RM INFRASTRUCTURE INCOME PLC
(the ''Company'' or "RMII")
ANNUAL REPORT AND ACCOUNTS
For the year ended 31 December 2023
LEI: 213800RBRIYICC2QC958
About
us
At a General Meeting held on 20 December 2023,
RM Infrastructure Income plc ("RMII" or the "Company") adopted a
revised Investment Objective in order to facilitate a managed
wind-down of the Company.
The Company aims to conduct an orderly
realisation of the assets of the Company, to be effected in a
manner that seeks to achieve a balance between returning cash to
Shareholders promptly and maximising value.
Prior to this, the Company's investment
objective was to generate attractive and regular dividends through
investment in secured debt instruments of UK Small and Medium sized
Enterprises ("SMEs") and mid-market corporates including any loan,
promissory notes, lease, bond, or preference share (such debt
instruments, as further described in the annual report, being
"Loans") sourced or originated by RM Capital Markets Limited (the
"Investment Manager") with a degree of inflation protection through
index-linked returns where appropriate.
PORTFOLIO AT
A GLANCE
Operational
highlights
·
Diversified portfolio with gross assets of £104.5m invested
across 31 loans and one wholly owned asset, across 8 sectors and 14
sub-sectors.
· A
low interest rate sensitivity portfolio, with an average duration
of circa 1.69 years and a weighted average yield of
10.91%.
·
NAV Total Return over the last twelve months of 3.16% and
inception to date of 41.56%.
·
As at 31 December 2023, all outstanding debt has been fully
repaid with the company now being completely ungeared.
Financial
highlights
Financial information
|
Year
ended
31 December 2023
|
Year ended
31 December 2022
|
Gross asset value
(£'000)1
|
£104,516
|
£126,076
|
Net Asset Value ("NAV") (£'000)
|
£104,516
|
£108,805
|
NAV per Ordinary Share (pence)
|
88.88p
|
92.49p
|
Ordinary Share price (pence)
|
74.25p
|
85.00p
|
Ordinary Share price discount to NAV1
|
(16.46%)
|
(8.1%)
|
Ongoing charges1
|
1.84%
|
1.86%
|
Gearing (net)1
|
nil
|
13.1%
|
Performance summary
|
% change2,4
|
%
change3,4
|
Total return - Ordinary Share NAV and
dividends1
|
+3.16%
|
+5.0%
|
Total return - Ordinary Share price and dividends1
|
-4.63%
|
+3.7%
|
1. These
are Alternative
Performance Measures
("APMs").
2. Total
returns for
the year
to 31
December 2023,
including dividend
reinvestment.
3. Total
returns for
the year
to 31
December 2022,
including dividend
reinvestment.
4.
Source: Bloomberg
As
at 19 April 2024, the latest date prior to the publication of this
document, the Ordinary Share price was 77p per share and the latest
published NAV was 89.18p per share as at 31 March
2024.
Alternative Performance
Measures ("APMs")
The financial information and performance summary data
highlighted in the footnote to the above table is considered to
represent APMs of the Company. Definitions of these APMs together
with how these measures have been calculated can be found
below.
Portfolio (as at 31
December 2023)
Largest 10
loans by drawn amounts across the entire
portfolio
Business activity
|
Investment type
(Private/Public/Bond)
|
Valuation+
£'000
|
Percentage
of
gross asset (%)
|
Healthcare
|
Private Loans
|
12,994
|
12.40
|
Manufacturing
|
Private Loans
|
9,980
|
9.50
|
Healthcare
|
Private Loans
|
8,799
|
8.40
|
Hotel & Leisure
|
Private Loans
|
8,115
|
7.80
|
Hotel & Leisure
|
Private Loans
|
5,287
|
5.10
|
Asset Backed Lending
|
Private Loans
|
4,707
|
4.50
|
Accommodation
|
Private Loans
|
4,434
|
4.20
|
Hotel & Leisure
|
Private Loans
|
4,178
|
4.00
|
Hotel & Leisure
|
Private Loans
|
3,691
|
3.50
|
Healthcare
|
Private Loans
|
3,654
|
3.50
|
Ten largest holdings
|
|
65,839
|
62.90
|
Other private loan investments
|
|
25,127
|
24.10
|
Wholly owned asset
|
|
2,966
|
2.80
|
Total holdings
|
|
93,932
|
89.80
|
Other net current
assets
|
|
10,584
|
10.20
|
Gross assets*
|
|
104,516
|
100.00
|
* The Company's gross assets
comprise the net asset values of the Company's Ordinary Shares and
the Bank loan, which had been repaid at the year end. The
calculation can be found below.
+ Valuation of private loans
conducted by external Valuation Agent.
Number of
loans: 31
Average yield:
10.91%
Full
portfolio (as at 31 December 2023)
Loan
ref#
|
Borrower
name
|
Deal type
|
Sector
|
Business
description
|
Nominal (£)
|
Market
value (£)
|
Valuer
|
Payment
|
88
|
Private Loan - SPV
|
Bilateral Loan
|
Healthcare
|
Care home
|
12,871,346
|
12,994,338
|
V Agent
|
Cash
|
39
|
Beinbauer
|
Syndicated Loan
|
Manufacturing
|
Auto Parts Manufacturer
|
10,022,097
|
9,980,275
|
V Agent
|
PIK/Cash
|
76
|
Gym Franchise
|
Bilateral Loan
|
Healthcare
|
Health and Well-being
|
8,553,696
|
8,798,765
|
V Agent
|
Cash
|
66
|
Private Loan - SPV
|
Bilateral Loan
|
Hotel & Leisure
|
Hotel
|
8,504,440
|
8,115,336
|
V Agent
|
Cash
|
67
|
Private Loan - SPV
|
Bilateral Loan
|
Hotel & Leisure
|
Hotel
|
5,540,560
|
5,287,063
|
V Agent
|
Cash
|
15
|
Voyage Care
|
Bond
|
Healthcare
|
Specialist Care
|
5,000,000
|
3,654,167
|
External
|
Cash
|
80
|
Private Loan - SPV
|
Bilateral Loan
|
Hotel & Leisure
|
Hotel
|
5,000,000
|
3,690,514
|
V Agent
|
Cash
|
60
|
Private Loan - SPV
|
Bilateral Loan
|
Asset Backed Lending
|
Asset Backed Lending
|
4,693,916
|
4,707,150
|
V Agent
|
Cash
|
79
|
Private Loan - SPV
|
Bilateral Loan
|
Construction
|
Construction
|
4,500,000
|
3,321,462
|
V Agent
|
Cash
|
12
|
Private Loan - SPV
|
Bilateral Loan
|
Accommodation
|
Student accommodation
|
4,430,000
|
4,434,438
|
V Agent
|
Cash
|
73
|
Private Loan - SPV
|
Bilateral Loan
|
Hotel & Leisure
|
Hotel
|
4,000,000
|
4,178,126
|
V Agent
|
Cash
|
68
|
Equity
|
Equity
|
Accommodation
|
Student accommodation
|
3,600,000
|
2,966,261
|
V Agent
|
N/A
|
62
|
Trent Capital
|
Bilateral Loan
|
Energy Efficiency
|
Energy Efficiency
|
3,259,437
|
3,026,936
|
V Agent
|
PIK
|
58
|
Private Loan - SPV
|
Bilateral Loan
|
Hotel & Leisure
|
Hotel
|
3,107,657
|
2,697,306
|
V Agent
|
PIK
|
99
|
Private Loan - SPV
|
Bilateral Loan
|
Hotel & Leisure
|
Hotel
|
2,881,472
|
2,907,875
|
V Agent
|
Cash
|
92
|
Private Loan - SPV
|
Bilateral Loan
|
Hotel & Leisure
|
Hotel
|
2,458,629
|
1,814,721
|
V Agent
|
Cash
|
95a
|
Private Loan - SPV
|
Bilateral Loan
|
Childcare &
Education
|
Childcare
|
2,349,061
|
2,132,123
|
V Agent
|
Cash
|
71
|
Euroports
|
Syndicated Loan
|
Transport Assets
|
Ports business
|
1,733,853
|
1,681,838
|
External
|
Cash
|
96
|
Private Loan - SPV
|
Bilateral Loan
|
Energy Efficiency
|
Energy Efficiency
|
1,539,700
|
1,601,159
|
V Agent
|
Cash
|
97a
|
Private Loan - SPV
|
Bilateral Loan
|
Healthcare
|
Care home
|
1,258,536
|
1,286,099
|
V Agent
|
Cash
|
74
|
Private Loan - SPV
|
Bilateral Loan
|
Accommodation
|
Student accommodation
|
930,000
|
0
|
V Agent
|
Cash
|
87
|
Private Loan - SPV
|
Bilateral Loan
|
Commercial Property
|
Restaurant
|
782,623
|
796,761
|
V Agent
|
Cash
|
76.1
|
Gym Franchise
|
Bilateral Loan
|
Healthcare
|
Health and Well-being
|
747,017
|
765,684
|
V Agent
|
PIK
|
98
|
Private Loan - SPV
|
Bilateral Loan
|
Childcare &
Education
|
Childcare
|
742,500
|
791,403
|
V Agent
|
Cash
|
63
|
Trent Capital (Fusion)
RF
|
Bilateral Loan
|
Energy Efficiency
|
Energy Efficiency
|
612,844
|
0
|
V Agent
|
PIK
|
97b
|
Private Loan - SPV
|
Bilateral Loan
|
Healthcare
|
Care home
|
566,036
|
568,330
|
V Agent
|
Cash
|
81
|
Private Loan - SPV
|
Bilateral Loan
|
Finance
|
Wealth Management
|
500,000
|
501,839
|
V Agent
|
Cash
|
95b
|
Private Loan - SPV
|
Bilateral Loan
|
Childcare &
Education
|
Childcare
|
468,212
|
444,630
|
V Agent
|
Cash
|
91
|
Private Loan - SPV
|
Bilateral Loan
|
Childcare &
Education
|
School
|
450,000
|
448,467
|
V Agent
|
Cash
|
94a
|
Gym Franchise
|
Bilateral Loan
|
Healthcare
|
Health and Well-being
|
228,170
|
239,265
|
V Agent
|
Cash
|
52
|
Private Loan - SPV
|
Bilateral Loan
|
Clean Energy
|
Renewable heat
incentive
|
13,496
|
13,665
|
V Agent
|
Cash
|
|
|
|
|
Total
|
101,345,298
|
93,931,896
|
|
|
MARKET
Market environment
For interest rate products, the
market was very weak for the first half of the year with UK
government bond yields rising from January 2023 and peaking during
late June 2023, with 5-year UK yields touching circa 4.9%. The
remaining three months of the year saw a sustained rally with
5-year UK yields closing at circa 3.5%. Credit spreads were strong
during the reporting period with the Markit iTraxx Crossover Index
opening at circa 400 and closing at circa 310 - although the
journey was not linear as spreads widened to circa 500 in March
2023, before tightening over the summer to then widen into the
autumn before a strong year end saw spreads tighten from 460 in
October to close the year at 310.
Overall, whilst the market
environment for credit was relatively benign, the high level of the
Sterling Overnight Average "SONIA" is providing tighter financial
conditions. Borrowers who are seeking a refinance are seeing SONIA
levels above 5% currently, which will affect their ability to
refinance. In the US markets in particular, we are starting to see
this affecting Commercial Real Estate "CRE" and we expect this to
continue whilst front end interest rates remain
elevated.
Markit iTraxx Europe Crossover
index
The Markit iTraxx Europe Crossover
index comprises 75 equally weighted credit default swaps on the
most liquid sub-investment grade European corporate entities. This
is the most liquid reference point for high yield credit in Europe.
Spreads opened the year at 460bps and softened throughout the year,
tightening down to 310bps end of December 2023.
COMPANY OBJECTIVES
Although the Company has
demonstrated strong NAV total return performance over the longer
term the discount to NAV per Share at which the Shares trade has
been both wide and persistent despite measures taken by the Board
to seek to address this through the use of buybacks and the
provision of a periodic realisation opportunity. This, coupled with
the small scale of the Company and the low levels of liquidity in
the Company's shares has restricted the Company's ability to
grow.
As set out in the Company's
announcement on 23 May 2023, in April 2023 the Board received a
non-binding indicative proposal which involved a combination of all
the Company's assets with another investment company managed by
Gravis Capital Partners (as disclosed on 11 August 2023). The
combination was proposed to be structured under section 110 of the
Insolvency Act 1986 with no option, partial or otherwise, for you
as a shareholder to elect to receive cash.
The proposal was considered
alongside a wide array of potential options under a broader review
of the Company's future strategy: a potential continuation of the
Company's existing investment policy and strategy, a full or
partial exit opportunity, a combination of the Company's assets
with another suitable investment company or fund and a managed
wind-down. The Board consulted with Shareholders on these options
and concluded that a partial exit opportunity would only exacerbate
the challenges the Company faces, as it would further reduce the
size of the Company.
Following the receipt of the first
proposal, the Board received two additional business combination
proposals, as described in the Company's announcement on 10 July
2023.
Having considered the various
proposals in detail, the Board concluded that no better option
existed which was likely to receive the required Shareholder
consent, and on 6 September 2023, the Board
announced its decision to put
forward a proposal for a managed wind-down of the Company.
Consequently, on 20 December 2023, the Company revised its
objective to implement a managed wind-down of the company. Its
revised objective is as follows:
Revised objective
The Company aims to conduct an
orderly realisation of the assets of the Company, to be effected in
a manner that seeks to achieve a balance between returning cash to
Shareholders promptly and maximising value.
