TIDMHONY
RNS Number : 4742I
Honeycomb Investment Trust PLC
30 August 2016
30 August 2016
FOR IMMEDIATE RELEASE
THE BOARD OF DIRECTORS OF HONEYCOMB INVESTMENT TRUST PLC
ANNOUNCES THE INTERIM REPORT AND UNAUDITED FINANCIAL STATEMENTS FOR
THE PERIODED 30 JUNE 2016.
Copies of the Company's Interim Report and Unaudited Financial
Statements are available from the Company Secretary, Apex Fund
Services (UK) Ltd at Veritas House, 125 Finsbury Pavement, London,
EC2A 1NQ, or on the Company's website
http://www.honeycombplc.com/documents.
Financial and Operational Highlights
Ordinary shares as at 30 June 2016
------------------------------------ ------------------------------------------
GBP147,979,439 GBP150,928,774
NET ASSETS (EX INCOME) (1) NET ASSETS (CUM INCOME) (2)
1,015.00p GBP152,250,102
SHARE PRICE (30 JUNE 2016 CLOSE) MARKET CAPITALISATION
2.48% 0.88%
ITD TOTAL NAV PER SHARE RETURN (3) PREMIUM / (DISCOUNT) TO NAV (CUM INCOME)
15,000,001 1,000.00p
SHARES IN ISSUE ISSUE PRICE (23 DECEMBER 2015)
986.53p 1,006.19p
NAV PER SHARE (EX INCOME) NAV PER SHARE (CUM INCOME)
(1) EX INCOME: net assets after recognition of the proposed
dividend
(2) CUM INCOME: net assets before recognition of the proposed
dividend
(3) ITD: inception to date - includes issue costs
Chairman's Statement
Dear Shareholders,
I am pleased to report the results of Honeycomb Investment Trust
plc ("Honeycomb", the "Company") for the period from the date of
the Company's listing on the Specialist Funds Market of the London
Stock Exchange to 30 June 2016. The period under review covers
fractionally over two financial quarters and I am pleased to say
that the Company has successfully deployed the proceeds of the
initial and subsequent capital raise ahead of the timetable set out
in the offerings and that the returns from the investments made to
date are ahead of expectations.
The Company believes that the retrenchment of mainstream lenders
from specialist markets presents an enormous opportunity to engage
with customers in markets which are underserved by traditional
lenders and platforms. We further believe that through targeting
verticals that require a specialist understanding, more detailed
underwriting, or where the vertical pre-selects higher quality
borrowers, attractive risk-adjusted returns can be delivered with
low volatility throughout the cycle.
Additionally, the Company believes that outperformance can be
delivered through the establishment of long-term, preferred
relationships with origination partners. This not only provides the
Company with differentiated deal flow, but by making equity
investments in select origination partners themselves, it allows
the Company, and our investors, to share in their success as they
grow.
We are hugely encouraged to see that our strategic focus
resonates with investors and both the Board and the Investment
Manager would like to thank investors for their support.
Deployment
As noted above, I am pleased to report that the Company had, by
the end of June 2016, fully invested all of the net proceeds of
both share offerings primarily through the acquisition of loan
portfolios whilst the volume of originated loans through Honeycomb
Finance (the "Origination Partner") and its referral partners
continued to develop.
Outlook
The Company has made an excellent start raising capital and
deploying it quickly. It has raised an initial tranche of debt
during this period. The core proposition of providing a targeted
and tailored financial solution in those segments of the market
that continue to be underserved by mainstream providers remains a
strong one, and the Company sees a number of further opportunities
in which to deploy capital. In light of these opportunities we are
progressing discussions with additional leverage providers during
the second half of 2016.
During the period the UK voted to leave the European Union. As a
result, there is uncertainty in the political and economic
landscape which we are monitoring closely. We believe that the
structural changes in the market and specialist approach that drive
our business, together with our intensive credit analysis, provides
a positive outlook for the business. In addition, new opportunities
may arise as mainstream lenders tighten their credit-risk appetite.
However, we remain vigilant of the impact any downturn in the
general economic environment.
Dividend
I am pleased to announce that the period to 30 June 2016 the
Company is paying a second quarter dividend of 19.66 pence per
share (GBP2.9 million).
The dividend represents an annualised return of 7.9% of the
share issue price for the 2(nd) quarter, just over a month after
full deployment of the capital raised.
We have made excellent progress through the first half of the
financial year.
Robert Sharpe
Chairman
22 August 2016
Investment Manager's Report
Honeycomb Investment Trust plc (the "Company") was established
in December 2015 to provide investors with access to UK lending
opportunities which Pollen Street Capital (the "Investment
Manager", the "Manager") believes have potential to provide
attractive and consistent risk-adjusted returns throughout the
cycle.
These returns are delivered through the Investment Manager's
focus on high-quality underwriting of borrowers in markets that are
underserved by mainstream finance providers and platforms, as well
as direct origination through specialist channels. The Investment
Manager has a combined experience of over 100 years in consumer
finance, providing the Company with both deep insights to the
underwriting space and also access to the Manager's established
eco-system enabling whole of market, high-quality origination flow
and portfolio acquisition opportunities.
To further enhance investor returns, the Company will make
selected investments in companies which are aligned with the
Company's strategy, such as brokers and originators of loans and
strategic providers of data and technology related to consumers and
small and medium enterprises.
The Company completed its initial public offering on 23 December
2015, raising initial gross proceeds of GBP100.0 million and
subsequently a further offering in May with gross proceeds of
GBP50.0 million. This was in conjunction with completing the first
debt facility with a European bank for GBP37.5 million in June
2016. The Company continues a program of effective capital
deployment through both direct originations and portfolio
acquisitions during the first half of 2016. As at 30 June, the
Company had completed investments with a total value exceeding
GBP170.0 million.
Also during the first half, the Company's Origination Partner
saw the successful roll-out of its first two referral partner
arrangements with Freedom Finance and Pay4Later, both of whom have
seen a steady growth of origination volumes (GBP10.6 million)
during the period. Further referral partners are currently being
on-boarded.
Equity investments as at 30 June totalled GBP4.7 million,
consisting of a 19.9% holding in Freedom Finance and a 4.9% equity
investment in retail point of sale finance provider Pay4Later. The
Investment Manager continues to observe the marketplace for
potential additional equity stakes in key suppliers to allow for
growth in originations.
The Investment Manager continues to see a strong pipeline of
opportunities to deploy funds in line with its returns targets.
After initial listing costs, the Company had a NAV of 981.86
pence per share upon listing, with the NAV per share (cumulative of
income) growing to 1,006.19 pence per ordinary share at 30 June,
equivalent to an increase of 2.48%. Additionally, the share price
of the Company at 30 June 2016 was 1,015.00 pence per share,
representing a 0.88% premium to NAV (cumulative of income).
Interim Management Report
For the period from 2 December 2015 (date of incorporation) to
30 June 2016
Principal Risks and Uncertainties
Risk is inherent in the Company's activities but it is managed
through a process of ongoing identification, measurement and
monitoring, subject to risk limits and other controls. The Company
is exposed to market risk (which includes currency risk, interest
rate risk and market price risk), credit risk and liquidity risk
arising from the financial instruments held by the Company (see
note 5).
The principal risks and uncertainties that could have a material
impact on the Company's performance have not changed from those set
out in detail on pages 18-37 of the Company's Prospectus dated 18
December 2015.
During the period the UK voted to leave the European Union. As a
result, there is uncertainty in the political and economic
landscape which we are monitoring closely. We believe that the
structural changes in the market and specialist approach that drive
our business, together with our intensive credit analysis, provides
a positive outlook for the business. In addition, new opportunities
may arise as mainstream lenders tighten their credit-risk appetite.
However, we remain vigilant of the impact any downturn in the
general economic environment.
In seeking to implement the investment objectives of the Company
while limiting risk, the Company is subject to the investment
limits restrictions set out in the Credit Risk section of this
note.
