RDL.L Regulatory News (RDL)

RDL REALISATION PLC (Formerly RANGER DIRECT LENDING FUND PLC)

(Registered No. 09510201)

LEI: 549300VGZSKYQ7C2U221

Annual Report for the year ended 31 December 2018

RDL Realisation Plc (the "Company") announces that it has published its Annual Report and Accounts for the year ended 31 December 2018. The full Annual Report and consolidated financial statements and the Notice of the 2019 Annual General Meeting are available to view on the Company's website at www.rdlrealisationplc.co.uk/documents or by contacting the Company Secretary on 01392 477500.

They have also been submitted to the National Storage Mechanism and will shortly be available for inspection at www.morningstar.co.uk/NSM.

The financial information set out below does not constitute the Company's statutory accounts for the year ended 31 December 2018 but is derived from those accounts. 

The unaudited full text of those parts of the annual report and accounts for the year ended 31 December 2018, which require to be published are set out below.

The Company also announces that it will hold its Annual General Meeting at 2.00pm on 12 July 2019 at the offices of Travers Smith LLP, 10 Snow Hill, London, EC1A 2AL.

Performance Summary

The Company's market capitalisation as at 31 December 2018 was USD 137,686,929 (GBP 108,023,638 based on a Share Price of GBP 6.70 and based on 16,122,931 outstanding Ordinary Shares).

The Group's total comprehensive loss for the year ended 31 December 2018 amounted to USD 35,046,160 (31 December 2017: USD 6,614,025 loss).

Further details of the Group's performance for the year are included in the Executive Directors' Report below which includes a review of the progress of the asset realisation, impact of applicable regulations and adherence to investment restrictions.

Ongoing Charges Information 5

1 Net Asset Value ("NAV") (cum income) includes all current year income, less the value of any dividends paid in respect of the period together with the value of the dividends which have been declared and marked ex-dividend but not yet paid, see below.

2 Net Asset Value (ex income) is the Net Asset Value cum/income excluding net current year income.

3 Translated at USD to GBP foreign exchange rate of 1.2746 (2017: 1.3524).

4 Share price taken from Bloomberg Professional.

5 Ongoing charges are set out as a percentage of annualised ongoing charge over average reported Net Asset Value.

6 Ongoing charges are those expenses of a type which are likely to recur in the foreseeable future. The annualised ongoing charge is calculated using the Association of Investment Companies recommended methodology.7 Performance fee is calculated based on the terms of the Investment Management Agreement. Further information is provided in note 17 of the Notes to the Consolidated Financial Statements.

Key Performance Indicators

The Company's Key Performance Indicators ("KPIs") are described in the Analysis of KPIs and Investment Restrictions below.

Investment Positions

Below is a list of the Company's investments as at 31 December 2018.

(Shown as aggregate Debt Investments acquired from individual Direct Lending Platform)

* The International MCA Platform was refinanced and realised at approximately USD 38 million post year-end.

CHAIRMAN'S STATEMENT 

2018 was another disappointing and difficult year for the Company. Adjusted for capital returns and dividends the NAV return was -6.41% in USD terms. After three years of dismal performance and as a result of Shareholder pressure, there were wholesale Board changes immediately prior to and following the Annual General Meeting on 19 June 2018 (the "AGM"). The Company's Shareholders endorsed the wind- down of the Company in accordance with the procedures adopted by the Company. These actions were ratified at the General Meeting held on 16 November 2018, at which the investment policy and investment objective were formally amended to pursue a wind-down of RDL. Following these developments, the RDL share price rose by 11.7% in GBP terms during the year. Late in 2018, the external investment manager Ranger Alternative Management II, LP ("Ranger") based in Dallas (USA) gave notice of its intent to terminate their contract on 12 February 2019. This was prior to the expiry of the 12 months' notice which had been previously delivered to Ranger under the terms of the investment management agreement between Ranger and the Company (the "IMA"). The Company has appointed IFM as its replacement Alternative Investment Fund Manager ("AIFM") and with effect from 26 February 2019, the Company has changed its name to RDL Realisation Plc.

Following the appointment of IFM, the Executive Directors of the Company continue performing the functions they have been carrying out. In particular, any investment or divestment decisions relating to the Company's portfolio will not be implemented without prior Board approval. In preparation for these changes, and as announced on 15 January 2019, the Company's Executive Board has been strengthened with the appointment of Joe Kenary who is a senior credit executive based in the US. Dominik Dolenec and Brett Miller continue to act as Executive Chairman and Executive Director of the Company, respectively. Since the year end, Nick Paris has been appointed to the Board as a Non-Independent Non-Executive Director.

Wind-down and Capital Returns

Since the AGM on 19 June 2018, the Company has returned 264p per share in the form of dividend payments. This amounts to approximately 26% of the published NAV as of 30 June 2018.

The new investment strategy seeks to maximise risk-adjusted IRRs to our Shareholders. To this end, the Company had adopted a three-pronged approach to winding down its portfolio of 12 platforms. The first category consisted of portfolios that could be sold outright. Having run a sale process, only three portfolios and a small equity position could be exited in this way without accepting a material discount. The second category consisted of two sizeable positions where the Company was the sole platform capital provider. One was successfully refinanced at par in December 2018. The second recently entered a forbearance agreement in light of its many contractual breaches and is now working with the Company on a plan to return the capital. The third category consisted of portfolios that are best run off. We are working to ensure that the overwhelming majority of this category will be repaid by late 2019. However, there can be no guarantee that the Company will be successful in accomplishing this objective. Some residual positions will only be liquidated once various bankruptcy proceedings are completed, with Princeton being the most notable, and it is expected that these will take longer.

The Company's subsidiary RDLZ has issued Zero Dividend Preference Shares ("ZDPs") that require the Company to meet a 2.75x asset cover ratio after any capital distribution, save for dividends required to maintain the Investment Trust status. The ZDP Shares mature on 31 July 2021 and accrue an annualised return of 5% per year. In light of the wind-down, the Company has been in active discussions with ZDP Shareholders about an early retirement of their instruments. This would allow the Company to then return all excess cash to the Company's Shareholders. To date, the Company has bought back almost 14% of the originally issued ZDP Shares.

Portfolio Performance

Aside from the widely publicised Princeton bankruptcy, the new Board was disappointed to discover that a number of other platform exposures were not monitored or managed in what the new Board would consider a prudent manner by Ranger. This was the case in at least two lending platforms which are among the largest positions in the Fund. In both cases, in our opinion, many established practices in the lending industry were not followed, such as diligent monitoring, appropriate cash controls, detailed, frequent and timely reporting and the retention of back-up servicers. Certain legal agreements required by the loan documentation and agreed to by borrowers, for example cash control agreements, were also not implemented and enforced, and this may have been to the detriment of the Company's Shareholders. The new Board is endeavouring to rectify many of these deficiencies and preserve capital.

A detailed analysis of the Company's portfolio is provided in the Executive Directors' Report.

Princeton

The Company announced on 7 November 2018 that a Chapter 11 Trustee had been appointed in relation to the bankruptcy proceedings of Princeton Alternative Income Fund, LP and its former general partner Princeton Alternative Funding, LLC (together, "Princeton"). This is a major milestone in the recovery of our Princeton investment. Since that time the Company has continued to actively engage with the Trustee and its other advisers in connection with its investment in Princeton.

Based on the information provided to date by the Trustee (which the Company has not been able to independently validate or verify), the Company is currently estimating a potential recovery of approximately USD 15 million from the Princeton bankruptcy. The net asset value published by the Company as at 30 November 2018 attributed a value of approximately USD 28.5 million to the Company's investment in Princeton. Princeton is now carried at USD 15m in the audited accounts.

The Company emphasises that this remains an unverified estimate and is subject to a number of potential variables. In particular, the amount that the Company will recover will be dependent upon the final structure of the creditor and investor waterfall and distribution scheme and the actual net amount available for distribution. A final determination of these issues is not expected for a number of months and it is not possible to predict the precise structure of the distribution scheme which will be approved by the bankruptcy court. In addition, other factors that will impact the Company's ultimate recovery amount include (but are not limited to): the actual recoveries in respect of both performing and delinquent payday loans in the Princeton portfolio - currently these recovery rates are based on assumptions using historical sector benchmarks which may not prove to be accurate in respect of the actual portfolio performance; certain restricted cash balances in the Princeton portfolio may not be released to the Company; no valuation of potential litigation claims has currently been made; and other, unforeseen factors or information may subsequently occur or be discovered. As such, no reliance can be placed on the estimated potential recovery amount and it is likely that such estimate will change in the future as additional information is received from the Trustee.

