| Level 1 € (Audited) |
Level 2 € |
Level 3 € (Audited) |
Total € (Audited) |
|
| (Audited) | ||||
| Financial assets at fair value through profit or loss: – Securities |
- | - | 252,599,259 | 252,599,259 |
| Financial assets at fair value through profit or loss: | ||||
| – Derivatives | - | 2,624,718 | - | 2,624,718 |
| Financial liabilities at fair value through profit or loss: | ||||
| – Derivatives | - | (1,753,881) | - | (1,753,881) |
| - | 870,837 | 252,599,259 | 253,470,096 |
All of the Company's investments are classified within Level 3 as they have significant unobservable inputs and they may trade infrequently. The sources of these fair values are not considered to be publicly available information. The Company has determined the fair values of its investments as described in Note 4. The Company's foreign exchange derivatives held as at the reporting date are classified within Level 2 as their prices are not publicly available, but are derived from information that is publicly available, such as quoted forward exchange rates.
Financial assets at fair value through profit or loss reconciliation
The following table represents the movement in Level 3 instruments:
| Six months ended | Year ended 31 July 2024 |
||
|---|---|---|---|
| 31 January 2025 | |||
| € | € | ||
| (Unaudited) | (Audited) | ||
| Fair value at the start of the period/year | 252,599,259 | 220,300,413 | |
| Purchases | 43,482,085 | 91,517,965 | |
| Sale and redemption proceeds | (45,686,155) | (58,194,349) | |
| Realised loss on sales and redemptions on FAFVTPL | (30,198,505) | (6,755,862) | |
| Unrealised gain on FAFVTPL | 38,189,177 | 5,731,092 | |
| Fair value at the end of the period/year | 258,385,861 | 252,599,259 |
The net unrealised gain recognised in the year on Level 3 instruments held as at the period end was €12,534,762 (31 July 2024: net unrealised loss: €451,184).
The appropriate fair value classification level is reviewed for each of the Company's investments at each period end. Any transfers into or out of a particular fair value classification level are recognised at the beginning of the period following such re-classification at the fair value as at the date of re-classification. There were no such transfers between fair value classifications levels during the six month period ended 31 January 2025 and the year ended 31 July 2024.
Sensitivity analysis
In the opinion of the Directors, the following analysis gives an approximation of the sensitivity of the different asset classes to market risk as at 31 January 2025 that is reasonable considering the current market environment and the nature of the main risks underlying the Company's assets. This sensitivity analysis presents an approximation of the potential effects of events that could have been reasonably expected to occur as at the reporting date. Where valuations were based upon prices received from arranging banks or other market participants, or on a NAV provided by the underlying fund administrator, the sensitivity analyses are not necessarily based upon the assumptions used by such sources as these are not made available to the Company, as explained in Note 4.
The sensitivity of the fair values of most of the assets held by the Company to the traditional risk variables is not the most relevant in the current environment. For example, the sensitivity to interest rates is interdependent with other, more significant, market variables. This analysis reflects the sensitivity to some of the most relevant determinants of the risks associated with each asset class. While 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.
FOR THE PERIOD ENDED 31 JANUARY 2025
10. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS (CONTINUED)
CLO tranches
Two of the main risks associated with CLO tranches are the occurrence of defaults and prepayments in the underlying portfolio.
The Directors believe it is reasonable to test the sensitivity of these assets to the following reasonably plausible changes to the base 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 case scenario is to project the rate of occurrence of defaults at the underlying loan portfolio level depending on the Moody's weighted average default rate (WARF) of each underlying portfolio: 15% of the CCC and 50% of the WARF are expected to default each year over the next 3 years, equivalent to circa 2% default rate over the next 3 years (after that a default rate equivalent to half of the WARF is assumed to be defaulting each year). The 1st stress is assuming that 30% of the CCC and 75% of the WARF are expected to default each year over the next 2 years, equivalent to 4% default rate over the next 3 years (after that a default rate equivalent to half the WARF is assumed to be defaulting each year). The second stress is assuming that 40% of the CCC and 75% of the WARF are expected to default each year over the next 2 years, equivalent to c.6% default rate over the next 3 years (after that a default rate equivalent to half the WARF is assumed to be defaulting each year).
The rate of occurrence of prepayments is measured by the CPR at the underlying loan portfolio level.
The base case scenario is to project a CPR at circa 20.0% per year for the US and Europe. The Directors consider that reasonably plausible changes in the CPR would be a decrease in the CPR of the underlying loan portfolios from 20.0% to 10.0% 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 and opposite impact. The projected impact of a decrease in CPR from 20.0% to 10.0% for the US and Europe is detailed in the below table.
The increase in default rate and the decrease in CPR is combined with an increase in discount margin ("DM") at which projected cash flows might be discounted in such scenario. In the below table DM (both for CLO Debt and CLO Equity positions) has been widened by 300bps for the first scenario & 500bps for the second scenario, while a shock was cause in terms of stress (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 "base case scenario" default rate. We also stress a decrease of the CPR from 20.0% to 10.0% coupled with a 150bps DM increase to illustrate sensitivity to this simple assumption.
