TIDMRCHA
RNS Number : 6425X
Rothschild & Co Contin Fin CI Ltd
30 April 2019
Rothschild & Co Continuation Finance CI Limited (formerly
Rothschilds Continuation Finance (C.I) Limited)
Report of the Directors and Financial Statements
for the year ended 31 December 2018
Report of the Directors
The Directors present their Directors' report and financial
statements for the year ended 31 December 2018.
Principal Activities and Business Review
The principal activity of Rothschild & Co Continuation
Finance CI Limited ("the Company") is the raising of finance for
the purpose of lending it to other members of the Rothschild &
Co Concordia SAS group.
In 2017, the Company changed its financial year end from 31
March to 31 December. This set of financial statements is the first
full year since this change and consequently, the comparative
figures for the Company's income statement, statement of
comprehensive income, statement of changes in equity, cash flow
statement and related notes are for the 9 months from 1 April 2017
to 31 December 2017.
As mentioned above, the Company operates as a finance vehicle
which issues debt and lends it onto other Rothschild & Co Group
companies on substantially the same terms. The only debt currently
in issue is perpetual subordinated notes. Given the nature of this
debt and the related loans to group companies, the Directors
consider that accrual accounting, as per prior years, best reflects
the purpose of the Company as a pass through financing vehicle and
to match the GBP125m loan asset and debt securities in issue. On
this basis, the loan asset and debt securities would be matched on
the balance sheet at GBP125m which reflects the real asset and
liability position of the Company.
However, the loans to the group undertakings do not pass the
"solely payments of principal and interest" test under IFRS 9
(which came into force from 1 January 2018) due to technical terms
in the loan documentation which, in accordance with IFRS 9,
override the Directors' view of the business. The Company has
therefore been required to report the loan asset at fair value on
the balance sheet, which resulted in an opening reserves gain of
GBP35.1m and a loss for the year of GBP5.9m (both before tax).
Given this mandatory treatment, the Directors have elected to fair
value the liabilities which result in offsetting losses of GBP35.0m
on transition to IFRS 9 and a gain of GBP5.9m in the income
statement for the year. The fair values of both loan asset and debt
securities have been based on a review of available quotes and any
third party transactions for the debt securities. The value of the
loan asset is marginally higher given the 1/64 per cent higher
margin than the debt securities.
Provision for deferred tax has been made on the fair value
movements, albeit that under various tax regulations both the loans
and debt securities will continue to be taxed on an amortised cost
basis. This resulted in a net deferred tax liability of
GBP21,250.
Overall, the impact of the IFRS 9 mandatory and elected changes,
along with the normal interest margin, is that reserves have
increased by GBP119,001 with a profit after tax for the year of
GBP15,251.
Principal Risks and Uncertainties
The principal risks of the Company are credit risk, liquidity
risk, market risk and operational risk. The Company follows the
risk management policies of fellow subsidiary undertaking, NM
Rothschild & Sons Limited ("NMR").
The Company's principal risk is credit exposure to other group
companies, as the notes issued by the Company have been on lent to
Rothschild & Co Continuation Limited ("RCL") and NMR. RCL has
also guaranteed the notes issued. The Company's ability to meet its
obligations in respect of notes issued by it is therefore reliant
on NMR and RCL to make payments to the Company. Currently an
uncertainty the Company is exposed to is the impact of Brexit on
NMR. NMR does not expect any structural or regulatory issues. The
changes in the UK and European economic environment could impact
revenues and profitability, but does not affect the going concern
assessment.
The changes to fair value accounting do not alter these risks
and the Company remains reliant on NMR's guarantee for the GBP125m
nominal amount and for interest payments from both RCL and NMR.
The Company's market risk exposure is limited to interest rate
movements. Exposure to interest rate movements on the perpetual
subordinated note issues has been passed to NMR and RCL, as the
issue proceeds have been lent onwards at a fixed margin of 1/64 per
cent above the rate being paid.
Liquidity risk has similarly been transferred to NMR and RCL as
the funds on-lent have the same maturity dates as the notes issued.
Operational risk arising from inadequate or failed internal
processes, people and systems or from external events is managed by
maintaining a strong framework of internal controls.
Directors
The Directors who held office during the year were as
follows:
Peter Barbour
Anthony Coghlan
Mark Crump
David Oxburgh
Directors' Indemnity
The Company has provided qualifying third-party indemnities for
the benefit of its Directors. These were provided during the year
and remain in force at the date of this report.
Dividends
During the year, the Company did not pay any dividends (9 months
to 31 December 2017: GBP150,000).
Auditor
Pursuant to the Companies (Guernsey) Law 2008, the auditor will
be deemed to be reappointed and KPMG LLP will therefore continue in
office.
Audit Information
The Directors who held office at the date of approval of this
Report of the Directors confirm that, so far as they are each
aware, there is no relevant audit information of which the
Company's auditor is unaware, and each Director has taken all the
steps that he or she ought to have taken as a Director to make
himself or herself aware of any relevant audit information and to
establish that the Company's auditors are aware of that
information.
