29 Mar 2021 07:00
RM ZDP PLC
LEGAL ENTITY IDENTIFIER ('LEI'): 213800QYQTLY4A32F885
ANNUAL FINANCIAL REPORT ANNOUNCEMENT
For the year ended 31 December 2020
OBJECTIVE AND FINANCIAL INFORMATION
Objective
The objective of RM ZDP Plc (the "Company") is to meet the final capital entitlement of the ZDP Shares at the ZDP Repayment Date.
Financial Information |
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| Year ended 31 December 2020 | Year ended 31 December 2019 |
Accrued capital entitlement per ZDP Share | 109.86p | 106.18p |
ZDP Share redemption yield | 3.5% | 3.5% |
CHAIR'S STATEMENT
I am pleased to present the Company's Annual Report and accounts for the year ended 31 December 2020 for RM ZDP Plc (the "Company").
The Company is a wholly owned subsidiary of RM Secured Lending plc (the "Parent" or "RMDL") and was established for the purpose of issuing zero dividend preference shares of GBP 0.01 each ("ZDP" Shares).
On 3 April 2018, 10,869,950 ZDP Shares were issued and admitted to trading on the standard segment of the Official List of the London Stock Exchange. The Company has made a loan of the gross proceeds raised from the issue of the ZDP Shares to RMDL pursuant to the ZDP Loan Agreement between the Company and RMDL ("Loan Agreement").
Subject to the Companies Act, on a return of capital, on a winding‐up or otherwise, ZDP Shareholders will be entitled to receive an amount equal to the Initial Capital Entitlement of 100 pence per ZDP Share, increased at such daily accrual rate as compounds annually to give a Final Capital Entitlement of 110.91 pence per ZDP Share at the ZDP Repayment Date of 6 April 2021, which is equivalent to a Redemption Yield of 3.5 per cent. per annum (compounded annually).
As at 31 December 2020 the accrued capital entitlement per ZDP Share was 109.86p and the share price per ZDP Share was 107.50p.
As part of the Loan Agreement, the Company and the Parent entered into the Undertaking. Pursuant to the Undertaking, to the extent that the Final Capital Entitlement multiplied by the number of outstanding ZDP Shares as at the Repayment Date (or, if earlier, the accrued capital entitlement multiplied by the number of outstanding ZDP Shares following the date on which a Winding-Up Resolution is approved) exceeds the aggregate principal amount and accrued interest due from the Parent to the Company pursuant to the Loan Agreement as at the Repayment Date, the Parent shall: (i) subscribe an amount equal to or greater than the Additional Funding Requirement for the Company Ordinary Shares or (ii) make a capital contribution or gift or otherwise pay an amount equal to or greater than (where rounding is required) the Additional Funding Requirement. Where applicable, the Additional Shares may be Company Ordinary Shares or such other class of shares in the Company as is agreed between the Parent and the Company.
The key performance indicator against which the Board has reviewed the Company's performance is set out on page 4.
From the perspective of the Directors, the Company's activities are integrated with the Parent for which the Annual Report can be found on the Parent's website.
Norman Crighton
Chair
26 March 2021
BOARD OF DIRECTORS
Composition
At the date of this report, the Board consists of three non-executive Directors including the Chair, two of whom are male and one female. All the Directors have served during the entire year since their appointment on 21 February 2018.
The Board believes that during the year ended 31 December 2020 its composition was appropriate for the Company's purpose.
The Directors have a broad range of relevant experience to meet the Company's requirements and their biographies are given below:
Norman Crighton (Non-executive Chair)
Norman is the Chair of Weiss Korea Opportunity Fund and AVI Japan Opportunity Trust. Norman was, until May 2011, an Investment Manager at Metage Capital Limited where he was responsible for the management of a portfolio of closed-ended funds and has 30 years' experience in closed-ended funds having worked at Olliff and Partners, LCF Edmond de Rothschild, Merrill Lynch, Jefferies International Limited and latterly Metage Capital Limited. His experience in investment banking covers analysis and research as well as sales, market making, proprietary trading and corporate finance.
Guy Heald (Non-executive Director)
Guy has spent most of his career in banking, not only specialising in markets, but also in general management positions overseeing all aspects of banking, including lending. He worked in London, New York and Tokyo and has an extensive knowledge of companies needs for financing and managing interest rate, liquidity and foreign exchange risks. During his career he worked for Brown Shipley, Chemical Bank and HSBC where he held senior positions including Head of Global Markets and Chief Executive Officer at HSBC Japan. After leaving banking in 2003 he has served as an adviser, non-executive director and trustee of several charities as well as starting a number of successful family companies of his own. The SME market is of particular interest to Guy, specifically the challenges facing companies in their pursuit for growth, as he invests venture and growth capital himself.
Marlene Wood (Non-executive Director and Chair of the Audit Committee)
Marlene is a chartered accountant with a broad range of experience in both the private and public sector and is currently a Non-executive Director and Chair of the Audit Committee of GCP Student Living plc and Home REIT plc.