As at 31 January 2025
| 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 20.0% to 10.0% 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 | 21.9% | (72.5)% | (15.9)% | (60.9)% | (13.3)% | (83.9)% | (18.4)% |
| EUR CLO Equity | 30.4% | (70.5)% | (21.4)% | (57.3)% | (17.4)% | (84.0)% | (25.5)% |
| USD CLO Debt | 13.0% | (81.8)% | (10.6)% | (72.1)% | (9.3)% | (87.9)% | (11.4)% |
| EUR CLO Debt | 19.3% | (91.6)% | (17.7)% | (83.0)% | (16.1)% | (98.9)% | (19.1)% |
| All CLO tranches | 84.6% | (65.6)% | (56.1)% | (74.4)% |
As at 31 July 2024
| Asset class | 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 20.0% to 10.0% for US and Europe |
||||
|---|---|---|---|---|---|---|---|
| % of NAV | Price impact |
Impact on NAV |
Price impact |
Impact on NAV |
Price impact |
Impact on NAV |
|
| USD CLO Equity | 20.1% | (26.2)% | (5.1)% | (45.9)% | (8.9)% | (5.4)% | (1.0)% |
| EUR CLO Equity | 27.2% | (17.6)% | (4.7)% | (33.7)% | (9.0)% | (3.6)% | (1.0)% |
| USD CLO Debt | 15.9% | (10.5)% | (1.7)% | (20.7)% | (3.3)% | (5.4)% | (0.9)% |
| EUR CLO Debt | 23.5% | (14.6)% | (3.4)% | (22.3)% | (5.2)% | (8.3)% | (2.0)% |
| All CLO tranches | 86.7% | (14.9)% | (26.4)% | (4.9)% |
As presented above, a reasonably plausible increase in the default rate in the underlying loan portfolios would have a negative impact on both the debt and equity tranches of CLO. A decrease in the CPR would have a negative impact on the debt tranches (as principal 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.
FOR THE PERIOD ENDED 31 JANUARY 2025
11. TRADE AND OTHER RECEIVABLES
| 31 January 2025 € |
31 July 2024 € |
||
|---|---|---|---|
| (Unaudited) | (Audited) | ||
| Prepayments and other receivables | 56,615 | 35,529 | |
| Interest receivable | 37,598 | - | |
| Total | 94,213 | 35,529 |
12. TRADE AND OTHER PAYABLES
| 31 January 2025 € |
31 July 2024 € (Audited) |
|
|---|---|---|
| (Unaudited) | ||
| Investment Manager management fees | 1,907,362 | 1,839,368 |
| Investment Manager performance Fees | 2,011,347 | 6,528,317 |
| Directors' fees (shares payable) | 24,375 | 24,375 |
| Amounts due to brokers | - | 11,590,000 |
| Accrued expenses and other payables | 131,662 | 404,530 |
| Total | 4,074,746 | 20,386,590 |
13. SHARE CAPITAL
| 31 January 2025 Number of shares (Unaudited) |
31 July 2024 Number of shares (Audited) |
|
|---|---|---|
| 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 |
With respect to voting rights at general meetings of the Company, the Ordinary shares and Class B share confer on the holder of such shares the right to one vote for each share held, while the holders of Class C shares do not have the right to vote. Each class of share ranks pari passu with each other with respect to participation in the profits and losses of the Company.
The Class B share is identical in all respects to the Company's Ordinary shares, except that it entitles the holder of the Class B share (an affiliate of AXA IM) to elect a single Director to the Company's Board of Directors. At such time as the holdings of the AXA Group investors decline to less than 5% of the Company's equity capitalisation (with the Class B share and the other 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 currently no mechanism by which any Class C shares can be issued in the future (31 July 2024: nil Class C shares in issue).
| Issued and fully paid | ||||
|---|---|---|---|---|
| Number of Ordinary shares 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 July 2023 (Audited) | 36,580,580 | 1 | - | 36,580,581 |
| Issued to Directors during the year | - | - | - | - |
| Balance at 31 July 2024 (Audited) | 36,580,580 | 1 | - | 36,580,581 |
| Issued to Directors during the period | - | - | - | - |
| Balance at 31 January 2025 (Unaudited) | 36,580,580 | 1 | - | 36,580,581 |
The Directors of the Company receive 30% of their Directors' fee in the form of Ordinary shares purchased on the secondary market. The Company purchased the following Ordinary shares on the secondary market during the six month period ended 31 January 2025:
-
1 August 2024: 3,380 Ordinary shares at an average price of €5.2 per Ordinary share.
-
1 November 2024: 3,403 Ordinary shares at an average price of €5.5 per Ordinary share.
Ordinary shares purchased on the secondary market during the year ended 31 July 2024:
- 1 August 2023: 4,124 Ordinary Shares at an average price of €5.14 per Ordinary share.
- 31 October 2023: 4,549 Ordinary Shares at an average price of €5.09 per Ordinary share.
- 31 January 2024: 3,936 Ordinary Shares at an average price of €5.13 per Ordinary share.
- 30 April 2024: 3,491 Ordinary Shares at an average price of €4.90 per Ordinary share.
