Castle Trust PCC - Castle Trust Growth Housa PC · Castle Trust Growth Housa PC A cell of the...

Castle Trust Growth Housa PC

A cell of the Castle Trust PCC

Castle Trust PCC - Castle Trust Growth Housa PC

Directors’ report and unaudited condensed interim financial statements for the period from

1 October 2019 to 31 March 2020



Directors’ report and financial statements

For the period from 1 October 2019 to 31 March 2020 Contents

Page

Corporate information

1

Directors’ report

2

Statement of directors’ responsibilities

8

Condensed statement of comprehensive income

10

Condensed statement of financial position

11

Condensed statement of changes in net assets attributable to Participating Preference and Founder Shareholders

12

Notes to the unaudited condensed interim financial statements

13



1

Corporate information Directors

Mark Grenyer Kenny Rae Martin Gordon Cudlipp (appointed 6 January 2020) Registered office 28 Esplanade St Helier Jersey JE2 3QA Secretary and administrator

JTC (Jersey) Limited 28 Esplanade St Helier Jersey JE2 3QA Investment Manager

Castle Trust Capital Management Limited 10 Norwich Street London EC4A 1BD

English legal adviser

Macfarlanes LLP 20 Cursitor Street London EC4A 1LT

Jersey legal adviser

Carey Olsen 47 Esplanade St Helier Jersey JE1 0BD Channel Islands

Maltese legal adviser

GANADO Advocates 171 Old Bakery Street, Valletta VLT 1455 Malta



2

Directors’ report The directors present the directors’ report and financial statements for Castle Trust Growth Housa PC (the “Cell”) for the period 1 October 2019 to 31 March 2020. The information on page 1 forms part of this report. The financial statements are for the period ended 31 March 2020 and the comparatives provided are as per the statement of financial position as at 30 September 2019 and the condensed statement of comprehensive income and condensed statement of changes in net assets attributable to Participating Preference and Founder Shareholders for the interim period ended 31 March 2019. The Cell The Cell is a cell of Castle Trust PCC (the “PCC”). The PCC is a public protected cell company with limited liability incorporated in Jersey, Channel Islands, on 27 July 2011 under the Companies (Jersey) Law 1991. The PCC has no power to meet any liability attributable to a particular cell from the non-cellular assets of the PCC or to meet any liability, whether attributable to a particular cell or not, from the cellular assets of another cell. However, the PCC is a single legal entity which may operate or have assets held on its behalf or be subject to claims in other jurisdictions which may not necessarily recognise such segregation. There can be no guarantee that the courts of any jurisdiction outside of Jersey will respect the limitations on liability associated with protected cell companies. The Cell was created on 5 September 2012 as a public protected cell of the PCC. Regulatory status under the Collective Investment Funds (Jersey) Law 1988 was granted by the Jersey Financial Services Commission on 1 October 2014. The Participating Redeemable Preference Shares ("Participating Preference Shares") of the Cell are listed on The International Stock Exchange (“TISE”) (formerly known as the Channel Islands Stock Exchange (“CISE”). The Participating Preference Shares are issued to UK investors. The Cell is an investment product which is designed to grant the investor exposure to the potential growth or fall of the Halifax House Price Index (the "HPI") over the life of the product. It will provide a return such that the amount invested will be adjusted by the returns providing an enhanced exposure to the upside in the HPI and a reduced exposure to the downside. The precise terms of the return payable to investors will depend on the duration of the product. The Participating Preference Shares of the Cell are divided into individual classes. Three classes were offered each month up to and including January 2014: 3 year term shares (“Growth 3 year share class”); 5 year term shares (“Growth 5 year share class”); and 10 year term shares (“Growth 10 year share class”). In January 2014 the decision was taken by the directors to stop the issue of the Growth 3 year share class due to subscription by investors being lower than hoped. From February 2014, the Growth 3 year share class ceased to be issued and a new Protected 5 year share class (“Protected 5 year share class”) was issued in its place. The terms of the Protected 5 year share class are substantially the same as those for the Growth 5 year share class but with no downside participation on the initial capital and a lower potential upside return. Protected refers to the absence of downside participation only as there is no external guarantee or collateral support. No further issues of the Growth 3 year share class, Growth 5 year share class, Protected 5 year share class and Growth 10 year share class have been offered since July 2014.



3

Directors’ report (continued) The Cell (continued) Due to legislation changes in the United Kingdom that came into effect in May 2015, the Cell’s products have to be offered to the public on a European Union recognised Stock Exchange. Consequently, on 2 February 2015, eight new classes were listed on the Maltese Stock Exchange (MSE):

UK Growth 2 year term shares (“UK Growth 2 year share class”);

Greater London Growth 2 year term shares (“Greater London Growth 2 year share class”);



UK Foundation 5 year term shares (“UK Foundation 5 year share class”);

Greater London Foundation 5 year term shares (“Greater London Foundation 5 year share class”);

UK Foundation 10 year term shares (“UK Foundation 10 year share class”); and

Greater London Foundation 10 year term shares (“Greater London Foundation 10 year share class”).

The terms of the UK Foundation 5 year share class; Greater London Foundation 5 year share class; UK Foundation 10 year share class; and Greater London Foundation 10 year share class are substantially the same as those for the Protected 5 year share class whilst the terms of the UK Growth 2 year share class; Greater London Growth 2 year share class; UK Growth 5 year share class; and Greater London Growth 5 year share class are substantially the same as those for the Growth 5 year share class. Tax treatment will depend on the individual circumstances of each shareholder and may be subject to change. Applicants should inform themselves as to the legal requirements of applying for shares, and any applicable exchange control regulations and taxes in the countries of their respective citizenship, residence or domicile. Shareholders are therefore advised to consult their professional advisers concerning possible taxation or other consequences of purchasing, holding, selling or otherwise disposing of the Participating Preference Shares and the receipt of distributions (whether or not on redemption). As at the statement of financial position date there were 59 classes of Participating Preference Shares in the capital of the Cell (period ended 30 September 2019: 65). 20 classes were Participating Preference Shares of no par value in the capital of the Cell (being Growth Housa Shares issued up to July 2014); these shares carry the rights set out in the Castle Trust PCC Summary and Securities Note dated 3 October 2012. None of these classes were Participating Preference Shares of no par value in the capital of the Cell (being Protected Housa Shares issued up to July 2014); these shares carry the rights set out in the Castle Trust PCC Summary and Securities Note dated 28 January 2014. The remaining 39 classes were Participating Preference Shares issued on the MSE from February 2015 onwards; these shares carry the rights set out in the Castle Trust PCC Summary and Securities Note dated 20 January 2015. In particular, the Participating Preference Shares do not pay dividends, have no voting rights in respect of general meetings of the Cell, but have voting rights in respect of separate meetings of the holders of the shares of the relevant share class. All Participating Preference Shares in issue at 17:00 on the day of maturity of the relevant share class shall be redeemed, under the terms of the Set off Agreement dated 24 September 2012 (“Set off Agreement”), by the Cell for the Investment Return on the payment by Castle Trust Capital Plc (“CTC”), a UK company.



4

Directors’ report (continued) The Cell (continued) As at the statement of financial position date, 4,135,000,000 Participating Preference Shares had been issued by the Cell (year ended 30 September 2019: 4,135,000,000) of which 1,407,236 were fully paid up and remained in issue (year ended 30 September 2019: 2,448,969). All of the Participating Preference Shares fully paid up at the statement of financial position date were held by external investors (year ended 30 September 2019: all held by external investors). 4,126,337,971 Participating Preference Shares were forfeited and cancelled at the statement of financial position date (year ended 30 September 2019: 4,126,337,971) and 1,041,733 were redeemed during the current year at the statement of financial position date (year ended 30 September 2019: 3,985,979). The Cell's financial assets at fair value through profit or loss comprise HPI Derivative Swap positions which are due from CTC under the HPI Swap Agreement. The Cell achieves its exposure to the HPI through the Swap positions. Investment Return The investment return is the amount payable as calculated under the relevant investment product with respect to each Participating Preference Share on the relevant maturity date calculated by Castle Trust Capital Management (”CTCM”) as follows: ((Return Multiple x HPI Percentage Change) + 1) x Investment Amount

Where:

The “Return Multiple” is: (i) if the final HPI Level is greater than the Initial HPI Level:

Maturity Period of Participating Preference Shares Return Multiple

2 Year Growth (UK Growth & Greater London Growth) 1.00

3 Year Growth 1.25


5 Year Growth 1.50

5 Year Protected /Foundation (UK & Greater London) 1.00

10 Year Growth 1.70

10 Year Foundation 1.50

(ii) if the final HPI Level is lower than the Initial HPI Level:



3 Year Growth 0.75


5 Year Growth 0.50

5 Year Protected/Foundation UK Growth & Greater London Growth) Initial capital returned

10 Year Growth 0.30

10 Year Foundation (UK & Greater London) Initial capital returned



5

Directors’ report (continued) Castle Trust Capital Group structure The Castle Trust Capital Group (the “Group”), of which the cell is a subsidiary by virtue of control, comprises of nine operating entities: Castle Trust Capital Plc (“CTC”), Castle Trust Capital Management Limited (“CTCM”), Castle Trust Income Housa Plc (“CTIH”), Castle Trust Direct Plc (“CTD”), Castle Trust Finance Limited (“CTF”), Castle Trust Treasury Limited (“CTT”), one dormant company, Castle Trust Services Limited (“CTS”) (formerly Castle Trust Treasury Limited (“CTT”)), Castle Trust POS Limited (“CTPOS”), Omni Capital Retail Finance Limited (“OCRF”) and one nominee company, Castle Trust Capital Nominees Limited (“CTCN”) (collectively the “Group”). There is also a new “orphaned” entity “Castle Trust Belfry Limited” as well as a new holding company “Castle Trust Holdings Limited” that will be consolidated into the Group. In addition, Castle Trust PCC (“the PCC”) and its Protected Cell, Castle Trust Growth Housa PC (“the Cell”), are structured entities which are not owned by the Group but consolidated by virtue of control. Activities and results The statement of comprehensive income for the period is set out on page 10 and reflects total comprehensive expense for the period of £11,954 (period ended 31 March 2019: total comprehensive expense of £16,278). This comprises net gains on financial assets and liabilities of £nil (period ended 31 March 2019: £nil) against which there are operating expenses of £11,954 (period ended 31 March 2019: £16,278). When Participating Preference Shares of nominal value are issued only 96% of the funds received are used to purchase a HPI derivative asset from CTC, the remaining 4% of the nominal value is intended to be used to pay marketing and investment management fees. However the Cell receives nominal exposure from CTC under the terms of the derivative equivalent to 100% of the nominal commitment of the Participating Preference Shares. Principal risks and uncertainties With the recent and rapid development of the coronavirus outbreak, many countries have required entities to limit or suspend business operations and implemented travel restrictions and quarantine measures. These measures and policies have significantly disrupted (or are expected to disrupt) the activities of many businesses. The Group have assessed the potential impacts of COVID-19 in its cash flow forecasts, assuming stressed scenarios, and determined the Cell and the wider Group would have sufficient resources and liquidity to meet future obligations relating to administrative expenses for the twelve months up to March 2021 and remain with a cash surplus during this period. The above has been considered in determining the Cell’s ability to continue as a going concern for the twelve-month period from the date of signing these financial statements. As the outbreak continues to progress and evolve, it is challenging at this juncture to predict the full extent and duration of its business and economic impact. The Group have assessed that there is an immaterial impact on its business. The impact of COVID-19 will be continually assessed. The principal risks the Cell is exposed to are set out in note 10 of these financial statements. Future developments Castle Trust has applied to the relevant financial regulators for permission to accept deposits, commonly known as a banking licence. In March 2020, the PRA granted a banking licence with restrictions to Castle Trust with an expectation that the restrictions be lifted in the summer of 2020. Once these restrictions are lifted, Castle Trust will be operational as a fully licenced bank and the



