TIDMSSIF
RNS Number : 7545Y
Secured Income Fund PLC
08 September 2022
8 September 2022
Secured Income Fund plc
("SSIF" or the "Company")
Annual Financial Report
For the year ended 30 June 2022
A copy of the Company's Annual Report and Financial Statements for
the year ended 30 June 2022 will shortly be available to view and
download from the Company's website, http://www.securedincomefundplc.co.uk/
. Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into or forms part of this
announcement.
Enquiries to:
Directors
David Stevenson (Chair) tel: +44 7973 873785
Susan Gaynor Coley tel: +44 7977 130673
Brett Miller tel: +44 7770 447338
finnCap Ltd. tel: +44 20 7220 0500
Corporate Finance: William Marle
Sales: Mark Whitfeld
http://www.securedincomefundplc.co.uk/
The contents of this announcement have been extracted from the Company's
Annual Report, which is currently in print and will be distributed
within the week. The information shown for the years ended 30 June
2022 and 30 June 2021 does not constitute statutory accounts and
has been extracted from the full accounts for the years ended 30
June 2022 and 30 June 2021. The reports of the auditors on those
accounts were unqualified and did not contain adverse statements
under sections 498(2) or (3) of the Companies Act 2006. The accounts
for the year ended 30 June 2021 have been filed with the Registrar
of Companies. The accounts for the year ended 30 June 2022 will be
delivered to the Registrar of Companies in due course.
Strategic Report
Key Points
30 June 30 June
2022 2021
Net assets ([1]) GBP10,916,000 GBP19,106,000
NAV per Ordinary Share 20.73p 36.28p
Share price 12.00p 42.50p
(Discount)/premium to NAV (42.1)% 17.1%
Loss for the year GBP(554,000) GBP(11,017,000)
Dividend per share declared in respect of the
year 0.75p ([2]) 8.50p
B Share issue and redemption per Ordinary Share
declared in respect of the year 14.50p 19.50p
Total return per Ordinary Share (based on NAV)
([3]) -2.9% -25.6%
Total return per Ordinary Share (based on share
price) ([3]) -37.6% -7.8%
Ordinary Shares in issue 52,660,350 52,660,350
[1] In addition to the Ordinary Shares in issue, 1 Management Share
of GBP1 is in issue (2021: 1) (see note 20).
[2] On 2 September 2022, the Board declared a dividend of 0.75p per
Ordinary Share for the year ended 30 June 2022, which is to be
paid on 7 October 2022. It is the Board's intention that the Company
will pay sufficient dividends each financial year to maintain
investment trust status under the Corporation Tax Act 2010 for
so long as the Company remains listed.
[3] Total return per Ordinary Share has been calculated by comparing
the NAV or share price, as applicable, at the start of the year
with the NAV or share price, as applicable, plus dividends and
B Share redemptions paid, at the year end.
Chairman's Statement
Introduction
I am pleased to provide Shareholders with my Chairman's Statement,
covering the financial year from 1 July 2021 to 30 June 2022. Over
the reporting period, Secured Income Fund plc (the "Company") has
continued to focus on returning capital to Shareholders efficiently
and in a timely manner. Since the wind down proposals were adopted
on 17 September 2020, the Company has maintained regular distributions
to Shareholders and has returned GBP22.4 million (equivalent to 42.5p
per Ordinary Share) through a combination of dividends and a B Share
Scheme.
Performance
For the reporting year ended 30 June 2022, the Company suffered a
net loss of GBP0.6 million and loss per Ordinary Share of 1.05p (compared
to a loss of GBP11.0 million and loss per Ordinary Share of 20.92p
for the year ended 30 June 2021). The Company's NAV at 30 June 2022
was GBP10.9 million (20.73p (cum income) per Ordinary Share) compared
to GBP19.1 million (36.28p per Ordinary Share) as at 30 June 2021.
GBP7.6 million of the GBP8.2 million reduction in the NAV in the
period related to the B Share distributions of GBP7.6 million, with
the remainder being attributable to the net loss of GBP0.6 million.
During the reporting period, the IFRS 9 provision across some of
the direct loans has been increased further. Ongoing monitoring of
the Film Production Financing portfolio has highlighted further deterioration
of the expected cash flows. This portfolio remains heavily impacted
by the changes in operating practises resulting from the Covid-19
pandemic. The Company has engaged third party specialists in the
hope of maximising returns for Shareholders for the remaining film
portfolio.
Furthermore, there continues to be a delay in receiving the full
principal repayment from the SME loan company as they have yet to
secure a refinance of the facility. However, the Company has successfully
negotiated monthly capital repayments, which commenced in February
2022, and remains in regular dialogue with the Borrower to assess
the ongoing position.
Further information about the status of the remaining loans along
with the respective assigned provisions is provided within the Investment
Report.
During the reporting period, the Company traded at an average discount
to NAV of 20.9%.
No foreign exchange hedging has been employed during the reporting
period. Non-Sterling cash balances are converted into Sterling at
the earliest opportunity. A table showing the FX exposure in the
portfolio as at 30 June 2022 has been included in note 23.
The portfolio exposure by maturity, geography, type and currency
are presented in the Company Analytics section in the Annual Report
and Financial Statements .
Corporate Activity
The Company has focused on the expeditious return of capital to investors.
Costs have been monitored carefully and no new underwriting commitments
were made in the period.
As part of its ongoing management of the Company's running costs,
a Special Resolution was proposed and approved at the Company's General
Meeting held on 16 December 2021. Once the Company's NAV falls below
GBP7 million, the Board will notify the London Stock Exchange of
its intention to cancel the Company's admission to trading on the
Specialist Fund Segment of the Main Market (the "Cancellation of
Trading").
Management Arrangements
On 20 August 2021, the Company announced that it had reached an agreement
with KKV Investment Management Ltd and its AIFM, Kvika Securities
Limited, to terminate the Investment Management Agreement ("IMA");
the IMA was duly terminated on 31 December 2021.
The Company had its application to become a small self-managed AIFM
approved by FCA and entered into the register of the Small Registered
UK AIFMs with effect from 31 December 2021.
In order to assist the Board with the management of the portfolio,
with effect from 1 January 2022, the Company has entered into a consultancy
agreement to secure the services of one of the individuals who has
the greatest knowledge of the Company's assets. In addition, Brett
Miller, a Director of the Company who is highly experienced in this
area, has continued to be directly involved in the managed wind down
of the Company's portfolio.
The Board believes that the Company has the necessary resource and
expertise for the efficient and effective realisation of the balance
of the portfolio. However, the Board will engage specialist consultants
where it considers that such appointments will assist in maximising
returns for, and/or expediting capital returns to, Shareholders.
Dividends
Following the decision to proceed with a managed wind-down, the Board
reviewed the dividend policy and decided to cease paying monthly
dividends and is instead returning excess capital as and when the
Company has excess cash reserves available for distribution. However,
it is the Board's intention that the Company will pay sufficient
dividends each financial year to maintain investment trust status
under the Corporation Tax Act 2010 for so long as the Company remains
listed. Therefore, On 2 September 2022, the Board declared a dividend
of 0.75p per Ordinary Share for the year ended 30 June 2022, which
is to be paid on 7 October 2022.
Capital Distributions
The Company adopted a B Share scheme, following approval by Shareholders
at the General Meeting held on 23 March 2021. The Company is therefore
able to issue redeemable B Shares to Shareholders which are subsequently
redeemed for cash, this allows the capital returns to be made in
a more tax efficient manner for some Shareholders.
During this reporting period, the Board distributed GBP7.6 million
using the B Share Scheme, which is equivalent to 14.5p per Ordinary
Share.
To date, a total of GBP17.9 million has been distributed to Shareholders
via the B share scheme since the commencement of the managed wind
down, this is equivalent to 34.0p per Ordinary Share. Moreover, an
additional GBP4.5 million, equivalent to 8.5p per Ordinary Share,
had been distributed in the form of dividends prior to the B share
scheme being set up.
The quantum and timing of a Return of Capital to Shareholders following
receipt by the Company of the net proceeds of realisations of investments
will be dependent on the Company's liabilities and general working
capital requirements. Accordingly, any future Return of Capital will
continue to be at the discretion of the Board, which will announce
details of each Return of Capital, including the relevant Record
Date, Redemption Price and Redemption Date, through an RNS Announcement,
whilst the Company remains listed, a copy of which will be posted
to Shareholders. The Board intends for a further capital return to
be made within the next three months.
Shareholder Engagement
The Board has engaged with Shareholders over the reporting period,
taking feedback and responding to their recommendations where appropriate.
Brett Miller has led this activity and will continue to do so as
we continue to wind down the Company.
Outlook
The key focus of the Board remains resolute, achieving a balance
between maximising the value of the remaining assets and ensuring
timely returns of capital to Shareholders. The Board successfully
navigated a smooth transition of the management back to the Company
by the start of 2022. The Company is efficiently positioned to finalise
the realisation of the remaining assets, which the Board expects
to be largely achieved within the next 18 months to two years.
The Company is now close to reaching the GBP7 million NAV which will
activate the Special Resolution that was approved in December 2021.
The Board will keep Shareholders abreast of developments and dates
over the next few months.
We thank investors for their continued support throughout this period
and hope to deliver investors total proceeds as close as possible
for the remaining NAV. We shall keep investors informed of any changes
as they occur.
David Stevenson
Chairman
7 September 2022
Investment Report
Overview
The Company is continuing to work closely with Borrowers, whilst
optimising the return of capital to Shareholders in as expeditious
a way as possible. Since the wind-down of the Company commenced in
September 2020, 8.5 pence per Ordinary share (excluding the 0.75p
per Ordinary Share dividend to be paid on 7 October 2022) has been
returned to Shareholders via dividend distribution and 34 pence per
Ordinary share via a B Share Scheme, which was adopted to ensure
more tax efficient capital distributions for Shareholders.
The Investment Management Agreement between the Company and KKV Investment
Management Ltd was terminated on 31 December 2021. There has been
a smooth transition of management back to the Company, which has
been facilitated by retaining key personnel. Furthermore, with effect
from 31 December 2021, the Company has been approved by the FCA as
a Small Registered UK AIFM .
Portfolio
There were ten direct loans in the portfolio as at 30 June 2022,
with an average carrying value of GBP0.8 million per loan. A direct
loan to a UK leasing company that had been in place since July 2017
was fully repaid at the end of September 2021.
There has been further increases in IFRS 9 impairment provisions
for some of the direct loans during the reporting period. In particular,
the six film financings have suffered the effects of the Covid-19
pandemic with a marked deterioration of the expected cash flows,
through cancelled film festivals and cinema screenings, and changes
in operating practices whereby future sales are expected to be made
via longer tail earn-outs, instead of the customary large upfront
payments.
At the start of the reporting period, some of the legacy loans that
formed part of the portfolio prior to April 2017 were repaid in full
or a settlement was reached. The final performing loan that remained
on the UK peer to peer loan platform was repaid in full in August
2021. In September 2021, the agreed settlement value was received
for the US promissory note.
The remaining legacy loans are fully impaired under IFRS 9 and therefore
have zero carrying value assigned to them. This is due to various
factors such as continuous delays in repayment, depleted borrower
assets and uncertainties in relation to a borrower's going concern.
The Company has continued to engage with each of these Borrowers
for updates and will reassess the positions should there be any changes
in circumstances.
Direct Loans
Loan Carrying
Principal Value at
Balance Amortised
Outstanding ECL provision Cost ([1]) Amortisation/
as at 30 at 30 at 30 June Bullet
June 2022 June 2022 2022 repayment/
Borrower GBP GBP GBP other Asset Type Currency Yield
Borrower GBP3,141,262 GBP9,424 GBP3,131,838 Pass-through SME and EUR Variable
1 amortisation Leasing
Fund
Borrower Bullet Wholesale
2 GBP4,001,504 GBP1,200,451 GBP2,801,053 repayment/other Lending GBP 10%
Interest
only for
12 months,
Borrower then Medical
3 GBP3,079,323 GBP1,539,662 GBP1,539,661 amortisation Services USD 12%
Film
Borrower Production
4 GBP1,617,366 GBP1,323,850 GBP293,516 Cash sweep Financing USD 12%
Film
Borrower Production
5 GBP1,624,925 GBP1,490,404 GBP134,521 Cash sweep Financing GBP 11%
Film
Borrower Production
6 GBP1,537,010 GBP1,415,992 GBP121,018 Cash sweep Financing GBP 11%
Laser and
Borrower Scheduled LED
7 GBP104,351 GBP313 GBP104,038 amortisation Manufacturer GBP 10%
Film
Borrower Production
8 GBP642,559 GBP597,347 GBP45,212 Cash sweep Financing GBP 12%
Film
Borrower Production
9 GBP506,945 GBP476,563 GBP30,382 Cash sweep Financing GBP 12%
Film
Borrower Production
10 GBP2,395,295 GBP2,365,292 GBP30,003 Cash sweep Financing GBP 12%
Direct GBP18,650,540 GBP10,419,298 GBP8,231,242
Loans
Total
([1]) The carrying values of loans at amortised cost disclosed in
the table above do not include capitalised transaction fees, which
totalled GBP15,715 at 30 June 2022.