Marlene has 20 years' experience in the commercial property sector having been finance director for Miller Developments raising finance for major property transactions both in the UK and Europe. Her experience covers governance and risk management as well as financial oversight and debt raising.
STRATEGIC REPORT AND OTHER STATUTORY INFORMATION
Incorporation details
RM ZDP Plc was incorporated and registered in England and Wales on 21 February 2018 with registered number 11217952 as a public company limited by shares. The registered office of the Company is at 1st Floor, Senator House, 85 Queen Victoria Street, London, EC4V 4AB.
Principal activities
The Company is a wholly owned subsidiary of RM Secured Direct Lending PLC (the "Parent") and was incorporated by the Parent for the sole purpose of issuing the ZDP Shares. The Company's only material financial obligations are in respect of the ZDP Shares. Its only material assets are its Loan to the Parent pursuant to the Loan Agreement and the obligation of the Parent pursuant to the Undertaking to put the Company in a position to meet its obligations in respect of the ZDP Shares and to pay its operating expenses.
Objective
The objective of the Company is to meet the final capital entitlement of the ZDP Shares at the ZDP Repayment Date.
As per the prospectus, subject to the Companies Act, on a return of capital, on a winding‐up or otherwise, ZDP Shareholders will be entitled to receive an amount equal to the Initial Capital Entitlement of 100 pence per ZDP Share, increased at such daily accrual rate as compounds annually to give a Final Capital Entitlement of 110.91 pence per ZDP Share at the ZDP Repayment Date of 6 April 2021, which is equivalent to a Redemption Yield of 3.5 per cent. per annum (compounded annually).
Financial performance
The current year loss is £274,000 (2019: loss of £269,000).
Key performance indicators
The Board reviews the performance of the Company by reference to one key performance indicator (KPIs) as follows;
· Accrued capital entitlement, which represents the Company's liability per ZDP share. As at 31 December 2020, the total accrued capital entitlement is £11,541,000, equivalent to 109.86p per ZDP Share.
Further KPIs for the Parent can be found in its Annual Report. The Company's ZDP Shares market capitalisation as of 31 December 2020 was £11.7 million based on 10.9 million ZDP Shares and at a share price of 107.50p per ZDP share.
Current and future developments
The current and future developments of the Company are set out in the Chair's statement on page 2 and can also be reviewed as part of the Group's activities by reference to the Parent's Annual Report.
External service providers
Administrative functions are contracted to external service providers. However, the Directors retain responsibility for exercising overall control and supervision of these external service providers.
Principal risks and uncertainties
Due to the Company's dependence on the Parent to repay the loan and provide any contribution to meet the final capital entitlement of the ZDP Shareholders, the principal risk faced by the Company is the credit risk posed by the Loan Agreement and the Parent's ability to perform its obligations under the undertaking. The Board has carried out a robust assessment of this risk. The specific risks faced by the Parent are described in its annual report, which include macroeconomic risks, legal and compliance risks, investment risks, taxation risks, cyber security risks and an update on any effect of Brexit.
In addition, the Company is also focused on the following risk;
Final capital entitlement: The Parent's debt to the Company pursuant to the Loan Agreement and the Parent's obligations under the Undertaking will rank behind any secured creditors of the Parent, therefore it is not guaranteed that the final capital entitlement will be paid.
Mitigation: The Parent has granted the Undertaking to the Company. Pursuant to the Undertaking, the Parent will ensure that the Company has sufficient assets on the ZDP Repayment Date to satisfy the ZDP Capital Entitlement then due and to pay any operational costs or expenses incurred by the Company from time to time. Dividends and other payments to Shareholders will be restricted while the ZDP Shares are in issue unless Cover is at least 3 times immediately following any such payment or if such payment is required in order for the Parent Company to maintain its investment trust status.
In addition, under the Investment Policy of the Parent, there is a limit that gearing represented by borrowings, including any obligations owed by the Parent in respect of an issue of zero dividend preference shares (whether issued by RMDL or any other member of its group) or any third‐party borrowings, will not, in aggregate, exceed 20 per cent. of the net asset value of the Parent calculated at the time of drawdown. The unaudited Gross Assets of the Parent at 31 December 2020 were £132 million.
DIRECTORS' REPORT
The Directors present their report and accounts for the year ended 31 December 2020. The Company commenced its operations on 3 April 2018 when its ZDP Shares were admitted to trading on the London Stock Exchange.
Strategic report
The Directors' Report should be read in conjunction with the Strategic Report on pages 4 to 5.
Directors and Share Interests
The Directors who served during the year, all of whom are non-executive and were appointed with effect from incorporation on 21 February 2018 were as follows;
· Norman Crighton (Chair)
· Guy Heald
· Marlene Wood
Since the Directors of the Company are also Directors of the Parent, they are considered to be non-independent Directors of the Company; however, in their capacity as Directors of the Parent, each is considered to be independent. Biographies of each Director are set out on page 3 and demonstrate the wide range of skills and experience each brings to the Board.
A formal performance evaluation of the Parent Board and its committees has been carried out and the Parent Board considers that all of the Directors contribute effectively and have the skills and experience relevant to the future leadership and direction of the Parent.
