TIDMRDL
RNS Number : 2085O
RDL Realisation PLC
30 September 2019
RDL Realisation Plc (the "Company")
Half-Year Report
The Directors present the Half-Yearly Financial Report of the
Company for the period to 30 June 2019.
FINANCIAL SUMMARY
This Report covers the six months between 1 January 2019 and 30
June 2019.
Highlights Ordinary Shares
30 June 2019 31 Dec 2018 30 June 2018
Net Asset Value(1) (Cum Loss/Income) GBP 5.35(3) GBP 5.88(3) GBP 9.67(3)
per share /USD 6.80 /USD 7.49 /USD 12.75
Net Asset Value(2) (Ex Loss/Income) GBP 5.78(3) GBP 7.62(3) GBP 9.70(3)
per share /USD 7.34 /USD 9.71 /USD 12.79
Total dividends per share 17.14 pence 288.21 pence 43.93 pence
Share Price(4) GBP 4.35(3) GBP 6.70(3) GBP 8.00(3)
/USD 5.52 /USD 8.41 /USD 10.56
Premium/(discount) to NAV
at end of each month(5) (18.69%) (11.79%) (18.03%)
Return on Share Price (35.10%) (6.82%) 0.76%
The Company's market capitalisation as at 30 June 2019 was USD
88,933,725 (GBP 70,054,135 based on a Share Price of GBP 4.35 and
based on 16,122,931 outstanding Ordinary Shares).
The Group's total comprehensive loss for period ended 30 June
2019 amounted to USD 7,748,852 (30 June 2018: USD 586,429) (31
December 2018: USD 35,046,160 loss).
Further details of the Group's performance for the period are
included in the Executive Directors' Report below which includes a
review of the progress of the Company's asset realisation.
1 Net Asset Value ("NAV") (cum income) includes all current year
income/(loss), less the value of any dividends paid on respect of
the period together with the value of the dividends which have been
declared and market ex-dividend but not paid, see below.
2 Net Asset Value (ex income) is the Net Asset Value cum income
excluding net current year income/(loss).
3 Translated at USD to GBP foreign exchange rate of 1.2695 (31
December 2018: 1.2746, 30 June 2018: 1.3194).
4 Share price taken from Bloomberg Professional.
(5) The Board monitors the price of the Company's Ordinary
Shares in relation to their NAV and the premium/discount at which
the shares trade.
OVERVIEW
About RDL Realisation Plc
RDL Realisation Plc ("RDL" or the "Company"), was incorporated
and registered in England and Wales on 25 March 2015. This
half-yearly financial report for the period ended 30 June 2019 (the
"Half Yearly Report") includes the results of RDL Fund Trust (the
"Trust") and RDLZ Realisation Plc (In Liquidation) ("RDLZ") in
respect of which further details are set out below.
The Company commenced operations on 1 May 2015 following its
admission of GBP 0.01 each Ordinary Shares (the "Ordinary Shares")
to the London Stock Exchange Premium segment of the Main Market
(the "Admission"). The Company has carried on business as an
Investment Trust within the meaning of Chapter 4 of Part 24 of the
Corporation Tax Act 2010.
On 11 June 2018, the Company announced that it would move to
realise its assets and proceed with a managed wind-down process in
order to best serve the interests of the Company's Shareholders.
The Company's Investment Management Agreement ("IMA") with Ranger
Alternative Management II, LP ("Ranger") was terminated with effect
from 12 February 2019.
The Executive Directors of the Company are managing the orderly
realisation of the Company's assets. The Company has appointed
International Fund Management Limited ("IFM") as its replacement
Alternative Investment Fund Manager with effect from 12 February
2019. Following the appointment of IFM, the Executive Directors of
the Company have continued to retain responsibility for the
portfolio management. The Executive Directors' Report can be found
below. Other administrative functions are contracted to external
service providers. However, the Directors retain responsibility for
exercising overall control and supervision of the external service
providers. The Company has no employees.
The Trust
The Company holds a number of its debt instrument investments
through the Trust. On establishment of the Trust, the Company was
the depositor, managing holder and sole beneficiary of the Trust.
The Trust is a Delaware trust established on 22 April 2015 pursuant
to a declaration of trust and trust agreement entered into between
the Company as depositor and managing holder and Delaware Trust
Company (a Delaware state-chartered trust company). Under the terms
of the declaration of trust and trust agreement that was entered
into on establishment of the Trust, the Company is the sole
beneficiary of the Trust and also has administrative powers in
respect of the Trust's assets.
The Trust has no separate legal personality and is wholly
transparent for UK tax purposes.
RDLZ
On 20 June 2019, RDLZ, a public limited company incorporated
under the laws of England and Wales as a wholly-owned subsidiary of
the Company, was placed into a members' voluntary liquidation
following payment of the revised final capital entitlement payment
in relation its Zero Dividend Preference Shares of GBP 0.01 each
(the "ZDP Shares").
The Company, the Trust and RDLZ are collectively referred to in
this report as the "Group".
OBJECTIVE AND INVESTMENT POLICY
Investment Objective
The Company will be managed, either by a third party non-EEA
investment manager or internally by the Company's Board of
Directors, with the intention of realising all remaining assets in
the portfolio in a prudent manner consistent with the principles of
good investment management, with a view to returning cash to its
Shareholders in an orderly manner.
Investment Policy
The Company will pursue its Investment Objective by effecting a
managed wind-down with a view to realising all of the investments
in a manner that achieves a balance between maximising the value
received from investments and making timely returns to
Shareholders. The Company may sell its investments either to
co-investors in the relevant investment or to third parties, but in
all cases with the objective of achieving the best available price
in a reasonable time scale.
As part of the realisation process, the Company may also
exchange existing debt instruments issued by any direct lending
platform for equity securities in such direct lending platform
where, in the reasonable opinion of the Board, the Company is
unlikely to be able to otherwise realise such debt instruments or
will only be able to realise them at a material discount to the
outstanding principal balance of that debt instrument.
The following investment restrictions will apply to the
Company:
The Company will cease to make any new investments or to
undertake capital expenditure except, with the prior written
consent of the Board and where:
-- the investment is a follow-on investment made in connection
with an existing investment made in order to comply with the
Company's pre-existing obligations; or
-- failure to make the follow-on investment may result in a
breach of contract or applicable law or regulation by the Company;
or
-- the investment is considered necessary by the Board to
protect or enhance the value of any existing investments or to
facilitate orderly disposals.
Any cash received by the Company as part of the realisation
process prior to its distribution to Shareholders will be held by
the Company as cash on deposit and/or as cash equivalents,
generally in US Dollars.
The Company will not undertake new borrowing other than for
short-term working capital purposes.
CHAIRMAN'S STATEMENT
Key developments
It has been an eventful period for the Company as we continue to
fulfil our mandate of realising assets and returning capital to
Shareholders. This work is ongoing and whilst considerable progress
has been made there is still a lot to do.
