30 Jun 2017 10:53
Rothschilds Continuation Finance (C.I.) Limited
Report of the Directors and Financial Statements for the year ended
31 March 2017
Report of the Directors
The Directors present their Directors' report and financial statements for the year ended 31 March 2017.
Principal Activities and Business Review
The principal activity of Rothschilds Continuation Finance (C.I.) Limited (the Company) is the raising of finance for the purpose of lending it to other companies, including members of the Rothschild Concordia SAS group. The results for the year are set out in the Statement of Comprehensive Income on page 7.
As at 31 March 2017, £125,000,000 perpetual subordinated notes were in issue by the Company.
Rothschild & Co SCA announced on 21 March 2017 that it will change its financial year end from 31 March to 31 December. There will therefore be a 9 month accounting period until 31 December 2017. Rothschilds Continuation Finance (C.I.) Limited will also change its year end in line with its ultimate parent.
Principal Risks and Uncertainties
The principal risks of the Company are credit risk, liquidity risk, market risk and operational risk. The Company follows the risk management policies of a fellow Group company N M Rothschild & Sons Limited.
The Company's market risk exposure is limited to interest rate. Exposure to interest rate movements on the perpetual subordinated note issues has been passed to a fellow subsidiary N M Rothschild & Sons Limited ("NMR") and parent undertaking Rothschilds Continuation Limited ("RCL"), as the issue proceeds have been on-lent to NMR and RCL at a fixed margin of 1/64 per cent above the rate being paid.
Liquidity risk has similarly been transferred to NMR and RCL as the funds on-lent have the same maturity dates as the notes issued. The Company's principal credit risk is with NMR and RCL.
Since notes issued by the Company have been guaranteed by, and funds have been on-lent to, NMR and RCL, the Company's ability to meet its obligations in respect of notes issued by it is affected by NMR's and RCL's ability to make payments to the Company.
Currency risk is not considered significant as all material foreign currency balances and cash flows are matched.
Directors
The Directors who held office during the year were as follows:
Anthony Coghlan | |
Mark Crump | |
David Oxburgh |
Directors' Indemnity
The Company has provided qualifying third-party indemnities for the benefit of its Directors. These were provided during the period and remain in force at the date of this report
Dividends
The Directors do not recommend the payment of a dividend (2016: £nil).
Auditor
Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and KPMG LLP will therefore continue in office.
Audit Information
The Directors who held office at the date of approval of this Report of the Directors confirm that, so far as they are each aware, there is no relevant audit information of which the Company's auditor is unaware, and each Director has taken all the steps that he or she ought to have taken as a Director to make himself or herself aware of any relevant audit information and to establish that the Company's auditors are aware of that information.
By Order of the Board
Anthony Coghlan Director | Peter Barbour Director |
23 June 2017
Statement of Directors' Responsibilitiesin Respect of the Directors' Report and the Financial Statements
The Directors are responsible for preparing the Directors' Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and applicable law.
The financial statements are required by law to give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.
In preparing these financial statements, the Directors are required to:
· | select suitable accounting policies and then apply them consistently; |
· | make judgements and estimates that are reasonable and prudent; |
· | state whether applicable International Financial Reporting Standards as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements; and |
· | prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business. |
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the financial statements comply with The Companies (Guernsey) Law, 2008. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities.
By Order of the Board | |
Anthony Coghlan Director | Peter Barbour Director |
23 June 2017 |
Independent Auditor's Report to the Members of Rothschilds Continuation Finance (C.I.) Limited
We have audited the financial statements (the "financial statements") of Rothschilds Continuation Finance (C.I.) Limited (the "Company") for the year ended 31 March 2017 which comprise the Statement of Comprehensive Income, the Balance Sheet, Statement of Changes in Equity, the Cash Flow Statement and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as adopted by the European Union.
