TIDMRMDL TIDMTTM
RNS Number : 7215T
RM Secured Direct Lending PLC
29 March 2021
RM SECURED DIRECT LING PLC
(the "Company" or "RMDL")
FINAL RESULTS
RESILIENT PERFORMANCE AMID CONTINUED PORTFOLIO GROWTH
REFRESHED INVESTMENT FOCUS ON SOCIAL & ENVIRONMENTAL
INFRASTRUCTURE SECTORS
RMDL, the investment trust specialising in secured debt
investments, announces its results for the year ended 31 December
2020.
Operational highlights
-- Diversified portfolio of GBP122.7 million invested across 35 loans across 14 sectors
o Eight new investments totalling GBP26m during the year
o Close management of the portfolio throughout the pandemic
-- RM Funds was recognised by the British Business Bank as an
accredited lender for the Coronavirus Business Interruption Loan
Scheme ("CBILS") with RMDL as a funding partner
o 12% of portfolio NAV invested into partially government
guaranteed CBILS eligible loans
-- Robust performance of portfolio sectors exposed to
restrictions related to the coronavirus pandemic, including
Accommodation with Hotels (27.6%) and Student Accommodation
(12.3%)
Financial highlights
-- 6.5 pence dividend for full year
-- Dividend fully covered by earnings 1.1 times
-- NAV total return for the period 3.15%
Year ended 31 December Year ended 31 December
2020 2019
Group Net asset value ("NAV") GBP110,380 GBP119,528
(GBP'000)
----------------------- ----------------------
Group NAV per Ordinary Share
(pence) 93.25p 97.79p
----------------------- ----------------------
Ordinary Share price (pence) 87.00p 99.50p
----------------------- ----------------------
Ordinary Share (discount)/premium
to NAV (6.7%) 1.7%
----------------------- ----------------------
Total return - Ordinary
Share NAV and dividends +3.1% +8.2%
----------------------- ----------------------
Outlook
-- Refreshed investment focus on lending to Social &
Environmental Infrastructure sectors with high-quality pipeline
transactions in its six target sectors:
o Healthcare; Childcare & Education; Accommodation; Clean
Energy & Renewables; Waste Management; and Energy Efficiency
& Carbon Reduction
o Aligned to Sustainable Development Goals (SDGs) where capital
from RMDL can make a positive impact
o Appealing risk adjusted returns with attractive credit metrics
and significantly higher yields than would be available in the
public markets
-- Partnership with The Good Economy will provide reputable
third-party assurance for ESG & Impact reporting
-- Vaccine roll-out and expected easing of national restrictions
will allow certain portfolio companies to return to trading at full
capacity
Norman Crighton, Chairman of RMDL, commented:
"The Board is pleased to report a resilient year for RMDL amid
an unprecedented market environment. This has been demonstrated
through our portfolio which has continued to diversify and grow,
now totalling GBP123m invested in 35 loans across 14 sectors.
Meanwhile, our gross portfolio yield increased to c.9.3%, from
c.8.8% in 2019, and we have continued to deliver on our dividend
target of 6.5 pence for the year.
Our refreshed investment strategy will focus on increasing our
exposure to the social and environmental sectors. Currently
comprising c.30% of the portfolio, these sectors hold clear
alignment to specific SDGs and will allow RMDL to meet the funding
needs of quality businesses who are making a meaningful, positive
contribution to society.
In addition, our partnership with The Good Economy will provide
key third-party assurance for ESG and Impact reporting, which will
ensure ESG-related criteria remains an integral part of our
rigorous investment process. This will allow us to achieve our
company purpose of delivering positive impact outcomes linked to
Sustainable Development Goals, while offering stable, risk-adjusted
returns for our investors.
We have entered 2021 in a strong position and a high quality
pipeline of secured lending opportunities. The Board has every
confidence in the long-term future of RMDL and our ability to
deliver for our shareholders."
Investor webinar
An investor webinar will be held tomorrow morning at 10.00 am,
hosted by James Robson (Chief Investment Officer, RM Funds) and
Pietro Nicholls (Portfolio Manager, RM Funds). If you would like to
join the webinar, please follow the link here .
For further information, please contact:
RM Funds - Investment Manager
James Robson
Pietro Nicholls 0131 603 7060
N+1 Singer Advisory LLP - Financial Adviser
and Broker
James Maxwell
Carlo Spingardi 020 7496 3000
Peel Hunt LLP - Financial Adviser and Broker
Luke Simpson
Liz Yong 020 7418 8900
Tulchan Communications LLP - Financial PR 0207 353 4200
Elizabeth Snow rmdl@tulchangroup.com
Oliver Norgate
PraxisIFM Fund Services (UK) Limited - Administrator
and Company Secretary
Brian Smith
Ciara McKillop 020 4513 9267
ANNUAL FINANCIAL REPORT
For the year ended 31 December 2020
About us
RM Secured Direct Lending Plc ("RMDL" or the "Company") aims to
generate attractive and regular dividends through investment in
secured debt instruments. Loans in which the Company invests will
be predominantly secured against assets such as real estate or
plant and machinery and/or income streams such as account
receivables.
As at 31 December 2020 the portfolio was invested in 14 sectors
and 19 sub-sectors of which 98% was allocated to private debt.
Since inception in December 2016 to December 2020 the Company has
declared or paid dividends totalling 24.225 pence and has generated
a NAV total return of 21.46%.
Portfolio at a glance
Operational highlights
> Diversified portfolio of GBP122.7 million invested across
35 loans with eight new
investments totalling GBP26m during the year
> RM Funds was accredited by the British Business Bank as an
accredited lender for the Coronavirus Business
Interruption Loan Scheme ("CBILS") with RMDL as a funding partner
> 11% of the portfolio invested into partially government
guaranteed CBILS eligible loans
> Approximately 30% of the portfolio invested into Social
& Environmental Infrastructure sectors with
strong pipeline and expectation that allocations to these areas in 2021 will significantly expand
> The Good Economy engaged to provide investors with third
party assurance for ESG & Impact reporting to start in 2021
> Hotel exposure representing 27% of the portfolio exposure
has performed well with interest serviced throughout the
lockdown
Financial highlights
> 6.5 pence dividend for full year meeting target set at IPO
> Dividend fully covered by earnings 1.1 times
> NAV total return for the year 3.15%
Financial information Group Group
Year ended Year ended
31 December 2020 31 December
2019
================================================ ================= ==============
Gross asset value (GBP'000) 1 GBP132,822 GBP131,069
Net Asset Value ("NAV") (GBP'000) GBP110,380 GBP119,528
NAV per Ordinary Share (pence) 93.25p 97.79p
Ordinary Share price (pence) 87.00p 99.50p
Ordinary Share price (discount)/premium
to NAV 1 (6.7%) 1.7%
Ongoing charges 1 1.91% 1.77%
Gearing (net) 1 18.3% 2.6%
Accrued entitlement of Zero Dividend Preference
("ZDP") Share (pence) 2 109.87 106.18
================================================ ================= ==============
Performance summary
% change 3,5 % change 4,5
================================================ ================= ==============
Total return - Ordinary Share NAV and dividends
1 +3.1% +8.2%
================================================ ================= ==============
Total return - Ordinary Share price and
dividends 1 -5.3% +4.9%
================================================ ================= ==============
1.These are Alternative Performance Measures
("APMs").
2.Based on the net assets attributable
to the ZDP Shares as at 31 December 2019
and 2020.
3.Total returns for the year to 31 December
2020, including dividend reinvestment.
4.Total returns for the year to 31 December
2019, including dividend reinvestment.
5.Source: Bloomberg.
Alternative Performance Measures ("APMs")
The financial information and performance summary data
highlighted in the footnote to the above tables are considered to
represent APMs of the Group and the Company. Definitions of these
APMs together with how these measures have been calculated are
disclosed in the Annual Report.
Portfolio (as at 31 December 2020)
Largest 10 loans by drawn amounts across the entire portfolio
Business activity Investment type Valuation Percentage
(Private/Public/Bond) GBP'000 of
gross asset
(%)
=============================== ================================= ========= ============
Asset finance Private loans 9,990 7.5
Hotel Private loans 8,079 6.1
Automotive parts manufacturing Private loans 6,840 5.1
Gym franchise Private loans 6,247 4.7
Hotel Private loans 6,166 4.6
Student accommodation Private loans 5,782 4.4
HR and payroll services Private loans 5,740 4.3
Healthcare Private loans 5,294 4.0
Student accommodation Private loans 5,029 3.8
Hotel Private loans 5,000 3.8
=============================== ================================= ========= ============
Ten largest holdings 64,167 48.3
Other private loan investments 55,843 42.0
Bond investments 2,695 2.1
================================================================== ========= ============
Total holdings 122,705 92.4
Other net current assets 10,117 7.6
Gross assets* 132,822 100.0
================================================================== ========= ============
* The Group's gross assets comprise the net asset values of the
Group's Ordinary Shares, accrued capital entitlement of the ZDP
Shares and the Bank loan .
Valuation conducted by external Valuation Agent.
Market
Market environment
The year was dominated by Covid-19 as the benign and calm credit
conditions, which had persisted since the eurozone debt crisis,
were replaced by large volatility within the equity and credit
markets during late February and into March. As the depth of
government support measures became understood by the market credit
spreads stabilised and by year-end were back to near pre-Covid
levels. Sectors that lagged the market were those affected
specifically by the pandemic such as Travel and Leisure and
Hospitality. As we look into 2021, there is optimism that those
sectors which underperformed during 2020 will
perform with the scheduled easing of restrictions and as the vaccine roll-out continues.
Market opportunities
The Investment Manager ("RM" or "RM Funds") is seeing an
excellent pipeline of opportunities within the two focus investment
areas and six sectors. The business targeted typically have complex
lending needs, are often overlooked by their banking relationships
with funding requirements that are too small for the larger direct
lending businesses yet offer excellent security and return
profiles.RM funds have demonstrated the ability to originate and
transact in such deals over last four years and have a developed
pipeline for sourcing such transactions.
In addition, there is an attractive opportunity for credit
enhancements. RM Funds is an accredited lender under the
Coronavirus Business Interruption Loan Scheme ("CBILS") and RMDL is
the funding partner, thus giving RMDL access to high quality loans
with a material credit enhancement. CBILS provides financial
support to smaller businesses ("SMEs") across the UK that are
losing revenue, and seeing their cash flow disrupted, as a result
of the Covid-19 outbreak. The scheme is a part of a wider package
of government support for UK businesses and employees and is
administered by the British Business Bank. CBILS gives the lender a
partially government-backed guarantee for the loan repayments in
order to encourage more lending. At year-end 12% of the portfolio
had been invested into CBILS eligible loans.
Looking forward to Recovery Loan Scheme will become the new
government support scheme and as with CBILS each loan comes with a
partial government guarantee of a minimum of 80% of the loan
balance. This scheme looks set to broaden the pipeline of
opportunities as the scheme eligibility is wider and the maximum
loan size will increase to GBP10m.
Investment Objective, Financial Information and Performance
Summary
Investment Objective
RM Secured Direct Lending Plc ("the Company") aims to generate
attractive and regular dividends through investment in secured debt
instruments of UK Small and Medium sized Enterprises ("SMEs") and
mid-market corporates and/or individuals including any loan,
promissory notes, lease, bond, or preference share (such debt
instruments, as further described being "Loans") sourced or
originated by RM Capital Markets Limited (the "Investment Manager")
with a degree of inflation protection through index-linked returns
where appropriate.
Financial In formation
Group Group
Year ended Year ended
31 December 2020 31 December 2019
----------------------------------------- ----------------- -----------------
Gross asset value (GBP'000)(1) GBP132,822 GBP131,069
Net Asset Value ("NAV") (GBP'000) GBP110,380 GBP119,528
NAV per Ordinary Share (pence) 93.25p 97.79p
Ordinary Share price (pence) 87.00p 99.50p
Ordinary Share price (discount)/premium
to NAV(1) (6.7%) 1.7%
Ongoing charges(1) 1.91% 1.77%
Gearing(net)(1) 18.3% 2.6%
Accrued entitlement of Zero Dividend
Preference ("ZDP") Share (pence)(2) 109.87 106.18
Performance Summary
% change(3,5) % change(4,5)
------------------------------------- ------------- -------------
Total return - Ordinary Share NAV
and dividends(1) +3.1% +8.2%
Total return - Ordinary Share price
and dividends(1) -5.3% +4.9%
(1) These are Alternative Performance Measures ("APMs").
(2) Based on the net assets attributable to the ZDP Shares as at
31 December 2019 and 2020.
(3) Total returns for the year to 31 December 2020, including
dividend reinvestment.
(4) Total returns for the year to 31 December 2019, including
dividend reinvestment.
(5) Source: Bloomberg.
Alternative Performance Measures ("APMs")
The financial information and performance summary data
highlighted in the footnote to the above tables are considered to
represent APMs of the Group and the Company. Definitions of these
APMs together with how these measures have been calculated can be
found in the Annual Report.
Chair's Statement
Introduction
On behalf of the Board, I am pleased to present RM Secured
Direct Lending plc's ("RMDL" or the "Company") Annual Report and
Accounts for the year ended 31 December 2020.
This year, the fourth year since the Company launched on the
London Stock Exchange in December 2016, has been the most
challenging yet, but I am delighted at the resilience the portfolio
has shown. It is testament to RMDL's secured lending model, and the
Investment Manager's ("RM" or "RM Funds") strong credit processes
and actions taken during the year, and we are pleased to confirm
total dividends of 6.5 pence per Ordinary Share for the year ended
31 December 2020, with the final quarterly dividend being paid in
March 2021. The dividends for 2020 are in line with the target
stated at the launch of the Company, an exceptional achievement in
a difficult year.
RMDL has traditionally sought to invest in high quality
businesses with loans supported by tangible security packages to
generate attractive risk-adjusted returns for investors. We have
always adhered to the highest standards of corporate governance and
expect the same from the companies we lend to. During the last four
years, social and environmental infrastructure projects have been a
core focus, and the Company has allocated 40% of its capital to
assets in these areas.
The Board and RM Funds now plan to concentrate the investment
focus to Social & Environmental Infrastructure over the next
three years and only allocate loans across six sectors:
Environmental Infrastructure
-- Energy efficiency & carbon reduction
-- Clean energy & renewables
-- Waste Management
Social Infrastructure
-- Accommodation
-- Education & childcare
-- Healthcare
In addition to enhancing the sustainability of the portfolio,
the Board and the Investment Manager believe that this new focus
will give investors further exposure to critical infrastructure
assets which are not correlated to the broader economic cycle.
These assets will have tangible asset backing and this focus we
believe will further deliver attractive risk-adjusted returns. Our
firm belief is that the Company is well placed to deliver strong
income returns and steady NAV growth alongside an impact and
sustainability framework. For this next 3-year period we have set
an Impact Goal of seeking to meet the funding needs of quality UK
businesses who make a meaningful, positive contribution towards
social and environmental outcomes that are linked to specific UN
Sustainable Development Goals; 3, 4, 7,11, 12 & 13.