Please refer to page 12 for information on Director holdings in the Company's Ordinary shares.
FOR THE PERIOD ENDED 31 JANUARY 2025
14. SHARE PREMIUM
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 Company's initial issue of 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 15).
15. RESERVES
| Other distributable | Retained earnings |
||
|---|---|---|---|
| reserves € |
€ | ||
| At 31 July 2023 (Audited) | 1,136,348 | 199,038,620 | |
| Profit for the year and total comprehensive income | - | 44,965,561 | |
| Net settlement of Directors' fees share based payments | 24,731 | - | |
| Dividends paid in cash | (1,161,079) | (18,957,457) | |
| At 31 July 2024 (Audited) | - | 225,046,724 | |
| Profit for the period and total comprehensive income | - | 28,903,578 | |
| Net settlement of Directors' fees share based payments | 12,398 | - | |
| Dividends paid in cash | (12,398) | (10,779,161) | |
| At 31 January 2025 (Unaudited) | - | 243,171,141 |
Other distributable reserves represent the balance transferred from the share premium account on 26 January 2007, less dividends paid. The initial purpose of this reserve was to create a reserve from which dividend payments could be paid under the law prevailing at that time and the Company's Articles. However, the Companies (Guernsey) Law 2008 (as amended) became effective from 1 July 2008. Under this law, dividends can be paid from any source, provided that a company satisfies the relevant solvency test as prescribed under the law and the Directors make the appropriate solvency declaration.
Dividends for the six month period ended 31 January 2025 were paid from the remaining other distributable reserves available and the remaining balance was paid from retained earnings.
The retained earnings represents all profits and losses recognised through the Statement of Comprehensive Income to date, net of dividends paid.
16. FINANCIAL RISK MANAGEMENT
Capital risk management
The Board's policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the Company. The Company's capital is represented by the shares, share premium account, other distributable reserves and retained earnings reserve. The capital of the Company is managed in accordance with its investment policy, in pursuit of its investment objectives. The Company seeks to attain its investment objectives by pursuing a multi-asset-class investment strategy. The investment strategy focuses on direct and indirect investments in and exposures to, a variety of assets selected for the purpose of generating cash flows for the Company.
The Board of Directors also monitors the level of dividends to Ordinary Shareholders.
The Company's other financial risk management objectives and policies are consistent with those disclosed in the Company's Audited Annual Financial Statements for the year ended 31 July 2024.
17. RELATED PARTIES
Transactions with Directors
For disclosure of Directors' remuneration, refer to Note 6. As at 31 January 2025, Directors' fees of €nil (31 July 2024: €nil) had been accrued but not paid. Directors' fees to be paid in Ordinary shares of €24,375 (31 July 2024: €24,375) had been accrued, but not paid.
On 17 January 2025, Ms Dagmar Kershaw purchased additional 19,000 Ordinary Euro shares in the Company.
As at 31 January 2025, the Directors of the Company owned 0.27% (31 July 2024: 0.19%) of the voting shares of the Company.
FOR THE PERIOD ENDED 31 JANUARY 2025
17. RELATED PARTIES (CONTINUED)
Transactions with the Investment Manager
The fee structure with AXA IM, effective from 31 March 2024, is as follows:
AXA IM will be entitled to receive from the Company an investment management fee equal to the aggregate of:
- a) an amount equal to 1.5% per annum, of the lower of the NAV and €236 million (as opposed to the previous threshold which was €300 million); and
- b) if the NAV is greater than €236 million, an amount equal to 1.0% per annum of the amount by which the NAV exceeds €236 million.
The investment management fee will continue to be calculated for each six month period ending on July 31 and January 31 of each year on the basis of the Company's NAV as of the end of the preceding period and payable semi-annually in arrears. The investment management fee payable to AXA IM will continue to be subject to reduction for investments in AXA IM Managed Products as set out in the Company's existing Investment Guidelines.
AXA IM will be 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 (which will be equal to the latest audited NAV per Ordinary share multiplied by (1+8%)) and adjustments for dividends paid, share issuances, redemptions and buybacks. The performance fee will be calculated and paid annually in respect of each 12 month period ending on 31 July (each an "Incentive Period").
Notwithstanding the foregoing, performance fees payable to AXA IM in respect of any Incentive Period shall not exceed 4.99% of the NAV at the end of such Incentive Period.
During the six month period ended 31 January 2025, the investment management fees incurred were €1,907,362 (31 January 2024: €1,762,696). Investment Manager management fees accrued but unpaid as at 31 January 2025 were €1,907,362 (31 July 2024: €1,839,368).
During the six month period ended 31 January 2025, the performance fees incurred were €2,011,347 (31 January 2024: €4,185,013). Performance fees accrued but unpaid as at 31 January 2025 were €2,011,347 (31 July 2024: €6,528,317).