This report is made solely to the Company's members, as a body, in accordance with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective Responsibilities of Directors and Auditor
As explained more fully in the Statement of Directors' Responsibilities set out on page 4 the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Board of Directors; and the overall presentation of the financial statements. In addition we read all the financial and non-financial information in the Report of the Directors to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
Ÿ | give a true and fair view of the state of the Company's affairs as at 31 March 2017 and of its profit for the year then ended; |
Ÿ | are in accordance with International Financial Reporting Standards as adopted by the European Union; and |
Ÿ | comply with the Companies (Guernsey) Law 2008. |
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Guernsey) Law 2008 requires us to report to you if, in our opinion:
Ÿ | the Company has not kept proper accounting records, or |
Ÿ | the financial statements are not in agreement with the accounting records; or |
Ÿ | we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit. |
Pamela McIntyre (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
23 June 2017
Statement of Comprehensive Income
For the year ended 31 March 2017
2017 | 2016 | ||
Notes | £ | £ | |
Interest income | 11,238,815 | 11,305,245 | |
Interest expense | (11,219,178) | (11,280,822) | |
Operating profit | 19,637 | 24,423 | |
Administrative expenses | (1,300) | (650) | |
Profit before tax | 4 | 18,337 | 23,773 |
Income tax expense | 5 | (3,667) | (4,755) |
Profit for the financial year | 14,670 | 19,018 | |
Other comprehensive income | - | - | |
Total comprehensive income for the financial year | 14,670 | 19,018 |
All amounts are in respect of continuing activities.
Balance Sheet
At 31 March 2017
2017 | 2017 | 2016 | 2016 | ||
Notes | £ | £ | £ | £ | |
Non-current assets | |||||
Loans to group undertakings | 6 | 125,000,000 | 125,000,000 | ||
Current assets | |||||
Other financial assets | 7 | 1,358,519 | 1,389,395 | ||
Cash and cash equivalents | 8 | 265,660 | 252,024 | ||
1,624,179 | 1,641,419 | ||||
Current liabilities | |||||
Current tax payable | (3,667) | (4,755) | |||
Other financial liabilities | 9 | (1,356,164) | (1,386,986) | ||
Net current assets | 264,348 | 249,678 | |||
Total assets less current liabilities | 125,264,348 | 125,249,678 | |||
Non-current liabilities | |||||
Subordinated guaranteed notes | 10 | (125,000,000) | (125,000,000) | ||
Net assets | 264,348 | 249,678 | |||
Shareholders' equity | |||||
Share capital | 11 | 100,000 | 100,000 | ||
Retained earnings | 164,348 | 149,678 | |||
Total shareholders' equity | 264,348 | 249,678 |
Approved by the Board of Directors and signed on its behalf on 23 June 2017 by:
Anthony Coghlan Director | Peter Barbour Director |
Statement of Changes in Equity
For the year ended 31 March 2017
Share Capital | Retained Earnings | Total Equity | |
£ | £ | £ | |
At 1 April 2016 | 100,000 | 149,678 | 249,678 |
Total comprehensive income for the financial year | - | 14,670 | 14,670 |
At 31 March 2017 | 100,000 | 164,348 | 264,348 |
At 1 April 2015 | 100,000 | 130,660 | 230,660 |
Total comprehensive income for the financial year | - | 19,018 | 19,018 |
At 31 March 2016 | 100,000 | 149,678 | 249,678 |
Cash Flow Statement
For the year ended 31 March 2017
2017 | 2016 | ||
Notes | £ | £ | |
Cash flow from operating activities | |||
Profit for the financial year | 14,670 | 19,018 | |
Income tax expense | 3,667 | 4,755 | |
Operating profit before changes in working capital and provisions | 18,337 | 23,773 | |
Net decrease/(increase) in debtors | 30,876 | (49,401) | |
Net (decrease)/increase in other financial liabilities | (30,822) | 30,821 | |
Cash generated from operations | 18,391 | 5,193 | |
Income taxes paid | (4,755) | (5,104) | |
Net cash flow from operating activities | 13,636 | 89 | |
Net increase in cash and cash equivalents | 13,636 | 89 | |
Cash and cash equivalents at 1 April | 252,024 | 251,935 | |
Cash and cash equivalents at 31 March | 8 | 265,660 | 252,024 |
Interest paid and received during the year were as follows :
2017 | 2016 | |
£ | £ | |
Interest paid | 11,250,000 | 11,250,000 |
Interest received | 11,269,691 | 11,255,844 |
Notes to the Financial Statements
(forming part of the Financial Statements)
For the year ended 31 March 2017
1. Accounting Policies
Rothschilds Continuation Finance (C.I.) Limited ("the Company") is a private limited company incorporated in Guernsey. The principal accounting policies which have been consistently adopted in the presentation of the financial statements are as follows:
a. Basis of preparation
The financial statements are prepared and approved by the Directors in accordance with International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations, endorsed by the European Union ("EU") and with those requirements of the Companies (Guernsey) Law 2008 applicable to companies reporting under IFRS. The financial statements are prepared under the historical cost accounting rules and presented in its sterling, unless otherwise stated. The maturities of the Company's liabilities are matched with the maturities of its assets. There is, therefore a strong expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and accordingly, the financial statements have been prepared on a going concern basis.The financial statements are presented in sterling, unless otherwise stated.