-- Healthcare (3)
-- Education & childcare (4)
-- Clean energy & renewables (7)
-- Accommodation (11)
-- Waste Management (12)
-- Energy efficiency & carbon reduction (13)
The investment strategy and the investment policy remain
unchanged with a narrower investment sector focus.
Income generation and NAV Performance
In the four years since listing, the Company has returned to
Shareholders 24.225 pence per Ordinary Share in dividends which
have been entirely covered by earnings. We have been pleased to
continue our track record of meeting our target income distribution
and the payment of a fully covered dividend for the year ended 31
December 2020, despite the disruption caused by the pandemic. The
Company has paid or declared regular dividends totalling 6.5 pence
per Ordinary Share during the year.
The ability of the Company to pay dividends in excess of target
during a period when our peer group has struggled is testament to
the ability of the Investment Manager to structure Loans for the
benefit of Shareholders, whilst maintaining strict credit
controls.
This was especially important for our investors, many of whom
have seen a swathe of dividend cuts across their portfolios during
the course of 2020.
On the 25 February 2021 the Company declared a fourth interim
dividend for the year of 1.625 pence per Ordinary Share to be paid
on the 26 March 2021, the 16(th) consecutive dividend paid which
has met or exceeded the target set at launch.
Portfolio overview
The Board and the Investment Manager were quick to anticipate
and react to the effects of the pandemic, temporarily ceasing any
new lending activity and focusing on capital preservation.
However, certain investments in our portfolio were directly
impacted by the lockdowns and restrictions, specifically hotel, gym
and student accommodation assets, alongside childcare nurseries and
healthcare businesses.
The portfolio investments are valued under IFRS 13, which adopts
a "mark to market" approach, and therefore RMDL saw the NAV of the
Company fall at the peak of the market sell-off in March 2020,
followed by a general gradual retracement in the NAV for the final
three quarters as sentiment improved and government support
measures worked their way through the economy.
Importantly, the asset values were adjusted lower to reflect the
increased risk and they have not affected the Company's ability to
pay a dividend nor necessarily the likelihood of any loss. RM Funds
believe that these value reductions are largely temporary in
nature; thus, as we have seen over the last number of months, the
trajectory of the NAV has been promising and the Investment Manager
will report on the key areas that they believe will continue to
drive performance in 2021.
During the year the Company was accredited as a funding partner
for Coronavirus Business Interruption Loan Scheme "CBILS" which is
administered by the British Business Bank, owned by the UK
Government. This recognises the role RMDL can play in helping high
quality UK based business access funding opportunities and also
offers Shareholders access to Loans underwritten by 80% minimum
from the UK Government. At year end 12% of the portfolio was to be
underwritten by the scheme.
The Investment Manager has an attractive pipeline of loans to
businesses into Social & Environmental Infrastructure which
will see a relatively rapid recycling of capital into these focus
sectors. There is a real opportunity to see the portfolio and the
Company grow over the near to medium term as we try to match
capital seeking sustainable investments delivering high impact with
the borrowers seeking capital. I am delighted that we have been
able to partner with the Good Economy to provide an independent
reporting and assurance of the impact measurement system which the
Company will be adopting.
Carefully managed credit risk and valuations
As outlined in previous years credit risk is the most important
risk factor within the portfolio. This is managed carefully by the
Investment Manager, the Alternative Investment Fund Manager
("AIFM") and overseen by the Board. Exposure is mitigated by having
clear borrower/issuer risk limits and industry risk limits which
are detailed in the Company's prospectus. These limits reflect a
maximum borrower/issuer limit of 10% of the portfolio and are
across a range of sectors to ensure sufficient sector
diversity.
Committed to responsible investing
The Board and the Investment Manager have long been committed to
high ESG standards and to responsible investing. The refreshed
investment focus towards social and environmental infrastructure
sectors enhances this commitment through investment in assets at
the forefront of providing essential services to society. RM Funds'
Responsible Investing Investment Policy ensures that these
considerations are integrated into each individual investment
process and the alignment of the portfolio to achieving
contributions towards outcomes linked to UN Sustainable Development
Goals 3,4,7,11,12&13. As we look to the future the Good Economy
will assist with the ESG reporting metrics for the portfolio as we
strive to improve our borrower performances across core ESG
Practices.
Returns to Shareholders
As at 31 December 2020, the Company had generated a NAV total
return for the year of +3.1% (dividends re-invested at NAV) and
since inception the NAV total return for investors has been +21.5%.
The share price total return was -5.3% for the year and +10.2%
since inception.
Historically RMDL had always traded at a premium to NAV, however
as the pandemic took hold the share price fell to a discount to
NAV. The Board and RM Funds have taken a number of steps to reduce
this discount, which has been one of the drivers of the share price
total return for the year. During 2020, RMDL acquired 3.86 million
shares as part of share buy backs and it has been encouraging that
this discount has reduced over the year since the levels seen in
March 2020. The lowest price paid was 72.5 pence per Ordinary Share
on the 7 April 2020 and the highest price 85.0 pence per Ordinary
Share on the 30 December 2020. Both the Investment Manager and the
Board are focused on restoring the share price to NAV rating to a
premium again.
ESG Leadership for the Company, as well as for the Portfolio
I have outlined above some of the changes the Investment Manager
and the Board intend to make to the loan portfolio. The reasons for
these changes and the greater emphasis on ESG issues are addressed
in more detail in the Investment Manager's Report. However, there
is no doubt that factors represented by these three letters will be
playing an increasingly crucial role in all decision making,
whether operational or investment, for corporates and individuals
alike. In terms of corporate governance, the G in ESG, your Company
has adopted the very highest standards from the start, with
measures in place to prevent value destruction caused by wide
discounts to NAV, and directly aligning the interests of the
Investment Manager with Shareholders, among other approaches.
Going forward, the Board will be turning its attention to the E
and S factors, ensuring that your Company remains at the vanguard
of putting these criteria at the core of what we do. RMDL, like
every other investment trust with no premises and no employees, can
have a limited direct effect on E and S issues. However, your Board
believes that you as Shareholders, our most important stakeholders,
expect more from us as Directors. We therefore intend to take an
increasingly proactive approach and encourage our stakeholders to
focus on their own mitigation strategies. We will start by asking
all of RMDL's counterparties - the investment manager, broker,
administrator, legal team, accountants and auditors, as well as
major Shareholders and others, two questions:
(1) What ESG policies are implemented within your own
organisation? and
(2) What ESG policies do you expect your stakeholders to
follow?
The responses are likely to range from the very straightforward,
"We recycle paper in the office" or "We buy electricity from
renewable sources", to the more nuanced; "We use carbon offsets to
mitigate business air travel made on behalf of our clients", which
might lead us to ask, "How do you calculate the most efficient
offset program?" We might ask our Shareholders what additional cost
they would be willing to incur to ensure RMDL's stakeholders adopt
improved ESG measures, if indeed there are additional costs? The
information collected will form the basis of a full understanding
of these priorities within the investment trust community. Although
participation will be entirely voluntary, we anticipate a high
level of engagement. Your Board will review the results, share them
with the respondents and with refinements over time, develop them
into a comprehensive Investment Trust ESG Policy. We are very
excited to be launching this initiative and hope to have the first
set of responses to share with you in the next Interim Report in
six months' time.
Realisation opportunity
At the launch of the Company there was a commitment made to
offer Shareholders a Liquidity Opportunity prior to the 4th AGM
which will be held this year. The original intention was, if the
investment objective was not achievable, that Shareholders be given
the opportunity to realise their investment at close to the
prevailing NAV. I am very pleased that despite a difficult year,
the income objectives of the Company have been exceeded.
Nonetheless, we will be canvassing Shareholders in the coming weeks
to talk through their liquidity needs and structure a set of
proposals that is suitable and cost effective. I sincerely hope
that demand will be limited given the performance of the Company
over the last few years.
Outlook
The outlook is very promising, mainly due to the COVID-19
vaccine which is being rolled out at pace. Any easing of lock-down
restrictions allowing portfolio companies to start trading to their
full capacity is clearly good news and one which should then have
positive follow-on effects with the Company NAV and the share
price.
The Board and RM Funds are excited about the future and the
refreshed investment focus. These sectors offer investors appealing
risk adjusted returns that all have attractive credit metrics and
significantly higher yields than would be available in the public
markets and are especially appealing as the credit cycle becomes
stretched by Government support actions which one day will end.
The Investment Manager has noted they are seeing large increases
in the volume of high-quality pipeline transactions in its target
sectors, ensuring the Company is in the fortunate position of being
fully deployed and needing more capital to grow.
The Board is focused on continuing to grow the portfolio of
investments, and with this new concentrated focus and the deep
pipeline of opportunities which the Investment Manager is pursuing,
this is eminently achievable. This is a key objective for the next
three years as well as continuing to distribute an attractive
income and maintain and grow the NAV.
Norman Crighton
Chair
26 March 2021
Investment Manager's Report
Strong and sustainable NAV & Income performance
Over the course of the year, the portfolio generated a NAV total
return of +3.1%, with total dividend distributions attributable to
Shareholders for the year totalling 6.5 pence per Ordinary Share.
Following the year end an interim dividend relating to the final
quarter of the year of 1.625p per Ordinary Share was declared on 25
February 2021 and paid to Shareholders on the 26 March 2021. These
dividends totalling 6.5 pence per Ordinary Share for full year 2020
bring the total distributions since the Company's launch in
December 2016 to 24.225 pence per share, exceeding the 23.5 pence
targeted over the first four years by the Investment Manager.
Resilient portfolio performance
The year ended 31 December 2020 was extremely challenging for
the portfolio with the COVID-19 pandemic causing disruption both to
the demand and supply side of the economy.
The Investment Manager, in conjunction with the Board, made the
immediate decision to cease new lending in early March 2020 with
all focus from the Investment Manager on ensuring the portfolio
performed through the second and third quarters whilst awaiting
news on the vaccine development. It is a testament to the credit
processes, the lending model and portfolio companies themselves
that the main RMDL loans were serviced through this period.
Investments within Asset Finance, Healthcare and Food Sectors
have delivered robust returns throughout the year however the
largest portfolio exposure is to Accommodation with Hotels (27.6%)
and Student Accommodation (12.3%) investments, which were adversely
affected by the national restrictions during the year. Despite the
significant challenges, these Loans have generally performed
well.
Total income generation for the year was GBP10.9 million and
this was split between cash pay and PIK 82.5%. At the year end, the
loan portfolio had GBP122.7 million (2019: GBP131.2 million) of
investments across 35 Loans (2019: 34) well diversified by borrower
and sector with investments predominantly completed within the
UK.
There were eight new investments and a number of repayments and
divestments that totalled GBP34.6 million during the year,
demonstrating the successful execution of the business strategy, as
the Company has resumed making loans, receiving interest and has
been successfully repaid by borrowers. Overall, the gross portfolio
yield increased to 9.37% as of 31 December 2020 (2019: 8.84%).
The portfolio is focused on private debt which as at 31 December
2020 represented 98% of the portfolio and we favour this asset
class as the Investment Manager can document investor protections
in the form of loan covenants and receive an illiquidity premium
offering an enhanced yield to investors than those available in the
public markets.
The portfolio is focused on defensive sectors with tangible
asset backing giving high levels of protection should there be an
economic downturn. Loan to value ("LTV") is limited with a blended
leverage averaging 68.3% across the portfolio. 46.8% of the
portfolio is either senior secured or CBILS guaranteed to give
enhanced downside protection. Construction risk has increased to
(two) loans totalling GBP8.3 million which is within the 20% of
Gross Assets construction limit.
There are four investments within the portfolio that have
enhanced monitoring and have opportunity for delivering NAV growth
during 2021:
1. Energie Fitness. An investment in the senior loan (and equity
participation) to this gym franchise business. RMDL participated in
a management buyout during 2020 and owns a net 28% of the business.
This loan has been marked at 85% of nominal value and reflects at
this valuation 5.85% of the Companies assets. The company is well
positioned to trade strongly when the lockdowns ease. The value of
the equity is marked at zero.
2. Hotel Development Glasgow. The Company has funded a hotel
development in Glasgow which is now nearing completion - this
borrower has a 5* operator Hotel Management Agreement "HMA" in
place and the scheme is scheduled to be finished later in 2021.
These two loans represent 6.7% of net Company assets at their
current valuation with one loan of GBP3.35million marked at 73% of
nominal value which is expected to move towards 100% of face value
as the development is finished over the course of 2021.
3. Purpose Built Student Accommodation "PBSA" Coventry. An
investment into a senior secured PBSA asset representing 4.53% of
net Company assets valued at 81.5% of nominal value. Initially a
project finance construction loan to a building completed in March
2020 at the height of the COVID-19 first wave. Post March 2020 the
borrower did not provide a suitable recovery plan given the
building had not been occupied and RM Funds appointed an
administrator. It is expected that RMDL will own this asset after
the administration process. An operator for the building has been
identified with students expected to occupy the building during
2021 which will enhance the value of the asset and start generating
income for the portfolio thus creating two drivers of value over
the course of this year.
4. Automotive Parts. This well-managed business with a
high-quality sponsor responded swiftly to the initial factory close
downs and the subsequent start-ups. The loan represents 6.16% of
net Company assets and at the Company's year-end was valued at 85%
of par value. The loan was documented at the outset to allow
flexibility between the borrower paying their interest in cash or
payment in kind "PIK" for situations such as these where demand
might be slower than forecast. The valuation on this loan have been
lowered to reflect the increase in risk from the current operating
environment, however the strong fundamentals and as the economy
starts to move out of the Q1 2021 lockdowns and the business starts
to function more normally this valuation will likely be revised
higher.
Coronavirus Business Interruption Loan Scheme ("CBILS")
This scheme was introduced by the British Government, is
administered by the British Business Bank and was designed to
provide support to corporates affected by the pandemic. The support
is via partial loan guarantees made to accredited lenders which
assists affected corporates with obtaining debt finance. The key
features are that the UK Government provides a minimum 80%
guarantee to eligible loans of sizes up to GBP5 million and in
addition, the UK Government pays the first year's interest in the
form of Business Interruption Payment ("BIP"). RM Funds was
accredited as a funder under the scheme and RMDL was designated as
a funding partner. As at the year-end 12.0% of the portfolio was
invested into CBILS eligible loans. This is material credit
enhancement for the portfolio.
Market environment
Credit spreads dramatically increased in March 2020 meaning
valuations on High Yield bonds and Leverage Loans were
significantly lower at the end of the month. The external valuation
agent uses these securities as pricing benchmarks for the monthly
valuations of the level 2 assets(liquid) held by the Company and
more widely when assessing the current value of the level 3
assets(illiquid). March 2020 saw a NAV total return of -10.5% due
to this broader increase in credit spreads. This negative move was
subsequently followed by month on month increases as the wider
credit markets normalised leading to a +3.1% NAV total return for
the full year. Whilst this NAV was more volatile than RMDL would
typically expect it is important to note that it did not affect the
ability of the Company to pay the planned dividends.