AXA IM also acts as investment manager for the following of the Company's investments held as at the year-end which together represented 1.29% of NAV as at 31 January 2025: Adagio V CLO DAC Subordinated Notes; Adagio VI CLO DAC Subordinated Notes; Adagio VII CLO DAC Subordinated Notes; and Adagio VIII CLO DAC Subordinated Notes. (31 July 2024: 2.2% of NAV: Adagio V CLO DAC Subordinated Notes; Adagio VI CLO DAC Subordinated Notes; Adagio VII CLO DAC Subordinated Notes; Adagio VIII CLO DAC Subordinated Notes; and Bank Deleveraging Opportunity Fund).
The investments in Adagio V CLO DAC Subordinated Notes, Adagio VI CLO DAC Subordinated Notes, Adagio VII CLO DAC Subordinated Notes and Adagio VIII CLO DAC Subordinated Notes are classified as Restricted AXA IM Managed Products.
The Investment Manager earns investment management fees, including incentive fees where applicable, directly from each of the above investment vehicles, in addition to its investment management fees earned from the Company. However, with respect to AXA IM Managed Products, there is no duplication of investment management fees as adjustment for these investments is made in the calculation of the investment management fees payable by the Company such that AXA IM earns investment management fees only at the level of the Company.
Due to the fact that the Company's investments in Adagio V CLO DAC Subordinated Notes, Adagio VI CLO DAC Subordinated Notes, Adagio VII CLO DAC Subordinated Notes and Adagio VIII CLO DAC Subordinated Notes 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, however possible for AXA IM to earn incentive fees at the level of both the Restricted AXA IM Managed Product and the Company.
Except for the Company's Restricted AXA IM Managed Products and AXA IM Managed Products, (as detailed above), all other investments in products managed by the Investment Manager were made by way of secondary market purchases on a bona fide arm's length basis from parties unaffiliated with the Investment Manager. Therefore, the Company pays investment management fees with respect to these investments calculated in the same way as if the investment manager of these deals were an independent third party.
AXA Group held 27.5% (31 July 2024: 27.5%) of the voting shares in the Company as at 31 January 2025 and 27.5% as at the date of approval of this report.
FOR THE PERIOD ENDED 31 JANUARY 2025
18. COMMITMENTS
As at 31 January 2025, the Company had the following uncalled commitments outstanding:
- a. Crescent European Specialty Lending Fund (a CCC Equity transaction exposed to sub-investment grade corporate credits) €1,931,660 (31 July 2024: €1,931,660) remaining commitment from an original commitment of €7,500,000; and
- b. Aurium XII CLO Warehouse €nil (31 July 2024: €2,972,500) remaining commitment from an original commitment of €7,500,000 and
- c. Madison Park Warehouse €8,555,935 (31 July 2024: €5,886,223) remaining commitment from an original commitment of €11,500,000.
19. SUBSEQUENT EVENTS
Management has evaluated subsequent events for the Company from 1 February 2025 to 1 April 2025, the date the condensed financial statements were available to be issued. The following points are pertinent:
On 3 February 2025, the Company purchased 3,250 Ordinary shares of no par value in the Company at an average price of €6.2 per Ordinary share. These Ordinary shares purchased in the secondary market were transferred to the Directors as part payment of their Directors' fees, as allocated below:
Stephen Le Page - 700 Ordinary shares Dagmar Kershaw - 1,000 Ordinary shares Yedau Ogoundele - 700 Ordinary shares Joanne Peacegood - 850 Ordinary shares
On 4 February 2025, the Company entered into a Warehouse Deed to invest into a new European warehouse, with a total commitment of EUR 12,500,000. As of date of this report, no amount has been drawn down.
On 5 March 2025, the Company declared a quarterly interim dividend of €0.155 per Ordinary share, which is payable on 3 April 2025, amounting to approximately €5.70 million.
FORWARD-LOOKING STATEMENTS
This report includes statements that are, or may be considered, "forward-looking statements". These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "plans", "expects", "targets", "aims", "intends", "may", "will", "can", "can achieve", "would" or "should" or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report, including in the Chair's Statement. They include statements regarding the intentions, beliefs or expectations of the Company or the Investment Manager concerning, among other things, the investment objectives and investment policies, financing strategies, investment performance, results of operations, financial condition, liquidity prospects, dividend policy and targeted dividend levels of the Company, the development of its financing strategies and the development of the markets in which it, directly and through special purpose vehicles, will invest and issue securities and other instruments. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Forward-looking statements are not guarantees of future performance. The Company's actual investment performance, results of operations, financial condition, liquidity, dividend policy and dividend payments and the development of its financing strategies may differ materially from the impression created by the forward-looking statements contained in this document. In addition, even if the investment performance, results of operations, financial condition, liquidity, dividend policy and dividend payments of the Company and the development of its financing strategies are consistent with the forward-looking statements contained in this document, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that may cause differences include, but are not limited to: changes in economic conditions generally and in the structured finance and credit markets particularly; fluctuations in interest and currency exchange rates, as well as the degree of success of the Company's hedging strategies in relation to such changes and fluctuations; changes in the liquidity or volatility of the markets for the Company's investments; declines in the value or quality of the collateral supporting any of the Company's investments; legislative and regulatory changes and judicial interpretations; changes in taxation; the Company's continued ability to invest its cash in suitable investments on a timely basis; the availability and cost of capital for future investments; the availability of suitable financing; the continued provision of services by the Investment Manager and the Investment Manager's ability to attract and retain suitably qualified personnel; and competition within the markets relevant to the Company.