6

Directors’ report (continued) Future developments (continued) nature of funding for the Group’s business activities will change. It is possible therefore that the Company’s business will be discontinued as part of a wider rationalisation of entities within the Group. The legal entity structure of the Group is being rationalised with two subsidiaries, Castle Trust Finance Limited and Castle Trust Treasury Limited currently in the process of being liquidated as part of the banking licence application process. In the event that business activities of the Company are discontinued, the directors anticipate that any wind down would take place in an orderly manner to ensure the Company can meet liabilities as they fall due on the basis that the maturity profile of the Company’s financial assets and liabilities is matched. Subsequent Events In April 2018, CTC announced its intention to become a bank. CTC views this as a more suitable model for its business in the longer term as the business continues to grow. Since then, CTC has been working closely with both of its UK regulators, the PRA and the FCA, with a view to obtaining a full banking licence. The proposed transition of CTC to a bank regulated in the United Kingdom therefore involves numerous steps, in particular as regards to the sources of funding provided to CTC by third parties and its wider group. One of those steps is provided by the Scheme where, inter alia, shareholders of the Castle Trust Growth Housa Preference Shares are being asked to approve redeeming their Scheme Shares in return for structured deposits in the Housa accounts. At the Court Meeting held on 21 May 2020, the resolution on the proposed Scheme was duly passed by a majority representing not less than 75 per cent. of the voting rights held by the Scheme Shareholders who were present and voting (and entitled to vote). Subject to receipt of the sanction of The Royal Court of Jersey and the satisfaction or waiver of the other Conditions set out in the Scheme Document, the Scheme is expected to become effective in early June 2020. Subsequent to the reporting date and at the date of signing the financial statements, the following Participating Preference Shares were redeemed.

Share Class

Number of Participating Preference Shares issued

Number of Participating Preference Shares redeemed

Number of Participating Preference Shares forfeited

Number of Participating Preference Shares outstanding

Greater London Growth Housa 5 year

Apr 2015 15,000,000 37,740 14,962,260 -

UK Foundation Housa 5 year Apr 2015 15,000,000 25,000 14,975,000 -

Greater London Foundation Housa 5

year Apr 2015 15,000,000 4,000 14,996,000 -

UK Growth Housa 5 year May 2015 15,000,000 20,000 14,980,000 -


May 2015 15,000,000 81,500 14,918,500 -

UK Foundation Housa 5 year May

2015 15,000,000 11,000 14,989,000 -


year May 2015 15,000,000 83,000 14,917,000 -



7

Directors’ report (continued) Going concern With the recent and rapid development of the coronavirus outbreak, many countries have required entities to limit or suspend business operations and implemented travel restrictions and quarantine measures. These measures and policies have significantly disrupted (or are expected to disrupt) the activities of many businesses. The Group have assessed the potential impacts of COVID-19 in its cash flow forecasts, assuming stressed scenarios, and determined the Cell and the wider Group would have sufficient resources and liquidity to meet future obligations relating to administrative expenses for the twelve months up to March 2021 and remain with a cash surplus during this period. The above has been considered in determining the Cell’s ability to continue as a going concern for the twelve-month period from the date of signing these financial statements. As the outbreak continues to progress and evolve, it is challenging at this juncture to predict the full extent and duration of its business and economic impact. The Group have assessed that there is an immaterial impact on its business. The impact of COVID-19 will be continually assessed. The directors of the cell are satisfied that the Group has sufficient resources to continue in business for the foreseeable future and meet its liabilities as they fall due which is the earlier of the next 12 months or when the scheme arrangement becomes effective. Furthermore, the directors are not aware of any material uncertainties that may cast significant doubt on the Group’s ability to continue as a going concern. Pursuant to the terms of the Investment Management Agreement (the “Investment Management Agreement”) between the Cell and CTCM, CTCM will meet the ongoing general expenses and any other expenses of the Cell as required. The directors have considered the ability of CTCM to meet its obligations as manager, which include meeting the operating expenses of the Cell in return for the upfront management fee paid. This consideration has taken into account the letter of support from CTC to CTCM and as such, the ability of CTC to meet its obligations under this letter of support. Dividends The directors do not recommend the payment of a dividend for the period (period ended 30 September 2019: £nil). Directors The membership of the Board of directors of the Cell is set out on page 1. Directors' Interest No directors of the Cell have any interest in the Cell. Secretary The secretary of the Cell who held office during the period, and subsequently, was JTC (Jersey) Limited. JTC (Jersey) Limited Secretary



8

Statement of directors’ responsibilities The directors are responsible for preparing the report and financial statements in accordance with

applicable law and regulations.

Jersey company law requires the directors to prepare financial statements for each financial period in

accordance with any generally accepted accounting principles. The financial statements of Castle

Trust Growth Housa PC (the “Cell”) are required by law to give a true and fair view of the state of

affairs of the Cell at the period end and of the profit or loss of the Cell for the period then ended. In

preparing these financial statements, the directors should:

select suitable accounting policies and then apply them consistently;

make judgements and estimates that are reasonable and appropriate;

specify which generally accepted accounting principles have been adopted in their

preparation; and

prepare the financial statements on the going concern basis, unless it is inappropriate to

presume that the Cell will continue in business.

The directors are responsible for keeping accounting records which are sufficient to show and explain

its transactions and are such as to disclose with reasonable accuracy at any time the financial position

of the Cell and enable them to ensure that the financial statements prepared by the Cell comply with

the requirements of the Companies (Jersey) Law 1991. They are also responsible for safeguarding

the assets of the Cell and hence for taking reasonable steps for the prevention and detection of fraud

and other irregularities.

The directors are responsible for the maintenance and integrity of the corporate and financial

information included on the Castle Trust. Legislation in Jersey governing the preparation and

dissemination of financial statements may differ from legislation in other jurisdictions.

The directors are also responsible for ensuring that the directors’ report includes a fair review of the

development and performance of the business and the position of the Cell as well as a description of

the principal risks and uncertainties the Cell faces. Such review has been included in the directors’

report on pages 2 to 7.

During the period from 1 October 2019 to 31 March 2020 the following persons acted as directors of

the Cell:

Mark Grenyer

Kenneth Rae

Martin Gordon Cudlipp (appointed 6 January 2020)



9

Statement of directors’ responsibilities (continued)

Each current director, named above, confirms that, to the best of each person’s knowledge and belief:

As required by EU Directives:

the financial statements, prepared in accordance with IFRS as adopted by the European

Union, give a true and fair view of the assets, liabilities and financial position of the Cell and

the profit of the Cell; and

the Directors’ Report contained in the Annual Report includes a fair review of the

development and performance of the Cell’s business and the position of the Cell, together

with a description of the principal risks and uncertainties that they face.

____________________________ _________________________

Director Director

May 2020 May 2020

29 29

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MGC sig



10

Condensed statement of comprehensive income For the period from 1 October 2019 to 31 March 2020

Unaudited 31 March 2020


Notes £ £

Expenses

Marketing fee 11 - -

Investment management fee 11 (11,954) (16,278)

Total operating expenses (11,954) (16,278)

Net loss on derivative financial assets at fair value through profit or loss 4, 9.3 (156,978) (197,754) Net gain on financial liabilities at fair value through profit or loss 9.3 156,978 197,754

Total net gain on derivative financial assets and financial liabilities at fair value through profit or loss

- -

Loss for the period before tax (11,954) (16,278)

Taxation - -

Loss and total comprehensive expense for the period

(11,954) (16,278)

All of the results above are from continuing operations.

The accompanying notes on pages 13 to 48 form an integral part of these financial statements.



11

Condensed statement of financial position As at 31 March 2020

Unaudited Audited

31 March 2020 30 September

2019

Notes £ £

Assets

Non current assets

Derivative financial assets at fair value through profit or loss

4, 9 1,001,763 2,159,154

Current assets

Derivative financial assets at fair value through profit or loss

4, 9 872,829 1,046,206

Receivables 5 9,943 21,897

Total current assets 882,772 1,068,103

Total assets 1,884,535 3,227,257

Equity

Stated capital 6 2 2

Retained earnings 9,941 21,895

Total equity 9,943 21,897

Liabilities

Non current liabilities

Financial liabilities at fair value through profit or loss 9 1,001,763 2,159,154

Current liabilities

Financial liabilities at fair value through profit or loss 9 872,829 1,046,206

1,874,592 3,205,360

Total liabilities 1,874,592 3,205,360

Total equity and liabilities 1,884,535 3,227,257

The financial statements on pages 11 to 48 were approved and authorised for issue by the directors

on May 2020 and signed on behalf of the Board by:

Director Director


29

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12

Condensed statement of change in net assets attributable to Participating Preference and Founder Shareholders For the period from 1 October 2019 to 31 March 2020 (Unaudited)

Founder shares

Retained earnings

Total equity

£ £ £

Balance as at 1 October 2019

2

21,895 21,897

Total comprehensive expense for the period

-

(11,954) (11,954)

Balance as at 31 March 2020

2

9,941 9,943

For the period from 1 October 2018 to 31 March 2019 (Unaudited)

Founder

shares

Retained earnings

Total equity

£ £ £

Balance as at 1 October 2018

2

45,681 45,683

Total comprehensive expense for the period

-

(16,278) (16,278)

Balance as at 31 March 2019

2

29,403 29,405




Notes to the financial statements

For the period from 1 October 2019 to 31 March 2020

13

1. General information 1.1 Incorporation and structure

Castle Trust Growth Housa PC (the “Cell”), is a cell of Castle Trust PCC (the “PCC”). The PCC is a public protected cell with limited liability incorporated in Jersey, Channel Islands, on 27 July 2011 under the Companies (Jersey) Law 1991. The PCC has no power to meet any liability attributable to a particular cell from the non-cellular assets of the PCC or to meet any liability, whether attributable to a particular cell or not, from the cellular assets of another cell. However, the PCC is a single legal entity which may operate or have assets held on its behalf or be subject to claims in other jurisdictions which may not necessarily recognise such segregation. There can be no guarantee that the courts of any jurisdiction outside of Jersey will respect the limitations on liability associated with protected cell companies. The Cell was created on 5 September 2012 as a public protected cell of the PCC. Regulatory status under the Collective Investment Funds (Jersey) Law 1988 was granted by the Jersey Financial Services Commission on 1 October 2014.

