REG - RM Infrastructure RM SecDirect - RMDC - Final Results
26/04/2023 07:00
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RNS Number : 4463X RM Infrastructure Income PLC 26 April 2023
RM INFRASTRUCTURE INCOME PLC
(the ''Company'' or "RMII")
ANNUAL REPORT AND ACCOUNTS
For the year ended 31 December 2022
LEI: 213800RBRIYICC2QC958
About us
RM Infrastructure Income plc ("RMII" or the "Company") aims to generate
attractive and regular dividends through investment in secured debt
instruments of UK Small and Medium sized Enterprises ("SMEs") and mid-market
corporates including any loan, promissory notes, lease, bond, or preference
share (such debt instruments, 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 £126.1 million invested
across 37 loans and one wholly owned asset, across 12 sectors and 16
sub-sectors
· RM Funds further accreditation by the British Business Bank as an
accredited lender for the RLS with RMII as a funding partner: 28% of the
portfolio invested into partially government guaranteed CBILS & RLS
eligible loans
· Approximately 59.1% of the portfolio NAV is committed to Social &
Environmental Infrastructure sectors reflecting an increase of 8.3% over 2022,
with a strong pipeline and expectation that further allocations to these areas
in 2023 will continue to increase as the portfolio's maturing investments are
recycled within those core sectors
· A short dated, high yielding portfolio that has outperformed many
other fixed income comparables during 2022
Financial highlights
Financial information Year ended Year ended
31 December 2022
31 December 2021
Gross asset value (£'000)1 £126,076 £130,821
Net Asset Value ("NAV") (£'000) £108,805 £111,250
NAV per Ordinary Share (pence) 92.49p 94.41p
Ordinary Share price (pence) 85.00p 95.00p
Ordinary Share price (discount)/premium to NAV1 (8.1%) 0.6%
Ongoing charges1 1.86% 1.92%
Gearing (net)1 13.1% 14.6%
Performance summary
% change2,4 % change3,4
Total return - Ordinary Share NAV and dividends1 +5.0% + 7.6%
Total return - Ordinary Share price and dividends1 +3.7% + 16.7%
1. These are Alternative Performance Measures ("APMs").
2. Total returns for the year to 31 December 2022, including dividend
reinvestment.
3. Total returns for the year to 31 December 2021, including dividend
reinvestment.
4. Source: Bloomberg
As at 20 April 2023, the latest date prior to the publication of this
document, the Ordinary Share price was 79p per share and the latest published
NAV was 92.10p per share as at 31 March 2023.
Alternative Performance Measures ("APMs")
The financial information and performance summary data highlighted in the
footnote to the above tables are considered to represent APMs of the Company.
Portfolio (as at 31 December 2022)
Largest 10 loans by drawn amounts across the entire portfolio
Business activity Investment type Valuation(+) Percentage of
(Private/Public/Bond)
£'000
gross asset (%)
Asset finance Private Loans 12,690 10.10
Hotel Private Loans 9,630 7.60
Automotive parts manufacturing Private Loans 8,410 6.70
Care home Private Loans 8,118 6.40
Gym franchise Private Loans 7,820 6.20
Hotel Private Loans 5,479 4.30
Student Accommodation Private Loans 4,955 3.90
Care home Private Loans 4,943 3.90
Hotel Private Loans 4,589 3.60
Healthcare Bond 4,429 3.50
Ten largest holdings 71,063 56.20
Other private loan investments 41,105 32.70
Wholly owned asset 3,593 2.90
Bond investments 4,208 3.30
Total holdings 119,969 95.10
Other net current assets 6,110 4.90
Gross assets* 126,079 100.00
*the Company's gross assets comprise the net asset values of the Company's
Ordinary Shares and the Bank loan.
(+)Valuation conducted by external Valuation Agent
Full portfolio (as at 31 December 2022)
Loan Borrower Deal type Sector Business Nominal (£) Market Valuer Payment
ref#
name
description
value (£)
88 Private Loan - SPV Bilateral Loan Healthcare Care home 12,833,220 12,689,910 V Agent Cash
39 Beinbauer Syndicated Loan Manufacturing Auto Parts Manufacturer 9,663,522 9,629,584 V Agent PIK/Cash
66 Private Loan - SPV Bilateral Loan Hotel & Leisure Hotel 8,504,440 8,410,122 V Agent Cash
60 Private Loan - SPV Bilateral Loan Asset Backed Lending Asset Backed Lending 8,193,916 8,117,971 V Agent Cash
76 Gym Franchise Bilateral Loan Healthcare Health and Well-being 7,962,055 7,820,003 V Agent Cash
67 Private Loan - SPV Bilateral Loan Hotel & Leisure Hotel 5,540,560 5,479,113 V Agent Cash
15 Voyage Care Bond Healthcare Specialist Care 5,000,000 4,208,334 External Cash
80 Private Loan - SPV Bilateral Loan Hotel & Leisure Hotel 5,000,000 4,085,178 V Agent Cash
82 Private Loan - SPV Bilateral Loan Healthcare Care home 5,000,000 4,954,904 V Agent Cash
86 Private Loan - SPV Bilateral Loan Hotel & Leisure Hotel 5,000,000 4,942,918 V Agent Cash
89 Private Loan - SPV Bilateral Loan Accommodation Student accommodation 5,000,000 4,589,466 V Agent Cash
79 Private Loan - SPV Bilateral Loan Construction Construction 4,500,000 3,676,660 V Agent Cash
61 Private Loan - SPV Bilateral Loan Asset Backed Lending Asset Backed Lending 4,469,939 4,428,509 V Agent Cash
12 Private Loan - SPV Bilateral Loan Accommodation Student accommodation 4,422,500 4,422,500 V Agent Cash
73 Private Loan - SPV Bilateral Loan Hotel & Leisure Hotel 4,000,000 3,938,378 V Agent Cash
84 Private Loan - SPV Bilateral Loan Accommodation Student accommodation 4,000,000 3,958,630 V Agent Cash
68 Equity Equity Accommodation Student accommodation 3,600,000 3,592,800 V Agent N/A
62 Trent Capital Bilateral Loan Energy Efficiency Energy Efficiency 3,011,643 2,859,658 V Agent PIK
83 Private Loan - SPV Bilateral Loan Healthcare Care home 2,796,462 2,771,240 V Agent Cash
92 Private Loan - SPV Bilateral Loan Hotel & Leisure Hotel 2,458,629 2,008,787 V Agent Cash
58 Private Loan - SPV Bilateral Loan Hotel & Leisure Hotel 2,401,638 1,746,076 V Agent PIK
95a Private Loan - SPV Bilateral Loan Childcare & Education Childcare 2,381,061 2,376,299 V Agent Cash
71 Euroports Syndicated Loan Transport Assets Ports business 1,770,695 1,664,453 External Cash
69 Private Loan - SPV Bilateral Loan Hotel & Leisure Hotel 937,500 889,924 V Agent Cash
74 Private Loan - SPV Bilateral Loan Accommodation Student accommodation 930,000 915,870 V Agent Cash
87 Private Loan - SPV Bilateral Loan Commercial Property Restaurant 782,623 773,253 V Agent Cash
96 Private Loan - SPV Bilateral Loan Manufacturing Other Manufacturing 700,000 695,881 V Agent Cash
63 Trent Capital (Fusion) RF Bilateral Loan Energy Efficiency Energy Efficiency 699,545 199,972 V Agent PIK
76.1 Gym Franchise Bilateral Loan Healthcare Health and Well-being 660,838 649,048 V Agent PIK
97a Private Loan - SPV Bilateral Loan Healthcare Care home 680,460 680,460 V Agent Cash
78 Private Loan - SPV Bilateral Loan Energy Efficiency Energy Efficiency 500,000 398,748 V Agent Cash
81 Private Loan - SPV Bilateral Loan Finance Wealth Management 500,000 494,848 V Agent Cash
95b Private Loan - SPV Bilateral Loan Childcare & Education Childcare 476,212 475,260 V Agent Cash
91 Private Loan - SPV Bilateral Loan Childcare & Education School 450,000 450,000 V Agent Cash
97b Private Loan - SPV Bilateral Loan Healthcare Care home 420,115 420,115 V Agent Cash
94a Gym Franchise Bilateral Loan Healthcare Health and Well-being 286,391 276,920 V Agent Cash
52 Private Loan - SPV Bilateral Loan Clean Energy Renewable heat incentive 165,121 164,256 V Agent Cash
9 Private Loan - SPV Bilateral Loan Clean Energy Renewable heat incentive 114,218 113,604 V Agent Cash
Total 125,813,302 119,969,650
MARKET
Market environment
A very challenging macro environment persisted throughout the year. The key
driver was inflationary pressure which was exacerbated by the Russian invasion
of Ukraine in the spring. Central banks then started their tightening phase
with the Bank of England raising interest rates 9 times during the year to the
highest levels seen in 14 years. Credit spreads were also volatile with two
spikes during the year seen after the initial days of the Russian invasion and
then after the poorly received "mini-budget" in September. In conjunction with
widening credit spreads underlying government bond yields rose dramatically
with 5 year UK Gilt yields rising from 0.80% to finish the year at circa 3.6%,
280bps higher. This caused fixed income as an asset class to have a very poor
year as the absolute level of spread and yield widening from such a low
initial base meant that any instrument with duration and any credit exposure
saw material declines in value.