These forward-looking statements speak only as at the date of this report. Subject to its legal and regulatory obligations (including under the rules of Euronext Amsterdam, the UK Listing Authority and the London Stock Exchange) the Company expressly disclaims any obligations to update or revise any forward-looking 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 circumstances on which any statement is based.
The Company qualifies all such forward-looking statements by these cautionary statements. Please keep these cautionary statements in mind while reading this report.
ALTERNATIVE PERFORMANCE MEASURES DISCLOSURES
FOR THE PERIOD ENDED 31 January 2025
Alternative performance measures disclosure
In accordance with ESMA Guidelines on APMs the Board has considered what APMs are included in the Interim Report and condensed financial statements which require further clarification. An APM is defined as a financial measure of historical or future financial performance, financial position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework. APMs included in the condensed financial statements, which are unaudited and outside the scope of IFRS, are deemed to be as follows:
NAV to market price discount / premium
The NAV per Ordinary share is the 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 Euronext Amsterdam and London Stock Exchange, the share price may be lower or higher than the NAV. The difference is known as a discount or premium. The Company's discount / premium to NAV is calculated by expressing the difference between the share price (closing price)1 and the NAV per Ordinary share on the same day compared to the NAV per Ordinary share on the same day.
The discount or premium per Ordinary share is a key indicator of the discrepancy between the market value and the intrinsic value of the Company.
At 31 January 2025, the Company's Ordinary shares traded at €6.15 on the Euronext Amsterdam (31 July 2024: €5.20). The Ordinary shares traded at a discount of 19.4% (31 July 2024: discount of 27.1%) to the NAV per Ordinary share of €7.6264 (31 July 2024: €7.1310).
Annualised ongoing charges
The annualised principal ongoing charges ratio (excluding performance fees) for the six month period ended 31 January 2025 was 1.84% (year ended 31 July 2024: 1.93%) and the annualised ongoing charges (including performance fees) was 3.32% (year ended 31 July 2024: 4.53%). The AIC's methodology for calculating an ongoing charges figure is based on annualised ongoing charges (refer to the table below) divided by average NAV in the period of €271,508,186 (31 July 2024: average NAV in the year of €251,146,473).
Calculating ongoing charges
The ongoing charges are based on actual costs incurred in the year excluding any non-recurring fees in accordance with the AIC methodology. Expense items have been excluded in the calculation of the ongoing charges figure when they are not deemed to meet the following AIC definition:
"Ongoing charges are those expenses of a type which are likely to recur in the foreseeable future, whether charged to capital or revenue and which relate to the operation of the investment company as a collective fund, excluding the costs of acquisition/disposal of investments, financing charges and gains/losses arising on investments. Ongoing charges are based on costs incurred in the year as being the best estimate of future costs."
Please refer below for annualised principal ongoing charges (excluding performance fees) and the ongoing charges (including performance fees) reconciliation for the six month period ended 31 January 2025 and year ended 31 July 2024:
| 31 January 2025 € |
31 July 2024 € |
|
|---|---|---|
| Expenses included in the calculation of annualised ongoing charges figures, in accordance with AIC's methodology: |
||
| Investment Manager management fees | (1,907,362) | (3,602,064) |
| Director's remuneration and expenses | (162,500) | (351,149) |
| Administration fees | (141,546) | (263,204) |
| Audit fees, audit related and non-audit related fees | (90,628) | (179,933) |
| Insurance fees | (19,281) | (45,736) |
| Depository fees | (27,317) | (58,883) |
| Other operating expenses | (143,584) | (344,669) |
| Total annualised ongoing charges for the period/year | (2,492,218) | (4,845,638) |
| Investment Manager performance fees | (2,011,347) | (6,528,317) |
| Total ongoing charges for the year (including performance fees) | (4,503,565) | (11,373,955) |
Calculating an average NAV
The AIC's methodology for calculating average NAV for the purposes of the ongoing charges figure is to use the average of NAV at each NAV calculation date. On this basis the average NAV figure has been calculated using the monthly published NAVs over the six month period ended 31 January 2025 and year ended 31 July 2024.
Internal Rate of Return
The IRR is calculated as the gross projected future return on the Company's investment portfolio as at 31 January 2025 under standard AXA IM assumptions. As at 31 January 2025 the IRR is 12.4% (31 July 2024: 12.7%).
ALTERNATIVE PERFORMANCE MEASURES DISCLOSURES (CONTINUED)
FOR THE PERIOD ENDED 31 JANUARY 2025
Internal Rate of Return (continued)
The IRR is calculated using projected cash flows and a Discounted Cash Flow model from the investment portfolio, which are consistent with the Company's accounting policies.
The IRR reflects the projected gross future return on the investment portfolio and helps to assess the potential profitability and efficiency of the Company's investments over time.
Dividend yield
Dividend yield is calculated by annualising the last dividend paid during the six month periods ended 31 January 2025 and 31 July 2024, divided by the share price as at 31 January 2025 and 31 July 2024 respectively.