Responsible Investing
RM Funds is a signatory to the Principles for Responsible
Investment ("PRI"). The PRI defines responsible investment as a
strategy and practice to incorporate environmental, social and
governance factors in investment decisions. RM Funds incorporates
ESG criteria early on as part of the investment process and in
addition there is active engagement wherever possible with
portfolio companies to help them improve their ESG processes. In
practice this is delivered by the RM Funds Responsible Investing
Investment Policy which is integral to RM's business philosophy as
we believe we can make a difference. This policy framework applies
to all investment made by RM Funds and is governed by our
principles and our commitments:
Our principles
Respect for the internationally proclaimed human rights
principles, equal opportunity independent of gender, race or
religion; freedom of association and the right to bargain
collectively; working conditions that surpass basic health and
safety standards; the conduct of good governance practices, in
particular in relation to bribery and conflicts of interest;
environmental responsibility and responsibility for active climate
change engagement.
Our commitments
Integrate the above principles into our decision-making process,
by carefully considering ESG issues associated with any potential
investment during the due diligence phase; encourage portfolio
companies to follow the above principles by implementing governance
structures that provide appropriate level of oversight and by
seeking disclosure on ESG issues; provide ESG training and support
to RM employees involved in the investment process, so that they
may perform their work in accordance with the above principles and
with this policy; seek to be transparent in its efforts to
integrate ESG considerations in investments and annually report on
its progress towards implementing the above principles, comply with
national and other applicable laws; help promote the implementation
of the above principles; consider our alignment with other related
conventions and standards set by Invest Europe, the UN Global
Compact Initiative and the UN Principles for Responsible
Investment); continuously strive to improve ESG performance within
RM Funds and our portfolio companies.
Investment Manager aligned to investor interests
In line with the commitment to investors made at the IPO, RM
Funds has continued to purchase shares of the Company during the
year. The Investment Manager now owns 1,249,825 Ordinary Shares
which is an increase of 50,000 shares over the year; the management
team and related parties' own additional shares. Since IPO the
Investment Manager has purchased 749,825 shares directly in the
secondary market. This is an ongoing commitment and by purchasing
RMDL shares, the Investment Manager has shown a significant
alignment of its interests with Shareholders.
Share price performance
The share price performance of the Company over the year has
been disappointing which was principally driven by the share price
discount to NAV widening during the March COVID-19 related
sell-off. This discount remained above the target level of 6.0% for
much of the year. The Board and the Investment Manager are focused
on reducing the discount to below the target level and took steps
to make selective share purchases in order to provide liquidity
into the market and assist Shareholders who were seeking to sell.
At the year end the share price to NAV discount was at 6.9% and
post year-end it reduced below the target 6.0% level.
Robust outlook for 2021
In the annual report for the year ended 31 December 2019, RM
noted that opportunities supported by major structural or
socio-demographic drivers will be the most significant areas of
opportunity for RMDL.
We still believe this to be the case and over the short and
medium term we will further focus our efforts on capital deployment
to the key areas of Social & Environmental Infrastructure.
Historically approximately 40% of RMDL's capital has been allocated
to these two areas. In addition, these areas align to sustainable
development goals where capital from RMDL can make an impact. RM
Funds has been working with The Good Economy, a leading social
advisory firm, who have helped design an impact measurement and
management framework.
The Investment Objective and the Investment Policy will remain
the same however going forward all new capital will be allocated to
the following six sectors:
Social Infrastructure
-- Healthcare
-- Childcare and Education
-- Accommodation
Environmental Infrastructure
-- Clean Energy & Renewables
-- Waste Management
-- Energy Efficiency & Carbon reduction
The Good Economy will be retained to provide an annual external
ESG & Impact report for investors.
RM Capital Markets Limited
26 March 2021
Investment Policy, Results and Other Information
Investment objective
The Company aims to generate attractive and regular dividends
through investment in secured debt instruments of UK SMEs and
mid-market corporates and/or individuals including any loan,
promissory notes, lease, bond, or preference share (such debt
instruments, as further described below, being "Loans") sourced or
originated by the Investment Manager with a degree of inflation
protection through index-linked returns where appropriate.
Investment policy
The Company will seek to meet its investment objective by making
investments in a diversified portfolio of Loans to UK SMEs and
mid-market corporates, special purpose vehicles and/or to
individuals. These Loans will generally be, but not limited to,
senior, subordinated, unitranche and mezzanine debt instruments,
documented as loans, notes, leases, bonds or convertible bonds.
Such Loans shall typically have a life of 2-10 years. In certain
limited cases, Loans in which the Company invests may have equity
instruments attached, ordinarily any such equity interests would
come in the form of warrants or options attached to a Loan.
Typically the Loans will have coupons which may be fixed,
index-linked or LIBOR linked.
For the purposes of this investment policy, UK SMEs include
entities incorporated outside of the UK provided their assets and/
or principal operations are within the UK. The Company is permitted
to make investments outside of the UK to mid-market corporates.
Loans will be directly originated or sourced by the Investment
Manager who will not invest in Loans sourced via or participations
through, peer to peer lending platforms.
Loans in which the Company invests will be predominantly secured
against assets such as real estate or plant and machinery and/or
income streams such as account receivables.
The Company will make Loans to borrowers in a range of Market
Sectors within certain exposure limits which will vary from time to
time, according to market conditions and as determined by the
Board, subject to the Investment Restrictions set out below.
The Company will at all times invest and manage its assets in a
manner which is consistent to the spreading of investment risk.
Investment restrictions
The following investment limits and restrictions will apply to
the Company's Loans and business which, where appropriate, shall be
measured at the time of investment or once the Company is fully
invested:
-- the amount of no single Loan shall exceed 10% of Gross Assets;
-- exposure to a single borrower shall not exceed 10% of Gross Assets;
-- loans will be made across not less than four Market Sectors;
-- not less than 70% of Gross Assets will be represented by
Loans denominated in sterling or hedged back to sterling;
-- loans made to borrowers in any one Market Sector shall not
exceed 40% of Gross Assets;
-- loans with exposure to project development/construction
assets shall not exceed 20% of Gross Assets;
-- the Company will not provide Loans to borrowers whose
principal business is defence, weapons, munitions or gambling;
-- the Company will not provide Loans to borrowers which generate their annual turnover predominantly from tobacco, alcohol or pornography; and
-- the Company will not invest in other listed closed-ended funds.
In the event of a breach of the investment guidelines and
restrictions set out above, the Investment Manager shall inform the
Board upon becoming aware of the same and if the Board considers
the breach to be material, notification will be made to a
Regulatory Information Service and the Investment Manager will look
to resolve the breach with the agreement of the Board.
The Company intends to conduct its affairs so as to qualify as
an investment trust for the purposes of section 1158 of the
Corporation Tax Act 2010, and its investment activities will
therefore be subject to the restrictions set out above.
Borrowing and gearing
The Company intends to utilise borrowings for investment
purposes as well as for share buybacks and short-term liquidity
purposes. Gearing represented by borrowings, including any
obligations owed by the Company in respect of an issue of zero
dividend preference shares (whether issued by the Company or any
other member of its group) or any third-party borrowings, will not,
in aggregate exceed 20 per cent. of Net Asset Value calculated at
the time of drawdown.
Hedging and derivatives
The Company may invest in derivatives for efficient portfolio
management purposes. In particular the Company can engage in
interest rate hedging. Loans will primarily be denominated in
sterling, however the Company may make limited Loans denominated in
currencies other than sterling and the Board, at the recommendation
of the Investment Manager, may look to hedge any other currency
back to sterling should they see fit.
In accordance with the requirements of the UK Listing Authority,
any material change to the Company's investment policy will require
the approval of Shareholders by way of an ordinary resolution at a
general meeting.
RM ZDP plc
RM ZDP plc ("RM ZDP"), a public limited company incorporated
under the laws of England and Wales was incorporated on 21 February
2018. RM ZDP is a wholly owned subsidiary of the Company. RM ZDP
was established solely for the purpose of issuing zero dividend
preference shares of GBP 0.01 each ("ZDP Shares").
On 3 April 2018, RM ZDP was admitted to the standard segment of
the Official List of the UK Listing Authority and its ZDP Shares
were admitted to trading on the London Stock Exchange's main market
for listed securities. The proceeds from the issuance of the ZDP
Shares have been loaned to the Company by way of an intercompany
loan agreement (the "Loan Agreement"). The Company also granted RM
ZDP an undertaking to ensure that RM ZDP has sufficient assets to
satisfy its obligations to the ZDP Shareholders and pay any
operational costs incurred by RM ZDP.
RM ZDP raised gross proceeds of GBP10,869,950 through the issue
of ZDP Shares.
The Board intend that RM ZDP plc be put into voluntarily
liquidation through a General Meeting on 6 April 2021, for the
purpose of proposing a resolution to wind up the ZDP Subsidiary
voluntarily, with the assets of the RM ZDP then available for
distribution.
Dividend policy
Dividends are expected to be declared by the Directors in May,
August, November and February of each year in respect of the
preceding quarter with dividends being paid in June, September,
December and March.
The last dividend in respect of any financial year is declared
prior to the relevant annual general meeting. Therefore, it is
declared as a fourth interim dividend and no final dividend is
payable. The Board understands that this means that Shareholders
will not be given the opportunity to vote on the payment of a final
dividend. However, the Board believe that the payment of a fourth
interim dividend as opposed to a final dividend is in the best
interests of Shareholders as it provides them with regularity on
the frequency of dividend payments and avoids the delay to payment
which would result from the declaration of a final dividend. A
resolution will be put forward at the Annual General Meeting to
approve the policy of declaring and paying all dividends of the
Company as interim dividends.
The Company targeted an annualised dividend yield in excess of
6.5% for the financial year to 31 December 2020.
Investors should note that the targeted annualised dividend
yields are targets only and not profit forecasts and there can be
no assurance that either will be met or that any dividend growth
will be achieved.
Results and dividend
The consolidated financial statements include the results of the
Company and its subsidiary RM ZDP plc (the "Group"). The Group
revenue return after tax for the year ended 31 December 2020
amounted to GBP7,108,000 (2019: GBP9,816,000). The Group made a
capital loss after tax of GBP5,251,000 (2019: capital loss of
GBP1,288,000). Therefore, the total return after tax for the Group
was GBP1,857,000 (2019: GBP8,528,000).
The first interim dividend of 1.625p per Ordinary Share was
declared on 20 April 2020 in respect of the period from January to
March 2020. The second interim dividend of 1.625p per Ordinary
Share for the quarter ended 30 June 2020 was declared on 5 August
2020 and the third interim dividend of 1.625p per Ordinary Share
for the quarter ended 30 September 2020 was declared on 2 November
2020. On 25 February 2021, the Board declared a fourth interim
dividend of 1.625 pence per Ordinary Share for the quarter to 31
December 2020.
Key performance indicators ("KPIs")
The Board measures the Group's success in attaining its
investment objective by reference to the following KPIs:
(i) Dividends
The Group has paid or proposed four interim dividends totalling,
in aggregate, 6.5 pence per Ordinary Share, equivalent to 6.5%
based on the Ordinary Share issue price of GBP1 per share at
Admission. The targeted annualised dividend yield of 6.5% has
therefore been met during the year.
(ii) Total return
The Group's total return is monitored by the Board. The Ordinary
Shares generated a NAV total return of +3.1% (2019: +8.2%) in the
year ended 31 December 2020.
(iii) Discount/premium to NAV
The discount/premium relative to the NAV per share represented
by the share price is closely monitored by the Board. The Ordinary
Share price closed at a 6.7% discount (2019: premium of 1.7%) to
the NAV as at 31 December 2020. To address the abnormally wide
discount due to the impact of COVID-19 in 2020, 3.86 million shares
were bought back during the year at prices ranging from 72.5 pence
and 85 pence per shares. This added 0.422 pence per Ordinary Share
to the NAV.
(iv) Control of the level of ongoing charges
The Board monitors the Group's operating costs. Based on the
Group's average net assets for the year ended 31 December 2020, the
Group's ongoing charges figure calculated in accordance with the
AIC methodology was 1.91% (2019: 1.77%).
Risks and Risk Management
The Board is responsible for the management of risks faced by
the Company and delegates this role to the Audit and Management
Engagement Committee (the "Committee"). The Committee periodically
carries out a robust assessment of principal and emerging risks and
uncertainties and monitors the risks on an ongoing basis. The
experience and knowledge of the Board is invaluable to these
discussions, as is advice received from the Board's service
providers, specifically the AIFM who is responsible for the risk
and portfolio management services and outsources the portfolio
management to the Investment Manager. The Committee has a dynamic
risk assessment programme in place to help identify key risks in
the business and oversee the effectiveness of internal controls and
processes, providing a visual reflection of the Company's
identified principal and emerging risks.
During the year, the Committee were particularly concerned with
the risks posed by the COVID-19 pandemic which has had a
significant impact in all risk categories. In addition to
implementing more regular reviews of investment performance with
the Investment Manager, the Committee requested and received
assurances from its key service providers that they would be able
to maintain high standards of service whilst working remotely.
Further information on how the Committee has considered COVID-19
when assessing its effect on the Company's ability to operate as a
going concern and the Company's longer-term viability.
The principal and emerging risks, together with a summary of the
processes and internal controls used to manage and mitigate risks
where possible are outlined in the following paragraphs.
(i) Market risks
Availability of appropriate investments
There is no guarantee that loans will be made in a timely
manner.
Before the Group is able to make or acquire loans, the
Investment Manager is required to complete necessary due diligence
and enter into appropriate legal documentation. In addition, the
Group may become subject to competition in sourcing and making
investments. Some of the Group's competitors may have greater
financial, technical and marketing resources or a lower cost of
capital and the Group may not be able to compete successfully for
investments. Competition for investments may lead to the available
interest coupon on investments decreasing, which may further limit
the Group's ability to generate its desired returns.
If the Investment Manager is not able to source a sufficient
number of suitable investments within a reasonable time frame
whether by reason of lack of demand, competition or otherwise, a
greater proportion of the Group's assets will be held in cash for
longer than anticipated and the Group's ability to achieve its
investment objective will be adversely affected. To the extent that
any investments to which the Group is exposed prepay, mature or are
sold it will seek to reinvest such proceeds in further investments
in accordance with the Group's investment policy.
Market sectors
Loans will be made to borrowers that operate in different market
sectors each of which will have risks that are specific to that
particular market sector.
Management of risks
The Group has appointed an experienced Investment Manager who
directly sources loans. The Group is investing in a wide range of
loan types and sectors and therefore benefits from diversification.
Investment restrictions are relatively flexible giving the advisor
ability to take advantage of diverse loan opportunities.
The Investment Manager, AIFM, Brokers and the Board review
market conditions on an ongoing basis.
(ii) Risks associated with meeting the Group's investment
objective or target dividend yield
The Group's investment objective is to generate attractive and
regular dividends through investment in loans sourced or originated
by the Investment Manager and to generate capital appreciation by
virtue of the fact that the returns on some loans will be
index-linked. The declaration, payment and amount of any future
dividends by the Group will be subject to the discretion of the
Directors and will depend upon, amongst other things, the Group
successfully pursuing the investment policy and the Group's
earnings, financial position, cash requirements, level and rate of
borrowings and availability of profit, as well the provisions of
relevant laws or generally accepted accounting principles from time
to time.