The appointment and replacement of Directors are governed by the Articles of association ("Articles"), the Companies Act 2006 and related legislation. The Articles themselves may be amended by a special resolution in a general meeting and at a class meeting of the Company's shareholders.
Corporate governance
As set out in the Company's prospectus dated 12 March 2018, the Company has a standard listing on the London Stock Exchange, so is not obliged to comply with UK Corporate Governance Code, nor does the Company intend to comply with it on a voluntary basis. In the opinion of the Board, the interests of the Company and the Shareholders are protected by the governance procedures adopted by the Parent as set out in its Annual Report.
Legal status and listing rules requirements
The Company was incorporated in England and Wales as a public company limited by shares under the Companies Act. The principal legislation under which the Company operates is the Companies Act.
The Company is admitted to the standard segment of the Official Listing as such the Company is not subject to the ongoing requirements applicable to premium-listed companies under the Listing Rules.
Alternative Investment Fund Manager ("AIFM")
Pursuant to the AIFM Agreement, a summary of which is set out in the Prospectus, the Company has appointed International Fund Management Limited to act as the external non-EEA AIFM.
The AIFM acts as the Company's alternative investment fund manager for the purposes of AIFMD and maintains responsibility for implementing appropriate risk measurement and management standards and procedures for the Company.
Under the terms of the AIFM Agreement, the AIFM is entitled to receive a fixed fee of £3,000 plus reimbursement of all out-of-pocket costs, expenses and charges reasonably and properly incurred and documented on behalf of the Company.
Share issues
On incorporation, the issued share capital of the Company was 50,000 Ordinary Shares of a nominal value of £1.00 each which were subscribed by the Parent and fully paid up.
The Company's sole purpose is to issue ZDP Shares, which were issued at the Issue Price of 100 pence. The number of ZDP Shares to be issued pursuant to the Initial ZDP Placing was limited to 20 million ZDP Shares. However, at a general meeting of the Company held on 7 March 2018, a special resolution was proposed to, inter alia, provide the Directors with authority to allot ZDP Shares and authority to issue up to 60 million ZDP Shares. The Parent was the only shareholder entitled to vote at the general meeting and, as a result, such authority to issue up to 60 million ZDP Shares was granted prior to the issue and allotment of ZDP Shares pursuant to the Initial ZDP Placing and the ZDP Placing Programme.
Significant Agreements
The Company is not party to any significant agreements which take effect after or terminate upon a change of control of the Company, nor has the Company entered into any agreements with its Directors to provide for compensation for loss of office.
Company Secretary & Administrator
PraxisIFM Fund Services (UK) Limited has been appointed as the Company Secretary of the Company and in addition, as Administrator, to provide administration services to the Company.
Capital structure and voting rights
At the year end, the Company's issued ordinary share capital comprised 50,000 Ordinary Shares of £1.00 nominal value.
There were 10,869,950 ZDP Shares in issue at the year end.
The Company's Ordinary Shares to be held by the Parent are the only voting shares in the Company, subject to certain matters which require ZDP Shareholder approval. The ZDP Shareholders shall have the right to receive notice of all general meetings of the Company for information purposes but shall have no right to attend or vote at any such meeting of the Company.
Anti-bribery and corruption
It is the Company's policy to conduct all of its business in an honest and ethical manner. The Company takes a zero-tolerance approach to bribery and corruption and is committed to acting professionally, fairly and with integrity in all its business dealings and relationships wherever it operates. The Company's policy and the procedures that implement it are designed to support that commitment.
Notice of general meetings
At least twenty-one days' notice shall be given to all the members and to the auditors. All other general meetings shall also be convened by not less than twenty-one days' notice to all those members and to the auditors unless the Company offers members an electronic voting facility and a special resolution reducing the period of notice to not less than fourteen days has been passed, in which case a general meeting may be convened by not less than fourteen days' notice in writing. A special resolution will be proposed at the Annual General Meeting to reduce the period of notice for general meetings other than the Annual General Meeting to not less than fourteen days.
Going concern
Given that the Company is due to pay its final capital entitlement to the ZDP Shareholders (110.91 pence per ZDP Share) on the ZDP Repayment Date of 6 April 2021 and the Company will be placed into voluntary liquidation and wound up thereafter, the Directors believe that it would not be reasonable to adopt the going concern basis in preparing the financial statements. Therefore, the financial statements have been prepared under a basis other than going concern. The cost of liquidation will be borne by the Parent Company and as such provision for the estimated liquidation costs has not been provided for. Please refer to note 1 on page 23 of the accounting policies.
Auditor information
Each of the Directors at the date of the approval of this report confirms that:
(i) so far as the Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and
(ii) the Director has taken all steps that he ought to have taken as Director to make himself aware of any relevant information and to establish that the Company's auditors are aware of that information.
This confirmation is given and should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.
In accordance with Section 489 of the Companies Act 2006, an ordinary resolution to re-appoint Ernst & Young LLP as the Company's auditors will be put forward at the forthcoming Annual General Meeting.