The managed wind-down process is
monitored closely by the Board further details can be found in the
Directors' report in the annual report. The Investment Manager
keeps the Board updated on latest developments as the managed
wind-down process progresses which is also discussed at each of the
Company's quarterly Board meetings.
CHAIR'S STATEMENT
Introduction
On behalf of the board of
Directors ("the Board"), I am pleased to present RM Infrastructure
Income plc's ("RMII" or "the Company") Annual Report & Accounts
for the year ended 31 December 2023.
This year marks the seventh year
since the Company's Initial Public Offering ("IPO") on the London
Stock Exchange in December 2016 and was significant as the Board of
Directors proposed the implementation of a managed wind-down of the
Company which was unanimously approved by Shareholders at a General
Meeting convened on 20 December 2023.
Our focus now moves to the
realisation of the Company's assets and return of capital to
Shareholders.
Income generation and NAV performance
In the seven years since listing,
the Company has returned to Shareholders 43.73 pence per Ordinary
Share in dividends.
On the 29 February 2024 the
Company declared a fourth interim dividend for the year of 1.625
pence per Ordinary Share which was paid on the 2 April 2024, thus
total dividends of 6.5 pence per Ordinary Share were declared or
paid for the year ended 31 December 2023.
At 31 December 2023 the audited
NAV per share was 88.88 pence per Ordinary Share (31 December 2022:
92.50 pence). The NAV percentage per Ordinary Share Total Return
for the year was 3.16% (2022: 4.98%) and annualised over 2022 and
2023 gives a 4.15% per annum NAV Total Return. Since inception the
NAV percentage Total Return on an annualised basis has been
5.15%.
Returns to Shareholders
In common with most of the
investment trust sector, discounts to net asset values increased
sharply over the year. The closing mid-market share price on 31
December 2023 was 74.25 pence per Ordinary Share compared with 85
pence per Ordinary Share and as of 31 December 2022. The 10.75
pence per Ordinary Share decrease, combined with dividends, means
the total percentage share price return for the year was -4.63%
(2022: -3.75% and since IPO to date 18.97%).
Portfolio overview
The loan portfolio reduced in size
as borrowers repaid and no new loans were made during the latter
half of the year, instead capital was used to repay borrowing
facilities so that at year end these were undrawn. The portfolio
size closed at £94m (2022: £126m) of invested capital across 31
loans (38 loans 2022).
The year was much quieter than
previous years in terms of investment activity with one new loan
made during the year to a children's nursery and one refinance of
an existing transaction. There were several smaller drawdowns to
existing facilities.
The Investment Manager is now
targeting a reduction of the portfolio and an expedient return of
capital to Shareholders. No new loans will be made save for the
funding of committed facilities and any follow-on funding required
to protect value for RMII Shareholders.
Committed to responsible investing
The Board and the Investment
Manager have long been committed to high ESG standards and to
responsible investing. The refreshed investment focus towards
social and environmental infrastructure sectors enhances this
commitment through investment in assets at the forefront of
providing essential services to society. RM Funds' Responsible
Investing Investment Policy ensures that these considerations are
integrated into each individual investment process and the
alignment of the portfolio to achieving contributions towards
outcomes linked to UN Sustainable Development Goals
3,4,7,11,12&13.
Outlook
The Investment Manager is
targeting a significant return of capital to shareholders during
2024 and 2025 and is aiming to return a majority of shareholder
capital by year end 2025.
The Investment Manager believes
the key risks to this repayment schedule relate to several factors
linked to either recovery or the ability to refinance for the
larger borrowers:
1. The speed
and amounts of recovery to the loans secured on the Clyde Street
asset which went into administration in December 2023.
2. The
ability of the borrower to refinance loans 66 & 67 secured over
a portfolio of hotels. To maximise recovery these two loans will
likely require to be extended.
3. The
ability of the borrower of loan 88, secured over a modern, purpose
built operating aged care asset, to secure a refinancing during
2024.
4. The
ability of the gym franchise to be able to achieve a refinance or
sale during 2025.
I look forward to continued
engagement with Shareholders. Please do not hesitate to contact me
through our broker Singer Capital Markets if any additional
information is required.
Norman Crighton
Chair
22 April 2024
INVESTMENT MANAGER'S REPORT
Strong and
sustainable NAV & income performance
Over the course of the year, the portfolio generated
a NAV Total Return of 3.16% with total dividend distributions
attributable to Shareholders for the year totalling 6.5 pence per
Ordinary Share. Overall, the NAV per Ordinary Share decreased
by 3.61 pence per Ordinary Share, from 92.50 pence per Ordinary
Share at 31 December 2022 to 88.88 pence per Ordinary Share at 31
December 2023.
For the year ended
31 December 2023
Net interest income
|
+6.30p
|
Change in portfolio
valuations
|
-1.94p
|
Payment of 2023
Dividends
|
-6.50p
|
Forecasted Liquidation
Expenses
|
-1.47p
|
Net NAV Movement
|
-3.61p
|
Following the year end, an interim dividend in
respect of the period from 1 October 2023 to 31 December 2023 was
declared on 29 February 2024 and paid to Shareholders on 2 April
2024. These dividends totalling 6.5 pence per Ordinary Share for
the year ending 31 December 2023 bring the total distributions
since the Company's launch in December 2016 to 42.10 pence per
Ordinary Share, exceeding the target set at IPO.
Share price
performance
Negative share price performance combined with the
widening of the share price discount to NAV from -8.10% at 31
December 2022 to -16.46% at 31 December 2023 meant that there was a
negative share price total return of -4.63%. Since IPO the total
percentage share return achieved is 18.97% which, if annualised,
since inception brings it to 2.54% per annum.
Market
environment
For interest rate products, the market was very weak
for the first half of the year with UK government bond yields
rising from January 2023 and peaking during late June 2023, with
5-year UK yields touching circa 4.9%. The remaining six months of
the year saw a sustained rally with 5-year UK yields closing at
circa 3.5%. Credit spreads were strong during the reporting period
with the Markit ITraxx Crossover Index opening at circa 400 and
closing at circa 310, although the journey was not linear as
spreads widened to circa 500 in March 2023, before tightening over
the summer to then widen into the autumn before a strong year end
saw spreads tighten from 460 in October to close the year at
310.
Overall, whilst the market environment for credit
was relatively benign, the high level of the Sterling Overnight
Average ("SONIA") is providing tighter financial conditions.
Borrowers who are seeking a refinance are seeing SONIA levels above
5% currently, which will affect their ability to refinance. In the
US markets in particular, we are starting to see this affecting
Commercial Real Estate ("CRE") and we expect this to continue
whilst front end interest rates remain elevated.
Financial
performance
All debt facilities held with OakNorth Bank were
repaid during the year.
Total income generation for the year was £10.9m
(2022: £10.8m) and this was split between cash interest £10.6m and
£0.3m of Payment In Kind ("PIK"), (2022: £8.0m and £2.8m).
Total operating costs were £5.0m (2022: £3.3m).
Revolving Credit Facility ("RCF") and other finance
charges were £1.0m (2022: £1.1m).
For the year ended
31 December 2023
Income
|
£10,875,596
|
Total expenses
|
(£1,521,054)
|
Finance costs
|
(£1,003,658)
|
Total
|
£8,350,884
|
Dividends
|
(£7,643,116)
|
Profit after interest
costs &
before tax
|
£707,768
|
There were four dividends paid or declared in
respect of the year ending 31 December 2023 totaling 6.5 pence per
Ordinary Share.
Period
|
Payment
date
|
Dividend proceeds
|
Q1 2023
|
30 June 2023
|
£1,910,779
|
Q2 2023
|
29 September 2023
|
£1,910,779
|
Q3 2023
|
29 December 2023
|
£1,910,779
|
Q4 2023
|
2 April 2024
|
£1,910,779
|
Portfolio
performance
As of 31 December 2023, the number of loans in the
portfolio reduced over the reporting period as there were several
repayments over the year. The number of loans fell to 31 from 38
and the invested capital reduced materially to £94m (2022:
£126m).
The overall yield on the portfolio increased over
the reporting period by 176bps to 10.91%, from 9.15%.
Only one new investment loan was funded (Loan
reference 98), secured on a children's nursery. There was a further
transaction (Loan reference 99) which refinanced an existing RMII
mezzanine loan secured against a hotel (Loan reference 69). This
transaction was structured to reduce the overall leverage within
the transaction as the borrower injected cash equity and RMII moved
from the junior position to the senior position by providing
additional funding that refinanced the senior lender.
There were 18 drawdowns against existing facilities
which totaled £1.6m. As of 31 December 2023, the remaining
commitments to fund totaled approximately £6m.
There were 15 borrowers that repaid over the period
which totaled £33.1m, the significant repayments were:
> Asset
Finance, Ref #60: £3.5m
> Asset
Finance, Ref #61 £4.5m
>
Healthcare, Ref #82: £5m
>
Accommodation, Ref #84: £4m
>
Healthcare, Ref #83: £2.8m
> Hotel
& Leisure, Ref 86: £5m
The portfolio is now going into a realisation phase
with no new loans being originated and cash being returned to
Shareholders as loans repay. Further loans could be made to
existing borrowers to preserve the value of an existing loan and
loan maturities can be extended if that is deemed in the best
interests of the Company. The initial repayments were used to pay
down the leverage facilities of the Company and to retain some
liquidity to fund committed but undrawn facilities.
The Company has been pursuing a legal claim against
the former main contractor of investment loan reference 68, a
wholly owned 79 beds student accommodation located in the city
centre of Coventry, UK, since September 2022 via an adjudication
process. This claim related to the provision of cladding and other
areas of the construction the main contractor took responsibility
for. Post Period end, on the 2nd of January 2024, RMII was
successfully awarded circa £1.2m by the adjudicator.
The enhanced monitoring watchlist had four assets as
of 30 June 2023. Three of these groups of loans were off the
enhanced monitoring at year end as described below:
> Loan
reference 84 to a purpose-built student accommodation developer was
successfully refinanced.
> Loan
reference 89 to 5 operational purpose-built student accommodation
assets claimed against its CBILS guarantee, successfully recovering
the mark.
> Loan
references 82, 83 and 88 to purpose built aged care assets were
taken off the watchlist as accrued and outstanding balances were
paid. Loan references 82 & 83 were subsequently repaid.
> Loan
references 58,79,80 & 92 secured on the hotel development and
contractor in Glasgow. In December the senior lender appointed an
administrator, so these loans are now in workout and remain on the
watchlist. The investment manager believes these loans are
appropriately marked.
As at 31 December 2023 the enhanced monitoring list
was:
> Loan
references 58,79,80 & 92 secured on the hotel development and
contractor in Glasgow as described above.
> Loan
references 66 and 67 secured on two portfolios of 5 operational
hotels. Whilst these loans have paid their interest in cash on time
since inception in 2019, it is doubtful that the borrower will be
able to achieve a successful refinancing ahead of their maturity in
April 2024. RM are liaising with the senior lender and borrower
about an appropriate solution that protects value for RMII and it
is likely this will be some form of amendment and extension of the
existing loan facility.
Construction exposure within the portfolio has been
closely monitored. During the period three loans (Loan references
82, 83 & 88) which were facilities for the provision of
construction funding for new purpose-built aged care homes saw the
assets exit the construction phase and enter their operational
phase. Loans 82 & 83 were refinanced, and loan 88 saw its
maturity extended by 12 months, to April 2025.
The portfolio has exposure to two other construction
loans (Loan references 97a & 97b) which is to a separate
borrower and relate to the final construction allocations within
the portfolio. These Loans have a combined drawn balance of circa
£2.2m at the period end with a combined committed balance of circa
£6.3m. This is expected to be fully utilised during 2024.
Outlook for
2024
The Investment Manager is focused on realising the
portfolio and returning capital to investors as quickly as
possible. It is currently expected that material progress will be
made during 2024.
Key risks to the realisation of the portfolio are
the ability of existing borrowers to be able to refinance RMII
loans. Our expectation is that Bank of England rates and the SONIA
will come down during 2024 which will be helpful for borrowers in
facilitating their refinancing processes. Set against this, we see
the tighter financial conditions of the last year affecting credit
markets and in particular CRE loans during 2024 in a negative way
which could restrict the availability and willingness of other
lenders to make property backed loans.
RM Capital Markets
Limited
22 April 2024
INVESTMENT POLICY, RESULTS AND OTHER
INFORMATION
Revised Investment
Objective and Investment Policy
At a General Meeting held on 20 December 2023 the
following new investment objective and investment policy were
adopted:
Revised Investment
Objective
The Company aims to conduct an orderly realisation
of the assets of the Company, to be effected in a manner that seeks
to achieve a balance between returning cash to Shareholders
promptly and maximising value.
Revised Investment
Policy
The assets of the Company will be realised in an
orderly manner, returning cash to Shareholders at such times and in
such manner as the Board may, in its absolute discretion,
determine. The Board will endeavour to realise all of the Company's
investments in a manner that achieves a balance between maximising
the net value received from those investments and making timely
returns to Shareholders.
The Company may not make any new investments save
for:
a)
further secured debt instruments of UK SMEs and mid-market
corporates and/or individuals including any loan, promissory note,
lease, bond, or preference share ("Loans"), such debt instruments
being to an existing borrower which is expected to preserve the
value of an existing Loan; or
b)
extending the maturity or repayment date or any interest payment
date if that is in the best interests of the Company.
