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