The Company has been engaged in discussions with the Trustee regarding the content of a Chapter 11 Plan of Liquidation (the "Plan") proposed by the Trustee. The Plan was filed on 19 April 2019 and provides for the prompt and orderly liquidation of fund assets by approved professionals and the pursuit of possible third-party litigation claims under the direction of a liquidating trustee to be appointed under the Plan. The Plan also contemplates the Company being treated in the same way as other Princeton investors. However, in light of the arbitration findings that have previously been announced by the Company, the Company has agreed with the Trustee that it will be paid USD 2.5 million out of the liquidation proceeds in priority to other investors. This amount will cover part of the costs of the legal proceedings that were incurred by the Company.

The disclosure and confirmation process in a Chapter 11 case after the filing of a plan typically requires a period of two to four months. The Company understands that the Trustee will be reaching out to investors to explain the Plan and respond to questions regarding its content, structure and implementation. The Company will continue to work closely with the Trustee and his professionals to complete this process.

Recently, Microbilt Corporation recruited an informal group of minority investors to support its alternative Chapter 11 plan, which is vague in structure and content. Among other things, the Microbilt plan leaves the fund in bankruptcy for an indeterminate period of time. The Company believes that the Microbilt plan is not in the best interest of the Company or other investors. The Company will support the Plan filed by the Chapter 11 Trustee and seek its confirmation before the Bankruptcy Court.

Operational Transition and Reporting Arrangements

The operational transition away from Ranger as external investment manager of the Company has now been completed. This involved considerable effort on our part as we implemented many of the operational practices and controls that we believe are normally expected from a credit fund manager responsible for third party capital. Moreover, in the transition, Ranger also was not fully cooperative with the Company's requests and continues to withhold certain information related to the portfolio from the Company.

Late last year, the Company retained a senior credit professional and financial controller based in Dallas to assist with the day to day management of the Company's remaining credit portfolios. This professional reports directly to the Board. The Company has recently also retained the services of MCA Financial Group as the new accounting and servicing provider. They replace the functions previously provided by Ranger's accounting department. For the purposes of these accounts and going forward, the Company has engaged an independent third-party valuation agent for the purposes of assisting the Board in valuing the Company's portfolio.

Given the realisation process currently being undertaken, the Directors of the Company are of the view that it is appropriate to carry out half-yearly rather than monthly valuations with immediate effect, such calculations being carried out as at 30 June and 31 December in each year. The Company will announce its net asset value and net asset value per Ordinary Share as soon as practicable following each half year valuation date. The Company may undertake additional valuations in respect of part or all of the portfolio in connection with potential sales or material changes of circumstance of its investments to the extent it deems it appropriate to do so.

The Company will continue to comply with its obligations under the ZDP Share Undertaking and, in particular, will continue to calculate the cover in respect of ZDP Shares monthly using all applicable information relevant to that calculation, including items such as currency movements and disposals of investments which arise subsequent to any valuation.

Outlook

A great deal of effort has gone into prudently winding down the portfolio and transitioning the management away from Ranger and implementing the procedures and controls we believe are appropriate for the Company. Whilst much work still remains to be done, we are pleased with our team's efforts in spite of the challenges we have faced in the portfolio we have inherited.

In 2019, we hope to realise a substantial part of the remaining assets and return the proceeds to our Shareholders. We will also continue to streamline management and other administrative costs. With that in mind, we might also delist our Shares in the future.

It is our goal to maximize the return to Shareholders in a prudent and cost-effective manner.

Dominik DolenecChairman17 June 2019

EXECUTIVE DIRECTORS' REPORT

It has been a busy period since the new Board was appointed. As you know, immediately prior to the AGM on 19 June 2018, Christopher Waldron, Matthew Mulford and Scott Canon resigned. Dominik Dolenec, Greg Share and Brendan Hawthorne were appointed to the Board at the AGM. Brett Miller and Joe Kenary were subsequently appointed on 6 July 2018 and 4 December 2018 respectively. Nick Paris has subsequent to the year end, been appointed to the Board. On 27 July 2018, Dominik Dolenec and Brett Miller assumed executive responsibilities as the scale of the task facing the new Board became apparent. Of the "old" Board only Jonathan Schneider remained for a period of continuity until he stepped down in November 2018. The Board would like to express their thanks to Mr Schneider for his assistance during this period of transition. In December 2018, the Board was further strengthened with the appointment of Joe Kenary, who subsequent to the year-end has also assumed an executive role. Since the year end, Nick Paris has been appointed to the Board as a Non-Independent Non-Executive Director. The Board is thus comprised of six Directors of whom three are executive and three are non-executive, although it should be noted that the non-executive Directors have been called on to assist in a much more active role than typically to be expected of a non-executive Director.

The new Board was entrusted by Shareholders with a mandate to realise assets and return capital to Shareholders. This new investment policy was set out in a circular to Shareholders and formally approved by Shareholders at a general meeting in November 2018 and can be found below.

The Executive Directors have spent considerable time in the USA this year, reviewing the portfolio, meeting investee platforms, working with Ranger and transitioning away from Ranger as described in the Chairman's Statement. This work is ongoing and whilst considerable headway has been achieved there remains much to do. The implementation of the new investment policy has got off to a good start, some of the highlights of which are:

· In October 2018, the Company sold the current receivables held by it that were originated by the Consumer Receivables Platform (the "Receivables"), achieving a sales price of 96.5 per cent. of par for all Receivables held by the Company (in addition to all accrued but unpaid interest attributable to such Receivables) which at that time were either current or up to 30 days delinquent. The carrying value for the Receivables was USD 18,942,415 and the loss on sale was USD 658,539.

· Subsequent to the year end, in January 2019 the Company's exposure to the International MCA Platform was refinanced and our promissory notes paid off. We realised USD 38,007,945 (at carrying value) pursuant to this transaction, the entirety of which has been paid to the Company.

· The Company has continued to work with the Real Estate platform to offer individual performing loans to the platform's existing and new investors. The investment balance for this platform at 1 January 2018 was USD 71,848,345, of which the defaulted loans in recovery constituted USD 16,396,547. At the year end, we had sold or received payment of loans amounting to USD 66,254,440, leaving a net balance exposure to this platform of USD 36,836,584.

· Significant progress has been made in the Princeton litigation and bankruptcy procedure, and whilst the information forthcoming has not been good, we have significantly more clarity on the value of this investment compared to when we were appointed to the Board. However, much work remains to be done on this unfortunate investment.

· One smaller portfolio was disposed of at 77c on the dollar but a small premium to our carrying NAV due to some conservative default provisioning.

· The small equity interest was disposed of for USD 300,000, being the carrying value at the time.

As a result of the above actions the Company has returned 264p in cash to Shareholders by way of dividend. This amounts to approximately 26% of the published NAV as of 30 June 2018.

Whilst we are delighted with the above results achieved to date, and in particular the refinancing of the International MCA platform at par, we cannot be certain that we will achieve similar pricing for the remainder of the portfolio and Shareholders would be counselled to exercise caution in making any predictions based on these past results.

Notwithstanding the above, Shareholders should take note that a mandate requiring the active sale or timed liquidation of portfolios presents an inherent risk which does not present itself with the run-off of a portfolio, in that such assets may not be realised at their fair value. Although the Company is not currently considering offers which fall materially below the values referred to below, the inherent risk of attracting opportunistic buyers must be managed with the optionality to run down a short-term portfolio in order to ensure the realisation of appropriate value. It is also important for Shareholders to recognise that a material amount of the future value for the Company will be tied to current claims in litigation.

Transition arrangements

On 12 October 2018, Ranger informed the Board that it would terminate the IMA between it and the Company with effect from 12 February 2019 and the agreement was indeed terminated on that date. Shareholders are reminded that the Company had previously served a termination notice on Ranger with effect from 1 May 2019 to the extent the agreement has not already been terminated.