Going Concern
The financial statements have been prepared on a going concern
basis under the historical cost convention, as modified by the
valuation of investments at fair value. The Directors consider that
the Company has adequate financial resources to enable it to
continue operations for a period no less than 12 months from the
reporting date. Accordingly, the Directors believe that it is
appropriate to adopt the going concern basis in preparing the
Company's financial statements.
Related Party Transactions
All related party transactions that have taken place during the
period are detailed in note 13.
Responsibility Statement of the Directors
The Directors, being the persons responsible, confirm that to
the best of their knowledge:
a) the condensed set of Unaudited Financial Statements contained
within the half-yearly financial report have been prepared in
accordance with International Accounting Standard (IAS) 34, Interim
Financial Reporting, as adopted by the European Union, as required
by the Disclosure and Transparency Rule 4.2.4R, and gives a true
and fair view of the assets, liabilities and financial position of
the Company.
b) the Interim Report includes a fair review, as required by
Disclosure and Transparency Rule 4.2.7R, of important events that
have occurred during the first six months of the financial year,
their impact on the condensed set of Financial Statements, and a
description of the principal risks and perceived uncertainties for
the remaining six months of the financial year; and
c) the Interim Report includes a fair review of the information
concerning related parties' transactions as required by Disclosure
and Transparency Rule 4.2.8R.
Signed on behalf of the Board of Directors by:
Robert Sharpe
Chairman
22 August 2016
Statement of Financial Position
As at 30 June 2016
(Unaudited)
30 June 2016
Notes GBP
-------------------------------------------------------------------------- ---- ---- ------ --------------
Non-current assets
Financial assets designated as held at fair value through profit or loss 3 4,730,000
Loans at amortised cost 3, 6 144,950,207
-------------------------------------------------------------------------------------- ------ --------------
149,680,207
------------------------------------------------------------------------------------ ------ --------------
Current assets
Cash and cash equivalents 5,379,419
Other current assets and prepaid expenses 1,361,417
-------------------------------------------------------------------------------------- ------ --------------
6,740,835
------------------------------------------------------------------------------------ ------ --------------
Total assets 156,421,043
-------------------------------------------------------------------------------------- ------ --------------
Current liabilities
Investment management fees payable 7 169,919
Performance fees payable 7 396,027
Accrued expenses and other liabilities 1,926,323
-------------------------------------------------------------------------------------- ------ --------------
2,492,269
------------------------------------------------------------------------------------ ------ --------------
Total assets less current liabilities 153,928,774
-------------------------------------------------------------------------------------- ------ --------------
Borrowings 8 3,000,000
Total net assets 150,928,774
-------------------------------------------------------------------------------------- ------ --------------
Equity attributable to Shareholders of the Company
Called-up share capital 11 150,000
Share premium 49,379,547
Revenue reserve 3,312,393
Capital reserve (13,167)
Special distributable reserve 11 98,100,000
-------------------------------------------------------------------------------------- ------ --------------
Total equity 150,928,774
-------------------------------------------------------------------------------------- ------ --------------
Net Asset Value per Ordinary Share 10 1,006.19p
-------------------------------------------------------------------------------------- ------ --------------
Signed on behalf of the Board of Directors by Robert Sharpe,
Chairman
22 August 2016
See notes to the financial statements
Statement of Comprehensive Income
For the period from 2 December 2015 (date of incorporation) to
30 June 2016 (unaudited)
Revenue Capital Total
Notes GBP GBP GBP
--------------------------------------------------------------------- ------ ------------ --------- ------------
Interest income 4 5,104,098 - 5,104,098
--------------------------------------------------------------------- ------ ------------ --------- ------------
Total return 5,104,098 - 5,104,098
--------------------------------------------------------------------- ------ ------------ --------- ------------
Expenses
Investment management fee 7 (403,489) (13,167) (416,656)
Performance fee 7 (396,027) - (396,027)
Impairment of loans 6 (139,070) - (139,070)
Other expenses 7 (505,680) - (505,680)
--------------------------------------------------------------------- ------ ------------ --------- ------------
Total operating expenses (1,444,267) (13,167) (1,457,433)
--------------------------------------------------------------------- ------ ------------ --------- ------------
Net return on ordinary activities before finance costs and taxation 3,659,831 (13,167) 3,646,665
--------------------------------------------------------------------- ------ ------------ --------- ------------
Finance costs (30,938) - (30,938)
--------------------------------------------------------------------- ------ ------------ --------- ------------
Net return on ordinary activities before taxation 3,628,893 (13,167) 3,615,727
--------------------------------------------------------------------- ------ ------------ --------- ------------
Taxation on ordinary activities 9 - - -
Net return on ordinary activities after taxation 3,628,893 (13,167) 3,615,727
--------------------------------------------------------------------- ------ ------------ --------- ------------
Return per Ordinary Share (basic and diluted) 241.93p (0.88)p 241.05p
--------------------------------------------------------------------- ------ ------------ --------- ------------
The total column of this statement represents the Company's
Statement of Comprehensive Income, prepared in accordance with
International Financial Reporting Standards ("IFRS"). The
supplementary revenue and capital columns are both prepared under
guidance published by the Association of Investment Companies
("AIC"). All items in the above Statement derive from continuing
operations.
See notes to the financial statements
Statement of Changes in Shareholders' Funds
For the period from 2 December 2015 (date of incorporation) to
30 June 2016 (unaudited)
Special
Called-up Share Distributable
Capital Share Premium Revenue Reserve Capital Reserve Reserve Total Equity
GBP GBP GBP GBP GBP GBP
---------------- ---------------- -------------- ---------------- ---------------- --------------- -------------
Net assets - - - - - -
attributable to
shareholders at
the beginning
of the period
Amounts
receivable on
issue of
Management
Shares 50,000 - - - - 50,000
Management
Shares
redeemed (50,000) - - - - (50,000)
Amounts
receivable on
issue of
Ordinary
Shares 150,000 149,850,000 - - - 150,000,000
Share issue
costs - (2,370,453) - - - (2,370,453)
Transfer to
special
distributable
reserve - (98,100,000) - - 98,100,000 -
Return on
ordinary
activities
after taxation - - 3,628,893 (13,167) - 3,615,727
Dividends
declared and
paid - - (316,500) - - (316,500)
---------------- ---------------- -------------- ---------------- ---------------- --------------- -------------
Net assets
attributable
to
shareholders
as at 30 June
2016 150,000 49,379,547 3,312,393 (13,167) 98,100,000 150,928,774
---------------- ---------------- -------------- ---------------- ---------------- --------------- -------------
See notes to the financial statements
Statement of Cash Flows
For the period from 2 December 2015 (date of incorporation) to
30 June 2016 (unaudited)
(Unaudited)
30 June 2016
Notes GBP
---------------------------------------------------------------------------------- ---- --- ------- --------------
Cash flows from operating activities:
Net return on ordinary activities after taxation 3,615,727
Adjustments to reconcile net return on ordinary activities after taxation to net
cash inflow
from operating activities
Increase in other assets and prepaid expenses (1,361,417)
Increase in trade and other payables 2,492,269
Impairment of loans 139,070
------------------------------------------------------------------------------------------------------ --------------
Net cash inflow from operating activities 4,885,649
------------------------------------------------------------------------------------------------------ --------------
Cash flows from investing activities:
---------------------------------------------------------------------------------- ---- --- ------- --------------
Purchase of investments (4,730,000)
Purchase of loans (145,089,278)
------------------------------------------------------------------------------------------------------ --------------
Net cash (outflow) from investing activities (149,819,278)
------------------------------------------------------------------------------------------------------ --------------
Cash flows from financing activities:
Proceeds from subscription of Ordinary Shares 150,000,000
Proceeds from issue of management shares 50,000
Share issue costs (2,370,453)
Redemption of management shares (50,000)
Borrowings 3,000,000
Dividends declared and paid (316,500)
------------------------------------------------------------------------------------------------------ --------------
Net cash inflow from financing activities 150,313,047
------------------------------------------------------------------------------------------------------ --------------
Net change in cash and cash equivalents 5,379,419
Cash and cash equivalents at the beginning of the period -
---------------------------------------------------------------------------------- ---- --- ------- --------------
Net cash and cash equivalents 5,379,419
------------------------------------------------------------------------------------------------------ --------------
See notes to the financial statements
Notes to the Financial Statements
For the period from 2 December 2015 (date of incorporation) to
30 June 2016 (unaudited)
1. General Information
Honeycomb Investment Trust plc (the "Company") is a closed-ended
investment company incorporated in England and Wales on 2 December
2015 with registered number 09899024. The Company commenced
operations on 23 December 2015 and carries on business as an
investment trust within the meaning of chapter 4 of Part 24 of the
Corporation Tax Act 2010.