The Participating Redeemable Preference Shares ("Participating Preference Shares") of the Cell are listed on The International Stock Exchange (“TISE”) (formerly known as the Channel Islands Stock Exchange (“CISE”).The Participating Preference Shares are issued to UK investors. The Cell is an investment product which is designed to grant the investor exposure to the potential growth or fall of the Halifax House Price Index (the "HPI") over the life of the product. It will provide a return such that the amount invested will be adjusted by the returns providing an enhanced exposure to the upside in the HPI and a reduced exposure to the downside. The precise terms of the return payable to Investors will depend on the duration of the product. The Participating Preference Shares of the Cell are divided into individual classes. Three classes were offered each month up to and including January 2014: 3 year term shares (“Growth 3 year share class”); 5 year term shares (“Growth 5 year share class”); and 10 year term shares (“Growth 10 year share class”). In January 2014 the decision was taken by the directors to stop the issue of the Growth 3 year share class due to subscription by investors being lower than hoped. From February 2014, the Growth 3 year share class ceased to be issued and a new Protected 5 year share class (“Protected 5 year share class”) was issued in its place. The terms of the Protected 5 year share class are substantially the same as those for the Growth 5 year share class but with no downside participation on the initial capital and a lower potential upside return. Protected refers to the absence of downside participation only as there is no external guarantee or collateral support. No further issues of the Growth 3 year share class, Growth 5 year share class and Protected 5 year share class have been offered since July 2014. Due to legislation changes in the United Kingdom passed in May 2015, the Cell’s products have to be offered to the public on a European Union recognised Stock Exchange. Consequently, on 2 February 2015, eight new classes were listed on the MSE and were offered each month:



UK Growth 5 year term shares (“UK Growth 5 year share class”); Greater London Growth 5 year term shares (“Greater London Growth 5 year share class”);

UK Foundation 5 year term shares (“UK Foundation 5 year share class”);

Greater London Foundation 5 year term shares (“Greater London Foundation 5 year share class”);

UK Foundation 10 year term shares (“UK Foundation 10 year share class”); and

Greater London Foundation 10 year term shares (“Greater London Foundation 10 year share class”).





(continued)

14

1. General information (continued)

1.1 Incorporation and structure (continued)

On 1 November 2015, eight new classes were listed on the MSE and were offered each month:

UK Growth 2 year term shares (“UK Growth 2 year share class”),

Greater London Growth 2 year term shares (“Greater London Growth 2 year share class”),

UK Growth 5 year term shares (“UK Growth 5 year share class”),

Greater London Growth 5 year term shares (“Greater London Growth 5 year share class”),

UK Foundation 5 year term shares (“UK Foundation 5 year share class”),

Greater London Foundation 5 year term shares (“ Greater London Foundation 5 year share class”),

UK Foundation 10 year term shares (“UK Foundation 10 year share class”),

Greater London Foundation 10 year term shares (“Greater London 10 year share class”). The terms of the UK Foundation 5 year share class; Greater London Foundation 5 year share class; UK Foundation 10 year share class; and Greater London Foundation 10 year share class are substantially the same as those for the Protected 5 year share class whilst the terms of the UK Growth 2 year share class; Greater London Growth 2 year share class; UK Growth 5 year share class; and Greater London Growth 5 year share class are substantially the same as those for the Growth 5 year share class.

The address of the Cell's registered office is 28 Esplanade, St Helier, Jersey JE2 3QA.

1.2 Activities and results

The statement of comprehensive income for the period is set out on page 10 and reflects a loss and total comprehensive expense for the period of £11,954 (period ended 31 March 2019: loss and total comprehensive expense: £16,278). This comprises a total net gain on financial assets and liabilities of £nil (2019: £nil) against operating expenses of £11,954 (period ended 31 March 2019: £16,278). Operating expenses represent those marketing and investment management fees which arise upon the issuance of Participating Preference Shares as more fully explained in note 11. Participating Preference Shares issued in the October 2012 to July 2014 listings had a 14 day cooling off period whilst Participating Preference Shares issued in the February 2015 to September 2015 listings had a cooling off period which expires on the 24

th day of the following month (collectively the “cooling off period”).

Participating Preference Shares issued on 1 November had a 14 day cooling off period. Investment management fees relating to those shares issued which remain within the “cooling off period” are refundable and as such are recognised as a debtor in the statement of financial position. For those Participating Preference Shares which are past their cooling off period, their associated investment management fees shall be amortised over the relevant maturity of the particular share class. This treatment compares with the immediate recognition of a revaluation amounting to 4% of the nominal value of shares issued against the carrying value of the derivative financial asset. This differing treatment arising upon the issuance of Participating Preference Shares towards the immediate revaluation of derivative financial assets compared with the amortisation of expenses associated with the issuance of Participating Preference Shares gives rise to a net operating profit which will over the life of each share class eventually net to nil when all timing differences are reversed. Where all issued Participating Preference Shares are beyond the cooling off period, the valuation of the derivative financial asset and financial liabilities at fair value through profit or loss will be equal and opposite.





(continued)

15

2. Accounting policies

2.1 Basis of presentation

The unaudited condensed interim financial statements (the “interim financial statements”) for the period 1 October 2019 to 31 March 2020 (the “Financial Statements”) have been prepared in accordance with International Accounting Standard 34 ‘Interim Financial Reporting’ (“IAS 34”). The accounting policies adopted are consistent with those of the previous financial year and corresponding interim period.

2.2 Statement of cash flows

The Cell does not have a bank account and therefore no cash or cash equivalents balances are recorded. As a result the Cell is not required to prepare a statement of cash flows.

2.3 Separate financial statements

Separate financial statements are prepared for the PCC and the Cell.

2.4 Changes in accounting policies and disclosures

2.4.1 New standards, interpretations and amendments to the existing standards and interpretations

All new standards, amendments and interpretations which are effective for the financial period beginning 1 October 2019 are not material to the Cell.

2.4.2 Standards and amendments to existing standards that are relevant to the Company, not yet effective and have not been early adopted by the Company:

At the date of authorisation of these financial statements, the following Standards and Interpretations relevant to the Cell which have not been applied in these financial statements were in issue but not yet effective:

Amendments to IAS 1 ‘Presentation of Financial Statements’ and IAS 8 ‘Accounting Policies, Changes In Accounting Estimates and Errors’ on the definition of material effective for annual periods beginning on or after 1 January 2020. These amendments i) use a consistent definition of materiality throughout IFRSs and the Conceptual Framework for Financial Reporting; ii) clarify the explanation of the definition of material; and iii) incorporate some of the guidance in IAS 1 about immateriality information.

The Directors have considered the above and are of the opinion that the above Standards and interpretations are not expected to have a material impact on the financial statements. These items will be applied in the first financial period for which they are required.





(continued)

16

2. Accounting policies (continued)

2.5 Going concern With the recent and rapid development of the coronavirus outbreak, many countries have required entities to limit or suspend business operations and implemented travel restrictions and quarantine measures. These measures and policies have significantly disrupted (or are expected to disrupt) the activities of many businesses. The Group have assessed the potential impacts of COVID-19 in its cash flow forecasts, assuming stressed scenarios, and determined the Cell and the wider Group would have sufficient resources and liquidity to meet future obligations relating to administrative expenses for the twelve months up to March 2021 and remain with a cash surplus during this period. The above has been considered in determining the Cell’s ability to continue as a going concern for the twelve-month period from the date of signing these financial statements. As the outbreak continues to progress and evolve, it is challenging at this juncture to predict the full extent and duration of its business and economic impact. The Group have assessed that there is an immaterial impact on its business. The impact of COVID-19 will be continually assessed. The Group’s directors have assessed its ability to continue as a going concern and are satisfied that it has the resources to continue in business for the foreseeable future. Furthermore, the directors are not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to continue as a going concern. Consequently, the financial statements of the Cell have been prepared on a going concern basis. Please refer to the director’s report for further details of the assessment.

2.6 Financial instruments Financial instruments carried on the statement of financial position include financial assets at fair value through profit or loss and financial liabilities at fair value through profit or loss. The accounting policies adopted for these financial instruments are disclosed in the individual policy statements associated with each item below. (i) Classification Financial assets at fair value through profit or loss As a derivative, the Halifax House Price Index ("HPI") Derivative Swap is a financial asset included within financial assets held at fair value through profit or loss (note 4). Financial liabilities at fair value through profit or loss The Cell classifies all of its liabilities, including its Participating Preference Shares, upon recognition, as financial liabilities at fair value through profit or loss to minimise an accounting mismatch which would otherwise occur. (ii) Recognition and derecognition The Cell recognises financial assets and financial liabilities when, and only when, the Cell becomes a party to the contractual provisions of the instrument.





(continued)

17

2. Accounting policies (continued) 2.6 Financial instruments (continued) (ii) Recognition and derecognition (continued) The Cell derecognises a financial asset where:

the rights to receive cash flows from the assets have expired;

the Cell has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and

either (i) the Cell has transferred substantially all the risks and rewards of the assets, or (ii) the Cell has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Cell has met the last two conditions above but has not transferred control of the asset, the asset is recognised to the extent of the Cell’s involvement in the asset, which is measured as the extent to which the Cell is exposed to changes in the value of the transferred asset.

The Cell derecognises a financial liability when the obligation under the liability is discharged. (iii) Measurement

Initial measurement Financial assets and liabilities at fair value through profit or loss are initially recognised at the fair value at the date of recognition. All transaction costs for such instruments are recognised directly in the statement of comprehensive income as incurred. Other receivables and payables are initially measured at fair value plus any directly attributable incremental costs of acquisition or issue. Subsequent measurement Subsequent to initial measurement, the Cell re-measures financial instruments at fair value. Changes in fair value are recognised in the statement of comprehensive income.

Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised.

(iv) Fair value estimation The fair values of derivative financial assets and financial liabilities held by the Cell are derived by reference to the HPI linked return, which is subject to a number of macroeconomic factors.





(continued)

18


2.6 Financial instruments (continued) (v) Net gains or losses on financial assets at fair value through profit or loss

Net gains or losses on financial assets at fair value through profit or loss include changes in fair value and the realised gains or losses from disposal of financial assets at fair value through profit or loss. Net gains or losses on financial liabilities designated at fair value through profit or loss include changes in fair value and the realised gains or losses from redemption or maturity of financial liabilities at fair value through profit or loss.

2.7 Foreign currency (i) Functional and presentation currency The Cell’s functional and presentation currency is sterling (“£”), which is the currency in which the Cell’s performance is evaluated and is also the primary economic environment in which the Cell operates. The Participating Preference Shares are issued in £ and any returns to the investors in a liquidation would be in £.

(ii) Foreign currency translations Transactions denominated in currencies other than £ are translated into £ at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated into £ at exchange rates in effect at the reporting date. Resulting translation differences are charged or credited to the statement of comprehensive income as foreign currency gains or losses. Foreign exchange gains and losses relating to financial assets and liabilities carried at fair value through profit or loss are presented in the statement of comprehensive income within ‘net gain/loss on financial assets and financial liabilities at fair value through profit or loss’.

2.8 Prepayments The Cell classifies other debtors, comprising prepaid investment management and marketing fees upon initial recognition, as prepayments. Payments are expensed to the Statement of Comprehensive Income over a period for which the Cell is receiving the benefit of these expenditures. The investment management fees (being 3% of fully paid up Participating Preference Shares) are subsequently amortised over the life of the investment product until redemption and the marketing fees (being 1% of fully paid up Participating Preference Shares) are fully expensed upon the completion of the cooling off period.