The Company will continue to comply with all the
investment restrictions imposed by the Listing Rules in order to
maintain the Company's admission to the Official List under Chapter
15 of the Listing Rules.
In the event of a breach of the investment
guidelines and restrictions, the Investment Manager shall inform
the Board upon becoming aware of the same and if the Board
considers the breach to be material, notification will be made to a
Regulatory Information Service and the Investment Manager will look
to resolve the breach with the agreement of the Board.
The Company intends to conduct its affairs in order
to qualify as an investment trust for the purposes of section 1158
of the CTA 2010, and its investment activities will therefore be
subject to the restrictions set out above.
Borrowing and
gearing
The Company may utilise borrowings for short term
liquidity purposes. The Company may also, from time to time, use
borrowing for investment purposes on a short term basis where it
expects to repay those borrowings from realisation of investments.
Gearing represented by borrowings will not exceed 20 per cent. of
Net Asset Value calculated at the time of drawdown.
Hedging and
derivatives
The Company may invest in derivatives for efficient
portfolio management purposes. In particular the Company can engage
in interest rate hedging.
In accordance with the requirements of the FCA, any
material change to the Company's investment policy will require the
approval of Shareholders by way of an ordinary resolution at a
general meeting.
Dividend policy
Since the commencement of the
managed wind-down process, the Company expects not to be able to
keep paying dividends at the rate of 6.5 pence per share per annum
as was previously the case. The Company will instead pay dividends
only as required to maintain investment trust status. As the
Company's portfolio reduces in size its fixed costs will become a
greater proportion of its income.
The Company intends to maintain
its investment trust status and listing during this managed
realisation process prior to the Company's eventual liquidation.
Maintaining the listing would allow Shareholders to continue to
trade Shares during the managed wind- down of the
Company.
Results and dividend
The Company's revenue return after
tax for the year ended 31 December 2023 amounted to £7,407,000
(2022: £7,462,000). The Company made a capital loss after tax of
£4,008,000 (2022: capital loss after tax of £2,072,000). Therefore,
the total return after tax for the Company was £3,399,000 (2022:
£5,390,000).
The first interim dividend of
1.625p per Ordinary Share was declared on 23 May 2023 in respect of
the period from 1 January to 31 March 2023. The second interim
dividend of 1.625p per Ordinary Share for the quarter ended 30 June
2023 was declared on 14 August 2023 and the third interim dividend
of 1.625p per Ordinary Share for the quarter ended 30 September
2023 was declared on 31 October 2023. On 29 February 2024, the
Board declared a fourth interim dividend of 1.625 pence per
Ordinary Share for the quarter to 31 December 2023.
Key performance
indicators ("KPIs")
During the year under review, the Board measured the
Company's success in attaining its investment objective that was in
place for the year by reference to the following KPIs:
(i)
Dividends
A fourth interim dividend for the quarter ending 31
December 2023 of 1.625p per share was paid to Shareholders on the 2
April 2024 bringing total payments for the year to 6.5p per share,
thus meeting the annual target.
(ii)
Total return
The Company's total return is monitored by the
Board. The Ordinary Shares generated a NAV total return of 3.16%
(2022: +4.98%) in the year ended 31 December 2023.
(iii)
Discount/premium to NAV
The discount/premium relative to the NAV per share
represented by the share price is closely monitored by the Board.
The Ordinary Share price closed at a 16.46% discount (2022: 8.1%
discount) to the NAV as at 31 December 2023. To address the
discount, 50,000 shares were bought back during the year at 85.5
pence per share.
(iv)
Control of the level of ongoing charges
The Board monitors the Company's operating costs.
Based on the Company's average net assets for the year ended 31
December 2023, the Company's ongoing charges figure calculated in
accordance with the AIC methodology was 1.84% (2022: 1.86%).
Since the Company's investment objective changed on
20 December 2023 the Board measured the Company's success of the
managed wind-down process through its regular engagement with the
Investment Manager and at its quarterly Board meetings.
RISK AND RISK MANAGEMENT
Principal and
emerging risks and uncertainties
The Board is responsible for the management of risks
faced by the Company and delegates this role to the Audit and
Management Engagement Committee (the "Committee"). The Committee
periodically carries out a robust assessment of principal and
emerging risks and uncertainties and monitors the risks on an
ongoing basis. The Committee considers both the impact and the
probability of each risk occurring and ensures appropriate controls
are in place to reduce risk to an acceptable level. The experience
and knowledge of the Board is invaluable to these discussions, as
is advice received from the Board's service providers, specifically
the AIFM who is responsible for the risk and portfolio management
services and outsources the portfolio management to the Investment
Manager. The Committee has a dynamic risk matrix in place to help
identify key risks in the business and oversee the effectiveness of
internal controls and processes.
During the year under review the Committee continued
to monitor geopolitical risks, particularly with the ongoing war in
Ukraine and increased tensions in the Middle East following the
conflict in Gaza. The Committee continues to review the processes
in place to mitigate risk; and to ensure that these are appropriate
and proportionate in the current market environment.
During the year the Company amended its investment
objective/policy in order to conduct an orderly realisation of the
assets of the Company, to be effected in a manner that seeks to
achieve a balance between returning cash to Shareholders promptly
and maximizing value.
The principal and emerging risks, together with a
summary of the processes and internal controls used to manage and
mitigate risks where possible are outlined in the following
paragraphs.
(i)
Market risks
Inability of the
Company's Investment Manager to realise the Company's assets in
accordance with the Company's managed wind-down
The Investment Manager may struggle to meet its
obligation to realise the Company's assets in accordance with the
company's newly adopted investment policy.
Market
sectors
Loans are made to borrowers that operate in
different market sectors each of which will have risks that are
specific to that particular market sector. Idiosyncratic risks
coupled with a downward turning market may increase refinancing
risk with actions leading to a loss in value and recoverability in
junior and mezzanine positions.
Valuation
The Company's approach regarding the valuation of
its investments remains unchanged albeit the methodology to reach
said valuation has become more substantive. Fair value write downs
continue to be driven by market risk and idiosyncratic risk, with
idiosyncratic risk relating to loan specific information which is
reflected within specific loan pricing.
Management of
risks
The Company has appointed an experienced Investment
Manager who directly sourced loans and advise on the management
there of. The Company has a portfolio of a wide range of loan types
and sectors and therefore benefits from diversification.
Investment restrictions have been revised now that
the Company is in managed wind-down and are relatively flexible
giving the Investment Manager ability to take advantage of exit
opportunities as they arise.
The Investment Manager, AIFM, Brokers and the Board
review market conditions on an ongoing basis.
(ii)
Risks associated with meeting the
Company's investment objective or target dividend yield
The Company's updated investment objective is to
conduct an orderly realisation of the assets of the Company, to be
effected in a manner that seeks to achieve a balance between
returning cash to Shareholders promptly and maximizing value. The
declaration, payment and amount of any future dividends by the
Company will be subject to the discretion of the Directors and will
depend upon, amongst other things, the Company successfully
pursuing the investment policy and the Company's earnings,
financial position, cash requirements, level and rate of borrowings
and availability of profit, as well as the provisions of relevant
laws or generally accepted accounting principles from time to
time.
Management of
risks
The Investment Manager has a clearly defined
investment policy and process which is regularly and rigorously
reviewed by the independent Board of Directors and performance is
reviewed at quarterly Board meetings. The Investment Manager is
experienced and has employed its expertise in making investments in
a diversified portfolio of loans. The Investment Manager has a
target portfolio yield which covers the level of dividend targeted
by the Company. The Board reviews the position at Board
meetings.
(iii)
Financial risks
The Company's investment activities expose it to a
variety of financial risks which include liquidity, currency,
leverage, interest rate and credit risks.
Further details on financial risks and the
management of those risks can be found in note 19 to the financial
statements.
(iv)
Corporate governance and internal
control risks
The Company has no employees, and the Directors have
all been appointed on a non-executive basis. The Company must
therefore rely upon the performance of third-party service
providers to perform its executive functions. In particular, the
AIFM, the Investment Manager, the Administrator, the Company
Secretary and the Registrar, will perform services that are
integral to the Company's operations and financial performance.
Poor performance of the above service providers
could lead to various consequences including the loss of the
Company's assets, inadequate returns to Shareholders and loss of
investment trust status. Cyber security risks could lead to
breaches of confidentiality, loss of data records and inability to
make investment decisions.
Management of
risks
Each of the above contracts was entered into after
full and proper consideration of the quality and cost of services
offered, including the financial control systems in operation in so
far as they relate to the affairs of the Company. All of the above
services are subject to ongoing oversight of the Board and the
performance of the principal service providers is reviewed on a
regular basis. The Company's key service providers report
periodically to the Board on their procedures to mitigate cyber
security risks.
(v)
Regulatory risks
The Company and its operations are subject to laws
and regulations enacted by national and local governments and
government policy. Compliance with, and monitoring of, applicable
laws and regulations may be difficult, time consuming and costly.
Any change in the laws, regulations and/or government policy
affecting the Company or any changes to current accountancy
regulations and practice in the UK may have a material adverse
effect on the ability of the Company to successfully pursue its
investment policy and meet its investment objective and/or on the
value of the Company and the shares. In such event, the performance
of the Company, the NAV, the Company's earnings and returns to
Shareholders may be materially adversely affected.
Management of
risks
The Company has contracted out relevant services to
appropriately qualified professionals. The Secretary and AIFM
report on compliance matters to the Board on a quarterly basis and
the Board has access to the advice of its Corporate Broker on a
continuing basis. The assessment of regulatory risks forms part of
the Board's risk assessment program.
Emerging
risks
The Board also has robust processes in place to
identify and evaluate emerging risks.
(vi) Business interruption
Failure in services provided by key service
providers, meaning information is not processed correctly or in a
timely manner, resulting in regulatory investigation or financial
loss, failure of trade settlement, or potential loss of investment
trust status.
Failure to identify emerging risks may cause
reactive actions rather than being proactive and the Company could
be forced to change its structure, objective or strategy and, in
worst case, could cause the Company to become unviable or otherwise
fail.
Management of
risks
Each service provider has business continuity
policies and procedures in place to ensure that they are able to
meet the Company's needs and all breaches of any nature are
reported to the Board.
The following is a description of the Company's
service providers who assist in identifying the Company's emerging
risks to the Board.
1. Investment Manager: the Investment
Manager provides a report to the Board at least quarterly on
industry trends, insight to future challenges in the sector,
including the regulatory, political and economic changes likely to
impact the Company. The Chair also has contact with the Investment
Manager on a regular basis to discuss any pertinent issues;
2. Alternative Investment Fund Manager:
the AIFM maintains a register of identified risks including
emerging risks likely to impact the Company, which is updated
quarterly following discussions with the Investment Manager and
other service providers. The risks are documented on a risk
register, and classified in the following categories: Market Risks;
Risks associated with Investment Objective; Financial Risks;
Corporate Governance Risks; Regulatory Risks and Emerging Risks.
Any changes and amendments to the risk register are highlighted to
the Board on a quarterly basis;
3. Broker: provides advice periodically,
specific to the Company on the Company's sector, competitors and
the investment company market whilst working with the Board and
Investment Manager to communicate with Shareholders;
4. Company Secretary: briefs the Board on
forthcoming legislation and regulatory change that might impact the
Company. The Secretary also liaises with the Company's Legal
Adviser, Auditor and the AIC (including other regulatory bodies) to
ensure that industry and regulatory updates are brought to the
Board's attention.
The Board regularly reviews the Company's risk
matrix, focusing on risk mitigation and ensuring that the
appropriate controls are in place. Regular review ensures that the
Company operates in line with the risk matrix, prospectus and
investment strategy. Emerging risks are actively discussed
throughout the year to ensure that risks are identified and managed
so far as practicable. The experience and knowledge of the Board is
invaluable to these discussions, as is advice received from the
Board's service providers.
All key service providers produce annual internal
control reports for review by the Audit and Management Engagement
Committee. These reviews include consideration of their business
continuity plans and the associated cyber security risks. Service
providers report on cyber risk mitigation and management at least
annually, which includes confirmation of business continuity
capability in the event of a cyberattack. Penetration testing is
carried out by the Investment Manager and key service providers at
least annually. Details of the Directors' assessment of the going
concern status of the Company can be found in the annual report.
The Investment Manager complies with all sanctioning regimes and
presently views Russia as uninvestable.
(vii) ESG and
Climate Change
The impact of climate change has come increasingly
into focus and is considered an emerging risk by both the Board and
its Investment Manager. While the Company itself faces limited
direct risk from climate change, the Company's underlying holdings
selected by the Investment Manager are impacted. While efforts to
mitigate climate change continue, the physical impacts are already
emerging in the form of changing weather patterns. Extreme weather
events can result in flooding, drought, fires, storm damage,
potentially impairing the operations of a portfolio company at a
certain location, or impacting locations of companies within their
supply chain. Significant changes in climate, or the Government
measures to combat it, could present a material risk to the
Company. There is also potential reputational damage from
non-compliance with regulations or incorrect disclosures.
Management of
risks
The Company incorporates ESG considerations into its
investment process and more detail can be found in the Annual
Report. The Investment Manager also uses its position to engage
with and influence companies towards taking positive steps to
contribute to ESG and against climate change. The Company's ESG
Policy, which is updated annually is also published on the
Company's website and the AIC website. The Board have considered
the impact of climate change on the financial statements as
documented in the Notes to the financial statements.