Market opportunities
The focus of the strategy remains on relatively short-dated lending. The
widening seen over the last 12 months in credit spreads combined with the
increase in underlying UK Gilt yields means there are opportunities to
increase the coupons charged. Such new lending is also targeting senior
secured loans thus seeking to improve the overall credit quality of the
portfolio.
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 2022.
This year marks the sixth year since the Company's Initial Public Offering
("IPO") on the London Stock Exchange in December 2016 and was particularly
challenging given significant movements seen in credit and interest rate
markets. The rise in energy prices over parts of the year, due to the Russian
invasion of Ukraine, was staggering and it is welcome that we are now seeing
prices normalise, albeit at elevated levels. Further pressure was put on the
UK gilt market in late September by the "mini-budget" and risk-free rates, as
represented by UK government bond yields, rose significantly. Our portfolio
was structured to mitigate against such interest rate risk, and it is
therefore very pleasing to see significant outperformance of the share price
percentage total return versus more liquid loan and bond market benchmarks.
The year saw the Net Asset Value ("NAV") per Ordinary Share of the Company
fall slightly as fair value markdowns were taken during the period. As in 2020
during the Covid period, we believed it was sensible to take fair value
markdowns given the heightened levels of risk and the increase in risk free
rates as well as credit spreads over the year. Our expectations are that some
of these fair value markdowns, will be released during 2023 as the Investment
Manager has made good progress with the enhanced monitoring loans, which have
reduced over the period from three to one.
Income generation and NAV performance
In the six years since listing, the Company has returned to Shareholders
37.225 pence per Ordinary Share in dividends which have been entirely covered
by earnings. During 2022 the dividend was covered by 0.975x with income, and
we dipped into accrued revenue reserves in order to pay the dividend. This
dividend cover is forecast to increase, as a higher net interest income from
the portfolio is expected during 2023. Given the increase in government bond
yield and credit spreads the Company can now make new loans at higher coupon
rates which will feed through into higher gross revenue. This means that
absent of any increase in credit losses, the Company is seeking to pay a
higher dividend than the previous stated target of 6.5 pence per Ordinary
Shares for 2023 and beyond whilst these favourable conditions persist. The
current range that the Investment Manager is indicating to the Board is that
there will be sufficient income to pay a dividend of at least 7 pence per
Ordinary Share which will equate to a current yield of 8.24% versus the year
end share price.
On the 1 March 2023, the Company declared a fourth interim dividend for the
year of 1.625 pence per Ordinary Share paid on the 31 March 2023, thus total
dividends of 6.5 pence per Ordinary Share were paid for the year ended 31
December 2022.
At 31 December 2022, the published NAV per share was 92.49 pence per Ordinary
Share (31 December 2021: 94.41 pence). The NAV percentage per Ordinary Share
Total Return for the year was +5.0% (2021: 7.6%) and annualised over 2021 and
2022 gives a +6.29% per annum NAV Total Return. Since inception the NAV
percentage Total Return on an annualised basis has been +5.49%.
Returns to Shareholders
The closing mid-market share price on 31 December 2022 was 85 pence per
Ordinary Share compared with 95 pence per Ordinary Share as of 31 December
2021. The 10 pence per Ordinary Share decrease, combined with dividends, means
the total percentage share price return for the year was +3.75% (2021: +16.7%
and since IPO to date +24.74%).
On 31 December 2022, the share price discount to NAV was 8.1% which is
slightly higher than the 6% maximum target and as a result there were share
buy backs conducted in December totalling 204,629 Ordinary Shares all of which
were bought back at 85 pence per Ordinary Share. After the period end a
further 50,000 shares were bought back at 85.5 pence per Ordinary Share. Over
the life of the Company a total of 4,638,222 Ordinary Shares have been
acquired through buy backs, all which are held in treasury. It is our target
during 2023 and the medium term to regain the premium rating of the shares to
NAV; and then the Company will divest these treasury shares at a premium to
NAV.
Portfolio overview
The overall portfolio size remained largely unchanged during the year, closing
out at £126 million of invested capital (2021: £131 million) across 37 loans
and 1 wholly owned asset (2021: 34 loans and 1 wholly owned asset).
Six new loans were made during the year, alongside further drawdowns from
existing facilities, and there were repayments and divestments totalling
c.£26m. The weighted average life of the portfolio reduced from 2.3 years to
1.5 years which is reflective of the desire to keep duration relatively short,
providing the optionality to redeploy capital at higher yields. The average
yield of the portfolio increased by 67bps, rising from 8.54% to 9.21%.
Overall, the credit quality of the portfolio improved as the above- mentioned
capital received from repayments and divestments which was invested equally
between senior secured and junior secured investments was redeployed entirely
in senior secured investment loans. Further, these new investment loans
generate an additional c.300bps which will increase the dividend cover in the
near to medium term. The Investment Manager's report will go into further
detail, however, it is pleasing to note that out of the three borrowers that
were on the enhanced monitoring list as of the start of the year, two have
reached successful resolutions with only one remaining. The Investment Manager
is also seeking to monetise the equity stake in Energie Fitness which was
received during the restructuring of the business post the initial Covid wave
in 2020. This was always scheduled to be a 3-year investment horizon and
despite a delayed real start due to extra lockdowns I am pleased to report
that this objective is broadly on track.
During the year the Board took the opportunity, when Covid restrictions were
relaxed, to visit several of the projects funded by Shareholders. In July the
Directors visited Trianco (Trent), an energy efficiency manufacturer based in
Rotherham and spent several hours with management, discussing the business and
touring the factory.
Since the Company was launched in 2016, when we were able, the Board has made
an annual visit to RM Funds' offices in Edinburgh to meet with staff and
members of the investment committee who are responsible for finding and
vetting opportunities. This year we took the opportunity to visit the
development at Clyde Street in Glasgow and meet the site managers before going
on to Edinburgh.
In January 2023 the Board made visits to Southport and Lytham to visit two
purpose-built care homes managed by Athena Healthcare Group. These two care
homes provide 277 beds and will help to address the significant shortfall in
adequate bed capacity for the UK's elderly population.
The Board then travelled to Milton Keynes to visit the head office of Energie
Fitness to discuss the company's performance and strategy. The Board also had
the opportunity to visit two gym franchisees nearby, one being the first
franchisee to have opened nearly 18 years ago and the second one being a
recently opened franchise.
In all cases the Directors were impressed by the level of professionalism of
all the managers of each of the businesses, their enthusiasm and the
relationship they have with RM Funds. In 2023 the Board intends to visit many
more of the projects funded by 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.
The Board and the Investment Manager seek to understand and report to
investors on the impact their capital has made to society and the planet. We
have therefore engaged The Good Economy ("TGE") as the impact reporting and
assurance partner for RMII. The first Impact Report was released in the Spring
of 2022 (www.rm-funds.co.uk/
(http://www.rm-funds.co.uk/responsible-investing-4/responsible-investing-3/)
responsible-investing-4/responsible-investing-3/
(http://www.rm-funds.co.uk/responsible-investing-4/responsible-investing-3/) )
and the second impact report is scheduled for release during Q2 of 2023.
The Company will continue to target social good, and it is pleasing to see new
transactions being committed to over the period contained
sustainability-linked lending covenants which incentivise the borrower to
achieve social and environmental outcomes as measured against specific
objectives for each loan.
Outlook
Due to the increase in credit spreads and higher government bond yields the
Investment Manager is making new loans at higher levels increasing the average
portfolio yield. The portfolio average yield rose by 67bps over 2022 and this
is set to rise further over 2023 thus generating additional net interest
income. We therefore expect this to increase the level of dividend cover
allowing for higher distributions absent of an increase in credit losses.
We are therefore seeking to target distribution for 2023 to be at least 7
pence per Ordinary Share which is a 7.7% increase in income for Shareholders
over the distributions received in 2022. Using the share price at the time of
writing of 84 pence per share this would equate to a dividend yield more than
8.33% and represents an increase of 68bps over the dividend yield of 7.65%
based on the closing share price as at 31 December 2022.
Over the course of the financial year, the Company has operated in very
challenging conditions. The discount levels at which our shares have traded at
have been a function of rising yields. We recognised the issues and are
seeking to address them by increasing the portfolio yield to higher, more
attractive levels. Given our portfolio and the market backdrop in which we
operate, this will naturally take some time. As detailed above, we expect the
income yield paid to Shareholders to be higher than previously paid and we
hope this increases the attractiveness of the shares, goes some way to
addressing the discount we currently trade at and help restore the premium
rating I targeted in last year's report. Notwithstanding that, on the 12 May
2021 the Company announced that if the shares trade at more than an average of
zero percent discount for the six-month period to 31 March 2023, that a
liquidity consultation process will take place prior to the AGM to be held on
30 May 2023.
In preparing the financial statements we have considered the upcoming
liquidity opportunity consultation. As this consultation will not conclude
until after the approval of these financial statements it means that there is
material uncertainty over the going concern of the Company. The Board will
honour that commitment and our brokers will consult with Shareholders shortly.