Dividends
The Directors do not recommend the payment of a final dividend in respect of the year ended 31 December 2020.
Environmental matters
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' Reports) Regulations 2013.
Employees
The Company has no employees. As at 31 December 2020 the Company had three Directors of whom one is female and two are male.
Social, community and human rights issues
Having no employees, the Company, as an investment company, has no direct impact on social, community, environmental or human rights matters.
By order of the Board
Brian Smith
For and on behalf of
PraxisIFM Fund Services (UK) Limited
Company Secretary
26 March 2021
DIRECTORS' REMUNERATION POLICY AND REPORT
Remuneration Policy
None of the Directors will receive any remuneration from the Company for their services. No Director has a service contract with the Company and no Director is eligible for bonuses, pension benefits, share options, long-term incentive scheme or other benefits.
Remuneration in year
In line with the above policy, the directors did not receive any remuneration or other benefits from the Company in the year ended 31 December 2020.
Norman Crighton
Chair
26 March 2021
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable laws and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the group and parent company financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.
Under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules, group financial statements are required to be prepared in accordance with international financial reporting standards (IFRSs) adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates, which are reasonable and prudent;
• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the accounts; and
• prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.
For reasons stated in the Directors' Report and note 2, the financial statements of the Company have been prepared on a basis other than going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the accounts comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The accounts are published on the Company's website at https://rmdl.co.uk/ which is maintained by the Company's Investment Manager. The work carried out by the auditors does not involve consideration of the maintenance and integrity of these websites and, accordingly, the auditors accept no responsibility for any changes that have occurred to the accounts since being initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors' confirmation statement
The Directors each confirm to the best of their knowledge that:
(a) the accounts, prepared in accordance with applicable accounting standards, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
(b) this Annual Report includes a fair review of the development and performance of the business and position of the Company, together with a description of the principal risks and uncertainties that it faces.
The Directors consider that the Annual Report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for Shareholders to assess the Company's performance, business model and strategy.
For and on behalf of the Board
Norman Crighton
Director
26 March 2021
Statement of Comprehensive Income | |||
For the year ended 31 December 2020 | |||
Year ended31 December 2020 | Year ended31 December 2019 | ||
Note | £'000 | £'000 | |
Income | |||
Investment income | 3 | 229 | 220 |
Administrative expenses | (73) | (79) | |
Result from operating activities | 156 | 141 | |
Finance costs | 6 | (401) | (386) |
Loss before taxation | (245) | (245) | |
Taxation | 4 | (29) | (24) |
Loss after taxation | (274) | (269) | |
Return per Ordinary Share (pence) | (5.48p) | (5.38p) | |
There were no items of other comprehensive income in the current year therefore the loss | |||
for the year are also the total comprehensive loss for the year. | |||
The notes form an integral part of these financial statements. | |||
Statement of Financial Position |
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As at 31 December 2020 | As at 31 December 2019 | |||
Note | £'000 | £'000 | ||
Current assets | ||||
Financial assets at amortised cost | 3 | 11,942 | 11,541 | |
Cash and cash equivalents | 18 | 18 | ||
Trade and other receivables | 172 | 105 | ||
Total current assets | 12,132 | 11,664 | ||
Total assets | 12,132 | 11,664 | ||
Current liabilities | ||||
Trade and other payables | (140) | (73) | ||
Zero Dividend Preference Shares | 6 | (11,942) | (11,541) | |
Total current liabilities | (12,082) | (11,614) | ||
Total liabilities | (12,082) | (11,614) | ||
Net assets | 50 | 50 | ||
Capital and reserves: equity | ||||
Share capital | 8 | 50 | 50 | |
Capital contribution | 743 | 469 | ||
Profit and loss reserve | (743) | (469) | ||
Total Shareholders' funds | 50 | 50 | ||
NAV per share - Ordinary Shares (pence) | 9 | 100.00p | 100.00p | |
Capital Entitlement - ZDP Shares (pence) | 9 | 109.86p | 106.18p | |
The financial statements of the Company were approved and authorised for issue by the Board of Directors on 26 March 2021 and signed on their behalf by: |
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Norman Crighton
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Director | ||||
The Company is registered in England and Wales with registered company number 11217952. |
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The notes form an integral part of these financial statements. |
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Statement of Changes in Equity | |||||
For the year ended 31 December 2020 | |||||
Share capital | Capital contribution | Profit and loss | Total | ||
Note | £'000 | £'000 | £'000 | £'000 | |
Balance as at beginning of the year | 50 | 469 | (469) | 50 | |
Loss after taxation | - | - | (274) | (274) | |
Capital contribution | - | 274 | - | 274 | |
Balance as at 31 December 2020 | 50 | 743 | (743) | 50 | |
For the year ended 31 December 2019 | |||||
Share capital | Capital contribution | Profit and loss | Total | ||
Note | £'000 | £'000 | £'000 | £'000 | |
Balance as at beginning of the year | 50 | 200 | (200) | 50 | |
Loss after taxation | - | - | (269) | (269) | |
Capital contribution | - | 269 | - | 269 | |
Balance as at 31 December 2020 | 50 | 469 | (469) | 50 | |
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Share capital represents the nominal value of the Company's Ordinary Shares that have been issued. | |||||
The Capital contribution from Parent is to be utilised on current and future obligations of the Company and may be not distributable unless if required for the Company. | |||||
The notes form an integral part of these financial statements. | |||||
Statement of Cash Flows |
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For the year ended 31 December 2020 |
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Year ended31 December 2020 | Year ended31 December 2019 |
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Note |
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Operating activities |
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Result from operating activities | 156 | 141 |
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Increase in capital contribution relating to operating expenses | (156) | (141) |
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Increase in receivables | (67) | (26) |
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Increase in other payables | 67 | 26 |
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Net cash flow from operating activities | - | - |
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Increase in cash | - | - |
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Opening balance | 18 | 18 |
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Closing Balance | 18 | 18 |
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* There was no cash inflow from investment income during the year. |
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The notes form an integral part of these financial statements. |
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| Notes to the financial statements | ||||
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| 1. General information | ||||
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| RM ZDP Plc (the "Company") was incorporated in England and Wales on 21 February 2018, with registered number 11217952 as a public company limited by shares under the Companies Act. The Company has a limited life, with a ZDP Shares Repayment Date of 6 April 2021, unless early terminated or extended, as per provisions in the prospectus dated 12 March 2018. The Company commenced its operations on 3 April 2018.