The Company released its first annual Impact Report
provided by The Good Economy, an independent advisory firm
specialising in impact measurement and management. The Report,
covering the 12-month period to end March 2022, assesses the
Company's 12-month performance against its stated impact objectives
relating to UN Sustainable Development Goals: Healthcare,
Education, Housing, Affordable and clean energy, Climate action and
Responsible consumption and production.
RM Funds is a signatory to the Principles of
Responsible Investment Initiative ("PRI") and reports annually
according to the PRI reporting framework.
Investment trusts are currently exempt from the Task
Force on Climate-Related Financial Disclosures ("TCFD") disclosure,
however the Board will continue to monitor the situation.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors are responsible for preparing the
annual report and the financial statements in accordance with
applicable United Kingdom law and regulations.
Company law requires the Directors to prepare
financial statements for each financial year. Under that law the
Directors have elected to prepare the Company financial statements
in accordance with UK- adopted international accounting standards.
Under company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the Company for that period.
In preparing these financial statements the
Directors are required to:
> select
suitable accounting policies in accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors and then apply
them consistently;
> make
judgements and accounting estimates that are reasonable and
prudent;
> present
information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable
information;
> provide
additional disclosures when compliance with the specific
requirements of UK-adopted international accounting standards is
insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the financial position
and financial performance;
> in
respect of the financial statements, state whether UK-adopted
international accounting standards, have been followed, subject to
any material departures disclosed and explained in the financial
statements;
> prepare
the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in
business; and
> for the
reasons stated in the Directors'/Strategic Report and note 2, the
financial statements have not been prepared on a going concern
basis.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Company and enable them to
ensure that the financial statements comply with the Companies' Act
2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors
are also responsible for preparing a strategic report, Directors'
report, Directors' remuneration report and corporate governance
statement that comply with that law and those regulations. The
Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's
website.
The Directors each confirm to the best of their
knowledge that:
(a) the
financial statements, prepared in accordance with applicable
accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit of the Company; and
(b) this Annual
Report, including the strategic report, includes a fair review of
the development and performance of the business and position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
The Directors consider that the financial statements
are fair, balanced and understandable and provide the information
necessary for Shareholders to assess the Company's performance,
business model and strategy.
For and on behalf of the Board
Norman
Crighton
Chair
22 April 2024
FINANCIAL STATEMENTS
Company statement of comprehensive income
For the
year ended
31
December 2023
|
Year
ended 31
December 2023
|
Year
ended 31 December 2022
|
|
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
Notes
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
(Losses) on investments
|
3
|
-
|
(2,441)
|
(2,441)
|
-
|
(2,072)
|
(2,072)
|
Income
|
4
|
10,876
|
-
|
10,876
|
10,768
|
-
|
10,768
|
Investment management fee
|
5
|
(944)
|
-
|
(944)
|
(971)
|
-
|
(971)
|
Other expenses
|
6
|
(1,521)
|
(1,567)
|
(3,088)
|
(1,230)
|
-
|
(1,230)
|
Return before
finance costs
and taxation
|
|
8,411
|
(4,008)
|
4,403
|
8,567
|
(2,072)
|
6,495
|
Finance costs
|
7
|
(1,004)
|
-
|
(1,004)
|
(1,102)
|
-
|
(1,102)
|
Return on
ordinary activities before
taxation
|
|
7,407
|
(4,008)
|
3,399
|
7,465
|
(2,072)
|
5,393
|
Taxation
|
8
|
-
|
-
|
-
|
(3)
|
-
|
(3)
|
Return on
ordinary activities
after taxation
|
|
7,407
|
(4,008)
|
3,399
|
7,462
|
(2,072)
|
5,390
|
Return per
ordinary share
(pence)
|
14
|
6.30p
|
(3.41p)
|
2.89p
|
6.33p
|
(1.76p)
|
1.15p
|
The total column of this Statement
represents the profit and loss account of the Company. The
supplementary revenue and capital columns are prepared under
guidance issued by the Association of Investment
Companies.
'Return on ordinary activities
after taxation' is also the Total
comprehensive income for the year.
A Statement of Comprehensive
Income is not required as the Company does not have any other
comprehensive income and the net return on ordinary activities
after taxation is both the profit and total comprehensive income
for the year.
The notes
form an integral part of these financial statements.
Statement of financial position
|
Notes
|
As at
31
December 2023
£'000
|
As
at
31
December 2022
£'000
|
Fixed assets
Investments at fair value through profit or loss
|
3
|
93,932
|
119,970
|
Current assets
Cash and cash equivalents
|
|
7,791
|
2,993
|
Receivables
|
9
|
7,969
|
5,421
|
|
|
15,760
|
8,414
|
Payables: amounts falling due within one year
Payables
|
10
|
(5,176)
|
(2,308)
|
Bank loan - Credit facility
|
11
|
-
|
(17,271)
|
|
|
(5,176)
|
(19,579)
|
Net current liabilities
|
|
10,584
|
(11,165)
|
Total assets less current
liabilities
|
|
104,516
|
108,805
|
Net assets
|
|
104,516
|
108,805
|
Capital and reserves: equity
Share capital
|
12
|
1,175
|
1,176
|
Share premium
|
13
|
70,168
|
70,168
|
Special reserve
|
|
44,597
|
44,640
|
Capital reserve
|
|
(14,229)
|
(10,221)
|
Revenue reserve
|
|
2,805
|
3,042
|
Total shareholders' funds
|
|
104,516
|
108,805
|
NAV per share - Ordinary Shares (pence)
|
15
|
88.88p
|
92.49p
|
The financial statements
of the
Company were
approved and
authorised for
issue by
the Board
of Directors
on 22 April 2024
and signed
on their behalf by:
Norman Crighton
Chair
Registered in England
and Wales
with registered
number 10449530.
The notes form an integral part of these financial statements.
Statement of changes in equity
For the year ended
31
December 2023
|
|
|
|
Share
|
Share
|
Special
|
Capital
|
Revenue
|
|
|
|
capital
|
premium
|
reserve
|
reserve
|
reserve
|
Total
|
|
Notes
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance as at beginning of the year
|
|
1,176
|
70,168
|
44,640
|
(10,221)
|
3,042
|
108,805
|
Return on ordinary
activities
|
|
-
|
-
|
-
|
(4,008)
|
7,407
|
3,399
|
Buy back of shares
|
12
|
(1)
|
-
|
(42)
|
-
|
-
|
(43)
|
Share buy back costs
|
|
-
|
-
|
(1)
|
-
|
-
|
(1)
|
Transfer to capital reserves reserve
|
|
-
|
-
|
-
|
-
|
-
|
-
|
Dividend paid
|
16
|
-
|
-
|
-
|
-
|
(7,644)
|
(7,644)
|
Balance as
at
31
December 2023
|
|
1,175
|
70,168
|
44,597
|
(14,229)
|
2,805
|
104,516
|
For the year ended
31
December 2022
|
|
|
|
|
|
|
|
Share
|
|
|
Share
|
premium
|
Special
|
Capital
|
Revenue
|
|
|
|
capital
|
account
|
reserve
|
reserve
|
reserve
|
Total
|
|
Notes
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance as at beginning of the year
|
|
1,178
|
70,168
|
44,813
|
(8,149)
|
3,240
|
111,250
|
Return on ordinary
activities
|
|
-
|
-
|
-
|
(2,072)
|
7,462
|
5,390
|
Buy back of shares
|
12
|
(2)
|
2
|
(173)
|
-
|
-
|
(173)
|
Shares buy back
costs
|
|
-
|
(2)
|
-
|
-
|
-
|
(2)
|
Dividend paid
|
16
|
-
|
-
|
-
|
-
|
(7,660)
|
(7,660)
|
Balance as
at
31
December 2022
|
|
1,176
|
70,168
|
44,640
|
(10,221)
|
3,042
|
108,805
|
Distributable reserves comprise:
the revenue reserve; capital reserve attributable to realised
profits; and the special reserve.
The capital reserves attributable
to realised
profits for
the year
ended 31
December 2022
and 2023
are in
a net
loss position.
Share capital represents the
nominal value of shares that have been issued. The share premium
includes any premiums received on the issue of share capital. Any transaction costs associated with the
issuing of shares are deducted from share premium.
The notes form an integral part of these financial statements.
Statement of cash flows
For the year ended 31 December 2023
|
|
|
Notes
|
Year
ended 31
December 2023
£'000
|
Year
ended 31
December 2022
£'000
|
Operating activities
|
|
|
|
Return on ordinary activities
before finance costs and taxation*
|
|
4,403
|
6,495
|
Adjustments for movements not generating an operating cash
flow:
|
|
|
|
Adjustment for losses on
investments
|
|
2,247
|
1,802
|
PIK adjustments to the operating
cash flow
|
|
(2,637)
|
(2,466)
|
Finance costs
|
|
1,004
|
1,102
|
Adjustments for balance sheet
movements:
|
|
|
|
Increase in receivables
|
|
(2,548)
|
(2,737)
|
Increase in payables
|
|
2,868
|
458
|
Net cash
flow from operating activities
|
|
4,333
|
3,552
|
Investing activities
|
|
|
|
Private loan repayments/bonds
sales proceeds
|
|
33,494
|
25,784
|
Private loans issued/bonds
purchases
|
|
(7,066)
|
(18,416)
|
Net cash
flow from
investing activities
|
|
26,428
|
7,368
|
Financing activities
|
|
|
|
Finance costs
|
|
(1,004)
|
(1,102)
|
Ordinary Share bought back
|
12
|
(43)
|
(173)
|
Ordinary Share buyback costs
|
|
(1)
|
(2)
|
OakNorth loan facility drawdown
|
|
6,621
|
12,550
|
OakNorth loan facility repaid
|
|
(23,892)
|
(14,850)
|
Equity dividends paid
|
16
|
(7,644)
|
(7,660)
|
Net cash
flow used
in
financing activities
|
|
(25,963)
|
(11,237)
|
Increase/(Decrease) in cash
|
|
4,798
|
(317)
|
Opening balance
at
beginning of
the year
|
|
2,993
|
3,310
|
Balance as
at
year
end
|
|
7,791
|
2,993
|
|
|
|
|
* Cash inflow from interest on investment
holdings was £8,743,000
(2022: £8,396,000).
* Included in return on ordinary activities before finance
costs and taxation was finance costs of £1.00m (2022: £1.10m).
The notes form an integral part of these financial statements.
Changes in financing liabilities
|
Year
ended 31 December 2023
|
Year
ended 31 December 2022
|
Movement in financial liabilities
|
OakNorth facility
|
Intercompany loan
|
OakNorth facility
|
Intercompany loan
|
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance as at beginning of the year
|
17,271
|
-
|
19,571
|
-
|
Facility drawdowns during the year
|
6,621
|
-
|
12,550
|
-
|
Facility interest payable during the year
|
1,004
|
-
|
1,102
|
-
|
Facility and interest repayments
during the
year
|
(24,896)
|
-
|
(15,952)
|
-
|
Balance as
at
31
December 2023
|
-
|
-
|
17,271
|
-
|
NOTES TO THE FINANCIAL STATEMENTS
1. General information
RM Infrastructure Income plc (the "Company") was
incorporated in England and Wales on 27 October 2016 with
registered number 10449530, as a closed-ended investment company.
The Company commenced its operations on 15 December 2016. The
Company intends to carry on business as an investment trust within
the meaning of Chapter 4 of Part 24 of the Corporation Tax Act
2010.
The Company aims to conduct an orderly realisation
of the assets of the Company, to be effected in a manner that seeks
to achieve a balance between returning cash to Shareholders
promptly and maximising value.
The registered office is 6th Floor, 125 London Wall,
London EC2Y 5AS.
2. Accounting policies
The principal accounting policies followed by the
Company are set out below:
(a) Basis of
accounting
The financial statements have been prepared in
accordance with UK-adopted international accounting standards. The
financial statements have been prepared on a realisation basis,
except for investments measured at recoverable value (being fair
value less cost to sell).
In preparing these financial statements the
directors have considered the impact of climate change as a risk as
set out in the annual report and have concluded that there was no
further impact of climate change to be taken into account. In line
with IAS, investments are initially valued at fair value and
climate change risk is taken into consideration in the valuation of
the investments we hold.
The Board has determined by having regard to the
currency of the Company's share capital and the predominant
currency in which the Company operates, that sterling is the
functional and presentational currency. Where presentational
recommendations set out in the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture
Capital Trusts" ("SORP"), issued in the UK by the AIC in July 2022,
do not conflict with the requirements of UK-adopted international
accounting standards ("IFRS"), the directors have prepared the
financial statements on a basis consistent with the recommendations
of the SORP, in the belief that this will aid comparison with
similar investment companies incorporated in the United
Kingdom.
In accordance with the SORP, the Statement of
Comprehensive Income has been analysed between a revenue return
(dealing with items of a revenue nature) and a capital return
(relating to items of a capital nature). Revenue returns include,
but are not limited to, investment related income, operating
expenses, income related finance costs and taxation (insofar as
they are not allocated to capital). Net revenue returns are
allocated via the revenue return to the Revenue reserve.
Capital returns include, but are not limited to,
profits and losses on the disposal and the valuation of non-current
investments, derivative instruments, cash (including effect on
foreign currency translation), operating costs and finance costs
(insofar as they are not allocated to revenue). Net capital returns
are allocated via the capital return to Capital reserves.