Dividend yield is calculated to measure the Company's distribution of dividends to the Company's Ordinary Shareholders relative to share price to allow comparability to other companies in the market.
Dividend yield is calculated as follows:
| 31 January 2025 | 31 July 2024 | |
|---|---|---|
| Last Dividends declared and paid in the period/year | €0.15 | €0.145 |
| Annualised Dividend for twelve months | €0.60 | €0.58 |
| Share price as at end of the period/year | €6.15 | €5.20 |
| Dividend yield | 9.8% | 11.2% |
NAV total return
NAV total return per Ordinary share is calculated as the movement in the NAV per Ordinary share plus the total dividends paid per Ordinary share during the period, with such dividends paid being re-invested at NAV, as a percentage of the NAV per Ordinary share as at period end.
The six month period NAV total return is calculated over the period 1 August 2024 to 31 January 2025.
NAV total return summarises the Company's true growth over time while taking into account both capital appreciation and dividend yield.
NAV total return per Ordinary share has been calculated as follows:
| 1 August 2024 to 31 January 2025 |
1 August 2023 to 31 January 2024 |
|
|---|---|---|
| € | € | |
| Opening NAV per Ordinary share as disclosed in the SOFP | 7.1310 | 6.4510 |
| Closing NAV per Ordinary share as disclosed in the SOFP | 7.6264 | 6.8867 |
| 0.4954 | 0.4357 | |
| Capital return per Ordinary share (%) | 6.95% | 6.8% |
| Dividends paid during the period as disclosed above | 0.2950 | 0.2650 |
| Impact of dividend re-investment (%) | 4.14% | 4.3% |
| NAV total return per Ordinary share | 0.7904 | 0.7007 |
| NAV total return per Ordinary share (%) | 11.3% | 11.1% |
Share price total return
Share price total return is calculated as the movement in the share price plus the total dividends paid per Ordinary share during the period end, with such dividends paid being re-invested at the share price, as a percentage of the share price as at period end.
Share price total return per Ordinary share has been calculated as follows:
| 1 August 2024 to 31 January 2025 |
1 August 2023 to 31 January 2024 |
|
|---|---|---|
| € | € | |
| Opening share price per Euronext Amsterdam | 5.20 | 5.08 |
| Closing share price per Euronext Amsterdam | 6.15 | 5.10 |
| 0.95 | 0.02 | |
| Share price movement (%) | 0.2% | 0.4% |
| Dividends paid during the period as disclosed above | 0.2950 | 0.2650 |
| Impact of dividend re-investment (%) | 5.7% | 5.2% |
| Share price total return | 1.25 | 0.29 |
| Share price total return (%) | 24.5% | 5.6% |
BOARD OF DIRECTORS
Dagmar Kent Kershaw
Independent Director – appointed 30 June 2021
Ms Kent Kershaw has over 25 years' experience in financial markets, leading and developing fund management and alternative debt businesses. She headed Prudential M&G's debt private placement activities, and launched its Structured Credit business in 1998, which she led for ten years. In 2008, she joined Intermediate Capital Group to head its European and Australian credit business including institutional funds, CLOs, direct lending and hedge funds. Since 2017, she has held non-executive positions and is currently a director of Brooks Macdonald plc, Royal London Asset Management and Scotiabank Ireland, and a Senior Advisor to Strategic Value Partners. Ms Kent Kershaw holds a BA in Economics and Economic History from York University.
Stephen Le Page
Independent Director – appointed 16 October 2014
Mr Le Page has served as a non-executive director on a number of boards since his retirement from his role as Senior Partner (equivalent to Executive Chair) of Pricewaterhouse Coopers in the Channel Islands in 2013. Throughout his thirty year career with that firm he worked with many different types of financial organisation as both auditor and advisor, particularly with both listed and unlisted investment companies. He is currently the Audit Committee Chair of two London listed funds, Tufton Oceanic Assets Limited and Amedeo Air Four Plus Limited, and of Channel Island Property Fund Limited, which is listed on The International Stock Exchange. Mr Le Page is a Fellow of the Institute of Chartered Accountants in England and Wales and a Chartered Tax Advisor. He is a past president of the Guernsey Society of Chartered and Certified Accountants and a past Chair of the Guernsey International Business Association.
Yedau Ogoundele
Independent Director – appointed 1 July 2022
Ms Ogoundele has over 25 years' experience in financial markets, developing fixed income activities and leading financial services businesses. She was Europe, the Middle East and Africa's Head of Market Specialists at Bloomberg, then headed an enterprise sales department. Previously, she worked for over 17 years in investment banking at Credit Agricole CIB and Natixis in various roles including head of credit structuring where she specialised in CLO structuring and secondary loan trading. Since 2021, she has worked as a senior advisor for financial institutions and advises investors, asset managers, and corporates on fundraising and risk management solutions. She is currently an independent director of a pan-African financial institution. Ms Ogoundele holds a Master's degree in Management & Finance from EM Lyon Business School.