Standards affecting the financial statements
In the current year, there have been no new or revised Standards and Interpretations that have been adopted that have materially affected the amounts reported in these financial statements.
Future accounting developments
A number of new standards, amendments to standards and interpretations are effective for accounting periods ending after 31 March 2017 and therefore have not been applied in preparing these financial statements. None of these are expected to have a significant effect on future financial statements.
b. Interest receivable and payable
Interest is recognised in the statement of comprehensive income using the effective interest rate method.
c. Taxation
Tax payable on profits is recognised in the statement of comprehensive income.
d. Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise balances with other group companies that are readily convertible to cash and are subject to an insignificant risk of changes in value.
e. Capital management
The Company is not subject to any externally imposed capital requirements. It is dependent on Rothschilds Continuation Limited (the parent undertaking) to provide capital resources which are therefore managed on a group basis.
f. Financial assets and liabilities
Financial assets and liabilities are recognised on trade date and derecognised on either trade date, if applicable, or on maturity or repayment.
On initial recognition, IAS 39 requires that financial assets be classified into the following categories; at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available for sale investments. The company does not hold any assets that are classified as held-to-maturity or available for sale.
g. Loans and advances
Loans and advances are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Loans and advances are intitially recorded at fair value, including any transaction costs and are subsequently measured at amortised cost using the effective interest rate method. Gains and losses arising on derecognition of loans and advances are recognised in other operating income.
h. Accounting Judgements and estimates
The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the accounting policies.
2. Financial Risk Management
The Company follows the financial risk management policies of the parent undertaking, Rothschilds Continuation Limited. The key risks arising from the Company's activities involving financial instruments, which are monitored at the group level, are as follows:
- Credit risk - the risk of loss arising from client or counterparty default is not considered a significant risk to the Company as all asset balances are with other group companies as detailed in note 12 Related Party Transactions.
- Market risk - exposure to changes in market variables such as interest rates, currency exchange rates, equity and debt prices is not considered significant as the terms of financial assets substantially match those of financial liabilities.
- Liquidity risk - the risk that the Company is unable to meet its obligations as they fall due or that it is unable to fund its commitments is not considered significant as material cash inflows and outflows from financial assets and liabilities are substantially matched.
3. Directors' Emoluments
None of the Directors received any remuneration in respect of their services to the Company during the year (2016: £nil).
4. Profit Before Tax
2017 | 2016 | |
£ | £ | |
Is stated after | ||
i. Income | ||
Interest from loans to Group undertakings | ||
Parent undertaking | 4,495,462 | 4,520,163 |
Fellow subsidiary undertaking | 6,743,194 | 6,780,244 |
11,238,656 | 11,300,407 | |
Other interest receivable from fellow subsidiary undertaking | 159 | 4,838 |
11,238,815 | 11,305,245 | |
ii. Charges | ||
Interest payable on subordinated guaranteed notes | 11,219,178 | 11,280,282 |
The amount receivable by the auditors and their associates in respect of the audit of these financial statements is £3,511 (2016: £3,902). The audit fee is paid on a group basis by N M Rothschild & Sons Limited.