Dividends on Ordinary Shares may be paid out of
Revenue reserve, Capital reserve and Special reserve.
(b) Adoption
of new IFRS standards
New standards, interpretations and amendments
adopted from 1 January 2023
A number of new standards, amendments to standards
and interpretations are effective for the annual periods beginning
after 1 January 2023. None of these are expected to have a
significant effect on the measurement of the amounts recognized in
the financial statements of the Company.
New standards and amendments issued but not yet
effective
The relevant new and amended standards and
interpretations that are issued, but not yet effective, up to the
date of issuance of the Company's financial statements are
disclosed below. These standards are not expected to have a
material impact on the entity in future reporting periods and on
foreseeable future transactions.
Amendments to IAS 1
Presentation of Financial Statements - Classification of
Liabilities as Current or Non-current
The amendments to IAS 1 clarify that the
classification of liabilities as current or non-current is based on
rights that are in existence at the end of the reporting period,
specify that classification is unaffected by expectations about
whether an entity will exercise its right to defer settlement of a
liability, explain that rights are in existence if covenants are
complied with at the end of the reporting period, and introduce a
definition of settlement to make clear that settlement refers to
the transfer to the counterparty of cash, equity instruments, other
assets or services. The amendments are applied retrospectively for
annual periods beginning on or after 1 January 2024, with early
application permitted.
Amendments to IAS 1
Presentation of Financial Statements - Non-current Liabilities with
Covenants
The amendments specify that only covenants that an
entity is required to comply with on or before the end of the
reporting period affect the entity's right to defer settlement of a
liability for at least twelve months after the reporting date (and
therefore must be considered in assessing the classification of the
liability as current or non-current). Such covenants affect whether
the right exists at the end of the reporting period, even if
compliance with the covenant is assessed only after the reporting
date (e.g. a covenant based on the entity's financial position at
the reporting date that is assessed for compliance only after the
reporting date). The amendments are applied retrospectively for
annual reporting periods beginning on or after 1 January 2024.
Earlier application of the amendments is permitted.
Amendments to IAS 7
Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures - Supplier Finance Arrangements
The amendments add a disclosure objective to IAS 7
stating that an entity is required to disclose information about
its supplier finance arrangements that enables users of financial
statements to assess the effects of those arrangements on the
entity's liabilities and cash flows. In addition, IFRS 7 was
amended to add supplier finance arrangements as an example within
the requirements to disclose information about an entity's exposure
to concentration of liquidity risk. The amendments, which contain
specific transition reliefs for the first annual reporting period
in which an entity applies the amendments, are applicable for
annual reporting periods beginning on or after 1 January 2024.
Earlier application is permitted.
(c) Going
concern
The Directors, as at the date of this report, are
required to consider whether they have a reasonable expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future. Following the General Meeting
held on 20 December 2023 at which shareholders unanimously voted in
favour of a change in the Company's Objective and Investment Policy
in order to facilitate a managed wind- down, the process for an
orderly realisation of the Company's assets and a return of capital
to shareholders has begun. The Company is
therefore preparing its financial statements on a basis other than
going concern due to the Company being in a managed
wind-down.
The Board will endeavour to realise all of the
Company's investments in a manner that achieves a balance between
maximising the net value received from those investments and making
timely returns to Shareholders.
Whilst the Directors are satisfied that the Company
has adequate resources to continue in operation throughout the
winding down period and to meet all liabilities as they fall due,
given the Company is now in a managed wind-down the Directors
considered it appropriate to adopt a basis other than a going
concern in preparing the financial statements. No material
adjustments to accounting policies or the valuation basis have
arisen as a result of ceasing to apply the going concern basis. All
of the balance sheet items have been recognised on a recoverable
basis, which is not materially different from the carrying amount.
The Directors have also made appropriate provisions in order to
bring about the orderly wind- down of the Company and its
operations.
(d) Assessment
as an Investment Entity
The Company meets the definition of an investment
entity on the basis of the following criteria:
1. the Company obtains funds from
multiple investors for the purpose of providing those investors
with investment management services;
2. the Company commits to its
investors that its business purpose is to invest funds solely for
returns from capital appreciation, investment income, or both;
and
3. the Company measures and
evaluates the performance of substantially all of its investments
on a fair value basis.
To determine that the Company meets the definition
of an investment entity, further consideration is given to the
characteristics of an investment entity, which are that:
- it should have more
than one investment, to diversify the risk portfolio and maximise
returns;
- it should have
multiple investors, who pool their funds to maximise investment
opportunities;
- it should have
investors that are not related parties of the entity; and
- it should have
ownership interests in the form of equity or similar interests.
The Directors are of the opinion that the Company
meets the essential criteria and typical characteristics of an
Investment Entity.
(e) Investments
Investments consist of private loans and bonds,
which are classified as fair value through profit or loss as they
are included in the Company's financial assets that are managed and
their performance evaluated on a fair value basis. They are
initially and subsequently measured at fair value and gains and
losses are attributed to the capital column of the Statement of
Comprehensive Income. Investments are recognised on the date that
the Company becomes a party to the contractual provisions of the
instrument and are derecognised when their term expires, or on the
date they are sold, repaid or transferred.
Unquoted investments are valued at fair value by the
Board which is established with regard to the International Private
Equity and Venture Capital Valuation Guidelines by using, where
appropriate, latest dealing prices, valuations from reliable
sources and other relevant factors. Due to the Company's wind-down
status, investments have been recognised at recoverable value,
which has been determined as fair value less cost to realise. The
difference between the investment's fair value and recoverable
value was not material.
(f) Foreign currency
Transactions denominated in foreign currencies are
translated into sterling at actual exchange rates as at the date of
the transaction. Monetary assets and liabilities and non-monetary
assets held at fair value denominated in foreign currencies are
translated into sterling using London closing foreign exchange
rates at the year end. Any gain or loss arising from a change in
exchange rates is included as an exchange gain or loss to capital
or revenue in the Statement of Comprehensive Income as appropriate.
Foreign exchange movements on investments are included in the
Statement of Comprehensive Income within gains and losses on
investments. The financial statements are presented in pounds
sterling, which is the Company's functional and presentation
currency.
(g) Income
Fair value movements attributable to PIK interest
and Cash Interest on the investment portfolio are recorded under
Income in the Statement of Comprehensive Income.
All other income including deposit interest is
accounted for on an accruals basis and early settlement fees
received are recognised upon the early repayment of the loan.
Arrangement fees earned on private loan investments
are recognised as an income over the term of the private loans.
A simplified credit loss provision has been applied
against uncertain interest receivables.
(h) Cash and
cash equivalents
Cash and cash equivalents include deposits held at
call with banks and other short-term deposits with original
maturities of three months or less.
(i) Capital reserves
Realised and unrealised gains and losses on the
Company's investments are recognised in the capital column of the
Statement of Comprehensive Income and allocated to the capital
reserve.
(j) Expenses
All expenses are accounted for on an accruals
basis.
Management fees and
finance costs
The Company is expecting to derive its returns
predominantly from interest income. Therefore, the Board has
adopted a policy of allocating all management fees and finance
costs to the revenue column of the Statement of Comprehensive
Income.
Other expenses are recognised in the revenue column
of the Statement of Comprehensive Income, unless they are incurred
in order to enhance or maintain capital profits.
(k) Taxation
The charge for taxation is based upon the net
revenue for the year. The tax charge is allocated to the revenue
and capital columns of the Statement of Comprehensive Income
according to the marginal basis whereby revenue expenses are first
matched against taxable income arising in the revenue account.
Deferred taxation will be recognised as an asset or
a liability if transactions have occurred at the initial reporting
date that give rise to an obligation to pay more taxation in the
future, or a right to pay less taxation in the future. An asset
will not be recognised to the extent that the transfer of economic
benefit is uncertain.
(l) Financial liabilities
Bank loan facility and overdrafts are initially
recorded as the proceeds received net of direct issue costs and
subsequently measured at amortised cost using the effective
interest rate. The associated costs of the bank loan facility are
amortised over the period of the bank loan facility. The Directors
have also made appropriate provisions in order to bring about the
orderly wind-down of the Company and its operations.
(m)
Dividends
Interim dividends to the holders of shares are
recorded in the Statement of Changes in Equity on the date that
they are paid. Final dividends would be recorded in the Statement
of Changes in Equity when they are approved by Shareholders,
however the Company currently declares four interim dividends as
opposed to any final dividends.
(n) Judgements, estimates and
assumptions
The preparation of financial statements requires the
directors to make estimates and assumptions that affect the
application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Although these estimates
are based on management's best knowledge of current facts,
circumstances and, to some extent, future events and actions, the
Company's actual results may ultimately differ from those
estimates, possibly significantly.
The Company recognises loan investments at fair
value through profit or loss and disclosed in note 3 to the
financial statements. The significant assumptions made at the point
of valuation of loans are the discounted cash flow analysis and/or
benchmarked discount/interest rates, which are deemed appropriate
to reflect the risk of the underlying loan. These assumptions are
monitored to ensure their ongoing appropriateness. The sensitivity
impact on the measurement of fair value of loan investments due to
price is discussed in note 19.
As per AIC SORP, where an Investment Company is
approaching a wind-up and a provision for liquidation expenses has
been made, the Board needs to consider why those expenses have
been/are going to be incurred and whether the circumstances meet
the maintenance or enhancement test for allocating them to capital.
It may also be the case that certain of the costs should be treated
as being related to the disposal of the Investment Company's
assets. Certain expenses, such as brokerage fees and stamp duty,
are incurred as part of the process of buying and selling
Investments and, for Investment Companies, it is considered that
such expenses are capital in nature.
The liquidation expenses provided for in the
accounts are in relation to the disposal of the Company's assets
and the ultimate costs of returning the shareholders capital. Thus,
these have been included within the Capital section of the
Statement of Comprehensive Income.
3. Investment at fair value through profit or
loss
(a) Summary
of
valuation
|
31
December 2023
£'000
|
31
December 2022
£'000
|
Financial assets
held:
|
|
|
Equity investments
|
2,966
|
3,593
|
Bond investments
|
3,654
|
4,208
|
Private loan investments
|
87,312
|
112,169
|
|
93,932
|
119,970
|
|
Year ended
|
Year ended
|
(b) Movements
|
31 December 2023
£'000
|
31 December 2022
£'000
|
Opening valuation
|
119,970
|
126,674
|
Opening losses on
investments
|
7,306
|
5,803
|
Book cost at the beginning of the
year
|
127,276
|
132,477
|
Private loans issued/bonds
purchases at cost
|
7,066
|
18,415
|
Purchase in kind interest
("PIK")
|
2,637
|
2,690
|
Purchase of equity
investments
|
-
|
-
|
Sales:
|
|
|
- Private loans repayments/bonds
sales proceeds
|
(33,121)
|
(25,784)
|
- Losses on investment
|
(373)
|
(298)
|
- Purchase in kind interest
("PIK")
|
-
|
(224)
|
Unrealised losses on investments
held
|
(9,553)
|
(7,306)
|
Closing valuation at year end
|
93,932
|
119,970
|
Book cost at end of the
year
|
103,485
|
127,276
|
Unrealised losses on investment
holdings at the year end
|
(9,553)
|
(7,306)
|
Closing valuation at year end
|
93,932
|
119,970
|
The Company received £33.5 million (2022: £25.5
million) from investments sold in the year. The book cost of these
investments when they were purchased was £33.1 million (2022: £25.8
million). These investments have been revalued over time and until
they were sold any unrealised gains/losses were included in the
fair value of the investments. The Company's investments are
UK-based with the exception of Beinbauer which is based in Germany.
The fair value of the investment in Beinbauer amounted to £10.0
million (2022: £9.6 million).
(c) Gains/(losses)
on
investments
|
31 December 2023
£'000
|
31 December 2022
£'000
|
Realised gains/(losses) on
investments
|
10
|
(298)
|
Unrealised gains/(losses) on
investments held
|
(2,247)
|
(1,503)
|
Other capital gains
|
-
|
217
|
Foreign exchange losses
|
(204)
|
(488)
|
Total losses on investments
|
(2,441)
|
(2,072)
|
At the year end, the Company had
three unquoted investments, which are recorded at fair value as the
Company meets the definition of an investment entity within IFRS
10.
- Esprit Holdco Limited
(Energie Fitness). The Company
participated in a management buyout during 2020 and owns 28% of the
business, the registered office and principal of business of
Energie Fitness is 1 Pitfield Kiln Farm, Milton Keynes, United
Kingdom, MK11 3LW. The Investment Manager valued holdings in
Energie Fitness at nil.
- Trent Capital
Limited. The Company structured a
Loan in 2019, which also offered equity within Trent Capital
Limited. The Company has a 70% net equity holding within the
business which is registered at 17 Walkergate, Berwick Upon Tweed,
Northumberland, TD15 1DJ and the principal business address is Unit
7 Newton Chambers Way, Thornecliffe Industrial Estate, Chapeltown,
Sheffield, S35 2PH. The Investment Manager valued holdings in Trent
Capital Limited at nil.
- Coventry Student
Accommodation 1 Limited ("Coventry", wholly owned
asset). The Company holds an
unquoted investment in Coventry. As at 31 December 2023, the
Company owns 100% of the business. The registered office and
principal place of business of Coventry is 6th Floor, 125 London
Wall, London, EC2Y 5AS. The Investment Manager's valuation of the
holdings in Coventry is £3.0 million as at. 31 December 2023 (2022:
£3.6 million). A credit loss has been recognised under the
simplified approach for interest income in note 10.