Directors' Responsibilities Statement
The Directors are responsible for preparing the Directors'
Report and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they have
elected to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU) and applicable law.
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 and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with IFRS as adopted by the EU;
-- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
and
-- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
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 (Guernsey) Law
2008. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
By Order of the Board
Anthony Coghlan Peter Barbour
Director Director
30 April 2019
Independent Auditor's Report to the Members of Rothschild &
Co Continuation Finance CI Limited
1. Our opinion is unmodified
We have audited the financial statements of Rothschild & Co
Continuation Finance CI Limited ("the Company") for the year ended
31 December 2018 which comprise the statement of comprehensive
income, balance sheet, statement of changes in equity, cash flow
statement and the related notes, including the accounting policies
in note 1.
In our opinion:
-- the financial statements give a true and fair view of the
state of the Company's affairs as at 31 December 2018 and of the
Company's profit for the year then ended;
-- the Company financial statements have been properly prepared
in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
-- the financial statements have been prepared in accordance
with the requirements of the Companies (Guernsey) Law 2008
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) ("ISAs (UK)") and applicable law. Our
responsibilities are described below. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion. Our audit opinion is consistent with our report to
those charged with governance.
We were appointed as auditor by the Directors on 31 March 1994.
The period of total uninterrupted engagement is the 24 years ended
31 December 2018. We have fulfilled our ethical responsibilities
under, and we remain independent of the Company in accordance with,
UK ethical requirements including the FRC Ethical Standard as
applied to listed public interest entities. No non-audit services
prohibited by that standard were provided.
Overview
=========================================================================================
Materiality: GBP1.64m (31 December 2017:GBP1.35m)
financial statements 1% (31 December 2017: 1%) of
as a whole Total Assets
======================== ===============================================================
Risks of material vs December 2017
misstatement
======================== ===============================================================
Recurring Loans to group Loans to group undertakings
risks undertaking and subordinated guaranteed
and Subordinated notes are classified
guaranteed at fair value upon adoption
notes of IFRS 9 on 1 January
2018. Therefore, a new
risk related to the fair
value of loans and subordinated
guaranteed notes has
been identified in the
current year. As a result,
the risk of recoverability
is not separately identified.
====================== ======================== =======================================
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. We summarise below
the key audit matters in arriving at our audit opinion above,
together with our key audit procedures to address those matters,
and, as required for public interest entities, our results from
those procedures. These matters were addressed, and our results are
based on procedures undertaken, in the context of, and solely for
the purpose of, our audit of the financial statements as a whole,
and in forming our opinion thereon, and consequently are incidental
to that opinion, and we do not provide a separate opinion on these
matters.
The risk Our response
========================== ============================ ============================================================
The impact of Unprecedented levels We have developed a standardised
uncertainties of uncertainty firm-wide approach to the
due to Britain All audits assess and consideration of the uncertainties
exiting the European challenge the arising from Brexit in planning
Union on our reasonableness and performing our audits.
audit of estimates, in Our procedures included:
Refer to page particular * Our Brexit knowledge - We considered the Directors'
2 (principal as described in loans assessment of Brexit-related sources of risk for the
risks and uncertainties) to group undertaking, Company's business and financial resources compared
effective interest rate with our own understanding of the risks. We
adjustment below, related considered the directors' plans to take action to
disclosures and the mitigate the risks.
appropriateness of the
going concern basis
of preparation of the * Sensitivity analysis - When addressing the fair value
annual accounts. All of loans to group undertakings and subordinated
of these depend on guaranteed notes, we compared the directors'
assessments sensitivity analysis to our assessment of the full
of the future economic range of reasonably possible scenarios resulting from
environment and the Brexit uncertainty.
Company's future
prospects
and performance. * Assessing transparency - As well as assessing
In addition, we are individual disclosures as part of our procedures on
required to consider loans to group undertakings, we considered all the
the other information Brexit related disclosures together, including those
presented in the Annual in the strategic report, comparing the overall
Report including the picture against our understanding of the risks.
principal risks
disclosure
and to consider the Our results
directors' statement As reported under valuation
that the annual report of loans to group undertakings
and financial statements and subordinated guaranteed
taken as a whole is notes, we found the resulting
fair, balanced and disclosures of sensitivity
understandable and disclosures in relation
and provides the to going concern to be acceptable.
information However, no audit should
necessary for be expected to predict the
shareholders unknowable factors or all
to assess the Company's possible future implications
position and performance, for a Company and this is
business model and particularly the case in
strategy. relation to Brexit.
Brexit is one of the
most significant economic
events for the UK and
at the date of this
report its effects are
subject to unprecedented
levels of uncertainty
of outcomes, with the
full range of possible
effects unknown.