2.9 Expenses Operating expenses including investment management fees and marketing fees are accounted for on an accruals basis. Investment management fees are calculated as 3% of the nominal amount of the shares issued, amortised over the term of the shares held as active. Other expenses including ongoing expenses such as directors’ and audit fees are described in note 11 and are paid by CTCM.





(continued)

19


2.10 Founder Shares

The Cell issues Founder Shares which are non-redeemable ordinary shares and as such are classified as equity.

2.11 Participating Preference Shares The Cell issues Participating Preference Shares, which are redeemable at maturity. Where an investor has made a request to CTC to redeem their Participating Preference Shares prior to the maturity date, CTC can at its discretion purchase those Participating Preference Shares at that time at a price to be determined by CTC. Any such shares purchased by CTC will be cancelled by the Cell and the corresponding HPI Swap reduced accordingly, resulting in no overall net gain or loss to the Cell. Any gain or loss will therefore be recognised by CTC. Participating Preference Shares are classified as financial liabilities at fair value through profit or loss.

2.12 Taxation

The tax charge for the period comprises current and deferred tax. Tax is recognised in the statement of comprehensive income, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case the tax is recognised in other comprehensive income or directly in equity. Current tax is the expected tax payable on the taxable income for the period, calculated using tax rates enacted or substantively enacted by the reporting date.

3. Significant accounting judgements, estimates and assumptions

The preparation of the financial statements in conformity with IFRS requires the directors to make estimates, assumptions and judgements that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The key assumptions and judgements concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. The Cell based its assumptions and estimates on parameters available when the financial statements were prepared. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Cell. Such changes are reflected in the assumptions when they occur. Fair value of financial instruments Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using a pricing model which incorporates key inputs such as the volatility of the movement in HPI and discount rates which is subject to estimation uncertainty as described more fully in note 9.





(continued)

20

3. Significant accounting judgements, estimates and assumptions (continued)

IFRS 13 requires disclosures relating to the fair value measurements using a three-level fair value hierarchy that reflects the significance of the inputs used in measuring fair values. The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustments based on unobservable inputs, then that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability. At the period end, the derivative financial assets at fair value through profit or loss have been classified at Level 3 because judgement is applied, fair value has been derived indirectly using unobservable market data (as at 30 September 2019: Level 3). See note 9 for fair value hierarchy.

4. Derivative financial assets at fair value through profit or loss

Unaudited

31 March 2020

Audited 30 September

2019

£

£

HPI derivative swaps

Book cost 1,350,962 2,351,025

Fair value adjustment 523,630 854,335

Fair value 1,874,592 3,205,360

The derivative financial assets at fair value through profit or loss comprise derivative swaps receivable from CTC which are shown at fair value using the valuation techniques explained in note 9. By the very nature of these assets there is no denomination of investment in CTC. The sole investment is therefore the derivative asset. There is no equity ownership of CTC. For every derivative asset, there is a corresponding liability for the same value. Total realised gains deriving from financial assets at fair value through profit or loss, which are not listed, from inception to 31 March 2020 amounted to £2,928,566 (31 March 2019: £1,549,957) of which £487,682 (31 March 2019: £804,840) relates to the current period. Total unrealised gains from inception to 31 March 2020 amounted to £523,630 (31 March 2019: £1,536,477) which includes an unrealised loss of £330,704 (31 March 2019: £607,085) that has been recognised in the current period.





(continued)

21

4. Derivative financial assets at fair value through profit or loss (continued)

The derivative financial assets at fair value through profit or loss is reflected on the statement of financial position as follows:

Unaudited

31 March 2020


2019 £ £

Non current assets 1,001,763 2,159,154 Current assets 872,829 1,046,206

1,874,592 3,205,360

There is a master derivative agreement with terms such that the derivative matches each series of the participating preference shares.

5. Receivables

Unaudited

31 March 2020


2019

£

£

Prepayments 9,941 21,895

Due on ordinary founder shares 2 2

9,943 21,897

6. Participating and Founder Shares

The Cell is authorised to issue an unlimited number of Participating Preference Shares of no par value and 2 Founder Shares of £1 par value.

The Participating Preference Shareholder will not receive dividends, shall have no voting rights in respect of general meetings of the Cell, but shall have voting rights in respect of separate meetings of the holders of the shares of the relevant Share Class.

Participating Preference Shares will be redeemed on maturity, or before maturity date at the request of the holder subject to the discretion of CTC.

The Founder Shares will not receive dividends whilst Participating Preference Shares are in issue. At any time that there are no Participating Preference Shares in issue, dividends may be declared and paid on the Founder Shares in accordance with the provisions of Cell Articles. The Founder Shares are non-redeemable.





(continued)

22

6. Participating and Founder Shares (continued) The Founder Shares shall have voting rights, and the holders of Founder Shares shall be entitled to receive notice of, and to attend and speak at, general meetings of the Cell. The Founder Shares are held by The Housing Foundation Charitable Trust. The following table shows the number and nominal value of Participating Preference Shares and Founder Shares in issue at the statement of financial position date:


Audited 30 September 2019

Number £ Number £

Authorised

Founder Shares of £1 par value 2 2 2 2

Issued and fully paid – Founder Shares 2 2 2 2

Issued and fully paid – Participating

Preference Shares

31 March 2020

Number £

30 September 2019

Number £

10 Year Growth October 2012 2,425 2,425 13,025 13,025

10 Year Growth November 2012 20,075 20,075 20,075 20,075

10 Year Growth December 2012 15,000 15,000 15,000 15,000

10 Year Growth January 2013 20,000 20,000 20,000 20,000

10 Year Growth February 2013 82,250 82,250 82,250 82,250

10 Year Growth March 2013 970 970 6,610 6,610

10 Year Growth April 2013 73,259 73,259 81,415 81,415

10 Year Growth May 2013 19,270 19,270 44,310 44,310

10 Year Growth June 2013 27,800 27,800 60,810 60,810

10 Year Growth July 2013 3,500 3,500 3,500 3,500

10 Year Growth September 2013 17,471 17,471 17,471 17,471

10 Year Growth October 2013 15,000 15,000 20,664 20,664

10 Year Growth November 2013 - - 10,000 10,000

10 Year Growth December 2013 15,000 15,000 35,000 35,000

10 Year Growth January 2014 58,000 58,000 58,000 58,000

10 Year Growth February 2014 13,000 13,000 13,000 13,000

10 Year Growth March 2014 27,280 27,280 145,560 145,560

10 Year Growth April 2014 128,340 128,340 137,340 137,340

10 Year Growth May 2014 46,807 46,807 106,807 106,807

10 Year Growth June 2014 6,800 6,800 81,800 81,800

10 Year Growth July 2014 23,834 23,834 23,834 23,834

5 Year Greater London Growth February 2015 - - 5,000 5,000

5 Year Greater London Foundation February

2015 - - 2,500 2,500

5 Year UK Growth March 2015 14,507 14,507 24,507 24,507

5 Year Greater London Growth March 2015 10,000 10,000 44,500 44,500

5 Year UK Foundation March 2015 23,000 23,000 33,000 33,000

10 Year UK Foundation March 2015 4,500 4,500 4,500 4,500

10 Year Greater London Foundation March

2015 11,500 11,500 12,500 12,500

5 Year UK Growth April 2015 - - 5,000 5,000

5 Year Greater London Growth April 2015 15,000 15,000 37,740 37,740

5 Year UK Foundation April 2015 25,000 25,000 25,000 25,000

5 Year Greater London Foundation April 2015 4,000 4,000 4,000 4,000

5 Year UK Growth May 2015 10,000 10,000 20,000 20,000





(continued)

23

6. Participating and Founder Shares (continued)

Issued and fully paid – Participating

Preference Shares

31 March 2020 Number £

30 September 2019 Number £

5 Year Greater London Growth May 2015 32,500 32,500 81,500 81,500

5 Year UK Foundation May 2015 10,000 10,000 11,000 11,000

5 Year Greater London Foundation May 2015 24,500 24,500 83,000 83,000

10 Year UK Foundation May 2015 8,000 8,000 16,000 16,000

10 Year Greater London Foundation May 2015 12,811 12,811 12,811 12,811

5 Year UK Growth June 2015 63,378 63,378 65,378 65,378

5 Year Greater London Growth June 2015 34,371 34,371 81,592 81,592

5 Year UK Foundation June 2015 30,577 30,577 30,577 30,577

5 Year Greater London Foundation June 2015 39,841 39,841 64,841 64,841

10 Year Greater London Foundation June

2015 20,000 20,000 20,000 20,000

5 Year UK Growth July 2015 30,000 30,000 47,490 47,490

5 Year Greater London Growth July 2015 - - 17,250 17,250

5 Year UK Foundation July 2015 5,000 5,000 40,000 40,000

5 Year Greater London Foundation July 2015 11,691 11,691 11,691 11,691

10 Year UK Foundation July 2015 3,000 3,000 3,000 3,000

5 Year UK Growth August 2015 8,943 8,943 9,943 9,943

5 Year Greater London Growth August 2015 29,295 29,295 35,535 35,535

5 Year UK Foundation August 2015 4,000 4,000 9,000 9,000

5 Year Greater London Foundation August

2015 13,481

13,481

13,481

13,481


2015 - -

15,240

15,240

5 Year UK Growth September 2015 25,000 25,000 108,091 108,091

5 Year Greater London Growth September

2015 21,000

21,000

45,091

45,091

5 Year UK Foundation September 2015 5,000 5,000 75,000 75,000

5 Year Greater London Foundation

September 2015 5,000

5,000

20,000

20,000



September 2015 10,102

10,102

20,102

20,102

5 year UK Growth Housa October 2015 116,815 116,815 157,295 157,295

5 year Greater London Growth Housa October

2015 20,240

20,240

30,240

30,240

5 year UK Foundation October 2015 16,000 16,000 26,000 26,000

5 year UK Foundation Housa October 2015 38,863 38,863 38,863 38,863

10 year UK Foundation Housa October 2015 8,240 8,240 8,240 8,240

10 year Greater London Foundation Housa

October 2015 21,000 21,000

21,000 21,000

Total at 31 March 2020 1,407,236 1,407,236 2,448,969 2,448,969





(continued)