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| The Company's ZDP Shares were admitted to the Official List of the UK Listing Authority with a standard listing on 3 April 2018 ("Admission"). On the same day, trading of the Ordinary Shares commenced on the London Stock Exchange. The registered office is 1st Floor, Senator House, 85 Queen Victoria Street, London, EC4V 4AB. | ||||
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| 2. Significant accounting policies | ||||
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| The principal accounting policies applied by the Company are set out below: | ||||
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| (a) Basis of accounting The financial statements have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 (''IFRS'') and the applicable legal requirements of the Companies Act 2006.
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| (b) Going concern | ||||
| Given that the Company is due to pay its final capital entitlement to the ZDP Shareholders (110.91 pence per ZDP Share) on the ZDP Repayment Date of 6 April 2021 and the Company will be placed into voluntary liquidation and wound up thereafter, the Directors believe that it would not be reasonable to adopt the going concern basis in preparing the financial statements. The cost of liquidation will be borne by the Parent Company as such provision for the estimated liquidation costs has not been provided for. The accounts have been prepared on a basis other than a going concern but the ZDP's shown in the financial statements continue to be presented on an amortised basis rather than a settlement basis. This is deemed appropriate given the purpose of the Company being limited to the issuance of ZDP shares. The capital entitlement attached to the ZDPs will continue to be recognised until their maturity in April 2021. All other receivables and cash are recognized at an equivalent to the realizable value and payables at an equivalent to settlement value.
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| (c) Financial assets and liabilities at amortised cost-Loans made by the Company and ZDP Shares | ||||
| Loans made by the Company to its Parent are classified financial assets at amortised cost. ZDP Shares have been classified as financial liabilities at amortised cost.
Loans made by the Company and ZDP Shares are initially recognised at cost, being the fair value of the consideration received or paid associated with the loan or borrowing. Loans and ZDP Shares are subsequently measured at amortised cost using the effective interest method, less any impairment (for the loans). Interest income is recognised by applying the effective interest rate. The loan will be de-recognised when the company is no longer eligible for the cash flows from it and the ZDPS will be de-recognised when they are repaid.
The final capital entitlement to ZDP Shareholders will rank in priority to the capital entitlement of the Ordinary Shares as such ZDP Shares are classified as a liability.
The accounts have been prepared on a breakup basis but the figures shown in the financial statements continue to be presented on an amortised basis rather than a settlement basis given the purpose of the Company being limited to the issuance of ZDP shares. | ||||
| Impairment of assets - Financial assets at amortised cost and Trade and other receivables are subject to impairment calculated under the expected credit loss model within IFRS 9. | ||||
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| (d) IncomeInterest income is recognised on accrual basis using the effective interest rate method. | ||||
| (e) ExpensesAll expenses are accounted for on an accruals basis and recognised in the Statement of Comprehensive Income.
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| (f) Taxation | ||||
| The charge for taxation is based upon the net return for the period using the applicable UK corporation tax rate for the reporting period. It takes into account both deductible and non-deductible income and expenses incurred in the reporting period. Deferred taxation will be recognised as an asset or a liability if transactions have occurred at the initial reporting date that give rise to an obligation to pay more taxation in the future, or a right to pay less taxation in the future. An asset will not be recognised to the extent that the transfer of economic benefit is uncertain. | ||||
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| (g) Dividends | ||||
| Interim dividends to the holders of shares are recorded in the Statement of Changes in Equity on the date that they are paid. Final dividends are recorded in the Statement of Changes in Equity when they are approved by Shareholders. | ||||
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| (h) Judgement, estimates and assumptions There are no judgement, estimate and assumptions for the Company that would have a significant impact on the financial statements. | ||||
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(i) Capital contribution | ||||
| Capital contribution(s) from the Parent to meet current and future obligations of the Company are recognised directly in equity.