========================== ============================ ============================================================
The risk Our response
========================= ============================= ============================================================
Valuation of Low Risk, high value: Our procedures included:
Loans to group The amount of the * Test of details: We involved our valuation
undertakings intercompany specialists to independently determine the fair value
and subordinated loan receivables represent of the loans to group undertakings and the
guaranteed notes 94% (December 2017: 93%) subordinated guaranteed notes at the IFRS 9
Loans to group of the Company's total transition date of 1 January 2018 and as at the year
undertakings assets. ended 31 December 2018.
(GBP154 million; The terms of the loans to
31 December 2017: group undertakings are
GBP125 million) similar * We assessed whether the Company's disclosures in
Subordinated to the subordinated relation to fair value were in compliance with the
guaranteed notes guaranteed relevant standards.
(GBP154 million; notes. The fair value of
31 December 2017:GBP125 subordinated guaranteed
million) notes Our results:
in issue is based on We found the valuation of
Refer to page available loans to group undertakings
16 (note 6) and quotes from brokers and and subordinated guaranteed
page 17 (note third notes, and the relevant
11) party transactions where disclosures to be acceptable.
available. As a result, (December 2017: N/A)
valuation
is not at a high risk of
material misstatement or
subject to significant
judgement.
However, due to its
materiality
in the context of the
financial
statements, valuation of
loan to parent undertaking
and subordinated
guaranteed
notes is considered to be
an area that has the
greatest
effect on our audit.
========================= ============================= ============================================================
3. Our application of materiality and an overview of the scope of our audit
Materiality for the Company as a whole was set at GBP1.64m (31
December 2017: GBP1.35m), determined with reference to a benchmark
of total assets (of which it represents 1% (31 December 2017: 1%).
%). The threshold for reporting misstatements to those charged with
governance was GBP0.08m (31 December 2017: GBP0.07m).
4. We have nothing to report on going concern
The Directors have prepared the financial statements on the
going concern basis as they do not intend to liquidate the Company
or to cease its operations, and as they have concluded that the
Company's financial position means that this is realistic. They
have also concluded that there are no material uncertainties that
could have cast significant doubt over its ability to continue as a
going concern for at least a year from the date of approval of the
financial statements ("the going concern period").
Our responsibility is to conclude on the appropriateness of the
Directors' conclusions and, had there been a material uncertainty
related to going concern, to make reference to that in this audit
report. However, as we cannot predict all future events or
conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the absence of reference to a material uncertainty in
this auditor's report is not a guarantee that the Company will
continue in operation.
In our evaluation of the Directors' conclusions, we considered
the inherent risks to the Company's business model, including the
impact of Brexit and analysed how those risks might affect the
Company's financial resources or ability to continue operations
over the going concern period. We evaluated those risks and
concluded they were not significant enough to require us to perform
additional audit procedures.
Based on this work, we are required to report to you if we have
concluded that the use of the going concern basis of accounting is
inappropriate or there is an undisclosed material uncertainty that
may cast significant doubt over the use of that basis for a period
of at least a year from the date of approval of the financial
statements.
We have nothing to report in these respects, and we did not
identify going concern as a key audit matter.
5. We have nothing to report the other information in the financial statements
The Directors are responsible for the other information
presented in the financial statements. Our opinion on the financial
statements does not cover the other information and, accordingly,
we do not express an audit opinion or, except as explicitly stated
below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
Directors' report
Based solely on our work on the other information:
-- we have not identified material misstatements in the Directors'
report;
-- in our opinion the information given in the report for
the financial year is consistent with the financial statements;
and
-- in our opinion the report has been prepared in accordance
with the Companies (Guernsey) Law 2008.
6. We have nothing to report on the other matters on which we are required to report by exception
Under the Companies (Guernsey) Law 2008, we are required to
report to you if, in our opinion:
-- adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
-- the Company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of Directors' remuneration specified
by law are not made; or
-- we have not received all the information and explanations
we require for our audit.
We have nothing to report in these respects.
7. Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 3,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or other irregularities (see
below), or error, and to issue our opinion in an auditor's report.
Reasonable assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements
can arise from fraud, other irregularities or error and are
considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users
taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the
FRC's website at: www.frc.org.uk/auditorsresponsibilities.
Irregularities - ability to detect
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on the annual
accounts from our general commercial and sector experience, through
discussion with the directors (as required by auditing standards),
and from inspection of the Group's regulatory correspondence and
discussed with the directors the policies and procedures regarding
compliance with laws and regulations. We communicated identified
laws and regulations throughout our team and remained alert to any
indications of non-compliance throughout the audit. The potential
effect of these laws and regulations on the financial statements
varies considerably.
The Company is subject to laws and regulations that directly
affect the financial statements including financial reporting
legislation (including related companies legislation),
distributable profits legislation, and taxation legislation and we
assessed the extent of compliance with these laws and regulations
as part of our procedures on the related financial statement
items.
Whilst the Company is subject to many other laws and
regulations, we did not identify any others where the consequences
of non-compliance alone could have a material effect on amounts or
disclosures in the financial statements.