24


Share Class

Number of Participating

Preference Shares Issued

Number of

Participating Preference

Shares Forfeited

Number of


Shares Redeemed


Preference Shares

Remaining in Issue

3 Year Growth October 2012 50,000,000 50,000,000 - -

5 Year Growth October 2012 50,000,000 49,995,000 5,000 -

10 Year Growth October 2012 50,000,000 49,986,975 10,600 2,425

3 Year Growth November 2012 50,000,000 50,000,000 - -


10 Year Growth November 2012 50,000,000 49,979,925 - 20,075

3 Year Growth December 2012 50,000,000 49,500,000 500,000 -

5 Year Growth December 2012 50,000,000 50,000,000 - -

10 Year Growth December 2012 50,000,000 49,985,000 - 15,000

3 Year Growth January 2013 50,000,000 50,000,000 - -


10 Year Growth January 2013 50,000,000 49,980,000 - 20,000

3 Year Growth February 2013 50,000,000 50,000,000 - -

5 Year Growth February 2013 50,000,000 49,894,780 105,220 -

10 Year Growth February 2013 50,000,000 49,917,750 - 82,250

3 Year Growth March 2013 50,000,000 50,000,000 - -

5 Year Growth March 2013 50,000,000 49,914,100 85,900 -

10 Year Growth March 2013 50,000,000 49,993,390 5,640 970

3 Year Growth April 2013 50,000,000 50,000,000 - -

5 Year Growth April 2013 50,000,000 49,895,075 104,925 -

10 Year Growth April 2013 50,000,000 49,918,585 8,156 73,259

3 Year Growth May 2013 50,000,000 49,996,000 4,000 -

5 Year Growth May 2013 50,000,000 49,918,841 81,159 -

10 Year Growth May 2013 50,000,000 49,955,690 25,040 19,270

3 Year Growth June 2013 50,000,000 50,000,000 - -

5 Year Growth June 2013 50,000,000 49,925,232 74,768 -

10 Year Growth June 2013 50,000,000 49,939,190 33,010 27,800

3 Year Growth July 2013 50,000,000 49,969,108 30,892 -

5 Year Growth July 2013 50,000,000 49,918,880 81,120 -

10 Year Growth July 2013 50,000,000 49,996,500 - 3,500

3 Year Growth August 2013 50,000,000 49,850,480 149,520 -


10 Year Growth August 2013 50,000,000 50,000,000 - -

3 Year Growth September 2013 50,000,000 49,922,223 77,777 -


10 Year Growth September 2013 50,000,000 49,982,529 - 17,471



10 Year Growth October 2013 50,000,000 49,979,336 5,664 15,000

3 Year Growth November 2013 50,000,000 49,951,000 49,000 -





10 Year Growth December 2013 50,000,000 49,965,000 20,000 15,000

3 Year Growth January 2014 50,000,000 49,808,460 191,540 -







(continued)

25


Share Class



Number of


Shares Forfeited

Number of


Shares Redeemed


Preference Shares

Remaining in Issue

5 Year Protected February 2014 50,000,000 49,811,960 188,040 -



5 Year Protected March 2014 50,000,000 49,653,802 346,198 -


10 Year Growth March 2014 50,000,000 49,854,440 118,280 27,280

5 Year Protected April 2014 50,000,000 49,333,851 666,149 -


10 Year Growth April 2014 50,000,000 49,862,660 9,000 128,340

5 Year Protected May 2014 50,000,000 49,742,537 257,463 -

5 Year Growth May 2014 50,000,000 49,766,042 233,958 -

10 Year Growth May 2014 50,000,000 49,893,193 60,000 46,807

5 Year Protected June 2014 50,000,000 49,617,053 382,947 -

5 Year Growth June 2014 50,000,000 49,828,900 171,100 -

10 Year Growth June 2014 50,000,000 49,903,200 90,000 6,800

5 Year Protected July 2014 50,000,000 49,866,218 133,782 -

5 Year Growth July 2014 50,000,000 49,986,068 13,932 -

10 Year Growth July 2014 50,000,000 49,976,166 - 23,834

2 Year UK Growth February 2015 15,000,000 15,000,000 - -

2 Year Greater London Growth February

2015 15,000,000 15,000,000 - -



2015 15,000,000 14,995,000 5,000 -

5 Year UK Foundation February 2015 15,000,000 15,000,000 - -


February 2015 15,000,000 14,997,500 2,500 -



February 2015 15,000,000 15,000,000 - -

2 Year UK Growth March 2015 15,000,000 14,983,000 17,000 -

2 Year Greater London Growth March

2015 15,000,000 14,992,000 8,000 -

5 Year UK Growth March 2015 15,000,000 14,975,493 10,000 14,507


2015 15,000,000 14,955,500 34,500 10,000

5 Year UK Foundation March 2015 15,000,000 14,967,000 10,000 23,000


March 2015 15,000,000 15,000,000 - -

10 Year UK Foundation March 2015 15,000,000 14,995,500 - 4,500


March 2015 15,000,000 14,987,500 1,000 11,500

2 Year UK Growth April 2015 15,000,000 14,995,000 5,000 -

2 Year Greater London Growth April

2015 15,000,000 14,980,500 19,500 -


5 Year Greater London Growth April

2015 15,000,000 14,962,260 22,740 15,000





(continued)

26


Share Class




Preference Shares

Forfeited


Preference Shares

Redeemed

Number of


Shares Remaining in

Issue

5 Year UK Foundation April 2015 15,000,000 14,975,000 - 25,000

5 Year Greater London Foundation April

2015 15,000,000 14,996,000 - 4,000

10 Year UK Foundation April 2015 15,000,000 15,000,000 - -


2015 15,000,000 15,000,000 - -

2 Year UK Growth May 2015 15,000,000 14,985,000 15,000 -

2 Year Greater London Growth May 2015 15,000,000 14,998,000 2,000 -

5 Year UK Growth May 2015 15,000,000 14,980,000 10,000 10,000

5 Year Greater London Growth May 2015 15,000,000 14,918,500 49,000 32,500

5 Year UK Foundation May 2015 15,000,000 14,989,000 1,000 10,000

5 Year Greater London Foundation May

2015 15,000,000 14,917,000

58,500 24,500

10 Year UK Foundation May 2015 15,000,000 14,984,000 8,000 8,000


2015 15,000,000 14,987,189 - 12,811

2 Year UK Growth June 2015 15,000,000 14,966,260 33,740 -

2 Year Greater London Growth June

2015 15,000,000 14,870,970 129,030 -

5 Year UK Growth June 2015

15,000,000 14,934,622

2,000 63,378

5 Year Greater London Growth June

2015 15,000,000 14,918,408 47,221 34,371

5 Year UK Foundation June 2015 15,000,000 14,969,423 - 30,577


2015 15,000,000 14,935,159 25,000 39,841

10 Year UK Foundation June 2015 15,000,000 15,000,000 - -


2015 15,000,000 14,980,000 - 20,000

2 Year UK Growth July 2015 15,000,000 14,983,799 16,201 -

2 Year Greater London Growth July

2015 15,000,000 14,968,652 31,348 -

5 Year UK Growth July 2015 15,000,000 14,952,510 17,490 30,000

5 Year Greater London Growth July 2015 15,000,000 14,982,750 17,250 -

5 Year UK Foundation July 2015 15,000,000 14,960,000 35,000 5,000

5 Year Greater London Foundation July

2015 15,000,000 14,988,309 - 11,691

10 Year UK Foundation July 2015 15,000,000 14,997,000 - 3,000

2 Year UK Growth August 2015 15,000,000 15,000,000 - -

2 Year Greater London Growth August

2015 15,000,000 14,979,751 20,249 -

5 Year UK Growth August 2015 15,000,000 14,990,057 1,000 8,943


2015 15,000,000 14,964,465 6,240 29,295

5 Year UK Foundation August 2015 15,000,000 14,991,000 5,000 4,000


August 2015 15,000,000 14,986,519 - 13,481





(continued)

27


30 September 2019:

Share Class




Preference Shares

Forfeited


Preference Shares

Redeemed

Number of


Shares Remaining in

Issue

10 Year UK Foundation August 2015 15,000,000 15,000,000 - -


2015 15,000,000 14,984,760 15,240 -

2 Year UK Growth September 2015 500,000 482,760 17,240 -

2 Year Greater London Growth

September 2015 500,000 499,000 1,000 -

5 Year UK Growth September 2015 500,000 391,909 83,091 25,000


September 2015 500,000 454,909 24,091 21,000

5 Year UK Foundation September 2015 1,000,000 925,000 70,000 5,000


September 2015 1,000,000 980,000 15,000 5,000



September 2015 500,000 479,898 10,000 10,102

2 year UK Growth Housa October 2015 500,000 459,266 40,734 -

2 year Greater London Growth Housa

October 2015 500,000 491,000 9,000 -

5 year UK Growth Housa October 2015 1,000,000 842,705 40,480 116,815


October 2015 1,000,000 969,760 10,000 20,240

5 year UK Foundation October 2015 500,000 474,000 10,000 16,000

5 year UK Foundation Housa October 2015 500,000 461,137 - 38,863



October 2015 500,000 479,000 - 21,000

Total at 31 March 2020 4,135,000,000 4,126,337,971 7,254,793 1,407,236

Share Class



Number of


Shares Forfeited

Number of


Shares Redeemed


Preference Shares

Remaining in Issue

3 Year Growth October 2012 50,000,000 50,000,000 - -


10 Year Growth October 2012 50,000,000 49,986,975 - 13,025





5 Year Growth December 2012 50,000,000 50,000,000 - -






(continued)

28


Share Class



Number of


Shares Forfeited

Number of


Shares Redeemed


Preference Shares

Remaining in Issue




3 Year Growth February 2013 50,000,000 50,000,000 - -



3 Year Growth March 2013 50,000,000 50,000,000 - -


10 Year Growth March 2013 50,000,000 49,993,390 - 6,610

3 Year Growth April 2013 50,000,000 50,000,000 - -


10 Year Growth April 2013 50,000,000 49,918,585 - 81,415

3 Year Growth May 2013 50,000,000 49,996,000 4,000 -

5 Year Growth May 2013 50,000,000 49,918,841 81,159 -

10 Year Growth May 2013 50,000,000 49,955,690 - 44,310

3 Year Growth June 2013 50,000,000 50,000,000 - -

5 Year Growth June 2013 50,000,000 49,925,232 74,768 -

10 Year Growth June 2013 50,000,000 49,939,190 - 60,810

3 Year Growth July 2013 50,000,000 49,969,108 30,892 -

5 Year Growth July 2013 50,000,000 49,918,880 81,120 -

10 Year Growth July 2013 50,000,000 49,996,500 - 3,500



10 Year Growth August 2013 50,000,000 50,000,000 - -



10 Year Growth September 2013 50,000,000 49,982,529 - 17,471



10 Year Growth October 2013 50,000,000 49,979,336 - 20,664










5 Year Protected February 2014 50,000,000 49,811,960 188,040 -



5 Year Protected March 2014 50,000,000 49,653,802 346,198 -


10 Year Growth March 2014 50,000,000 49,854,440 - 145,560

5 Year Protected April 2014 50,000,000 49,333,851 666,149 -





(continued)