We hope that Shareholders can take a longer-term view, recognise the increased
dividend target, see the value within the portfolio and allow the Investment
Manager to continue to invest in attractive opportunities on your behalf.
I look forward to continued engagement with Shareholders. Please do not
hesitate to contact me through our brokers Singer Capital Markets or Peel Hunt
if any additional information is required.
Norman Crighton
Chair
25 April 2023
INVESTMENT MANAGER'S REPORT
Strong and sustainable NAV & income performance
Over the course of the year, the portfolio generated a NAV Total Return of
4.98%, with total dividend distributions attributable to Shareholders for the
year totalling 6.5 pence per Ordinary Share. Overall, the NAV per Ordinary
Share decreased from 94.41 pence per Ordinary Share at 31 December 2021 to
92.49 pence per Ordinary Share at 31 December 2022. Over the past two years
from January 2021 the Company has generated annualized NAV percentage Total
Returns of 12.98% per annum and since IPO 5.49%, demonstrating the stable
income and capital preservation which the Company is seeking to deliver for
Investors.
Following the year end, an interim dividend in respect of the period from 1
October 2022 to 31 December 2022 was declared on 1 March 2023 and was paid to
Shareholders on the 31 March 2023. These dividends totalling 6.5 pence per
Ordinary Share for the year ended 31 December 2022 bring the total
distributions since the Company's launch in December 2016 to 37.225 pence per
Ordinary Share, exceeding the target set at IPO.
The portfolio yield increased by 72bps over the period and this increase is
expected to continue over 2023 as any new loans are made with higher coupons.
The Investment Manager has recommended to the Board that, absent of any
increase in credit losses, the dividend can be increased to at least 7 pence
per share for the period of 2023 and beyond if these favourable lending
conditions persist.
Financial performance
Total income of £10.8m (2021: £11.2m) was marginally ahead of budget whilst
expenses at £2.20m were marginally below budget leading to a profit before
interest and tax of £8.6m, £429,000 ahead of budget. Set against this
OakNorth Bank RCF costs were higher than budget with high utilisation combined
with an increase in the cost of funds due to Bank of England Base Rate
increases. Overall this led to a Profit after Interest cost that was £172,000
behind budget, a negative variance of 2.2% to budget. Given the challenging
year and the provisions recorded versus income recognition the Investment
Manager believes this is a satisfactory result.
The split between cash interest and Payment-in-Kind interest was respectively
£7.9m and £2.8m, or 74% / 26%. To note that the way construction facilities
were underwritten during the reporting period, meant that drawdown under the
allocated interest reserve accounts were considered PIK interest, which
optically looks less favourable than in previous years, though providing
significant benefits regarding the running yield on committed construction
facilities. When these above-mentioned construction facilities are removed
from the analysis, then the Cash / PIK split looks more favourable versus
2021.
For the year ended 31 December 2022
Income £10,768,337
Total expenses (£2,201,431)
Finance costs (£1,102,169)
Total £7,464,737
Dividends (£7,655,526)
Loss after interest costs & before tax (£190,789)
There were four dividends paid or declared in respect of the year ended 31
December 2022 totalling 6.5 pence per Ordinary Share.
Period Payment date Dividend proceeds
Q1 2022 24 June 2022 £1,914,916
Q2 2022 30 September 2022 £1,914,916
Q3 2022 30 December 2022 £1,914,916
Q4 2022 31 March 2023 £1,910,778
During the year ended 31 December 2022, £376,949 was treated as income but
written down as a bad debt provision, thus not included in the 2022 revenue
line item. This provision was taken because the timing of the income receipt
is uncertain and there is uncertainty over the recoverability of such income.
In total the Company balance sheet now has £1.159m of income provisions.
Share price performance
Negative share price performance combined with the widening of the share price
premium to NAV from 0.6% at the year ended 31 December 2021 to -8.10% at the
year ended 31 December 2022 meant that there was a negative share price total
return of -3.75%. Since IPO the Total percentage share return achieved is
24.74% which is annualised since inception at 3.81% per annum.
This performance needs to be set against the wider negative market backdrop
for fixed income and comparables to the broader sector peers.
Market environment
In the 2021 annual report outlook we noted "as we look into 2022 it is likely
that there will be further upwards pressure on government bond yields as
inflationary pressures remain and central banks move into a tightening
phase… negative outlook for general fixed income markets… credit spreads
will likely move wider over the coming year." All of this played out over the
course of 2022 which was indeed a very difficult environment for credit,
rates, and equities. The RMII portfolio was appropriately positioned with
short duration exposure that minimised these wider credit spreads and higher
underlying government bond yields.
The ITRX Markit Crossover index widened from circa 250 to nearly 700 post the
mini budget in September and ended the year materially wider than where it
started at circa 450. 2-year UK government bond yields started the year
comfortably under 1% and peaked at over 4.5% in late September and closed out
the year at over 3.5%.
The RMII portfolio did not suffer the volatility seen within these markets,
however general fair value mark downs were taken during the year to reflect
the widening in credit spreads and the increase in government bond yields.
Portfolio performance
Portfolio credit metrics improved over the year as measured by the proportion
of senior loans and CBILS/RLS versus junior debt. As at the year end the
portfolio was 63% invested within these types of loans versus 61% at the year
ended 31 December 2021. The average life of the loan book reduced to 1.5 years
as at the year-end (2021: 2.3 years) reflecting the continued strategic
decision for the duration of the portfolio to remain as short as practically
possible. As described on the last annual report such short duration minimises
exposure to these continued inflationary pressures described above and is a
key reason why RMII should offer an attractive proposition as an alternative
credit investment versus more traditional corporate bond funds that typically
are lower yielding with longer durations.
As at 31 December 2022, the overall number of loans within the portfolio
remained relatively stable with 37 loans and 1 wholly owned asset (2021: 34
loans and 1 wholly owned asset) and total invested capital of £126m (2021:
£131m).
The weighted average yield of the portfolio stood at 9.21% as at 31 December
2022, which is a 67bps uplift versus the previous year of 8.54% as at 31
December 2021. This has been driven by the Company's ability to redeploy loan
repayments into higher yielding investments, with new loans over the year
earning an additional c.300bps versus the repaid loans. As most of these new
investments were made in the second half of 2022 and is ongoing, investors
should see the full effect over the course of 2023.
It was an active year for the portfolio with new investments totalling
c.£5.6m, drawdowns to existing facilities and re-investments totalling
c.£15.5m and several repayments and divestments that totalled c.£26m during
the year.
During the year, the Company completed on its first ESG sustainability- linked
investment via a c.£6.2m senior secured investment for the construction of a
45-bed modern purpose-built care home near London. The loan contains a margin
ratchet, which is linked to environmental building standards, and operational
and governance conditions which align with the Company's ESG reporting
framework and its desire to address certain sustainable development goals.
Going forward and where applicable, the Company will look to further introduce
sustainability and other ESG considerations linkage to the applicable margin.
The Company has contributed meaningfully to the provision of modern, purpose
built and fit for purpose aged care capacity as two new sites in the northwest
of England totalling 277 beds, funded by RMII were satisfactorily completed or
nearing completion at the year end.
The exposure to core sectors as measured by their commitments has increased to
59.1%. as at 31 December 2022 vs 47.5% as of 31 December 2021. This inevitably
will further increase over the course of 2023 as non-core sector investments
come to maturity and are prepaid, with the most imminent one being the
Company's asset-backed investments (c.11% of capital invested as at 31
December 2022).
The Company's approach regarding the conservative valuation of its investments
remains unchanged with fair value mark downs worth approximately £5.8m or c.5
pence per Ordinary Share. These provisions are driven by what is defined as
market risk and idiosyncratic risk. For market risk during 2022 as risk free
rates rose and credit spreads widened it was sensible to widen yields across
the portfolio to reflect such public market moves. Idiosyncratic risk refers
to loan specific information which is reflected within specific loan pricing.
Over 2022 provisions were increased to reflect the wider markets and
idiosyncratic risks and this was in line with our approach during the Covid
Pandemic of 2020 - our view is that fair value mark downs are likely to
partially reverse over the course of 2023 as market conditions stabilise.
These fair value mark downs are in addition to the income provisions totalling
£1.159m, or c.1 pence per Ordinary Share, described above.
During the year the number of investments on the enhanced monitoring list
dropped from three to one, as outlined below:
1.Removed from enhanced monitoring: Trent
Capital
(Loan reference 62 & 63)
Reduced leverage with c.£2.2m recovered via revenues from residential
properties against which the Company had a secured charge with further modest
deleveraging expected over 2023. Performance wise, the operating business
Trianco has been performing profitably since the restructuring and is well
positioned to thrive on the UK's agenda to meet its net zero objectives.