Management of risks
The Investment Manager has a well-defined investment policy and
process which is regularly and rigorously reviewed by the
independent Board of Directors and performance is reviewed at
quarterly Board meetings. The Investment Manager is experienced and
employs its expertise in making investments in a diversified
portfolio of loans. The Investment Manager has a target portfolio
yield which covers the level of dividend targeted by the Group. The
Board reviews the position at board meetings.
(iii) Financial risks
The Group's investment activities expose it to a variety of
financial risks which include liquidity, currency, leverage,
interest rate and credit risks.
Further details on financial risks and the management of those
risks can be found in note 21 to the financial statements.
(iv) Corporate governance and internal control risks (including
cyber security)
The Group has no employees, and the Directors have all been
appointed on a non-executive basis. The Group must therefore rely
upon the performance of third-party service providers to perform
its executive functions. In particular, the AIFM, the Investment
Manager, the Administrator, the Group Secretary and the Registrar,
will perform services that are integral to the Group's operations
and financial performance.
Poor performance of the above service providers could lead to
various consequences including the loss of the Group's assets,
inadequate returns to Shareholders and loss of investment trust
status. Cyber security risks could lead to breaches of
confidentiality, loss of data records and inability to make
investment decisions.
Management of risks
Each of the above contracts was entered into after full and
proper consideration of the quality and cost of services offered,
including the financial control systems in operation in so far as
they relate to the affairs of the Group. All of the above services
are subject to ongoing oversight of the Board and the performance
of the principal service providers is reviewed on a regular basis.
The Group's key service providers report periodically to the Board
on their procedures to mitigate cyber security risks.
(v) Regulatory risks
The Group and its operations are subject to laws and regulations
enacted by national and local governments and government policy.
Compliance with, and monitoring of, applicable laws and regulations
may be difficult, time consuming and costly. Any change in the
laws, regulations and/or government policy affecting the Group or
any changes to current accountancy regulations and practice in the
UK may have a material adverse effect on the ability of the Group
to successfully pursue its investment policy and meet its
investment objective and/or on the value of the Group and the
shares. In such event, the performance of the Group, the Net Asset
Value, the Group's earnings and returns to Shareholders may be
materially adversely affected.
Management of risks
The Group has contracted out relevant services to appropriately
qualified professionals. The Secretary and AIFM report on
compliance matters to the Board on a quarterly basis and the Board
has access to the advice of its Corporate Broker on a continuing
basis. The assessment of regulatory risks forms part of the Board's
risk assessment programme.
(vi) Business interruption, repayment of RM ZDP loan and the
Shareholders liquidity opportunity -emerging risks
Failure in services provided by key service providers, meaning
information is not processed correctly or in a timely manner,
resulting in regulatory investigation or financial loss, failure of
trade settlement, or potential loss of investment trust status.
The following is a description of the emerging risks that each
service provider highlights to the Board on a regular basis to aid
in the identification of emerging risks for the Company.
1. Investment Manager: the Investment Manager provides a report
to the Board at least quarterly on industry trends, insight to
future challenges in the sector, including the regulatory,
political and economic changes likely to impact the Group. The
Chair also has contact with the Investment Manager on a regular
basis to discuss any pertinent issues;
2. Alternative Investment Fund Manager: the AIFM maintains a
register of identified risks including emerging risks likely to
impact the Company, which is updated quarterly following
discussions with the Investment Manager other service providers.
The risks are documented on a risk register, grouped in main
categories: Market Risks; Risks associated with Investment
Objective; Financial Risks; Corporate Governance Risks; Regulatory
Risks and Emerging Risks. Any changes and amendments to the risk
register are highlighted to the Board on a quarterly basis;
3. Brokers: provide advice periodically, specific to the Company
on the Company's sector, competitors and the investment company
market whilst working with the Board and Investment Manager to
communicate with Shareholders;
4. Company Secretary and Auditor: briefs the Board on
forthcoming legislation and regulatory change that might impact on
the Company. The Auditor also has specific briefings at least
annually;
5. AIC: the Company is a member of the AIC, which provides
regular technical updates as well as drawing members' attention to
forthcoming industry and regulatory issues.
The COVID-19 pandemic was identified as a risk early in the
year. Its impact has been significant with restrictions to movement
of people and disruption to business operations impacting global
portfolio company valuations and returns and potentially impacting
the operational resilience of the Company's service providers. The
impact of COVID-19 on the markets and the Company's financial
position are closely monitored by the Investment Manager's report
and the Board. Please refer to the Chair's statements and
Investment Manager for their assessment and effects it had on
valuations, performance and the Company's plans going forward.
The Board intend that RM ZDP plc be put into voluntarily
liquidation through a General Meeting on 6 April 2021, for the
purpose of proposing a resolution to wind up the ZDP Subsidiary
voluntarily, with the assets of the RM ZDP then available for
distribution.
On a winding up of the ZDP Subsidiary voluntarily, the assets of
the ZDP Subsidiary are available for distribution to ZDP
Shareholders, in accordance with the Companies Act and shall be
applied as follows:
-- There shall be payment to holders of the ZDP Shares an amount
equal to the initial capital entitlement of 100 pence as increased
at such rate as accrues daily and compounds annually to give an
entitlement to 110.91 pence on the ZDP repayment date of 6 April
2021; and
-- There shall be payment to the holders of the Ordinary Shares
the balance of the assets of the ZDP Subsidiary available for
distribution in accordance with the Companies Act and the Articles
of Association. With the entitlements of holders of ZDP Shares
being rounded down to the nearest whole penny.
The Company will put forward proposals to Shareholders before
the Company's fourth Annual General Meeting to realise the value of
their Ordinary Shares at or near the prevailing Net Asset Value per
Ordinary Share less costs before the Company's fourth Annual
General Meeting on 8 June 2021. Shareholders should note that due
to the nature of the assets held by the Company, any realisation is
expected to take an extended period of time. The risk is that this
liquidity opportunity to the Shareholders will reduce the Company
to a size whereby it is not viable to operate.
Management of risks
Each service provider has business continuity policies and
procedures in place to ensure that they are able to meet the
Company's needs and all breaches of any nature are reported to the
Board.
The Board regularly reviews the Company's risk matrix, focussing
on risk mitigation and ensuring that the appropriate controls are
in place. Regular review ensures that the Group operates in line
with the risk management policy, prospectus and investment
strategy. Emerging risks are actively discussed throughout the year
to ensure that risks are identified and managed so far as
practicable. The experience and knowledge of the Board is
invaluable to these discussions, as is advice received from the
Board's service providers.
Due to the COVID-19 pandemic and the restrictions on gatherings
and travel introduced by the UK Government, the Audit and
Management Engagement Committee requested assurances from the
Company's key service providers that business continuity plans had
been enacted where necessary, with service providers enabling
remote working arrangements. This provided a satisfactory level of
assurance that there had not been, and there was no anticipation of
any disruption to service quality.
Details of the Directors' assessment of repayment of the RM ZDP
Loan, the liquidity opportunity of Shareholders and the adequacy of
the Company's resources are disclosed in the Annual Report.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the consolidated
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.
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 during and as at the end
of the year. In preparing these financial statements, the Directors
are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates, which are reasonable and prudent;
-- present information including accounting policies and
additional disclosures as required to ensure the report is
presented in a manner that provides relevant, reliable, comparable
and understandable information;
-- state whether international accounting standards in
conformity with the requirements of the Companies Act 2006 and
international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union
have been followed, subject to any material departures disclosed
and explained in the financial statements; and
-- prepare the consolidated financial statements on a going
concern basis unless it is inappropriate to presume that the Group
will continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group's
transactions and which disclose with reasonable accuracy at any
time the financial position of the Group and enable them to ensure
that the accounts comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Group and hence for
taking reasonable steps for the prevention and detection of fraud
and other irregularities.
The accounts are published on the Group's website at
https://rmdl.co.uk/ which is maintained by the Group'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 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 Group; and
(b) this Annual Report includes a fair review of the development
and performance of the business and position of the Group, together
with a description of the principal risks and uncertainties that it
faces.
The Directors consider that the consolidated financial
statements taken as a whole is fair, balanced and understandable
and provides the information necessary for Shareholders to assess
the Group's performance, business model and strategy.
For and on behalf of the Board
Norman Crighton
Chair
26 March 2021
Consolidated Statement of Comprehensive Income
For the year ended 31 December
2020
Year ended 31 December Year ended 31 December
2020 2019
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Losses on investments 3 (565) (5,106) (5,671) - (1,161) (1,161)
Income 5 10,942 - 10,942 12,541 - 12,541
Investment management fee 6 (1,088) - (1,088) (1,062) - (1,062)
Other expenses 7 (1,267) (145) (1,412) (1,080) (145) (1,225)
-------------------------------- ------ -------- -------- -------- -------- -------- --------
Return before finance costs
and taxation 8,022 (5,251) 2,771 10,399 (1,306) 9,093
Finance costs 8 (635) - (635) (541) - (541)
-------------------------------- ------ -------- -------- -------- -------- -------- --------
Return on ordinary activities
before taxation 7,387 (5,251) 2,136 9,858 (1,306) 8,552
Taxation 9 (279) - (279) (42) 18 (24)
-------------------------------- ------ -------- -------- -------- -------- -------- --------
Return on ordinary activities
after taxation 7,108 (5,251) 1,857 9,816 (1,288) 8,528
-------------------------------- ------ -------- -------- -------- -------- -------- --------
Return per Ordinary Share
(pence) 16 5.88p (4.34p) 1.54p 8.85p (1.16p) 7.69p
-------------------------------- ------ -------- -------- -------- -------- -------- --------
The total column of this statement is the profit and loss account of the
Group.
All the revenue and capital items in the above statement derive from continuing
operations.
'Return on ordinary activities after taxation' is also the 'Total comprehensive
income for the year'.
Company Statement of Comprehensive Income
For the year ended 31 December
2020
Year ended 31 December Year ended 31 December
2020 2019
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Losses on investments 3 (565) (5,210) (5,775) - (1,264) (1,264)
Income 5 10,942 - 10,942 12,541 - 12,541
Investment management fee 6 (1,088) - (1,088) (1,062) - (1,062)
Other expenses 7 (1,192) (145) (1,337) (1,002) (164) (1,166)
-------------------------------- ------ -------- -------- -------- -------- -------- --------
Return before finance costs
and taxation 8,097 (5,355) 2,742 10,477 (1,428) 9,049
Finance costs 8 (635) - (635) (541) - (541)
-------------------------------- ------ -------- -------- -------- -------- -------- --------
Return on ordinary activities before
taxation 7,462 (5,355) 2,107 9,936 (1,428) 8,508
Taxation 9 (246) - (246) (15) 15 -
-------------------------------- ------ -------- -------- -------- -------- -------- --------
Return on ordinary activities
after taxation 7,216 (5,355) 1,861 9,921 (1,413) 8,508
-------------------------------- ------ -------- -------- -------- -------- -------- --------
Return per Ordinary Share
(pence) 16 5.96p (4.43p) 1.53p 8.94p (1.27p) 7.67p
-------------------------------- ------ -------- -------- -------- -------- -------- --------
The total column of this statement is the profit and loss account of the
Company.
All the revenue and capital items in the above statement derive from continuing
operations.
'Return on ordinary activities after taxation' is also the 'Total comprehensive
income for the year'.
Consolidated Statement of Financial Position
As at 31 December As at 31 December
2020 2019
Notes GBP'000 GBP'000
----------------------------------------- ------ ------------------ ------------------
Fixed assets
Investments at fair value through
profit or loss 3 122,705 131,201
Current assets
Cash and cash equivalents 2,236 8,390
Receivables 10 10,515 2,266
----------------------------------------- ------ ------------------ ------------------
12,751 10,656
Payables: amounts falling due within
one year
Payables 11 (2,634) (10,788)
Zero Dividend Preference Shares 12 (11,942) -
Bank loan - Credit facility 8 (10,500) -
(25,076) (10,788)
----------------------------------------- ------ ------------------ ------------------
Net current liabilities (12,325) (132)
----------------------------------------- ------ ------------------ ------------------
Non-current liabilities
Zero Dividend Preference Shares 12 - (11,541)
Total assets less current liabilities 110,380 119,528
----------------------------------------- ------ ------------------ ------------------
Net assets 110,380 119,528
----------------------------------------- ------ ------------------ ------------------
Capital and reserves: equity
Share capital 14 1,184 1,222
Share premium 15 70,168 70,146
Special reserve 45,277 48,304
Capital reserve (9,125) (3,874)
Revenue reserve 2,876 3,730
Total Shareholders' funds 110,380 119,528
----------------------------------------- ------ ------------------ ------------------
NAV per share - Ordinary Shares (pence) 17 93.25p 97.79p
----------------------------------------- ------ ------------------ ------------------
The financial statements of the Group were approved and
authorised for issue by the Board of Directors on 26 March 2021 and
signed on their behalf by:
Norman Crighton
Chair
Company Statement of Financial Position
As at 31 December As at 31 December
2020 2019
Notes GBP'000 GBP'000
----------------------------------------- ------ ------------------ ------------------
Fixed assets
Investments at fair value through
profit or loss 3 122,705 131,201
Investments in subsidiary 4 50 50
Current assets
Cash and cash equivalents 2,218 8,372
Receivables 10 10,498 2,210
----------------------------------------- ------ ------------------ ------------------
12,716 10,582
Payables: amounts falling due within
one year
Payables 11 (2,645) (10,764)
Intercompany loan payable 13 (11,942) -
Bank loan - Credit facility (10,500) -
(25,087) (10,764)
----------------------------------------- ------ ------------------ ------------------
Net current liabilities (12,371) (182)
----------------------------------------- ------ ------------------ ------------------
Non-current liabilities
Intercompany loan payable 13 - (11,541)
Total assets less current liabilities 110,384 119,528
----------------------------------------- ------ ------------------ ------------------
Net assets 110,384 119,528
----------------------------------------- ------ ------------------ ------------------
Capital and reserves: equity
Share capital 14 1,184 1,222
Share premium 15 70,168 70,146
Special reserve 45,277 48,304
Capital reserve (9,412) (4,057)
Revenue reserve 3,167 3,913
Total Shareholders' funds 110,384 119,528
----------------------------------------- ------ ------------------ ------------------
NAV per share - Ordinary Shares (pence) 17 93.26p 97.79p
----------------------------------------- ------ ------------------ ------------------
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:
Norman Crighton
Chair
Consolidated Statement of Changes in Equity
For the year ended 31
December
2020
Share Share Special Capital Revenue
capital premium reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------ ------------- ----------- -------- --------- --------- -------------
Balance as at
beginning
of the year 1,222 70,146 48,304 (3,874) 3,730 119,528
Return on ordinary
activities - - - (5,251) 7,108 1,857
Redemption of shares 14 (38) 38 (3,027) - - (3,027)
Share buyback costs - (16) - - - (16)
Dividend paid 18 - - - - (7,962) (7,962)
Balance as at 31
December
2020 1,184 70,168 45,277 (9,125) 2,876 110,380
---------------------- ------ ------------- ----------- -------- --------- --------- -------------
For the year ended 31 December 2019
Share
Share premium Special Capital Revenue
capital account reserve reserves reserves Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------ ------------- ----------- -------- --------- --------- -------------
Balance as at beginning of
the year 987 47,351 48,304 (2,586) 1,664 95,720
Return on ordinary
activities - - - (1,288) 9,816 8,528
Issue of shares 14 235 23,265 - - - 23,500
Share issue costs - (470) - - - (470)
Dividend paid 18 - - - - (7,750) (7,750)
Balance as at 31
December
2019 1,222 70,146 48,304 (3,874) 3,730 119,528
---------------------- ------ ------------- ----------- -------- --------- --------- -------------
Distributable reserves comprise: the revenue reserve; capital reserves
attributable to realised profits; and the special reserve.