The Company's investment objective is to provide shareholders
with an attractive level of dividend income and capital growth
through the acquisition of loans made to consumers and small
businesses as well as other counterparties, together with related
investments ("Credit Assets") and selected equity investments that
are aligned with the Company's strategy and that present
opportunities to enhance the Company's returns from its investments
("Equity Assets").
The Company's investment manager is Pollen Street Capital
Limited (the "Investment Manager"), who also acts as the
Alternative Investment Fund Manager (the "AIFM") under the
Alternative Investment Fund Managers Directive (the "AIFMD"). The
Company is defined as an Alternative Investment Fund and is subject
to the relevant articles of the AIFMD.
The Company invest, directly and indirectly, in Credit Assets in
a number of ways:
a) the acquisition of interests in loans to consumers, small
businesses and other counterparties, whether offered to the Company
by the Origination Partner (see note 7) or by other third party
sources. These loans may be unsecured or secured;
b) investments in loans to specialist lenders for the purposes
of providing wholesale finance to those specialist lenders, secured
against (amongst other things) granular portfolios of loan
receivables; and
c) the acquisition by the Company of, or the investment by the
Company in, interests in portfolios of Credit Assets from third
parties.
The Company will seek to enhance returns for shareholders
through Equity Assets that are selected investments in listed and
unlisted securities that are aligned with the Company's strategy
and that present opportunities to enhance the Company's returns
from its investments, including (but not limited to), investments
in entities involved in:
a) the brokerage and origination of consumer loans, small
business loans and other related investments; and
b) the acquisition, transmission, storage, processing and
analysis of data related to lending to consumers and small and
medium enterprises.
As at 30 June 2016 the Company's share capital comprised
15,000,001 ordinary shares. These shares are listed and trade on
the London Stock Exchange's Specialist Fund Market.
Apex Fund Services (UK) Limited has been appointed as the
Administrator and Company Secretary of the Company, and is
responsible for the Company's general administrative functions,
such as calculation and publication of the Net Asset Value ("NAV")
and maintenance of the Company's accounting records.
2. Significant Accounting Policies
Basis of preparation
The Company's financial statements are prepared in accordance
with International Accounting Standard 34 - Interim Financial
Reporting ("IAS 34"). They comprise standards and interpretations
approved by the International Accounting Standards Board and
International Financial Reporting Committee, interpretations issued
by the International Accounting Standard Committee that remain in
effect, to the extent they have been adopted by the European Union.
The financial statements are also in compliance with relevant
provisions of the Companies Act 2006 as applicable to companies
reporting under IAS 34.
The financial statements have been prepared on a going concern
basis under the historical cost convention, as modified by the
valuation of investments at fair value. The Directors consider that
the Company has adequate financial resources to enable it to
continue operations for a period no less than 12 months from the
reporting date. Accordingly, the Directors believe that it is
appropriate to adopt the going concern basis in preparing the
Company's financial statements.
Where presentational guidance set out in the Statement of
Recommended Practice ("SORP") for investment trusts issued by the
Association of Investment Companies ("AIC") in January 2009 is
consistent with the requirements of IAS 34, the Directors have
sought to prepare the financial statements on a basis compliant
with the recommendations of the SORP.
The Company's presentational and functional currency is Pounds
Sterling (GBP). Pounds Sterling reflects the currency in which
funds from financing activities are generated.
Presentation of Statement of Comprehensive Income
In order to better reflect the activities of an investment trust
company and in accordance with the guidance set out by the AIC,
supplementary information which analyses the Statement of
Comprehensive Income between items of revenue and capital nature
has been presented alongside the Statement of Comprehensive Income.
Net revenue is the measure the Directors believe appropriate in
assessing the Company's compliance with certain requirements set
out in section 1158 of the Corporation Taxes Act 2010.
In respect of the analysis between revenue and capital items
presented within the Statement of Comprehensive Income, all
expenses and finance costs, which are accounted for on an accruals
basis, have been presented as revenue items except those items
listed below:
a) expenses are allocated to capital where a direct connection
with the maintenance or enhancement of the value of the investments
can be demonstrated. Investment management fees and finance costs
are allocated to capital in accordance with accounting policy set
out below in expenses, fees and commissions; and
b) expenses which are incidental to the disposal of an
investment are deducted from the disposal proceeds of the
investment.
The following are presented as capital items:
a) gains and losses on the realisation of investments;
b) increases and decreases in the valuation of investments held at the year-end;
c) expenses, together with the related taxation effect,
allocated to capital in accordance with the above policies
Income
For financial instruments measured at amortised cost the
effective interest rate ("EIR") method is used to measure the
carrying value of a financial asset or liability and to allocate
associated interest income or expense over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts through the expected
life of the financial instrument or, when appropriate, a shorter
period to the net carrying amount of the financial asset or
financial liability.
In calculating the effective interest rate, the Company
estimates cash flows considering all contractual terms of the
financial instrument (for example, early redemption penalty
charges) but does not consider future credit losses. The
calculation includes all fees received and paid and costs borne
that are an integral part of the effective interest rate and all
other premiums or discounts above or below market rates.
Once a financial asset or a group of similar financial assets
becomes impaired, interest income is recognised using the rate of
interest used to discount the future cash flows for the purpose of
measuring the impairment loss and is recognised over the period to
which the expected cash flows relate.
Dividend income from investments is taken to the revenue column
of the Statement of Comprehensive Income on an ex-dividend
basis.
Bank interest and other income receivable are accounted for on
an accruals basis.
Expenses, fees and commissions
Expenses, fees and commissions not directly attributable to
generating a financial instrument are recognised when services are
provided, or on the performance of a significant act which means
the Company has become contractually obligated to settle those
amounts.
Investment management fees are allocated between the revenue and
capital accounts based on the relevant split of Credit Assets and
Equity Assets (being 96.8% and 3.2% respectively). The Company
charges performance fees to the revenue account as it is the
current expectation that the majority of the Company's return will
be generated through revenue rather than capital gains on equity
investments. Refer to Note 7 for further details of the management
and performance fees.
All other expenses are accounted for on an accruals basis.
Dividends payable to Shareholders
Dividends to shareholders are accounted for in the period which
they are paid or approved in general meetings. Dividends payable to
shareholders are recognised in the Statement of Changes in Equity
when they are paid, or have been approved by shareholders in the
case of a final dividend and become a liability to the Group.
Taxation
The tax currently payable is based on the taxable profit for the
year. Taxable profit differs from net profit as reported in the
Statement of Comprehensive Income because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. The
Company's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted at the Statement of
Financial Position date.
In line with the recommendations of the SORP, the allocation
method used to calculate tax relief on expenses presented against
capital returns in the supplementary information in the Statement
of Comprehensive Income is the "marginal basis". Under this basis,
if taxable income is capable of being offset entirely by expenses
presented in the revenue return column of the Statement of
Comprehensive Income, then no tax relief is transferred to the
capital return column.