The following provides a narrative relating to our direct loan investments.
Names of counterparties have been omitted for commercial and business
sensitivity reasons.
Irish SME and Leasing Fund investment (Borrower 1) - 28.7% of NAV
This portfolio of approximately 20 underlying loans has continued
to perform well. Most of the underlying loans are delivering income
and the manager has continued to make healthy distributions to the
Company during the reporting period. As the Fund is in its harvest
phase, the capital distributions are expected to accelerate as the
loans mature or are refinanced.
During the reporting period, the Company has received EUR1,171,061
in capital repayments. A further EUR286,621 has been received in
capital repayments post year end.
SME Loan company (Borrower 2) - 25.7% of NAV
This loan has been in place since May 2017 and is secured against
a wholesale portfolio of working capital SME loans.
The Borrower was initially due to make a bullet repayment at the
end of September 2021. An extension was granted until the end of
2021 so the Borrower could source new funding to refinance the facility,
this revised date was not met. The Borrower is continuing to pursue
refinance opportunities.
In the meantime, material amortisation has taken place during the
second half of this reporting period. The Company has received GBP1,631,056
by way of capital repayments as a result of active collection efforts
undertaken. A further GBP579,433 has been received in capital repayments
post year end. In addition to this, monthly interest on the loan
continues to be serviced by the Borrower.
US healthcare services company (Borrower 3) - 14.1% of NAV
This loan was made to a company specialising in ancillary medical
services to a number of hospitals in the American Midwest including
optometry, audiology, dentistry and podiatry. A key aspect of the
security package is that there is a parent company guarantee in place
over all scheduled interest and principal repayments.
The Borrower is in default as it sold its core business assets, rendering
the business economically unviable. Several Reservations of Rights
letters have been issued to the Borrower and Guarantor in relation
to this and certain payment defaults.
After some delays in payment, monthly payments of principal and interest
have been made on schedule recently. At the time of writing, payments
are up to date but we will be continuing to monitor these receivables
very closely. Whilst there is necessarily a sizeable IFRS 9 provision
against this position as it is in unremedied default, we believe
it is in the Guarantor's best interest to ensure the loan is repaid
in full as per the schedule. All rights over the Guarantor have been
reserved.
Media financing (Borrowers 4, 5, 6, 8, 9 and 10) - 6.0% of NAV
Ongoing monitoring of the Film Production Financing portfolio has
highlighted further deterioration of the expected cash flow. The
portfolio, comprising of six film financings, has been heavily impacted
by the changes in operating practises resulting from the Covid-19
pandemic. This has resulted in significant delays in recouping the
outstanding balances within the "contracted cash flow" element (comprising
Tax Credit, Receipts and Presold Income), hampered further by the
political uncertainty across some of the remaining territories. Moreover,
the level of uncertainty across the "non-contractual Future Sales"
element, which is considered mezzanine in nature and carries a higher
risk profile, has continued to increase.
The Company remains in regular dialogue with the borrower to closely
monitor receipts, expectations of future sales and assess any changes
to the cashflows.
External specialists have been engaged by the Company to independently
value these positions and provide assistance in identifying the best
approach in realising maximum value for Shareholders given the specialist
nature of the sector.
LED manufacturer in Ireland (Borrower 7) - 1.0% of NAV
This is a secured term loan that has been in place since May 2017
and is secured by a guarantee from the parent company, a debenture
over the borrower and a charge over equipment purchased via the Capex
portion of the facility.
During the reporting period, with the Company's consent, the guarantor
was sold to a US company for approximately 40% premium to the share
price.
The loan continues to make timely amortised payments and is due to
mature in December 2022.
Legacy portfolio
Loan Carrying
Value at
Principal Balance ECL provision Amortised
Outstanding at at 30 June Cost at 30
30 June 2022 2022 June 2022
Borrower GBP GBP GBP Currency Yield
Borrower GBP1,218,063 GBP1,218,063 - GBP -
11
Borrower GBP1,000,000 GBP1,000,000 - GBP -
12
Borrower GBP415,714 GBP415,714 - GBP -
13
Borrower GBP320,566 GBP320,566 - EUR -
14
Legacy Loans GBP2,954,343 GBP2,954,343 -
Total
The following provides a narrative relating to the legacy loans within
the portfolio.
UK Venture Debt (Borrower 11) - 0.0% of NAV
This broadband company was previously restructured and has been facing
key decisions with regards to its going concern. Therefore, we have
continued to fully provide for this position and will reassess once
there is further clarity on next steps.
The broadband company is in advanced talks to be acquired by a competitor
which has a new generation product. The combined entity would use
the Borrower's existing customer base to accelerate sales of their
new product. The Company will remain as an investor of this combined
entity in the hope of achieving a positive resolution for its Shareholders.
UK Offshore platform (Borrower 12) - 0.0% of NAV
The final credit from this offshore platform has been in place since
early 2017 and is a real estate linked loan to a developer in Gibraltar.
Despite continued assurances, we have not been repaid, and the position
(including the accrued penalty interest) remains fully impaired,
given the continuous delays. We remain in regular contact with the
platform to monitor progress and will continue to press for repayment.
However, we remain uncertain of the balance that will be recovered.
Small company bond platform (Borrower 13) - 0.0% of NAV
The only outstanding debt from this platform was a recruitment business
that had undergone a protracted recovery process through the courts.
This loan is fully impaired.
Spanish peer to peer loan platform (Borrower 14) - 0.0% of NAV
We have assigned zero probability of any further collections on the
remaining loans within the portfolio. The platform is engaged in
ongoing legal proceedings with the borrowers of the four remaining
loans on the platform.
Outlook
The Company has continued to make good progress with the realisation
of the portfolio to date.
The Company is working closely with the relevant borrowers to ensure
all parties remain aligned to our objective of achieving the maximum
returns for Shareholders from the outstanding loans. The Company
has also engaged specialists to enhance returns where possible.
We would like to thank Shareholders for their continued support and
will share any updates on the progress over the upcoming months.
Brett Miller
Director
7 September 2022
Principal Risks and Uncertainties
Risk is inherent in the Company's activities, but it is managed through
an ongoing process of identifying and assessing risks and ensuring
that appropriate controls are in place. The key risks faced by the
Company, along with controls employed to mitigate those risks, are
set out below.
Macroeconomic risk
Adverse macroeconomic conditions may have a material adverse effect
on the Company's yield on investments, default rate and cash flows.
The Board and (until the termination of Investment Management Agreement
on 31 December 2021), KKV Investment Management Limited (the "Former
Investment Manager") keep abreast of market trends and information
to try to prepare for any adverse impact.
The Company's assets are diversified by geography, asset class, and
duration, thereby reducing the impact that macroeconomic risk may
have on the overall portfolio.
Interest rate risk arises from the possibility that changes in interest
rates will affect future cash flows and/or fair values of the Company's
investments. Exposure to interest rate risk is limited by the use
of fixed rate interest on the majority of the Company's loans, thereby
giving security over future loan interest cash flows.
Currency risk is the risk that changes in foreign exchange rates
will impact future profits and net assets.
Covid-19
The Covid-19 pandemic is a risk to the global economy. Details of
the macroeconomic impact, as it may affect the Company, are provided
in the Chairman's Statement and Investment Report. The situation
continues to change and future cashflows and valuations are more
uncertain and may be more volatile than pre-pandemic. Indeed, the
level of estimation uncertainty and judgement for the calculation
of expected credit losses has increased as a result of the economic
effects of the Covid-19 pandemic (see note 4 for further details).
However, the Directors believe that the Company is well placed to
survive the impact of the Covid-19 pandemic, thereby enabling the
Company to realise its assets in an orderly manner.
Russian Invasion of Ukraine and the subsequent energy crisis
Russia's invasion of Ukraine is a risk to the global economy. The
invasion itself and resulting international sanctions on Russia are
believed to have already caused substantial economic damage to that
country, which is likely to worsen the longer the sanctions are in
place, and has had some wider global effect on the supply and prices
of certain commodities and consequently on inflation and general
economic growth of the global economy. The effects vary from country
to country, depending, for example, on their dependence on Russian
energy supplies, particularly gas, which cannot be so easily transported
and substituted as oil. The full effects will take time to flow through
fully and manifest themselves in the balance sheets of companies
and impact their ability to repay loans. In this context, we can
only express reservations on the near-term impact on credit risk
and the impairment of securities, which may be more volatile as a
result of the Russian invasion and the subsequent energy crisis.
Credit risk
The Company invests in a range of secured loan assets mainly through
wholesale secured lending opportunities, secured trade and receivable
finance and other collateralised lending opportunities. The Company
is also exposed to direct loans. Significant due diligence is undertaken
on the borrowers of these loans and security taken to cover the loans
and to mitigate the credit risk on such loans.
The key factor in underwriting secured loans is the predictability
of cash flows to allow the borrower to perform as per the terms of
the contract.
Following the change of investment objective on 17 September 2020,
the Company ceased to make any new investments or to undertake capital
expenditure except where, in the opinion of both the Board and the
Former Investment Manager (or, where relevant, the Former Investment
Manager's successors):
* the investment is a follow-on investment made in
connection with an existing asset in order to comply
with the Company's pre-existing obligations; or
* failure to make the follow-on investment may result
in a breach of contract or applicable law or
regulation by the Company; or
* the investment is considered necessary to protect or
enhance the value of any existing investments or to
facilitate orderly disposals.
The Company's assets are diversified by geography, asset class, and
duration, thereby reducing the impact that investment risk may have
on the overall portfolio. This diversification may reduce as assets
are realised, but is an acceptable, and to some extent unavoidable,
risk associated with the realisation process.
The credit risk associated with the investments is reduced not only
by diversification but also by the use of security. Despite the use
of security, credit risk is not reduced entirely and so the Board
monitors the recoverability of the loans (on an individual loan basis)
each month and impairs loans in accordance with IFRS 9 Financial
Instruments.
Regulatory risk
The Company's operations are subject to wide ranging regulations,
which continue to evolve and change. Failure to comply with these
regulations could result in losses and damage to the Company's reputation.
The Company employs third party service providers to ensure that
regulations are complied with.
Reputational risk
Any adverse impact on the Company's reputation would likely result
in a fall in its share price, thereby adversely affecting Shareholders.
Details of the premium/discount of the share price to NAV are disclosed
in the Key Performance Indicators section of the Company's Annual
Report and Financial Statements.
Environment, Employee, Social and Community Issues
As an investment company, the Company does not have any employees
or physical property, and most of its activities are performed by
other organisations. Therefore, the Company does not combust fuel
and does not have any greenhouse gas emissions to report from its
operations, nor does it have responsibility for any other emissions
producing sources under the Companies (Directors' Report) and Limited
Liability Partnerships (Energy and Carbon Report) Regulations 2018.
When making investment decisions, the Former Investment Manager had
not, historically, considered the impact that an entity in which
the Company invested may have on the community. However, whilst the
Board believes that all companies have a duty to consider their impact
on the community and the environment, the Company does not have a
direct impact on the community or environment and, as a result, does
not maintain policies in relation to these matters.
The Board is committed to achieving the best possible risk-adjusted
returns through integrating Environmental, Social and Governance
("ESG") considerations into its core investment analysis and decision-making
process, whilst being mindful of the managed wind-down of the Company.
The Board and Former Investment Manager recognised the value in considering
ESG risks and the Former Investment Manager had adopted the following
ESG approach in conducting its business:
* Taking into account the non-financial performance of
target companies, specifically related to governance,
social and environmental policy.
* Adopting responsible and ethical approach to
governance including:
* Remuneration of senior management and a policy on
bonuses that is compliant with international
standards;
* Implementation of compliance policies and procedures
and on-going monitoring of the firm's systems and
controls;
* Implementation of risk controls throughout the
business; and
* Consideration of our ethical obligations in all
business conduct (anti money laundering,
anti-corruption, reputational due diligence).