Share capital represents the nominal value of shares that have been issued.
The share premium includes any premiums received on the issue of share
capital. Any transaction costs associated with the issuing of shares
are deducted from share premium.
Company Statement of Changes in Equity
For the year ended 31
December
2020
Share Share Special Capital Revenue
capital premium reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------ ------------- ----------- -------- --------- --------- ---------------
Balance as at
beginning
of the year 1,222 70,146 48,304 (4,057) 3,913 119,528
Return on ordinary
activities - - - (5,355) 7,216 1,861
Redemption of shares 14 (38) 38 (3,027) - - (3,027)
Share buyback costs - (16) - - - (16)
Dividend paid 18 - - - - (7,962) (7,962)
Balance as at 31
December
2020 1,184 70,168 45,277 (9,412) 3,167 110,384
---------------------- ------ ------------- ----------- -------- --------- --------- ---------------
For the year ended 31 December 2019
Share
Share premium Special Capital Revenue
capital account reserve reserves reserves Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ------ ------------- ----------- -------- --------- --------- ---------------
Balance as at beginning of
the year 987 47,351 48,304 (2,644) 1,742 95,740
Return on ordinary
activities - - - (1,413) 9,921 8,508
Issue of shares 14 235 23,265 - - - 23,500
Share issue costs - (470) - - - (470)
Dividend paid 18 - - - - (7,750) (7,750)
Balance as at 31
December
2019 1,222 70,146 48,304 (4,057) 3,913 119,528
---------------------- ------ ------------- ----------- -------- --------- --------- ---------------
Distributable reserves comprise: the revenue reserve; capital reserves
attributable to realised profits; and the special reserve.
Share capital represents the nominal value of shares that have been issued.
The share premium includes any premiums received on the issue of share
capital. Any transaction costs associated with the issuing of shares
are deducted from share premium.
Consolidated Statement of Cash Flows
For the year ended 31 December
2020
Year ended 31 Year ended 31
December 2020 December 2019
Notes GBP'000 GBP'000
-------------------------------------- --------- ---------------------------- -------------------
Operating activities
Return on ordinary activities
before finance costs and taxation* 2,771 9,093
Adjustment for losses on investments 5,357 1,161
Increase in receivables (919) (1,189)
Increase in payables 414 247
PIK income adjustment to the
operating
cash flow (2,081) (1,129)
Net cash flow from operating
activities 5,542 8,183
-------------------------------------- --------- ---------------------------- -------------------
Investing activities
Private loan repayments/ bonds
sales proceeds 33,478 56,335
Private loans issued/ bonds purchases (44,435) (79,392)
Net cash flow used in investing
activities (10,957) (23,057)
-------------------------------------- --------- ---------------------------- -------------------
Financing activities
Finance costs (234) (154)
Ordinary Share issue proceeds - 23,500
Ordinary Share issue costs - (470)
Ordinary Share bought back 14 (3,027) -
Ordinary Share buyback costs (16) -
Oaknorth loan facility drawdown 17,800 16,900
Oaknorth loan facility repaid (7,300) (16,900)
Equity dividends paid 18 (7,962) (7,750)
Net cash (used in)/flow from
financing
activities (739) 15,126
-------------------------------------- --------- ---------------------------- -------------------
(Decrease)/increase in cash (6,154) 252
Opening balance at beginning of
the year 8,390 8,138
-------------------------------------- --------- ---------------------------- -------------------
Balance as at 31 December 2020 2,236 8,390
-------------------------------------- --------- ---------------------------- -------------------
* Cash inflow from interest on investment holdings was GBP8,960,000
(2019: GBP10,680,000).
Company Statement of Cash Flows
For the year ended 31 December
2020
Year ended 31 Year ended 31
December 2020 December 2019
Notes GBP'000 GBP'000
-------------------------------------- --------- ---------------------------- -------------------
Operating activities
Return on ordinary activities
before finance costs and taxation* 2,742 9,049
Adjustment for losses on investments 5,357 1,239
Increase in receivables (958) (1,192)
Increase in payables 481 216
PIK income adjustment to the
operating
cash flow (2,081) (1,129)
Net cash flow from operating
activities 5,541 8,183
-------------------------------------- --------- ---------------------------- -------------------
Investing activities
Private loan repayments/ bonds
sales proceeds 33,479 56,335
Private loans issued/ bonds purchases (44,435) (79,392)
Net cash flow used in investing
activities (10,956) (23,057)
-------------------------------------- --------- ---------------------------- -------------------
Financing activities
Finance costs (234) (154)
Ordinary Share issue proceeds - 23,500
Ordinary Share issue costs - (470)
Ordinary Share bought back 14 (3,027) -
Ordinary Share buyback costs (16) -
Oaknorth loan facility drawdown 17,800 16,900
Oaknorth loan facility repaid (7,300) (16,900)
Equity dividends paid 18 (7,962) (7,750)
Net cash flow (used in)/ from
financing activities (739) 15,126
-------------------------------------- --------- ---------------------------- -------------------
(Decrease)/increase in cash (6,154) 252
Opening balance at beginning of
the year 8,372 8,120
-------------------------------------- --------- ---------------------------- -------------------
Balance as at 31 December 2020 2,218 8,372
-------------------------------------- --------- ---------------------------- -------------------
* Cash inflow from interest on investment holdings was GBP8,960,000
(2019: GBP10,680,000).
Changes in financing liabilities
Year ended 31 December Year ended 31 December
Movement in financial liabilities-Group 2020 2019
--------------------------- -----------------------------
OakNorth OakNorth
facility ZDP Shares facility ZDP Shares
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ----------- -------------- ----------- ----------------
Balance as at beginning of the
year - 11,541 - 11,155
Facility drawdowns during the
year 17,800 - 16,900 -
Facility interest payable during
the year 234 - 106 -
Facility and interest repayments
during the year (7,534) - (17,006) -
Return on ZDP Shares during
the year-non cash flow - 401 - 386
------------------------------------------- ----------- -------------- ----------- ----------------
Balance as at 31 December 2020 10,500 11,942 - 11,541
------------------------------------------- ----------- -------------- ----------- ----------------
Year ended 31 December Year ended 31 December
Movement in financial liabilities-Company 2020 2019
--------------------------- -----------------------------
OakNorth Intercompany OakNorth Intercompany
facility loan facility loan
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ----------- -------------- ----------- ----------------
Balance as at beginning of the
year - 11,541 - 11,155
Facility drawdowns during the
year 17,800 - 16,900 -
Facility interest payable during
the year 234 - 106 -
Facility and interest repayments
during the year (7,534) - (17,006) -
Intercompany finance cost-non
cash flow - 401 - 386
Balance as at 31 December 2020 10,500 11,942 - 11,541
------------------------------------------- ----------- -------------- ----------- ----------------
Notes to the Financial Statements
1. General information
RM Secured Direct Lending plc (the "Company") was incorporated in England
and Wales on 27 October 2016 with registered number 10449530, as a
closed-ended investment company. The Company commenced its operations
on 15 December 2016. The Company intends to carry on business as an
investment trust within the meaning of Chapter 4 of Part 24 of the
Corporation Tax Act 2010.
The consolidated financial information of the Company comprises that
of the Company and its subsidiary RM ZDP Plc (together referred to
as the "Group") for the year ended 31 December 2020. RM ZDP 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's investment objective is to generate attractive and regular
dividends through investment in secured debt instruments of UK SMEs
and mid-market corporates including any loan, promissory notes, lease,
bond or preference share sourced or originated by the Investment Manager
with a degree of inflation protection through index-linked return where
appropriate.
The registered office is 1st Floor, Senator House, 85 Queen Victoria
Street, London, EC4V 4AB.
2. Accounting policies
The principal accounting policies followed by the Group and the Company
are set out below:
(a) Basis of accounting
These financial statements have been prepared in accordance with international
accounting standards in conformity with the requirements of the Companies
Act 2006 and the applicable legal requirements of the Companies Act
2006. In addition to complying with international accounting standards
in conformity with the requirements of the Companies Act 2006, the
consolidated financial statements also comply with international financial
reporting standards adopted pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union.The financial statements have been
prepared on a historical cost basis, except for the measurement at
fair value of investments.
The Board has determined by having regard to the currency of the Company's
share capital and the predominant currency in which its shareholders
operate, that sterling is the functional and reporting currency. Where
presentational recommendations set out in the Statement of Recommended
Practice "Financial Statements of Investment Trust Companies and Venture
Capital Trusts" ("SORP"), issued in the UK by the AIC in October 2019,
do not conflict with the requirements of IFRS, the directors have prepared
the financial statements on a basis consistent with the recommendations
of the SORP, in the belief that this will aid comparison with similar
investment companies incorporated in the United Kingdom.
In accordance with the SORP, the Statement of Comprehensive Income
has been analysed between a revenue return (dealing with items of a
revenue nature) and a capital return (relating to items of a capital
nature). Revenue returns include, but are not limited to, investment
related income, operating expenses, income related finance costs and
taxation (insofar as they are not allocated to capital). Net revenue
returns are allocated via the revenue return to the Revenue reserve.
Capital returns include, but are not limited to, profits and losses
on the disposal and the valuation of non-current investments, derivative
instruments and on cash and borrowings, operating costs and finance
costs (insofar as they are not allocated to revenue). Net capital returns
are allocated via the capital return to Capital reserves.
Dividends on Ordinary Shares may be paid out of Revenue reserve, Capital
reserve and Special reserve.
(b) 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 Group.
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 Group.
Amendments to IFRS 7, IFRS 9 and IAS 39 Interest Rate Benchmark Reform
The amendments to IFRS 7, 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 Group.
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 Group.
(c) Basis of consolidation
The consolidated financial statements comprise the financial information
of the Group as at the year end date. A Subsidiary is an entity over
which the Company has control. 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 to direct the activities of the entity. The financial information
of the subsidiary is included in the consolidated financial statements
from the date that control commences until the date that control ceases.
Accounting policies of the subsidiary are consistent with the policies
adopted by the Company. All intra-group transactions, balances, income
and expenses are eliminated on consolidation.
(d) Going concern
The Directors have adopted the going concern basis in preparing the
financial statements. In forming this opinion, the directors have considered
any potential impact of the COVID-19 pandemic on the going concern
and viability of the Group. In making their assessment, the Directors
have reviewed income and expense projections and the liquidity of the
investment portfolio, and considered the mitigation measures which
key service providers, including the Investment Manager, have in place
to maintain operational resilience particularly in light of COVID-19.
Details of the Directors assessment of the going concern status of
the Group, which considered repayment of the RM ZDP loan and the Shareholders
liquidity opportunity are disclosed in the Annual Report.
The Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for at least twelve
months from the date of this document. In reaching this conclusion,
the Directors have considered the Group's portfolio of loan investments
of GBP122.7 million (2019: GBP131.2 million) as well as its income
and expense flows and the cash position of GBP1.4 million (2019: GBP8.4
million). The Group's net assets at 31 December 2020 were GBP110.4
million (2019: GBP119.5 million). The total expenses (excluding finance
costs and taxation) for the year ended 31 December 2020 were GBP2.5
million (2019: GBP2.3 million), which represented approximately 1.91%
(2019: 1.77%) of average net assets during the year. At the date of
approval of this document, based on the aggregate of investments and
cash held, the Group has substantial operating expenses cover.
The RM ZDP loan final capital entitlement amount of GBP12,055,000 is
payable to RM ZDP on 6 April 2021, upon passing of the resolution for
voluntary liquidation of the ZDP Subsidiary. At the date of approval
of this document, it is estimated that approximately 16% of the value
of the investments held at the year-end could be realised in two months
as these are traded. Based on the expected realised value of investments
and cash held, the Directors are comfortable that the Group is able
to meet its final capital entitlement amount. The Directors also considered
the Group's RCF of GBP10.5million to meet this obligation. As at the
date of approval of this document, the undrawn amount of this facility
was GBP9.4 million.
Prior to the Company's fourth Annual General Meeting on 8 June 2021,
the Company's Shareholders will have an opportunity to realise the
value of their shares at or near the prevailing NAV per Share. The
Directors have also considered the liquidity opportunity and confirm
that the proposals submitted to Shareholders will take into consideration
the requirement to manage the Company's ability to repay existing liabilities
as they fall due.
Based on the above, there are no material uncertainties that call into
question the Company's ability to continue to be a going concern from
the date of approval of these financial statements to 30 June 2022
and the Board is confident that the Company will be able to continue
in operation and meet its liabilities as they fall due.
(e) Investment entity status
The Company meets the criteria within IFRS 10 as an investment entity
and should therefore hold investments in subsidiaries at fair value
rather than consolidate them, unless those subsidiaries are not themselves
investment entities and their main purpose is to provide services related
to the group's investment activities. The Group's subsidiary, RM ZDP
is not an investment entity and its main purpose is to provide finance
for the group through the issue of zero dividend preference shares
and therefore this subsidiary has been consolidated.
(f) Investments
Investments consist of private loans and bonds, which are classified
as fair value through profit or loss as they are included in a group
of financial assets that are managed and their performance evaluated
on a fair value basis. They are initially and subsequently measured
at fair value and gains and losses are attributed to the capital column
of the Statement of Comprehensive Income. Investments are recognised
on the date that the Group becomes a party to the contractual provisions
of the instrument and are derecognised when their term expires, or
on the date they are sold, repaid or transferred.
Unquoted investments are valued at fair value by the Board which is
established with regard to the International Private Equity and Venture
Capital Valuation Guidelines by using, where appropriate, latest dealing
prices, valuations from reliable sources and other relevant factors.
(g) Foreign currency
Transactions denominated in foreign currencies are translated into
sterling at actual exchange rates as at the date of the transaction.
Monetary assets and liabilities and non-monetary assets held at fair
value denominated in foreign currencies are translated into sterling
using London closing foreign exchange rates at the year end. Any gain
or loss arising from a change in exchange rates is included as an exchange
gain or loss to capital or revenue in the Statement of Comprehensive
Income as appropriate. Foreign exchange movements on investments are
included in the Statement of Comprehensive Income within loss on investments.