On 20 May 2019, the Company's Board was strengthened with the
appointment of Nicholas Paris as a non-independent Non-Executive
Director. Mr. Paris is a portfolio manager within the LIM Advisors
Group, which currently owns approximately 26% of RDL's outstanding
shares.
On 12 July 2019, Dominik Dolenec stepped down as Chairman of the
Company and Brendan Hawthorne was elected as Chairman by the Board.
With the majority of the work required to wind down the activities
of the Company completed or well underway, the Board felt it
appropriate to transition the role as Chairman to a Non-Executive
Director. Mr. Dolenec will remain an Executive Director with a
particular focus on maximising the recovery of the Company's
investment in Princeton. The Board expresses their sincere thanks
on behalf of all the Company's Shareholders for his executive
leadership in the portfolio restructuring and the wind down of the
Company.
Separately, the Company has also been notified that Oaktree
Value Equity Holdings, L.P. and LIM Advisors (London) Limited have
agreed with each other, subject to certain conditions, not to
requisition any addition to or removal from the Company's Board of
Directors for the period up to 31 December 2019.
The Company completed its transition away from Ranger in the
first half of the year which proved to be a complex exercise.
Difficulties were experienced with our year end audit process which
caused a delay in the Company's audit sign off, resulting in the
suspension of the Company's shares. The Board have taken concrete
steps around strengthening our financial reporting processes and
valuation methodologies to ensure that there will be no
reoccurrence of this regretful episode in future years.
As announced on 30 July 2019, Deloitte LLP resigned as auditor
for the Company with effect from 29 July 2019, due to a perceived
weakness in internal control relating to the valuation of loan
investments. We have addressed this issue by retaining Duff &
Phelps to carry out bi-annual valuations of the full portfolio on a
fair value basis. The Company will undertake additional valuations
in respect of part or all of the portfolio in connection with
potential sales or material changes of circumstance of its
investments to the extent it deems it appropriate to do so. The
Board, on recommendation from the Audit Committee, appointed Crowe
U.K. LLP as auditor to the Company to fill the casual vacancy
created by Deloitte LLP's resignation.
A key development during the period was the retirement of the
Group's outstanding ZDP Shares. As announced by the Company on 20
June 2019, resolutions to place its subsidiary, RDLZ, into a
members' voluntary winding up and to amend the amounts payable in
respect of the ZDP Shares issued by RDLZ so that ZDP Shareholders
would receive a revised final capital entitlement of 121.8887 pence
per ZDP Share were passed at the ZDP Class Meeting and the General
Meeting of RDLZ held on 20 June 2019. The cost to the Company of
repaying the ZDP Shares on 21 June 2019 amounted to approximately
USD 70.7 million excluding transaction expenses of USD 860,000. As
a result of the early retirement of the ZDP Shares, the Company's
ability to pay further dividends is no longer constrained by the
cover ratio covenant that required the Company to keep 2.75 times
asset cover. Accordingly, the Company can recommence the payment of
dividends as and when it has excess capital and indeed has done so
as is detailed below.
In a further positive development, a significant cash paydown of
USD 27.9 million was received in August 2019 for the sale of the
entire Vehicle Services Contract Platform as a result of a
refinancing with a new lender. A separate USD 4.5 million loan
remains outstanding to the manager of the platform and is the
subject of re-financing negotiations.
The Company has made two dividend distributions since the start
of the year, on 22 May 2019, the Directors approved the payment of
a dividend of 17.14 pence per ordinary share (USD 21.71 cents)
totalling USD 3.5 million. The dividend was paid on 12 July 2019
and charged to revenue reserves. On 8 August 2019, the Company was
pleased to declare a special dividend of 255.00 pence per ordinary
share (equivalent US309.32 cents) in respect of the year ended 31
December 2018 (the "Special Dividend"). The Special Dividend was
paid on 30 August 2019 to Shareholders and totalled USD 49.9
million. The Company elected to designate 13% of the Special
Dividend as an interest distribution to its Shareholders in order
to maintain its investment trust status and 87% as a dividend
distribution.
Adjusted for capital returns and dividends the NAV return in the
period was -6.39% in USD terms.
Wind-down and Capital Returns
Since the Annual General Meeting held on 19 June 2018 (the
"AGM"), the Company has returned GBP5.36 per share in the form of
dividend payments. This amounts to approximately 55.45% of the
published NAV as of 30 June 2018, following Board changes at the
AGM. Our investment strategy continues to seek to maximise
risk-adjusted IRRs to our Shareholders. To this end, the Company
has made significant progress with its three-pronged approach to
winding down its portfolio. The first category consisted of
portfolios that could be sold outright. Having run a sale process,
only three portfolios and a small equity position could be exited
in this way without accepting a material discount. The second
category consisted of two sizeable positions where the Company was
the sole platform capital provider. One was successfully refinanced
at par in December 2018 and as previously mentioned, a significant
cash paydown of USD 27.9 million was received in relation to the
second. The third category consisted of portfolios that are best
run off. There is a reasonable prospect that the majority of this
category will be repaid by mid 2020. However, there can be no
guarantee that the Company will be successful in accomplishing this
objective. Some residual positions will only be liquidated once
various bankruptcy proceedings are completed, with Princeton being
the most notable, and it is expected that these will take
longer.
Portfolio Performance
At 30 June 2019, 100% of the portfolio was invested in secured
Debt Instruments (including loans, cash advances, and receivables
financing) to mainly SME borrowers. In accordance with our mandate,
no new investments were made during the period. A detailed analysis
of the Company's portfolio is provided in the Executive Directors'
Report.
Princeton
A Chapter 11 Plan of Liquidation (the "Plan") was filed by the
Trustee on 19 April 2019 and provides for the prompt and orderly
liquidation of fund assets by approved professionals and the
pursuit of possible third-party litigation claims under the
direction of a liquidating trustee to be appointed under the Plan.
The Plan also contemplates that the Company's investment interests
will be treated in the same way as other Princeton investors. In
addition, in light of the arbitration award that was previously
announced by the Company and was later reduced to a final judgment
in the Delaware courts, the Company has agreed with the Trustee
that it will also be paid USD 2.5 million as an unsecured claim
under the Plan, in addition to its investment distribution. This
amount will cover part of the costs of the legal proceedings that
were incurred by the Company.
Recently, MicroBilt Corporation recruited an informal group of
minority investors, who had been solicited to invest in Princeton
after the Company made its redemption demand in 2016, to support
its alternative Chapter 11 plan (the "MicroBilt Plan"). The
MicroBilt Plan is vague in structure and content and utilises asset
values which the Trustee has asserted are unreliable. In addition,
the MicroBilt plan leaves the fund in bankruptcy for an
indeterminate period. The Company believes that the MicroBilt plan
is not in the best interest of the Company or other investors. The
Company will support the Plan filed by the Chapter 11 Trustee and
will join the Trustee in seeking its confirmation before the
Bankruptcy Court.