* Encouraging a human resource policy which values and
respects all staff members through:
* Objective criteria to measure performance and
competencies;
* Support programs requiring senior management
involvement in all staff members career progression;
and
* Equality across all staff irrespective of role,
gender, race, age, religious belief or sexual
orientation.
Gender Diversity
The Board of Directors of the Company currently comprises two male
Directors and one female Director. Further information in relation
to the Board's policy on diversity can be found in the Directors'
Remuneration Report in the Company's Annual Report and Financial
Statements.
Key Performance Indicators
The Board uses the following key performance indicators ("KPIs")
to help to assess the Company's performance against its objectives.
Further information on the Company's performance is provided in the
Chairman's Statement and the Investment Report.
Cash returned to Shareholders
The Company distributes at least 85% of its distributable income
by way of dividends. During any year, the Company may retain some
of the distributable income and use these to smooth future dividend
flows.
The Company has announced dividends of GBP395,000 (0.75p per Ordinary
Share) for the year ended 30 June 2022 (2021: GBP4,476,000 (8.50p
per Ordinary Share)), being an 11% retention of distributable income
(2021: far in excess of distributable income) for the year (see notes
5 and 21 for further details). To ensure the tax efficient streaming
of qualifying interest income, the Company may announce an additional
dividend for the year ended 30 June 2022, once the tax advisers have
finalised the tax computations.
Following the change in investment objective on 17 September 2020,
the Directors consider it important to measure the amount of capital
returned to Shareholders. During the year, GBP7,636,000 (2021: GBP10,269,000)
(see note 5) was returned to Shareholders by way of B Share redemptions
and GBPnil (2021: GBP5,090,000) (see note 5) was paid to Shareholders
by way of dividends. In addition, during 2021 49,999 Management Shares
were bought back for GBP49,999 and cancelled (see note 20).
NAV and total return
The Directors regard the Company's NAV as a key component to delivering
value to Shareholders, but believe that total return (which includes
dividends and B Share redemptions) is the best measure for shareholder
value.
Details of the NAV and total return are disclosed in the Key Points
section of this Annual Financial Report.
Premium/discount of share price to NAV
The Board understand the importance of minimising the discount to
NAV at which the Company's Ordinary Shares trade and the Board regularly
monitors the premium/discount of the price of the Ordinary Shares
to the NAV per share. During the year, the Company traded at an average
discount to NAV of 20.9% (2021: 8.7%). A t 30 June 2022, the shares
were trading at 12.00p, a 42.1% discount to NAV (2021: 42.50p, a
17.1% premium to NAV).
David Stevenson
Chairman
7 September 2022
Promoting the Success of the Company
The following disclosure outlines how the Directors have had regard
to the matters set out in Section 172(1)(a) to (f) of the Companies
Act 2006.
The Board considers the needs of a number of stakeholders when considering
the long-term future of the Company. The key stakeholders with which
the Board has liaised during the year ended 30 June 2022 were:
* Shareholders; and
* Key service providers.
Shareholders
The Company's significant Shareholders at the year end can be found
in the Directors' Report in the Company's Annual Report and Financial
Statements .
When making principal decisions the Board consider it imperative
to analyse the views of the Company's investors to ensure that its
decisions are aligned with the wishes of Shareholders and that the
Company can achieve its Investment Policy (as disclosed in the Company's
Annual Report and Financial Statements ). The key performance indicators
have been considered on an ongoing basis as part of the Board's decision
making process.
Details of how the Directors communicate with Shareholders can be
found in the Corporate Governance Report in the Company's Annual
Report and Financial Statements .
Other than the routine engagement with investors regarding strategy
and performance, the Company's continuation was discussed with investors.
A continuation vote was held on 19 June 2020 that, in line with the
Directors' recommendation, did not pass. A further general meeting
of the Company was held on 17 September 2020 at which a special resolution
approved the managed wind-down of the Company and the adoption of
the new investment policy of the Company.
Key service providers
Details of the Company's key service providers can be found in the
Directors' Report in the Company's Annual Report and Financial Statements
.
The key service providers are fundamental to the Company's ability
to continue in the same state as any changes could disrupt the expected
timeliness of information provided to the markets. In turn, this
would be likely to have a detrimental impact on the Company's reputation.
However, on 20 August 2021, the Company agreed with the Former Investment
Manager and its AIFM to amend the Investment Management Agreement
and for the agreement to terminate with effect from midnight on 31
December 2021. The Board believed that the revised Agreement provided
the Company with certainty over the level of future management fees
payable to the Former Investment Manager with the added flexibility
of facilitating the Company becoming self-managed, whilst providing
for the ongoing management of the portfolio to 31 December 2021.
Overall, it allowed for an orderly transition of the management of
the portfolio to the Company.
The Board has continuous access to the Company's key service providers
and has open two-way communication with them. Key aspects of discussion
with these service providers, other than those regarding Company
performance and strategy, were in respect of fees payable to these
providers.
David Stevenson
Chairman
7 September 2022
Statement of Comprehensive Income
for the year ended 30 June 2022
Year ended
30 June Year ended
Note 2022 30 June 2021
GBP'000 GBP'000
Revenue
Interest income 3f 2,600 4,010
Impairment of interest income 14 (1,195) (877)
------------ ------------
Net interest income 1,405 3,133
------------ ------------
Total revenue 1,405 3,133
------------ ------------
Operating expenses
Directors' remuneration 8 (195) (119)
Other expenses 11 (172) (203)
Management fees 7a (133) (309)
Administration fees 7b (118) (130)
Legal and professional fees (109) (139)
Audit fees 10 (71) (46)
Consultancy fees 7c (71) -
------------ ------------
Total operating expenses (869) (946)
------------ ------------
Investment gains and losses
Movement in unrealised gains and losses
on loans due to movement in foreign exchange
on non-Sterling loans 14, 23 363 (1,283)
Movement in impairment losses on financial
assets (or loans) 14 720 (9,657)
Realised loss on disposal of loans (2,186) (2,544)
Movement in unrealised loss on investments
at fair value through profit or loss 15 - (92)
Movement in unrealised gain on derivative
financial instruments 16, 23 - 6
Realised gain on disposal of investments
at fair value through profit or loss - 94
Realised gain on derivative financial instruments 16, 23 - 269
------------ ------------
Total investment gains and losses (1,103) (13,207)
------------ ------------
Net loss from operating activities before
gain on foreign currency exchange (567) (11,020)
Net foreign exchange gain 23 13 3
------------ ------------
Loss and total comprehensive income for
the year attributable to the owners of the
Company (554) (11,017)
------------ ------------
Loss per Ordinary Share (basic and diluted) 13 (1.05)p (20.92)p
------------ ------------
There were no other comprehensive income items in the year.
Except for unrealised investment gains and losses, all of the Company's
profit and loss items are distributable.
The accompanying notes form an integral part of the financial statements
.
Statement of Changes in Equity
for the year ended 30 June 2022
Called Capital Special Profit
up share redemption distributable and loss
Note capital reserve reserve account Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2020 577 - 48,181 (3,226) 45,532
Loss for the year 21 - - - (11,017) (11,017)
Transactions with Owners in their capacity as owners:
Dividends paid 5,21 - - (4,324) (766) (5,090)
B Shares issued during 5, 20,
the year 21 10,269 - (10,269) - -
B Shares redeemed during 5, 20,
the year 21 (10,269) 10,269 (10,269) - (10,269)
Management Share buy 20,
backs 21 (50) 50 (50) - (50)
------------ ------------ ------------ ------------ ------------
At 30 June 2021 527 10,319 23,269 (15,009) 19,106
Loss for the year 21 - - - (554) (554)
Transactions with Owners in their capacity as owners:
Dividends paid 5,21 - - - - -
B Shares issued during 5, 20,
the year 21 7,636 - (7,636) - -
B Shares redeemed during 5, 20,
the year 21 (7,636) 7,636 (7,636) - (7,636)
------------ ------------ ------------ ------------ ------------
At 30 June 2022 527 17,955 7,997 (15,563) 10,916
------------ ------------ ------------ ------------ ------------
There were no other comprehensive income items in the year.
The above amounts are all attributable to the owners of the Company.
The accompanying notes on form an integral part of the financial
statements .
Statement of Financial Position
as at 30 June 2022
30 June 30 June
Note 2022 2021
GBP'000 GBP'000
Non-current assets
Loans at amortised cost 14 3,440 7,336
------------ ------------
Total non-current assets 3,440 7,336
------------ ------------
Current assets
Loans at amortised cost 14 4,807 7,333
Other receivables and prepayments 17 65 189
Cash and cash equivalents 2,770 4,396
------------ ------------
Total current assets 7,642 11,918
------------ ------------
Total assets 11,082 19,254
------------ ------------
Current liabilities
Other payables and accruals 18 (166) (148)
------------ ------------
Total liabilities (166) (148)
------------ ------------
------------ ------------
Net assets 10,916 19,106
------------ ------------
Capital and reserves attributable to owners
of the Company
Called up share capital 20 527 527
Other reserves 21 10,389 18,579
------------ ------------
Equity attributable to the owners of the
Company 10,916 19,106
------------ ------------
Net asset value per Ordinary Share 22 20.73p 36.28p
------------ ------------
These financial statements of Secured Income Fund plc (registered
number 09682883) were approved by the Board of Directors on 7 September
2022 and were signed on its behalf by:
David Stevenson Gaynor Coley
Chairman Director
7 September 2022 7 September 2022
The accompanying notes form an integral part of the financial statements
.
Statement of Cash Flows
for the year ended 30 June 2022
Year ended Year ended
30 June 30 June 2021
2022
GBP'000 GBP'000
Cash flows from operating activities
Net loss before taxation (554) (11,017)
Adjustments for:
Movement in unrealised gains and losses on loans
due to movement in foreign exchange on non-Sterling
loans (363) 1,283
Movement in impairment losses on financial assets
(or loans) (720) 9,657
Realised loss on disposal of loans 2,186 2,544
Amortisation of transaction fees 28 46
Movement in unrealised loss on investments at
fair value through profit or loss - 92
Movement in unrealised gain on derivative financial
instruments - (6)
Realised gain on disposal of investments at fair
value through profit or loss - (94)
Realised gain on derivative financial instruments - (269)
Interest received and reinvested by platforms - (1)
Capitalised interest - (1,174)
Decrease in investments 5,291 16,131
------------ ------------
Net cash inflow from operating activities before
working capital changes 5,868 17,192
Decrease in other receivables and prepayments 124 1,436
Increase/(decrease) in other payables and accruals 18 (16)
------------ ------------
Net cash inflow from operating activities 6,010 18,612
Cash flows from financing activities
B Share scheme redemptions (7,636) (10,269)
Dividends paid - (5,090)
Management share buy backs - (50)
------------ ------------
Net cash outflow from financing activities (7,636) (15,409)
------------ ------------
(Decrease)/increase in cash and cash equivalents
in the year (1,626) 3,203
Cash and cash equivalents at the beginning of
the year 4,396 1,193
------------ ------------
Cash and cash equivalents at the year end 2,770 4,396
------------ ------------
Supplemental cash flow information
Non-cash transaction - interest income - 1,175
The accompanying notes form an integral part of the financial statements
.
Notes to the Financial Statements
for the year ended 30 June 2022
1. General information
The Company is a public company (limited by shares) and was incorporated
and registered in England and Wales under the Companies Act 2006 on
13 July 2015 with registered number 09682883. The Company's shares
were admitted to trading on the London Stock Exchange Specialist Fund
Segment on 23 September 2015 ("Admission"). The Company is domiciled
in England and Wales.
The Company is an investment company as defined in s833 of the Companies
Act 2006.
The Investment Management Agreement between the Company and KKV Investment
Management Ltd was terminated on 31 December 2021. There has been
a smooth transition of management back to the Company, which has been
facilitated by retaining key personnel. Furthermore, with effect from
31 December 2021, the Company has been approved by the FCA as a Small
Registered UK AIFM .
2. Statement of compliance
a) Basis of preparation
These financial statements present the results of the Company for
the year ended 30 June 2022. These financial statements have been
prepared in accordance with UK-adopted International Accounting Standards.
T he Company's capital is raised in Sterling, expenses are paid in
Sterling, the majority of the Company's financial assets and liabilities
are Sterling based, and (until September 2020) the Company hedged
substantially all of its foreign currency risk back to Sterling. Therefore,
the Board of Directors consider that Sterling most faithfully represents
the economic effects of the underlying transactions of the Company,
events and conditions. T hese financial statements are presented in
Sterling, which is the Company's functional and presentation currency.