(h) Income
Interest income is recognised in the revenue column of the Statement
of Comprehensive Income on a time-apportioned basis. Payment-in-kind
(PIK) interest income is accounted on an accrual basis and capitalised
to the principal value of the loan.
All other income including deposit interest is accounted on an accrual
basis and early settlement fees received are recognised upon the early
repayment of the loan.
Arrangement fees earned on private loan investments are recognised
as an income over the term of the private loans.
(i) Capital reserves
Realised and unrealised gains and losses on the Group's investments
are recognised in the capital column of the Statement of Comprehensive
Income and allocated to the capital reserve.
(j) Expenses
All expenses are accounted for on an accruals basis.
Other expenses are recognised in the revenue column of the Statement
of Comprehensive Income, unless they are incurred in order to enhance
or maintain capital profits.
Management fees and finance costs
The Group is expecting to derive its returns predominantly from interest
income. Therefore, the Board has adopted a policy of allocating all
management fees and finance costs to the revenue column of the Statement
of Comprehensive Income.
ZDP Shares finance cost
The ZDP Shares are designed to provide a pre-determined capital growth
from their original issue price of 100p on 3 April 2018 to a final
capital entitlement of 110.91p on 6 April 2021, on which date the RM
ZDP is planned to be wound up. The provision for the capital growth
entitlement of the ZDP Shares is included as a finance cost and charged
to revenue within the Statement of Comprehensive Income.
(k) Taxation
The charge for taxation is based upon the net revenue for the year.
The tax charge is allocated to the revenue and capital columns of the
Statement of Comprehensive Income according to the marginal basis whereby
revenue expenses are first matched against taxable income arising in
the revenue account.
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.
(l) Financial liabilities
Bank loan facility and overdrafts are initially recorded at the proceeds
received net of direct issue costs and subsequently measured at amortised
cost using the effective interest rate.. The associated costs of bank
loan facility are treated as revenue and amortised over the period
of the bank loan facility.
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. ZDP 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 ZDP Shares. The final capital entitlement to ZDP shareholders
will rank in priority to the capital entitlement of the Ordinary Shares
of RM ZDP as such ZDP Shares are treated as debt.
(m) Dividends
Interim dividends to the Shareholders 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.
(n) Judgements, estimates and assumptions
The preparation of financial statements requires the directors to
make estimates and assumptions that affect the application of accounting
policies and the reported amounts of assets, liabilities, income and
expenses. Although these estimates are based on management's best knowledge
of current facts, circumstances and, to some extent, future events
and actions, the Group's actual results may ultimately differ from
those estimates, possibly significantly.
The Group recognises loan investments at fair value through profit
or loss and disclosed in note 3 to the financial statements. The significant
assumptions made at the point of valuation of loans are the discounted
cash flow analysis and/or benchmarked discount/interest rates, which
are deemed appropriate to reflect the risk of the underlying loan.
These assumptions are monitored to ensure their ongoing appropriateness.
The sensitivity impact on the measurement of fair value of loan investments
due to price is discussed in note 21.
(o) Investments in subsidiary
The investments in subsidiary company is included in the Company's
Statement of Financial Position
at cost less provision for impairment.
3. INVESTMENT AT FAIR VALUE THROUGH PROFIT OR
LOSS
Group
(a) Summary of valuation
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------------------- ------------- -------------
Financial assets held:
Bond investments 2,695 6,322
Private loan investments 120,010 124,879
122,705 131,201
----------------------------------------- ------------- -------------
(b) Movements
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------------------- ------------- -------------
Opening valuation 131,201 102,581
Opening unrealised losses on investment
holdings 2,919 438
----------------------------------------- ------------- -------------
Book cost at the beginning of the
year 134,120 103,019
Private loans issued/bonds purchases
at cost 35,589 84,785
Payment in kind interest (PIK) 2,602 1,244
Sales:
- Private loans repayments/bonds
sales proceeds (41,067) (55,511)
- gains on investment 258 698
- Payment in kind interest (PIK) (521) (115)
Unrealised losses on investments
held (8,276) (2,919)
Closing valuation at year end 122,705 131,201
----------------------------------------- ------------- -------------
Book cost at end of the year 130,981 134,120
Unrealised losses on investment
holdings at the year end (8,276) (2,919)
Closing valuation at year end 122,705 131,201
----------------------------------------- ------------- -------------
(c) Losses on investments
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------------------- ------------- -------------
Realised gains on investments 362 698
Unrealised losses on investments
held (5,357) (2,481)
Foreign exchange (losses)/gains (676) 622
Total losses on investments (5,671) (1,161)
----------------------------------------- ------------- -------------
3. INVESTMENT AT FAIR VALUE THROUGH PROFIT OR
LOSS
Company
(a) Summary of valuation
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------------------- ------------- -------------
Financial assets held:
Bond investments 2,695 6,322
Private loan investments 120,010 124,879
122,705 131,201
----------------------------------------- ------------- -------------
(b) Movements
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------------------- ------------- -------------
Opening valuation 131,201 102,581
Opening unrealised losses on investment
holding 2,919 438
----------------------------------------- ------------- -------------
Book cost at the beginning of the
year 134,120 103,019
Private loans issued/bonds purchases
at cost 35,589 84,785
Payment in kind interest (PIK) 2,602 1,244
Sales:
- Private loans repayments/bonds
sales proceeds (41,067) (55,408)
- gains on investment 258 595
- Payment in kind interest (PIK) (521) (115)
Unrealised losses on investments
held (8,276) (2,919)
Closing valuation at year end 122,705 131,201
----------------------------------------- ------------- -------------
Book cost at end of the year 130,981 134,120
Unrealised losses on investment
holdings at the year end (8,276) (2,919)
Closing valuation at year end 122,705 131,201
----------------------------------------- ------------- -------------
(c) Losses on investments
Year ended Year ended
31 December 31 December
2020 2019
GBP'000 GBP'000
----------------------------------------- ------------- -------------
Realised gains on investments 258 595
Unrealised losses on investments
held (5,357) (2,481)
Foreign exchange (losses)/gains (676) 622
Total losses on investments (5,775) (1,264)
----------------------------------------- ------------- -------------
At the year end, the Company had one unquoted investment in
Esprit Holdco Limited (Energie Fitness). The Company participated
in a management buyout during 2020 and owns 28% of the business,
the registered office and principal of business of Energie Fitness
is 1 Pitfield Kiln Farm, Milton Keynes, United Kingdom, MK11 3LW.
The Investment Manager valued holdings in Energie Fitness at
nil.
The equity investment in Energie Fitness meets the criteria
within IFRS 10 as an investment entity and therefore held at fair
value.
4. INVESTMENT IN SUBSIDIARY
Company
Year ended 31 December
2020
GBP'000
------------ --------------------- ---------------------------- --------------------------
Investment in subsidiary 50
-----------------------------------------------------------------
Total 50
----------------------------------------------------------------- --------------------------
Subsidiary Effective ownership
name % Country of incorporation Principal activity
------------ --------------------- ---------------------------- --------------------------
1st Floor, Senator House,
85 Queen Victoria Street,
London, EC4V 4AB, United Issuance of zero dividend
RM ZDP plc 100 Kingdom preference shares
5. INCOME-GROUP AND COMPANY
Year ended 31 Year ended 31
December 2020 December 2019
GBP'000 GBP'000
----------------------------------------------- ----------------- -------------------
Income from investments
Bond and loan-cash interest 8,817 10,215
Bond and loan-PIK interest 1,879 1,314
Bank interest - 4
Arrangement fees 102 190
Loan redemption fees - 451
Delayed Compensation fees received 46 148
Prepayment fee 58 -
Other income 40 219
----------------- -------------------
Total 10,942 12,541
----------------------------------------------- ----------------- -------------------
6. INVESTMENT MANAGEMENT FEE
Year ended 31
Year ended 31 December 2020 December 2019
GROUP AND COMPANY GBP'000 GBP'000
--------------------------------- ------------------------------- ----------------
Basic fee:
100% charged to revenue 1,088 1,062
Total 1,088 1,062
--------------------------------- ------------------------------- ----------------
The Company's Investment Manager is RM Capital Markets Limited. Under
the amended Investment Management Agreement, effective 1 April 2020,
the Investment Manager is entitled to receive a management fee payable
monthly in arrears or as soon as practicable after the end of each calendar
month an amount one-twelfth of:
(a) 0.875 per cent. of the prevailing NAV in the event that the prevailing
NAV is up to or equal to GBP250 million; or
(b) 0.800 per cent. Of the prevailing NAV in the event that the prevailing
NAV is above GBP250 million but less than GBP500 million; or
(c) 0.750 per cent. of the prevailing NAV in the event that the prevailing
NAV is above GBP500 million.
In calculating Net Asset Value for these purposes all assets referable
to the issue of ZDP Shares shall be counted as though they were assets
of the Company but, for the avoidance of doubt, no liabilities referable
to the issue of any ZDP Shares shall be deducted.
The management fee shall be payable in Sterling on a pro-rata basis
in respect of any period which is less than a complete calendar month.
There is no performance fee payable to the Investment Manager.
7. OTHER EXPENSES
Year ended 31 Year ended 31
December 2020 December 2019
GROUP GBP'000 GBP'000
------------------------------------------ --------------- ---------------
Basic fee charged to revenue:
Administration Fees 284 263
Auditor's remuneration:
Statutory audit fee 102 75
Broker Fees 106 90
Consultancy Fees 90 100
Directors' Fees 99 99
AIFM fees 160 164
Registrars fees 43 46
Valuation Fees 90 118
Other Expenses 293 125
---------------
Total revenue expenses 1,267 1,080
Expenses charged to capital:
Prospectus issue and capital transaction
costs 145 145
---------------
Total other expenses 1,412 1,225
------------------------------------------ --------------- ---------------
Year ended 31 Year ended 31
December 2020 December 2019
Company GBP'000 GBP'000
---------------------------------------------- ------------------ -------------------------
Basic fee charged to revenue:
Administration Fees 242 221
Auditor's remuneration:
Statutory audit fee 94 64
Broker Fees 106 90
Consultancy Fees 90 100
Directors' Fees 99 99
AIFM fees 160 164
Registrars fees 31 34
Valuation Fees 90 118
Other Expenses 280 112
-------------------------
Total revenue expenses 1,192 1,002
Expenses charged to capital:
Prospectus issue and capital transaction
costs 145 164
Total expenses 1,337 1,166
---------------------------------------------- ------------------ -------------------------
8. FINANCE COSTS
Year ended 31 December Year ended 31 December
2020 2019
Revenue Capital Total Revenue Capital Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------- -------- -------- -------- --------- -------- --------
Loan arrangement fees 105 - 105 48 - 48
Loan Interest paid 129 - 129 107 - 107
ZDP Shares finance costs 401 - 401 386 - 386
635 - 635 541 - 541
-------------------------- -------- -------- -------- --------- -------- --------
Year ended 31 December Year ended 31 December
2020 2019
Revenue Capital Total Revenue Capital Total
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- -------- -------- -------- -------- -------- --------
Loan arrangement fees 105 - 105 48 - 48
Loan Interest paid 129 - 129 107 - 107
ZDP inter-company loan finance
costs 401 - 401 386 - 386
635 - 635 541 - 541
-------------------------------- -------- -------- -------- -------- -------- --------
The Company has a GBP10.5 million revolving credit facility with OakNorth
Bank. On 5 November 2020, the Company renewed and amended its revolving
credit facility with Oak North Bank. Under the terms of the amended
revolving credit facility, the Company may draw down loans up to an
aggregate value of GBP10.5 million, on materially similar terms as the
Company's previous revolving credit facility. The revolving credit facility
expires on 5 November 2021.
This will facilitate the tactical use of borrowings ahead of any known
investment redemptions or capital raises. Aside from setup costs and
an arrangement fee, there is no additional cost to maintaining the facility.
Interest will accrue on each Loan at the annual percentage of which
is the aggregate of three-month LIBOR and 3.65% per annum.
During the year, the Company drew cumulative amount of GBP17.8million
(2019: GBP16.9 million) from the revolving credit facility and repaid
cumulative amount of GBP 7.3 million (2019: GBP16.9 million). The remaining
balance as at 31 December 2020 amounts to GBP10.5 million (2019: nil).
9. TAXATION
Year ended 31 December Year ended 31 December
2020 2019
Revenue Capital Total Revenue Capital Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- -------- -------- -------- --------
Analysis of tax charge / (credit) the
year:
Corporation tax-current year 276 - 276 42 (18) 24
Corporation tax-prior year 3 - 3 - - -
----------------------------------- -------- -------- -------- -------- -------- --------
Total current tax charge/(credit)
(see note 9 (b)) 279 - 279 42 (18) 24
----------------------------------- -------- -------- -------- -------- -------- --------
Year ended 31 December Year ended 31 December
2020 2019
Revenue Capital Total Revenue Capital Total
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- -------- -------- -------- -------- -------- --------
Analysis of tax charge / (credit)
the year:
Corporation tax 246 - 246 15 (15) -
----------------------------------- -------- -------- -------- -------- -------- --------
Total current tax charge/(credit)
(see note 9 (b)) 246 - 246 15 (15) -
----------------------------------- -------- -------- -------- -------- -------- --------
(b) Factors Affecting the tax charge
for the year:
The effective UK corporation tax rate for the year is 19.00% (2019:19.00%).
The tax charge differs from the charge resulting from applying the standard
rate of UK corporation tax for an investment trust company. The differences
are explained below:
Year ended 31 December Year ended 31 December
2020 2019
Revenue Capital Total Revenue Capital Total
Group GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- -------- -------- -------- --------
Return on ordinary activities
before taxation 7,387 (5,251) 2,136 9,858 (1,306) 8,552
------------------------------------- -------- -------- -------- -------- -------- --------
UK corporation tax at 19.00%
(2019:19.00%) 1,404 (998) 406 1,873 (248) 1,625
Effects of:
Intercompany income not deductible (32) - (32) 31 - 31
Fair value losses not deductible - 970 970 - 221 221
Effect of management expenses
not utilised - - (15) (15)
Interest distributions paid/payable (1,172) - (1,172) (1,908) - (1,908)
Finance costs not allowable 76 - 76 42 - 42
Management expenses not allowable - 28 28 4 24 28
Prior year adjustment 3 - 3
Total tax charge/(credit) 279 - 279 42 (18) 24
------------------------------------- -------- -------- -------- -------- -------- --------
The Group is not liable to tax on capital gains due to its
status as an investment trust.