Although the performance of the business has been encouraging, the full credit
provisions worth c.£0.7m, or c.0.8 pence per ordinary share have been
retained.
2.Removed from enhanced monitoring: Coventry PBSA property
(Loan reference 68)
This Coventry-based student accommodation property is fully owned by the
Company, post its lender-led administration in 2021. Cladding remedial works
have now been fully completed with occupancy at c.65% and expected near full
occupancy for the next academic year of 2023/24. Now that this has been
rehabilitated the Company is pursuing a legal claim against the former main
contractor to recover all costs and loss of income incurred to date, these
claims have not been accounted for within the NAV of RMII.
3. Still under enhanced monitoring: Hotel Development & Contractor Glasgow
(Loan reference 58, 79, 80 & 92)
This hotel was scheduled to open in June 2022 and has been delayed to April
2023 and is to be operated by Virgin Hotels under a 35-year Hotel Management
Agreement. The total market value exposure that is correlated to the outcome
of this asset is currently 10.6% of Company net assets. Credit provisions of
£2.8m or c.2.4 pence per ordinary share were made.
Responsible investing
RM Funds is a signatory to the Principles for Responsible Investment ("PRI").
The PRI defines responsible investment as a strategy and practice to
incorporate environmental, social and governance factors in investment
decisions.RM Funds incorporates ESG criteria early on as part of the
investment process and in addition there is active engagement wherever
possible with portfolio Companies to help them improve their ESG processes. In
practice this is delivered by the RM Funds Responsible Investing Investment
Policy which is integral to RM's business philosophy as we believe we can make
a difference. This policy framework applies to all investment made by RM Funds
and is governed by our principals and our commitments:
Our principles
> Respect for the internationally proclaimed human
rights principles, equal opportunity independent of gender, race or religion;
freedom of association and the right to bargain collectively;
> Working conditions that surpass basic health and
safety standards;
> The conduct of good governance practices, in
particular in relation to bribery and conflicts of
interest; and
> Environmental responsibility and responsibility to
active climate change engagement.
Our commitments
> Integrate the above principles into our
decision-making process, by carefully considering ESG issues associated with
any potential investment during the due diligence phase;
> Encourage portfolio companies to follow the above
principles by implementing governance structures that provide appropriate
level of oversight and by seeking disclosure on ESG issues;
> Provide ESG training and support to RM Fund's
employees involved in the investment process, so that they may perform their
work in accordance with the above principles and with this policy;
> Seek to be transparent in our efforts to integrate
ESG considerations in investments and annually report on progress towards
implementing the above principles;
> Comply with national and other applicable laws; and
> Help promote the implementation of the above
principles; consider our alignment with other related conventions and
standards set by Invest Europe, the UN Global Compact Initiative and the UN
Principles for Responsible Investment (PRI); continuously strive to improve
ESG performance within RM and our portfolio companies.
Investment Manager aligned to investor interests
At the IPO RM Funds purchased 500,000 Ordinary Shares and in line with the
commitment to investors made at IPO has made an ongoing commitment and by
purchasing RMII shares, the Investment Manager has shown a significant
alignment of its interests with Shareholders. In addition to this the
management team own additional shares in a personal capacity.
RM Funds has continued to purchase Ordinary Shares of the Company during the
year and at the year-end RM Funds own 1,316,625 Ordinary Shares, which is an
increase of 37,500 Ordinary Shares over the year.
Outlook for 2023
As described earlier in the report, 2022 was a very poor year for fixed income
markets. The stage is set for a better 2023 and with 2-year UK government bond
yields touching 4% and wider credit spreads and corporate bond yields look
appealing in the short end. The Company is now able to recycle its capital and
earn higher returns which absent of an increase in credit losses should allow
for greater distributions for investors. This is therefore a promising outlook
with potentially higher dividends and set against uncertain equity valuations
such a stable income and NAV as targeted by RMII should appeal to a wide
number of investors.
RM Capital Markets Limited
25 April 2023
INVESTMENT POLICY, RESULTS AND OTHER INFORMATION
Investment objective
The Company aims to generate attractive and regular dividends through
investment in secured debt instruments of UK SMEs and midmarket corporates
and/or individuals including any loan, promissory notes, lease, bond, or
preference share (such debt instruments, as further described below, being
"Loans") sourced or originated by the Investment Manager with a degree of
inflation protection through index-linked returns where appropriate.
Investment policy
The Company will seek to meet its investment objective by making investments
in a diversified portfolio of Loans to UK SMEs and mid market corporates,
special purpose vehicles and/or to individuals. These Loans will generally be,
but not limited to, senior, subordinated, uni-tranche and mezzanine debt
instruments, documented as loans, notes, leases, bonds or convertible bonds.
Such Loans shall typically have a life of 210 years. In certain limited cases,
Loans in which the Company invests may have equity instruments attached,
ordinarily any such equity interests would come in the form of warrants or
options attached to a Loan. Typically the Loans will have coupons which may be
fixed, index-linked or LIBOR linked.
For the purposes of this investment policy, UK SMEs include entities
incorporated outside of the UK provided their assets and/ or principal
operations are within the UK. The Company is permitted to make investments
outside of the UK to midmarket corporates.
Loans will be directly originated or sourced by the Investment Manager who
will not invest in Loans sourced via or participations through, peer to peer
lending platforms.
Loans in which the Company invests will be predominantly secured against
assets such as real estate or plant and machinery and/or income streams such
as account receivables.
The Company will make Loans to borrowers in a range of Market Sectors within
certain exposure limits which will vary from time to time, according to market
conditions and as determined by the Board, subject to the Investment
Restrictions set out below.
The Company will at all times invest and manage its assets in a manner which
is consistent to the spreading of investment risk.
Investment restrictions
The following investment limits and restrictions will apply to the Company's
Loans and business which, where appropriate, shall be measured at the time of
investment or once the Company is fully invested:
> the amount of no single Loan shall exceed 10% of Gross
Assets;
> exposure to a single borrower shall not exceed 10% of Gross
Assets;
> loans will be made across not less than four Market
Sectors;
> not less than 70% of Gross Assets will be represented by
Loans denominated in sterling or hedged back to sterling;
> loans made to borrowers in any one Market Sector shall not
exceed 40% of Gross Assets;
> loans with exposure to project development/construction
assets shall not exceed 20% of Gross Assets;
> the Company will not provide Loans to borrowers whose
principal business is defence, weapons, munitions or gambling;
> the Company will not provide Loans to borrowers which
generate their annual turnover predominantly from tobacco, alcohol or
pornography; and
> the Company will not invest in other listed closed-ended
funds.
In the event of a breach of the investment guidelines and restrictions set out
above, the Investment Manager shall inform the Board upon becoming aware of
the same and if the Board considers the breach to be material, notification
will be made to a Regulatory Information Service and the Investment Manager
will look to resolve the breach with the agreement of the Board.
The Company intends to conduct its affairs so as to qualify as an investment
trust for the purposes of section 1158 of the Corporation Tax Act 2010, and
its investment activities will therefore be subject to the restrictions set
out above.
Borrowing and gearing
The Company intends to utilise borrowings for investment purposes as well as
for share buybacks and short term liquidity purposes. Gearing represented by
borrowings, including any obligations owed by the Company in respect of an
issue of zero dividend preference shares (whether issued by the Company or any
other member of its group) or any third party borrowings, will not, in
aggregate exceed 20% of Net Asset Value calculated at the time of drawdown.
Hedging and derivatives
The Company may invest in derivatives for efficient portfolio management
purposes. In particular the Company can engage in interest rate hedging. Loans
will primarily be denominated in sterling, however the Company may make
limited Loans denominated in currencies other than sterling and the Board, at
the recommendation of the Investment Manager, may look to hedge any other
currency back to sterling should they see fit.
In accordance with the requirements of the UK Listing Authority, any material
change to the Company's investment policy will require the approval of
Shareholders by way of an ordinary resolution at a general meeting.
Dividend policy
Dividends are expected to be declared by the Directors in May, August,
November and February of each year in respect of the preceding quarter with
dividends being paid in June, September, December and March.
The last dividend in respect of any financial year is declared prior to the
relevant annual general meeting. Therefore, it is declared as a fourth interim
dividend and no final dividend is payable. The Board understands that this
means that Shareholders will not be given the opportunity to vote on the
payment of a final dividend. However, the Board believe that the payment of a
fourth interim dividend as opposed to a final dividend is in the best
interests of Shareholders as it provides them with regularity on the frequency
of dividend payments and avoids the delay to payment which would result from
the declaration of a final dividend. A resolution will be put forward at the
Annual General Meeting to approve the policy of declaring and paying all
dividends of the Company as interim dividends.
The Company targeted an annualised dividend yield in excess of 6.5% for the
financial year to 31 December 2022.