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance
with laws and regulations (irregularities) is from the events and
transactions reflected in the financial statements, the less likely
the inherently limited procedures required by auditing standards
would identify it. In addition, as with any audit, there remained a
higher risk of non-detection of irregularities, as these may
involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. We are
not responsible for preventing non-compliance and cannot be
expected to detect non-compliance with all laws and
regulations.
8. The purpose of our audit work and to whom we owe our responsibilities
This report is made solely to the Company's members, as a body,
in accordance with section 262 of the Companies (Guernsey) Law
2008. Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members, as a body, for our audit work, for this report, or for the
opinions we have formed.
Pamela McIntyre (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square
London E14 5GL
30 April 2019
Statement of Comprehensive Income
For the year ended 31 December 2018
Year to 9 months
31 December to
2018 31 December
2017
Notes GBP GBP
------------------------------- ------ ------------------------ --------------
Interest income 11,269,478 8,490,743
------------------------------- ------ ------------------------ --------------
Interest expense (11,250,000) (8,476,027)
------------------------------- ------ ------------------------ --------------
Operating profit 19,478 14,716
------------------------------- ------ ------------------------ --------------
Revaluation of loans 6 (5,937,500) -
------------------------------- ------ ------------------------ --------------
Revaluation of debt securities 11 5,937,500 -
------------------------------- ------ ------------------------ --------------
Administrative expenses (650) -
------------------------------- ------ ------------------------ --------------
Profit before tax 18,828 14,716
------------------------------- ------ ------------------------ --------------
Income tax expense 5 (3,577) (2,796)
------------------------------- ------ ------------------------ --------------
Profit for the financial year 15,251 11,920
------------------------------- ------ ------------------------ --------------
Other comprehensive income - -
------------------------------- ------ ------------------------ --------------
Total comprehensive income for
the financial year 15,251 11,920
------------------------------- ------ ------------------------ --------------
All amounts are in respect of continuing activities.
Balance Sheet
At 31 December 2018
31 December 31 December
2018 2018 2017 2017
Notes GBP GBP GBP GBP
---------------------------- ------ ------------- -------------- ----------------- -------------------
Non-current assets
Loans to group undertakings 6 154,187,500 125,000,000
---------------------------- ------ ------------- -------------- ----------------- -------------------
Current assets
Other financial assets 7 6,496,137 6,496,192
---------------------------- ------ ------------- -------------- ----------------- -------------------
Cash and cash equivalents 8 3,481,151 3,465,064
---------------------------- ------ ------------- -------------- ----------------- -------------------
9,977,288 9,961,256
---------------------------- ------ ------------- -------------- ----------------- -------------------
Current liabilities
Current tax liability 5 (3,577) (2,796)
---------------------------- ------ ------------- -------------- ----------------- -------------------
Deferred tax liability 9 (21,250) -
---------------------------- ------ ------------- -------------- ----------------- -------------------
Other financial liabilities 10 (9,832,192) (9,832,192)
---------------------------- ------ ------------- -------------- ----------------- -------------------
Net current assets 120,269 126,268
---------------------------- ------ ------------- -------------- ----------------- -------------------
Total assets less
current liabilities 154,307,769 125,126,268
---------------------------- ------ ------------- -------------- ----------------- -------------------
Non-current liabilities
Subordinated guaranteed
notes 11 (154,062,500) (125,000,000)
---------------------------- ------ ------------- -------------- ----------------- -------------------
Net assets 245,269 126,268
---------------------------- ------ ------------- -------------- ----------------- -------------------
Shareholders' equity
Share capital 12 100,000 100,000
---------------------------- ------ ------------- -------------- ----------------- -------------------
Retained earnings 145,269 26,268
---------------------------- ------ ------------- -------------- ----------------- -------------------
Total shareholders'
equity 245,269 126,268
---------------------------- ------ ------------- -------------- ----------------- -------------------
Approved by the Board of Directors and signed on its behalf on
30 April 2019 by:
Anthony Coghlan Peter Barbour
Director Director
Statement of Changes in Equity
For the Year ended 31 December 2018
Share Capital Retained Earnings Total Equity
GBP GBP GBP
--------------------------- ------------- ----------------- ------------
At 31 December 2017 100,000 26,268 126,268
--------------------------- ------------- ----------------- ------------
Transition to IFRS 9 - 103,750 103,750
--------------------------- ------------- ----------------- ------------
At 1 January 2018 100,000 130,018 230,018
--------------------------- ------------- ----------------- ------------
Total comprehensive income
for the financial year - 15,251 15,251
--------------------------- ------------- ----------------- ------------
At 31 December 2018 100,000 145,269 245,269
--------------------------- ------------- ----------------- ------------
At 1 April 2017 100,000 164,348 264,348
--------------------------- ------------- ----------------- ------------
Total comprehensive income
for the financial period - 11,920 11,920
--------------------------- ------------- ----------------- ------------
Shareholders' dividends - (150,000) (150,000)
--------------------------- ------------- ----------------- ------------