The Company has, since the year end, appointed IFM as its replacement Alternative Investment Fund Manager.

Following the appointment of IFM, the Executive Directors of the Company will continue performing the functions they have been carrying out during the current management arrangements. In particular, any investment or divestment decisions relating to the Company's portfolio will not be implemented without prior Board approval. In preparation for these changes, and as announced on 15 January 2019, the Company's Executive Board has been strengthened with the appointment of Joe Kenary who is a senior credit executive based in the US. Dominik Dolenec and Brett Miller continue to act as Executive Chairman and Executive Director of the Company, respectively. The Company has also appointed a senior credit professional and a financial controller, both based in Dallas, USA, to assist with the management and realisation of the portfolio. A huge amount of time has been spent by the Executive Directors in the run up to 12 February 2019 to ensure a smooth transition of management responsibilities and to avert any disruption to the portfolio management role. It was also a considerable task transitioning over the accounting function to the new service provider. The difficulty of the task was compounded by Ranger, at the transition, withholding essential information that we assert is the property of the Company. Whilst much work still remains, we are satisfied with the significant progress the team has made since Ranger's termination. In spite of all the challenges, the bulk of the work has been done to plan and the Board are pleased with the new arrangements.

Investment Portfolio

In accordance with the Board's instructions, Ranger, in June 2018 discontinued making investments through normal course of business with the following exceptions:

· the investment is a follow-on investment made in connection with an existing Investment made in order to comply with the Company's pre-existing obligations; or

· failure to make the follow-on investment may result in a breach of contract or applicable law or regulation by the Company; or

· the investment is considered necessary by the Board to protect or enhance the value of any existing investments or to facilitate orderly disposals.

In accordance with the above, new investments after June 2018 were made to:

· Second SME Loans Platform for USD 5,412,606 in July 2018

· International LOC Partner for USD 510,169 in September 2018

· Real Estate Lending Partner for USD 300,000 in September 2018

At 31 December 2018, 91.3% of the portfolio was invested in secured Debt Instruments (including loans, cash advances, and receivables financing) to mainly SME borrowers, and 8.7% of the portfolio consisted of unsecured consumer loans. For this purpose, a secured Debt Instrument is defined by the Company as a payment obligation in which property, revenue (including receivables), or a payment guaranty has been pledged, mortgaged or sold to the Company as partial or full security with respect to such obligation.

In addition to investing in Debt Instruments, the Company was previously able to invest up to 10% of gross assets in the equity of Direct Lending Platforms and/or organisations serving the direct lending industry. As at 31 December 2018, one such equity investment had been made for USD 300,000 in June 2017. As mentioned above, this investment has been sold subsequent to the year end for USD 300,000.

Below is a brief summary of each investment platform / partner which provides:

· Net balance at 31 December 2018 (estimated fair value)

· Commentary summarising primary activity and expected disposition of the investments

· All amounts shown below are in USD

SME/CRE Loans Platform

Since June 2018, there has been a regular run-off of all performing investments. The Executive Directors are in weekly contact with this platform who are trying to assist in the sale of some investments to its other investors throughout 2019, and remaining investments will be run off.

Note: Included in the balance above is USD 4.5m which is an acquisition loan extended to the Second SME Loans Platform - see below.

Second SME Loans Platform

Due to the combination of the loss in volume from the reduced number of new vehicle service contracts generated by the platform and cash drain from losses at affiliated entities, the platform failed to make a series of mandatory pre-payments, and the platform has failed to meet the required loan to value requirements. These factors entitled the Company to declare an event of default pursuant to its Master Loan Agreement. The platform has recently found a new funding source for new vehicle service contracts going forward and is making payments under a revised repayment schedule. The Company has since the year end executed a Forbearance Agreement and Cash Control Agreement which will bring credit monitoring and cash controls to a standard customary for financing structures of this type.

The platform has engaged an investment banker to assist in the refinancing efforts and there are ongoing communications with prospective new lenders. The refinancing of the notes as a portfolio has been complicated by the fact that in May (prior to the appointment of the new board of Directors), the Company also extended a USD 4.5M enterprise value loan to this platform to finance an acquisition of a loss-making business and unlike the previous loan, there is no advance rate based on discrete collateral. This loan falls due in May 2019 and is reported in the balance of the SME/CRE Lending Platform. The investment balance secured by vehicle service contracts at 31 December 2018 was USD 44m. The Board continues to investigate why this loan was made. The LTV, which as at 31 December 2018 was 103% and at 31 March 2019 was 129%, representing a significant breach of the LTV requirement. As a result, taking into consideration the Duff & Phelps Report, the report of another independent third party, and internal credit analysis, an additional reserve of approximately USD 9m to reflect the estimated impairment to the loan value has been recognised as of 31 December 2018. The combined balance of the two loans at the VSC platform as 31 December 2018 was USD 48.5m. The total balance after the impairment charge is USD 39m. Restructuring efforts are continuing.

Real Estate Lending Partner

There has been a combination of sales of some investments with help of the platform and regular run-off of all performing investments, particularly during the latter part of the year. The platform will continue to assist with the sale of some investments to its other investors throughout 2019, and the remaining investments will be run-off.

Princeton Alternative Income Fund

Subsequent to the year end and as announced on 11 February 2019 the Company is currently estimating a potential recovery of approximately USD 15m from the Princeton bankruptcy. A Princeton further update is provided below.

Canadian SME Lending Platform

The ongoing review of the platform's operations unfortunately revealed that the platform had not been adequately servicing the loans sold to the Company. To prevent further deterioration of the Canadian SME Lending Platform portfolio, the former Investment Manager temporarily took over the servicing of these investments. These are now serviced directly by the Company. Using the information from the former Investment Manager's direct contact with the borrowers, the Company continued its servicing and re-structuring of payment obligations with individual borrowers whose loans were originated by the platform. These loans are venture loans to mainly small and early stage companies with underdeveloped profit profiles which bear certain risks common to venture lending. The remaining investments are expected to be run off in due course under a variety of collection efforts. Current collection efforts include litigation and realisation of collateral proceeds, restructured pay out terms with longer amortisation, and participation in royalty streams from future company sales to be applied to the outstanding loans.

Equipment Loans Platform

Since June 2018, there has been a regular run-off of all performing investments. The remaining investments are expected to be run-off.

Second Consumer Loans Platform

Since June 2018, there has been a regular run-off of all performing investments. Platform will try to assist in the sale of some or all remaining loans to its other investors in 2019, and remaining investments (if any) will be run-off.

Invoice Factoring Platform

Since June 2018, there has been a regular run-off of all performing investments. The remaining investments are expected to be run-off.

Third SME Loans Platform

Since June 2018, there has been a regular run-off of all performing investments. The remaining investments are expected to be run-off.

Consumer Loans Platform

From June to October 2018, there has been a regular run-off of all performing investments. In October, all performing loans were sold to a third party which left the non-performing loans to run-off.

Independent valuation of the portfolio

Duff & Phelps, an independent valuation firm was engaged to perform valuation consulting services on the four largest platforms for the Company's portfolio. This excludes the investment in Princeton, owing to a lack of available information for this investment. The consulting services consisted of certain limited procedures that the Company identified and requested the independent valuation firm to perform.

A copy of the report from Duff & Phelps (the "DP Report") has now been delivered to the Board.

The Company is ultimately and solely responsible for determining fair value of the investments in good faith, and following its review of the report, the values at December 2018 were updated based on the Duff & Phelps valuation with the exception of the Vehicle Service Contract (VSC) platform. The VSC platform, including the holding company loan, was valued taking into consideration the DP Report, the report of another independent third party, and internal credit analysis. Based on a thorough review of the collateral at the VSC enterprise including the holding company loan, it indicates a substantial reduction in collateral security for RDL's outstanding principal amount due to a variety of factors. In order to accurately reflect the risk and the appropriate cost of capital for the portion of the loan that is not directly secured by collateral, the Company has applied a risk adjusted discount rate more appropriate for an unsecured loan, resulting in an impairment to the loan value. 