On 29 July 2019, the Trustee filed an adversary complaint in the
Bankruptcy Court against MicroBilt Corporation ("MicroBilt") and
various related entities and individuals. The Complaint alleges 15
separate causes of action on behalf of the bankruptcy estate for
breach of contract, breach of fiduciary duty, fraudulent
conveyance, engaging in racketeering activity and other wrongdoing
by MicroBilt and other defendants. On 5 and 8 August 2019, Ranger
participated in a court ordered settlement conference with a group
of minority investors, MicroBilt and the Chapter 11 Trustee. The
settlement conference did not result in a settlement of any claims
in the bankruptcy proceeding. At the conclusion of the settlement
conference, the Bankruptcy Court set a schedule to decide a motion
that the Trustee filed in 26 August 2019 to set the relative value
of the investors' capital accounts based on a restatement of the
value of the fund's investments. An evidentiary hearing on the
motion is presently scheduled on 10 October 2019. The MicroBilt
Plan is based upon the use of NAVs as determined by Princeton's
management as of February 2018, which was the last statement prior
to the bankruptcy. The motion to be filed by the Trustee proposes
to discard Princeton's NAV values, since they are deemed
unreliable. Under the Plan filed by the Trustee, all investors'
ownership percentages will be determined through a "net equity
method", based upon the actual amount invested minus actual amounts
paid to each investor, as either distributions or income.
Outlook
Your Board's overriding objective is to achieve a balance
between delivering maximum value and making timely returns of
capital to Shareholders, consistent with the mandate given to it by
Shareholders in 2018, and we are focussed on that. The Board is
fortunate to have the support of an excellent team of advisors
whose industriousness, diligence and experience have enabled
clarity of debate and comfort in the decisions it has made.
By the middle of 2020, we hope to realise a substantial part of
the remaining assets and return the proceeds to our Shareholders.
We will also continue to streamline management and other
administrative costs further and ultimately will look to delist the
Company's shares once the remaining assets have been substantively
returned to Shareholders.
Brendan Hawthorne
Chairman
30 September 2019
EXECUTIVE DIRECTORS' REPORT
On 20 May 2019, Nicholas Paris was appointed to the Board as a
Non-Executive Director. Mr Paris is a portfolio manager within the
LIM Advisors Group, which currently owns approximately 26% of RDL's
outstanding shares. Subsequent to the period end, Dominik Dolenec
stepped down as Chairman of the Company and Brendan Hawthorne has
been elected as Chairman by the Directors. Mr. Dolenec will remain
an Executive Director with a particular focus on maximising the
recovery of the Company's investment in Princeton.
As a reminder, the Board was entrusted by Shareholders with a
mandate to realise assets and return capital to Shareholders. The
investment policy was set out in a circular to Shareholders and
formally approved by Shareholders at a general meeting held in
November 2018.
The Executive Directors have continued to spend considerable
time in the USA, monitoring the portfolio, meeting investee
platforms and working with the platforms on realisations. This work
is ongoing and whilst considerable headway has been achieved there
remains much to do. Some of the key achievements during the period
are:
-- In January 2019, the Company's exposure to the International
MCA Platform was refinanced and our promissory notes paid off. We
realised USD 38,007,954 (at carrying value) pursuant to this
transaction, the entirety of which has been paid to the Company;
and
-- The Company has continued to work with the Real Estate
platform to offer individual performing loans to the platform's
existing and new investors. The investment balance for this
platform at 1 January 2019 was USD 36.8 million. As at 30 June
2019, the net exposure to this platform was USD 16.2 million.
Perhaps the key achievement during the period was the retirement
of the Group's outstanding ZDP shares. As announced by the Company
on 20 June 2019, resolutions to place its subsidiary, RDLZ, into a
members' voluntary winding up and to amend the amounts payable in
respect of the zero dividend preference shares ("ZDP Shares")
issued by RDLZ so that ZDP Shareholders would receive a revised
final capital entitlement of 121.8887 pence per ZDP Share were
passed at the RDLZ Class Meeting and the General Meeting of RDLZ
held on 20 June 2019. The cost to the Company of repaying the ZDP
Shares on 20 June 2019 amounted to approximately USD 70.7 million.
Note that this figure does not include associated transaction
expenses, which amounted to approximately USD 860,000.
As a result of the early retirement of the ZDP Shares, the
Company's ability to pay further dividends is no longer constrained
by the cover ratio covenant that required the Company to keep 2.75
times asset cover. Accordingly, the Company can recommence the
payment of dividends as and when it has excess capital. Pursuant to
this, a further special dividend of 255.00 pence per ordinary share
(equivalent US 309.32 cents) was paid on 30 August 2019, subsequent
to the period end. This is in addition to the 17.14 pence per share
special dividend (USD 21.71 cents) that was paid on 12 July
2019.
Shareholders should take note that a mandate requiring the
active sale or timed liquidation of portfolios presents an inherent
risk which does not present itself with the run-off of a portfolio,
in that such assets may not be realised at their fair value.
Although the Company is not currently considering offers which fall
materially below the values referred to in this Executive
Directors' Report, the inherent risk of attracting opportunistic
buyers must be managed with the optionality to run down a
short-term portfolio in order to ensure the realisation of
appropriate value. It is also important for Shareholders to
recognise that a material amount of the future value for the
Company will be tied to current claims in litigation.
Management arrangements
On 12 February 2019, the Investment Management Agreement between
the Company and Ranger was terminated. The Company has, during the
period, appointed IFM as its replacement Alternative Investment
Fund Manager. Following the appointment of IFM, the Executive
Directors have and will continue to perform their Executive
responsibilities. In particular, any investment or divestment
decisions relating to the Company's portfolio will not be
implemented without prior Board approval.
Steve Bellah, a senior credit professional and a financial
controller, both of Remuda Credit Advisors, LLC, based in Dallas,
have been engaged to assist the Executive Directors with the
management and realisation of the portfolio. A huge amount of time
was spent by the Executive Directors in the run up to 12 February
2019 to ensure a smooth transition of management responsibilities
and to avert any disruption to the portfolio management role. It
was also a considerable task transitioning over the accounting
function to the new service provider.
Investment portfolio
In accordance with the Board's instructions, Ranger, in June
2018 discontinued making investments through normal course of
business with the following exceptions:
-- the investment is a follow-on investment made in connection
with an existing Investment made in order to comply with the
Company's pre-existing obligations; or
-- failure to make the follow-on investment may result in a
breach of contract or applicable law or regulation by the Company;
or
-- the investment is considered necessary by the Board to
protect or enhance the value of any existing investments or to
facilitate orderly disposals.
No new investments were made during the period.
At 30 June 2019, the entire portfolio was invested in secured
Debt Instruments (including loans, cash advances, and receivables
financing) to mainly Small to Medium Enterprise ("SME") borrowers,
and the portfolio no longer includes any unsecured consumer loans.