Year ended 31 December Year ended 31 December
2020 2019
Revenue Capital Total Revenue Capital Total
Company GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- -------- -------- -------- -------- -------- --------
Return on ordinary activities
before taxation 7,463 (5,355) 2,108 9,936 (1,428) 8,508
------------------------------------- -------- -------- -------- -------- -------- --------
UK corporation tax at 19.00%
(2019:19.00%) 1,418 (1,018) 400 1,888 (271) 1,617
Effects of:
Intercompany income not deductible - - - 31 - 31
Fair value losses not deductible - 990 990 - 221 221
Effect of management expenses
not utilised - - - - (15) (15)
Interest distributions paid/payable (1,172) - (1,172) (1,908) - (1,908)
Management expenses not allowable - 28 28 4 50 54
Total tax charge/(credit) 246 - 246 15 (15) -
------------------------------------- -------- -------- -------- -------- -------- --------
The Company is not liable to tax on capital gains due to its
status as an investment trust.
(c) Deferred tax assets/(liabilities)
The Company had no recognised or unrecognised deferred asset/liability
as at the year end.
10. RECEIVABLES
As at 31 December As at 31 December
2020 2019
Group GBP'000 GBP'000
--------------------------------------- ------------------ ------------------
Amounts falling due within one year:
Repayment of investment private loans
receivable 7,330 -
Bond and loan interest receivable 1,983 1,861
Prepayments and other receivables 1,202 405
------------------
10,515 2,266
--------------------------------------- ------------------ ------------------
As at 31 December As at 31 December
2020 2019
Company GBP'000 GBP'000
----------------------------------------- ------------------ --------------------
Amounts falling due within one year:
Repayment of investment private loans
receivable 7,330 -
Bond and loan interest receivable 1,983 1,861
Prepayments and other receivables 1,185 349
--------------------
10,498 2,210
----------------------------------------- ------------------ --------------------
11. PAYABLES
Year ended 31 Year ended 31
December 2020 December 2019
Group GBP'000 GBP'000
----------------------------------------- ------------------ ------------------
Amounts falling due within one year:
Unsettled investments purchases - 8,846
Loan reserves retained 595 -
Taxation payable 303 24
Other payables 1,736 1,918
------------------
2,634 10,788
----------------------------------------- ------------------ ------------------
Year ended 31 Year ended 31
December 2020 December 2019
Company GBP'000 GBP'000
-------------------------------------- --------------- ---------------
Amounts falling due within one year:
Unsettled investments purchases - 8,846
Loan reserves retained 595 -
Inter company payable 157 50
Taxation payable 246 -
Other payables 1,647 1,868
---------------
2,645 10,764
-------------------------------------- --------------- ---------------
12. ZERO DIVID PREFERENCE SHARES-GROUP
Group Group
As at 31 December As at 31 December
2020 2019
GBP'000 GBP'000
-------------------------------------- -------------------- --------------------
Zero Dividend Preference Shares 11,541 11,155
ZDP Shares finance costs 401 386
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 RM ZDP held on
7 March 2018, a special resolution was passed to issue up to 60 million
ZDP Shares. On 3 April 2018, the Group 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 GBP10,869,950, which were allotted
and fully paid up.
The Parent Company incurred ZDP Share issue costs of GBP129,000, which
has been amortised over the life of ZDP Shares. Amortised cost for
this year amounts to GBP43,000 (2019: GBP43,000) and is included under
other expenses in note 7.
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 Group. The ZDP Shares will
have a life of 3 years and, on that basis, a Final Capital Entitlement
of GBP12,055,000 (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. Under the obligations
of Loan Agreement, the Ordinary Shares and the C Shares of the Parent
rank behind the ZDP Shares.
Voting rights of ZDP Shares
The ZDP Shareholders shall have the right to receive notice of all
general meetings of RM ZDP for information purposes but shall have
no right to attend or vote at any such meeting of RM ZDP. For the
avoidance of doubt:
-- 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; and
-- any ZDP Recommended Resolution or any resolution to approve a ZDP
Reconstruction Proposal (if required) shall only be approved by RM
ZDP Ordinary Shareholders provided they have first been approved by
way of a ZDP Class Consent.
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).
The Final Capital Entitlement will rank behind any liabilities of
the Group. 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.
13. INTERCOMPANY LOAN
COMPANY COMPANY
As at 31 December 2020 As at 31 December 2019
GBP'000 GBP'000
------------------------------- ------------------------ ------------------------
Intercompany loan payable
to RM ZDP 11,541 11,155
Finance costs and capital
contribution 401 386
------------------------
11,942 11,541
------------------------------- ------------------------ ------------------------
Intercompany Loan Agreement
On 29 March 2018, the Company entered into a Loan Agreement with RM ZDP
(the "ZDP Loan"). Pursuant to the Loan Agreement, RM ZDP lent the entirety
of the gross proceeds of the issue of ZDP Shares on 3 April 2018 to the
Company, which has been applied towards making investments in accordance
with the Investment Policy and for working capital purposes.
The Loan Agreement provides that, interest will accrue on the ZDP 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 RM ZDP
along with repayment of the principal amount of the ZDP Loan on the date
falling 2 Business Days before the ZDP Repayment Date of 6 April 2021,
provided that the ZDP Loan shall become repayable by the Company immediately
upon the passing of a winding-up resolution of RM ZDP.
Deed of Undertaking
The Company also entered into an undertaking with RM ZDP, 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 Company to RM ZDP as
at the Repayment Date, the Company shall: (i) subscribe an amount equal
to or greater than the additional funding requirement for RM ZDP Ordinary
Shares or (ii) make a capital contribution or gift or otherwise pay an
amount equal to or greater than the additional funding requirement.
Further details in relation to the ZDP Shares can be found in note 12.
Finance costs comprises GBP230,000 (2019: GBP221,000) interest pursuant
to the loan agreement between the Company and RM ZDP and GBP171,000 (2019:
GBP165,000) other finance costs in connection with the intercompany loan.
14. SHARE CAPITAL (GROUP AND COMPANY)
As at 31 December 2020 As at 31 December 2019
-------------------------------- -----------------------------
No. of Shares GBP'000 No. of Shares GBP'000
-------------------------- ---------------- -------------- -------------- -------------
Allotted, issued & fully
paid:
Ordinary Shares of 1p 118,364,282 1,184 122,224,581 1,222
-------------------------- ---------------- -------------- -------------- -------------
Share movement
The table below sets out the share movement for the year ended 31 December
2020.
-------------------------------------------------------------------------------------------
Shares in
issue at
Shares bought 31 December
Opening balance Shares issued back 2020
-------------------------- ---------------- -------------- -------------- -------------
Ordinary Shares 122,224,581 - (3,860,299) 118,364,282
-------------------------- ---------------- -------------- -------------- -------------
At the yearend 3,860,299 of the above Ordinary Shares were held in Treasury.
Ordinary Share buy backs
During the year, the Company bought back 3,860,299 Ordinary Shares for
an aggregate cost of GBP3,027,000. Since the year end a further 419,500
Ordinary Shares have been bought back for an aggregate cost of GBP366,000.
15. SHARE PREMIUM (GROUP AND COMPANY)
As at 31 December As at 31 December
2020 2019
GBP'000 GBP'000
--------------------------------------- ------------------ ------------------
Balance as at beginning of the year 70,146 47,351
Share buybacks 38 -
Issue Ordinary Shares - 23,265
Share buyback costs (16) (470)
Balance as at 31 December 2020 70,168 70,146
--------------------------------------- ------------------ ------------------
16. RETURN PER ORDINARY SHARE
Based on the weighted average of number of 120,985,417 (2019: 110,960,198)
Ordinary Shares in issue for the year ended 31 December 2020, the
returns per share were as follows:
Year ended 31 December
Year ended 31 December 2020 2019
Group Revenue Capital Total Revenue Capital Total
--------------------------- ------------ ---------- ------ --------- --------- ------
Return per Ordinary
Share 5.88p (4.34p) 1.54p 8.85p (1.16p) 7.69p
--------------------------- ------------ ---------- ------ --------- --------- ------
Year ended 31 December
Year ended 31 December 2020 2019
Company Revenue Capital Total Revenue Capital Total
--------------------------- ------------ ---------- ------ --------- --------- ------
Return per Ordinary
Share 5.96p (4.43p) 1.53p 8.94p (1.27p) 7.67p
--------------------------- ------------ ---------- ------ --------- --------- ------
17. NET ASSET VALUE PER SHARE- (GROUP AND COMPANY)
The net asset value per share is based on total Group and
Company Shareholders' funds of GBP110,380,000 (2019:
GBP119,528,000), and on 118,364,282 (2019: 122,224,581) Ordinary
Shares in issue at the year end.
18. DIVID
Total dividends paid Year ended 31 December
in the year Year ended 31 December 2020 2019
------------------------------------------------------ --------------------------------------
Pence per Pence
Ordinary Revenue Capital per Ordinary Revenue Capital
share GBP'000 GBP'000 Total share GBP'000 GBP'000 Total
---------------------- ---------- --------- --------- ------ ---------------- --------- --------- ------
2019 Interim - Paid
27 Mar 2020 (2019:
29 March 2019) 1.7000p 2,078 - 2,078 1.6250p 1,604 - 1,604
2020 Interim - Paid
26 Jun 2020 (2019:
25 Jun 2019) 1.6250p 1,975 - 1,975 2.0000p 2,244 - 2,244
2020 Interim - Paid
25 Sep 2020 (2019:
26 Sep 2019)* 1.6250p 1,967 - 1,967 1.6250p 1,824 - 1,824
2020 Interim - Paid
30 Dec 2020 (2019:
24 Dec 2019) 1.6250p 1,942 - 1,942 1.7000p 2,078 - 2,078
---------------------- ---------- --------- --------- ------ ---------------- --------- --------- ------
Total 6.5750p 7,962 - 7,962 6.9500p 7,750 - 7,750
---------------------- ---------- --------- --------- ------ ---------------- --------- --------- ------
The dividend relating to the year ended 31 December 2020, which is the basis
on which the requirements of Section 1159 of the Corporation Tax Act 2010
are considered is detailed below:
Total dividends in Year ended 31 December 2020 Year ended 31 December
relation to the year 2019
------------------------ ------------------------------------------- -----------------------------------------------
Pence per Pence
Ordinary Revenue Capital per Ordinary Revenue Capital
share GBP'000 GBP'000 Total share GBP'000 GBP'000 Total
------------------------ ---------- ---------- ---------- ------- -------------- ---------- ---------- -------
2020 Interim - Paid
26 Jun 2020 (2019:
25 Jun 2019) 1.6250p 1,975 - 1,975 2.0000p 2,244 - 2,244
2020 Interim - Paid
25 Sep 2020 (2019:
26 Sep 2019) 1.6250p 1,967 - 1,967 1.6250p 1,824 - 1,824
2020 Interim - Paid
30 Dec 2020 (2019:
24 Dec 2019)* 1.6250p 1,942 - 1,942 1.7000p 2,078 - 2,078
2020 Interim - Payable
31 Mar 2021** (2019:
27 Mar 2020) 1.6250p 1,918 - 1,918 1.7000p 2,078 - 2,078
Total 6.5000p 7,802 - 7,802 7.0250p 8,224 - 8,224
------------------------ ---------- ---------- ---------- ------- -------------- ---------- ---------- -------
* An interim dividend of 1.625 pence per Ordinary Share was declared
by the Board on 2 November 2020. The dividend was paid 1.367p per
share (GBP1,630,000) in respect of the period to 31 December 2019
and 0.258p per share (GBP312,000) in respect of the period to 31
December 2020.
** Not included as a liability in the year ended 31 December 2020
financial statements.
On the 25 February 2021, the Directors approved the payment of an interim
dividend for year ended 31 December 2020 to ordinary Shareholders at the rate
of 1.625 pence per Ordinary Share. The dividend had a record date of 5 March
2021 and was paid on 26 March 2021. The dividend was funded from the Company's
revenue reserve.
19. RELATED PARTY TRANSACTION
Fees are payable at an annual rate of GBP36,000 to the Chair of the Board,
GBP33,000 to the Chair of the Audit and Management Engagement Committee
and GBP30,000 to the other Director. As at 31 December 2020, there were
no Directors' fees outstanding. The Directors' fees are disclosed in
Note 7 and the Directors' shareholdings are disclosed in the Directors
Remuneration Report in the Annual Report for the year ended 31 December
2020.
Fees payable to the Investment Manager are shown in the Statement of
Comprehensive Income. As at 31 December 2020 the fee outstanding to the
Investment Manager was GBP93,000 (2019: GBP96,000).
Arrangement fees are paid by some borrowers to the Investment Manager.
The amount the Investment Manager can retain from borrowers in most cases
is capped at 1.25% and agreed with the Board. The Company receives any
arrangement fees from the Investment Manager in excess of the 1.25% or
otherwise agreed with the borrower. During the year to 31 December 2020,
the Company received GBP102,000 (2019: GBP190,000) in arrangement fees.
As at 31 December 2020, the Investment Manager held 1,237,325 (2019:
1,199,825) Ordinary Shares in the Company.
Since the year end, the Investment Manager purchased further 12,500 Ordinary
Shares in the Company, and as of the date of this report, the Investment
Manager's total holding of Ordinary Shares is 1,249,825 (2019: 1,199,825).
Details with intercompany transactions can be found in note 13.
20. CLASSIFICATION OF FINANCIAL INSTRUMENTS
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:
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.
Level 3
Inputs are unobservable for the asset or liability.
The classification of the Company's investments held at fair value through
profit or loss is detailed in the table below:
31 December 2020 31 December 2019
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
GROUP GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------- --------- -------- --------- -------- --------- -------- -------------
Financial assets:
Financial assets - Private
loans and bonds - 25,013 - 25,013 - 43,323 - 43,323
Financial assets - Private
loans - - 97,692 97,692 - - 87,878 87,878
Forward contract
receivable - 12,795 - 12,795 - 12,056 - 12,056
Financial liabilities:
Forward contract payable - (12,795) - (12,795) - (12,056) - (12,056)
Total - 25,013 97,692 122,705 - 43,323 87,878 131,201
--------------------------- --------- --------- -------- --------- -------- --------- -------- -------------
31 December 2020 31 December 2019
Level Level Level Level Level Level
1 2 3 Total 1 2 3 Total
COMPANY GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- --------- ----------- ---------- ---------- --------- ---------- ----------
Financial assets:
Financial assets -
Private
loans and bonds - 25,013 - 25,013 - 43,323 - 43,323
Financial assets -
Private
loans - - 97,692 97,692 - - 87,878 87,878
Forward contract
receivable - 12,795 - 12,795 - 12,056 - 12,056
Financial
liabilities:
Forward contract
payable - (12,795) - (12,795) - (12,056) - (12,056)
Total - 25,013 97,692 122,705 - 43,323 87,878 131,201
---------------------- ---------- --------- ------- -------------- ---------- --------- ---------- ----------
The forward exchange contract has been presented in the fair value hierarchy
at gross exposure with the net unrealised gain of GBP161,027 (2019: GBP93,635)
recognised within prepayments and other debtors in the Statement of Financial
Position.
The Zero Dividend Preference Shares have a fair value of GBP11.7 million
which has been measured using the closing stock exchange price. The Intercompany
loan payable between the Parent and its Subsidiary is financed by the ZDP
shares and as such has been valued using the ZDP price. The Directors consider
that the carrying amounts of the Zero Dividend Preference Shares and Intercompany
Loan Payable are approximates to their fair value.