Deferred tax is the tax expected to be payable or recoverable on
temporary differences between the carrying amounts of assets and
liabilities in the consolidated financial statements and the
corresponding tax bases used in the computation of taxable profit,
and is accounted for using the liability method. Deferred tax
liabilities are recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Investment trusts which have approval as such under section 1158
of the Corporation Taxes Act 2010 are not liable for taxation on
capital gains. The carrying amount of deferred tax assets is
reviewed at each Statement of Financial Position date and reduced
to the extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax rates that have been enacted or substantively
enacted at the Statement of Financial Position date. Deferred tax
is charged or credited in the Statement of Comprehensive Income,
except when it relates to items charged or credited directly to
equity, in which case the deferred tax is also dealt with in
equity.
Financial assets and financial liabilities
The Company classifies its financial assets and financial
liabilities into the following categories:
(i) Financial assets and financial liabilities at fair value
through profit or loss
This category consists of unlisted equities that are valued at
fair value based on primary issuance of stock, secondary market
transactions, discounted cash flow and other models, consideration
of market multiples for comparative companies or third party
valuations which are considered representative of the fair value.
Gains and losses arising from the changes in the fair values are
recognised in the Statement of Comprehensive Income.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. The Company's loan assets are classified as loans and
receivables.
Loans are recognised when the funds are advanced to borrowers.
Loans and receivables are carried at amortised cost using the
effective interest rate method less provisions for impairment.
(iii) Purchases and sales of financial assets
Purchases and sales of financial assets are accounted for at
trade date. Financial assets are derecognised when the rights to
receive cash flows have expired or where the assets have been
transferred and substantially all of the risks and rewards of
ownership have been transferred.
(iv) Impairment of financial assets
Assets carried at amortised cost
The Company assesses at each reporting date whether, as a result
of one or more events that occurred after initial recognition,
there is objective evidence that a financial asset or group of
financial assets is impaired. Evidence of impairment may
include:
-- indications that a borrower or group of borrowers is
experiencing significant financial difficulty;
-- default or delinquency in interest or principal payments; or
-- debt being restructured to reduce the burden on the borrower.
The Company assesses whether objective evidence of impairment
exists either individually for assets that are separately
significant or individually or collectively for assets that are not
separately significant.
If there is no objective evidence of impairment for an
individually assessed asset it is included in a group of assets
with similar credit risk characteristics and collectively assessed
for impairment.
If there is objective evidence that an impairment loss has
incurred, the amount of the loss is measured as the difference
between the assets carrying amount and the present value of
estimated future cash flows discounted at the asset's original
effective interest rate. The resultant provisions are deducted from
the appropriate asset values in the Statement of Financial
Position.
The methodology and assumptions used for estimating future cash
flows are reviewed regularly by the Company to reduce any
differences between loss estimates and actual loss experience.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the provision is
adjusted and the amount of the reversal is recognised in the
Statement of Comprehensive Income.
Where a loan is not recoverable, it is written off against the
related provision for loan impairment once all the necessary
procedures have been completed and the amount of the loss has been
determined. Subsequent recoveries of amounts previously written off
are reflected against the impairment losses recorded in the
Statement of Comprehensive Income.
Key estimates and assumptions in impairment of financial
assets
The assessment of impairment of the loans and receivables at
amortised cost requires the use of accounting estimates and
assumptions that could cause material adjustment to the carrying
value of those investments. The methodology and assumptions used
for estimating future cash flows are reviewed regularly by the
Company.
(v) Financial liabilities
Financial liabilities are derecognised when the obligation is
discharged, cancelled or has expired.
(vi) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount
reported in the Statement of Financial Position if, and only if,
there is a currently enforceable legal right to set off the
recognised amounts and there is an intention to settle on a net
basis, or to realise an asset and settle the liability
simultaneously.
Cash and cash equivalents
Cash comprises cash on hand and demand deposits. Cash
equivalents are short-term, highly liquid investments with a
maturity of 3 months or less that are readily convertible to known
amounts of cash.
Other current assets and prepaid expenses
Other current assets and prepaid expenses do not carry any
interest and are short-term in nature and are accordingly stated at
their nominal value as reduced by appropriate allowances for
estimated impairment.
Current liabilities
Current liabilities, other than derivatives, are not
interest-bearing and are stated at their nominal value.
Ordinary shares
Ordinary shares are classified as equity. The costs of issuing
or acquiring equity are recognised in equity (net of any related
income tax benefit), as a reduction of equity on the condition that
these are incremental costs directly attributable to the equity
transaction that otherwise would have been avoided.
The costs of an equity transaction that is abandoned are
recognised as an expense. Those costs might include registration
and other regulatory fees, amounts paid to legal, accounting and
other professional advisers, printing costs and stamp duties.
The Company's NAV per ordinary share is calculated by dividing
the total net assets by the total number of outstanding ordinary
shares.
Capital reserves
Capital reserve - arising on investments sold includes:
-- gains/losses on disposal of investments;
-- exchange differences on currency balances and on settlement of loan balances;
-- cost of own shares bought back; and
-- other capital charges and credits charged to this account in
accordance with the accounting policies above.
Capital reserve - arising on investments held includes:
-- increases and decreases in the valuation of investments held at the year end.
All of the above are accounted for in the Statement of
Comprehensive Income except the cost of own shares bought back
which is accounted for in the Statement of Changes in Shareholders'
Funds.
Segmental reporting
The Chief Operating Decision Maker is the Board of Directors.
The Directors are of the opinion that the Company is engaged in a
single segment of business, being the investment of the Company's
capital in Credit Assets and Equity Assets.
Key estimates and assumptions
Estimates and assumptions used in preparing the financial
statements are reviewed on an ongoing basis and are based on
historical experience and various other factors that are believed
to be reasonable under the circumstances.
The results of these estimates and assumptions form the basis of
making judgments about carrying values of assets and liabilities
that are not readily apparent from other sources.
The Company's loans and receivables are held at amortised costs
less impairments. Loans are assessed individually for impairment
based on specific evidence of an impairment having occurred, for
example a borrower being a certain number of days late. Through a
review of the Company's own data as well as that reported by
servicers, a percentage of principal is impaired at different
stages of delinquency as a borrower becomes progressively later on
their payment. This rate varies by loan type. Recovery assumptions
are made depending on any security posted against a loan, any sale
agreements for loans in arrears, actual recoveries observed over
time on comparable loans, or as determined and approved by the
Investment Manager. The amount of impairment loss experienced for
any given loan may ultimately differ from these assumptions. As the
Company records further data about impairment losses, the estimates
applied to the impairment assessment continue to be refined and
updated as applicable. Further information about significant areas
of estimation uncertainty and critical judgements in relation to
the impairment of loans are described in Note 6.
Estimates and assumptions made in the valuation of unquoted
investments and investments for which there is an inactive market
may cause material adjustment to the carrying value of those assets
and liabilities. These are valued in accordance with the techniques
set out under Note 2 financial assets and financial
liabilities.
Accounting standards issued but not yet effective
At the date of this document, the following applicable standards
were in issue but not yet effective:
IFRS 9, 'Financial instruments', effective from 1 January 2018,
specifies how an entity should classify and measure financial
assets and liabilities, including some hybrid contracts. The
standard improves and simplifies the approach for classification
and measurement of financial assets compared with the requirements
of IAS 39. Most of the requirements in IAS 39 for classification
and measurement of financial liabilities were carried forward
unchanged. The standard applies a consistent approach to
classifying financial assets and replaces the numerous categories
of financial assets in IAS 39, each of which had its own
classification criteria. IFRS 9 now divides all financial assets
that are under the scope of IAS 39 into two classifications - those
measured at amortised cost and those measured at fair value. The
determination is made at initial recognition. Specifically, under
IFRS 9 loans and receivables can be measured at amortised cost only
if the objective of the entity is to hold the financial asset to
collect contractual cash flows and that the contractual terms of
the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal
outstanding. All other debt instruments will be measured at fair
value through profit or loss. Also, IFRS 9 requires expected credit
losses to be recognised in contrast to IAS 39 which only recognises
incurred credit losses.