For this purpose, a secured Debt Instrument is defined by the
Company as a payment obligation in which property, financial assets
(including receivables), or a payment guaranty has been pledged,
mortgaged or sold to the Company as partial or full security with
respect to such obligation.
Below is a brief summary of each investment platform / partner
which provides:
-- Net balance at 30 June 2019 (estimated fair value); and
-- Commentary summarising primary activity and expected disposition of the investments.
Note: all amounts shown below are in USD.
SME/CRE Loans Platform
Net Balance at Net Balance at
31 December 2018 30 June 2019
USD 40,446,802 USD 26,375,106
Since 31 December 2018, there has been a regular run-off of all
performing investments. The Executive Directors are in weekly
contact with this platform, who are trying to assist in the sale of
some investments to its other investors throughout 2019, and
remaining investments will be run off.
Vehicle Services Contract Platform
Net Balance at Net Balance at
31 December 2018 30 June 2019
USD 39,375,565 USD 28,168,672
A significant cash paydown of USD 27.9 million was received in
August as a result of a refinancing with a new lender. A separate
USD 4.5 million loan remains outstanding to the manager of the
platform and is the subject of re-financing negotiations.
Real Estate Lending Partner
Net Balance at Net Balance at
31 December 2018 30 June 2019
USD 36,836,583 USD 16,192,844
There has been a combination of sales of some investments with
help of the platform and regular run-off of all performing
investments, particularly during the latter part of the year. The
platform will continue to assist with the sale of some investments
to its other investors throughout 2019, and the remaining
investments will be run-off.
Princeton Alternative Income Fund
Net Balance at Net Balance at
31 December 2018 30 June 2019
USD 15,000,000 USD 15,000,000
As announced on 11 February 2019, the Company is currently
estimating a potential recovery of approximately USD 15 million
from the Princeton bankruptcy. A further update is provided
below.
Canadian SME Lending Platform
Net Balance at Net Balance at
31 December 2018 30 June 2019
USD 4,974,099 USD 3,868,137
This platform portfolio is now serviced directly by the Company.
Using the information from the former investment manager's direct
contact with the borrowers, the Company continued its servicing and
re-structuring of payment obligations with individual borrowers
whose loans were originated by the platform. These loans are
venture loans to mainly small and early stage companies with
underdeveloped profit profiles which bear certain risks common to
venture lending. The remaining investments are expected to be run
off in due course under a variety of collection efforts. Current
collection efforts include litigation and realisation of collateral
proceeds, restructured pay out terms with longer amortisation, and
participation in royalty streams from future company sales to be
applied to the outstanding loans.
Equipment Loans Platform
Net Balance at Net Balance at
31 December 2018 30 June 2019
USD 669,641 USD 479,592
Since 31 December 2018, there has been a regular run-off of all
performing investments. The remaining investments are expected to
be run-off.
Second Consumer Loans Platform
Net Balance at Net Balance at
31 December 2018 30 June 2019
USD 299,655 USD nil
Since 31 December 2018, there has been a regular run-off of all
performing investments.
Invoice Factoring Platform
Net Balance at Net Balance at
31 December 2018 30 June 2019
USD 175,477 USD nil
Since December 2018, there has been a regular run-off of all
performing investments.
Third SME Loans Platform
Net Balance at Net Balance at
31 December 2018 30 June 2019
USD 21,296 USD nil
Since December 2018, there has been a regular run-off of all
performing investments.
Consumer Loans Platform
Net Balance at Net Balance at
31 December 2018 30 June 2019
USD 7,587 USD nil
In October 2018, all performing loans were sold to a third party
which left the non-performing loans to run-off.
Independent valuation of the portfolio
Duff & Phelps, an independent valuation firm, is engaged to
value all of the platforms making up the Company's main portfolio,
with the exception of the Canadian SME Lending Platform and the
investment in Princeton.
A copy of the report from Duff & Phelps (the "D&P
Report") as at 30 June 2019 has been delivered to the Board.
The Company is ultimately and solely responsible for determining
fair value of the investments in good faith, and following its
review of the report, the values at 30 June 2019 were updated based
on the Duff & Phelps valuation with the exception of i) the
Vehicle Service Contract (VSC) platform (this is the Second SME
Loan Platform), which was not valued as the platform was refinanced
and our outstanding position was completely paid off prior to Duff
& Phelps completing their analysis, and ii) the Canadian SME
Lending Platform.
These loans are venture loans with little to or no fixed
repayment dates. Payments are determined annually and are reliant
upon Canadian Government tax rebates and credits. Further, well
over half of the portfolio is non-performing. Thus, Duff &
Phelps indicated that it is unable to apply traditional valuation
methods.
Princeton Update
The Company announced on 11 February 2019 that it was currently
estimating a potential recovery of approximately USD 15 million
from the Princeton bankruptcy. Prior to this, it had attributed a
value of approximately USD 28.5 million to the Company's investment
in Princeton in calculating the Net Asset Value ("NAV").
Accordingly, the Company resolved to impair the carrying value of
its investment in Princeton by a further USD 13.5 million in the 31
December 2018 financial statements.
The Company emphasises that this remains an unverified estimate
and is subject to a number of potential variables; in particular
the amount that the Company will recover will be dependent upon the
final structure of the creditor and investor waterfall and
distribution scheme and the actual net amount available for
distribution. A final determination of these issues is not expected
for a number of months and it is not possible to predict the
precise structure of the distribution scheme which will be approved
by the bankruptcy court. In addition, other factors that will
impact the Company's ultimate recovery amount include (but are not
limited to): the actual recoveries in respect of both performing
and delinquent payday loans in the Princeton portfolio - currently
these recovery rates are based on assumptions using historic sector
benchmarks which may not prove to be accurate in respect of the
actual portfolio performance; certain restricted cash balances in
the Princeton portfolio may not be released to the Company; no
valuation on potential litigation claims has currently been made;
and other, unforeseen factors or information may subsequently occur
or be discovered. As such, no reliance can be placed on the
estimated potential recovery amount and it is likely that such
estimate will change in the future as additional information is
received from the Trustee.
The Company engaged in active discussions with the Trustee
regarding the content of a Chapter 11 Plan of Liquidation (the
"Plan") proposed by the Trustee. The Plan was filed by the Trustee
on 19 April 2019 and provides for the prompt and orderly
liquidation of fund assets by approved professionals and the
pursuit of possible third-party litigation claims under the
direction of a liquidating trustee to be appointed under the Plan.
The Plan also contemplates that the Company's investment interests
will be treated in the same way as other Princeton investors.
In addition, in light of the arbitration award that was
previously been announced by the Company and was later reduced to a
final judgment in the Delaware courts, the Company has agreed with
the Trustee that it will also be paid USD 2.5 million as an
unsecured claim under the Plan, in addition to its investment
distribution. This amount will cover part of the costs of the legal
proceedings that were incurred by the Company.