Joanne Peacegood
Independent Director – appointed 1 July 2023
Ms Peacegood has over 25 years of experience in the asset management sector including Listed Companies and Investment Trusts. Prior to becoming a non-executive director, Ms Peacegood worked for PwC in the Channel Islands, UK and Canada and was responsible for leading teams to deliver both audit and controls engagements. Ms Peacegood has significant experience in auditing complex valuations and also has 10 years' experience in Risk and Quality. Ms Peacegood is a Fellow of the Institute of Chartered Accountants in England and Wales, graduating with an Honours degree in Accounting and holds the Institute of Directors Diploma. Ms Peacegood is the Chair of Castelnau Group Limited (A London Listed company) and the Audit Committee Chair of NextEnergy Solar Fund Limited (A FTSE 250 Listed Company). She is also the Deputy Chair of the Guernsey International Business Association Council. Ms Peacegood resides in Guernsey.
COMPANY INFORMATION
Volta Finance Limited
Company registration number: CMP45747 Guernsey, Channel Islands
Registered office
BNP Paribas House St Julian's Avenue St Peter Port Guernsey GY1 1WA Channel Islands
Website: www.voltafinance.com
Administrator and Company Secretary BNP Paribas S.A., Guernsey Branch1
BNP Paribas House St Julian's Avenue St Peter Port Guernsey GY1 1WA Channel Islands
Depositary
BNP Paribas S.A., Guernsey Branch1 BNP Paribas House St Julian's Avenue St Peter Port Guernsey GY1 1WA Channel Islands
Legal advisors as to English Law
Herbert Smith Freehills LLP Exchange House Primrose Street London EC2A 2EG United Kingdom
Legal advisors as to Dutch Law
De Brauw Blackstone Westbroek N.V. Claude Debussylaan 80 PO Box 75084 1070 AB Amsterdam The Netherlands
Legal advisors as to Guernsey Law
Mourant Ozannes Royal Chambers St Julian's Avenue St Peter Port Guernsey GY1 4HP Channel Islands
Investment Manager
AXA Investment Managers Paris S.A. Tour Majunga La Défense 6 Place de la Pyramide 92800 Puteaux France
Corporate Broker and Corporate Finance Advisor Cavendish Securities plc
1 Bartholomew Close London EC1A 7BL United Kingdom
Independent Auditor
Deloitte LLP PO Box 403, Gaspé House, 66-72 Esplanade, St Helier JE4 8WA Channel Islands
Listing agent (Euronext Amsterdam) ING Bank N.V. Bijlmerplein 888 1102 MG Amsterdam The Netherlands
Registrar Computershare Investor Services (Guernsey) Limited C/o 13 Castle Street St Helier Jersey JE1 1ES Channel Islands
1BNP Paribas S.A. Guernsey Branch is regulated by the Guernsey Financial Services Commission.
Listing information
The Company's Ordinary shares are listed on Euronext Amsterdam and the premium segment of the London Stock Exchange's Main Market for listed securities. The ISIN number of the Company's listed shares is GG00B1GHHH78 and the tickers for the relevant markets are listed below:
- Euronext Amsterdam Stock Exchange, Euro quote: VTA.NA
- London Stock Exchange, Euro quote: VTA.LN
- London Stock Exchange, Sterling quote: VTAS.LN
GLOSSARY (CONTINUED)
Definitions and explanations of methodologies used:
| Terms | Definitions |
|---|---|
| ABS | Asset-backed securities. |
| ABS Residual | Residual income positions, which are a sub-classification of ABS, being backed by any of the following: residential mortgage loans; commercial mortgage loans; automobile loans; student loans; credit card receivables; or leases. |
| AIC | the Association of Investment Companies, of which the Company is a member. |
| AIC Code | the AIC Code of Corporate Governance effective from 1 January 2019. |
| AFM | the Netherlands Authority for the Financial Markets (the "Autoriteit Financiële Markten" or "AFM"), being the financial markets supervisor in the Netherlands. |
| AIFM | Alternative Investment Fund Manager, appointed in accordance with the AIFMD. |
| AIFMD | the Alternative Investment Fund Managers Directive. |
| APM | Alternative performance measure. We assess our performance using a variety of measures that are not specifically defined under IFRS as adopted by the EU and are therefore termed alternative performance measures. The APMs that we use may not be directly comparable with those used by other companies. The APMs disclosed in the Interim Report and Annual Report and Audited Financial Statements reflect those measures used by management to measure performance. These APMs provide readers with important additional information and will enable comparability of performance in future periods. |
| Articles | the Articles of Incorporation of the Company. |
| AUM | Assets under management. |
| AXA IM, Investment Manager | AXA Investment Managers Paris S.A. |
| BA | Bachelor of Arts |
| BBS | Bank Balance Sheet transactions: Synthetic transactions that permit banks to transfer part of their exposures such as exposures to corporate loans, mortgage loans, counterparty risks, trade finance loans or any classic and recurrent risks banks take in conducting their core business. |
| BNP Paribas/Administrator | BNP Paribas S.A. Guernsey Branch. |
| Board | the Board of Directors of the Company. |
| Bp(s) | Basis point(s). |
| BSL | Broadly Syndicated Loan |