At 31 December 2017 100,000 26,268 126,268
--------------------------- ------------- ----------------- ------------
Cash Flow Statement
For the year ended 31 December 2018
Year to 9 months
31 December to 31 December
2018 2017
Notes GBP GBP
------------------------------------------- ----- ------------------------ ----------------
Cash flow from operating activities
(Loss)/profit for the financial year 15,251 11,920
------------------------------------------- ----- ------------------------ ----------------
Income tax expense 3,577 2,796
------------------------------------------- ----- ------------------------ ----------------
Operating profit before changes in
working capital and provisions 18,828 14,716
------------------------ ----------------
Fair value movements of loans 5,937,500 -
------------------------------------------- ----- ------------------------ ----------------
Fair value movements of debt securities (5,937,500) -
------------------------------------------- ----- ------------------------ ----------------
Net decrease/(increase) in debtors 55 (5,137,673)
------------------------------------------- ----- ------------------------ ----------------
Net (decrease)/increase in other financial
liabilities - 8,476,028
------------------------------------------- ----- ------------------------ ----------------
Cash generated from operations 18,883 3,353,071
------------------------------------------- ----- ------------------------ ----------------
Income taxes paid (2,796) (3,667)
------------------------------------------- ----- ------------------------ ----------------
Net cash flow from operating activities 16,087 3,349,404
------------------------------------------- ----- ------------------------ ----------------
Cash flow used in financing activities
Dividends paid - (150,000)
------------------------------------------- ----- ------------------------ ----------------
Net cash flow used in financing activities - (150,000)
------------------------------------------- ----- ------------------------ ----------------
Net increase in cash and cash equivalents 16,087 3,199,404
------------------------------------------- ----- ------------------------ ----------------
Cash and cash equivalents at beginning
of year 3,465,064 265,660
------------------------------------------- ----- ------------------------ ----------------
Cash and cash equivalents at end of
year 8 3,481,151 3,465,064
------------------------------------------- ----- ------------------------ ----------------
Interest paid and received during the period were as follows
:
Year to 9 months
31 December to 31 December
2018 2017
GBP GBP
------------------ ------------ ----------------
Interest paid 11,250,000 -
------------------ ------------ ----------------
Interest received 11,269,533 3,353,070
------------------ ------------ ----------------
Notes to the Financial Statements
(forming part of the Financial Statements)
For the year ended 31 December 2018
1. Accounting Policies
Rothschild & Co Continuation Finance CI Limited ("the
Company") is a private limited company incorporated in Guernsey.
The principal accounting policies which have been consistently
adopted in the presentation of the financial statements are as
follows:
a. Basis of preparation
The financial statements are prepared and approved by the
Directors in accordance with International Financial Reporting
Standards ("IFRS") and International Financial Reporting
Interpretations Committee ("IFRIC") interpretations, endorsed by
the European Union ("EU") and with those requirements of the
Companies (Guernsey) Law 2008 applicable to companies reporting
under IFRS. The financial statements are presented in sterling,
unless otherwise stated.
The maturities of the Company's liabilities are matched with the
maturities of its assets. There is, therefore a strong expectation
that the Company has adequate resources to continue in operational
existence for the foreseeable future and accordingly, the financial
statements have been prepared on a going concern basis.
The financial statements are presented in sterling, unless
otherwise stated.
Standards affecting the financial statements
IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts
with Customers were implemented with effect from 1 January 2018.
IFRS 15 has not had a significant effect on these financial
statements.
IFRS 9, which replaces IAS 39 Financial Instruments: Recognition
and Measurement, includes revised guidance in respect of the
classification and measurement of financial assets and liabilities
and introduces additional requirements for liabilities and hedge
accounting as well as a new expected credit loss model for
calculating impairment on financial assets.
Previously financial assets were classified as either fair value
through profit or loss, loans and advances, held-to-maturity
investments or available-for-sale. IFRS 9 eliminates the loans and
advances categories, and requires financial assets to be measured
at amortised cost, fair value through profit or loss ("FVTPL") or
fair value through other comprehensive income ("FVOCI").
IFRS 9 resulted in the requirement to fair value the loans to
the parent undertaking, and as a result the Company has elected to
fair value the debt securities in issue. The full impact of this
transition to IFRS 9 can be seen in note 15.
Future accounting policies
A number of new standards, amendments to standards and
interpretations are effective for accounting periods ending after
31 December 2018 and therefore have not been applied in preparing
these financial statements. The Company has reviewed these new
standards to determine their effects on the Company's financial
reporting, and none are expected to have a material impact on the
Company's financial statements.
b. Interest receivable and payable
Interest income and expense represents interest arising out of
lending and borrowing activities. Interest income and expense is
recognised in the income statement using the effective interest
rate method.
c. Taxation
Tax payable on profits is recognised in the statement of
comprehensive income.
Deferred tax is provided in full, using the balance sheet
liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts.