29


Share Class




Preference Shares

Forfeited


Preference Shares

Redeemed

Number of


Shares Remaining in

Issue


10 Year Growth April 2014 50,000,000 49,862,660 - 137,340

5 Year Protected May 2014 50,000,000 49,742,537 257,463 -

5 Year Growth May 2014 50,000,000 49,766,042 233,958 -

10 Year Growth May 2014 50,000,000 49,893,193 - 106,807

5 Year Protected June 2014 50,000,000 49,617,053 382,947 -

5 Year Growth June 2014 50,000,000 49,828,900 171,100 -

10 Year Growth June 2014 50,000,000 49,903,200 15,000 81,800

5 Year Protected July 2014 50,000,000 49,866,218 133,782 -

5 Year Growth July 2014 50,000,000 49,986,068 13,932 -

10 Year Growth July 2014 50,000,000 49,976,166 - 23,834



2015 15,000,000 15,000,000 - -



2015 15,000,000 14,995,000 - 5,000



February 2015 15,000,000 14,997,500 - 2,500



February 2015 15,000,000 15,000,000 - -

2 Year UK Growth March 2015 15,000,000 14,983,000 17,000 -


2015 15,000,000 14,992,000 8,000 -

5 Year UK Growth March 2015 15,000,000 14,975,493 - 24,507


2015 15,000,000 14,955,500 - 44,500


5 Year Greater London Foundation March

2015 15,000,000 15,000,000 - -



March 2015 15,000,000 14,987,500 - 12,500


2 Year Greater London Growth April 2015 15,000,000 14,980,500 19,500 -

5 Year UK Growth April 2015 15,000,000 14,995,000 - 5,000

5 Year Greater London Growth April 2015 15,000,000 14,962,260 - 37,740

5 Year UK Foundation April 2015 15,000,000 14,975,000 - 25,000


2015 15,000,000 14,996,000 - 4,000

10 Year UK Foundation April 2015 15,000,000 15,000,000 - -


2015 15,000,000 15,000,000 - -

2 Year UK Growth May 2015 15,000,000 14,985,000 15,000 -





(continued)

30


Share Class




Preference Shares

Forfeited


Preference Shares

Redeemed

Number of


Shares Remaining in

Issue

2 Year Greater London Growth May 2015 15,000,000 14,998,000 2,000 -

5 Year UK Growth May 2015 15,000,000 14,980,000 - 20,000

5 Year Greater London Growth May 2015 15,000,000 14,918,500 - 81,500

5 Year UK Foundation May 2015 15,000,000 14,989,000 - 11,000


2015 15,000,000 14,917,000 - 83,000

10 Year UK Foundation May 2015 15,000,000 14,984,000 - 16,000


2015 15,000,000 14,987,189 - 12,811

2 Year UK Growth June 2015 15,000,000 14,966,260 33,740 -

2 Year Greater London Growth June 2015 15,000,000 14,870,970 129,030 -

5 Year UK Growth June 2015 15,000,000 14,934,622 - 65,378

5 Year Greater London Growth June 2015 15,000,000 14,918,408 - 81,592

5 Year UK Foundation June 2015 15,000,000 14,969,423 - 30,577


2015 15,000,000 14,935,159 - 64,841

10 Year UK Foundation June 2015 15,000,000 15,000,000 - -


2015 15,000,000 14,980,000 - 20,000

2 Year UK Growth July 2015 15,000,000 14,983,799 16,201 -

2 Year Greater London Growth July 2015 15,000,000 14,968,652 31,348 -

5 Year UK Growth July 2015 15,000,000 14,952,510 - 47,490

5 Year Greater London Growth July 2015 15,000,000 14,982,750 - 17,250


5 Year Greater London Foundation July

2015 15,000,000 14,988,309 - 11,691


2 Year UK Growth August 2015 15,000,000 15,000,000 - -


2015 15,000,000 14,979,751 20,249 -

5 Year UK Growth August 2015 15,000,000 14,990,057 - 9,943


2015 15,000,000 14,964,465 - 35,535

5 Year UK Foundation August 2015 15,000,000 14,991,000 - 9,000


2015 15,000,000 14,986,519 - 13,481

10 Year UK Foundation August 2015 15,000,000 15,000,000 - -


2015 15,000,000 14,984,760 - 15,240

2 Year UK Growth September 2015 500,000 482,760 17,240 -


September 2015 500,000 499,000 1,000 -

5 Year UK Growth September 2015 500,000 391,909 - 108,091


September 2015 500,000 454,909 - 45,091

5 Year UK Foundation September 2015 1,000,000 925,000 - 75,000





(continued)

31


Financial liabilities at fair value through profit or loss The table below analyses the net asset value ("NAV") of each fully paid Participating Preference Share class at the reporting date: 31 March 2020

Total fair value

through profit or

loss

Number of

Participating

Preference

Shares

Fair value through

profit or loss per

Participating

Preference Share

£ £

10 Year Growth October 2012 3,663 2,425 1.5105

10 Year Growth November 2012 30,430 20,075 1.5158

10 Year Growth December 2012 22,559 15,000 1.5039

10 Year Growth January 2013 29,892 20,000 1.4946

10 Year Growth February 2013 123,858 82,250 1.5059

10 Year Growth March 2013 1,448 970 1.4928

10 Year Growth April 2013 108,064 73,259 1.4751

10 Year Growth May 2013 27,926 19,270 1.4492

10 Year Growth June 2013 40,096 27,800 1.4423

Share Class




Preference Shares

Forfeited


Preference Shares

Redeemed

Number of


Shares Remaining in

Issue


September 2015 1,000,000 980,000 - 20,000

10 Year UK Foundation September 2015 500,000 485,000 - 15,000


September 2015 500,000 479,898 - 20,102

2 year UK Growth Housa October 2015 500,000 459,266 40,734 -


October 2015 500,000 491,000 9,000 - 5 year UK Growth Housa October 2015 1,000,000 842,705 - 157,295 5 year Greater London Growth Housa October 2015 1,000,000 969,760 - 30,240 5 year UK Foundation October 2015 500,000 474,000 - 26,000




October 2015 500,000 479,000 - 21,000

Total at 30 September 2019 4,135,000,000 4,126,337,971 6,213,060 2,448,969





(continued)

32

6. Participating and Founder Shares (continued) Financial liabilities at fair value through profit or loss (continued)

Total fair value

through profit or

loss

Number of

Participating

Preference

Shares

Fair value through

profit or loss per

Participating

Preference Share

£ £

10 Year Growth July 2013 4,977 3,500 1.4220

10 Year Growth September 2013 24,831 17,471 1.4213





10 Year Growth March 2014 36,953 27,280 1.3546


10 Year Growth May 2014 63,316 46,807 1.3527

10 Year Growth June 2014 8,845 6,800 1.3007

10 Year Growth July 2014 30,897 23,834 1.2963

5 Year UK Growth March 2015 19,959 14,507 1.3758

5 Year Greater London Growth March 2015 15,452 10,000 1.5452

5 Year UK Foundation March 2015 28,750 23,000 1.2500


10 Year Greater London Foundation March 2015 15,306 11,500 1.3310

5 Year Greater London Growth April 2015 21,657 15,000 1.4438

5 Year UK Foundation April 2015 30,917 25,000 1.2367

5 Year Greater London Foundation April 2015 5,179 4,000 1.2948

5 Year UK Growth May 2015 12,894 10,000 1.2894

5 Year Greater London Growth May 2015 46,671 32,500 1.4360

5 Year UK Foundation May 2015 11,913 10,000 1.1913

5 Year Greater London Foundation May 2015 31,581 24,500 1.2890



5 Year UK Growth June 2015 81,360 63,378 1.2837

5 Year Greater London Growth June 2015 49,099 34,371 1.4285

5 Year UK Foundation June 2015 36,292 30,577 1.1869

5 Year Greater London Foundation June 2015 51,133 39,841 1.2834


5 Year UK Growth July 2015 37,146 30,000 1.2382

5 Year UK Foundation July 2015 5,781 5,000 1.1562

5 Year Greater London Foundation July 2015 14,108 11,691 1.2067


5 Year UK Growth August 2015 11,103 8,943 1.2415

5 Year Greater London Growth August 2015 38,357 29,295 1.3093





(continued)

33


Total fair value

through profit

or loss

Number of

Participating

Preference

Shares

Fair value through

profit or loss per

Participating

Preference Share

£ £

5 Year UK Foundation August 2015 4,632 4,000 1.1580

5 Year Greater London Foundation August 2015 16,221 13,481 1.2032

5 Year UK Growth September 2015 30,470 25,000 1.2188

5 Year Greater London Growth September 2015 27,386 21,000 1.3041

5 Year UK Foundation September 2015 5,713 5,000 1.1426

5 Year Greater London Foundation September

2015 5,997 5,000 1.1994



2015 12,275 10,102 1.2151

5 year UK Growth Housa October 2015 144,443 116,815 1.2365


2015 25,130 20,240 1.2416

5 year UK Foundation Housa October 2015 18,463 16,000 1.1539

5 year Greater London Foundation Housa October

2015 45,021 38,863 1.1585



October 2015 24,748 21,000 1.1785

Total at 31March 2020 1,874,592 1,407,236

30 September 2019:

Total fair value

through profit or

loss

Number of

Participating

Preference

Shares

Fair value through

profit or loss per

Participating

Preference Share

£ £








10 Year Growth May 2013 63,532 44,310 1.4338

10 Year Growth June 2013 86,784 60,810 1.4271

10 Year Growth July 2013 4,925 3,500 1.4071

10 Year Growth September 2013 24,585 17,471 1.4072





(continued)

34


Total fair value

through profit or

loss

Number of

Participating

Preference

Shares

Fair value through

profit or loss per

Participating

Preference Share

£ £








10 Year Growth May 2014 143,146 106,807 1.3402

10 Year Growth June 2014 105,502 81,800 1.2898

10 Year Growth July 2014 30,641 23,834 1.2856

5 Year Greater London Growth February 2015 7,696 5,000 1.5392

5 Year Greater London Foundation February

2015 3,389 2,500 1.3556

5 Year UK Growth March 2015 32,428 24,507 1.3232

5 Year Greater London Growth March 2015 67,998 44,500 1.5280



10 Year Greater London Foundation March 2015 17,024 12,500 1.3619

5 Year UK Growth April 2015 6,529 5,000 1.3058

5 Year Greater London Growth April 2015 54,186 37,740 1.4358

5 Year UK Foundation April 2015 29,971 25,000 1.1988

5 Year Greater London Foundation April 2015 5,142 4,000 1.2855

5 Year UK Growth May 2015 24,945 20,000 1.2473

5 Year Greater London Growth May 2015 116,336 81,500 1.4274





5 Year UK Growth June 2015 81,176 65,378 1.2416

5 Year Greater London Growth June 2015 115,750 81,592 1.4186

5 Year UK Foundation June 2015 35,324 30,577 1.1552



5 Year UK Growth July 2015 57,095 47,490 1.2023

5 Year Greater London Growth July 2015 22,702 17,250 1.3161


5 Year Greater London Foundation July 2015 14,083 11,691 1.2046


5 Year UK Growth August 2015 11,972 9,943 1.2041

5 Year Greater London Growth August 2015 46,534 35,535 1.3095

5 Year UK Foundation August 2015 10,166 9,000 1.1296


2015 16,173 13,481 1.1997





(continued)

35


Total fair value

through profit

or loss

Number of

Participating

Preference

Shares

Fair value through

profit or loss per

Participating

Preference Share

£ £

10 Year Greater London Foundation August 2015 18,903 15,240 1.2404

5 Year UK Growth September 2015 128,016 108,091 1.1843

5 Year Greater London Growth September 2015 58,763 45,091 1.3032



2015 23,902 20,000 1.1951



2015 24,903 20,102 1.2388

5 year UK Growth Housa October 2015 188,441 157,295 1.1980


2015 37,646 30,240 1.2449


5 year Greater London Foundation Housa October

2015 44,944 38,863 1.1565



October 2015 25,207 21,000 1.2003

Total at 30 September 2019 3,205,360 2,448,969

Investment return

The investment return is the amount payable as calculated under the relevant investment product with respect to each Participating Preference Share on the relevant maturity date calculated by CTCM as follows: ((Return Multiple x HPI Percentage Change) + 1) x Investment Amount Where:

The “Return Multiple” is:

(i) if the final HPI Level is greater than the Initial HPI Level:



3 Year Growth 1.25


5 Year Growth 1.50

5 Year Protected /Foundation (UK & Greater London) 1.00

10 Year Growth 1.70

10 Year Foundation 1.50





(continued)

36

6. Participating and Founder Shares (continued) Investment return (continued)

(ii) if the final HPI Level is lower than the Initial HPI Level:



3 Year Growth 0.75


5 Year Growth 0.50

5 Year Protected/Foundation UK Growth & Greater London Growth) Initial capital returned

10 Year Growth 0.30

10 Year Foundation (UK & Greater London) Initial capital returned

7. Taxation Profits arising in the Cell are subject to Jersey income tax at the rate of 0% (year ended 30 September 2019: 0%).