Investors should note that the targeted annualised dividends are targets only
and not profit forecasts and there can be no assurance that either will be met
or that any dividend growth will be achieved.
Results and dividend
The Company's revenue return after tax for the year ended 31 December 2022
amounted to £7,462,000 (2021: £7,742,000). The Company made a capital loss
after tax of £2,072,000 (2021: capital profit of £1,263,000). Therefore, the
total return after tax for the Company was £5,390,000 (2021: £9,005,000).
The first interim dividend of 1.625p per Ordinary Share was declared on 25 May
2022 in respect of the period from January to March 2022. The second interim
dividend of 1.625p per Ordinary Share for the quarter ended 30 June 2022 was
declared on 3 August 2022 and the third interim dividend of 1.625p per
Ordinary Share for the quarter ended 30 September 2022 was declared on 1
November 2022. On 1 March 2023, the Board declared a fourth interim dividend
of 1.625 pence per Ordinary Share for the quarter to 31 December 2022.
Key performance indicators ("KPIs")
The Board measures the Company's success in attaining its investment objective
by reference to the following KPIs:
(i) Dividends
A fourth interim dividend for the quarter ending 31 December 2022 of 1.625p
per share was paid to Shareholders on the 31 March 2023 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 +4.98% (2021: +7.6%) in the year ended 31
December 2022.
(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
8.1% discount (2021: premium of 0.6%) to the NAV as at 31 December 2022. To
address the discount, 204,629 shares were bought back during the year at 85
pence per share. This added 0.15 pence per Ordinary Share to the NAV.
Following the Company's year end, 50,000 shares have been bought back.
(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 2022, the Company's ongoing
charges figure calculated in accordance with the AIC methodology was 1.86%
(2021: 1.92%).
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 was particularly concerned with the
increase in geopolitical risk following the outbreak of war in the Ukraine.
The subsequent rise in global energy prices, inflation and rising interest
rates worldwide have led to a more uncertain investment environment. 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.
The principal and emerging risks, together with a summary of the processes and
internal controls used to manage and mitigate risks where possible are
outlined in the following paragraphs.
(i) Market risks
Availability of appropriate investments
There is no guarantee that loans will be made in a timely manner.
Before the Company is able to make or acquire loans, the Investment Manager is
required to complete necessary due diligence and enter into appropriate legal
documentation. In addition, the Company may become subject to competition in
sourcing and making investments. Some of the Company's competitors may have
greater financial, technical and marketing resources or a lower cost of
capital and the Company may not be able to compete successfully for
investments. Competition for investments may lead to the available interest
coupon on investments decreasing, which may further limit the Company's
ability to generate its desired returns.
If the Investment Manager is not able to source a sufficient number of
suitable investments within a reasonable time frame whether by reason of lack
of demand, competition or otherwise, a greater proportion of the Company's
assets will be held in cash for longer than anticipated and the Company's
ability to achieve its investment objective will be adversely affected. To the
extent that any investments to which the Company is exposed prepay, mature or
are sold it will seek to reinvest such proceeds in further investments in
accordance with the Company's investment policy.
Market sectors
Loans will be made to borrowers that operate in different market sectors each
of which will have risks that are specific to that particular market sector.
Valuation
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.
Management of risks
The Company has appointed an experienced Investment Manager who directly
sources loans. The Company is investing in a wide range of loan types and
sectors and therefore benefits from diversification.
Investment restrictions are relatively flexible giving the Manager ability to
take advantage of diverse loan opportunities.
For market risk during 2022 as risk free rates rose and credit spreads
widened, yields were widened across the portfolio to reflect such public
market moves.
Provisions were increased to reflect the wider market and idiosyncratic risks
and this was in line with the Company's approach during the Covid-19 pandemic
of 2020. Fair value mark downs are expected to partially reverse over the
course of 2023 as market conditions stabilise.
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 investment objective is to generate attractive and regular
dividends through investment in loans sourced or originated by the Investment
Manager and to generate capital appreciation by virtue of the fact that the
returns on some loans will be index-linked. The declaration, payment and
amount of any future dividends by the 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 well-defined investment policy and process which
is regularly and rigorously reviewed by the independent Board of Directors and
performance is reviewed at quarterly Board meetings. The Investment Manager is
experienced and employs its expertise in making investments in a diversified
portfolio of loans. The Investment Manager has a target portfolio yield which
covers the level of dividend targeted by the 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 programme.
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.
The ongoing impact of COVID-19 on the markets and the Company's financial
position continue to be monitored by the Investment Manager and the Board.
During the year under review the Committee was particularly concerned with the
increase in geopolitical risk following the outbreak of war in the Ukraine.
The subsequent rise in global energy prices, inflation and rising interest
rates worldwide have led to a more uncertain investment environment. The
Company's portfolio has no direct exposure to Russia or Ukraine and the
Company's cash position remains robust, however the impact of sanctions and
exposure via the underlying businesses of multinational companies can have a
material impact on investment returns.
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. Brokers: provide advice periodically, specific to the Company on the
Company's sector, competitors and the investment company market whilst working
with the Board and Investment Manager to communicate with Shareholders;
4. Company Secretary: 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, focussing 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, including consideration of the uncertainty resulting from the
upcoming consultation on a liquidity opportunity consultation, is given in the
Annual Report. The Investment Manger 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 Manger 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; and
> prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the Company will continue in business.
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.
Directors' responsibility statement
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
25 April 2023
FINANCIAL STATEMENTS
Company statement of comprehensive income
For the year ended 31 December 2022
Year ended 31 December
2022
Year ended 31 December 2021
Revenue Capital Total Revenue Capital Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
(Losses)/gains on investments 3 - (2,072) (2,072) - 1,263 1,263
Income 4 10,768 - 10,768 11,164 - 11,164
Investment management fee 5 (971) - (971) (1,013) - (1,013)
Other expenses 6 (1,230) - (1,230) (1,598) - (1,598)
Return before finance costs and taxation 8,567 (2,072) 6,495 8,553 1,263 9,816
Finance costs 7 (1,102) - (1,102) (797) - (797)
Return on ordinary activities before taxation 7,465 (2,072) 5,393 7,756 1,263 9,019
Taxation 8 (3) - (3) (14) - (14)
Return on ordinary activities after taxation 7,462 (2,072) 5,390 7,742 1,263 9,005
Return per ordinary share (pence) 14 6.33p (1.76p) 1.15p 6.56p 1.07p 7.63p
The total column of this statement is the profit and loss account of the
Company.
All the revenue and capital items in the above statement derive from
continuing operations.
'Return on ordinary activities after taxation' is also the Total comprehensive
income for the year.
The notes form an integral part of these financial statements.
Statement of financial position
As at 31 December 2022 As at 31 December 2021
£'000 £'000
Notes
Fixed assets
Investments at fair value through profit or loss 119,970 126,674
3
Current assets
Cash and cash equivalents 2,993
3,310
Receivables 9 5,421 2,684
8,414 5,994
Payables: amounts falling due within one year
Payables (2,308)
10 (1,847)
Bank loan - Credit facility 11 (17,271) (19,571)
(19,579) (21,418)
Net current liabilities (11,165) (15,424)
Total assets less current liabilities 108,805 111,250
Net assets 108,805 111,250
Capital and reserves: equity
Share capital
12 1,176 1,178
Share premium 13 70,168 70,168
Special reserve 44,640 44,813
Capital reserve (10,221) (8,149)
Revenue reserve 3,042 3,240
Total shareholders' funds 108,805 111,250
NAV per share - Ordinary Shares (pence) 15 92.49p 94.41p
The financial statements of the Company were approved and authorised for issue
by the Board of Directors on 25 April 2023 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 2022
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 1,178 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)
Share buy back costs - (2) - - - (2)
Transfer to capital reserves reserve - - - - - -
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
For the year ended 31 December 2021
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 1,184 70,168 45,277 (9,412) 3,167 110,384
Return on ordinary activities - - - 1,263 7,742 9,005
Buy back of shares 12 (6) 6 (464) - - (464)
Shares buy back costs - (6) - - - (6)
Dividend paid 16 - - - - (7,669) (7,669)
Balance as at 31 December 2021 1,178 70,168 44,813 (8,149) 3,240 111,250
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 2021 and 2022 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 2022
Year ended 31 December 2022
£'000 Year ended 31 December 2021
Notes £'000
Operating activities
Return on ordinary activities before finance costs and taxation* 6,495 9,816
Adjustments for movements not generating an operating cash flow:
Adjustment for losses/(gains) on investments 1,802 (823)
Adjustment to amortisation costs - 114
PIK adjustments to the operating cash flow (2,466) (2,539)
Adjustments for balance sheet movements:
(Increase)/decrease in receivables (2,737) 484
Increase/(decrease) in payables 458 (812)
Net cash flow from operating activities 3,552 6,240
Investing activities
Private loan repayments/bonds sales proceeds 25,784 56,292
Realisation of investment in subsidiary - non cash adjustment - 50
Private loans issued/bonds purchases (18,416) (44,582)
Purchase of equity investments - (5,100)
Net cash flow from investing activities 7,368 6,660
Financing activities
Finance costs (1,102) (684)
ZDP loan principal and accumulated interest paid - (12,056)
Ordinary Share bought back 12 (173) (464)
Ordinary Share buyback costs (2) (6)
OakNorth loan facility drawdown 12,550 30,071
OakNorth loan facility repaid (14,850) (21,000)
Equity dividends paid 16 (7,660) (7,669)
Net cash flow used in financing activities (11,237) (11,808)
(Decrease)/Increase in cash (317) 1,092
Opening balance at beginning of the year 3,310 2,218
Balance as at 31 December 2022 2,993 3,310
* Cash inflow from interest on investment holdings was £8,396,000 (31
December 2021: £9,561,000).