All amounts are rounded to the nearest thousand.
Financial statements prepared on a non-going concern basis
On 19 June 2020, the Company held a continuation vote (the "Continuation
Vote") that, in line with the Directors' recommendation, did not pass.
This vote was required under the Articles as the Company did not have
a Net Asset Value of at least GBP250 million as at 31 December 2019.
As this vote did not pass, the Directors (as required under the Articles)
convened a further general meeting of the Company on 17 September
2020 at which a special resolution approved the managed wind-down
of the Company and the adoption of the new investment policy of the
Company, as set out in the Company's Annual Report and Financial Statements
, to carry out an orderly realisation of the Company's portfolio of
assets and distribution of cash to Shareholders .
This has had no significant impact on the accounting policies, judgements
or recognition of and carrying value of assets and liabilities within
the financial statements as the loans are included net of their expected
credit loss provision ("ECL") and are expected to be realised in an
orderly manner, and the estimated costs of winding up the Company
are immaterial and therefore have not been provided for in the financial
statements .
The ongoing Covid-19 pandemic, the Russian invasion of Ukraine and
the subsequent energy crisis are risks to the global economy. Details
of the impact, as they may affect the Company, are provided in the
Chairman's Statement, Investment Report and note 4. The Directors
believe that the Company is well placed to survive the impact of the
Covid-19 pandemic, the Russian invasion of Ukraine and the subsequent
energy crisis , thereby enabling the Company to realise its assets
in an orderly manner.
b) Basis of measurement
The financial statements have been prepared on a historical cost basis,
except for investments at fair value through profit or loss and derivative
instruments, which are measured at fair value through profit or loss.
Given the Company's investment policy to carry out an orderly realisation
of the Company's portfolio of assets and distribution of cash to Shareholders,
the financial statements have been prepared on a non-going concern
basis.
c) Segmental reporting
The Directors are of the opinion that the Company is engaged in a
single economic segment of business, being investment in a range of
SME loan assets. Consequently, no segmental analysis is required.
d) Use of estimates and judgements
The preparation of financial statements in conformity with IFRS requires
management to make judgements, estimates and assumptions that affect
the application of policies and the reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions
are based on historical experience and various other factors that
are believed to be reasonable under the circumstances, the results
of which form the basis of making the judgements about carrying values
of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised, if the revision affects only that
period, or in the period of the revision and future periods, if the
revision affects both current and future periods.
Judgements made by management in the application of IFRS that have
a significant effect on the financial statements and estimates with
a significant risk of material adjustment in the next year are discussed
in note 4.
3. Significant accounting policies
a) Foreign currency
Foreign currency transactions are translated into Sterling using the
exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions
and from the translation at period-end exchange rates of monetary
assets and liabilities denominated in foreign currencies are recognised
in the Statement of Comprehensive Income. Translation differences
on non-monetary financial assets and liabilities are recognised in
the Statement of Comprehensive Income.
b) Financial assets and liabilities
The financial assets and liabilities of the Company are defined as
loans, bonds with loan type characteristics, investments at fair value
through profit or loss, cash and cash equivalents, other receivables,
derivative instruments and other payables.
Classification
IFRS 9 requires the classification of financial assets to be determined
on both the business model used for managing the financial assets
and the contractual cash flow characteristics of the financial assets.
Loans have been classified at amortised cost as:
* they are held within a "hold to collect" business
model with the objective to hold the assets to
collect contractual cash flows; and
* the contractual terms of the loans give rise on
specified dates to cash flows that are solely
payments of principal and interest on the principal
amount outstanding.
Although there has been a change in the investment objective and policy,
there has been no change in the business model as the loans continued
to be held under a 'hold to collect' model.
The Company's unquoted investments have been classified as held at
fair value through profit or loss as they are held to realise cash
flows from the sale of the investments.
Recognition
The Company recognises a financial asset or a financial liability
when, and only when, it becomes a party to the contractual provisions
of the instrument. Purchases and sales of financial assets that require
delivery of assets within the time frame generally established by
regulation or convention in the marketplace are recognised on the
trade date, i.e. the date that the Company commits to purchase or
sell the asset.
Derecognition
A financial asset (or, where applicable, a part of a financial asset
or part of a group of similar assets) is derecognised where:
* The rights to receive cash flows from the asset have
expired; or
* The Company has transferred its rights to receive
cash flows from the asset or has assumed an
obligation to pay the received cash flows in full
without material delay to a third party under a
"pass-through" arrangement; and
* Either (a) the Company has transferred substantially
all the risks and rewards of the asset, or (b) the
Company has neither transferred nor retained
substantially all the risks and rewards of the asset,
but has transferred control of the asset.
When the Company has transferred its rights to receive cash flows
from an asset (or has entered into a pass-through arrangement) and
has neither transferred nor retained substantially all the risks and
rewards of the asset nor transferred control of the asset, the asset
is recognised to the extent of the Company's continuing involvement
in the asset.
The Company derecognises a financial liability when the obligation
under the liability is discharged, cancelled or expires.
Initial measurement
Financial assets and financial liabilities at fair value through profit
or loss are recorded in the Statement of Financial Position at fair
value. All transaction costs for such instruments are recognised directly
in profit or loss.
Financial assets and financial liabilities not designated as at fair
value through profit or loss, such as loans, are initially recognised
at fair value, being the amount issued less transaction costs.
Subsequent measurement
After initial measurement, the Company measures financial assets and
financial liabilities not designated as at fair value through profit
or loss, at amortised cost using the effective interest rate method,
less impairment allowance. Gains and losses are recognised in the
Statement of Comprehensive Income when the asset or liability is derecognised
or impaired. Interest earned on these instruments is recorded separately
as investment income.
After initial measurement, the Company measures financial instruments
which are classified at fair value through profit or loss at fair
value. Subsequent changes in the fair value of those financial instruments
are recorded in net gain or loss on financial assets and liabilities
at fair value through profit or loss.
The carrying value of cash and cash equivalents and other receivables
and payables equals fair value due to their short-term nature.
Impairment
A financial asset is credit-impaired when one or more events that
have occurred have a significant impact on the expected future cash
flows of the financial asset. It includes observable data that has
come to the attention of the holder of a financial asset about the
following events:
* Significant financial difficulty of the issuer or
borrower;
* A breach of contract, such as a default or past-due
event;
* The lenders for economic or contractual reasons
relating to the borrower's financial difficulty
granted the borrower a concession that would not
otherwise be considered;
* It becoming probable that the borrower will enter
bankruptcy or other financial reorganisation;
* The disappearance of an active market for the
financial asset because of financial difficulties; or
* The purchase or origination of a financial asset at a
deep discount that reflects incurred credit losses.
Each direct loan is assessed on a continuous basis by the Board and,
prior to 31 December 2021, the Former Investment Manager's own underwriting
team with peer review occurring on a regular basis.
Each platform loan is monitored via the company originally deployed
to conduct underwriting and management of the borrower relationship.
When a potential impairment is identified, the Board and Investment
Consultant (prior to 31 December 2021, the Former Investment Manager)
requests data and management information from the platform. The Board
and Investment Consultant (prior to 31 December 2021, the Former Investment
Manager) will then actively pursue collections, giving guidance to
the platforms on acceptable levels of impairment. In some cases, the
Board and Investment Consultant (prior to 31 December 2021, the Former
Investment Manager) will proactively take control of the process.
Impairment of financial assets is recognised on a loan-by-loan basis
in stages:
Stage As soon as a financial instrument is originated or purchased,
1: 12-month expected credit losses are recognised in profit or loss
and a loss allowance is established. This serves as a proxy for
the initial expectations of credit losses. For financial assets,
interest revenue is calculated on the gross carrying amount (i.e.
without deduction for expected credit losses).
Stage If the credit risk increases significantly and is not considered
2: low, full lifetime expected credit losses are recognised in profit
or loss. The calculation of interest revenue is the same as for
Stage 1. This stage is triggered by scrutiny of management accounts
and information gathered from regular updates from the borrower
by way of email exchange or face-to-face meetings. The Board
(prior to 31 December 2021, the Former Investment Manager) extends
specific queries to borrowers if they acquire market intelligence
or channel-check the data received. A covenant breach may be
a temporary circumstance due to a one-off event and will not
trigger an immediate escalation in risk profile to stage 2.
At all times, the Board (prior to 31 December 2021, the Former
Investment Manager) considers the risk of impairment relative
to the cash flows and general trading conditions of the company
and the industry in which the borrower resides.
Stage If the credit risk of a financial asset increases to the point
3: that it is considered credit-impaired, interest revenue is calculated
based on the amortised cost (i.e. the gross carrying amount less
the loss allowance). Financial assets in this stage will generally
be assessed individually. Lifetime expected credit losses are
recognised on these financial assets. This stage is triggered
by a marked deterioration in the management information received
from the borrower and a view taken on the overall credit conditions
for the sector in which the company resides. A permanent breach
of covenants and a deterioration in the valuation of security
would also merit a move to stage 3.
The Board (prior to 31 December 2021, the Former Investment Manager)
also takes into account the level of security to support each
loan and the ease with which this security can be monetised.
This has a meaningful impact on the way in which impairments
are assessed, particularly as the Former Investment Manager had
a very strong track record in managing write-downs and reclaim
of assets.
For more details in relation to judgements, estimates and uncertainty
see note 4.
c) Cash and cash equivalents
Cash and cash equivalents are defined as cash in hand, demand deposits
and short-term, highly liquid investments readily convertible to known
amounts of cash and subject to insignificant risk of changes in value.
The carrying values of cash and cash equivalents are deemed to be
a reasonable approximation of their fair values.
d) Receivables and prepayments
Receivables are carried at the original invoice amount, less impairments,
as discussed above.
The carrying values of the accrued interest and other receivables
are deemed to be reasonable approximations of their fair values.
e) Transaction costs
Transaction costs incurred on the acquisition of loans are capitalised
upon recognition of the financial asset and amortised over the term
of the respective loan.
f) Income and expenses
Interest income and bank interest are recognised on a time-proportionate
basis using the effective interest rate method.
Dividend income is recognised when the right to receive payment is
established.
All expenses are recognised on an accruals basis. All of the Company's
expenses (with the exception of share issue costs, which are charged
directly to the special distributable reserve) are charged through
the Statement of Comprehensive Income in the period in which they
are incurred.
g) Taxation
The Company is exempt from UK corporation tax on its chargeable gains
as it satisfies the conditions for approval as an investment trust.
The Company is, however, liable to UK corporation tax on its income.
However, the Company has elected to take advantage of modified UK
tax treatment in respect of its "qualifying interest income" in order
to deduct all, or part, of the amount it distributes to Shareholders
as dividends as an "interest distribution".
h) B Shares
B Shares are redeemable at the Company's option and are classified
as equity as the potential indicator of a liability, being the fixed
rate cumulative dividend, is immaterial given the shares are allotted
and redeemed on the same day. B Shares, which are redeemed immediately
following issue, are measured at the redemption amount.
i) Reserves
Under the Company's articles of association, the Directors may, having
obtained the relevant authority of Shareholders pursuant to the implementation
of the B share scheme, capitalise any sum standing to the credit of
any reserve of the Company for the purposes of paying up, allotting
and issuing B Shares to Shareholders.
(i) Capital Redemption Reserve
The nominal value of Ordinary Shares if bought back and cancelled
and the nominal value of B Shares redeemed and subsequently cancelled
are added to this reserve. This reserve is non-distributable.
(ii) Special Distributable Reserve
During the period ended 30 June 2016, and following the approval of
the Court, the Company cancelled the share premium account and transferred
GBP51,143,000 to a special distributable reserve, being premium on
issue of shares of GBP52,133,000 less share issue costs of GBP990,000.
The special distributable reserve is available for distribution to
Shareholders, including the payment of dividends, return capital to
shareholders, buy back of Ordinary Shares or redemption of B Shares.
(iii) Profit and loss account - distributable
The net profit/loss arising from realised revenue (income, expenses,
foreign exchange gains and losses and taxation) in the Statement of
Comprehensive Income is added to this reserve, along with realised
gains and losses on the disposal of financial assets and derivative
positions. Dividends paid during the year are deducted from this reserve,
where sufficient reserves are available.