Princeton Update

On 6 November 2018, the United States Bankruptcy Court for the District of New Jersey granted the Company's motion for the appointment of a Chapter 11 Trustee in the bankruptcy cases of Princeton and directed the United States Trustee to appoint a Chapter 11 Trustee. Among other things, the Court found that the existence of irreconcilable conflicts of interest between the Princeton fund and its insider management and the existence of an outstanding claim filed in the cases by the Securities and Exchange Commission required an independent Trustee to be appointed.

The United States Trustee appointed Matthew Cantor as chapter 11 Trustee and the Bankruptcy Court entered an order approving the appointment. Mr. Cantor, the Trustee, is an experienced financial professional and served as Chief Counsel for Lehman Brothers Holdings, Inc. Upon his appointment, the Trustee displaced current management and assumed control over Princeton and its assets. The Trustee has retained legal and financial professionals and is currently evaluating the fund assets and formulating a plan of liquidation. The Company and its legal counsel are working closely with the Trustee to formulate a plan of liquidation and effectuate an orderly recovery of our Shareholders' capital. It is hoped that in the coming months Princeton can exit bankruptcy under a liquidation plan with a liquidation trustee who will oversee distributions to investors and run off the remaining assets.

Subsequent to the year end and based on the information provided to date by the Trustee (which the Company has not been able to independently validate or verify), the Company announced on 11 February 2019 that it was currently estimating a potential recovery of approximately USD 15 million from the Princeton bankruptcy. Prior to this, it had attributed a value of approximately USD 28.5 million to the Company's investment in Princeton in calculating the NAV. Accordingly, the Company resolved to impair the carrying value of its investment in Princeton by a further USD 13.5 million.

The Company emphasises that this remains an unverified estimate and is subject to a number of potential variables, in particular the amount that the Company will recover will be dependent upon the final structure of the creditor and investor waterfall and distribution scheme and the actual net amount available for distribution. A final determination of these issues is not expected for a number of months and it is not possible to predict the precise structure of the distribution scheme which will be approved by the bankruptcy court. In addition, other factors that will impact the Company's ultimate recovery amount include (but are not limited to): the actual recoveries in respect of both performing and delinquent payday loans in the Princeton portfolio - currently these recovery rates are based on assumptions using historic sector benchmarks which may not prove to be accurate in respect of the actual portfolio performance; certain restricted cash balances in the Princeton portfolio may not be released to the Company; no valuation on potential litigation claims has currently been made; and other, unforeseen factors or information may subsequently occur or be discovered. As such, no reliance can be placed on the estimated potential recovery amount and it is likely that such estimate will change in the future as additional information is received from the Trustee.

As referenced in the Chairman's Statement, the Company has been engaged in active discussions with the Trustee regarding the content of a Chapter 11 Plan of Liquidation (the "Plan") proposed by the Trustee. The Plan was filed on 19 April 2019 and provides for the prompt and orderly liquidation of fund assets by approved professionals and the pursuit of possible third-party litigation claims under the direction of a liquidating trustee to be appointed under the Plan. The Plan also contemplates the Company being treated in the same way as other Princeton investors. However, in light of the arbitration findings that have previously been announced by the Company, the Company has agreed with the Trustee that it will be paid USD 2.5 million out of the liquidation proceeds in priority to other investors. This amount will cover part of the costs of the legal proceedings that were incurred by the Company.

Recently, Microbilt Corporation recruited an informal group of minority investors to support its alternative Chapter 11 plan, which is vague in structure and content. Among other things, the Microbilt plan leaves the fund in bankruptcy for an indeterminate period of time. The Company believes that the Microbilt plan is not in the best interest of the Company or other investors. The Company will support the Plan filed by the Chapter 11 Trustee and seek its confirmation before the Bankruptcy Court.

Sector Reporting

As at 31 December 2018, the portfolio (excluding cash and cash equivalents) was diversified across different sectors as follows:

ZDP Update

As of 14 December 2018, the Company held 7,278,193 Zero Dividend Preference Shares ("ZDP Shares") in RDLZ. The Board of the Company has passed a resolution to waive the Company's entitlement to the accrued principal on its ZDP holdings up to 14 December 2018. The calculation of the Cover has been adjusted to deduct 7,278,193 ZDP Shares held by RDL from the total outstanding ZDP Shares to determine the ZDP redemption amount due on 31 July 2021.

 This has been reflected in the below calculation of the Estimated ZDP Cover 8.

As announced on 3 June 2019, a proposal to bring forward the winding up of RDLZ and amend the amounts payable in respect of the ZDP Shares has been proposed. Please see note 25 below.

The Board would like to draw attention to the above Accrued Capital Entitlement calculated in accordance with the IFRS 9 accounting standard. The figure differs from the legal Accrued Capital Entitlement (also shown above) due to the amortisation of issuance costs of approximately £1.1m over the life of the ZDPs.

8 Cover of the ZDP Shares shall represent a fraction where the numerator is equal to the Net Asset Value of RDL and its Group on a consolidated basis (adjusted to: (i) add back any liability to ZDP Shareholders; and (ii) deduct the estimated liquidation costs of the Company) and the denominator is equal to the amount which would be paid on the ZDP Shares as a class (and on all ZDP Shares ranking as to capital in priority thereto or pari passu therewith, save to the extent already taken into account in the calculation of the Net Asset Value) in a winding up of the Company on the ZDP Repayment Date. The calculation of the Cover has been adjusted to deduct 7,278,193 ZDP Shares held by RDL from the total outstanding ZDP Shares to determine the ZDP redemption amount due on 31 July 2021.

GROUP STRATEGIC REPORT

Cautionary Statement

This Group Strategic Report has been prepared solely to provide information to Shareholders to assess how the Directors have performed their duty to promote the success of the Company. It has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant to the Company and its subsidiaries when viewed as a whole.

The Group Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

OBJECTIVE AND INVESTMENT POLICY

Investment Objective

The Company will be managed, either by a third party non-EEA investment manager or internally by the Company's Board of Directors, with the intention of realising all remaining assets in the portfolio in a prudent manner consistent with the principles of good investment management, with a view to returning cash to its Shareholders in an orderly manner and meeting the obligations of the Company to RDLZ in respect of the ZDP Shares or purchasing ZDP Shares to reduce those obligations in advance of the final date for payments on the ZDP Shares.

Investment Policy

The Company will pursue its new Investment Objective by effecting a managed wind-down with a view to realising all of the investments in a manner that achieves a balance between maximising the value received from investments and making timely returns to Shareholders. The Company may sell its investments either to co-investors in the relevant investment or to third parties, but in all cases with the objective of achieving the best available price in a reasonable time scale.

As part of the realisation process, the Company may also exchange existing debt instruments issued by any direct lending platform for equity securities in such direct lending platform where, in the reasonable opinion of the Board, the Company is unlikely to be able to otherwise realise such debt instruments or will only be able to realise them at a material discount to the outstanding principal balance of that debt instrument.

The following investment restrictions will apply to the Company:

The Company will cease to make any new investments or to undertake capital expenditure except, with the prior written consent of the Board and where:

· the investment is a follow-on investment made in connection with an existing investment made in order to comply with the Company's pre-existing obligations; or

· failure to make the follow-on investment may result in a breach of contract or applicable law or regulation by the Company; or

· the investment is considered necessary by the Board to protect or enhance the value of any existing investments or to facilitate orderly disposals.

Any cash received by the Company as part of the realisation process prior to its distribution to Shareholders will be held by the Company as cash on deposit and/or as cash equivalents.

The Company will not undertake new borrowing other than for short-term working capital purposes. RDLZ, the Company's subsidiary, has ZDP Shares in issue which are repayable on 31 July 2021. In order to facilitate the Company's realisation strategy, the Company will be permitted to purchase ZDP Shares at the discretion of the Board.

Business Model

The Company is an Investment Trust within the meaning of Chapter 4 of Part 24 of the Corporation Tax Act 2010.

Following the Company's announcement on 11 June 2018 that it will move to realise its assets and proceed with the wind-down process, the Company's business model has changed from holding financial assets to collect their contractual cash flows to realising assets, in a prudent manner consistent with the principles of good investment management with a view to returning cash to its Shareholders in on orderly manner. As at 30 June 2018, the carrying value of the financial instruments reclassified from amortised cost to fair value through profit or loss was USD 248,386,018 (notes 3 and 4).