8. Capital management The Cell considers Participating Preference Shares to constitute the capital of the Cell. The Cell had issued 4,135,000,000 Participating Preference Shares in the October 2012 to October 2015 listings (4,135,000,000 Participating Preference Shares in the October 2012 to September 2015 listings) of which 1,407,236 (30 September 2019: 2,448,969) were fully paid up and remained in issue at the statement of financial position date. All of the Participating Preference Shares fully paid up as at 31 March 2020 were held by external investors (year ended 30 September 2019: all). 4,126,337,971 (30 September 2019: 4,126,337,971) unpaid Participating Preference Shares were forfeited and cancelled as at 31 March 2020 whilst 1,041,733 (30 September 2019: 6,213,060) were redeemed as at 31 March 2020. Upon redemption of a particular share class, the proceeds due to be received from CTC under the terms of the HPI Derivative Swap, subsequent to the cooling off period, are defined in such a way as to equal the proceeds payable to the specific class of Participating Preference Shareholders. The Cell’s operating expenses including investment management fees and marketing fees are deducted from the initial value of the Derivative HPI Swap. The Cell’s other expenses, including ongoing expenses such as directors’ and audit fees, are borne by CTCM.





(continued)

37

9. Fair value of derivative financial assets and financial liabilities at fair value through profit or loss

Financial assets at fair value through profit or loss comprise of HPI derivative swaps that are receivable from CTC.

9.1 Fair value modelling: policy and procedures When the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using discounted cash flow models. The fair values of the HPI swaps and financial liabilities are calculated by CTCM as calculation agent using a system called the Quantitative Risk System (“QRS”). This calculates the fair value, using discounted cash flow models. The models incorporate various inputs including the movement in HPI from issuance to the latest published value of HPI as at 31 March 2020, the amount of time elapsed from issuance to 31 March 2020, the expected future movement in HPI, the amount of variation or volatility in this future movement and the product terms, as described in more detail below.

During the cooling off period, the fair value is determined as being the fully paid-up subscriptions. The financial assets at fair value through profit or loss and the financial liabilities at fair value through profit or loss have been classified as Level 3, as the lowest level input identified is the discount rate which is derived from unobservable data. If an active market were to develop on the stock exchange on which the products were traded, then they would be transferred to level 1. It is highly improbable that this would occur.

9.2 Fair value measurement

The QRS model incorporates various inputs as follows:

Movement in HPI: This is the percentage movement in HPI from the Initial Index Level of each share class to the latest published value of HPI as of the end of the period. As at 31 March 2020 this is between 15.99% and 49.28% (30 September 2019: between 15.0% and 48.0%). As at 31 March 2020 the latest published value was 772.08 (30 September 2019: 765.38).

Elapsed term: This is the amount of time that has elapsed from the closing date of each share class to the end of the period. As at 31 March 2020, this value varied between 89 months (30 September 2019: 83 months) for the October 2012 series to 53 months (30 September 2019: 47 months) for the October 2015 series.

Volatility of the movement in HPI: This is the assumed annualised volatility of the future HPI returns and ranged from 11.16% to 11.16% per annum (30 September 2019: 11.33% to 11.33% per annum). This is defined consistently with market practice for financial option valuation approaches.

Product terms: These are terms that are specific to each share class such as profit share, loss share, coupon rate and term. The product terms are defined in the terms and conditions of each Housa. In summary, the profit share was between 100% and 170% (30 September 2019: between 100% and 170%); the loss share was between 0% and 100% (30 September 2019: between 0% and 100%); and the term was 2, 3, 5 or 10 years (30 September 2019: 2, 3, 5 or 10 years).

Discount rates: In the current year the discount rate is a function of the risk free rate, the funding spread and the risk premium. Of these, only the risk premium has been considered as a significant unobservable input, with sensitivity analysis performed over this input in note 10.





(continued)

38

9. Fair value of derivative financial assets and financial liabilities at fair value through profit or loss (continued)

9.2 Fair value measurement (continued)

For the house price derivative component cash flows, this calculation produced discount rates between 8.0% and 37.2% (30 September 2019: between 9.3% and 37.6%) whilst for the fixed income component cash flows, this calculation produced discount rates between 1.9% and 2.2% ((30 September 2019: between 2.3% and 3.4%) per annum for both components of cash flows).

Growth rate: this is the assumed annual rate that the HPI is expected to grow at in the future and was 2.6% per annum (2019: 2.6%). This is defined on a continuously compounded basis.

9.3 Fair value hierarchy The table below analyses the derivative financial assets and the financial liabilities at fair value through profit or loss, by the fair value hierarchy. The three different levels have been defined as follows:

Level 1 – inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date;

Level 2 – inputs are inputs, other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly; and

Level 3 – inputs are unobservable inputs for the asset or liability. The directors have assessed the asset and liability hierarchies for the period 1 October 2019 to 31 March 2020 and determined that the lowest level inputs with a material impact on the fair value are the discount rate, growth rate, volatility of HPI, increase/decrease in HPI and risk premium which is a non-market rate. Consequently, the derivative financial assets at fair value through profit or loss and the financial liabilities through profit or loss have been classed as Level 3 as the fair value has been derived indirectly using unobservable market data. See note 10 for sensitivity analysis on these unobservable inputs.

Unaudited

31 March 2020


2019

Level 3 Level 3

£

£

Derivative financial assets at fair value through profit or loss* 1,874,592

3,205,360

Total assets 1,874,592 3,205,360

Financial liabilities at fair value through profit or loss* (1,874,592) (3,205,360)

Total liabilities (1,874,592) (3,205,360)

*This amount comprises of the non-current £1,001,763 (30 September 2019: £2,159,154) and current £872,829 (30 September 2019: £1,046,206) portions of the derivative financial assets and liabilities at fair value through profit or loss.





(continued)

39

9. Fair value of derivative financial assets and financial liabilities at fair value through profit or loss (continued)

9.3 Fair value hierarchy (continued) Period from 1 October 2019 to 31 March 2020

Derivative financial assets

at fair value through profit

or loss

Financial liabilities at fair

value through profit or loss

£

£

Balance at 1 October 2019 3,205,360 (3,205,360)

Total gains/(losses) recognised in comprehensive income: 156,978 (156,978)

- realised 487,682 (446,014)

- unrealised (330,704) 289,036

Purchases at cost - -

Redemption proceeds (1,487,746) 1,487,746

Balance at 31 March 2020 1,874,592 (1,874,592)

Total gains and losses for the period included in profit or loss for assets held at the end of the reporting period (IFRS 13.93(f))

23,089 (23,089)

Period from 1 October 2018 to 30 September 2019

Derivative financial assets at fair value through

profit or loss

Financial liabilities at fair value

through profit or loss

£

£

Balance at 1 October 2018 8,321,111 (8,321,111)

Total gains/(losses) recognised in comprehensive income: 406,540 (406,540)

- realised 1,695,767 (1,536,330)

- unrealised (1,289,227) 1,129,790

Purchases at cost - -

Redemption proceeds (5,522,291) 5,522,291

Balance at 30 September 2019 3,205,360 (3,205,360)

Total gains and losses for the period included in profit or loss for assets held at the end of the reporting period (IFRS 13.93(f))

186,260 (186,260)





(continued)

40

10. Financial risk management The Cell’s activities expose it to various types of financial risk that are associated with the financial instruments and markets in which it participates. The Cell’s overall risk management objective is to minimise the potential adverse effects of these financial risks on its performance and maximise the correlation of the Cell’s performance to the HPI. The Cell’s Directors monitor and manage the assets of the Cell.

10.1 Market risk

Market risk is the risk that the fair value of future cash flows from financial instruments will fluctuate as a result of changes in market variables such as foreign exchange rates, interest rates and, given the inherent nature of the underlying investment product, the Cell is exposed to movements in the HPI.

10.1.1 Currency risk

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Cell’s functional and operational currency is £ and all contracts are in £, therefore there is little to no currency risk exposure.

10.1.2 Interest rate risk

Interest rate risk is the risk that changes in interest rates will affect future cash flows or fair values of financial instruments. The participating preference shares are issued at a fixed rate. The impact is in respect of the preference share value which is linked to house price values as house price values are impacted by changes in the interest rates.

10.1.3 Price risk

Upon redemption of a particular share class, the proceeds due to be received from CTC under the terms of HPI Derivative Swap, subsequent to the cooling off period, are defined in such a way as to equal the proceeds payable to the specific class of Participating Preference Shareholders.

Price risk is the risk that the fair values of the HPI Derivative Swap and the value of the Participating Preference Shares are not aligned. However, any change in HPI will impact upon the value of the HPI Derivative Swap and hence the redemption value of the Participating Preference Shares. The price risk exposure, subsequent to the cooling off period, is therefore negated by the HPI Derivative Swap which determines that the Cell’s assets and liabilities remain in line. The assumption for house price growth is currently 2.6% which has been based on external forecasts and market consensus of the expected growth in house prices. This is a long term average national growth rate and as such a short term drop in house price growth rates as a result of Brexit will have a lesser impact on this long term average. However, it is expected that uncertainty will be higher in the near term as a result of Brexit, and in addition, there is the risk of further interest rate hikes following the August’s increase. These uncertainties are offset by 1) the shortage of houses for sale and high, 2) currently rising employment (which is supportive for the housing market) and 3) mortgage interest rates at historically low levels. A sudden drop in house prices of up to 10% is considered a reasonably possible impact as a result of Brexit and this is reflected in the note under the sensitivity for movement in HPI.





(continued)

41

10. Financial risk management (continued) 10.1.3 Price risk (continued) As the entity is no longer making new issues, no measures are put in place to manage the price risk within the cooling off period. The analysis below shows the impact on the financial assets and financial liabilities if individually, the HPI were to increase or decrease by 10%, if growth were to increase or decrease by 1%, if the interest rate were to increase or decrease by 1%, if the risk premium were to increase or decrease by 10% and if volatility were to increase or decrease by 2%.The analysis assumes that all other variables remain constant.