The notes form an integral part of these financial statements.
Changes in financing liabilities
Movement in financial liabilities OakNorth facility Intercompany loan OakNorth facility Intercompany loan
£'000 £'000 £'000 £'000
Balance as at beginning of the year 19,571 - 10,500 11,942
Facility drawdowns during the year 12,550 - 30,071 -
Facility interest payable during the year 1,102 - 595 -
Facility and interest repayments during the year (15,952) - (21,595) -
Intercompany finance cost- noncash flow - - - 114
Repayment of intercompany loan - - (12,056)
Balance as at 31 December 2022 17,271 - 19,571 -
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's investment objective is to generate attractive and regular
dividends through investment in secured debt instruments of UK SMEs and
mid-market corporates including any loan, promissory notes, lease, bond or
preference share sourced or originated by the Investment Manager with a degree
of inflation protection through index-linked return where appropriate.
The registered office is 6th Floor, 125 London Wall, Barbican, 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 historical basis, except for investments measured at fair value.
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 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 April 2021, 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 2022
A number of new standards, amendments to standards and interpretations are
effective for the annual periods beginning after 1 January 2022. None of these
are expected to have a significant effect on the measurement of the amounts
recognised 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: Classification of Liabilities as Current or Non-current
In January 2020, the IASB issued amendments to paragraphs 69 to 76 of IAS 1 to
specify the requirements for classifying liabilities as current or
non-current. The amendments are effective for annual reporting periods
beginning on or after 1 January 2023.
Definition of Accounting Estimates - Amendments to IAS 8
In February 2021, the IASB issued amendments to IAS 8, in which it introduces
a definition of 'accounting estimates'. The amendments are effective for
annual reporting periods beginning on or after 1 January 2023.
Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS Practice
Statement 2
In February 2021, the IASB issued amendments to IAS 1 and IFRS Practice
Statement 2 Making Materiality Judgements. The amendments to IAS 1 are
applicable for annual periods beginning on or after 1 January 2023.
(c) Going concern
The Directors have adopted the going concern basis in preparing the financial
statements. In forming this opinion, the directors continue to consider the
ongoing impact of the Covid-19 pandemic, the conflict in Ukraine that has
impacted markets throughout the world and the rise in interest rates, however
the portfolio remains well positioned through the Investment Manager's focus
on creating a portfolio of high yielding and short duration loans that do not
hold significant exposure to interest rate movements. The Board does not
believe that these situations will affect the Company's viability or going
concern status.
Material uncertainty regarding liquidity opportunity consultation
In making their assessment, the Directors have also reviewed income and
expense projections and the liquidity of the investment portfolio. The
Directors have also considered that should the Company's shares trade at an
average discount of more than zero per cent. as measured over the six-month
period commencing on 1 October 2022 and ending on 31 March 2023, the Board
will seek to bring forward a liquidity opportunity consultation by 12 months
i.e. prior to the AGM in 2023. In preparing the financial statements we have
considered the upcoming liquidity opportunity consultation. As this
consultation will not conclude until after the approval of these financial
statements means that there is material uncertainty over the going concern of
the Company. Details of the Directors assessment of the going concern status
of the Company are given in the Annual Report. The material uncertainty has
not resulted in any adjustments.
The Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for at least twelve months from
the date of this document. In reaching this conclusion, the Directors have
considered the Company's portfolio of loan investments of £120.0 million
(2021: £126.7 million) and the cash position of £3.0 million (2021: £3.3
million). The Company's net assets at 31 December 2022 were £108.8 million
(2021: £111.3 million). The total expenses (excluding finance costs and
taxation) for the year ended 31 December 2022 were £2.2 million (2021: £2.6
million), which represented approximately 1.86% (2021: 1.92%) of average net
assets during the year. At the date of approval of this document, based on the
aggregate of investments and cash held, the Company has substantial operating
expenses cover.
The Directors have concluded that there is a reasonable expectation that the
Company will have adequate liquidity and cash balances to meet its liabilities
as they fall due and continue in operational existence for the foreseeable
future and continue as a going concern for the period to 31 March 2024.
(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.
(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.
(g) Income
Interest income (cash interest) is recognised in the revenue column of the
Statement of Comprehensive Income on an effective interest rate basis.
Payment-in-kind ("PIK") interest income is recognised on an accruals basis and
capitalised to the principal value of the loan.
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.
For any income which has an uncertainty, a provision should be considered by
the Company to reflect this income as a bad debt. The income is written down
and excluded from the Profit & Loss account. This methodology ensures
large balances should not accrue with counterparties who are unable to pay.
The uncertainty is due to:
> Timing - when is this income likely to be received? If the receipt is
likely to be paid in the medium to long term due to cash flow issues with the
borrower then a provision should be considered.
> Collateral - if there is strong collateral then this provision can be
reviewed as it would increase the probability of being paid the income over
the period being considered. Should there be weak collateral then this would
reinforce the provision to be taken.
When a bad debt provision is attached to an income line item, the next step is
determining the amount of provision as a percentage of revenue due over the
period. This is reviewed on a monthly basis including discussion with
independent valuers (Mazars LLP) whether the written down amounts and
percentage used remain appropriate.
(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 at the proceeds
received net of direct issue costs and subsequently measured at amortised cost
using the effective interest rate. The associated costs of bank loan facility
are treated as revenue and amortised over the period of the bank loan
facility.
(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.
3. Investment at fair value through profit or loss
(a) Summary of valuation 31 December 2022 31 December 2021
£'000 £'000
Financial assets held:
Equity investments 3,593 3,600
Bond investments 4,208 7,346
Private loan investments 112,169 115,728
119,970 126,674
Year ended Year ended
(b) Movements 31 December 2022 31 December 2021
£'000 £'000
Opening valuation 126,674 122,705
Opening gains on investments 5,803 8,276
Book cost at the beginning of the year 132,477 130,981
Private loans issued/bonds purchased at cost 18,415 44,582
Purchase in kind interest (PIK) 2,690 3,126
Purchase of equity investments - 5,100
Sales:
- Private loans repayments/bonds sales proceeds (25,784) (48,962)
- losses on investment (298) (1,763)
- Purchase in kind interest (PIK) (224) (587)
Unrealised losses on investments held (7,306) (5,803)
Closing valuation at year end 119,970 126,674
Book cost at end of the year 127,276 132,477
Unrealised losses on investment holdings at the year end (7,306) (5,803)
Closing valuation at year end 119,970 126,674
The Company received £25.5million (2021: £49.5 million) from investments
sold in the year. The book cost of these investments when they were purchased
was £25.8million (2021: £41.6 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.
(c) Gains/(losses) on investments 31 December 2022 31 December 2021
£'000 £'000
Realised (losses)/gains on investments (298) (1,763)
Unrealised gains/(losses) on investments held (1,503) 2,473
Other capital gains 217 -
Foreign exchange gains/(losses) (488) 553
Total gains/(losses) on investments (2,072) 1,263
At the year end, the Company had three unquoted investments, these equity
investments meet the criteria within IFRS 10 as an investment entity and are
therefore held at fair value.
· 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 2022, 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 £3.6 million as at 31 December 2022 (2021: £3.6 million).
4. Income
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Income from investments
Bond and loan - cash interest 7,895 8,581
Bond and loan - PIK interest 2,767 2,277
Arrangement fees 43 102
Delayed Compensation fees received 2 19
Other income 61 185
Total 10,768 11,164
5. Investment management fee
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Basic fee:
100% charged to revenue 971 1,013
Total 971 1,013
The Company's Investment Manager is RM Capital Markets Limited. Under the
amended Investment Management Agreement, effective 1 April 2020, the
Investment Manager is entitled to receive a management fee payable monthly in
arrears or as soon as practicable after the end of each calendar month an
amount one-twelfth of;
(a) 0.875 per cent. of the prevailing NAV in the event that the prevailing NAV
is up to or equal to £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.