Investments that trade in markets that are not considered to be active but
are valued based on quoted market prices, dealer quotations or alternative
pricing sources supported by observable inputs are classified within Level
2.
Level 3 holdings are valued using a discounted cash flow analysis and benchmarked
discount/interest rates appropriate to the nature of the underlying loan
and the date of valuation.
Interest rates are a significant input into the Level 3 valuation methodology.
Interest rates used in the valuation range from 5.3% to 15.0% (2019: 5.9%
to 24.0%). Sensitivity analysis of interest rates can be found below.
There have been no movements between levels during the reporting year. The
Company considers factors that may necessitate the transfers between levels
using the definition of the levels 1, 2 and 3 above.
Reconciliation of the Level 3 classification investments during the year
to 31 December 2020 is shown below:
31 December 31 December
2020 2019
GBP'000 GBP'000
---------------------- --------- ---------- ----------- ----- ------- ---------------- ------- --------------
Balance as at beginning of the year 87,878 58,013
New loans during the year 38,258 68,906
Repayments during the year (23,905) (37,359)
Realised gains during the year 545 195
Unrealised losses at the year end (5,084) (1,877)
---------------------------------------------
Closing balance as at 31 December 97,692 87,878
--------------------------------------------- ----------- ----- ------- ---------------- ------- --------------
21. FINANCIAL INSTRUMENT AND CAPITAL
DISCLOSURES
The Group invests in private loan and bond investments. Financial instrument
and capital disclosures are only prepared on a Group basis as this is
the basis on which reports are made to the decision makers. The following
describes the risks involved and the applied risk management. The Investment
Manager reports regularly both verbally and formally to the Board, and
its relevant committees, to allow them to monitor and review all the
risks noted below.
(i) Market risks
The Group is subject to a number of Market risks in relation to economic
conditions of the investee companies. Further detail on these risks and
the management of these risks are included in the Directors' report.
The Group's financial assets and liabilities at the year end
comprised:
31 December 2020 31 December 2019
Interest Non-interest Interest Non-interest
bearing bearing Total bearing bearing Total
Investments GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
GB sterling 109,354 - 109,354 118,293 - 118,293
Euro 13,351 - 13,351 12,908 - 12,908
Total investment 122,705 - 122,705 131,201 - 131,201
Cash and cash
equivalents 2,236 - 2,236 8,390 - 8,390
Receivables - 10,515 10,515 - 2,266 2,266
Payables (10,500) (2,634) (13,134) - (10,788) (10,788)
Zero Dividend
Preference
Shares (11,942) - (11,942) (11,541) - (11,541)
Total 102,499 7,881 110,380 128,050 (8,522) 119,528
Price risk sensitivity
The effect on the portfolio of a 10.0% increase or decrease in the value
of the loans would have resulted in an increase or decrease of GBP12,271,000
(2019: GBP13,120,000) in the investments held at fair value through profit
or loss at the period end date. This analysis assumes that all other
variables remain constant.
(ii) Credit risks
The Group's investments will be predominantly in the form of private
loans whose revenue streams are secured against contracted, predictable
medium to long-term cash flows and/or physical assets, and whose debt
service payments are dependent on such cash flows and/or the sale or
refinancing of the physical assets. The key risks relating to the private
loans include risks relating to counterparty default, senior debt covenant
breach risk, bridge loans, delays in the receipt of anticipated cash
flows and borrower default, and collateral risks.
The Group is also exposed to the risk of default on cash held at the
bank and other trade receivables. The maximum exposure to credit risk
on cash at bank and other trade receivables at 31 December 2020 was GBP2,236,000
and GBP10,515,000 respectively (2019: GBP8,390,000 and GBP2,266,000).
Impairment incurred on the balances is not considered material to the
Group and Company.
The table below shows the Group's exposure to credit risks at
the year end.
31 December 31 December
2020 2019
Maximum Maximum
Fair value exposure Fair value exposure
GBP'000 GBP'000 GBP'000 GBP'000
Private loan
investments 120,010 120,010 124,879 124,879
Bond investments 2,695 2,695 6,322 6,322
Cash and cash
equivalent 2,236 2,236 8,390 8,390
Receivables 10,515 10,515 2,266 2,266
Total 135,456 135,456 141,857 141,857
------------------ -----------------
Management of risks
The Investment Manager reports a number of key metrics on a monthly basis
to its Credit Committee including pipeline project information, outstanding
loan balances, lending book performance and early warning indicators.
The Investment Manager monitors ongoing credit risks in respect of the
loans. Typically, the Company's loan investments are private loans and
would usually exhibit credit risk classified as "non-investment" if a
public rating agency was referenced.
The Group's main cash balances are held with The Royal Bank of Scotland
plc ("RBS"). Bankruptcy or insolvency of the bank holding cash balances
may cause the Group's rights with respect to the cash held by them to
be delayed or limited. The Group manages its risk by monitoring the credit
quality of RBS on an ongoing basis.
(iii) Interest rate risks
Private Loans
The Group may make private loans based on estimates or projections of
future interest rates because the Investment Manager expects that the
underlying revenues and/or expenses of a borrower to whom the Group provides
loans will be linked to interest rates, or that the Group's returns from
a private loan are linked to interest rates. If actual interest rates
differ from such expectation, the net cash flows of the borrower or payable
to the Group may be lower than anticipated.
Interest rate
sensitivity
Interest Income earned by the Group is primarily derived from fixed interest
rates. The interest earned from the floating element of loan and debt
security investments is not significant. Based on the Group's private
loan investments, bond investments, cash and cash equivalents as at 31
December 2020, a 0.50% increase/(decrease) in interest rates, all other
things being equal, would lead to a corresponding increase/(decrease)
in the Group's income as follows.
31 December 31 December
2020 2019
0.50% Increase 0.50% Decrease 0.50% Increase 0.50% Decrease
GBP'000 GBP'000 GBP'000 GBP'000
Private loans
investments 488 (488) 439 (439)
Bond investments 125 (125) 217 (217)
Cash and cash
equivalent 11 (11) 42 (42)
Total 624 (624) 698 (698)
------------------ -----------------
Management of risks
The Investment Manager's investment process takes into account interest
rate risk. The investment strategy is to invest in private loans with maturities
typically between 2 and 10 years. Exposure to predominantly higher yielding
loans and possible floating rate investments can mitigate interest rate
risk to some extent. On a monthly basis, Investment Managers review fixed/floating
and weighted average life of the portfolio for interest rate risk.
(iv) Liquidity risks
Liquidity risk is defined as the risk that the Group will encounter difficulties
in realising assets or otherwise raising funds to meet financial commitments.
The cash and cash equivalent balance at the year end was GBP2,236,000
(2019: GBP8,390,000).
Financial liabilities by maturity at the period end are shown
below:
31 December 31 December
2020 2019
GBP'000 GBP'000
Within one month - 9,052
Between one and three months 2,039 349
Between three months and one
year 23,037 869
More than one year - 12,059
Total 25,076 22,329
The Investment Manager manages the Group's liquidity risk by investing
in a diverse portfolio of private loans and bonds in line with the Investment
Policy and Investment restrictions. The Investment Manager may utilise
other measures such as borrowing, share issues including treasury shares
for liquidity purposes.
The maturity profile of the Group's portfolio as at the year end is as
follows:
31 December 31 December
2020 2019
GBP'000 GBP'000
Within one month 6,625 10,833
Between one and three months - -
Between three months and one
year 5,394 15,626
More than one year 110,686 104,742
Total 122,705 131,201
(v) Foreign currency risks
Foreign currency risk is the risk that the value of a financial instrument
will fluctuate because of changes in foreign currency exchange rates.
Currency risk arises when future commercial transactions and recognised
assets and liabilities are denominated in a currency that is not the Group's
functional currency. The Group invests in bond investments that are denominated
in currencies other than sterling.
Accordingly, the value of the Group's assets may be affected favourably
or unfavourably by fluctuations in currency rates and therefore the Group
will necessarily be subject to foreign exchange risks.
Based on the financial assets and liabilities at 31 December 2020 and
all other things being equal, if sterling had weakened against the local
currencies by 10%, the impact on the Group's net assets at 31 December
2020 would have been as follows:
31 December 31 December
2020 2019
GBP'000 GBP'000
Euro 204 211
US dollar 16 16
Total 220 227
Foreign
currency
risk
profile
31 December 2020 31 December 2019
Investment Net Total Investment Net Total
exposure monetary currency exposure monetary currency
exposure exposure exposure exposure
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Euro 1,726 313 2,039 1,443 667 2,110
US dollar - 156 156 - 158 158
Total 1,726 469 2,195 1,443 825 2,268
As at the year end, the Group held forward instruments, which has reduced
the foreign exchange exposure to investment in euros by the equivalent
of GBP12,794,000 (2019: GBP12,055,000).
Management of currency risks
The Group's Investment Manager monitors the currency risk of the Group's
portfolio on a regular basis. Foreign currency exposure is regularly reported
to the Board by the Investment Manager. The Investment Manager may hedge
any currency back to sterling as they see fit.
Fair values of financial assets and liabilities
All financial assets and liabilities are recognised in the financial statements
at fair value, with the exception of short-term assets, liabilities and
Zero Dividend Preference Shares, which are held at amortised cost for
which fair value is given in note 20.
Capital
management
The Group considers its capital to consist of its share capital of Ordinary
Shares of 1 pence each and Zero Dividend Preference Shares of GBP1.00,
its distributable reserves, which comprise Revenue reserve, Capital reserve
and the Special reserve. In accordance with IFRS, the Group's Ordinary
Shares are considered to be equity and ZDP Shares are considered to financial
liability.
The Group has a stated discount control policy. The Investment Manager
and the Group's broker monitor the demand for the Group's shares and the
Directors review the position at Board meetings. Further details on share
issues during the year and the Group's policies for issuing further shares
and buying back shares (including the Group's discount management) can
be found in the Directors' Report in the Annual Report.
During the year the Group bought back 3,860,299 shares (2019: nil) which
are held in treasury.
The Group's policy on borrowing.
The Group has entered into a GBP10.5 million revolving credit facility
with OakNorth Bank. On 5 November 2020, the Group renewed and amended
its Revolving Credit Facility with Oak North Bank. In particular, the
loan to net asset value ratio must not exceed 20% of the Group's calculated
at the time of draw down. During the year, the Company drew cumulative
amount of GBP17.8million (2019: GBP16.9 million) from the revolving credit
facility and repaid cumulative amount of GBP 7.3 million (2019: GBP16.9
million). The remaining balance as at 31 December 2020 amounts to GBP10.5
million (2019: nil). The facility expires on 5 November 2021.
22. NAV PER ORDINARY SHARE RECONCILIATION
The table below is a reconciliation between the NAV per Ordinary
Share of the Company as announced on the London Stock Exchange and
the NAV per Ordinary Share disclosed in these financial
statements.
As at 31 December
As at 31 December 2020 2019
NAV per NAV per
Net assets Ordinary Net assets Ordinary
(GBP) share (p) (GBP) share (p)
NAV as published on 15 January
2021 111,123,419 93.88 - -
Tax liability adjustments (246,000) (0.20) - -
Share buy back adjustments (493,851) (0.42) - -
NAV as disclosed in these Financial
Statements 110,383,568 93.26 - -
23. POST BALANCE SHEET EVENTS
Since 31 December 2020, a further 419,500 Ordinary Shares have
been bought back for an aggregate cost of 366,000.
ALTERNATIVE PERFORMANCE MEASURES ('APMS')
APMs are often used to describe the performance of investment
companies although they are not specifically defined under IFRS.
APM calculations for the Company are shown below.
Gearing
Net gearing is calculated as total debt, net of cash and cash equivalents,
as a percentage of the total shareholders' funds.
31 December 31 December
2020 2019
GBP'000 GBP'000
Zero Dividend Preference Shares 11,942 11,541
Bank loan - Credit facility 10,500 -
Total borrowings 22,442 11,541
Cash and cash equivalents 2,236 8,390
Total borrowings less cash and
cash equivalents a 20,206 3,151
Net assets b 110,380 119,528
Gearing(net) (a÷b)*100 18.3% 2.6%
Gross asset
The Group's gross assets comprise the net asset values of the
Group's Ordinary Shares, accrued capital entitlement of the ZDP
Shares and the Bank loan breakdown as follows:
Per Share
As at 31 December 2020 GBP'000 (Pence)
Ordinary Shares - NAV a 110,380 93.25
RM ZDP plc - accrued entitlement b 11,942 109.87
Bank Loan-Credit facility c 10,500 -
Gross asset value a+b+c 132,822 n/a
Per Share
As at 31 December 2019 GBP'000 (Pence)
Ordinary Shares - NAV A 119,528 97.79
RM ZDP plc - accrued entitlement b 11,541 106.18
Bank Loan-Credit facility c - -
Gross asset value a+b+c 131,069 n/a
Ongoing charges
A measure, expressed as a percentage of average net assets, of
the regular, recurring annual costs of running an investment
company.
31 December 31 December
2020 2019
Average NAV (GBP'000) a 123,526 121,302
Annualised recurring expenses* b 2,355 2,142
b÷a 1.91% 1.77%
*Consists of investment management fees of GBP1,088,000(2019:
GBP1,062,000) and other recurring expenses of GBP1,267,000 (2019:
GBP1,080,000) Prospectus issue and capital transactions are not
considered to be recurring costs and therefore have not been
included.
(Discount)/premium
The amount, expressed as a percentage, by which the share price
is (less)/more than the Net Asset Value per share.
31 December 31 December
2020 2019
NAV per Ordinary Share (p) a 93.26 97.79
Share price (p) b 87.00 99.50
(Discount)/premium (b/a)-1 (6.7%) 1.7%
Total return
A measure of performance that includes both income and capital
returns. This takes into account capital gains and reinvestment of
dividends paid out by the Company into its Ordinary Shares on the
ex-dividend date.
As at 31 December 2020 NAV Share Price
Opening at 1 January 2020 (p) a 97.79 99.50
Closing at 31 December 2020 (p) b 93.26 87.00
Dividend adjustment factor c 1.0811 1.0831
Adjusted closing (d = b x c) d 100.82 94.23
Total return (d/a)-1 3.1% -5.3%
As at 31 December 2019 NAV Share Price
Opening at 1 January 2019 (p) A 96.96 101.50
Closing at 31 December 2019 (p) b 97.79 99.50
Dividend adjustment factor c 1.0728 1.0701
Adjusted closing (d = b x c) d 104.91 106.47
Total return (d/a)-1 8.2% 4.9%
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 statutory accounts for the year ended 31 December 2019
have been delivered to the registrar of companies. The auditors
have reported on the accounts for the year ended 31 December 2020
and the year ended 31 December 2019, their reports were 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 2021. 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.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held on 8 June 2021 at 11.00
a.m. at the offices of PraxisIFM, 1st Floor, Senator House, 85
Queen Victoria Street, London, EC4V 4AB.
29 March 2021
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
PraxisIFM Fund Services (UK) Limited
Tel: 020 4513 9260
END
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