(iv) Profit and loss accounts - non-distributable
Unrealised gains and losses on financial assets and derivative positions
are taken to this reserve.
j) Changes in accounting policy and disclosures
New and amended standards and interpretations
The accounting policies adopted are consistent with those of the previous
financial year, except as outlined below. The Company adopted the
following new and amended relevant IFRS in the year:
IFRS Financial Instruments: Disclosures - amendments regarding replacement
7 issues in the context of the IBOR reform
IFRS Financial Instruments - amendments regarding replacement issues
9 in the context of the IBOR reform
The adoption of these accounting standards did not have any impact
on the Company's Statement of Comprehensive Income, Statement of Financial
Position or equity. A number of other amendments and interpretations
are applicable for the year but are not relevant to the Company.
k) Accounting standards issued but not yet effective
The International Accounting Standards Board ("IASB") has issued/revised
a number of relevant standards with an effective date after the date
of these financial statements. Any standards that are not deemed relevant
to the operations of the Company have been excluded. The Directors
have chosen not to early adopt these standards and interpretations
and they do not anticipate that they would have a material impact
on the Company's financial statements in the period of initial application.
Effective date
IFRS Financial Instruments - Amendments resulting from
9 Annual Improvements to IFRS Standards 2018-2020 1 January 2022
(fees in the "10 per cent" test for derecognition
of financial liabilities)
IAS 1 Presentation of Financial Statements - amendments
regarding the classification of liabilities 1 January 2023
Presentation of Financial Statements - amendments
to defer the effective date of the January 2020 1 January 2023
amendments
Presentation of Financial Statements - amendments 1 January 2023
regarding the disclosure of accounting policies
IAS 8 Accounting Policies, Changes in Accounting Estimates
and Errors - Amendments regarding the definition 1 January 2023
of accounting estimate
IAS 37 Provisions, Contingent Liabilities and Contingent
Assets - Amendments regarding the costs to include 1 January 2022
when assessing whether a contract is onerous
4. Use of judgements and estimates
The preparation of the Company's financial statements requires the
Directors to make judgements, estimates and assumptions that affect
the reported amounts recognised in the financial statements. However,
uncertainty about these assumptions and estimates could result in
outcomes that could require a material adjustment to the carrying
amount of the asset or liability in future periods.
Judgements
In the process of applying the Company's accounting policies, management
made the following judgements, which has had a significant effect
on the amounts recognised in the financial statements:
Covid-19
The ongoing Covid-19 pandemic is a risk to the global economy. Details
of the macroeconomic impact, as it may affect the Company, are provided
in the Chairman's Statement and Investment Report. The situation continues
to change and future cashflows and valuations are more uncertain and
may be more volatile than pre-pandemic. Indeed, the level of estimation
uncertainty and judgement for the calculation of expected credit losses
has increased as a result of the economic effects of the Covid-19
pandemic. However, the Directors believe that the Company is well
placed to survive the impact of the Covid-19 pandemic, thereby enabling
the Company to realise its assets in an orderly manner.
Russian Invasion of Ukraine and the subsequent energy crisis
Russia's invasion of Ukraine is a risk to the global economy. The
invasion itself and resulting international sanctions on Russia are
believed to have already caused substantial economic damage to that
country, which is likely to worsen the longer the sanctions are in
place, and has had some wider global effect on the supply and prices
of certain commodities and consequently on inflation and general economic
growth of the global economy. The effects vary from country to country,
depending, for example, on their dependence on Russian energy supplies,
particularly gas, which cannot be so easily transported and substituted
as oil. The full effects will take time to flow through fully and
manifest themselves in the balance sheets of companies and impact
their ability to repay loans. In this context, we can only express
reservations on the near-term impact on credit risk and the impairment
of securities, which may be more volatile as a result of the Russian
invasion and the subsequent energy crisis.
Classification of B Shares
The B Shares pay a fixed rate cumulative preferential cash dividend
of 1% per annum of the nominal value of GBP1, and have limited rights,
including that: the holders of the B Shares shall not be entitled
to any further right of participation in the profits or assets of
the Company; and the B Shares are redeemable at the Company's option.
However, as the potential indicator of a liability, being the fixed
rate cumulative dividend, is immaterial given the B Shares are allotted
and redeemed on the same day, the B Shares are classified as equity.
B Shares, which are redeemed immediately following issue, are measured
at the redemption amount.
Estimates and assumptions
The Company based its assumptions and estimates on parameters available
when the financial statements were approved. However, existing circumstances
and assumptions about future developments may change due to market
changes or circumstances arising beyond the control of the Company.
Such changes are reflected in the assumptions when they occur.
The current economic uncertainty (and the frequent changes in outlook
for different economic sectors) has created increased volatility and
uncertainty (as mentioned above and in the Investment Report). In
such circumstances the level of estimation uncertainty and judgement
of expected credit losses has increased. As noted in the Investment
Report, there are uncertainties about the need for future provisions
that may need to be made against individual loans and receivables.
Notwithstanding the best endeavours of management to obtain full repayment
there is an inherent uncertainty in relation to the level of provisioning
made in these financial statements. The Board has updated the expected
credit loss assessment (as set out in note 3b) to the best of its
knowledge at the time of signing these financial statements to reflect
the likely impact on the Company's loan portfolio.
i) Recoverability of loans and other receivables
In accordance with IFRS 9, the impairment of loans and other receivables
has been assessed as described in note 3b. When assessing the credit
loss on a loan, and the stage of impairment of that loan, the Company
considers whether there is an indicator of credit risk for a loan
when the borrower has failed to make a payment, either capital or
interest, when contractually due and upon assessment. The Company
assesses at each reporting date (and at least on a monthly basis)
whether there is objective evidence that a loan classified as a loan
at amortised cost is credit-impaired and whether a loan's credit risk
or the expected loss rate has changed significantly. As part of this
process:
* Platforms are contacted to determine default and
delinquency levels of individual loans; and
* Recovery rates are estimated.
The analysis of credit risk is based on a number of factors and a
degree of uncertainty is inherent in the estimation process.
As mentioned above, due to the Covid-19 pandemic future cashflows
and valuations are more uncertain at the current time, and may be
more volatile than in recent years. Indeed, the level of estimation
uncertainty and judgement for the calculation of expected credit losses
has increased as a result of the economic effects of the Covid-19
pandemic, the Russian invasion of Ukraine and the subsequent energy
crisis.
The determination of whether a specific factor is relevant and its
weight compared with other factors depends on the type of product,
the characteristics of the financial instrument and the borrower,
and the geographical region. It is not possible to provide a single
set of criteria that will determine what is considered to be a significant
increase in credit risk. Events that the Company will assess when
deciding if a financial asset is credit impaired include:
* significant financial difficulty of the borrower;
* a breach of contract, such as a default or past-due
event; and
* it becoming probable that the borrower will enter
bankruptcy or other financial reorganisation.
Although it may not always be the case (e.g. if discussions with a
borrower are ongoing), generally a loan is deemed to be in default
if the borrower has missed a payment of principal or interest by more
than 180 days, unless the Company has good reason not to apply this
rule. If the Company has evidence to the contrary, it may make an
exception to the 180 day rule to deem that a borrower is, or is not,
in default. Therefore, the definitions of credit impaired and default
are aligned as far as possible so that stage 3 represents all loans
that are considered defaulted or otherwise credit impaired.
IFRS 9 confirms that a Probability of Default ("PD") must never be
zero as everything is deemed to have a risk of default; this has been
incorporated into the assessment of expected credit losses . All PDs
are assessed against historic data as well as the prevailing economic
conditions at the reporting date, adjusted to account for estimates
of future economic conditions that are likely to impact the risk of
default.
Since November 2020, 12-month PD has been calculated based on a 10
level grading system, where:
* levels 1 to 6 fall into Stage 1, with 12-month PD
ranging from 0.01% to 10%;
* levels 7 to 9 fall into Stage 2, with 12-month PD
ranging from 20% to 60%, and
* level 10 falls into Stage 3, with a 12-month PD of
100%.
Prior to November 2020, 12-month PD was applied across the collective
as a cumulative in Stage 1, set at 2% in line with the Former Investment
Manager's historic performance data, market knowledge, and credit
enhancements (that was equivalent to there being 1 default for an
average portfolio of 50 unique borrowers). Once an investment moved
to Stage 2 then PD was calculated on an individual basis (and adjusted
for Stage 3 if appropriate).
All assessment is based on reasonable and supportive information available
at the time.
Since November 2020, 12-month ECL has been calculated based on the
following categorisation:
Category Loss given default ("LGD") approach
Easily Realisable Asset value less 10% haircut discounted at 10%
IRR for 12 months to recovery
Realisable Asset value less 20% discounted at 20% IRR for
2 years to recovery
Highly Specialised/Unsecured 70% LGD
Subordinated Debt 100% LGD
Prior to November 2020, 12-month ECL was applied across the collective
as a cumulative in Stage 1, split according to the investment's classification.
For direct loan investments this was calculated as 2% of the individual
investment's Contracted Cash Flows ("CCF"), and 2% of the investment's
CCF for platform investments. Those Stage 1 12-month ECL amounts were
taken to be the investments' floor amounts - the Lifetime ECL for
any investment could never be less than its floor amount. Once an
investment moved to Stage 2, Lifetime ECL was calculated on an individual
basis.
Lifetime ECL is reviewed at each reporting date based on reasonable
and supportive information available at the time.
Details of the judgements applied in assessing the recoverability
of loans can be found in the Investment Report and should be read
in conjunction with the current economic environment and, in particular,
the impact of Covid-19.
Collateral
While the presence of collateral is not a key element in the assessment
of whether there has been a significant increase in credit risk, it
is of great importance in the measurement of ECL. IFRS 9 states that
estimates of cash shortfalls reflect the cash flows expected from
collateral and other credit enhancements that are integral to the
contractual terms. This is a key component of the Company's ECL measurement
and interpretation of IFRS 9, as any investment would include elements
of (if not all): a fully collateralised position, fixed and floating
charges, a corporate guarantee, a personal guarantee.
Loans written off
Financial assets (and the related impairment allowances) are normally
written off, either partially or in full, when there is no realistic
prospect of recovery. Where loans are secured, this is generally after
receipt of any proceeds from the realisation of security. In circumstances
where the net realisable value of any collateral has been determined
and there is no reasonable expectation of further recovery, write-off
may be earlier. Platform loans of GBP1,880,000 were written off in
the year (2021: GBP 1,887 ,000) .
Renegotiated loans
A loan is classed as renegotiated when the contractual payment terms
of the loan are modified because the Company has significant concerns
about a borrower's ability to meet payments when due. On renegotiation,
the loan will also be classified as credit impaired, if it is not
already. Renegotiated loans will continue to be considered to be credit
impaired until there is sufficient evidence to demonstrate a significant
reduction in the risk of non-payment of future payments.
In addition to the methodology used, the Company has taken impairment
data from Platforms for the assessment of loans with third party exposure
, which was consistent with the approach the Board would have expected
to take in those circumstances as at 30 June 2022 .
There were no new assets originated during the year that were credit-impaired
at the point of initial recognition. There were no financial assets
that have been modified since initial recognition at a time when the
loss allowance was measured at an amount equal to lifetime expected
credit losses and for which the loss allowance changed during the
year to an amount equal to 12-month expected credit losses.
There were no financial assets for which cash flows were modified
in the year while they had a loss allowance measured at an amount
equal to the lifetime expected credit loss.
Please see note 3b, note 14 and note 23 for further information on
the loans at amortised cost and credit risk.
5. Dividends
The Company distributes at least 85% of its distributable income earned
in each financial year by way of dividends.
T he Company elected to designate all of the dividends for the year
ended 30 June 2022 as interest distributions to its Shareholders.
In doing so, the Company took advantage of UK tax treatment by "streaming"
income from interest-bearing investments into dividends that will
be taxed in the hands of Shareholders as interest income.
To date, the Company has declared the following dividends in respect
of earnings for the year ended 30 June 2022:
Total dividend
declared in respect
of earnings in Amount per
Announcement date Pay date the year Ordinary Share
GBP'000
2 September 2022 7 October 2022 395 0.75p
------------ ------------
Dividends declared (to date) for the
year 395 0.75p
Less, dividends paid after the year
end (395) (0.75)p
------------ ------------
Dividends paid in - -
the year
------------ ------------
In accordance with UK-adopted International Accounting Standards,
dividends are only provided for when they become a contractual liability
of the Company. Therefore, during the year a total of GBPnil (2021:
GBP5,090,000) was incurred in respect of dividends, none of which
was outstanding at the reporting date (2021: none).
All dividends in the year were paid out of revenue (and not capital)
profits.