4. Income
|
Year
ended 31
December 2023
£'000
|
Year
ended 31
December 2022
£'000
|
Income from
investments
|
|
|
Bond and loan - cash interest
|
10,352
|
7,895
|
Bond and loan - PIK interest
|
294
|
2,767
|
Arrangement fees
|
42
|
43
|
Delayed Compensation fees received
|
-
|
2
|
Other income
|
188
|
61
|
Total
|
10,876
|
10,768
|
5. Investment
management fee
|
Year ended 31 December 2023
£'000
|
Year ended 31 December 2022
£'000
|
Basic fee:
|
|
|
100% charged to revenue
|
944
|
971
|
Total
|
944
|
971
|
The Company's Investment Manager
is RM Capital Markets Limited. Under the amended Investment
Management Agreement, effective 1 April 2020 which was in place for
the year under review, the Investment Manager is entitled to
receive a management fee payable monthly in arrears or as soon as
practicable after the end of each calendar month an amount
one-twelfth of;
(a)
0.875 per cent. of the prevailing NAV in the event that the
prevailing NAV is up to or equal to £250 million; or
(b)
0.800 per cent. of the prevailing NAV in the event that the
prevailing NAV is above £250 million but less than £500 million;
or
(c)
0.750 per cent. of the prevailing NAV in the event that the
prevailing NAV is above £500 million.
The management fee shall be
payable in Sterling on a pro-rata basis in respect of any period
which is less than a complete calendar month.
There is no performance fee
payable to the Investment Manager.
Following the General Meeting held
on 20 December 2023 at which shareholders voted to place the
Company into managed wind-down, the IMA was amended so that the
management fee will continue to be calculated at the rate of 0.875
per cent. of NAV per annum (payable monthly in arrears), but
subject to a minimum fee of £33,300 payable monthly in arrears,
subject to renegotiation with the Board, until the earlier
of:
>
the Company's liquidation;
>
the value of the Company's portfolio (excluding cash and other
liquid assets) being less than or equal to £35 million;
or
>
31 December 2026.
Additionally, an incentive fee
will be accrued from 20 December 2023, being the date the Company
entered managed wind-down, on any loan that is repaid or sold at or
above the NAV as at that date, save for those loans where the
capital is used to repay any leverage or held as a cash balance for
future commitments, of 1.375 per cent. on loans repaid or sold from
now until 31 December 2024 and 1.125 per cent. on loans repaid
during 2025.
To incentivise the Investment
Manager to continue to work on the tail of the portfolio, the
Incentive Fee will be subject to the following escrow and payment
mechanism: (i) 50 per cent. of the fee will be paid in cash to the
Investment Manager at the end of each month when a loan is repaid
or sold and (ii) the remaining 50 per cent. will, so long as the
Shares trade at a discount to the latest published NAV, be used by
the company to buy back Shares on the market, and otherwise held by
the company in escrow.
The newly acquired Shares
purchased as a result of the payment of the Incentive Fee under
(ii) above will be held by the Company in treasury until the
company is liquidated, and, together with cash amounts held in
escrow will vest to the Investment Manager in the following
proportions depending on the amount of aggregated net proceeds
distributed to shareholders:
>
100 per cent. at or above the Reference NAV; or
>
90 per cent. at or greater than 99 per cent. and less than 100 per
cent. of the Reference NAV; or
>
80 per cent. at or greater than 98 per cent. and less than 99 per
cent. of the Reference NAV; or
>
70 per cent. at or greater than 97 per cent. and less than 98 per
cent. of the Reference NAV; or
>
60 per cent. at or greater than 96 per cent. and less than 97 per
cent. of the Reference NAV; or
>
50 per cent. at or greater than 95 per cent. and less than 96 per
cent. of the Reference NAV; or
>
40 per cent. at or greater than 94 per cent. and less than 95 per
cent. of the Reference NAV; or
>
30 per cent. at or greater than 93 per cent. and less than 94 per
cent. of the Reference NAV; or
>
20 per cent. at or greater than 92 per cent. and less than 93 per
cent. of the Reference NAV; or
>
10 per cent. at or greater than 91 per cent. and less than 92 per
cent. of the Reference NAV; or
>
0 per cent. below 91 per cent. of the Reference NAV.
Any shares held in treasury which
vest to the Investment Manager will be transferred to it to settle
the Company's obligation to pay the remaining part of the Incentive
Fee. The Board notes that for companies with a premium listing, the
Investment Associations preference is for no more than 10 per cent.
of their shares to be held in treasury but, given the special use
of treasury shares in this case, believes the use of treasury
shares in this manner is in the best interests of the Company. To
the extent that the number of treasury shares to be transferred to
the Investment Manager would otherwise be equal to or greater than
20 per cent. of the Company's issued share capital at the time, the
Company will deliver such number of treasury Shares as represents
one Share less than 20 per cent of the Company's issued share
capital and instead shall pay the Investment Manager upon the
liquidation of the Company an amount equal to the number of
undelivered Shares multiplied by the amount distributed upon every
Share in the liquidation, with such liability to be paid pro rata
alongside all other distributions to shareholders.
In the event that the Shares are
trading at a premium to the prevailing NAV, the remaining 50 per
cent. of the fee under (ii) above will be held in escrow in liquid
funds by the Company. Any dividends paid or declared in respect of
the Shares acquired under (ii), together with any capital
distributions made to shareholders, will be held by the Company in
escrow until the incentive vests as set out above.
6. Other
expenses
|
Year
ended
31
December 2023
£'000
|
Year
ended
31
December 2022
£'000
|
Basic fee charged to revenue:
|
|
|
Administration Fees
|
220
|
226
|
Auditor's remuneration:
|
|
|
- Statutory audit fee
|
122
|
161
|
Broker fees
|
150
|
146
|
Consultancy fees
|
18
|
72
|
Custody fees
|
15
|
-
|
Directors' fees
|
124*
|
99
|
AIFM fees
|
146
|
144
|
Registrars fees
|
40
|
32
|
Valuation fees
|
107
|
81
|
Other expenses
|
579
|
269
|
Total revenue expenses
|
1,521
|
1,230
|
Expenses charged to
capital:
|
|
|
Wind-down costs*
|
1,567
|
-
|
Total expenses
|
3,088
|
1,230
|
* Includes additional one off fees paid to each Board member
(£10,000 paid to the Chair and £7,500 paid to each of the other
Board members). The Company has estimated the costs of the managed
wind-down process and accordingly made a provision during the year
amounting to £1.6 million.
7. Finance costs
Year ended 31 December 2023
Year ended
31 December
2022
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Loan Interest paid
|
1,004
|
-
|
1,004
|
1,102
|
-
|
1,102
|
|
1,004
|
-
|
1,004
|
1,102
|
-
|
1,102
|
Refer to Note 11 for the details of the Company's
revolving credit facility.
8. Taxation
Year ended
31 December
2023
Year ended
31 December
2022
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Analysis of
tax charge/(credit)
for the
year:
Corporation tax
|
-
|
-
|
-
|
-
|
-
|
-
|
Corporation tax - prior year adjustment
|
-
|
-
|
-
|
3
|
-
|
3
|
Total current tax charge (see
note
6 (b))
|
-
|
-
|
-
|
3
|
-
|
3
|
(b) Factors
Affecting the
tax charge
for the
year:
The effective UK corporation tax rate for the year
is 23.50% (2022:19.00%).
In the Spring Budget 2020, the UK Government
announced that from 1 April 2023 the rate of corporation tax will
increase to 25% from 19%. A blended rate of 23.5% is used.
The tax charge differs from the charge resulting
from applying the standard rate of UK corporation tax for an
investment trust company. The differences are explained below:
Year ended 31 December 2023
Year ended
31 December
2022
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Return on
ordinary activities before
taxation
|
7,407
|
(4,008)
|
3,399
|
7,465
|
(2,072)
|
5,393
|
UK corporation tax at 23.50% (2022:19.00%)
|
1,741
|
(942)
|
799
|
1,418
|
(394)
|
1,024
|
Effects of:
Fair value losses
not deductible
|
-
|
574
|
574
|
-
|
394
|
394
|
Non-deductible expenses
|
-
|
368
|
368
|
-
|
-
|
-
|
Interest distributions paid/payable
|
(1,796)
|
-
|
(1,796)
|
(1,455)
|
-
|
(1,455)
|
Excess management expenses
carried forward
|
55
|
-
|
55
|
37
|
-
|
37
|
Prior year adjustment
|
-
|
-
|
-
|
3
|
-
|
3
|
Total tax
charge
|
-
|
-
|
-
|
3
|
-
|
3
|
The Company is not liable to tax on capital gains due to its status as an investment trust.
(c) Deferred
tax assets/(liabilities)
As at 31 December 2023, the Company had net surplus
excess management expenses of £426,902 (2022: £194,927) in respect
of which a deferred tax asset has not been recognised. This is
because the Company is not expected to generate taxable income in a
future period in excess of deductible expenses of deductible
expenses of that future period and, accordingly, it is unlikely
that the Company will be able to reduce future liabilities.
9. Receivables
|
Year ended 31 December 2023
£'000
|
Year ended 31 December 2022
£'000
|
Amounts falling
due within
one year:
|
|
|
Bond and loan
interest receivable
|
2,133
|
2,372
|
Bond and interest receivable with
credit loss fully provided
|
2,741
|
1,160
|
Coventry Street Loan
|
2,686
|
1,673
|
Prepayments and other
receivables
|
409
|
216
|
|
7,969
|
5,421
|
Bond and interest receivable with credit loss fully
provided
Bond and interest receivable with
credit loss fully provided is an interest receivable in relation to
the loans of the Company but are not guaranteed. The total amount
is offset against the credit loss under the liability account (see
note 10).
10.
Payables
|
Year ended 31 December 2023
£'000
|
Year ended 31 December 2022
£'000
|
Amounts falling
due within
one year:
|
|
|
Loan reserves retained
|
270
|
270
|
Taxation payable
|
-
|
3
|
Credit loss provision on interest
receivable
|
2,741
|
1,160
|
Other payables
|
2,165
|
875
|
|
5,176
|
2,308
|
11.
Bank loan
credit
facilities
|
Year ended 31 December 2023
£'000
|
Year ended 31 December 2022
£'000
|
OakNorth Bank - Credit facilities
|
-
|
17,271
|
Total
|
-
|
17,271
|
On 26 March 2021, the Company renewed and amended
its revolving credit facility with OakNorth. The Company had
entered into an uncommitted 90-day notice revolving loan of
£10,500,000 ("Facility A") and a committed term revolving loan of
£11,942,000 ("Facility B"), together with Facility A the
("Facilities") with OakNorth for the purposes set out in the credit
facility agreement.
Facility A will be
provided to be applied in or towards:
>
repaying all amounts due from the Company to the OakNorth under its
existing loan agreement;
>
funding by the Company of customer loans;
>
refinancing (where applicable) any customer loans made by the
Company;
>
purchasing investments by the Company;
>
the provision of liquidity to the Company; and
>
payment of finance costs (including fees) payable under the
loan.
Facility B will be
provided to be applied in or towards:
>
repaying sums due from the Company to RM ZDP plc;
>
funding by the Company of customer loans;
>
refinancing (where applicable) any customer loans made by the
Company;
>
purchasing investments by the Company;
>
the provision of liquidity to the Company; and
>
payment of finance costs (including fees) payable under the loan
agreement.
The rate of interest on the Facilities are the
aggregate of the applicable margin and base rate (subject to a base
rate floor of 0.10%). The margin is 4.65% p.a. The Facilities
expire on 26 March 2024.
During the year, the Company drew cumulative amount
of £6.6 million (2022: £12.6 million) from the revolving credit
facilities and repaid cumulative amount of £23.9 million (2022:
£14.9 million). The remaining balance as at 31 December 2023
amounts to nil (2022: £17.3 million).
12.
Share capital
|
As at 31 December 2023
|
|
As at 31 December 2022
|
|
|
No. of Shares
|
£'000
|
No. of Shares
|
£'000
|
Allotted, issued
& fully
paid:
Ordinary shares of 1p
|
117,586,359
|
1,175
|
117,636,359
|
1,176
|
Share movement
The table below
sets out
the share
movement for
the year
ended 31
December 2023.
|
Opening balance
|
Shares issued
|
Shares bought back
|
Shares in issue at 31 December 2023
|
Ordinary Shares
|
117,636,359
|
-
|
(50,000)
|
117,586,359
|
At the year end, the Company has
117,586,359 Ordinary Shares in issue with voting rights and
4,638,222 Ordinary Shares held in Treasury.
Ordinary Share buy backs
During the year, the Company
bought back 50,000 (2022: 204,629) Ordinary Shares for an aggregate
cost of £42,750 (2022: £173,935). Since the year end no shares have
been bought back.
13.
Share premium
|
As at 31 December 2023
£'000
|
As at 31 December 2022
£'000
|
Balance as at beginning of the year
|
70,168
|
70,168
|
Share buybacks
|
-
|
2
|
Share buyback costs
|
-
|
(2)
|
Balance as at the
end of the year
|
70,168
|
70,168
|
14. Return per
ordinary share
Total return per Ordinary Share is
based on the gain on ordinary activities after taxation of
£3,399,000 (2022: gain of £5,390,000).