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| (j) Segmental reporting | ||||
| The Directors perform regular reviews of the operating results of the Group as a whole and make decisions using financial information at the Group level. The Board of Directors is of the view that the Company is only engaged in one business segment. | ||||
k) Adoption of new IFRS standards
A number of new standards, amendments to standards and interpretations are effective for the annual periods beginning after 1 January 2020. None of these are expected to have a significant effect on the measurement of the amounts recognised in the financial statements of the Company.
IFRS 9 Financial Instruments - Fees in the '10 per cent' test for derecognition of financial liabilities
As part of its 2018-2020 Annual Improvements to IFRS standards process, the IASB issued an amendment to IFRS 9. The amendment clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial liability are substantially different from the terms of the original financial liability. The amendment is effective for annual reporting periods beginning on or after 1 January 2022 with earlier adoption permitted. This amendment is unlikely to have any impact on the financial statements of the Company.
Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform
The amendments to IFRS7, IFRS 9 and IAS 39 Financial Instruments: Recognition and Measurement provide a number of reliefs, which apply to all hedging relationships that are directly affected by interest rate benchmark reform. These amendments have no impact on the financial statements of the Company.
A number of new standards, amendments to standards and interpretations are not effective for the annual periods beginning after 1 January 2020 and have not been applied in preparing these financial statements and not expected to have a significant effect on the financial statements of the Company.
3 Financial assets at amortised cost | ||||||
As at 31 December 2020 | As at 31 December 2019 | |||||
£'000 | £'000 | |||||
Loan to Parent | 10,870 | 10,870 | ||||
Investment income receivable | 613 | 383 | ||||
Capital contribution receivable | 459 | 288 | ||||
Closing balance | 11,942 | 11,541 | ||||
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Intercompany Loan Agreement |
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| On 29 March 2018, the Company entered into a Loan Agreement with its Parent. Pursuant to the Loan Agreement, the Company lent the entirety of the gross proceeds of the issue of ZDP Shares to its Parent, which has been applied towards making investments in accordance with its Investment Policy and for working capital purposes. |
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| The Loan Agreement provides that, interest will accrue on the Loan daily at a rate of 2% per annum, compounded annually on each anniversary of Admission of the ZDP Shares and will be rolled up and paid to the Company along with repayment of the principal amount of the Loan to parent on the date falling 2 Business Days before the ZDP Repayment Date, provided that the Loan to Parent shall become repayable by the Parent immediately upon the passing of a Winding-Up Resolution. |
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| Deed of Undertaking |
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| The Company also entered into the Undertaking with the Parent , pursuant to which, to the extent that the Final Capital Entitlement multiplied by the number of outstanding ZDP Shares as at the ZDP Repayment Date exceeds the aggregate principal amount and accrued interest due from the Parent to the Company as at the Repayment Date, the Parent shall: (i) subscribe an amount equal to or greater than the additional funding Requirement for Subsidiary Ordinary Shares or (ii) make a capital contribution or gift or otherwise pay an amount equal to or greater than the additional funding requirement. |
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4. Taxation |
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Year ended31 December 2020 | Period ended31 December 2019 |
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Analysis of tax charge for the year | £'000 | £'000 |
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Corporation tax | 29 | 24 |
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Total tax charge for the year (see below note) | 29 | 24 |
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Factors affecting the tax charge for the year: |
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The effective UK corporation tax rate for the year is 19% (2019:19%). The tax charge for the year can be reconciled to the return on ordinary activities in the Statement of Comprehensive Income as follows: |
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Year ended31 December 2019 | Period ended31 December 2018 |
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£'000 | £'000 |
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Return on ordinary activities before taxation | (245) | (245) |
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UK corporation tax at 19% | (47) | (47) |
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Non-deductible expense | 76 | 71 |
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Total tax charge for the year | 29 | 24 |
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5. Basic and diluted loss per Ordinary Share |
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The calculation of loss per Ordinary Share is based on the net loss for the year £274,000 (2019: £269,000) and a weighted average number of 50,000 (2019:50,000) Ordinary Shares during the year.
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6. Financial liabilities at amortised cost-Zero Dividend Preference ('ZDP') Shares |
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As at 31 December 2020 | As at 31 December 2019 | |||||
£'000 | £'000 | |||||
Opening balance | 11,541 | 11,155 | ||||
Accrued interest during the year | 401 | 386 | ||||
Closing balance | 11,942 | 11,541 | ||||
Authorised | ||||||
The maximum number of ZDP Shares to be issued pursuant to the Initial ZDP Placing, as disclosed in the Prospectus dated 12 March 2018, has been set at 20 million. At a general meeting of the Company held on 7 March 2018, a special resolution was passed to issue up to 60 million ZDP Shares. |
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On 3 April 2018, the Company issued 10,869,950 ZDP Shares of a nominal value of 1 pence each at a placing price of 100 pence each to raise gross proceeds of £10,869,950, which were allotted and fully paid up. The Parent Company incurred ZDP Shares issue cost of £129,000, which has been amortised over the life of ZDP shares.