Deferred tax is determined using tax rates and laws that are
expected to apply when a deferred tax asset is realised, or when a
deferred tax liability is settled.
d. Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash
equivalents comprise balances with other group companies that are
readily convertible to cash and are subject to an insignificant
risk of changes in value.
e. Capital management
The Company is not subject to any externally imposed capital
requirements. It is dependent on Rothschild & Co Continuation
Limited (the parent undertaking) to provide capital resources which
are therefore managed on a group basis.
f. Financial assets and liabilities
Financial assets and liabilities are recognised on trade date
and derecognised on either trade date, if applicable, or on
maturity or repayment.
i. Loans and advances
Loans and advances are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market.
From 1 January 2018, loans and advances are initially recorded
at fair value and any subsequent movement in fair value is
recognised in the income statement.
Prior to 1 January 2018, loans and advances are initially
recorded at fair value, including any transaction costs and are
subsequently measured at amortised cost using the effective
interest rate method. Gains and losses arising on derecognition of
loans and advances are recognised in other operating income.
ii. Financial liabilities
From 1 January 2018, debt securities in issue are recorded at
fair value with any changes in fair value recognised in the income
statement. All other financial liabilities are recognised at
amortised cost.
Prior to 1 January 2018, all financial liabilities are carried
at amortised cost using the effective interest rate method.
g. Accounting judgements and estimates
The preparation of financial statements in accordance with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise judgement in applying the
accounting policies.
Valuation of financial assets and liabilities
Fair value is the price that would be received on selling an
asset or paid to transfer a liability in an orderly transaction
between market participants. For financial instruments carried at
fair value, market prices or rates are used to determine fair value
where an active market exists (such as a recognised exchange), as
this is the best evidence of the fair value of a financial
instrument. Where no active market price or rate is available, fair
values are estimated using inputs based on market conditions at the
balance sheet date.
Deferred tax
The recoverability of deferred tax assets is based on
management's assessment of the availability of future taxable
profits against which the deferred tax assets will be utilised.
2. Financial Risk Management
The Company follows the financial risk management policies of
the parent undertaking, Rothschild & Co Continuation Limited.
The key risks arising from the Company's activities involving
financial instruments, which are monitored at the group level, are
as follows:
- Credit risk - the risk of loss arising from client or
counterparty default is not considered a significant risk to the
Company as all asset balances are with other group companies as
detailed in note 13 Related Party Transactions.
- Market risk - exposure to changes in market variables such as
interest rates, currency exchange rates, equity and debt prices is
not considered significant as the terms of financial assets
substantially match those of financial liabilities.
- Liquidity risk - the risk that the Company is unable to meet
its obligations as they fall due or that it is unable to fund its
commitments is not considered significant as material cash inflows
and outflows from financial assets and liabilities are
substantially matched.
3. Directors' Emoluments
None of the Directors received any remuneration in respect of
their services to the Company during the year (9 months to 31
December 2017: GBPnil).
4. Audit Fee
The amount receivable by the auditors and their associates in
respect of the audit of these financial statements is GBP5,000 (9
months to 31 December 2017: GBP5,000). The audit fee is paid on a
group basis by N M Rothschild & Sons Limited.
5. Taxation
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
-------------- ------------- -------------
Current tax 3,577 2,796
-------------- ------------- -------------
Deferred tax - -
-------------- ------------- -------------
Total tax 3,577 2,796
-------------- ------------- -------------
The tax charge can be explained as follows:
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
------------------------------------------ ------------- -------------
Profit before tax 18,828 14,716
------------------------------------------ ------------- -------------
United Kingdom corporation tax charge at
19% 3,577 2,796
------------------------------------------ ------------- -------------
Total current tax 3,577 2,796
------------------------------------------ ------------- -------------
6. Non-Current Assets: Loans to Group Undertakings
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
----------------------------------------- -------------- --------------
At beginning of period 125,000,000 125,000,000
----------------------------------------- -------------- --------------
Revaluation due to transition to IFRS 9 35,125,000 -
----------------------------------------- -------------- --------------
160,125,000 125,000,000
----------------------------------------- -------------- --------------
Fair value movements (5,937,500) -
----------------------------------------- -------------- --------------
At end of period 154,187,500 125,000,000
----------------------------------------- -------------- --------------
Due
In 5 years or more 154,187,500 125,000,000
----------------------------------------- -------------- --------------
IFRS 9 requires the GBP125,000,000 loans to be carried at fair
value which as at 31 December 2018 was GBP154,187,500 (at 31
December 2017: GBP160,125,000). On an amortised cost basis, the
value of the loan at 31 December 2018 would be GBP125,000,000 (at
31 December 2017: GBP125,000,000). The fair values are based on the
market value of the external debt securities (level 2).
The interest rate charged on the subordinated perpetual loans to
group undertakings is 9 1/64 per cent.