The Directors expect that the process of realisation will result in a transition to voluntary liquidation to preserve the Company's Investment Trust status. The timing of such move is uncertain as the Directors progress the orderly realisation of the portfolio as soon as practicable and with regard to cost efficiency, working capital requirements of the Company and the rights of the ZDP Shareholders.

The Board has formed three working committees to provide the necessary oversight of the Company's Investments.

The first committee, which comprises of Dominik Dolenec, Brendan Hawthorne, Joe Kenary and Brett Miller is responsible for the wind-down and realisation of the Company's existing portfolio (excluding Princeton) with the specific aim of maximising returns for Shareholders. The second committee, which comprises all Board members, has been tasked with management of the Princeton Proceedings and the strategic decisions associated with those proceedings.

The third committee was formed to consider proposals relating to retiring the ZDP Shares issued by the Company's subsidiary, RDLZ. Brendan Hawthorne and Joe Kenary as Directors of RDLZ are not members of this committee. Any final decisions regarding the approach to the investment portfolio and any other proposals to be put to Shareholders are decided by the Board as a whole.

IFM is now the Alternative Investment Fund Manager of the Company (following the termination of Ranger) and is subject to the AIFMD only to the limited extent applicable when a non-EEA Alternative Investment Fund Manager (an "AIFM") offers or markets an EEA Alternative Investment Fund (an "AIF") in the EEA. For the purposes of the AIFMD, the Company is the AIF and IFM is the AIFM.

Outsourced principal service providers include the following:

Borrowing policy

As at 31 December 2018, the Company has a loan payable to RDLZ of USD 70,979,233 (2017: USD 73,835,016). In accordance with the Company's investment policy, the Company will not undertake new borrowing other than for short-term working capital purposes. However, in order to facilitate the Company's realisation strategy, the Company will be permitted to purchase RDLZ Shares at the discretion of the Board.

Principal Risks and Uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance and could cause actual results to differ materially from expected and historical results. The Board of Directors has overall responsibility for risk management and internal control within the context of achieving the Company's new investment objective. The Board agrees the strategy for the Company, approves the Company's risk appetite and monitors the risk profile of the Company.

The Company has a risk map which consists of the key risks and controls in place to mitigate those risks. The risk map, which is reassessed regularly by the Audit Committee, provides a basis for the Audit Committee and the Board to regularly monitor the effective operation of the controls and to update the matrix when new risks are identified. The Board's responsibility for conducting a robust assessment of the principal risks is embedded in the Company's risk map and stress testing. The Board, through delegation to the Audit Committee, undertakes this robust annual assessment and review of the principal risks facing the Company, together with a review of any new risks which may have arisen during the year.

The Company's investment management and administration functions have historically been outsourced to external service providers. In February 2019, Ranger's contract expired, and the Company appointed IFM as its AIFM working with the Board. In addition, the Company continues to rely on external service providers for a number of management and administrative functions. Any failure of any external service provider to carry out its obligations could have a materially detrimental impact on the effective operation, reporting and monitoring of the Company's financial position. This is likely to have an effect on the Company's ability to meet its new investment objective successfully. The Company receives and reviews internal control reports from its key external service providers on an annual basis and receives a third party independently reviewed control report on its Administrator and Registrar. The Audit Committee has reviewed and considered the guidance supplied by the Financial Reporting Council ("FRC") on Risk Management, Internal Control, and Related Finance and Business Reporting. Information regarding the Company's internal control and risk management procedures can be found in the Corporate Governance Statement.

The Board will continue to keep the Company's system of risk management and internal control under review and will continue to ensure that the principal risks and challenges faced by the Group are fully understood and managed appropriately.

An overview of the principal risks and the main uncertainties that the Board considers to be currently faced by the Company are provided below, together with the mitigating actions being taken.

Risks arising due to Managed Wind-Down

In a Managed Wind-Down, the value of the Portfolio will be reduced and concentrated in fewer holdings, and the mix of asset exposure will be affected accordingly.

The Company might experience increased volatility in its Net Asset Value and/or its Share price as a result of possible changes to the Portfolio structure.

The Company's assets may not be realised at their fair market value, and it is possible that the Company may not be able to realise some assets at any value.

Sales commissions, liquidations cost, taxes and other costs associated with the realisation of the Company's assets will reduce the cash available for distribution to Shareholders.

Due to the time it would typically take to repatriate the proceeds from the sale of assets to the UK, it is expected that there could be potentially significant time lags between sales made by the Company and any subsequent returns of capital to Shareholders.

The timing and ultimate amount of any returns will be impacted by the tax regimes of the countries in which the Company invests.

The liquidity profile of the Portfolio is such that Shareholders may have to wait a considerable period of time before receiving all of their distributions pursuant to the Managed Wind-Down. During that time, the concentration of the value of the Portfolio in fewer holdings will reduce diversification and the spread of risk. This may adversely affect the Portfolio's performance.

The maintenance of the Company as an ongoing listed vehicle will entail administrative, legal and listing costs, which will decrease the amount ultimately distributed to Shareholders. Although the Board intends to maintain the Company's listing for as long as the Directors believe it to be practicable during the Managed Wind-Down period, the Directors shall immediately notify the Financial Conduct Authority ("FCA") and may seek suspension of the listing of the Shares pursuant to the requirements of the Listing Rules (which may include Shareholder approval prior to any suspension or de-listing) if the Company can no longer satisfy the continuing obligations for listing set out therein including, but not limited to, the requirements in respect of Shares held in "public hands" (as such phrase is defined in the Listing Rules) and in relation to spreading investment risk, and consequently the listing of the Shares may be suspended and/or cancelled. Once suspended and/or cancelled, the Shares would no longer be capable of being traded on the London Stock Exchange, which would materially reduce market liquidity in the Shares. The Company would also lose its "Investment Trust" tax status in the UK as a result of such suspension or cancellation which may impact on the returns to investors.

It should also be noted that there may be other matters or factors which affect the availability, amount or timing of receipt of the proceeds of realisation of some or all of the Company's investments. In particular, ongoing redemptions will decrease the size of the Company's assets, thereby increasing the impact of fixed costs incurred by the Company on the remaining assets. In determining the size of any distributions, the Directors will take into account the Company's ongoing running costs, however, should these costs be greater than expected or should cash receipts for the realisations of investments be less than expected, this will reduce the amount available for Shareholders in future distributions.

Declarations of dividends will be made at the Directors' sole discretion, as and when they deem that the Company has sufficient distributable reserves available to make a distribution and which complies with the undertakings made to RDLZ and the ZDP Holders. Shareholders, therefore, have little certainty as to whether or not the Company will make a declaration of dividend.

Mitigation

The Board have designated a number of its members as "Executive Directors" who are focused on addressing the risks associated with the Managed Wind-Down.

Legal and compliance risk

Laws applicable to Debt Instruments may govern the terms of such instruments and subject the Company to legal and regulatory examination or enforcement action.

Further, any proceeding brought by the federal or state regulatory authorities to any of the Direct Lending Platforms could result in cases against the Company itself and could affect whether the Debt Instruments are enforceable in accordance with their terms.

Mitigation

To manage this risk the Directors are regularly briefed by the Company's legal counsel on legal and regulatory developments. Further, regulatory risk is a standing item at Board meetings.

Investment risk

The Group has substantial investments remaining in Debt Instruments and the major risks include market and credit risks.

On 22 December 2016, the Company announced the bankruptcy of Argon Credit, LLC ("Argon") to which it has indirectly provided credit lines through its investment in Princeton.

On 7 November 2018, a chapter 11 Trustee was appointed in relation to the bankruptcy proceedings of Princeton Alternative Income Fund, LP and its former general partner Princeton Alternative Funding, LLC (together, "Princeton").

Based on the information provided to date by the Trustee (which the Company has not been able to independently validate or verify), the Company is currently estimating a potential recovery of approximately USD 15 million from the Princeton bankruptcy.