6. Other expenses
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Basic fee charged to revenue:
Administration Fees 226 246
Auditor's remuneration:
Statutory audit fee 161 112
Broker Fees 146 141
Consultancy Fees 72 138
Directors' Fees 99 99
AIFM fees 144 151
Registrars fees 32 41
Valuation Fees 81 87
Other Expenses 269 583
Total revenue expenses 1,230 1,598
7. Finance costs
Year ended 31 December 2022 Year ended 31 December
2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Loan arrangement fees - - - 89 - 89
Loan Interest paid 1,102 - 1,102 595 - 595
ZDP Shares finance costs - - - 113 - 113
1,102 - 1,102 797 - 797
The Company has a £10.5 million revolving credit facility with OakNorth Bank.
On 9 April 2021, the Company renewed and amended its revolving credit facility
with OakNorth Bank. Under the terms of the amended revolving credit facility,
the Company may draw down loans up to an aggregate value of £10.5 million, on
materially similar terms as the Company's previous revolving credit facility.
The revolving credit facility expires on 26 March 2024.
8. Taxation
Year ended 31 December 2022 Year ended 31 December
2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Analysis of tax charge/(credit) for the year:
Corporation tax - - - 14 - 14
Corporation tax - prior year adjustment 3 - 3
Total current tax charge (see note 6 (b)) 3 - 3 14 - 14
(b) Factors Affecting the tax charge for the year:
The effective UK corporation tax rate for the period is 19.00% (2021:19.00%).
Changes to the UK corporation tax rates were substantively enacted as part of
Finance Bill 2021 (on 24 May 2021). These include increases to the rate to 25%
from 1 April 2023.
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 2022 Year ended 31 December
2021
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Return on ordinary activities before taxation 7,465 (2,072) 5,393 7,756 1,263 9,019
UK corporation tax at 19.00% (2021:19.00%) 1,418 (394) 1,024 1,474 240 1,714
Effects of:
Fair value losses/(gains) not deductible - 394 394 - (240) (240)
Interest distributions paid/payable (1,455) - (1,455) (1,460) - (1,460)
Excess management expenses carried forward 37 - 37 - - -
Prior year adjustment 3 - 3
Total tax charge 3 - 3 14 - 14
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 2022, the Company had net surplus excess management expenses
of £194,927 (2021: £nil) 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 2022 Year ended 31 December 2021
£'000 £'000
Amounts falling due within one year:
Bond and loan interest receivable 2,372 1,603
Provided for interest 1,160 783
Loan to non-consolidated subsidiary 1,673 -
Prepayments and other receivables 216 298
Total 5,421 2,684
Provided for interest and Bad debt provisions
Provided for interest account is an interest receivable in relation to the
loans of the Company but are not guaranteed. The total amount is offset
against the bad debt provisions under the liability account (see note 10).
10. Payables
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
Amounts falling due within one year:
Loan reserves retained 270 454
Taxation payable 3 14
Bad debt provision 1,160 783
Other creditors 875 596
Total 2,308 1,847
11. Bank loan credit facilities
Year ended 31 December 2022 Year ended 31 December 2021
£'000 £'000
OakNorth Bank - Credit facilities 17,271 19,571
Total 17,271 19,571
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 £12.6 million (2021:
£30.1 million) from the revolving credit facilities and repaid cumulative
amount of £14.9 million (2021: £20.0 million). The remaining balance as at
31 December 2022 amounts to £17.3million (2021: £19.6 million).
12. Share capital
As at 31 December 2022 As at 31 December 2021
No. of Shares £'000 No. of Shares £'000
Allotted, issued & fully paid:
Ordinary shares of 1p 117,636,359 1,176 117,840,988 1,178
Share movement
The table below sets out the share movement for the year ended 31 December
2022.
Shares in issue at 31 December 2022
Opening balance Shares issued Shares bought back
Ordinary Shares 117,840,988 - (204,629) 117,636,359
At the year end, the Company has 117,636,359 Ordinary Shares in issue with
voting rights and 4,588,222 Ordinary Shares held in Treasury.
Ordinary Share buy backs
During the year, the Company bought back 204,629 (2021: 523,294) Ordinary
Shares for an aggregate cost of £173,935 (2021: £463,838). Since the year
end, 50,000 Ordinary Shares have been bought back for an aggregate cost of
£42,750.
13. Share premium
As at 31 December 2022 As at 31 December 2021
£'000 £'000
Balance as at beginning of the year 70,168 70,168
Share buybacks 2 6
Share buyback costs (2) (6)
Balance as at 31 December 2022 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 £5,390,000 (2021: gain of £9,005,000).
Based on the weighted average of number of 117,839,605 (2021: 117,976,668)
Ordinary Shares in issue for the year ended 31 December 2022, the returns per
share were as follows:
Year ended 31 December
2022
Year ended 31 December 2021
Revenue Capital Total Revenue Capital Total
Return per Ordinary Share 6.33p (1.76p) 4.57p 6.56p 1.07p 7.63p
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
£108,805,000 (2021: £112,750,000), and on 117,636,359 (2021: 117,840,988)
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.
Net assets NAV per Ordinary share (p) Net assets NAV per Ordinary share (p)
(£) (£)
2022 NAV as published on 16 January 2023
(2021 NAV: Published on 15 January 2022) 108,807,765 92.50 112,949,700 95.85
Prior year tax liability adjustments (2,852) (0.01) - -
Income adjustment - - (199,500) (0.17)
Equity revaluation adjustment - - (1,500,000) (1.27)
Share buyback adjustments - - - -
NAV as disclosed in these Financial Statements 108,804,913 92.49 111,250,200 94.41
16. Dividend
Total dividends paid in the year
Year ended 31 December 2022 Year ended 31 December 2021
Pence per Ordinary Revenue Capital Total Pence per Ordinary Revenue Capital Total
share £'000 £'000 £'000 share £'000 £'000 £'000
2021 Interim - Paid 25 Mar 2022
(2020: 26 Mar 2021) 1.6250p 1,915 - 1,915 1.6250p 1,918 - 1,918
2022 Interim - Paid 24 Jun 2022
(2021: 25 Jun 2021) 1.6250p 1,915 - 1,915 1.6250p 1,917 - 1,917
2022 Interim - Paid 30 Sep 2022
(2021: 24 Sep 2021) 1.6250p 1,915 - 1,915 1.6250p 1,917 - 1,917
2022 Interim - Paid 30 Dec 2022
(2021: 30 Dec 2021) 1.6250p 1,915 - 1,915 1.6250p 1,917 - 1,917
Total 6.5000p 7,660 - 7,660 6.5000p 7,669 - 7,669
The dividend relating to the period ended 31 December 2022, 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 2022 Year ended 31 December 2021
Pence per Ordinary Revenue Capital Total Pence per Ordinary Revenue Capital Total
Share £'000 £'000 £'000 Share £'000 £'000 £'000
2022 Interim - Paid 24 Jun 2022
(2021: 25 Jun 2021) 1.6250p 1,915 - 1,915 1.6250p 1,917 - 1,917
2022 Interim - Paid 30 Sep 2022
(2021: 24 Sep 2021) 1.6250p 1,915 - 1,915 1.6250p 1,917 - 1,917
2022 Interim - Paid 30 Dec 2022
(2021: 30 Dec 2021) 1.6250p 1,915 - 1,915 1.6250p 1,917 - 1,917
2022 Interim - Paid 31 March 2023
(2021: 25 Mar 2022) 1.6250p 1,911 - 1,911 1.6250p 1,915 - 1,915
Total 6.5000p 7,656 - 7,656 6.5000p 7,666 - 7,666
*Not included as a liability in the year ended 31 December 2022 financial
statements.
17. Related party transactions
Fees are payable at an annual rate of £36,000 to the Chairman, £33,000 to
the Chairman of the Audit and Management Engagement Committee and £30,000 to
the other Director. As at 31 December 2022, there were no Directors' fees
outstanding. The Directors' fees are disclosed in note 7 and the Directors'
shareholdings are disclosed in the Directors Remuneration Report in the Annual
Report for the year ended 31 December 2022.
Fees payable to the Investment Manager are shown in the Statement of
Comprehensive Income. As at 31 December 2022 the fee outstanding to the
Investment Manager was £80,000 (2021: £84,000).
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 2022, the
Company received £43,000 (2021:£102,000) in arrangement fees from RM.
Borrowers paid the Investment Manager arrangement fees during the year
totalling £175,051. The Investment Manager also provides further work and
Loan & Security Agency services to some borrowers and during the year
charged borrowers £357,298.
As at 31 December 2022, the Investment Manager held 1,316,625 (2021:
1,279,125) Ordinary Shares in the Company. Since the year end, the Investment
Manager purchased a further 12,500 Ordinary Shares in the Company, and as of
the date of this report, the Investment Manager's total holding of Ordinary
Shares is 1,329,125 (2021: 1,291,625).
During the year the Company has total investments of £3,593,000 (2021:
£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 £1,673,000
(2021: £nil) 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 2022 31 December 2021
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 - Private loans and bonds
- 4,208 - 4,208 - 7,346 - 7,346
Financial assets - Private loans - - 112,169 112,169 - - 115,728 115,728
Financial assets - Equity investment - - 3,593 3,593 - - 3,600 3,600
Forward contract unrealised (loss)/gain* - (162) - (162) 137 - 137
Net financial assets - 4,046 115,762 119,808 - 7,483 119,328 126,811
*The net unrealised loss of £162,475 (2021: net unrealised gain of £136,729)
on forwards is recognised within other creditors whereas net unrealised gain
on forwards is recognised within prepayments and other debtors in the
Statement of Financial Position.