(continued)

42

10. Financial risk management (continued) 10.1.3 Price risk (continued)

Sensitivity analysis – 31 March 2020

1% Growth

rate increase

1% Growth

rate decrease

1% Interest

rate increase

1% Interest

rate decrease

10% Risk

Premium increase

10% Risk

Premium decrease

2%

Volatility increase

2%

Volatility decrease

HPI increase

by 10%

HPI decrease

by 10%

£ £

Financial assets Derivative financial assets at fair value through profit or loss 67,136 (15,919) (21,311) 63,959 (93,840) 110,806 38,001 (14,141) 170,188 (118,565)

Total financial assets 67,136 (15,919) (21,311) 63,959 (93,840) 110,806 38,001 (14,141) 170,188 (118,565)

Financial liabilities Liabilities at fair value through profit or loss (67,136) 15,919 21,311 (63,959) 93,840 (110,806) (38,001) 14,141 (170,188) 118,565

Total financial liabilities (67,136) 15,919 21,311 (63,959) 93,840 (110,806) (38,001) 14,141 (170,188) 118,565

Net effect on total equity - - - - - - - - - -





(continued)

43

10. Financial risk management (continued) 10.1.3 Price risk (continued)

Sensitivity analysis - 30 September 2019

1% Growth

rate increase

1% Growth

rate decrease

1% Interest

rate increase

1% Interest

rate decrease

10% Risk

Premium increase

10% Risk

Premium decrease

2% Volatility increase

2% Volatility decrease

HPI increase

by 10%

HPI decrease

by 10%

£ £

Financial assets Derivative financial assets at fair value through profit or loss 81,863 (78,012) (81,241) 85,293 (220,879) 153,152 25,964 (22,712) 314,078 (306,149)

Total financial assets 81,863 (78,012) (81,241) 85,293 (220,879) 153,152 25,964 (22,712) 314,078 (306,149)

Financial liabilities Liabilities at fair value through profit or loss (81,863) 78,012 81,241 (85,293) 220,879 (153,152) (25,964) 22,712 (314,078) 306,149

Total financial liabilities (81,863) 78,012 81,241 (85,293) 220,879 (153,152) (25,964) 22,712 (314,078) 306,149

Net effect on total equity - - - - - - - - - -





(continued)

44

10. Financial risk management (continued) 10.2 Liquidity risk Liquidity risk is the risk that the Cell will encounter difficulty in meeting obligations associated with financial liabilities. The significant element of liquidity risk for the Cell arises from the redemption of the Participating Preference Shares. Liquidity risk has been transferred to CTC under the terms of the Set Off Agreement, HPI Swap Agreement, Investment Management Agreement and Service Management Agreement. Under these agreements, the Cell is obliged to purchase the Participating Preference Shares from the holder at maturity, subject to the CTC fulfilling its obligation to pay the Cell an amount equal to the Investment Return. Prior to maturity, any sale or purchase is at the discretion of the two parties involved and there is no obligation to purchase on the Cell. The table below indicates the maturity profile of the Cell’s financial assets and financial liabilities at the statement of financial position sheet date. The analysis is based on the remaining period to contractual maturity as at the statement of financial position sheet date. 31 March 2020

Within 1

year

More than 1 year less

than 3 years

More than 3 less than 5 years

More than 5 less than

10 years

Total £ £ £ £ £

Financial assets Derivatives 887,285 256,566 778,611 142,967 2,065,429 Debtors(excluding prepayments) - - - - -

Total financial assets 887,285 256,566 778,611 142,967 2,065,429

Financial liabilities Preference Shares 887,285 256,566 778,611 142,967 2,065,429 Creditors - - - - -

Total financial liabilities 887,285 256,566 778,611 142,967 2,065,429

Net effect - - - - -





(continued)

45

10. Financial risk management (continued) 10.2 Liquidity risk (continued) 30 September 2019

Within 1

year

More than 1 year less

than 3 years

More than 3 less than 5 years

More than 5 less

than 10 years

Total £ £ £ £ £

Financial assets Derivatives 1,130,761 650,833 1,971,398 275,538 4,028,530 Debtors(excluding prepayments) - - - - -

Total financial assets 1,130,761 650,833 1,971,398 275,538 4,028,530

Financial liabilities Preference Shares 1,130,761 650,833 1,971,398 275,538 4,028,530 Creditors - - - - -

Total financial liabilities 1,130,761 650,833 1,971,398 275,538 4,028,530

Net effect - - - - -

10.3 Credit risk Credit risk is the risk that the counterparty to a financial asset will fail to honour an obligation under the original terms of a contract, resulting in a loss to the Cell. The Cell’s credit risk arises from the HPI Derivative Swap whereby the Cell has a receivable from CTC for 100% of the value of the Participating Preference Shares issued. The credit risk associated with CTC is considered to be low as they are a financial institution regulated by the FCA with a CET1 ratio of 19.6% which is well above the 8% minimum. If CTC, an unrated company, was unable to honour its obligation under the HPI derivative, the Cell would be unable to pay back the Participating Preference Shares when they mature nor pay expenses as and when they became payable. The adoption of IFRS 9 has resulted in the Cell revising its impairment methodology in line with the expected credit loss model (“ECL model”) as prescribed by IFRS 9. Under the ECL model, financial assets, including those subject to credit risk, are assessed for impairment based on potential lifetime credit losses, if there has been a significant increase in credit risk since initial recognition, or alternatively on a 12 month expected credit loss if the increase in credit risk since initial recognition is not deemed to be significant. The Cell’s maximum exposure to credit risk is as follows:

31 March 2020

30 September

2019

£ £

Derivative financial assets at fair value through profit or loss 1,874,592 3,205,360

Receivables (excluding prepayments) 2 2





(continued)

46

10. Financial risk management (continued) 10.4 Regulatory risk There are regulatory risks involved in making a banking licence application such as increased capital requirements and the potential that these could make the business less profitable. In March 2020, the PRA approved the banking licence with restrictions. Following the authorisation with restrictions being granted to Castle Trust, the directors believe the likelihood of the Group achieving full banking licence status to be high.

10.5 Fair values

All financial instruments at fair value through profit or loss are included in the financial statements at their fair value. The carrying amount of other liabilities and prepayments and the receivable is deemed an approximation to fair value. As at 31 March 2020, the accumulated amount of the change in fair value attributable to changes in credit risk was nil (30 September 2019: nil).

11. Related party transactions The following are considered related parties to the Cell:

11.1 Manager and Marketing Agent

CTCM (the “Manager” and "Marketing Agent") is considered a related party by virtue of the contractual arrangements with the Cell. The initial and ongoing general expenses and such other expenses of the Cell were and will continue to be paid by CTCM. The amount paid during the period was £50,567 (period ended 31 March 2019: £91,013).

Under the terms of the Investment Management Agreement, the investment management fee will be 3% of the Participating Preference Shares issued and fully paid up which is refundable during an investor's cooling off period. Due to the continuing obligations of the Directors, the 3% fee is treated as a prepayment and released over the life of the investment product. During the period, £11,954 of investment management fees were expensed in the period (period ended 31 March 2019: £16,278). Under the terms of the Marketing Agreement, the marketing fee will be 1% of Participating Preference Shares issued and fully paid up which is refundable during an investor's cooling off period. During the period, no marketing fees (period ended 31 March 2019: £nil) were paid to the Marketing Agent.

11.2 Registrar, Secretary, Administrator and Listing Sponsor

Kenny Rae is a director of JTC (Jersey) Limited (the “Registrar, Secretary and Administrator”) a wholly owned subsidiary of JTC Group Limited, which is a wholly owned subsidiary of JTC Group Holdings Limited, which is a related party to the Cell by virtue of common directors. Directors’ fees charged by JTC (Jersey) Limited for the period totalled £4,000 (period ended 31 March 2019: £4,000).

Mark Grenyer and Kenny Rae are directors of JTC Trustees Limited and JTC Listing Services Limited, respectively the Shareholder and Listing Sponsor of the Company and the Cell.





(continued)

47

11. Related party transactions (continued) 11.2 Registrar, Secretary, Administrator and Listing Sponsor (continued) JTC (Jersey) Limited charged fees (including the directors’ fees discussed above) totalling £31,428 to the Company and the Cell during the period (period ended 31 March 2019: £28,820) which were met by the Investment Manager as above. JTC (Jersey) Limited is considered a related party by virtue of common directors and its contractual role as the Registrar, Secretary and Administrator of the Company and the Cell.

11.3 CTC

CTC is considered a related party by virtue of being the parent company. The contractual arrangements which exist between CTC and the Cell are in relation to the HPI Derivative Swaps as disclosed in note 4.

12. Changes in liabilities from financing activities The following tables disclose the effects of the amendments to IAS 7 Statement of Cash Flows which requires additional disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flows and non-cash flows. The tables below show the amounts relating to the financial liabilities at fair value through profit or loss and creditors.

Financial liabilities at fair value through profit or loss 31 March

2020 30 September

2019

£ £

Opening balance 3,205,360 8,321,111

Settlement of redemptions (1,487,746) (5,522,291)

Non-cash flows

Net losses on financial liabilities 156,978 406,540

Closing balance 1,874,592 3,205,360

Redemption payable 31 March

2020 30 September

2019

£ £

Opening balance - 69,620

Settlement of redemptions - (70,066)

Non-cash flows

Net losses on financial liabilities - 446

Closing balance - -





(continued)

48

13. Post balance sheet events In April 2018, CTC announced its intention to become a bank. CTC views this as a more suitable model for its business in the longer term as the business continues to grow. Since then, CTC has been working closely with both of its UK regulators, the PRA and the FCA, with a view to obtaining a full banking licence. The proposed transition of CTC to a bank regulated in the United Kingdom therefore involves numerous steps, in particular as regards to the sources of funding provided to CTC by third parties and its wider group. One of those steps is provided by the Scheme where, inter alia, shareholders of the Castle Trust Growth Housa Preference Shares are being asked to approve redeeming their Scheme Shares in return for structured deposits in the Housa accounts. At the Court Meeting held on 21 May 2020, the resolution on the proposed Scheme was duly passed by a majority representing not less than 75 per cent. of the voting rights held by the Scheme Shareholders who were present and voting (and entitled to vote). Subject to receipt of the sanction of The Royal Court of Jersey and the satisfaction or waiver of the other Conditions set out in the Scheme Document, the Scheme is expected to become effective in early June 2020. Subsequent to the reporting date and at the date of signing the financial statements, the following Participating Preference Shares were redeemed.

Share Class

Number of Participating Preference Shares issued

Number of Participating Preference Shares redeemed

Number of Participating Preference Shares forfeited

Number of Participating Preference Shares outstanding


Apr 2015 15,000,000 37,740 14,962,260 -

UK Foundation Housa 5 year Apr 2015 15,000,000 25,000 14,975,000 -


year Apr 2015 15,000,000 4,000 14,996,000 -

UK Growth Housa 5 year May 2015 15,000,000 20,000 14,980,000 -


May 2015 15,000,000 81,500 14,918,500 -

UK Foundation Housa 5 year May

2015 15,000,000 11,000 14,989,000 -


year May 2015 15,000,000 83,000 14,917,000 -

There were no further significant post balance sheet events requiring disclosure.

14. Ultimate controlling party The entire Founder Share capital is owned by JTC Trustees Limited as trustee of Housing Foundation Charitable Trust however, the ultimate controlling party of the Cell is considered to be Mr James Christopher Flowers.

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