Mechanics for returning cash to Shareholders
The Board carefully considered the potential mechanics for returning
cash to Shareholders and the Company's ability to do so. The Board
believes it is in the best interests of Shareholders as a whole to
make distributions to Shareholders without a significant delay following
realisations of a material part of the Portfolio (whether in a single
transaction or through multiple, smaller transactions concluded on
similar timing), whether by dividend or other method.
After careful consideration and discussions with a number of Shareholders,
the Board believes that one of the fairest and most cost-efficient
ways of returning substantial amounts of cash to Shareholders is by
adopting a B Share Scheme, whereby the Company will be able to issue
redeemable B Shares to Shareholders. These are then redeemed on a
Redemption Date without further action being required by Shareholders.
The B Shares are issued out of the special distributable reserve,
then the special distributable reserve is utilised again when the
B Shares are redeemed - the B Share capital is cancelled and an equal
amount credited to the capital redemption reserve.
The Company made three B Share Scheme redemptions in the year, totalling
GBP7,636,000 (2021: GBP10,269,000), equivalent to 14.50p per Ordinary
Share (2021: 19.50p).
The Board also intends to make dividend payments to maintain investment
trust status for so long as the Company remains listed.
6. Related parties
As a matter of best practice and good corporate governance, the Company
has adopted a related party policy which applies to any transaction
which it may enter into with any Director, the Investment Consultant
and (prior to 1 January 2022), the Former Investment Manager , or
any of their affiliates which would constitute a "related party transaction"
as defined in, and to which would apply, Chapter 11 of the Listing
Rules. In accordance with its related party policy, the Company obtained:
(i) the approval of a majority of the Directors; and (ii) a third-party
valuation in respect of these transactions from an appropriately qualified
independent adviser.
See notes 7 and 8 for further details.
7. Key contracts
a) Former Investment Manager
The Former Investment Manager had responsibility for managing the
Company's portfolio until 31 December 2021. For their services, until
16 September 2020, the Former Investment Manager was entitled to a
management fee at a rate equivalent to the following schedule (expressed
as a percentage of NAV per annum, before deduction of accruals for
unpaid management fees for the current month):
* 1.0% per annum for NAV lower than or equal to GBP250
million;
* 0.9% per annum for NAV greater than GBP250 million
and lower than or equal to GBP500 million; and
* 0.8% per annum for NAV greater than GBP500 million.
From 17 September 2020, the 1.0% per annum base management fee was
reduced as follows:
* for 12 months from 17 September 2020 to 16 September
2021, to 0.75% per annum of the Company's NAV; and
* from 17 September 2021, to 0.55% of the Company's
NAV.
On 20 August 2021, the Company agreed with the Former Investment Manager
and its AIFM to amend the Investment Management Agreement and for
the agreement to terminate with effect from midnight on 31 December
2021.
The key terms of the revised agreement were as follows:
* Management fees payable by the Company to the Former
Investment Manager of GBP20,500 per month from 1
August 2021 to 31 December 2021;
* A payment of GBP20,000 in total payable by the
Company to the Former Investment Manager, but
conditional on a senior employee providing continued
services to the Company to 31 December 2021; and
* The agreement terminated with effect from midnight on
31 December 2021. No party had the right to terminate
the agreement prior to this date without cause. No
fees were payable by either party on termination
other than the amount referred to above.
The Board believed that the revised Agreement provided the Company
with certainty over the level of future management fees payable to
the Former Investment Manager with the added flexibility of facilitating
the Company becoming self-managed, whilst providing for the ongoing
management of the portfolio to 31 December 2021. Overall, it allowed
for an orderly transition of the management of the portfolio to the
Company.
The management fee was payable monthly in arrears on the last calendar
day of each month.
During the year, a total of GBP133,000 (2021: GBP309,000) was incurred
in respect of management fees, none of which was payable at the reporting
date (2021: GBP25,000).
Performance fee
From 17 September 2020, the Former Investment Manager was entitled
to a performance fee. During the year, no performance fee was paid,
or payable, to the Former Investment Manager (2021: none).
The performance fee ceased with effect from 1 January 2022, following
the termination of the Investment Management Agreement on 31 December
2021.
Transaction costs
Prior to the change in the investment policy, the Company incurred
transaction costs for the purposes of structuring investments for
the Company. These costs formed part of the overall transaction costs
that were capitalised at the point of recognition and were taken into
account when pricing a transaction. When structuring services were
provided by the Investment Manager (incumbent at the time of the transaction)
or an affiliate of them, they were entitled to charge an additional
fee to the Company equal to up to 1.0% of the cost of acquiring the
investment (ignoring gearing and transaction expenses). This cost
was not charged in respect of assets acquired from the Former Investment
Manager (incumbent at the time of the transaction), the funds they
managed or where they or their affiliates did not provide such structuring
advice.
During the year, transaction costs of GBP28,000 (2021: GBP46,000)
were amortised.
b) Administration fees
Elysium Fund Management Limited ("Elysium") is entitled to an administration
fee of GBP100,000 per annum in respect of the services provided in
relation to the administration of the Company, together with time-based
fees in relation to work on investment transactions. During the year,
a total of GBP118,000 (2021: GBP130,000) was incurred in respect of
administration fees, of which GBP33,000 (2021: GBP37,000) was payable
at the reporting date.
c) Consultancy fees
With effect from 1 January 2022, the Company entered into a consultancy
agreement with Syon Arc Limited ("Syon" or the "Consultant") to secure
the services of one of the individuals previously employed by KKV.
From that date, Syon was entitled to GBP6,000 exclusive of VAT (if
applicable) per month plus an additional GBP15,000 exclusive of VAT
(if applicable) upon the publication of the 31 December 2021 unaudited
condensed half-yearly financial statements and a further GBP15,000
exclusive of VAT (if applicable) upon the publication of these audited
financial statements.
At the Company's discretion, the Consultant may also be eligible for
an additional success fee in the event that the Company achieves recoveries
in excess of GBP100,000 in respect of positions carried at zero as
referenced by the Company's management accounts and IFRS 9 table from
which the Net Asset Value for 31 October 2021 was derived, if it is
determined by the Board that the Consultant is instrumental to the
work involved to achieve such recoveries. The amount of such additional
fee would be determined at the Company's sole discretion, however,
no less than GBP10,000 exclusive of VAT (if applicable).
During the year, a total of GBP71,000 (2021: nil) was incurred in
respect of consultancy fees, of which GBP7,000 (2021: nil) was payable
at the reporting date and a further GBP18,000 (2021: nil) had been
accrued but was not yet payable at the reporting date (being the amount
payable following the publication of these audited financial statements).
8. Directors' remuneration
During the year, a total of GBP195,000 (2021: GBP119,000) was incurred
in respect of Directors' remuneration, none of which was payable at
the reporting date (2021: none). No bonus or pension contributions
were paid or payable on behalf of the Directors. Further details can
be found in the Directors' Remuneration Report in the Company's Annual
Report and Financial Statements.
9. Key management and employees
The Company had no employees during the year (2021: none). Therefore,
there were no key management (except for the Directors) or employees
during the year.
The following distributions were paid to the Directors during the
year by virtue of their holdings of Ordinary Shares (these distributions
were not additional remuneration):
Year ended Year ended
30 June 2022 30 June 2021
Dividends GBP GBP
David Stevenson - 1,958
Gaynor Coley - 206
Brett Miller - -
B Share Scheme Redemptions
David Stevenson 2,937 3,950
Gaynor Coley 310 417
Brett Miller - -
10. Auditor's remuneration
For the year ended 30 June 2022, total fees, plus VAT, charged by
MKS, together with amounts accrued at 30 June 2022, amounted to GBP71,000
(2021: GBP46,000), GBP48,000 of which related to audit services (2021:
GBP46,000) and GBP23,000 of which related to non-audit services (2021:
nil).
As at 30 June 2022, GBP48,000 was due to MKS and GBP16,000 was due
to RSM UK Audit LLP (2021: GBP46,000 was due to MKS and GBP16,000
was due to RSM UK Audit LLP).
11. Other expenses
Year ended Year ended
30 June 2022 30 June 2021
GBP'000 GBP'000
Registrar fees 42 49
Broker fees 36 56
Transaction fees (note 7a) 28 46
Directors' national insurance 24 12
Other expenses 23 15
Listing fees 13 16
Accountancy and taxation fees 6 9
------------ ------------
172 203
------------ ------------
12. Taxation
The Company has received confirmation from HMRC that it satisfied
the conditions for approval as an investment trust, subject to the
Company continuing to meet the eligibility conditions in s.1158 of
the Corporation Tax Act 2010 and the ongoing requirements for approved
investment trust companies in Chapter 3 of Part 2 of the Investment
Trust (approved Company) Tax Regulations 2011 (Statutory Instrument
2011.2999). The Company intends to retain this approval and self-assesses
compliance with the relevant conditions and requirements.
As an investment trust the Company is exempt from UK corporation tax
on its chargeable gains. The Company is, however, liable to UK corporation
tax on its income. However, the Company has elected to take advantage
of modified UK tax treatment in respect of its "qualifying interest
income" in order to deduct all, or part, of the amount it distributes
to Shareholders as dividends as an "interest distribution".
Year ended Year ended
30 June 2022 30 June 2021
GBP'000 GBP'000
Reconciliation of tax charge:
Loss before taxation (554) (11,017)
------------ ------------
Tax at the standard UK corporation tax rate
of 19% (2021: 19%) (105) (2,093)
Effects of:
* Non-taxable investment gains and losses 209 2,509
* Adjustments for disallowable expenses 6 -
* Interest distributions ([1]) (75) (416)
* Relief claimed for carried forward losses (35) -
------------ ------------
Total tax expense - -
------------ ------------
([1]) On 2 September 2022, the Board declared a dividend of 0.75p per
Ordinary Share for the year ended 30 June 2022, which is to be
paid on 7 October 2022.
Domestic corporation tax rates in the jurisdictions in which the Company
operated were as follows:
Year ended Year ended
30 June 2022 30 June 2021
United Kingdom 19% 19%
Guernsey nil nil
Due to the Company's status as an investment trust and the intention
to continue to meet the required conditions, the Company has not provided
for deferred tax on any capital gains and losses.
13. Loss per Ordinary Share
The loss per Ordinary Share of 1.05p (2021: loss per Ordinary Share
of 20.92p) is based on a loss attributable to the owners of the Company
of GBP554,000 (2021: Loss of GBP11,017,000) and on a weighted average
number of 52,660,350 (2021: 52,660,350) Ordinary Shares in issue since
Admission . There is no difference between the basic and diluted earnings
per share.
14. Loans at amortised cost
Year ended Year ended
30 June 2022 30 June 2021
GBP'000 GBP'000
Loans 21,415 28,920
Unrealised loss* (13,168) (14,251)
------------ ------------
Balance at year end 8,247 14,669
------------ ------------
Loans: Non-current 3,440 7,336
Current 4,807 7,333
------------ ------------
Loans at amortised cost 8,247 14,669
------------ ------------
*Unrealised loss
Foreign exchange on non-Sterling loans 205 (158)
Impairments of financial assets (13,373) (14,093)
------------ ------------
Unrealised loss (13,168) (14,251)
------------ ------------
The movement in unrealised gains/losses on loans comprised:
Year ended Year ended
30 June 2022 30 June 2021
GBP'000 GBP'000
Movement in foreign exchange on non-Sterling
loans 363 (1,283)
Movement in i mpairment losses on financial
assets (or loans) 720 (9,657)
------------ ------------
Movement in unrealised gains and losses on
loans 1,083 (10,940)
------------ ------------
The movement in the impairment for the year comprised:
Year ended Year ended
30 June 2022 30 June 2021
GBP'000 GBP'000
Impairment of interest income (1,195) (877)
Impairment losses on financial assets (or loans) 720 (9,657)
------------ ------------
Total movement in impairment in the year (475) (10,534)
------------ ------------
The weighted average interest rate of the loans as at 30 June 2022
was 10.68% (2021: 6.48%).