Recently, MicroBilt Corporation recruited an informal group of
minority investors, who had been solicited to invest in Princeton
after the Company made its redemption demand in 2016, to support
its alternative Chapter 11 plan (the "MicroBilt Plan"). The
MicroBilt Plan is vague in structure and content and utilises asset
values which the Trustee has asserted are unreliable. In addition,
the MicroBilt plan leaves the fund in bankruptcy for an
indeterminate period of time. The Company believes that the
MicroBilt plan is not in the best interest of the Company or other
investors. The Company will support the Plan filed by the Chapter
11 Trustee and will join the Trustee in seeking its confirmation
before the Bankruptcy Court.
On 29 July 2019, the Trustee for Princeton filed an adversary
complaint in the Bankruptcy Court against MicroBilt Corporation
("MicroBilt") and various related entities and individuals. The
Complaint alleges 15 separate causes of action on behalf of the
bankruptcy estate for breach of contract, breach of fiduciary duty,
fraudulent conveyance, engaging in racketeering activity and other
wrongdoing by MicroBilt and other defendants. On 5 and 8 August
2019, Ranger participated in a court ordered settlement conference
with a group of minority investors, MicroBilt and the Chapter 11
Trustee. The settlement conference did not result in a settlement
of any claims in the bankruptcy proceeding. At the conclusion of
the settlement conference, the Bankruptcy Court set a schedule to
decide a motion that the Trustee filed 26 August 2019 to set the
relative value of the investors' capital accounts based on a
restatement of the value of the fund's investments. An evidentiary
hearing on the motion is presently scheduled on 10 October 2019.
The MicroBilt Chapter 11 plan is based upon the use of NAVs as
determined by Princeton's management as of February 2018, which was
the last statement prior to the bankruptcy. The motion to be filed
by the Trustee proposes to discard Princeton's NAV values, since
they are deemed unreliable. Under the Plan filed by the Trustee,
all investors' ownership percentages will be determined through a
"net equity method", based upon the actual amount invested minus
actual amounts paid to each investor, as either distributions or
income.
Sector Reporting
As at 30 June 2019, the portfolio (excluding cash and cash
equivalents) was diversified across five different sectors as
follows:
Allocation
Sector 30 Jun 2019 31 Dec 2018 Change
Bridge loans to real estate
developers 18% 21% 81%
Credit lines to finance companies 18% 9% 78%
Loans to businesses with
government grants 4% 3% 33%
Loans/advances to small/medium
size businesses 29% 45% (67%)
Vehicle service contract
financing 31% 22% 23%
-------
Total (excluding cash and
cash equivalents) 100% 100% -
============ ============ =======
INTERIM MANAGEMENT REPORT
The important events that have occurred during the period under
review, the key factors influencing the financial statements and
the principal risks and uncertainties for the remaining six months
of the financial year are set out in the Chairman's Statement above
and in the Executive Directors' Report above.
The principal risks and uncertainties the Group faces are
substantially unchanged since the date of the Annual Report and
Accounts and continue to be as set out in that report on pages 19
to 22.
The Board will continue to keep the Company's system of risk
management and internal control under review and will continue to
ensure that the principal risks and challenges faced by the Group
are fully understood and managed appropriately.
GOING CONCERN
The Board are in the process of disposing of the Company's
assets in an orderly manner and returning Shareholders' capital to
them.
Given these developments and the intention to wind down the
Company, the use of the going concern basis in preparing the
financial statements of the Group is not considered to be
appropriate. As such the financial statements have been prepared on
a basis other than that of a going concern, under which assets are
measured at their net realisable value. There were no adjustments
made to the carrying values of the assets and liabilities of the
Group as a result of this change in the basis of preparation,
because the Directors consider the carrying value of assets to
approximate their net realisable value.
No provision has been made for the costs of winding up the
Company as these will be charged to the income statement on an
accruals basis as they are incurred or as the Company becomes
obligated to make such payments in the future.
The Directors believe that the Company and Group have adequate
resources to continue in operational existence until the
anticipated liquidation of the Company.
DIRECTORS' RESPONSIBILITY STATEMENT
For the period 1 January 2019 to 30 June 2019
The Directors confirm that to the best of their knowledge:
-- The condensed consolidated financial statements ("condensed
financial statements") have been prepared in accordance with
International Accounting Standard 34 'Interim Financial Reporting'
as adopted by the European Union; and gives a true and fair view of
the assets, liabilities and financial position of the Group;
and
-- This Half-Yearly Report includes a fair review of the information required by:
a) the Disclosure Guidance and Transparency Rules ("DTR") 4.2.7R
(being an indication of important events during the first six
months of the current financial year and their impact on the
condensed financial statements; and a description of principal
risks and uncertainties for the remaining six months of the year);
and
b) DTR 4.2.8R (being disclosure of related parties' transactions
and any changes in the related party transactions described in the
last annual report that could do so).
This Half-Yearly Financial Report was approved by the Board of
Directors on 30 September 2019 and the above responsibility
statement was signed on its behalf by Brendan Hawthorne,
Chairman.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
(Unaudited) (Audited)
ASSETS Notes Jun 2019 Dec 2018
Non-current assets USD USD
Financial assets at fair value
through profit or loss 3 62,150,679 137,806,709
--------------- -------------
Total non-current assets 62,150,679 137,806,709
--------------- -------------
Current assets
Financial assets at fair value
through profit or loss 3 27,933,672 38,307,954
Derivative assets 9 - 412,297
Receivable from broker 1,060 5,825,498
Advances to/funds receivable
from direct
lending platforms 1,010,366 908,917
Prepayments and other receivables 253,802 790,379
Cash and cash equivalents 11 25,591,883 35,634,844
--------------- -------------
Total current assets 54,790,783 81,879,889
--------------- -------------
TOTAL ASSETS 116,941,462 219,686,598
--------------- -------------
Non-current liabilities
Zero dividend preference shares 6 - 65,180,787
Total non-current liabilities - 65,180,787
--------------- -------------
Current liabilities
Accrued expenses and other liabilities 5 6,145,215 32,154,477
Income tax liability 1,208,766 1,508,612
Derivative liabilities 9 - 6,101
---------------
Total current liabilities 7,353,981 33,669,190
--------------- -------------
TOTAL LIABILITIES 7,353,981 98,849,977
---------------
NET ASSETS 109,587,481 120,836,621
=============== =============
SHAREHOLDERS' EQUITY
Capital and reserves
Share capital 7 427,300 427,300
Share premium account 40,346,947 40,346,947
Other reserves 156,922,734 156,922,734
Revenue reserves (3,624,671) 1,421,278
Realised capital losses (82,973,460) (76,365,105)
Unrealised capital losses (3,110,629) (2,475,418)
Foreign currency translation
reserves 1,599,260 558,885
---------------
TOTAL SHAREHOLDERS' EQUITY 109,587,481 120,836,621
=============== =============
NAV per Ordinary Share 6.80 7.49
=============== =============
The accompanying notes are an integral part of these condensed
financial statements.