As at 31 December 2022, the fair value of the Company's loans is materially
equal to the carrying value.
The forward exchange contract has been presented in the fair value hierarchy
at net exposure with the net unrealised loss of £162,475 (2021: gain of
£136,729) 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 movements between levels during the reporting period.
Reconciliation of the Level 3 classification investments during the year to 31
December 2022 is shown below:
31 December 2022 31 December 2021
Equity Loan Total Equity Loan Total
£'000 £'000 £'000 £'000 £'000 £'000
Balance as at beginning of the year 3,600 115,728 119,328 - 97,692 97,692
New loans during the year - 13,605 13,605 - 38,253 38,253
New equity investments during the year - - - 3,600 - 3,600
Repayments during the year - (15,978) (15,978) - (16,558) (16,558)
Realised gains during the year - (190) (190) - (832) (832)
Unrealised losses during the year on positions held at year end
(7) (996) (1,003) - (2,827) (2,827)
Closing balance as at 31 December 3,593 112,169 115,762 3,600 115,728 119,328
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 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 2022 comprised:
Year ended 31 December
2022
Year ended 31 December 2021
Investments Interest Non-interest bearing Total Interest bearing Non-interest Total
bearing £'000 £'000 £'000 bearing £'000
£'000 £'000
Sterling 114,713 3,593 118,306 116,674 - 116,674
Euro 1,664 - 1,664 10,000 - 10,000
Total investment 116,377 3,593 119,970 126,674 - 126,674
Cash and cash equivalents 2,993 - 2,993 3,310 - 3,310
Receivables - 5,421 5,421 - 2,684 2,684
Payables* (17,271) (2,308) (19,579) - (21,418) (21,418)
Total 102,099 6,706 108,805 129,984 (18,734) 111,250
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 £11,997,000
(2021: £12,667,000) 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 2022 was £2,993,000 and
£5,421,000 respectively (2021: £3,310,000 and £2,684,000). 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
2022
As at 31 December 2021
Fair value Maximum exposure Fair value Maximum exposure
£'000 £'000 £'000 £'000
Private loan investments 112,169 112,169 115,728 115,728
Bond investments 4,208 4,208 7,346 7,346
Cash and cash equivalent 2,993 2,993 3,310 3,310
Receivables 5,421 5,421 2,684 2,684
Total 124,791 124,791 129,068 129,068
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
2022, a 1.00% increase/(decrease) (2021: 0.50% 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
2022
As at 31 December 2021
1.00% Increase 1.00% Decrease 0.50% Increase 0.50% Decrease
£'000 £'000 £'000 £'000
Private loans investments 1,122 (1,122) 579 (579)
Bond investments 42 (42) 37 (37)
Equity investments 36 (36) 18.00 (18.00)
Cash and cash equivalent 30 (30) 17 (17)
Total 1,230 (1,230) 651 (651)
Management of risks
The Investment Manager's investment process takes into account interest rate
risk. The investment strategy is to invest in private loans with maturities
typically between 2 and 10 years. Exposure to predominantly higher yielding
loans and possible floating rate investments can mitigate interest rate risk
to some extent. On a monthly basis, Investment Managers review fixed/floating
and weighted average life of the portfolio for interest rate risk.
(iv) Liquidity risks
Liquidity risk is defined as the risk that the 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
£2,993,000 (2021: £3,310,000).
Financial liabilities by maturity at the period end are shown below:
31 December 2022 31 December 2021
£'000 £'000
Within one month - -
Between one and three months 2,038 1,393
Between three months and one year - -
More than one year 17,541 20,025
Total 19,579 21,418
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. A liquidity opportunity consultation will be
implemented ahead of the Company's 2023 AGM, should the Company's shares trade
at an average discount of more than zero per cent. as measured over the
six-month period commencing on 1 October 2022 and ending on 31 March 2023.
More information is included in the Annual Report.
The maturity profile of the Company's portfolio as at the year-end is as
follows:
31 December 2022 31 December 2021
£'000 £'000
Within one month - 4,628
Between one and three months - -
Between three months and one year - 855
More than one year 119,970 121,191
Total 119,970 126,674
(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 2022 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 2022
would have been as follows:
31 December 2022 31 December 2021
£'000 £'000
Euro 230 167
US dollar - -
Total 230 167
Foreign currency risk profile
31 December 2022 31 December 2021
Net monetary Total currency Net monetary Total currency
Investment Investment
exposure exposure exposure exposure exposure exposure
£'000 £'000 £'000 £'000 £'000 £'000
Euro 2,087 214 2,301 1,410 262 1,672
US dollar - 7 7 - 4 4
Total 2,087 221 2,308 1,410 266 1,676
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 included in the
statement of financial position at fair value or a reasonable approximation of
fair value with no material difference in the carrying amount.
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 204,629 shares (2021: 523,294) which
are held in treasury and bought back a further 50,000 shares following the
year end.
The Company's policy on borrowing is detailed in the Directors' Report.
The details of the Company's OakNorth facilities are discussed in note 12.
20. Post balance sheet events
There are no other post period end events other than those disclosed in this
report.
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 2022 31 December 2021
£'000 £'000
Bank Loan - Credit facility 17,271 19,571
Total borrowings 17,271 19,571
Cash and cash equivalents 2,993 3,310
Total borrowings less cash and cash equivalents a 14,278 16,261
Net assets b 108,805 111,250
Gearing(net) (a÷b)*100 13.1% 14.6%
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 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
As at 31 December 2021
£'000 Per Share (Pence)
Ordinary Shares - NAV a 111,250 94.41
Bank Loan - Credit facility c 19,571 -
Gross asset value a+b+c 130,821 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 2022
Average NAV (£'000) a 111,126
Annualised recurring expenses b 2,067
b÷a 1.86%
Year ended 31 December 2021
£'000
Average NAV (£'000) a 112,891
Annualised recurring expenses* b 2,165
b÷a 1.92%
* Consists of investment management fees of £971,000 (2021: £1,012,000)
and other recurring expenses of £1,096,000 (2021: £1,153,000) 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 2022
NAV per Ordinary Share (p) a 92.49
Share price (p) b 85.00
Discount (b/a)-1 (8.1%)
As at 31 December 2021
NAV per Ordinary Share (p) a 94.41
Share price (p) b 95.00
Premium (b/a)-1 0.6%
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 2022 NAV Share Price
Opening at 1 January 2021 (p) a 94.41 95.00
Closing at 31 December 2021 (p) b 92.49 85.00
Dividend payment 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%
As at 31 December 2021
NAV Share Price
Opening at 1 January 2021 (p) a 93.26 87.00
Closing at 31 December 2021 (p) b 94.41 95.00
Dividend adjustment factor c 1.0631 1.0687
Adjusted closing (d = b x c) d 100.37 101.53
Total return (d/a)-1 7.6% 16.7%
Directors, Investment Manager and Advisers
Directors
Norman Crighton (Non-executive Chair)
Guy Heald
Marlene Wood
Investment Manager
RM Capital Markets Limited
4th Floor
7 Castle Street
Edinburgh EH2 3AH
Joint broker
Singer Capital Markets LLP
1 Bartholomew Lane
London
EC2N 2AX
Joint broker
Peel Hunt LLP
100 Liverpool Street
London
EC2M 2AT
Valuation agent
Mazars LLP
Tower Bridge House Katherine's Way London
E1W 1DD
Registered office*
6th Floor
125 London Wall London
EC2Y 5AS
* Registered in England and Wales No. 10449530
Custodian
US Bank Global Corporate Trust Services
125 Old Broad Street London
EC2N 1AR
Administrator and Company Secretary
Apex Listed Companies Services (UK) Limited
6th Floor
125 London Wall
London
EC2Y 5AS
AIFM
FundRock Management Company (Guernsey) Limited
Sarnia House
Le Truchot
St Peter Port Guernsey GY1 4NA
Auditors
Ernst & Young LLP
25 Churchill Place Canary Wharf
London
E14 5EY
Registrar
Link Group
Central Square
29 Wellington Street
Leeds
LS1 4DL
Legal advisers
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
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 2021 have been delivered to the registrar of companies. The
auditors have reported on the accounts for the year ended 31 December 2022 and
the year ended 31 December 2021, 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 2022 was approved on 25 April
2023. It will be made available on the Company's website at
https://rm-funds.co.uk/rm-infrastructure-income/investor-relations/
(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
(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 2023 at 12.00 p.m. at 6th
Floor, 125 London Wall, London, EC2Y 5AS.
For further information contact:
Brian Smith / Ciara McKillop
Apex Listed Companies Services (UK) Limited
Tel: 020 3327 9720
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