This remains an unverified estimate and is subject to a number of potential variables, in particular that the amount that the Company will recover will be dependent upon the final structure of the creditor and investor waterfall and distribution scheme and the actual net amount available for distribution

Link to KPITarget Return

Mitigation

The number of investments held and sector diversity enable the Group to spread the risks with regard to market volatility, currency movements, revenue streams and credit exposure.

The Company has continued to actively engage with the Trustee and its other advisers in connection with its investment in Princeton.

Taxation risk

As an investment company, the Company needs to comply with sections 1158/1159 of the Corporation Tax Act 2010.

Link to KPITotal dividends for the year

Mitigation

The Administrator prepares quarterly management accounts which allow the Board to assess the Company's compliance with Investment Trust conditions. Further, contractual arrangements with third party external service providers are in place, to ensure compliance with tax and regulatory requirements.

Cyber security risk

The Company relies on services provided by its external service providers and is therefore dependent on the effective operation of their systems in place. Likewise, the Company is dependent on the Direct Lending Platforms' ability to effectively manage vulnerabilities to technological failure and cyber-attacks.

Any weakness in their information security could result in a disruption to the dealing procedures, accounting and payment process.

Mitigation

The Company performs a due diligence review before entering into contracts with any external service provider and also prior to investing in a Debt Instrument. Subsequently, the Company receives a controls performance report such as ISAE 3402 report on key service providers which is subject to the Audit Committee's review.

Brexit risk

The Company has also considered Brexit's current and potential impact on the Company. The majority of the Group's portfolio is denominated in USD and the Company has entered into derivative contracts to manage the exposure to foreign currency on existing assets. Therefore, the Board has concluded that this event does not represent a principal risk to the Company.

Viability Statement

Given the change in Investment Policy and in accordance with the AIC Code, the Directors have assessed the prospects of the Company over its expected realisation timeframe, taking into account the final repayment date of the RDLZ Shares in 2021.

The Company has sufficient liquidity to redeem the ZDP Shareholders at any time.

The Directors also considered the requirement in the Articles of Association (the "Articles") to put a proposal for the continuance of the Company at the AGM in 2020 and have reviewed the potential impact that this may have on the Company's viability.

In their assessment of the viability of the Company, the Directors have considered each of the principal risks and uncertainties above. The Directors have also reviewed the Company's income and expenditure projections and the fact the Company's investments (including those held through the Trust) do not comprise readily realisable securities which can be sold to meet funding requirements if necessary. The Company maintains a risk register for its stress test to identify, monitor and control risk concentration.

The Company has processes for monitoring operating costs, share price discount, compliance with the investment objective and policy, asset allocation, the portfolio risk profile, counterparty exposure, liquidity risk, financial controls and stress-testing based assessment of the Company's prospects.

The Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the Managed Wind-Down period. The Directors note that the Company has sufficient liquidity to repay the ZDP Holders from existing cash reserves without any recourse to further leverage, further details are shown in the notes below to the consolidated financial statements. 

Going Concern

As announced on 6 July 2018 and disclosed within the Chairman's Statement above, the Board established three new committees that aim to quickly and efficiently wind down the Company. These committees focus on the Princeton proceedings and the associated strategic decisions and the Managed Wind-Down and realisation of the Company's existing portfolio (excluding Princeton) with the specific aim of maximising returns for Shareholders.

The Board are in the process of disposing of the Company's assets in an orderly manner and returning Shareholders' capital to them and fully intend to adequately reimburse the ZDP Shareholders by the end of July 2021, or earlier if an agreement is reached with the ZDP Shareholders.

Given these developments and the intention to wind down the Company, the use of the going concern basis in preparing the financial statements of the Group is not considered to be appropriate. As such the financial statements have been prepared on a basis other than that of a going concern, under which assets are measured at their net realisable value. There were no adjustments made to the carrying values of the assets and liabilities of the Group as a result of this change in the basis of preparation, because the Directors consider the carrying value of assets to approximate their net realisable value.

No provision has been made for the costs of winding up the Company as these will be charged to the income statement on an accruals basis as they are incurred or as the Company becomes obligated to make such payments in the future.

The Directors believe that the Company and Group have adequate resources to continue in operational existence until the anticipated liquidation of the Company. The Board will ensure that sufficient liquidity is held back at all times to ensure all liabilities, including those to ZDP Shareholders are at all times adequately covered.

Performance

The table below provides monthly performance information:

Premium/Discount

The Board monitors the price of the Company's Ordinary Shares in relation to their NAV and the premium/discount at which the shares trade. The following table shows the premium/discount through the year:

Analysis of Key Performance Indicators and Investment Restrictions

The Company's new investment policy calls for an orderly wind-down of the Company's investments with the aim of maximising risk-adjusted IRRs to Shareholders. New investments are restricted only to existing exposures and are subject to a number of pre-conditions.

8 This includes return on investments including provision for loan losses but excluding expenses and Investment Manager fees

Environmental, Human Rights, Employee, Social and Community Issues

The Company has no employees and the Board consists of Non-Executive and Executive Directors. As an Investment Trust, the Company's own direct environmental impact is minimal, and it has no direct impact on the community and as a result does not maintain specific policies in relation to these matters.

The Company falls outside the scope of the Modern Slavery Act 2015 as it does not meet the turnover requirements under that act. The Company operates by outsourcing significant parts of its operations to reputable professional companies, who are required to comply with all relevant laws and regulations and take account of social, environmental, ethical and human rights factors, where appropriate.

The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013, including those within its underlying investment portfolio.

In carrying out the realisation of the portfolio, the Company aims to conduct itself responsibly and ethically.

Board Diversity

The Board consists entirely of male Directors. A description of the Company's Board diversity is set out in the Directors' Report.

Non-Financial Information Statement

The Board has considered the requirements of the non-financial information statement in accordance with section 414CB of the Companies Act 2006 and do not consider them to be relevant to the Company, it being an Investment Trust with no employees and minimal environmental impact, with the exception of a description of the principal risks and description of the business model. These can be found above.

The Group Strategic Report was approved by the Board of Directors on 17 June 2019 and signed on its behalf by:

Dominik DolenecChairman

Board of Directors

Dominik Dolenec - Chairman

Brendan Hawthorne - Non-executive director and Chairman of the Audit Committee

Brett Miller - Executive Director

Gregory Share - Non-executive Director and Chairman of the Remuneration and Nomination Committee

Joseph Kenary - Executive Director

Nick Paris - Non-executive Director

EXTRACTS FROM THE DIRECTORS' REPORT

Current Share Capital

As at 31 December 2018 and as at the date of this Report, the Company had 16,122,931 Ordinary Shares of GBP 0.01 each in issue, all of which are admitted to the official list maintained by the Financial Conduct Authority and admitted to trading on the London Stock Exchange. No shares were held in treasury during the year or at the year end. During the year, there were no purchases of Ordinary Shares made by the Company.

The rights attaching to the Company's Ordinary Shares are set out in the Company's Articles. Further details are shown in note 10 to the consolidated financial statements.

The Shareholders granted the Directors the following authorities at the Annual General Meeting of the Company held on 18 June 2018 until the forthcoming Annual General Meeting of the Company:

· authority to allot equity securities up to an aggregate nominal value of GBP 16,122.93, being approximately 10% of the Company's issued share capital, on a non-pre-emptive basis; and

· authority to make market purchases of up to 2,416,827 Ordinary Shares, representing 14.99% of the Company's issued share capital.

Resolutions to renew the above authorities in respect of the allotment (and associated pre-emption approvals) and buyback of Ordinary Shares will be sought at the 2019 AGM on 12 July 2019.

Dividends

The declaration of interim dividends can be made at the Directors' sole discretion, as and when they deem that the Company has sufficient distributable reserves available to make a distribution, however, the Board does not intend to make quarterly dividends, other than when required to maintain its investment trust status.

For the year ended 31 December 2018, the Company declared dividends of 85.00% (2017: 91.83%) of its earned distributable income.

Dividend Policy

As advised to Shareholders in the Company's circular dated 29 October 2018, the Board does not intend to make quarterly dividends and will instead make payments by way of ad-hoc special dividends, where appropriate, during the course of the managed wind-down process so that the Company is able to return available cash to Shareholders as soon as reasonably practicable after cash becomes available in the portfolio whilst ensuring compliance with its obligations to RDLZ and the ZDP Shareholders.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The Directors are responsible for preparing the Annual Report and financial statements in accordance with United Kingdom applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial period. Under that law they have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS").