The financial statements for the period ended 30 June 2019 of
RDL Realisation Plc, a public listed company limited by shares and
incorporated in England and Wales with the registered number
09510201, were approved and authorised for issue by the Board of
Directors on 30 September 2019.
Signed on behalf of the Board of Directors:
Brendan Hawthorne
Chairman
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019
(Unaudited) (Unaudited) (Audited)
1 Jan to 30 Jun 19 1 Jan to 30 Jun 18 1 Jan to 31 Dec 18
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
Income (USD) (USD) (USD) (USD) (USD) (USD) (USD) (USD) (USD)
----------- ------------- ----------- ---------- ----------- ----------- ---------- ------------ ------------
Investment
income 3 5,403,920 - 5,403,920 12,593,352 - 12,593,352 22,647,763 - 22,647,763
2,817,392
Other income 721,475 - 721,475 2,817,392 - 2,817,392 4,844,030 - 4,844,030
Gain on
revaluation
of derivative
contracts - - - - - - - 203,869 203,869
Bank interest
income 7,446 - 7,446 3,350 - 3,350 3,765 - 3,765
Realised gains
on
financial
assets at
fair value
through
profit or loss - 189,051 189,051 - - - - - -
----------- ------------- ----------- ---------- ----------- ----------- ---------- ------------ ------------
6,132,841 189,051 6,321,892 15,414,094 - 15,414,094 27,495,558 203,869 27,699,427
----------- ------------- ----------- ---------- ----------- ----------- ---------- ------------ ------------
Operating
expenditure
Realised losses
on
financial
assets at
fair value
through
profit or loss - - - - - - - 19,199,453 19,199,453
Unrealised
losses
on financial
assets
at fair value
through
profit or loss - 3,098,879 3,098,879 - 759,589 759,589 - 15,830,398 15,830,398
Investment
Management
Fees 12 56,907 - 56,907 1,413,428 - 1,413,428 2,675,643 - 2,675,643
Service and
premium
fees 191,815 - 191,815 1,220,822 - 1,220,822 1,980,905 - 1,980,905
Provision for /
(Reversal
of) default - - - - (1,002,222) (1,002,222) - 1,002,222 1,002,222
Loans written
off 4 - - - - 7,091,372 7,091,372 - 7,091,372 7,091,372
Company
Secretarial,
administration
and
registrar fees 859,685 - 859,685 181,583 - 181,583 421,019 - 421,019
Finance costs 2,758,921 - 2,758,921 1,984,050 - 1,984,050 3,934,484 - 3,934,484
Foreign
exchange loss - 11,750 11,750 - 315,594 315,594 - 1,677,065 1,677,065
Other expenses 3,669,712 - 3,669,712 3,981,717 - 3,981,717 8,056,722 - 8,056,722
Loss on sale of
ZDP
Preference
Shares - 4,116,612 4,116,612 - - - - - -
Loss on
revaluation
of derivative
contracts - 205,376 205,376 - 6,887 6,887 - - -
----------- ------------- ----------- ---------- ----------- ----------- ---------- ------------ ------------
7,537,040 7,432,617 14,969,657 8,781,600 7,171,220 15,952,820 17,068,773 44,800,510 61,869,283
----------- ------------- ----------- ---------- ----------- ----------- ---------- ------------ ------------
(Loss)/profit
before
tax (1,404,199) (7,243,566) (8,647,765) 6,632,494 (7,171,220) (538,726) 10,426,785 (44,596,641) (34,169,856)
----------- ------------- ----------- ---------- ----------- ----------- ---------- ------------ ------------
Taxation (141,462) - (141,462) (128,872) - (128,872) (872,082) (728,288) (1,600,370)
----------- ------------- ----------- ---------- ----------- ----------- ---------- ------------ ------------
(Loss)/Profit after tax
for the period/year (1,545,661) (7,243,566) (8,789,227) 6,503,622 (7,171,220) (667,598) 9,554,703 (45,324,929) (35,770,226)
=========== ============= =========== ========== =========== =========== ========== ============ ============
The accompanying notes are an integral part of these condensed
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(continued)
FOR THE PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019
(Unaudited) (Unaudited) (Audited)
1 Jan to 30 Jun 19 1 Jan to 30 Jun 18 1 Jan to 31 Dec 18
Notes Revenue Capital Total Revenue Capital Total Revenue Capital Total
(USD) (USD) (USD) (USD) (USD) (USD) (USD) (USD) (USD)
------------- ------------- ------------- -------------- ---------------- -------------- ------------- ---------------- ----------------
Basic Earnings
Per
Ordinary
Share - USD 10 (0.10) (0.45) (0.55) 0.40 (0.44) (0.04) 0.60 (2.81) (2.21)
Basic Earnings
Per
Ordinary
Share - GBP 10 (0.07) (0.34) (0.41) 0.31 (0.34) (0.03) 0.47 (2.21) (1.74)
Diluted
Earnings Per
Ordinary
Share - USD 10 (0.10) (0.45) (0.55) 0.40 (0.44) (0.04) 0.60 (2.81) (2.21)
Diluted
Earnings Per
Ordinary
Share - GBP 10 (0.07) (0.34) (0.41) 0.31 (0.34) (0.03) 0.47 (2.21) (1.74)
Profit/(loss)
for
the
period/year (1,545,661) (7,243,566) (8,789,227) 6,503,622 (7,171,220) (667,598) 9,554,703 (45,324,929) (35,770,226)
-------------- ----- ------------- ------------- ------------- -------------- ---------------- -------------- ------------- ---------------- ----------------
Other comprehensive
income:
Items that may be
reclassified
subsequently to
profit and
loss:
Exchange differences
on
translation of net
assets
of subsidiary - - 1,040,375 - - 81,169 - - 724,066
------------- ------------- ------------- -------------- ---------------- -------------- ------------- ---------------- ----------------
Total comprehensive
income/(loss)
for the period/year (1,545,661) (7,243,566) (7,748,852) 6,503,622 (7,171,220) (586,429) 9,554,703 (45,324,929) (35,046,160)
============= ============= ============= ============== ================ ============== ============= ================ ================
The accompanying notes are an integral part of these condensed
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY
FOR THE PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019
(Unaudited)
------------------------------------------------------------------------------------------------------------------------------
Unrealised Foreign
Capital currency
Share Share Other Realised Profits/ Revenue translation
Notes Capital Premium Reserves Capital (Losses) Reserves reserves Total
Note (Losses)
(USD) (USD) (USD) (USD) (USD) (USD) (USD) (USD)
Balance at 1
January
2019 427,300 40,346,947 156,922,734 (76,365,105) (2,475,418) 1,421,278 558,885 120,836,621
Dividends 8 - - - - - (3,500,288) - (3,500,288)
Reclassification
of capital
losses - - - (2,475,418) 2,475,418 - - -
Loss for the
period - - - (4,132,937) (3,110,629) (1,545,661) - (8,789,227)
Other
comprehensive
income for the
period - - - - - - 1,040,375 1,040,375
--------- ------------ ------------- ------------------ ------------------- ----------------- ----------- -------------
Balance at 30
June
2019 427,300 40,346,947 156,922,734 (82,973,460) (3,110,629) (3,624,671) 1,599,260 109,587,481
========= ============ ============= ================== =================== ================= =========== =============