| CCC | Cash Corporate Credit: Deals structured credit positions predominantly exposed to corporate credit risks by direct investments in cash instruments (loans and/or bonds). |
| CCC Equity | Cash Corporate Credit Equity. |
| CLO(s) | Collateralised Loan Obligations. |
| Company or Volta | Volta Finance Limited, a limited liability company registered in Guernsey under the Companies (Guernsey) Law 2008 (as amended) with registered number CM45747. |
| CMV | Capitalised Manager Vehicle: a CMV is a long-term closed-ended structure which is established to act as a CLO manager and to also provide capital in order to meet risk retention obligations when issuing a CLO and also to provide warehousing capabilities. |
| CPR | Constant prepayment rate. |
| CR | Corporate Responsibility |
| DAC | Designated Activity Company. |
| Discount/premium - APM | Calculated as the NAV per Ordinary share as at 31 January 2025 less the Company's closing share price on Euronext Amsterdam as at that date, divided by the NAV per Ordinary share as at that date. |
| Dividend yield - APM | Last quarter dividend paid during the six month period ended 31 January 2025 annualised, divided by the share price as at 31 January 2025. |
| DM | Discount Margin. |
| DTR | Daily Time Record |
| ECB | European Central Bank |
Volta Finance Limited Interim Report 2025 38
GLOSSARY (CONTINUED)
| ELLI | European Leveraged Loan Index |
|---|---|
| ESMA | European Securities and Markets Authority. |
| ESG | Environmental, social and governance. |
| Euronext Amsterdam | Euronext in Amsterdam, a regulated market of Euronext Amsterdam N.V. |
| ETF | Exchange-Traded Fund. |
| EU | European Union. |
| FAFVTPL | Financial assets at fair value through profit or loss. |
| FCA | Financial Conduct Authority |
| FED | Federal Reserve. |
| Financial year | The period from 1 August 2024 to 31 July 2025. |
| FOMC | Federal Open Market Committee. |
| FTSE | Financial Times Stock Exchange |
| GDP | Gross Domestic Product. |
| GFC | Global Financial Crisis 2008. |
| IAS | International Accounting Standards |
| IFRS | International Financial Reporting Standards. |
| IPO | Initial Public Offering. |
| IRR | Internal rate of return. |
| ISIN | International Securities Identification Number. |
| JP Morgan PricingDirect | An independent valuation service which is a wholly-owned subsidiary of JPMorgan Chase & Co. |
| LBO | Leveraged Buyout. |
| LME | Liability Management Exercises |
| LSE | London Stock Exchange |
| LSTA | Loan Syndications and Trading Association. |
| MS | Morgan Stanley |
| M&A | Merger and Acquisition |
| NAV | Net asset value. |
| NAV total return - APM | NAV total return per Ordinary share as at period end 31 January 2025 is calculated as the movement in the NAV per Ordinary share plus the total dividends paid per Ordinary share during the period/year, with such dividends paid being re-invested at NAV, as a percentage of the opening NAV per Ordinary share. |
| Ordinary share(s) | Ordinary Share(s) of no par value in the share capital of the Company. |
| PMI | Purchasing Managers' Index |
| POTUS | President of the United States. |
| PRI | Principles for Responsible Investment |
| Projected portfolio IRR | Calculated as the gross projected future return on Volta's investment portfolio as at 31 January 2025 under standard market assumptions. |
| Reset | Consist in calling all the debt tranches of a CLO, re-marketing a full new debt package, with new CLO documentation, almost as if it is a new CLO. |
| SCC | Synthetic Corporate Credit: Structured credit positions predominantly exposed to corporate credit risks by synthetic contracts. |
| SCC BBS | Synthetic Corporate Credit Bank Balance Sheet. |
| Share(s) | All classes of the shares of the Company in issue. |
| Shareholder | Any Ordinary Shareholder. |
GLOSSARY (CONTINUED)
| Share price total return - APM | The percentage increase or decrease in the share price on Euronext Amsterdam plus the total dividends paid per Ordinary share during the reference period, with such dividends re-invested in the shares. Obtained from Bloomberg using the TRA (Total Return Analysis) function. |
|---|---|
| SOFP | Statement of Financial Position. |
| SOFR | Secured Overnight Financing Rate. |
| TCFD | Task Force on Climate-related Financial Disclosure |
| Underlying Assets | The underlying assets principally targeted for direct and indirect investment (collectively, the "Underlying Assets") consist of corporate credits (investment grade, sub-investment grade and unrated); sovereign and quasi-sovereign debt; residential mortgage loans; commercial mortgage loans; automobile loans; student loans; credit card receivables; and leases. |
| UK | United Kingdom. |
| UN | United Nations |
| UNGC | United Nations Global Compact. |
| UN SDGs | United Nations' Sustainable Development Goals. |
| US | United States. |
| Warehouse | A Warehouse is a short-term structure put in place before a CLO happens in order to accumulate assets in order to facilitate the issue of the CLO. A Warehouse is leveraged and can be marked to market. |
| WARF | Weighted average rating factor. |