IFRS 15, 'Revenue from contracts with customers', effective 1
January 2018. This is the converged standard on revenue recognition
and replaces IAS 11, 'Construction contracts', IAS 18, 'Revenue'
and related interpretations.
Both IFRS 9 and IFRS 15 are subject to endorsement from the
European Union. The Directors are currently evaluating the impact
of the above standards on the Company's financial statements.
3. Fair Value Measurement
Financial instruments measured and reported at fair value are
classified and disclosed in one of the following fair value
hierarchy levels based on the significance of the inputs used in
measuring its fair value:
Level 1 - Quoted prices (unadjusted) in active markets for
identical assets and liabilities.
Level 2 - Inputs other than quoted prices included in Level 1
that are observable for the asset or liability, either directly (as
prices) or indirectly (derived from prices).
Level 3 - Pricing inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
An investment is always categorised as Level 1, 2 or 3 in its
entirety. In certain cases, the fair value measurement for an
investment may use a number of different inputs that fall into
different levels of the fair value hierarchy. In such cases, an
investment's level within the fair value hierarchy is based on the
lowest level of input that is significant to the fair value
measurement. The assessment of the significance of a particular
input to the fair value measurement requires judgement and is
specific to the investment.
The following table analyses within the fair value hierarchy the
Company's assets and liabilities measured at fair value at 30 June
2016:
Total Level 1 Level 2 Level 3
GBP GBP GBP GBP
------------------- ---------- -------- -------- ----------
Unlisted equities 4,730,000 - - 4,730,000
Total 4,730,000 - - 4,730,000
------------------- ---------- -------- -------- ----------
The following table presents the movement in the Company's level
3 positions for the period ended 30 June 2016.
Unlisted Equities Total
GBP GBP
----------------------------------------- ------------------ ----------
Opening balance - -
Purchases 4,730,000 4,730,000
Sales - -
Net change in realised/unrealised gains - -
Distributed income re-invested - -
Closing balance 4,730,000 4,730,000
------------------------------------------- ------------------ ----------
The net change in realised/unrealised gains is recognised within
gains on investments in the Statement of Comprehensive Income.
Quantitative information regarding the unobservable inputs for
the Company's Level 3 positions is given below:
Fair value at 30 June 2016
Description GBP Valuation technique
------------------ --------------------------- --------------------
Unlisted equities 4,730,000 Recent transactions
If the price of unlisted equities held at 30 June 2016 period
end had increased/decreased by 5% it would have resulted in an
increase/decrease in the total value of unlisted equities of
GBP236,500.
Assets and liabilities not carried at fair value but for which
fair value is disclosed
The following table presents the fair value of the Company's
assets and liabilities (by class) not measured at fair value
through profit and loss at 30 June 2016 but for which fair value is
disclosed:
Total Level 1 Level 2 Level 3
GBP GBP GBP GBP
------------------------------------------- ------------ ---------- ---------- ------------
Assets
Cash and cash equivalents 5,379,419 5,379,419 - -
Other current assets and prepaid expenses 1,361,417 - 1,361,417 -
Loans at amortised cost 144,950,207 - - 144,950,207
Total 151,691,043 5,379,419 1,361,417 144,950,207
------------------------------------------- ------------ ---------- ---------- ------------
Liabilities
Investment management fees payable 169,919 - 169,919 -
Performance fees payable 396,027 - 396,027 -
Accrued expenses and other liabilities 1,926,323 - 1,926,323 -
Total 2,492,269 - 2,492,269 -
------------------------------------------- ------------ ---------- ---------- ------------
The table below provides details of the loans at amortised cost
held by the Company at 30 June 2016.
Amortised cost before impairment Cumulative impairment Amortised cost Carrying value
GBP GBP GBP GBP
------------------------- --------------------------------- ---------------------- --------------- ---------------
Loans at amortised cost 148,953,440 (4,003,232) 144,950,207 144,950,207
Cumulative impairment includes incurred losses already present
on the loan portfolios acquired at a discount to face value in
secondary transactions which are brought onto the balance sheet at
an amount that includes impairment losses up to the date of their
acquisition. Impairment included in the Statement of Financial
Position for the period is reported in impairment of loans in the
Statement of Comprehensive Income (see note 6).
4. Income and Gains on Investments
(Unaudited)
30 June 2016
GBP
------------------------------- --- --- --------------
Interest Income
Interest from loans 5,052,171
Interest from deposit account 11,874
Other income 40,052
Total 5,014,098
----------------------------------------- --------------
5. Principal Risks and Uncertainties
Introduction
Risk is inherent in the Company's activities but it is managed
through a process of ongoing identification, measurement and
monitoring, subject to risk limits and other controls. The Company
is exposed to market risk (which includes currency risk, interest
rate risk and market price risk), credit risk and liquidity risk
arising from the financial instruments held by the Company.
Risk management structure
The Directors are ultimately responsible for identifying and
controlling the risks inherent in the Company's activities, which
are managed through a process of ongoing identification,
measurement and monitoring, risk limits and other controls. The day
to day management of the risks affecting the Company has been
delegated to Pollen Street Capital Limited as Investment Manager
and AIFM to the Company.
The Company has no employees and the Directors have all been
appointed on a non-executive basis. Whilst the Company has taken
all reasonable steps to establish and maintain adequate procedures,
systems and controls to enable it to comply with its obligations,
the Company is reliant upon the performance of third party service
providers for its executive function. In particular, the Investment
Manager, the Depositary, the Administrator, the Registrar and
servicers are performing services which are integral to the
operation of the Company. Failure by any service provider to carry
out its obligations to the Company in accordance with the terms of
its appointment could have a materially detrimental impact on the
operation of the Company.
The principal risks and uncertainties that could have a material
impact on the Company's performance have not changed from those set
out in detail on pages 18-37 of the Company's Prospectus dated 18
December 2015, available on the Company's website,
www.honeycombplc.com. Namely:
a) There can be no assurance that the Investment Manager will be
successful in implementing the Company's investment objective or
that the Company's portfolio of investments will generate the rates
of return expected. There is no guarantee that any dividends will
be paid in respect of any financial year or period.
b) The Company has no employees and is reliant on the
performance of third party service providers, it has taken all
reasonable steps to establish and maintain adequate procedures,
systems and controls to enable it to comply with its
obligations.
c) Market conditions may delay or prevent the Company from
making appropriate investments that generate attractive returns.
Adverse market conditions and their consequences may have a
material adverse effect on the Investment Manager's ability to
identify and invest in Credit Assets and Equity Assets delivering
the returns necessary for the Company to meet its investment
objective.
d) The Company is likely to borrow in connection with its
investment activities, which subjects it to interest rate risk and
additional losses if the value of its investments fall.
e) Credit Assets are subject to risks of borrower default. The
default history for loans is limited and actual defaults may be
greater than indicated by historical data.
f) Increasing competition for Credit Assets, and increasing
regulation of the consumer, small business and specialist lending
industry, may lead to reductions in yields on Credit Assets. This
may result in a reduction in the Company's aggregate return on
investments, which may have a material adverse effect on the
Company's financial condition and results of operations, and its
ability to meet its investment objective.
g) The Origination Partner (see Note 7) has not guaranteed to
provide a minimum number of Credit Assets to the Company.