(Audited)
---------- ------------- -------------- ------------------------------- ------------- ------------ --------------
Other Unrealised Foreign
Reserves Realised Capital currency
Share Share Capital Profits/ Revenue translation Total
Capital Premium (Losses) (Losses) Reserves reserves
(USD) (USD) (USD) (USD) (USD) (USD) (USD) (USD)
Balance at 1
January
2018 427,300 40,346,947 204,225,570 (30,035,108) (3,480,486) 4,484,858 (165,181) 215,803,900
Dividends - - (47,302,836) - - (12,618,283) - (59,921,119)
Reclassification
of capital losses - - - (3,480,486) 3,480,486 - - -
(Loss)/profit for
the year - - - (42,849,511) (2,475,418) 9,554,703 (35,770,226)
Other
comprehensive
income for the
year - - - - - - 724,066 724,066
---------- ------------- -------------- --------------- -------------- ------------- ------------ --------------
Balance as at 31
December 2018 427,300 40,346,947 156,922,734 (76,365,105) (2,475,418) 1,421,278 558,885 120,836,621
========== ============= ============== =============== ============== ============= ============ ==============
The accompanying notes are an integral part of these condensed
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY (continued)
FOR THE PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019
(Unaudited)
--------- ----------- ------------ --------------------------- ------------ ------------ ------------
Realised Unrealised Foreign
Capital Capital currency
Share Share Other Profits Profits/ Revenue Translation
Notes Capital Premium Reserves (Losses) (Losses) Reserves reserves Total
(USD) (USD) (USD) (USD) (USD) (USD) (USD) (USD)
Balance at 1
January
2018 427,300 40,346,947 204,225,570 (30,035,108) (3,480,486) 4,484,858 (165,181) 215,803,900
Dividends 8 - - - - - (9,600,155) - (9,600,155)
Reclassification
of capital
losses - - - (3,480,486) 3,480,486 - - -
Profit/(loss) for
the period - - - (7,091,372) (79,848) 6,503,622 (667,598)
Other
comprehensive
income for the
period - - - - - - 81,169 81,169
--------- ----------- ------------ ------------- ------------ ------------ ------------ ------------
Balance as at 30
June 2018 427,300 40,346,947 204,225,570 (40,606,966) (79,848) 1,388,325 (84,012) 205,617,316
========= =========== ============ ============= ============ ============ ============ ============
The accompanying notes are an integral part of these condensed
financial statement.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019
(Unaudited) (Unaudited) (Audited)
1 Jan to 1 Jan to 1 Jan to
30 30 31
Jun 19 Jun 18 Dec 18
Notes (USD) (USD) (USD)
Loss for the period/year (8,789,227) (667,598) (35,770,226)
Adjustments for:
Provision for income tax expense 141,462 128,872 1,600,370
Tax paid (346,914) - (280,094)
Net loss on financial assets at fair
value through profit or loss 3 2,969,239 759,589 11,714,842
Impairment - - 13,534,657
Interest impairment - - 465,284
Investment income 3 (5,403,920) (12,593,352) (22,647,763)
Interest expense on ZDP Shares 6 2,280,788 1,899,670 3,770,242
Amortisation of transaction fees -
net - 23,209 23,209
Amortisation of issue costs 6 449,875 84,379 164,242
Foreign exchange loss (326,123) 229,796 971,835
Loss on RDLZ Preference Shares 6 4,116,612 - -
Loss/(gain) on revaluation of derivative
financial instruments 205,376 6,887 (203,869)
Loans written off 4 - 7,091,372 7,091,372
Reversal of provision for default 4 - (719,736) (719,736)
----------------- ------------- --------------
Operating cash flows before movements
in working capital (4,702,832) (3,756,912) (20,285,635)
Decrease/(increase) in other current
assets and prepaid expenses 6,361,015 (885,102) (6,423,242)
Increase in accrued expenses and other
liabilities 280,429 3,758,446 29,534,891
(Increase)/decrease in funds receivable
from direct lending platforms - net (101,449) (1,225,756) 2,873,999
----------------- ------------- --------------
Net cash flows generated from (used
in) operating activities 1,837,163 (2,109,324) 5,700,013
----------------- ------------- --------------
Investing activities
Acquisition of financial assets at
fair value through profit or loss 3 - - (6,222,775)
Acquisition of loans 4 - (91,163,256) (91,163,256)
Principal repayments 4 - 85,852,639 85,852,639
Proceeds from partial redemption of
financial assets at fair value through
profit or loss 3 83,422,646 27,237 68,349,705
Investment income received 3 5,042,346 11,950,287 24,076,643
Net settlement on derivative positions 200,820 854,348 362,877
----------------- ------------- --------------
Net cash flows generated from investing
activities 88,665,812 7,521,255 81,255,833
----------------- ------------- --------------
Financing activities (9,600,155)
Payment of ZDP shares to Preference
Shareholders (70,790,110) - -
Dividends paid (29,797,917) (9,600,155) (59,921,119)
----------------- ------------- --------------
Net cash used in financing activities (100,588,027) (9,600,155) (59,921,119)
----------------- ------------- --------------
Net change in cash and cash equivalents (10,085,052) (4,188,224) 27,034,727
Effect of foreign exchange 42,091 62,475 (1,099,682)
Cash and cash equivalents at the beginning
of the period/year 35,634,844 9,699,799 9,699,799
----------------- ------------- --------------
Cash and cash equivalents at the end
of the period/year 11 25,591,883 5,574,050 35,634,844
================= ============= ==============
The accompanying notes are an integral part of these condensed
financial statement.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2019 TO 30 JUNE 2019
1. GENERAL INFORMATION
The Company was incorporated and registered in England and Wales
on 25 March 2015 and commenced operations on 1 May 2015 following
its admission to the London Stock Exchange Main Market. The
registered office of the Company is 6 Floor, 65 Gresham Street,
London, EC2V 7NQ.
The condensed financial statements ("condensed financial
statements") include the results of the Trust and RDLZ (in
liquidation). The investment objective of the Group is the
realisation of all remaining assets in the portfolio in a prudent
manner consistent with the principles of good investment
management, with a view to returning cash to its Shareholders in an
orderly manner.
The half year results for the six months ended 30 June 2019 have
not been either audited or reviewed by the Company's Auditor. The
comparative figures for the year ended 31 December 2018 have been
extracted from the Group's latest published Annual Report and
Accounts and do not constitute statutory accounts as defined in
section 434 of the Companies Act 2006. This Annual Report and
Accounts have been delivered to the Registrar of Companies. The
Report of the Auditor on those financial statements was qualified.