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group and the Company for that period. In preparing these financial statements, the Directors are required to: 

· properly select and apply accounting policies consistently;

· make judgement and estimates which are reasonable and prudent;

· present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

· provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance; and

· prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. As explained in note 2 to the financial statements, the Directors do not believe the going concern basis to be appropriate for the preparation of the financial statements of the Group and accordingly the financial statements of the Group have not been prepared on a going concern basis. No provision has been made for the costs of winding up the Company as these will be charged to the income statement on an accruals basis as they are incurred or as the Company becomes obligated to make such payments in the future.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and Company and to prevent and detect fraud and other irregularities.

The Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with relevant laws and regulations, and for ensuring that the Annual Report includes information required by the Disclosure and Transparency Rules of the UK Listing Authority.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's and Stock Exchange websites. Legislation in the UK governing the preparation and dissemination of financial statements may differ from the legislation in other jurisdictions.

Responsibility statement

We, the Directors listed above, being the persons responsible, hereby confirm to the best of our knowledge that:

· the financial statements, have been prepared in accordance with IFRS, give a true and fair view of the assets, liabilities, financial positions and profit or loss of the Group and the Company; and

· the Group Strategic Report and the Executive Director's Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties the Company faces.

The Directors consider that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Group's and Company's position and performance, business model and strategy.

This responsibility statement was approved by the Board of Directors on 17 June 2019 and is signed on behalf of the Board. 

Dominik DolenecChairman

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the year ended 31 December 2018 but is derived from those accounts. Statutory accounts for the year ended 31 December 2018 will be delivered in due course.

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF RDL REALISATION PLC (FORMERLY KNOWN AS RANGER DIRECT LENDING FUND PLC)

Report on the audit of the financial statements

Report on other legal and regulatory requirements

Garrath Marshall, ACA (Senior statutory auditor)

For and on behalf of Deloitte LLP

Statutory Auditor

London, United Kingdom

17 June 2019

 CONSOLIDATED AND COMPANY STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2018

The accompanying notes below are an integral part of these financial statements.

The financial statements for the year ended 31 December 2018 of RDL Realisation Plc , a public company limited by shares and incorporated in England and Wales with registered number 09510201, were approved and authorised for issue by the Board of Directors on 17 June 2019.

Signed on behalf of the Board of Directors:

Dominik DolenecChairman

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2018

The accompanying notes below are an integral part of these financial statements.The total column of this Statement of Comprehensive Income was prepared in accordance with International Financial Reporting Standards ("IFRS"). The supplementary revenue and capital columns are both prepared under the guidance published by the Association of Investment Companies ("AIC"). All items in the above Statement derive from continuing operations.

COMPANY STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2018

The accompanying notes on pages below are an integral part of these financial statements.

The total column of this Statement of Comprehensive Income was prepared in accordance with International Financial Reporting Standards ("IFRS"). The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies ("AIC"). All items in the above Statement derive from continuing operations.

Other comprehensive income

There were no items of other comprehensive income in the current year or prior year.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEAR ENDED DECEMBER 2018

COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2018

The accompanying notes below are an integral part of these financial statements.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 2018

The accompanying notes below are an integral part of these financial statements.

COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 2018

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2018

1. GENERAL INFORMATION

The Company was incorporated and registered in England and Wales on 25 March 2015 and commenced operations on 1 May 2015 following its admission to the London Stock Exchange Main Market. The registered office of the Company is 6th Floor, 65 Gresham Street, London, EC2V 7NQ.

The consolidated financial statements ("financial statements") include the results of the Trust and RDLZ. The Company will be managed, either by a third party non-EEA investment manager or internally, by the Company's Board of Directors with the intention of realising all remaining assets in the portfolio, in a prudent manner consistent with the principles of good investment management with a view to returning cash to its Shareholders in an orderly manner and meeting the obligations of the Company to RDLZ in respect of the ZDP Shares or purchasing ZDP Shares to reduce those obligations in advance of the final date for payments on the ZDP Shares.

2. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted in the preparation of these financial statements are set out below.

Basis of accounting and preparation

These financial statements have been prepared in compliance with International Financial Reporting Standards ("IFRS") as adopted by the European Union ("EU"). The financial statements were also prepared in accordance with the Statement of Recommended Practice ("SORP") for Investment Trusts issued by the AIC (as issued in November 2014 and updated in January 2017), where this guidance is consistent with IFRS.

Basis of measurement and consolidation

The financial statements have been prepared on a historical cost basis as modified for the revaluation of certain financial assets. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Trust and RDLZ are fully consolidated from the date on which control is transferred to the Group and deconsolidated from the date that control ceases.

Going concern and Viability statement

As announced on 6 July 2018 and disclosed within the Directors' Report in the full Annual Report, the Board has established two committees that both aim to quickly and efficiently wind down the Company. These committees are focusing on the Princeton proceedings and the associated strategic decisions and the wind-down and realisation of the Company's existing portfolio (excluding Princeton) with the specific aim of maximising returns for stakeholders.

Plans are still currently being formulated by the Board, but the intention is to dispose of the Company's assets in an orderly manner and return Shareholders' capital to them and adequately reimburse the ZDP Shareholders by the end of July 2021, further details are shown in note 25 to the consolidated financial statements.

Given these developments and the intention to wind down the Company, the use of the going concern basis in preparing the financial statements of the Group is not appropriate. As such the financial statements have been prepared on a basis other than that of a going concern, which require assets to be measured at their net realisable value. There were no adjustments made to the carrying values of the assets and liabilities of the Group as a result of this change on the basis of preparation, because the Directors' consider the carrying value of assets to approximate the net realisable value.

No provision has been made for the costs of winding up the Company as these will be charged to the income statement on an accruals basis as they are incurred or as the Company becomes obligated to make such payments in the future.

The Directors believe that the Company and Group have adequate resources to continue in operational existence until the anticipated liquidation of the Company. The Board will ensure that sufficient liquidity is held back at all times to ensure all liabilities, including those to ZDP Shareholders are at all times adequately covered.

The Directors confirm that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the Managed Wind-Down period. The Directors note that the Company has sufficient liquidity to repay the ZDP Holders from existing cash reserves without any recourse to further leverage.

New Accounting Standards, amendments to existing Accounting Standards and/or interpretations of existing Accounting Standards (separately or together, "New Accounting Requirements") not yet adopted

In the Directors' opinion, all non-mandatory New Accounting Requirements are either not yet permitted to be adopted, or would have no material effect on the reported performance, financial position or disclosures of the Group and consequently have neither been adopted nor listed.

 IFRS 9 Financial Instruments

IFRS 9 Financial Instruments sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. This standard replaces IAS 39 Financial Instruments: Recognition and Measurement.

i - Classification - Financial assets

IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, Fair Value through Other Comprehensive Income ("FVOCI") and Fair Value through Profit or Loss ("FVTPL"). The standard eliminates the existing IAS 39 categories of held to maturity, loans and receivables and available for sale.Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the hybrid financial instrument as a whole is assessed for classification.

Following the Company's announcement on 11 June 2018 that the Company will move to realise its assets and proceed with the wind-down process, the Company's business model has changed from holding financial assets to collect their contractual cash flows to realising assets, in a prudent manner consistent with the principles of good investment management with a view to returning cash to its Shareholders in an orderly manner. In accordance with IFRS 9, the reclassification occurs on the first day of the first reporting period following the change in business model. As the company prepared interim accounts with a period ending 30 June 2018, the loans held at amortised cost were reclassified to FVTPL on the 01 July 2018. No gain or loss was recognised upon reclassification, as the directors considered the amortised cost value to approximate fair value.

ii - Impairment - Financial assets and contract assets

IFRS 9 replaces the 'incurred loss' model in IAS 39 with a forward-looking 'expected credit loss' (ECL) model. This will require considerable judgement about how changes in economic factors affect ECLs, which will be determined on a probability-weighted basis.

The new impairment model will apply to financial assets measured at amortised cost or FVOCI, except for investments in equity instruments, and to contract assets.