Based on the weighted average of
number of 117,587,862 (2022: 117,839,605) Ordinary Shares in issue
for the year ended 31 December 2023, the returns per share were as
follows:
Year ended 31 December 2023
Year ended 31 December 2022
|
Revenue
|
Capital
|
Total
|
Revenue
|
Capital
|
Total
|
Return per Ordinary Share
|
6.30p
|
(3.41p)
|
2.89p
|
6.33p
|
(1.76p)
|
4.57p
|
There are no
dilutive shares
in issue.
|
|
|
|
|
|
|
15. Net asset
value per
share
The NAV per share is based on
Company's total shareholders' funds of £104,516,000 (2022:
£108,805,000), and on 117,586,359 (2022: 117,636,359) Ordinary
Shares in issue at the year end.
NAV per
ordinary share
reconciliation
The table below is a
reconciliation between the NAV per Ordinary Share of the Company as
announced on the London Stock Exchange and the NAV per Ordinary
Share disclosed in these financial statements.
|
As at 31 December 2023
|
As at 31 December 2022
|
|
Net
assets
(£)
|
NAV per Ordinary share (p)
|
Net
assets
(£)
|
NAV per Ordinary share (p)
|
2023 NAV as published on 16
January 2024
(2022 NAV: Published on 16 January
2023)
|
106,235,896
|
90.35
|
108,807,765
|
92.50
|
Revaluation adjustment
|
(153,000)
|
(0.13)
|
-
|
-
|
Wind-up cost accrual
adjustments
|
(1,566,581)
|
(1.34)
|
-
|
-
|
Prior year tax
liability adjustments
|
-
|
-
|
(2,852)
|
(0.01)
|
NAV as
disclosed in
these Financial
Statements
|
104,516,315
|
88.88
|
108,804,913
|
92.49
|
16. Dividend
Total dividends paid
in the
year
|
Year ended 31 December 2023
|
Year ended
31 December
2022
|
|
Pence per Ordinary
|
Revenue
|
Capital
|
Total
|
Pence per Ordinary
|
Revenue
|
Capital
|
Total
|
share
|
£'000
|
£'000
|
£'000
|
share
|
£'000
|
£'000
|
£'000
|
2022 Interim - Paid 31 Mar
2023
(2021: 25 Mar 2022)
|
1.6250p
|
1,911
|
-
|
1,911
|
1.6250p
|
1,915
|
-
|
1,915
|
2023 Interim - Paid 30 Jun
2023
(2022: 24 Jun 2022)
|
1.6250p
|
1,911
|
-
|
1,911
|
1.6250p
|
1,915
|
-
|
1,915
|
2023 Interim - Paid 29 Sep
2023
(2022: 30 Sep 2022)
|
1.6250p
|
1,911
|
-
|
1,911
|
1.6250p
|
1,915
|
-
|
1,915
|
2023 Interim - Paid 29 Dec
2023
(2022: 30 Dec 2022)
|
1.6250p
|
1,911
|
-
|
1,911
|
1.6250p
|
1,915
|
-
|
1,915
|
Total
|
6.5000p
|
7,644
|
-
|
7,644
|
6.5000p
|
7,660
|
-
|
7,660
|
The dividend relating to the
period ended 31 December 2023, which is the basis on which the
requirements of Section 1159 of the Corporation Tax Act 2010 are
considered is detailed below:
Total dividends
declared in
the year
|
Year ended 31 December 2023
|
Year ended
31 December
2022
|
|
Pence per Ordinary
|
Revenue
|
Capital
|
Total
|
Pence per Ordinary
|
Revenue
|
Capital
|
Total
|
|
Share
|
£'000
|
£'000
|
£'000
|
Share
|
£'000
|
£'000
|
£'000
|
2023 Interim - Paid 30 Jun
2023
(2022: 24 Jun 2022)
|
1.6250p
|
1,911
|
-
|
1,911
|
1.6250p
|
1,915
|
-
|
1,915
|
2023 Interim - Paid 29 Sep
2023
(2022: 30 Sep 2022)
|
1.6250p
|
1,911
|
-
|
1,911
|
1.6250p
|
1,915
|
-
|
1,915
|
2023 Interim - Paid 29 Dec
2023
(2022: 30 Dec 2022)
|
1.6250p
|
1,911
|
-
|
1,911
|
1.6250p
|
1,915
|
-
|
1,915
|
2023 Interim - Paid 2 April
2024
(2022: 31 Mar 2023)
|
1.6250p
|
1,911
|
-
|
1,911
|
1.6250p
|
1,911
|
-
|
1,911
|
Total
|
6.5000p
|
7,644
|
-
|
7,644
|
6.5000p
|
7,656
|
-
|
7,656
|
*Not included as a liability in the year ended 31 December
2023 financial statements.
17. Related party
transactions
Fees are payable at an annual rate
of £36,000 to the Chair, £33,000 to the Chair of the Audit and
Management Engagement Committee and £30,000 to the other Director.
During the year an additional one-off payment was made of £10,000
to the Chair, £7,500 to the Audit and Management Engagement Chair
and £7,500 to the other Director in recognition of the extra work
undertaken to consider the Company's various strategic issues and
to progress the wind-down. As at 31 December 2023, there were no
Directors' fees outstanding. During the year under review the Board
agreed to an increase on their fees to £32,500 for Board members
and by 8% for the Chair and Audit Chair with effect from 1 January
2024. The Directors' fees are disclosed in note 6 and the
Directors' shareholdings are disclosed in the Directors
Remuneration Report in the Annual Report for the year ended 31
December 2023.
Fees payable to the Investment
Manager are shown in the Statement of Comprehensive Income. As at
31 December 2023 the fee outstanding to the Investment Manager was
£155,000 (2022: £80,000).
Arrangement fees are paid by some
borrowers to the Investment Manager. The amount the Investment
Manager can retain from borrowers in most cases is capped at 1.25%
and agreed with the Board. The Company receives any arrangement
fees from the Investment Manager in excess of the 1.25% or
otherwise agreed with the borrower. During the year to 31 December
2023, the Company received £42,000 (2022: £43,000) in arrangement
fees from RM.
Borrowers paid the Investment
Manager arrangement fees during the year totalling £286,084. The
Investment Manager also provides further work and Loan &
Security Agency services to some borrowers and during the year
charged borrowers £185,958.
As at 31 December 2023, the
Investment Manager held 1,329,125 (2022: 1,316,625) Ordinary Shares
in the Company. Since the year end, the Investment Manager
purchased a further 52,211 Ordinary Shares in the Company, and as
of the date of this report, the Investment Manager's total holding
of Ordinary Shares is 1,381,336 (2022: 1,329,125).
During the year the Company has
total investments of £3,119,000 (2022: £3,593,000) in Coventry
Student Accommodation 1 Limited for which investment details can be
found in Note 3. During the year, the Company provided Coventry
Student Accommodation 1 Limited an intercompany loan of £2,686,000
(2022: £1,673,000) as disclosed in note 9.
18.
Classification of financial instruments
IFRS 13 requires the Company to
classify its investments in a fair value hierarchy that reflects
the significance of the inputs used in making the
measurements.
IFRS 13
establishes a
fair value
hierarchy that
prioritises the
inputs to
valuation techniques used to measure fair value. The three levels of fair value hierarchy under IFRS 13
are as follows:
Level 1
Using unadjusted quoted
prices for
identical instruments in an active market.
Level 2
Using inputs, other than quoted prices included within Level 1, that are directly or indirectly observable (based
on market
data).
Level 3
Using inputs that
are unobservable
(for which
market data
is unavailable).
The classification of the Company's investments
held at
fair value
through profit
or loss
is detailed
in the
table below:
|
|
31 December 2023
|
|
|
31 December 2022
|
|
Level 1
|
Level 2
Level 3
|
Total
|
Level 1
|
Level 2
Level 3
|
Total
|
£'000
|
£'000
£'000
|
£'000
|
£'000
|
£'000
£'000
|
£'000
|
Financial assets:
|
|
|
|
|
|
|
Financial assets - Bond investments
|
-
|
3,654
-
|
3,654
|
-
|
4,208
-
|
4,208
|
Financial assets - Private loans
|
-
|
-
87,312
|
87,312
|
-
|
- 112,169
|
112,169
|
Financial assets - Equity investment
|
-
|
-
2,966
|
2,966
|
-
|
-
3,593
|
3,593
|
Forward contract unrealised
loss
|
-
|
47
-
|
47
|
|
(162)
-
|
(162)
|
Net financial
assets
|
-
|
3,701 90,278
|
93,979
|
-
|
4,046 115,762
|
119,808
|
The forward exchange contract has
been presented in the fair value hierarchy at net exposure with the
net unrealised loss of £47,360 (2022: gain of £162,475) recognised
within prepayments and other debtors in the Statement of Financial
Position.
Investments that trade in markets
that are not considered to be active but are valued based on quoted
market prices, dealer quotations or alternative pricing sources
supported by observable inputs are classified within Level
2.
Level 3 holdings are valued using
a discounted cash flow analysis and benchmarked discount/interest
rates appropriate to the nature of the underlying loan and the date
of valuation.
There have been no transfers
between levels during the reporting period (2022: none).
Reconciliation of the Level 3
classification investments during
the year
to 31
December 2023
is shown
below:
|
|
31
December 2023
|
|
|
31 December
2022
|
|
Equity
|
Loan
|
Total
|
Equity
|
Loan
|
Total
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Balance as at beginning of the year
|
3,593
|
112,169
|
115,762
|
3,600
|
115,728
|
119,328
|
|
New loans during the year
|
-
|
9,703
|
9,703
|
-
|
13,605
|
13,605
|
|
Repayments during the
year
|
-
|
(33,121)
|
(33,121)
|
-
|
(15,978)
|
(15,978)
|
|
Realised gains during the year
|
-
|
(373)
|
(373)
|
-
|
(190)
|
(190)
|
|
Unrealised losses during the year
on positions held at year end
|
(597)
|
(1,096)
|
(1,693)
|
(7)
|
(996)
|
(1,003)
|
|
Closing balance as at 31 December
|
2,996
|
87,282
|
90,278
|
3,593
|
112,169
|
115,762
|
|
|
|
|
|
|
|
|
| |
Valuation and
existence of
bonds and
private loan
investments
The Company holds assets in bonds
and private loan investments. The valuation and existence of these
bonds and private loan investments are the most material matter in
the production of the financial statements.
The bonds and private loan
investments are valued by an independent valuer (Mazars LLP) and
the valuations at year end were agreed to the valuers report. The
valuation process has been comprehensively reviewed during the
year, and is monitored, by the Board, the Manager and the AIFM. The
process includes quantitative and qualitative analysis, with the
analysis performed on a loan-by-loan basis and the valuation of
each loan taking into account the relevant risks and returns
associated with that loan. The Audit and Management Engagement
Committee reviewed valuation reports and also the procedures in
place for ensuring accurate valuation and existence of investments
and recommended these to the Board for review and
approval.
The Board has appointed a
third-party service provider (Mazars LLP) to value the Company's
loan investments on a monthly basis, in accordance with IFRS. The
Directors have satisfied themselves as to the methodology used, the
discount rates and key assumptions applied and the overall
valuation of the investments.
19. Financial instruments - risk profile
The Company invests in private loan and bond investments. The following describes
the risks
involved and
the applied
risk management.
The Investment Manager reports
regularly both verbally and formally to the Board, and its relevant
committees, to allow them to monitor and review all the risks noted below.
(i) Market
risks
The Company is subject to a number
of Market risks in relation to economic conditions. The Company's
approach regarding the conservative valuation of its investments
remains unchanged, with fair value write downs driven by market
risk and idiosyncratic risk, with idiosyncratic risk relating to
loan specific information which is reflected within specific loan
pricing. Further detail on these risks and the management of these
risks are included in the Investment Manager's Report and the Risk
and Risk Management report.
The Company's financial
assets and
liabilities at
31 December
2023 comprised:
Year ended 31 December 2023
Year ended
31 December
2022
Investments
|
Interest
bearing
£'000
|
Non-interest bearing
£'000
|
Total
£'000
|
Interest
bearing
£'000
|
Non-interest
bearing
£'000
|
Total
£'000
|
GBP Sterling
|
89,284
|
2,966
|
92,250
|
114,713
|
3,593
|
118,306
|
Euro
|
1,682
|
-
|
1,682
|
1,664
|
-
|
1,664
|
Total investment
|
90,966
|
2,966
|
93,932
|
116,377
|
-
|
119,970
|
Cash and cash equivalents
|
7,791
|
-
|
7,791
|
2,993
|
-
|
2,993
|
Receivables
|
-
|
7,969
|
7,969
|
-
|
5,421
|
5,421
|
Payables
|
-
|
(5,176)
|
(5,176)
|
(17,271)
|
(1,148)
|
(19,579)
|
Total
|
98,757
|
5,759
|
104,516
|
102,099
|
4,273
|
108,805
|
Price risk
sensitivity
The effect on the portfolio of a
10.0% increase or decrease in the value of the loans would have
resulted in an increase or decrease of £9,393,000 (2022:
£11,997,000) in the investments held at fair value through profit
or loss at the period end date. This analysis assumes that all
other variables remain constant.
(ii) Credit
risks
The Company's investments will be
predominantly in the form of private loans whose revenue streams
are secured against contracted, predictable medium to long-term
cash flows and/or physical assets, and whose debt service payments
are dependent on such cash flows and/or the sale or refinancing of
the physical assets. The key risks relating to the private loans
include risks relating to counterparty default, senior debt
covenant breach risk, bridge loans, delays in the receipt of
anticipated cash flows and borrower default, and collateral
risks.