7. Other Financial Assets
31 December 31 December
2018 2017
GBP GBP
----------------------------------- ------------------------------------------- -------------
Amounts owed by parent undertaking 2,556,432 2,556,486
----------------------------------- ------------------------------------------- -------------
Amounts owed by fellow subsidiary
undertaking 3,939,705 3,939,706
----------------------------------- ------------------------------------------- -------------
6,496,137 6,496,192
----------------------------------- ------------------------------------------- -------------
8. Cash and Cash Equivalents
At the year end the Company held cash of GBP3,481,151 (at 31
December 2017: GBP3,465,064) at a fellow subsidiary
undertaking.
9. Deferred Income Taxes
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
------------------------ ------------- -------------
At beginning of period - -
------------------------ ------------- -------------
Transition to IFRS 9 (21,250) -
------------------------ ------------- -------------
Recognised in income
Income statement credit - -
------------------------ ------------- -------------
At end of period (21,250) -
------------------------ ------------- -------------
Deferred tax assets less liabilities are attributable to the
following items:
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
--------------------------------------- ------------- -------------
Fair value of intra group loans (4,961,875) -
--------------------------------------- ------------- -------------
Fair value of debt securities in issue 4,940,625 -
--------------------------------------- ------------- -------------
(21,250) -
--------------------------------------- ------------- -------------
Both the intra-group loans and debt securities in issue are
taxed on an amortised cost basis of accounting and accordingly
taxable/deductible temporary differences arise following the
adoption of IFRS 9.
10. Other Financial Liabilities
31 December 31 December
2018 2017
GBP GBP
----------------- ------------------ -------------
Interest payable 9,832,192 9,832,192
----------------- ------------------ -------------
Interest payable on the subordinated guaranteed notes is fixed
at 9 per cent.
11. Subordinated Guaranteed Notes
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
----------------------------------------- -------------- --------------
At beginning of period 125,000,000 125,000,000
----------------------------------------- -------------- --------------
Revaluation due to transition to IFRS 9 35,000,000 -
----------------------------------------- -------------- --------------
160,000,000 125,000,000
----------------------------------------- -------------- --------------
Fair value movements (5,937,500) -
----------------------------------------- -------------- --------------
At end of period 154,062,500 125,000,000
----------------------------------------- -------------- --------------
Repayable
In 5 years or more 154,062,500 125,000,000
----------------------------------------- -------------- --------------
Given the IFRS 9 requirement to fair value the related loans,
the Company has elected to fair value the subordinated guaranteed
notes, which as at 31 December 2018 was GBP154,062,500 (at 31
December 2017: GBP160,000,000). On an amortised cost basis, the
value of the subordinated guaranteed notes at 31 December 2018
would be GBP125,000,000 (at 31 December 2017: GBP125,000,000). The
fair value was derived from the quoted market price at the balance
sheet date (level 1).
The following table shows contractual cash flows payable by the
Company on the subordinated guaranteed notes, analysed by remaining
contractual maturity at the balance sheet date. Interest cash flows
on the loan are shown up to five years only, with the prinicipal
balance being shown in the > 5yr column.
At 31 December Demand Demand-3m 3m - 1yr 1yr - 5yr > 5yr Total
2018
GBP GBP GBP GBP GBP GBP
--------------- ------ ---------- -------- ---------- ----------- -----------
Loan notes in
issue - 11,250,000 - 45,000,000 125,000,000 181,250,000
--------------- ------ ---------- -------- ---------- ----------- -----------
At 31 December Demand Demand-3m 3m - 1yr 1yr - 5yr > 5yr Total
2017
GBP GBP GBP GBP GBP GBP
--------------- ------ ---------- -------- ---------- ----------- -----------
Loan notes in
issue - 11,250,000 - 45,000,000 125,000,000 181,250,000
--------------- ------ ---------- -------- ---------- ----------- -----------
12. Share Capital
31 December 31 December
2018 2017
GBP GBP
----------------------------------- ------------ ------------
Authorised
Ordinary shares of GBP1 each 100,000 100,000
------------------------------------ ------------ ------------
Allotted, called up and fully paid
Ordinary shares of GBP1 each 100,000 100,000
------------------------------------ ------------ ------------
13. Related Party Transactions
Parties are considered related if one party controls, is
controlled by or has the ability to exercise significant influence
over the other party. This includes key management personnel, the
parent Company, subsidiaries and fellow subsidiaries.