The table below details expected credit loss provision ("ECL") of
financial assets in each stage at 30 June 2022:
30 June 2022 30 June 2021
Stage Stage Stage Total Stage Stage Stage Total
1 2 3 1 2 3
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Direct loans ([1]) 3,245 - 15,405 18,650 4,940 5,633 12,637 23,210
ECL on direct loans (9) - (10,410) (10,419) (14) (451) (8,228) (8,693)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Direct loans net of
the ECL 3,236 - 4,995 8,231 4,926 5,182 4,409 14,517
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Platform loans ([1]) - - 2,954 2,954 - - 5,508 5,508
ECL on platform loans - - (2,954) (2,954) - - (5,400) (5,400)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Platform loans net
of the ECL - - - - - - 108 108
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Accrued interest 57 - 2 59 175 - 7 182
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total loans ([1]) 3,245 - 18,359 21,604 4,940 5,633 18,145 28,718
Total ECL (9) - (13,364) (13,373) (14) (451) (13,628) (14,093)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Total net of the ECL 3,236 - 4,995 8,231 4,926 5,182 4,517 14,625
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
([1]) These are the principal amounts outstanding at 30 June 2022 and
do not include the capitalised transaction fees, which are not
subject to credit risk. At 30 June 2022, the amortised cost of
the capitalised transaction fees totalled GBP16,000 (2021: GBP44,000).
The table below details the movements in the year ended 30 June 2022
of the principal amounts outstanding and the ECL on those loans:
Non-credit impaired Credit impaired
Stage 1 Stage 2 Stage 3 Total
Principal Principal Principal Principal
outstanding Allowance outstanding Allowance outstanding Allowance outstanding Allowance
([1]) for ECL ([1]) for ECL ([1]) for ECL ([1]) for ECL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2021 4,940 (14) 5,633 (451) 18,145 (13,628) 28,718 (14,093)
Transfers from:
* stage 2 to stage 3 - - (5,633) 451 5,633 (451) - -
Net re-measurement
of ECL arising
from transfer
of stage - - - - - (1,239) - (1,239)
Net new and further
lending/repayments,
and foreign exchange
movements (1,695) 5 - - (3,539) 74 (5,234) 79
Loans written-off
in the year - - - - (1,880) 1,880 (1,880) 1,880
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
At 30 June 2022 3,245 (9) - - 18,359 (13,364) 21,604 (13,373)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
([1]) These are the principal amounts outstanding at 30 June 2022 and
do not include the capitalised transaction fees, which are not
subject to credit risk. At 30 June 2022, the amortised cost of
the capitalised transaction fees totalled GBP16,000.
The table below details the movements in the year ended 30 June 2021
of the principal amounts outstanding and the ECL on those loans:
Non-credit impaired Credit impaired
Stage 1 Stage 2 Stage 3 Total
Principal Principal Principal Principal
outstanding Allowance outstanding Allowance outstanding Allowance outstanding Allowance
([1]) for ECL ([1]) for ECL ([1]) for ECL ([1]) for ECL
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1 July 2020 41,633 (24) - - 5,346 (4,412) 46,979 (4,436)
Transfers from:
* stage 1 to stage 2
(10,000) 5 10,000 (5) - - - -
* stage 1 to stage 3 (19,552) 11 - - 19,552 (11) - -
Net re-measurement
of ECL arising
from transfer
of stage - - - (795) - (9,579) - (10,374)
Net new and further
lending/repayments,
and foreign exchange
movements (5,736) (1,411) (4,367) 349 (6,271) (108) (16,374) (1,170)
Loans written-off
in the year (1,405) 1,405 - - (482) 482 (1,887) 1,887
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
At 30 June 2021 4,940 (14) 5,633 (451) 18,145 (13,628) 28,718 (14,093)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
([1]) These are the principal amounts outstanding at 30 June 2021 and
do not include the capitalised transaction fees, which are not
subject to credit risk. At 30 June 2021, the amortised cost of
the capitalised transaction fees totalled GBP44,000.
An increase of 1% of total gross exposure into stage 3 (from stage
1) would result in an increase in ECL impairment allowance of GBP29,000
(2021: GBP43,000) based on applying the difference in average impairment
coverage ratios to the movement in gross exposure.
At 30 June 2022, the Board considered GBP13,373,000 (2021: GBP14,093,000)
of loans to be impaired:
30 June 2022 30 June 2021
GBP'000 GBP'000
Direct SME loans 10,419 8,693
Platform loans 2,954 5,400
------------ ------------
Total impairment 13,373 14,093
------------ ------------
During the year, GBP1,880,000 (2021: GBP1,887,000) of loans were written
off and included within realised loss on disposal of loans in the
Statement of Comprehensive Income.
See note 3b and note 4i regarding the process of assessment of loan
impairment.
The carrying values of the loans at amortised cost (excluding capitalised
transaction costs) are deemed to be a reasonable approximation of
their fair values.
15. Fair value of financial instruments
Investments at fair value through Year ended 30 Year ended 30 June
profit or loss June 2022 2021
GBP'000 GBP'000
Balance brought forward - 251
Disposals in the year - (253)
Realised gain on disposal of investments
at fair value through profit or loss - 94
Movement in unrealised gain on investments
at fair value through profit or loss - (92)
------------ ------------
Balance at year end - -
------------ ------------
Cost at year end - -
------------ ------------
The investment at fair value through profit or loss related to an
investment in a Luxembourg fund which was sold during the previous
financial year.
Transfers between levels
There were no transfers between levels in the year (2021: none).
Financial assets and liabilities not designated as at fair value
through profit or loss
The carrying values of the loans at amortised cost (excluding capitalised
transaction costs) are deemed to be a reasonable approximation of
their fair values. The carrying values of all other assets and liabilities
not designated as at fair value through profit or loss are deemed
to be a reasonable approximation of their fair values due to their
short duration.
16. Derivative financial instruments
In order to limit the exposure to foreign currency risk, the Company
had previously entered into hedging contracts. However, in September
2020, the Company closed out its foreign currency forward contracts
and it is not intended to enter into foreign exchange hedging contracts
in the future. The Company realised no gain/loss on forward foreign
exchange contracts during the year (2021: gain of GBP269,000).
As at 30 June 2022, there were no open forward foreign exchange contracts
(2021: none).
17. Other receivables and prepayments
30 June 2022 30 June 2021
GBP'000 GBP'000
Accrued interest 59 182
Prepayments 6 6
Other receivables - 1
------------ ------------
65 189
------------ ------------
The carrying values of the accrued interest and other receivables
are deemed to be reasonable approximations of their fair values.
18. Other payables and accruals
30 June 2022 30 June 2021
GBP'000 GBP'000
Audit fee 64 62
Administration fee 33 37
Consultancy fee 25 -
Legal fees 21 -
Other payables and accruals 13 20
Directors' national insurance 10 4
Management fee - 25
------------ ------------
166 148
------------ ------------
The carrying values of the other payables and accruals are deemed
to be reasonable approximations of their fair values.
19. Reconciliation of liabilities arising from financing activities
IAS 7 requires the Company to detail the changes in liabilities arising
from financing activities, including both cash and non-cash changes.
Liabilities arising from financing activities are those for which
cash flows were, or future cash flows will be, classified in the Company's
statement of cash flows as cash flows from financing activities.
As at 30 June 2022, the Company had no liabilities that would give
rise to cash flows from financing activities (2021: none).
20 . Share capital
30 June 2022 30 June 2021
GBP'000 GBP'000
Authorised share capital:
Unlimited number of Ordinary Shares - -
of 1 pence each
43,857,133 B Shares of GBP1 each (2021:
43,857,133) 43,857 43,857
Unlimited C Shares of 10 pence each - -
Unlimited Deferred Shares of 1 pence - -
each
50,000 Management Share of GBP1 each
(2021: 50,000) 50 50
------------ ------------
30 June 2022 30 June 2021
GBP'000 GBP'000
Called up share capital:
52,660,350 Ordinary Shares of 1 pence
each 527 527
1 Management Share of GBP1 (2021: - -
1)
------------ ------------
527 527
------------ ------------
Management Shares
The Management Share is entitled (in priority to any payment of dividend
of any other class of share) to a fixed cumulative preferential dividend
of 0.01% per annum on the nominal amount of the Management Share.
The Management Share does not carry any right to receive notice of,
nor to attend or vote at, any general meeting of the Company unless
no other shares are in issue at that time. The Management Share does
not confer the right to participate in any surplus of assets of the
Company on winding-up, other than the repayment of the nominal amount
of capital.
During the year, no Management Shares were bought back or cancelled
(2021: 49,999 Management Shares were bought back for GBP49,999 and
cancelled).
B Shares
The B Shares are entitled (in priority to any payment of dividend
of any other class of share, with the exception of the Management
Shares) to a fixed cumulative preferential dividend of 1% per annum
on the nominal amount of the B Shares, such dividend to be paid annually
on the date falling six months after the date on which the B Shares
are issued and thereafter on each anniversary. The B Shares do not
confer the right to participate in any surplus of assets of the Company
on winding-up, other than the repayment of the nominal amount of capital.
During the year 7,636,000 (2021: 10,269,000) B Shares of GBP1 each
were issued and immediately redeemed by the Company in accordance
with the B Share Scheme approved by Shareholders at a General Meeting
held on 23 March 2021 (see note 5 for further details). As the B Shares
were redeemed immediately upon issue, no cumulative preferential dividend
was earned on those shares.
21. Other reserves
Special Profit and loss
distributable account ([2])
reserve
([1] /
[3])
Capital Non-distributable
redemption Distributable Total
reserve
([3])
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 June 2020 48,181 - - (3,226) 44,955
Realised revenue profit - - 2,190 - 2,190
Realised investment gains and
losses - - (2,181) - (2,181)
Unrealised investment gains
and losses - - - (11,026) (11,026)
Dividends paid (4,324) - (766) (5,090)
B Shares issued during the year
(notes 5 and 20) (10,269) - - - (10,269)
B Shares redeemed during the
year (notes 5 and 20) ([3]) (10,269) 10,269 - - -
Management Share buy backs (50) 50 - - -
------------ ------------ ------------ ------------ ------------
At 30 June 2021 23,269 10,319 (757) (14,252) 18,579
Realised revenue profit - - 549 - 549
Realised investment gains and
losses - - (2,186) - (2,186)
Unrealised investment gains
and losses - - - 1,083 1,083
B Shares issued during the year
(notes 5 and 20) (7,636) - - - (7,636)
B Shares redeemed during the
year (notes 5 and 20) ([3]) (7,636) 7,636 - - -
------------ ------------ ------------ ------------ ------------
At 30 June 2022 7,997 17,955 (2,394) (13,169) 10,389
------------ ------------ ------------ ------------ ------------
([1]) During the period ended 30 June 2016, and following the approval
of the Court, the Company cancelled the share premium account and
transferred GBP51,143,000 to a special distributable reserve, being
premium on issue of shares of GBP52,133,000 less share issue costs
of GBP990,000. The special distributable reserve is available for
distribution to Shareholders.
([2]) The profit and loss account comprises both distributable and non-distributable
elements, as defined by Company Law. Realised elements of the Company's
profit and loss account are classified as "distributable", whilst
unrealised investment gains and losses are classified as "non-distributable".
([3]) The B Shares were issued out of the special distributable reserve,
then the special distributable reserve was utilised again when
the B Shares were redeemed, the B Share capital cancelled and an
equal amount credited to the capital redemption reserve (see notes
5 and 20)
With the exception of investment gains and losses, all of the Company's
profit and loss items are of a revenue nature as it does not allocate
any expenses to capital.
22. Net asset value per Ordinary Share
The net asset value per Ordinary Share is based on the net assets
attributable to the owners of the Company of GBP10,916,000 (2021:
GBP19,106,000), less GBP1 (2021: GBP1), being amounts owed in respect
of Management Shares, and on 52,660,350 (2021: 52,660,350) Ordinary
Shares in issue at the year end.
23. Financial Instruments and Risk Management
The Board (prior to 31 December 2021, the Former Investment Manager)
manages the Company's portfolio to provide Shareholders with attractive
risk adjusted returns, principally in the form of regular, sustainable
dividends, through investment predominantly in a range of secured
loans and other secured loan-based instruments originated through
a variety of channels and diversified by way of asset class, geography
and duration.
Prior to the change in investment policy on 17 September 2020, the
Company sought to ensure that diversification of its portfolio was
maintained, with the aim of spreading investment risk.
Risk is inherent in the Company's activities, but it is managed through
a process of ongoing identification, measurement and monitoring. The
Company is exposed to market risk (which includes currency risk, interest
rate risk and price risk), credit risk and liquidity risk from the
financial instruments it holds. Risk management procedures are in
place to minimise the Company's exposure to these financial risks,
in order to create and protect Shareholder value.
Risk management structure
The Board (prior to 31 December 2021, the Former Investment Manager)
is responsible for identifying and controlling risks. Prior to 31
December 2021, the Board of Directors supervised the Former Investment
Manager and was ultimately responsible for the overall risk management
approach within the Company.