Similarly, the other third party sources have not guaranteed to
refer a minimum number of loan applications to the Origination
Partner. As such, the Company will only be able to invest in Credit
Assets to the extent that:
i) The other third party sources receive sufficient loan
applications from underlying borrowers which satisfy the criteria
set by the Origination Partner (such that the other third party
sources refer the loan application to the Origination Partner);
and
ii) The Origination Partner refers sufficient opportunities to
the Company to invest in Credit Assets which satisfy the Investment
Manager's underwriting criteria.
h) The Company, may be exposed to the following risks relating to compliance and regulation.
i) Non-compliance with laws and regulations may impair the
Service Providers' ability to arrange or service Credit Assets.
ii) Should the Company fail to maintain its investment trust
status it would be subject to the normal rates of corporation tax
on chargeable gains arising on the transfer or disposal of Equity
Assets, which could adversely affect the Company's financial
performance, its ability to provide returns to its Shareholders or
the post-tax returns received by its Shareholders.
i) Failure by the Company, the Investment Manager, the
Origination Partner, the Servicer or any of the Referral Partners
to comply with applicable laws and regulations relating to the
origination, acquisition and servicing of the Credit Assets and the
broader consumer credit industry could result in suspension,
termination or impairment of the Company's ability to invest in
Credit Assets.
j) Changes in tax law may reduce any return for investors in the Company.
During the period the UK voted to leave the European Union. As a
result, there is uncertainty in the political and economic
landscape which we are monitoring closely. We believe that the
structural changes in the market and specialist approach that drive
our business, together with our intensive credit analysis, provides
a positive outlook for the business. In addition, new opportunities
may arise as mainstream lenders tighten their credit-risk appetite.
However, we remain vigilant of the impact any downturn in the
general economic environment.
In seeking to implement the investment objectives of the Company
while limiting risk, the Company is subject to the investment
limits restrictions set out in the Credit Risk section of this
note.
Market risk (incorporating currency risk, interest rate risk and
market price risk)
Market risk is the risk of loss arising from movements in
observable market variables. The Company is exposed to market risk
primarily through its investments in Credit Assets and Equity
Assets.
The Investment Manager reviews the investment portfolio and
industry developments to ensure that any events which impact the
Company are identified and considered. This also ensures that any
risks affecting the investment portfolio are identified and
mitigated to the fullest extent possible.
Currency risk
Currency risk is the risk that the value of net assets will
fluctuate due to changes in foreign exchange rates. Relevant risk
variables are generally movements in the exchange rates of
non-functional currencies in which the Company holds financial
assets and liabilities.
All the assets of the Company are invested in assets which are
denominated in Pounds Sterling, as such the Company is not exposed
to currency risk.
Interest rate risk
Interest rate risk arises from the possibility that changes in
interest rates will affect future cash flows or the fair values of
financial instruments.
Loans held by the Company at amortised cost, with a fixed
interest rate or subject to an administered rate, are not exposed
to interest rate changes. As at 30 June 2016, 90.26% of the total
assets were classified as loans with a fixed interest rate or
subject to an administered rate.
Financial Instruments with a floating interest rate that resets
as market rates change are exposed to cash flow interest rate risk.
As at 30 June 2016, the Company had 3.44% of the total assets
classified as cash and cash equivalents and 2.4% of loans at
amortised cost with floating interest rates.
The Company entered into a revolving bank facility which is
subject to a variable interest rate. At 30 June 2016 the Company
had GBP3,000,000 drawn down under the facility.
The Company does not intend to hedge interest rate risk on a
regular basis. However, where it enters floating-rate liabilities
against fixed-rate loans, it may at its sole discretion, seek to
hedge out the interest rate exposure, taking into consideration
amongst other things the cost of hedging and the general interest
rate environment.
Market price risk
The Company is exposed to price risk arising from the
investments held by the Company for which prices in the future are
uncertain. The investments in the Equity Assets are exposed to
market price risk. Refer to Note 3 for further details on the
sensitivity of the Company's Level 3 investments to price risk.
Credit risk
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge an obligation.
The Company's credit risks arise principally through exposures
to loans originated or acquired by the Company, which are subject
to risk of borrower default. The ability of the Company to earn
revenue is dependent upon payments being made by the borrower of
the loan originated or acquired by the Company. The Company will
receive payments under any loans it originates or acquires if the
corresponding borrower makes payments on the loan. On select
portfolios security could also be held on property or guarantees of
repayment from government authorities.
The Company will invest in Credit Assets originated across
various sectors and across credit risk bands in order to ensure
diversification and to seek to mitigate concentration risks. The
investment limits and restrictions outlined below apply to the
Company, to ensure that the diversification of the Portfolio is
maintained, that concentration risk is limited and that limits are
placed on risk associated with borrowings. The Company may invest
across various channels, asset classes, geographies primarily
United Kingdom and credit bands in order to ensure diversification
and to seek to mitigate concentration risks.
Liquidity risk
Liquidity risk is defined as the risk that the Company may not
be able to settle or meet its obligations on time or at a
reasonable price. The Ordinary Shares in issue as at 30 June 2016
are not redeemable. Redeemable shares may be issued subject to any
rights attached to existing shares, and the Board may determine the
terms and conditions and manner of redemption of any redeemable
shares issued.
The Company has borrowings in the form of a two year revolving
bank facility which is subject to regular performance and covenant
testing and is secured on the assets of the Company.
The Investment Manager manages the Company's liquidity risk,
including monitoring of amortising cash flows and monitoring and
forecasting of cash flows.
Asset class restrictions
The Company will not invest, in aggregate, more than 10 per cent
of the aggregate value of the total assets of the Company (the
"Gross Assets"), at the time of investment, in other investment
funds that invest in Credit Assets.
The Company will not invest, in aggregate, more than 50 per cent
of Gross Assets, at the time of investment, in Credit Assets
comprising investments in loans (alongside or in conjunction with
Shawbrook Bank Limited ("Shawbrook") referred to the Origination
Partner by Shawbrook.
The following restrictions apply, in each case at the time of
the investment by the Company:
-- no single Credit Asset comprising a consumer credit asset
shall exceed 0.15 per cent of Gross Assets;
-- no single SME or corporate loan, or trade receivable, shall
exceed 5 per cent of Gross Assets; and
-- no single facility, security or other interest backed by a
portfolio of loans, assets or receivables (excluding any borrowing
ring-fenced within any SPV which would be without recourse to the
Company) shall exceed 20 per cent of Gross Assets. For the
avoidance of doubt, this restriction shall not prevent the Company
from directly acquiring portfolios of Credit Assets which comply
with the other investment restrictions described in this
section.
The Company will not invest in Equity Assets to the extent that
such investment would, at the time of investment, result in the
Company controlling more than 35 per cent of the issued and voting
share capital of the issuer of such Equity Assets.
Other restrictions
The Company may invest in cash, cash equivalents, money market
instruments, money market funds, bonds, commercial paper or other
debt obligations (excluding collateralised loan obligations or
collateralised debt obligations) with banks or other counterparties
having single-A (or equivalent) or higher credit rating as
determined by an internationally recognised agency or systemically
important bank, or any "governmental and public securities" (as
defined for the purposes of the FCA rules) for cash management
purposes and with a view to enhancing returns to shareholders or
mitigating credit exposure.
6. Impairment of Investments at Amortised Cost
A financial asset is past due when the counterparty has failed
to make a payment when contractually due. The Company assesses at
each Statement of Financial Position date whether there is
objective evidence that a loan or group of loans, classified as
investments at amortised cost, is impaired. In performing such
analysis, the Company assesses the probability of default based on
the number of payments overdue, using recent historical rates of
default on loan portfolios with credit risk characteristics similar
to those of the Company.
The following impairment charges have been recorded in the
Statement of Financial Position relating to investments at
amortised cost:
(Unaudited)
30 June 2016
GBP
-------------------------------------------------------------- --- --- --------------
Incurred losses recognised at acquisition of loan portfolios 3,864,162
Impairment of loans through profit or loss 139,070
Cumulative impairment 4,003,232
------------------------------------------------------------------------ --------------
Cumulative impairment includes incurred losses already present
on the loan portfolios acquired at a discount to face value in
secondary transactions which are brought onto the balance sheet at
an amount that includes impairment losses up to the date of their
acquisition. Impairment included in the Statement of Financial
Position for the period is reported in impairment of loans in the
Statement of Comprehensive Income (see note 6).