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Rights attaching to the ZDP Shares | ||||||
The ZDP Shares carry no right to receive dividends or other distributions out of revenue or any other profits of the Company.
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The ZDP Shares will have a life of 3 years and, on that basis, a Final Capital Entitlement of 110.91 pence per ZDP Share on the ZDP Repayment Date of 6 April 2021, equivalent to a Redemption Yield of 3.5% per annum (compounded annually) on the Issue Price.
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Under the obligations of Loan Agreement, the Ordinary Shares and the C Shares of the Parent rank behind the ZDP Shares. |
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Voting rights of ZDP Shares | ||||||
The ZDP Shareholders shall have the right to receive notice of all general meetings of the Company for information purposes, but shall have no right to attend or vote at any such meeting of the Company. For the avoidance of doubt: |
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• any resolution to alter, modify or abrogate the special rights or privileges attached to the ZDP Shares shall require separate class consent (by special resolution) at a class meeting of ZDP Shareholders convened and held in accordance with the ZDP Articles (a "ZDP Class Consent"); and |
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• any ZDP Recommended Resolution or any resolution to approve a, ZDP Reconstruction Proposal (if required) shall only be approved by Company Ordinary Shareholders provided they have first been approved by way of a ZDP Class Consent.
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Variation of rights and Distribution on winding up | ||
Subject to the Companies Act, on a return of capital, on a winding-up or otherwise, ZDP Shareholders will be entitled to receive an amount equal to the Initial Capital Entitlement of 100 pence per ZDP Share, increased at such daily accrual rate as compounds annually to give a Final Capital Entitlement of 110.91 pence per ZDP Shares at the ZDP Repayment Date of 6 April 2021, which is equivalent to a Redemption Yield of 3.5% per annum (compounded annually).
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The Final Capital Entitlement will rank behind any liabilities of the Parent (including the liabilities to OakNorth under the RCF and in priority to the capital entitlements of the Ordinary Shares and any C Shares. The ZDP Shares carry no entitlement to income and the whole of their return accordingly takes the form of capital. The ZDP Shareholders are not entitled to receive any part of the revenue profits (including any accumulated revenue reserves) of the Company on a winding-up, even if the accrued capital entitlement of the ZDP Shares will not be met in full. | ||
7. Auditor's remuneration
Audit fees in respect of the Company's financial statements for the year ended 31 December 2020 are £7,000 (2019: £7,000) (excludes VAT of £2,000).
8. Share capital | ||||
Authorised | ||||
As at 31 December 2020 | As at 31 December 2019 | |||
Allotted, issued and fully paid: | Number ofshares | Nominal£'000 | Number ofshares | Nominal£'000 |
Ordinary Shares of £1 each | 50,000 | 50 | 50,000 | 50 |
On incorporation, the Company issued 50,000 Ordinary Shares of a nominal value of £1.00 each which were subscribed by the Parent and fully paid up. | ||||
Voting rights | ||||
The Company's ordinary shares held by the Parent are the only voting shares in the Company, subject to certain matters which will require ZDP Shareholder approval. | ||||
Ultimate controlling rights | ||||
The voting rights in the Company are wholly owned by RM Secured Direct Lending Plc, a company incorporated and registered in England and Wales, and is therefore the immediate and ultimate controlling party.
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9. Net asset value ('NAV') / Capital entitlement per share | ||||
As at 31 December 2020 | Shares in issue | Attributable to Shareholders (£'000) | Capital entitlement per share (p) | NAV per share (p) |
Ordinary Shares | 50,000 | 50 | n/a | 100.00 |
Zero Dividend Preference Shares | 10,869,950 | 11,942 | 109.86 | n/a |
As at 31 December 2019 | Shares in issue | Attributable to Shareholders (£'000) | Capital entitlement per share (p) | NAV per share (p) |
Ordinary Shares | 50,000 | 50 | n/a | 100.00 |
Zero Dividend Preference Shares | 10,869,950 | 11,541 | 106.18 | n/a |
10. Related parties |
As at the year end, the Parent Company held 50,000 Ordinary Shares of £1 each in the Company.
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On 29 March 2018, the Company entered into a Loan Agreement and Undertaking with its Parent Company which are disclosed in note 3.