Amounts receivable from related parties at the year-end were as
follows:
31 December 31 December
2018 2017
GBP GBP
---------------------------------------------- ------------ -------------
Subordinated perpetual loan to parent
undertaking
- at amortised cost - 50,000,000
---------------------------------------------- ------------ -------------
Subordinated perpetual loan to parent
undertaking 61,675,000 -
- at fair value
---------------------------------------------- ------------ -------------
Subordinated perpetual loan to fellow
subsidiary undertaking
- at amortised cost - 75,000,000
---------------------------------------------- ------------ -------------
Subordinated perpetual loan to fellow
subsidiary undertaking 92,512,500 -
- at fair value
---------------------------------------------- ------------ -------------
Amounts owed by parent undertaking 2,556,432 2,556,486
---------------------------------------------- ------------ -------------
Amounts owed by fellow subsidiary undertaking 3,939,705 3,939,706
---------------------------------------------- ------------ -------------
Cash at fellow subsidiary undertaking 3,481,151 3,465,064
---------------------------------------------- ------------ -------------
Amounts recognised in the statement of comprehensive income in
respect of related party transactions were as follows:
Year to 9 months
31 December to
2018 31 December
2017
GBP GBP
-------------------------------------------- --------------------------------------- -------------
Interest receivable from parent undertaking 6,761,665 5,094,446
-------------------------------------------- --------------------------------------- -------------
Interest receivable from fellow subsidiary
undertaking 4,507,813 3,396,297
-------------------------------------------- --------------------------------------- -------------
Amounts recognised directly in equity in respect of related
party transactions were as follows:
Year to 9 months to
31 December 31 December
2018 2017
GBP GBP
---------------------------------------- -------------- ------------
Dividend payable to parent undertaking - 150,000
---------------------------------------- -------------- ------------
There were no loans made to Directors during the year (9 months
to 31 December 2017: none) and no balances outstanding at the year
end (at 31 December 2017: GBPnil). There were no employees of the
Company during the year (9 months to 31 December 2017: none).
14. Parent Undertaking and Ultimate Holding Company
The largest group in which the results of the Company are
consolidated is that headed by Rothschild & Co Concordia SAS,
incorporated in France, and whose registered office is at 23bis,
Avenue de Messine, 75008 Paris. The smallest group in which they
are consolidated is that headed by Rothschild & Co SCA, a
French public limited partnership whose registered office is also
at 23bis, Avenue de Messine, 75008 Paris. The accounts are
available on Rothschild & Co website at
www.rothschildandco.com.
The Company's immediate parent company is Rothschild & Co
Continuation Limited, incorporated in England and Wales and whose
registered office is at New Court, St Swithins Lane, London EC4N
8AL.
The Company's registered office is located at St Julian's Court,
St Peter Port, Guernsey,GY1 3BP.
15. Transition to IFRS 9 on 1 January 2018
a) Classification of financial assets and liabilities.
The following table shows the original measurement categories
under IAS 39 and the new measurement categories under IFRS 9 for
each class of financial assets and liabilities as at 1 January
2018:
Original Original
classification New classification carrying New carrying
under IAS under IFRS value under value under
39 9 IAS 39 IFRS 9
Note
----------------------- ------ ----------------- -------------------- ------------- -------------
Financial assets
Loans to group Amortised
undertakings cost FVTPL 125,000,000 160,125,000
------------------------------- ----------------- ------------------- ------------- -------------
Total financial
assets 125,000,000 160,125,000
------------------------------------------------------------------------ ------------- -------------
Financial liabilities
Debt securities Amortised
in issue cost FVTPL 125,000,000 160,000,000
------------------------------- ----------------- ------------------- ------------- -------------
Total financial
liabilities 125,000,000 160,000,000
------------------------------------------------------------------------ ------------- -------------
b) Impact of transition to IFRS 9
The following table shows the effect on the Company's balance
sheet of the transition from IAS 39 to IFRS 9:
IAS 39 Balance IFRS 9 Balance
Sheet 31 Classification Sheet 1
December and measurement January
2017 changes 2018
------------------------------ --------------- ----------------- ---------------
Assets
Loans to group undertakings 125,000,000 35,125,000 160,125,000
------------------------------ --------------- ----------------- ---------------
Cash and cash equivalents 3,465,064 - 3,465,064
------------------------------ --------------- ----------------- ---------------
Other financial assets 6,496,192 - 6,496,192
------------------------------ --------------- ----------------- ---------------
Total assets 134,961,256 35,125,000 170,086,256
------------------------------ --------------- ----------------- ---------------
Liabilities
Current tax liability 2,796 - 2,796
------------------------------ --------------- ----------------- ---------------
Deferred tax liability - 21,250 21,250
------------------------------ --------------- ----------------- ---------------
Other financial liabilities 9,832,192 - 9,832,192
------------------------------ --------------- ----------------- ---------------
Debt securities 125,000,000 35,000,000 160,000,000
------------------------------ --------------- ----------------- ---------------
Total liabilities 134,834,988 35,021,250 169,856,238
------------------------------ --------------- ----------------- ---------------
Equity
Share capital 100,000 - 100,000
------------------------------ --------------- ----------------- ---------------
Retained earnings 26,268 103,750 130,018
------------------------------ --------------- ----------------- ---------------
Total equity 126,268 103,750 230,018
------------------------------ --------------- ----------------- ---------------
Total equity and liabilities 134,961,256 35,125,000 170,086,256
------------------------------ --------------- ----------------- ---------------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR CKKDBABKDCQN
(END) Dow Jones Newswires
April 30, 2019 12:38 ET (16:38 GMT)
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