7. Fees and Expenses
Investment management and performance fees
Under the terms of the Investment Management Agreement, the
Investment Manager is entitled to a management fee and a
performance fee together with reimbursement of reasonable expenses
incurred by it in the performance of its duties.
The Investment Manager charges a fee based on a percentage of
Gross Assets (such percentage not to exceed 1.0 per cent per annum
and provided that the aggregate Management Fee payable by the
Company shall not exceed an amount equal to 1.0 per cent of the
Gross Assets of the Company or the gross assets of its group in
aggregate (as applicable) in any year) to any entity which is
within the Company's group (including the Company).
For so long as the Origination Partner is part of the same group
as the Investment Manager, the amount of all fees payable by the
Company to the Origination Partner shall be deducted from the
Management Fee.
The Investment Manager is also entitled to a performance fee
calculated by reference to movements in the Adjusted Net Asset
Value (as defined below) from time to time.
The performance fee will be calculated in respect of each twelve
month period starting on 1 January and ending on 31 December in
each calendar year ("Calculation Period") save that the rst
Calculation Period shall be the period from admission to trading on
the London Stock Exchange and ending on 31 December 2015, and the
nal Calculation Period shall end on the day on which the Investment
Management Agreement is terminated or, if earlier, the business day
immediately preceding the day on which the Company goes into
liquidation.
The performance fee will only be payable if the Adjusted Net
Asset Value at the end of a Calculation Period exceeds a hurdle
threshold, equal to the Adjusted Net Asset Value immediately
following admission to trading on the London Stock Exchange,
compounded at a rate equal to 5 per cent per annum (the
"Hurdle").
If, on the last day of a Calculation Period (each a "Calculation
Date"), the Adjusted Net Asset Value exceeds the Hurdle, the
Investment Manager shall be entitled to a performance fee (the
"Performance Fee") equal to the lower of:
a) the amount by which the Adjusted Net Asset Value exceeds the
Hurdle, in each case as at the Calculation Date; and
b) ten per cent of the amount by which total growth in Adjusted
Net Asset Value since First Admission (being the aggregate of the
growth in Adjusted Net Asset Value in the relevant Calculation
Period and in each previous Calculation Period), after adding back
any Performance Fees paid to the Investment Manager, exceeds the
aggregate of all Performance Fees payable to the Investment Manager
in respect of all previous Calculation Periods.
"Adjusted Net Asset Value" means the Net Asset Value after: (i)
excluding any increases or decreases in Net Asset Value
attributable to the issue or repurchase of any Ordinary Shares;
(ii) adding back the aggregate amount of any dividends paid or
distributions made in respect of any Ordinary Shares; (iii)
excluding the aggregate amount of any dividends or distributions
accrued but unpaid in respect of any Ordinary Shares; and (iv)
excluding the amount of any Performance Fees accrued but unpaid, in
each case without double counting.
Origination Partner
The Origination Partner is Honeycomb Finance Limited. The
Origination Partner is wholly owned by the Investment Manager.
The Origination Partner has agreed to provide the Company with
opportunities to acquire Credit Assets originated or acquired by
the Origination Partner which meet speci ed underwriting criteria
relating to the underlying borrower and the corresponding terms of
credit (which may be modi ed from time to time at the discretion of
the Investment Manager).
The Origination Partner will be paid a fee calculated on the
purchase price for each Credit Asset acquired by the Company from
the Origination Partner. For so long as the Origination Partner is
part of the same group as the Investment Manager, such amount shall
be deducted from the Management Fee payable to the Investment
Manager.
The Company shall reimburse the Origination Partner for
acquisition related costs and on-going servicing fees (to the
extent paid by the Origination Partner) in connection with Credit
Assets in which the Company acquires an interest, but shall not be
liable to reimburse the Origination Partner for any other costs and
expenses. The amount of such fees shall be agreed between the
Origination Partner and the relevant counterparties on arm's length
commercial terms.
Administration
The Company has entered into an administration agreement with
Apex Fund Services (UK) Limited. The Administrator is responsible
for the Company's general administrative functions, such as the
calculation of the NAV and maintenance of the Company's accounting
records.
Under the terms of the administration agreement, the
Administrator is entitled to an initial implementation fee of
GBP5,000 and to an administration fee equal to the greater of: (i)
GBP5,000 per month; and (ii) an amount equal to 1/12 of 0.06 per
cent of the portion of NAV up to and including GBP150 million, and
1/12 of 0.05 per cent of the portion of NAV above GBP150 million.
The Administrator is also entitled to reimbursement of all
reasonable out of pocket expenses incurred by it in connection with
the performance of its duties.
Company Secretary
Under the terms of the administration agreement, the fee for the
provisions of the Company Secretary's services will be included in
the fund administration fee paid to the Administrator.
Registrar
Computershare Investor Services PLC has been appointed as the
Company's registrar to provide share registration services. They
will be entitled to an annual register maintenance fee from the
Company equal to GBP1.30 per shareholder per annum or part thereof,
subject to a minimum of GBP3,800 per annum. Other activity will be
charged for in accordance with the Registrar's normal tariff as
published from time to time.
Depositary
Indos Financial Limited has been appointed as the Company's
depositary for the purposes of the AIFM Directive. Under the terms
of the depositary agreement, the Depositary is entitled to a
periodic fee calculated as follows:
a) where NAV is less than or equal to GBP200 million, 0.02 per
cent of NAV per annum, subject to a minimum, monthly fee of
GBP2,500; and
b) where NAV is greater than GBP200 million, the sum of 0.02 per
cent per annum in respect of the first GBP200 million of NAV
and:
i) 0.0175 per cent per annum of that part of NAV which is in
excess of GBP200 million but less than or equal to GBP400 million;
and
ii) 0.015 per cent per annum of that part of NAV which is in excess of GBP400 million.
Other operational expenses
Other on-going operational expenses (excluding fees paid to
service providers as detailed above) of the Company will be borne
by the Company including printing, audit, finance costs, due
diligence and legal fees. All reasonable out of pocket expenses of
the Investment Manager, the Administrator, the Company Secretary,
the Registrar, the Depositary, the Custodian, the Origination
Partner and the Directors relating to the Company will be borne by
the Company.
8. Borrowings
(Unaudited)
30 June 2016
GBP
------------------------- --- --- --------------
Revolving bank facility 3,000,000
Total 3,000,000
----------------------------------- --------------
The Company entered into a two year revolving bank facility for
GBP37.5 million on 17 June 2016 with a European bank. The revolving
bank facility is secured upon the assets of the Company, has a term
of two years and interest is charged at one, three or six month
LIBOR plus a margin.
9. Taxation
Investment trust status
It is the intention of the Directors to conduct the affairs of
the Company so as to satisfy the conditions for approval as an
investment trust. As at 30 June 2016 the Company does not hold more
than 15% of its investments in any single company. As an investment
trust the Company is exempt from corporation tax on capital gains.
The Company's revenue income from loans is taxable in the hands of
the Company's shareholders and likewise is not subject to
corporation tax.
Any change in the Company's tax status or in taxation
legislation generally could affect the value of investments held by
the Company, affect the Company's ability to provide returns to
shareholders, lead the Company to lose its exemption from UK
Corporation tax on chargeable gains or alter the post-tax returns
to shareholders. It is not possible to guarantee that the Company
will remain a non-close company, which is a requirement to maintain
status as an investment trust, as the ordinary shares are freely
transferable. The Company, in the unlikely event that it becomes
aware that it is a close company, or otherwise fail to meet the
criteria for maintaining investment trust status, will as soon as
reasonably practicable, notify shareholders of this fact.
The following table presents the tax chargeable on the Company
for the period ended 30 June 2016.