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The Directors shall not be entitled to receive remuneration in respect of their performance of their duties as Company's Directors nor shall they be entitled to receive any expenses in relation to their role of Company Directors. As at the year end, the Directors held no shareholding in the Company. |
11. Financial risk and capital management | |||
The Board of Directors has overall responsibility for the oversight of the Company's risk management framework. The objective of the Company is to provide the Final Capital Entitlement of the ZDP Shares to ZDP holders at the redemption date. Due to the Company's dependence on Parent Company to repay the loan and provide contribution to meet the final capital entitlement of the ZDP shareholders, the risks faced by the Company are considered to be the same as Parent Company. The Company has exposure to the following risk from its use of financial instruments:
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· Credit risk | |||
· Liquidity risk | |||
· Interest rate risk | |||
(i) Credit risks | |||
Credit risk is the risk of the financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Loan Agreement and the obligation of Parent Company under the Undertaking to subscribe for such number of Ordinary Shares or otherwise ensure that Company is able to pay the Final Capital Entitlement to ZDP Shareholders on the ZDP Repayment date. Parent Company's credit risk is the risk of financial loss if a counterparty to a debt instrument fails to meet its contractual obligations. Parent Company and its investment manager seek to mitigate Parent Company's credit risk by actively monitoring Parent Company's portfolio of debt instruments and the credit quality of the underlying borrowers.
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The total value of balances subject to credit risk is £11,942,000(2019: £11,541,000) being the receivables due to the parent Company. Loans to the Parent Company have low credit risk as the Parent has a strong capacity to meet its contractual cash flow obligations in the near term. This has been assessed considering the net assets and revenue forecasts of the Parent Company. Adverse changes in economic and business conditions in the longer term are still unlikely to reduce the ability of the Parent to fulfil its obligations. Having assessed these factors and the credit-worthiness of the Parent Company, the expected credit loss is not material.
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(ii) Liquidity risks | |||
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The most significant cash outflow consists of the payment of the Final Capital Entitlement to the ZDP holders at the ZDP Repayment Date of 6 April 2021. The Company's exposure to liquidity risk depends upon Parent Company's ability to meet all current and future obligations of the Company. The Directors consider Parent Company's compliance with the Deed of Undertaking (described in note 2 (b) above) and the capital contributions received as sufficient in providing liquidity to the Company when required.
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The ZDP Shares capital entitlement amount of £12,055,000 will be repayable on 6 April 2021.
(iii) Interest rate risks | |||||||
The interest rate applied on the Loan Agreement is fixed at 2% and the interest rate payable on the ZDP shares is fixed at 3.5% compounded and as such no sensitivity analysis is required. | |||||||
Fair value estimation | |||||||
The fair values of cash and cash equivalents and short-term debtors and creditors are estimated to be approximately equal to their carrying values due to their short-term nature. The fair values of the financial assets at amortised cost due from the parent under the loan agreement and undertaking are also estimated to be approximately equal to their carrying values. The ZDP Shares are disclosed in this note for disclosures purposes only under IFRS 13 "Fair Value Measurement" (IFRS 13).
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The Directors based the fair value of the ZDP shares on the traded price of 107.50 pence per share (2019: 105.50 pence per share) which was observed on the London Stock Exchange on 31 December 2020 being the last observable traded price before the year end. | |||||||
Fair value hierarchy | |||||||
IFRS 13 requires the Company to classify its investments in a fair value hierarchy that reflects the significance of the inputs used in making the measurements. IFRS 13 establishes a fair value hierarchy that prioritises the inputs to valuation techniques used to measure fair value. The three levels of fair value hierarchy under IFRS 13 are as follows:
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Level 1 | |||||||
Inputs are quoted prices in active markets for identical assets or liabilities that the entity can access at the measurement date. | |||||||
Level 2 | |||||||
Inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
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Level 3 | |||||||
Inputs are unobservable for the asset or liability. | |||||||
The categorisation of a financial instrument within the hierarchy is based upon the pricing transparency of the financial instruments and does not necessarily correspond to the Company's perceived risk inherent in such financial instruments. |
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The ZDP shares are classified within Level 1 of the fair value hierarchy on the basis that the fair value was derived from an observable traded price. |
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The classification of the Company's investments held at fair value through profit or loss is detailed in the table below: |
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As at 31 December 2020 | Level 1 | Level 2 | Level 3 |
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£'000 | £'000 | £'000 |
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Fair value |
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Financial liabilities at market value | 11,685 | - |
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Level 1 | Level 2 | Level 3 |
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As at 31 December 2019 | £'000 | £'000 | £'000 |
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Fair value |
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Financial liabilities at market value | 11,468 | - |
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12. Subsequent events |
There are no post balance sheet events since the year end.
13. Financial information
This announcement does not constitute the Company's statutory accounts. The financial information is derived from the statutory accounts, which will be delivered to the registrar of companies and will be put forward for approval at the Company's Annual General Meeting. The auditors have reported on the accounts for the year ended 31 December 2020, their report was unqualified and did not include a statement under Section 498(2) or (3) of the Companies Act 2006.
The Annual Report for the year ended 31 December 2020 was approved on 26 March 2020. It will be made available on the Company's website at https://rmdl.co.uk/investor-centre/investor-relations/
The Annual Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
This announcement contains regulated information under the Disclosure Rules and Transparency Rules of the FCA.
Secretary and registered office: PraxisIFM Fund Services (UK) Limited 1st Floor, Senator House, 85 Queen Victoria Street, London, EC4V 4AB
For further information contact: Brian Smith / Ciara McKillop 0204 513 9260 |