5. Taxation
2017 | 2016 | |
£ | £ | |
Profit before tax | 18,337 | 23,773 |
United Kingdom corporation tax at 20% (2016: 20%) | 3,667 | 4,755 |
6. Loans to Group Undertakings
Subordinated | |
Perpetual Loans | |
to Group Undertakings | |
£ | |
At the beginning and end of the year | 125,000,000 |
The interest rate charged on the subordinated perpetual loans to group undertakings is 9 1/64 per cent. The fair value of the loans was £157,312,500 as at 31 March 2017 (2016: £148,668,750). The fair value was estimated using market price at the balance sheet date for similar instruments (level 2) .
7. Other Financial Assets
2017 | 2016 | |
£ | £ | |
Amounts owed by parent undertaking | 543,408 | 555,758 |
Amounts owed by fellow subsidiary undertaking | 815,111 | 833,637 |
1,358,519 | 1,389,395 |
8. Cash and Cash Equivalents
At the year end the Company held cash of £265,660 (2016: £252,024) at a fellow subsidiary undertaking. The Company receives interest at 0%.
9. Other Financial Liabilities
2017 | 2016 | |
£ | £ | |
Interest payable | 1,356,164 | 1,386,986 |
Interest payable on the subordinated guaranteed notes is fixed at 9 per cent.
10. Subordinated Guaranteed Notes
2017 | 2016 | |
£ | £ | |
£125,000,000 9% Perpetual | ||
Subordinated Guaranteed Notes | 125,000,000 | 125,000,000 |
The fair value of the subordinated guaranteed notes was £157,187,500 as at 31 March 2017 (2016: £148,543,750). The fair value was estimated using market price at the balance sheet date (level 1).
The following table shows contractual cash flows payable by the Company on the subordinated guaranteed notes, analysed by remaining contractual maturity at the balance sheet date. Interest cash flows on the loan are shown up to five years only, with the prinicipal balance being shown in the > 5yr column.
Demand | Demand-3m | 3m - 1yr | 1yr - 5yr | > 5yr | Total | |
£ | £ | £ | £ | £ | £ | |
Loan notes in issue | - | 2,804,795 | 8,445,205 | 45,000,000 | 125,000,000 | 181,250,000 |
11. Share Capital
2017 | 2016 | |
£ | £ | |
Authorised | ||
Ordinary shares of £1 each | 100,000 | 100,000 |
Allotted, called up and fully paid | ||
Ordinary shares of £1 each | 100,000 | 100,000 |
12. Related Party Transactions
Parties are considered related if one party controls, is controlled by or has the ability to exercise significant influence over the other party. This includes key management personnel, the parent company, subsidiaries and fellow subsidiaries.
Amounts receivable from related parties at the year end were as follows:
2017 | 2016 | |
£ | £ | |
Subordinated perpetual loan to parent undertaking | 50,000,000 | 50,000,000 |
Subordinated perpetual loan to fellow subsidiary undertaking | 75,000,000 | 75,000,000 |
Amounts owed by parent undertaking | 543,408 | 555,758 |
Amounts owed by fellow subsidiary undertaking | 815,111 | 833,637 |
Cash at fellow subsidiary undertaking | 265,660 | 252,024 |
Amounts recognised in the statement of comprehensive income in respect of related party transactions were as follows:
2017 | 2016 | |
£ | £ | |
Interest receivable from parent undertaking | 4,495,462 | 4,520,163 |
Interest receivable from fellow subsidiary undertaking | 6,743,353 | 6,780,244 |
There were no loans made to Directors during the year (2016: none) and no balances outstanding at year-end (2016: £nil). There were no employees of the Company during the year (2016: none).
13. Parent Undertaking and Ultimate Holding Company
The largest group in which the results of the Company are consolidated is that headed by Rothschild Concordia SAS, incorporated in France, and whose registered office is at 23bis, Avenue de Messine, 75008 Paris. The smallest group in which they are consolidated is that headed by Rothschild & Co SCA, a French public limited partnership whose registered office is also at 23bis, Avenue de Messine, 75008 Paris. The accounts are available on Rothschild & Co website at www.rothschildandco.com.
The Company's immediate parent company is Rothschilds Continuation Limited, incorporated in England and Wales and whose registered office is at New Court, St Swithins Lane, London EC4N 8AL.
The Company's registered office is located at St Julian's Court, St Peter Port, Guernsey,GY1 3BP.