Revenue Capital Total
GBP GBP GBP
---------------------------------------------------- ---------- --------- ----------
Net return on ordinary activities before taxation 3,628,893 (13,167) 3,615,727
---------------------------------------------------- ---------- --------- ----------
Tax at the standard UK corporation tax rate of 20% 725,779 (2,633) 723,145
Effects of:
Capital items exempt from corporation tax - 2,633 2,633
Non-taxable income (725,779) - (725,779)
Total tax charge - - -
---------------------------------------------------- ---------- --------- ----------
Overseas taxation
The Company may be subject to taxation under the tax rules of
the jurisdictions in which it invests, including by way of
withholding of tax from interest and other income receipts.
Although the Company will endeavour to minimise any such taxes this
may affect the level of returns to shareholders.
10. Net Asset Value Per Share
(Unaudited)
30 June 2016
------------------------------------------ --- --- ---------------
Ordinary Shares
Net assets attributable at end of period GBP150,928,774
Shares in issue 15,000,001
Net asset value per ordinary share 1,006.19p
11. Shareholders' Capital
Set out below is the issued share capital of the Company as at
30 June 2016.
Nominal value GBP Number of shares Voting rights of shares
----------------- ------------------ ----------------- ------------------------
Ordinary shares 150,000 15,000,001 15,000,001
On incorporation, the issued share capital of the Company was
GBP0.01 represented by one ordinary share, held by the subscriber
to the Company's memorandum of association.
50,000 management shares of GBP1 par value were paid up in full
on admission to the London Stock Exchange and redeemed out of the
proceeds of the issue.
Rights attaching to the Shares
The holders of the Ordinary Shares shall only be entitled to
receive, and to participate in, any dividends declared in relation
to the relevant class of shares that they hold.
On a winding-up or a return of capital by the Company, the
holders of any Ordinary Shares shall be entitled to all of the
Company's net assets.
The Ordinary Shares shall carry the right to receive notice of,
attend and vote at general meetings of the Company. On a show of
hands each Shareholder has one vote, and on a poll each Shareholder
has one vote per Ordinary Share held.
The consent of the holders of Ordinary Shares will be required
for the variation of any rights attached to the Ordinary
Shares.
Voting Rights
Members will be entitled to vote at a general meeting or class
meeting whether on a show of hands or a poll, as provided in the
applicable statutes (in this section, the "Companies Acts"). The
Companies Act provides that:
a) on a show of hands every member present in person has one
vote and every proxy present who has been duly appointed by one or
more members will have one vote, except that a proxy has one vote
for and one vote against if the proxy has been duly appointed by
more than one member and the proxy has been instructed by one or
more members to vote for and by one or more other members to vote
against. For this purpose, the Articles provide that, where a proxy
is given discretion as to how to vote on a show of hands, this will
be treated as an instruction by the relevant member to vote in the
way that the proxy decides to exercise that discretion; and
b) on a poll every member has one vote per share held by him and
he may vote in person or by one or more proxies. Where he appoints
more than one proxy, the proxies appointed by him taken together
shall not have more extensive voting rights than he could exercise
in person.
2.
This is subject to any special terms as to voting which are
given to any shares or on which shares are held.
In the case of joint holders of a share, the vote of the senior
who tenders a vote, whether in person or by proxy, shall be
accepted to the exclusion of the votes of the other joint holders
and, for this purpose, seniority shall be determined by the order
in which the names stand in the register in respect of the joint
holding.
No Shareholder shall have any right to vote at any general
meeting or separate meeting of the holders of any class of shares,
either in person or by proxy, in respect of any share held by him
unless all amounts presently payable by him in respect of that
share have been paid.
Variation of Rights & Distribution on Winding Up
If at any time the share capital of the Company is divided into
different classes of shares, the rights attached to any class may
be varied either in writing of the holders of three-quarters in
nominal value of the issued shares of that class or with the
sanction of an extraordinary resolution passed at a separate
meeting of the holders of the shares of that class.
The Company has no xed life but, pursuant to the Articles, an
ordinary resolution for the continuation of the Company will be
proposed at the annual general meeting of the Company to be held in
2021 and, if passed, every ve years thereafter. Upon any such
resolution not being passed, proposals will be put forward to the
effect that the Company be wound up, liquidated, reconstructed or
unitised.
If the Company is wound up, the liquidator may divide among the
shareholders in specie the whole or any part of the assets of the
Company and for that purpose may value any assets and determine how
the division shall be carried out as between the shareholders or
different classes of shareholders.
The table below shows the movement in shares during the period
ended 30 June 2016.
Shares in issue at the Shares in issue at the end
beginning of the period Shares subscribed Shares redeemed of the period
------------------- ---------------------------- ------------------ ---------------- -----------------------------
Management shares - 50,000 (50,000) -
Ordinary shares 1 15,000,000 - 15,000,001
Cash consideration was received for all subscriptions of
shares.
Special Distributable Reserve
At a general meeting of the company held on 14 December 2015,
special resolutions were passed approving the cancellation of the
amount standing to the credit of the Company's share premium
account as at 23 December 2015.
Following the approval of the Court and the subsequent
registration of the Court order with the Registrar of Companies on
21 March 2016, the reduction has now become effective. Accordingly,
GBP98,100,000, previously held in the share premium account, has
been transferred to the special distributable reserve as disclosed
in the Statement of Financial Position.
12. Dividends Per Share
The following table summarises the interim dividends payable to
Ordinary Shareholders during the period:
(Unaudited)
30 June 2016
GBP
---------------------------------------------------------- --- --- --------------
2.11p per Ordinary Share for the period to 31 March 2016
paid on 21 June 2016 316,500
Total 361,500
-------------------------------------------------------------------- --------------
13. Related Party Transactions
Each of the Directors is entitled to receive a fee from the
Company at such rate as may be determined in accordance with the
Articles. Save for the Chairman of the Board, the fees are
GBP25,000 for each Director per annum. The Chairman's fee is
GBP30,000 per annum. The Director's fees for the period ended 30
June 2016 totalled GBP60,456 out of which GBP26,863 was payable at
the period end.
All of the Directors are also entitled to be paid all reasonable
expenses properly incurred by them in attending general meetings,
Board or Committee meetings or otherwise in connection with the
performance of their duties. The Board may determine that
additional remuneration may be paid, from time to time, to any one
or more Directors in the event such Director or Directors are
requested by the Board to perform extra or special services on
behalf of the Company.
The Directors do not hold any Ordinary Shares.
Investment management fees and performance fees for the period
ended 30 June 2016 are payable by the Company to the Investment
Manager and these are presented on the Statement of Comprehensive
Income with further details disclosed in Note 7.
14. Approval of Financial Statements
The unaudited financial statements were approved and authorised
for issue by the Directors on 22 August 2016.
Company Information
Directors Administrator and Company Secretary
Robert Sharpe Apex Fund Services (UK) Ltd
James Coyle Veritas House
Ravi Takhar 125 Finsbury Pavement
Mark Huggins (resigned on 13 April 2016) London EC2A 1NQ
all of the registered office below England
Registered Office Registrar
Veritas House Computershare Investor Services PLC
125 Finsbury Pavement The Pavilions, Bridgewater Road
London EC2A 1NQ Bristol BS13 8AE
England England
Company Number Depositary
09899024 Indos Financial Limited
25 North Row
Website Address London W1K 6DJ
www.honeycombplc.com England
Sponsor, Broker and Placing Agent Auditor
Liberum Capital Limited PricewaterhouseCoopers LLP
Level 12, Ropemaker Place 7 More London Riverside
25 Ropemaker Place London SE1 2RT
London EC2Y 9LY England
England
Investment Manager and AIFM
Pollen Street Capital Limited
8 Hanover Street
London W1S 1YF
England
-Ends-
Enquiries:
Apex Fund Services (UK) Ltd
Company Secretary
Priya Dhaliah / Robert Kelly
020 3697 5368
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DBLFXQVFBBBF
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August 30, 2016 13:06 ET (17:06 GMT)
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