The Company is also exposed to the
risk of default on cash held at the bank and other trade
receivables. The maximum exposure to credit risk on cash at bank
and other trade receivables at 31 December 2023 was £7,791,000 and
£7,969,000 respectively (2022: £2,993,000 and £5,421,000). None of
these amounts are considered past due or impaired and interest is
based on the prevailing money market rates.
The table below shows the Company's exposure
to credit risks as the year end.
As at 31 December 2023
As at
31 December
2022
|
Fair value
|
Maximum exposure
|
Fair value
|
Maximum exposure
|
£'000
|
£'000
|
£'000
|
£'000
|
Private loan investments
|
87,312
|
87,312
|
112,169
|
112,169
|
Bond investments
|
3,654
|
3,654
|
4,208
|
4,208
|
Cash and cash equivalent
|
7,791
|
7,791
|
2,993
|
2,993
|
Receivables
|
7,969
|
7,969
|
5,421
|
5,421
|
Total
|
106,726
|
106,726
|
124,791
|
124,791
|
Management of
risks
The Investment Manager reports a
number of key metrics on a monthly basis to its Credit Committee
including pipeline project information, outstanding loan balances,
lending book performance and early warning indicators. The
Investment Manager monitors ongoing credit risks in respect of the
loans. Typically, the Company's loan investments are private loans
and would usually exhibit credit risk classified as 'non-investment
grade' if a public rating agency was referenced.
The Company's main cash balances
are held with The Royal Bank of Scotland plc ("RBS"). Bankruptcy or
insolvency of the bank holding cash balances may cause the
Company's rights with respect to the cash held by them to be
delayed or limited. The Company manages its risk by monitoring the
credit quality of RBS on an ongoing basis.
(iii) Interest
rate risks
Private Loans
The Company may make loans based
on estimates or projections of future interest rates because the
Investment Manager expects that the underlying revenues and/or
expenses of a borrower to whom the Company provides loans will be
linked to interest rates, or that the Company's returns from a loan
are linked to interest rates. If actual interest rates differ from
such expectation, the net cash flows of the borrower or payable to
the Company may be lower than anticipated.
Interest rate
sensitivity
Interest Income earned by the
Company is primarily derived from fixed interest rates. The
interest earned from the floating element of loan and debt security
investments is not significant. Based on the Company's private loan
investments, bond investments, cash and cash equivalents as at 31
December 2023, a 1% increase/(decrease) (2022: 1.00%
increase/(decrease)) in interest rates, all other things being
equal, would lead to a corresponding increase/(decrease) in the
Company's income as follows.
As at 31
December 2023
As at
31 December
2022
|
1.00% Increase
£'000
|
1.00% Decrease
£'000
|
0.50% Increase
£'000
|
0.50% Decrease
£'000
|
Private loans investments
|
873
|
(873)
|
1,122
|
(1,122)
|
Bond investments
|
37
|
(37)
|
42
|
(42)
|
Equity investments
|
30
|
(30)
|
36
|
(36)
|
Cash and cash equivalent
|
78
|
(78)
|
30
|
(30)
|
Total
|
1,018
|
(1,018)
|
1,230
|
(1,230)
|
Management of
risks
The Company aims to conduct an
orderly realisation of the assets of the Company, to be effected in
a manner that seeks to achieve a balance between returning cash to
Shareholders promptly and maximising value.
(iv) Liquidity
risks
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 cash and cash equivalent balance at the year end was £7,791,000
(2022: £2,993,000).
Financial liabilities by maturity at the period end are shown below:
|
|
|
31 December 2023
£'000
|
31 December 2022
£'000
|
Within one month
|
-
|
-
|
Between one and
three months
|
598
|
2,038
|
Between three months and one year
|
-
|
-
|
More than one year
|
4,578
|
17,541
|
Total
|
5,176
|
19,579
|
Notwithstanding the contractual
maturity of the credit facilities, which is 26 March 2024, the
loans have been presented as a current liability in the statement
of financial position which reflects management's intentions to use
the facilities for liquidity purposes and not long term gearing of
the Company.
The Investment Manager manages the
Company's liquidity risk by investing in a diverse portfolio of
loans and secured debt instruments in line with the Company's
Investment Policy and Investment restrictions. The Investment
Manager may utilise other measures such as borrowing, share issues
including treasury shares for liquidity purposes. The Investment
Manager performs stress tests on the Company's income and expenses
and the Directors, and the Manager remain comfortable that the
Company has substantial operating expenses cover and adequate
liquidity.
The maturity profile of the
Company's portfolio as at the year-end is as follows:
|
|
|
31 December 2023
£'000
|
31 December 2022
£'000
|
Within one month
|
1,700
|
-
|
Between one and
three months
|
-
|
-
|
Between three months and one year
|
26,927
|
-
|
More than one year
|
65,305
|
119,970
|
Total
|
93,932
|
119,970
|
(v) Foreign
currency risks
Foreign currency risk is the risk
that the value of a financial instrument will fluctuate because of
changes in foreign currency exchange rates. Currency risk arises
when future commercial transactions and recognised assets and
liabilities are denominated in a currency that is not the Company's
functional currency. The Company invests in debt security
instruments 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.
Based on the financial assets and
liabilities at 31 December 2023 and all other things being equal,
if sterling had weakened against the local currencies by 10%, the
impact on the Company's net assets at 31 December 2023 would have
been as follows:
|
31 December 2023
£'000
|
31 December 2022
£'000
|
Euro
|
266
|
230
|
Total
|
266
|
230
|
Foreign currency
risk
profile
|
|
31 December 2023
|
|
|
31 December 2022
|
|
Investment
|
Net monetary
|
Total currency
|
Investment
|
Net monetary
|
Total currency
|
exposure
|
exposure
|
exposure
|
exposure
|
exposure
|
exposure
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
Euro
|
2,362
|
302
|
2,664
|
2,087
|
214
|
2,301
|
US dollar
|
-
|
7
|
7
|
-
|
7
|
7
|
Total
|
2,362
|
309
|
2,671
|
2,087
|
221
|
2,308
|
Management of currency risks
The Company's Investment Manager
monitors the currency risk of the Company's portfolio on a regular
basis. Foreign currency exposure is regularly reported to the Board
by the Investment Manager. The Investment Manager may hedge any
currency back to sterling as they see fit.
Fair values of financial assets and
liabilities
All financial assets and
liabilities of the Company are either recorded at fair value in the
statement of financial position, or, where they are recorded at
amortised cost, such carrying amounts are a reasonable
approximation of fair value.
Capital management
The Company considers its capital
to consist of its share capital of Ordinary Shares of 1 pence each,
its distributable reserves, which comprise Revenue reserve, Capital
reserve and the Special reserve. In accordance with accounting
standards, the Company's Ordinary Shares are considered to be
equity.
The Company has a stated discount
control policy. The Investment Manager and the Company's brokers
monitor the demand for the Company's shares and the Directors
review the position at Board meetings. Further details on share
issues during the year and the Company's policies for issuing
further shares and buying back shares (including the Company's
discount management) can be found in the Directors'
Report.
During the year the Company bought
back 50,000 shares (2022: 204,629) which are held in treasury. The
Company's policy on borrowing is detailed in the Directors' Report.
The details of the Company's OakNorth facilities are discussed in
note 11.
20. Post balance
sheet events
Dividend Declaration
On 29 February 2024, the Company
declared a dividend of 1.625 pence per ordinary share in respect of
the period from 1 October 2023 to 31 December 2023 to shareholders
who appear on the register on 8 March 2024. The ex-dividend date is
7 March 2024. This was paid on 2 April 2024.
Legal Claim
The Company has been pursuing a
legal claim against the former main contractor of a 79 bed student
accommodation based in Coventry since September 2022. This was
undertaken via an adjudicator (or circa 1 pence per ordinary
share), with circa 90% of said sums now having been received in
cleared funds. As of January 2024, the Company has received
proceeds totalling £823,980.
Investment Manager's Holdings
On 28 February 2024 RM Capital
Markets Limited (the "Investment Manager") acquired 52,211 Ordinary
Shares at a price of 76 pence per share. Following the purchase,
the Investment Manager's total holding of Ordinary Shares was
1,381,336.
Alternative Performance Measures ("APMs")
APMs are often used to describe
the performance of investment companies although they are not
specifically defined under IFRS. APM calculations for the Company
are shown below.
Gearing
A way to
magnify income
and capital
returns, but
which can
also magnify
losses. A
bank loan
is a common method of gearing.
|
|
31 December 2023
£'000
|
31 December 2022
£'000
|
Bank Loan - Credit facility
|
|
|
-
|
17,271
|
Total borrowings
|
|
|
-
|
17,271
|
Cash and cash equivalents
|
|
|
7,791
|
2,993
|
Total borrowings less cash and cash equivalents
|
a
|
|
(7,791)
|
14,278
|
Net assets
|
b
|
|
104,516
|
108,805
|
Gearing(net)
|
(a÷b)*100
|
|
nil
|
13.1%
|
Gross asset
The Company's gross assets comprise the net asset values of the Company's Ordinary Shares, and the Bank loan breakdown as follows:
As at 31 December
2023
|
|
|
£'000
|
Per Share (Pence)
|
Ordinary Shares -
NAV
|
a
|
|
104,516
|
88.88
|
Bank Loan - Credit facility
|
c
|
|
-
|
-
|
Gross asset value
|
a+b+c
|
|
104,516
|
n/a
|
As at 31 December
2022
|
|
|
£'000
|
Per Share (Pence)
|
Ordinary Shares -
NAV
|
a
|
|
108,805
|
92.49
|
Bank Loan - Credit facility
|
c
|
|
17,271
|
-
|
Gross asset value
|
a+b+c
|
|
126,076
|
n/a
|
Ongoing charges
A measure, expressed
as a percentage of average net assets, of the regular, recurring annual costs of running an investment company.
Year ended
31
December 2023
|
|
|
|
Average NAV (£'000)
|
a
|
|
107,826
|
Annualised recurring expenses*
|
b
|
|
1,984
|
|
b÷a
|
|
1.84%
|
Year ended
31
December 2022
|
|
|
£'000
|
Average NAV (£'000)
|
a
|
|
111,126
|
Annualised recurring expenses*
|
b
|
|
2,067
|
|
b÷a
|
|
1.86%
|
*
Consists of investment management fees of £944,000
(2022: £971,000) and other recurring expenses of £1,040,000
(2022:£1,096,000). Prospectus issue and capital transactions are not considered to be
recurring costs and therefore have not
been included.
(Discount)/premium
|
|
|
The amount, expressed as a percentage, by which the share price is (less)/more than the NAV per
share.
|
|
As at 31 December
2023
|
|
|
NAV per Ordinary Share (p)
|
a
|
88.88
|
Share price (p)
|
b
|
74.25
|
Discount
|
(b/a)-1
|
(16.46%)
|
As at 31 December
2022
|
|
|
NAV per Ordinary Share (p)
|
a
|
92.49
|
Share price (p)
|
b
|
85.00
|
Discount
|
(b/a)-1
|
(8.1%)
|
Total return
A measure of performance that
includes both income and capital returns. This takes into account
capital gains and reinvestment of dividends paid out by the Company into its Ordinary Shares on the
ex-dividend date.
As at 31 December
2023
|
|
|
NAV
|
Share Price
|
Opening at 1 January 2023 (p)
|
a
|
|
92.49
|
85.00
|
Closing at 31 December 2023 (p)
|
b
|
|
88.88
|
74.25
|
Dividend payment
|
c
|
|
1.0731
|
1.0918
|
Adjusted closing (d = b x c)
|
d
|
|
95.38
|
81.06
|
Total return
|
(d/a)-1
|
|
3.16%
|
(4.63%)
|
As at 31 December
2022
|
|
|
NAV
|
Share Price
|
Opening at 1 January 2022 (p)
|
a
|
|
94.41
|
95.00
|
Closing at 31 December 2022 (p)
|
b
|
|
92.49
|
85.00
|
Dividend adjustment factor
|
c
|
|
1.0715
|
1.1588
|
Adjusted closing (d = b x c)
|
d
|
|
99.1
|
98.5
|
Total return
|
(d/a)-1
|
|
5.0%
|
3.7%
|
FINANCIAL INFORMATION
This announcement does not constitute the
Company's statutory accounts. The financial information is derived
from the statutory accounts, which will be delivered to the
registrar of companies and will be put forward for approval at the
Company's Annual General Meeting. The statutory accounts for the
year ended 31 December 2023 have been delivered to the registrar of
companies. The auditors have reported on the accounts for the year
ended 31 December 2023 and the year ended 31 December 2022, their
reports were unqualified and did not include a statement under
Section 498(2) or (3) of the Companies Act 2006.
The Annual Report for
the year ended 31 December 2023 was approved on 22 April
2024. It will be made available on the Company's website
at
https://rm-funds.co.uk/rm-infrastructure-income/investor-relations/
The Annual Report will be
submitted to the National Storage Mechanism and will shortly be
available for inspection at: https://data.fca.org.uk/#/nsm/nationalstoragemechanism
This announcement contains regulated
information under the Disclosure Rules and Transparency Rules of
the FCA.
ANNUAL GENERAL MEETING
The Annual General Meeting will be
held on 30 May 2024 at 10:00 a.m. at 6th Floor, 125 London Wall,
London, EC2Y 5AS.
For further
information contact:
Jennifer Thompson
Apex Listed Companies Services
(UK) Limited
Tel: 020 3327 9720