The Company has no employees and is reliant on the performance of
third party service providers. Failure by the Former Investment Manager,
Administrator, Broker, Registrar or any other third party service
provider to perform in accordance with the terms of its appointment
could have a significant detrimental impact on the operation of the
Company.
The market in which the Company participates is competitive and rapidly
changing. The risks have not changed from those detailed on pages
20 to 30 in the Company's Prospectus, which is available on the Company's
website, and as updated in the circular of 20 August 2020.
Risk concentration
Concentration indicates the relative sensitivity of the Company's
performance to developments affecting a particular industry or geographical
location. Concentrations of risk arise when a number of financial
instruments or contracts are entered into with the same counterparty,
or where a number of counterparties are engaged in similar business
activities, or activities in the same geographic region, or have similar
economic features that would cause their ability to meet contractual
obligations to be similarly affected by changes in economic, political
or other conditions. Concentrations of liquidity risk may arise from
the repayment terms of financial liabilities, sources of borrowing
facilities or reliance on a particular market in which to realise
liquid assets. Concentrations of foreign exchange risk may arise if
the Company has a significant net open position in a single foreign
currency, or aggregate net open positions in several currencies that
tend to move together.
In a Managed Wind-Down, the value of the Portfolio will be reduced
as investments are realised and concentrated in fewer holdings, and
the mix of asset exposure will be affected accordingly.
With the aim of maintaining a diversified investment portfolio, and
thus mitigating concentration risks, the Company had established (prior
to the change in the investment policy on 17 September 2020) the following
investment restrictions in respect of the general deployment of assets:
Investment Restriction Investment Policy
Geography
* Exposure to UK loan assets
Minimum of 60%
* Minimum exposure to non-UK loan assets 20%
Duration to maturity
* Minimum exposure to loan assets with duration of less
than 6 months
* Maximum exposure to loan assets with duration of 6 -
18 months and 18 - 36 months
None
* Maximum exposure to loan assets with duration of more None
than 36 months 50%
Maximum single investment 10%
Maximum exposure to single borrower or group 10%
Maximum exposure to loan assets sourced through single alternative lending platform or other
third party originator 25%
Maximum exposure to any individual wholesale loan arrangement 25%
Maximum exposure to loan assets which are neither sterling-denominated nor hedged back to
sterling 15%
Maximum exposure to unsecured loan assets 25%
Maximum exposure to assets (excluding cash and cash-equivalent investments) which are not
loans or investments with loan-based investment characteristics 10%
The Company complied with the investment restrictions up to the change
in investment policy on 17 September 2020, except that, on 9 September
2020, in preparation for the upcoming change in investment policy,
additional foreign currency forward contracts were entered into in
order to equally and oppositely match the open contracts at that date.
Market risk
(i) Price risk
Price risk exposure arises from the uncertainty about future prices
of financial instruments held. It represents the potential loss that
the Company may suffer through holding market positions in the face
of price movements. The investment at fair value through profit or
loss (see note 15) was the only financial instrument exposed to price
risk prior to being sold in the previous financial year.
(ii) Foreign currency risk
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
Company's functional currency. The Company invests in securities and
other investments that are denominated in currencies other than Sterling.
Accordingly, the value of the Company's assets may be affected favourably
or unfavourably by fluctuations in currency rates and therefore the
Company will necessarily be subject to foreign exchange risks.
The impact of foreign currency fluctuations during the year comprised:
Year ended Year ended
30 June 2022 30 June 2021
GBP'000 GBP'000
Movement in unrealised gains and losses on
loans due to movement in foreign exchange on
non-Sterling loans 363 (1,283)
Net foreign exchange gain 13 3
------------ ------------
Foreign currency gain/(loss) in the year excluding
the effect of foreign currency hedging 376 (1,280)
Movement in unrealised gain on foreign currency
derivative financial instruments - 6
Realised gain on foreign currency derivative
financial instruments - 269
------------ ------------
Foreign currency gain/(loss) in the year including
the effect of foreign currency hedging 376 (1,005)
------------ ------------
As at 30 June 2022, a proportion of the net financial assets of the
Company were denominated in currencies other than Sterling as follows:
Loans and Cash and Other payables
receivables cash equivalents and accruals Exposure
30 June 2022 GBP'000 GBP'000 GBP'000 GBP'000
US Dollars 1,836 451 (12) 2,275
Euros 3,188 - - 3,188
--------------- --------------- --------------- ---------------
5,024 451 (12) 5,463
--------------- --------------- --------------- ---------------
30 June 2021
US Dollars 2,713 1 - 2,714
Euros 4,293 - - 4,293
--------------- --------------- --------------- ---------------
7,006 1 - 7,007
--------------- --------------- --------------- ---------------
In order to limit the exposure to foreign currency risk, the Company
had previously entered into hedging contracts. However, in September
2020, the Company closed out its foreign currency forward contracts
and it is not intended to enter into foreign exchange hedging contracts
in the future.
At 30 June 2022, if the exchange rates for US Dollars and Euros had
strengthened/weakened by 5% against Sterling with all other variables
remaining constant, net assets at 30 June 2022 and the profit/(loss)
for the year ended 30 June 2022 would have increased/(decreased) by
GBP288,000/GBP(260,000) (2021: increased/(decreased) by GBP369,000/GBP(334,000)).
(ii) Interest rate risk
Interest rate risk arises from the possibility that changes in interest
rates will affect future cash flows or the fair values of financial
instruments. The Company is exposed to risks associated with the effects
of fluctuations in the prevailing levels of market interest rates
on its financial instruments and cash flow. However, due to the fixed
rate nature of the majority of the loans, cash and cash equivalents
of GBP2,770,000 (2021: GBP4,396,000) were the only interest bearing
financial instruments subject to variable interest rates at 30 June
2022. Therefore, if interest rates had increased/decreased by 50 basis
points, with all other variables held constant, the change in value
of interest cash flows of these assets in the year would have been
GBP14,000 (2021: GBP22,000).
Variable Non-interest
Fixed interest interest bearing Total
30 June 2022 GBP'000 GBP'000 GBP'000 GBP'000
Financial assets
Loans ([1]) 8,247 - - 8,247
Other receivables - - 59 59
Cash and cash equivalents - 2,770 - 2,770
------------ ------------ ------------ ------------
Total financial assets 8,247 2,770 59 11,076
------------ ------------ ------------ ------------
Financial liabilities
Other payables - - (166) (166)
------------ ------------ ------------ ------------
Total financial liabilities - - (166) (166)
------------ ------------ ------------ ------------
Total interest sensitivity
gap 8,247 2,770 (107) 10,910
------------ ------------ ------------ ------------
30 June 2021
Financial assets
Loans ([1]) 14,669 - - 14,669
Other receivables - - 183 183
Cash and cash equivalents - 4,396 - 4,396
------------ ------------ ------------ ------------
Total financial assets 14,669 4,396 183 19,248
------------ ------------ ------------ ------------
Financial liabilities
Other payables - - (148) (148)
------------ ------------ ------------ ------------
Total financial liabilities - - (148) (148)
------------ ------------ ------------ ------------
Total interest sensitivity
gap 14,669 4,396 35 19,100
------------ ------------ ------------ ------------
([1]) Of the loans of GBP8,247,000 (2021: GBP14,669,000), one loan amounting
to GBP3,132,000 (2021: GBP4,119,000) included both fixed elements
and variable elements, based on the performance of the borrowers'
underlying portfolios of loans.
The Board (prior to 31 December 2021, the Former Investment Manager)
manages the Company's exposure to interest rate risk, paying heed
to prevailing interest rates and economic conditions, market expectations
and its own views as to likely moves in interest rates.
Although it has not done so to date, t he Company may implement hedging
and derivative strategies designed to protect investment performance
against material movements in interest rates. Such strategies may
include (but are not limited to) interest rate swaps and will only
be entered into when they are available in a timely manner and on
terms acceptable to the Company. The Company may also bear risks that
could otherwise be hedged where it is considered appropriate. There
can be no certainty as to the efficacy of any hedging transactions
.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument
will fail to discharge an obligation or commitment that it has entered
into with the Company, resulting in a financial loss to the Company.
At 30 June 2022, credit risk arose principally from cash and cash
equivalents of GBP2,770,000 (2021: GBP4,396,000) and balances due
from the platforms and SMEs of GBP8,247,000 (2021: GBP14,669,000).
The Company seeks to trade only with reputable counterparties that
the Board (prior to 31 December 2021, the Former Investment Manager)
believes to be creditworthy.
The Company's credit risks principally arise through exposure to loans
provided by the Company, either directly or through platforms. These
loans are subject to the risk of borrower default. Where a loan has
been made by the Company through a platform, the Company will only
receive payments on those loans if the corresponding borrower through
that platform makes payments on that loan. The Board (prior to 31
December 2021, the Former Investment Manager) has sought to reduce
the credit risk by obtaining security on the majority of the loans
and by investing across various platforms, geographic areas and asset
classes, thereby ensuring diversification and seeking to mitigate
concentration risks, a s stated in the "risk concentration" section
earlier in this note.
The cash pending investment or held on deposit under the terms of
an investment instrument may be held without limit with a financial
institution with a credit rating of "single A" (or equivalent) or
higher to protect against counterparty failure.
The Company may implement hedging and derivative strategies designed
to protect against credit risk. Such strategies may include (but are
not limited to) credit default swaps and will only be entered into
when they are available in a timely manner and on terms acceptable
to the Company. The Company may also bear risks that could otherwise
be hedged where it is considered appropriate. There can be no certainty
as to the efficacy of any hedging transactions .
Please see note 3b and note 4 for further information on credit risk
and note 14 for information on the loans at amortised cost.
Liquidity risk
Liquidity risk is defined as the risk that the Company will encounter
difficulties in realising assets or otherwise raising funds to meet
financial commitments. The principal liquidity risk is contained in
unmatched liabilities. The liquidity risk at 30 June 2022 was low
since the ratio of cash and cash equivalents to unmatched liabilities
was 17:1 (2021: 30:1).
The Board (prior to 31 December 2021, the Former Investment Manager)
managed the Company's liquidity risk by investing primarily in a diverse
portfolio of loans, in line with the Prospectus and as stated in the
"risk concentration" section earlier in this note. However, as the
Company is i n a Managed Wind-Down, the value of the Portfolio will
be reduced as investments are realised and concentrated in fewer holdings,
and the mix of asset exposure and liquidity will be affected accordingly.
The maturity profile of the portfolio is as follows:
30 June 2022 30 June 2021
Percentage Percentage
0 to 6 months 55.1 54.7
6 months to 18 months 31.0 7.6
18 months to 3 years 13.9 27.9
Greater than 3 years - 9.8
------------ ------------
100.0 100.0
------------ ------------
Capital management
During the year, the Board's policy was to maintain a strong capital
base so as to maintain investor, creditor and market confidence and
to sustain future operation of the Company. The Company's capital
comprises issued share capital, retained earnings, a capital redemption
reserve (see note 3(i)) and a distributable reserve created from the
cancellation of the Company's share premium account. To maintain or
adjust the capital structure, the Company could issue new Ordinary
Shares, B Shares and/or C Shares, buy back shares for cancellation,
buy back shares to be held in treasury or redeem B Shares. The Company
returned capital to Shareholders through the use of a B Share Scheme,
which was approved by Shareholders on 23 March 2021 (see note 5).
During the year ended 30 June 2022, the Company did not issue any
new Ordinary or C shares, nor did it buy back any Ordinary Shares
for cancellation or to be held in treasury (2021: none). 49,999 Management
Shares were bought back for GBP49,999 and cancelled during the year
ended 30 June 2021 (see note 21).
During the year ended 30 June 2022, 7,636,000 B Shares were issued
and bought back for GBP7,636,000 (see note 5) (2021: 10,269,000 B
Shares issued and bought back for GBP10,269,000) .
The Company is subject to externally imposed capital requirements
in relation to its statutory requirement relating to dividend distributions
to Shareholders. The Company meets the requirement by ensuring it
distributes at least 85% of its distributable income by way of dividend.
24. Contingent assets and contingent liabilities
There were no contingent assets or contingent liabilities in existence
at the year end (2021: none).
25. Events after the reporting period
There were no other significant events after the reporting period.
26. Parent and Ultimate Parent
The Directors do not believe that the Company has an individual Parent
or Ultimate Parent, or an ultimate controlling party.
--- ENDS ---
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END
FR UWAWRUKUKRRR
(END) Dow Jones Newswires
September 08, 2022 05:00 ET (09:00 GMT)
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