Under IFRS 9, loss allowances will be measured on either of the following bases:

- 12 month ECL: these are ECLs that result from possible default events within the 12 months after the reporting date; and

- lifetime ECL: these are ECLs that result from all possible default events over the expected life of a financial instrument.

Lifetime ECL measurement applies if the credit risk of a financial asset at the reporting date has increased significantly since initial recognition and 12-month ECL measurement applies if it has not. An entity may determine that a financial asset's credit risk has not increased significantly if the asset has low credit risk at the reporting date.

Under IFRS 9, the Group has to classify all financial instruments in scope for impairment into 3 Stages - stage 1, stage 2 or 3, depending on the change in credit quality since initial recognition.

Investments in equity instruments and financial assets at FVTPL are out of scope of the impairment requirement.

Stage 1

This includes loans where there is no significant increase in credit risk since initial recognition or loans that have low credit risk on reporting date. For loans in stage 1, interest is accrued on the gross carrying amount of the loans and a 12-month expected credit loss ("ECL") is factored in the profit and loss ("P&L") calculations.

Stage 2

This consists of loans with significant increase in credit risk since initial recognition but not credit impaired. Interest for loans in stage 2 is accrued on the gross carrying amount, however, a lifetime ECL is factored into the profit and loss calculations.

Stage 3

Includes loans which demonstrate evidence of impairment on the reporting date. Interest is accrued on the net carrying amount of the loans and a lifetime ECL is factored into the profit and loss calculations.

For short-term receivables and cash and cash equivalents, the ECL model is not likely to result in a material change of the balance due to their short-term nature therefore the Group will apply the simplified approach for contracts that have a maturity of one year or less.

iii - Classification - Financial liabilities

IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities. However, under IAS 39 all fair value changes of liabilities designated as at FVTPL are recognised in profit or loss, whereas under IFRS 9 these fair value changes are generally presented as follows:

- the amount of change in fair value that is attributable to changes in the credit risk of the liability is presented in the OCI; and

- the remaining amount of change in the fair value is presented in profit or loss.

The Group has not designated any financial liabilities at FVTPL and it has no current intention to do so.

Use of estimates, judgements and assumptions

The Company 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 Group. Such changes are reflected in the assumptions when they occur.

The following are areas of particular significance to the Group's financial statements and include the use of estimates and the application of judgement.

Key source of estimation uncertainty - fair value of financial assets at fair value through profit or loss

The determination of fair values based on available market data requires significant credit judgement by the Group.

Management has applied certain estimated potential impairments to these financial instruments as of 31 December 2018. For the material financial instrument positions at 31 December 2018, a combination of factors was taken into consideration.

In addition to the credit judgement of management related to the reserves for potential impairment, third party valuations and analysis were also employed for the material financial instruments for comparison and consideration. For these third-party valuations, a weighted average IRR for each platform was used. Included in the discount analysis by third parties were increased discount rates for individual non-performing loans. Such valuations considered actual and market default rate comparisons for the discount rate. The key estimation uncertainty is considered to be the discount rate applied to the Vehicle Services Contract platform, further details are shown in note 18 below.

Functional and presentation currency

The financial statements are presented in US Dollars ("USD"), the currency of the primary economic environment in which the Company operates, the Company's functional currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign currency assets and liabilities are translated into the functional currency using the exchange rate prevailing at the statement of financial position date.

Financial assets held at fair value through profit or loss

The Group's financial assets consist of loans at fair value through profit or loss, equity investments in funds and an investment in a Cayman SPV. The Group designated its investment as financial assets at fair value through profit or loss in accordance with International Reporting Standards 9: Financial Instruments ("IFRS 9 "), as the fund is managed and its performance is evaluated on a fair value basis and the Group now holds the investments with the intention to sell rather than to collect contractual cash flows.

Purchases and sales of financial assets are recognised on the trade date, the date which the Group commits to purchase or sell the assets and are derecognised when the rights to receive cash flows from the financial assets have expired or the Group has transferred substantially all risks and rewards of ownership. Financial instruments are initially recognised at fair value, and transaction costs for financial assets carried at fair value through profit or loss are expensed. Gains and losses arising from changes in the fair value of the Group's financial instruments are included in the Statement of Comprehensive Income in the period which they arise.

Financial liabilities at amortised cost - Zero Dividend Preference Shares

These are initially recognised at cost, being the fair value of the consideration received associated with the borrowing net of direct issue costs. Zero Dividend Preference Shares are subsequently measured at amortised cost using the effective interest method. Direct issue costs are amortised using the effective interest method and are added to the carrying amount of the Zero Dividend Preference Shares.

Derivative financial instruments

Derivative financial instruments, including short-term forward currency and swap contracts are classified as held at fair value through profit or loss, and are classified in current assets or current liabilities in the statement of financial position. Derivatives are entered into to reduce the exposure on the foreign currency loans. Changes in the fair value of derivative financial instruments are recognised in the Statement of Comprehensive Income as a capital item. The Group's derivatives are not used for speculative purposes and hedge accounting is not applied.

Taxation

Investment trusts which have approval as such under section 1158 of the Corporation Taxes Act 2010 are not liable for taxation on capital gains. The Company has taken advantage of modified UK tax treatment in respect of its qualifying interest income for an accounting period and has chosen to designate as an "interest distribution" all or part of any amount it distributes to the Shareholders as dividends, to the extent that it has qualifying interest income for the accounting period. As such, the Company is able to deduct such interest distributions from its income in calculating its taxable profit for the relevant accounting period. It is expected that the Company will have material amounts of qualifying interest income and therefore may decide to designate some or all of the dividends payable as interest distributions.

The current tax payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted at the statement of financial position date.

Deferred tax is the tax expected to be payable or recoverable on temporary differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the liability method. Deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax rates that have been enacted or substantively enacted at the statement of financial position date.

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Investment and other income

Investment income and other income are recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Income for all interest bearing financial instruments is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to that asset's net carrying amount on initial recognition.

Dividend income

Dividend income from investments is recognised when the Shareholders' rights to receive payment have been established.

Dividends payable

Dividends payable on ordinary shares are recognised in the Statement of Changes in Equity when approved by the Directors in respect of interim dividends and by the Shareholders if declared as a final dividend by the Directors at the AGM. As advised to Shareholders in the Company's circular dated 29 October 2018, the Board does not intend to make quarterly dividends and will instead make payments by way of ad-hoc special dividends, where appropriate, during the course of the managed wind-down process so that the Company is able to return available cash to Shareholders as soon as reasonably practicable after cash becomes available in the portfolio whilst ensuring compliance with its obligations to RDLZ and ZDP Shareholders.

Cash and cash equivalents

Cash and cash equivalents include cash at bank and in hand and highly liquid interest-bearing securities with original maturities of three months or less.

Segmental reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses. The Directors perform regular reviews of the operating results of the Group and make decisions using financial information at the Group level only. Accordingly, the Directors believe that the Group has only one reportable operating segment.

The Directors are responsible for ensuring that the Group carries out business activities in line with the transaction documents. They may delegate some or all of the day-to-day management of the business, including the decisions to purchase and sell securities, to other parties both internal and external to the Group. The decisions of such parties are reviewed on a regular basis to ensure compliance with the policies and legal responsibilities of the Directors, therefore the Directors retain full responsibility as to the major allocation decisions of the Group.

Earnings per share

The Company presents basic and diluted earnings per share ("EPS") data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary Shareholders by the weighted average number of ordinary shares outstanding during the period. The diluted EPS is the same as the Basic EPS as there is currently no arrangement which could have a dilutive effect on the Company's ordinary shares.

Share capital and share premium

Ordinary Shares are not redeemable and are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity as a deduction, net of tax, from the proceeds.

Expenses (including finance costs)

Expenses are accounted for on an accruals basis and are recognised in the Statement of Comprehensive Income. Investment management fee is 100% allocated to revenue. Except for provision of default and performance fee associated with financial assets at fair value through profit or loss, which are allocated into capital and revenue in accordance with SORP, all other expenses are charged through revenue.

3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS 

The Group's financial assets at fair value through profit or loss represents all its loan investments and investments in Princeton and in Crowdnetic.