The Auditor considered there to be insufficient appropriate audit
evidence, as described in note 3, which relates to the valuation of
Princeton and a disagreement in respect of the estimation of fair
value of non-current loan investments held at fair value through
profit or loss. The Auditor drew attention to an emphasis of a
matter paragraph in relation to the preparation of the financial
statements on a basis other than a going concern and did not
contain a statement under section 498(2) of the Companies Act 2006.
The comparative figures for the period ended 30 June 2018 have been
extracted from the Group's 30 June 2018 half-yearly financial
report which were reviewed by the Auditor.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of accounting and preparation
These condensed financial statements have been prepared in
compliance with IAS 34 'Interim Financial Reporting' as adopted by
the European Union ("EU"). The annual financial statements were
prepared with International Financial Reporting Standards ("IFRS")
as adopted by the EU. The financial statements were also prepared
in accordance with the Statement of Recommended Practice ("SORP")
for investment trusts issued by the AIC, where this guidance is
consistent with IFRS.
Basis of measurement and consolidation
The condensed financial statements have been prepared on a
historical cost basis as modified for the revaluation of certain
financial assets. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through
its power over the entity. The Trust is fully consolidated from the
date on which control is transferred to the Group and
deconsolidated from the date that control ceases.
Going concern and viability statements
As previously announced on 6 July 2018, the Board established
two new committees that both aim to quickly and efficiently wind
down the Company in an orderly manner. These committees are
focusing on the Princeton proceedings and the associated strategic
decisions and the wind-down and realisation of the Company's
existing portfolio with the specific aim of maximising returns for
stakeholders.
Given these developments and the intention to wind down the
Company, the use of the going concern basis in preparing these
financial statements of the Group is not appropriate. As such the
financial statements have been prepared on a basis other than that
of a going concern, which require assets to be measured at their
net realisable value. There were no adjustments made to the
carrying values of the assets and liabilities of the Group as a
result of this change in the basis of preparation, because the
Directors' consider the carrying value of assets to approximate the
net realisable value. The Directors believe that the Company and
Group have adequate resources to continue in operational existence
until the anticipated liquidation of the Company.
New Accounting Standards, amendments to existing Accounting
Standards and/or interpretations of existing Accounting Standards
(separately or together, "New Accounting Requirements") adopted
during the current period
The Directors have assessed the impact, or potential impact, of
all New Accounting Requirements. In the opinion of the Directors,
there are no mandatory New Accounting Requirements applicable in
the current period that are relevant and/or material to the
Company. Consequently, no such mandatory New Accounting
Requirements are listed. The Company has not early adopted any New
Accounting Requirements that are not mandatory.
New Accounting Standards, amendments to existing Accounting
Standards and/or interpretations of existing Accounting Standards
(separately or together, "New Accounting Requirements") not yet
adopted
In the Directors' opinion, all non-mandatory New Accounting
Requirements are either not yet permitted to be adopted, or would
have no material effect on the reported performance, financial
position or disclosures of the Group and consequently have neither
been adopted nor listed.
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments sets out requirements for
recognising and measuring financial assets, financial liabilities
and some contracts to buy or sell non-financial items.
-- Classification - Financial assets
IFRS 9 contains three principal classification categories for
financial assets: measured at amortised cost, Fair Value through
Other Comprehensive Income ("FVOCI") and Fair Value through Profit
or Loss ("FVTPL").
Under IFRS 9, derivatives embedded in contracts where the host
is a financial asset in the scope of the standard are never
bifurcated. Instead, the hybrid financial instrument as a whole is
assessed for classification.
Based on its assessment, the Group does not believe that the new
classification requirements will have a material impact on its
accounting for loans held at amortised cost and investments in
equity securities that are managed on a fair value basis.
-- Impairment - Financial assets and contract assets
IFRS 9 replaces the 'incurred loss' model in IAS 39 with a
forward-looking 'expected credit loss' (ECL) model. This will
require considerable judgement about how changes in economic
factors affect ECLs, which will be determined on a
probability-weighted basis.
The new impairment model will apply to financial assets measured
at amortised cost or FVOCI, except for investments in equity
instruments, and to contract assets.
Under IFRS 9, loss allowances will be measured on either of the
following bases:
-- 12-month ECL: these are ECLs that result from possible
default events within the 12 months after the reporting date;
and
-- lifetime ECL: these are ECLs that result from all possible
default events over the expected life of a financial
instrument.
Lifetime ECL measurement applies if the credit risk of a
financial asset at the reporting date has increased significantly
since initial recognition and 12-month ECL measurement applies if
it has not. An entity may determine that a financial asset's credit
risk has not increased significantly if the asset has low credit
risk at the reporting date.
IFRS 9 Financial Instruments (continued)
The Group believes that impairment losses are likely to become
more volatile for assets in the scope of the IFRS 9 impairment
model.
Under IFRS 9, the Group has to classify all financial
instruments in scope for impairment into 3 Stages - stage 1, stage
2 or 3, depending on the change in credit quality since initial
recognition.
Investments in equity instruments and financial assets at FVTPL
are out of scope of the impairment requirement.
Stage 1
This includes loans where there is no significant increase in
credit risk since initial recognition or loans that have low credit
risk on reporting date. For loans in stage 1, interest is accrued
on the gross carrying amount of the loans and a 12-month expected
credit loss ("ECL") is factored in the profit and loss ("P&L")
calculations.
Stage 2
This consists of loans with significant increase in credit risk
since initial recognition but not credit impaired. Interest for
loans in stage 2 is accrued on the gross carrying amount; however,
a lifetime ECL is factored into the profit and loss
calculations.
Stage 3
This includes loans which demonstrate evidence of impairment on
the reporting date. Interest is accrued on the net carrying amount
of the loans and a lifetime ECL is factored into the profit and
loss calculations.
For the Group's loan investments, the assessment is performed on
a collective basis per platform as the underlying loans have shared
risk characteristics however individual assessment may be performed
depending on the magnitude and available information from the
platform providers.
For short-term receivables and cash and cash equivalents, the
ECL model is not likely to result in a material change of the
balance due to their short-term nature therefore the Group will
apply the simplified approach for contracts that have a maturity of
one year or less.
-- Classification - Financial liabilities
IFRS 9 largely retains the requirements in IAS 39 for the
classification of financial liabilities. However, under IAS 39 all
fair value changes of liabilities designated as at FVTPL are
recognised in profit or loss, whereas under IFRS 9 these fair value
changes are generally presented as follows:
- the amount of change in fair value that is attributable to
changes in the credit risk of the liability is presented in the
OCI; and
- the remaining amount of change in the fair value is presented in profit or loss.
The Group has not designated any financial liabilities at FVTPL
and it has no current intention to do so.
Use of estimates, judgements and assumptions
The Company based its assumptions and estimates on parameters
available when the financial statements were prepared. However,
existing circumstances and assumptions about future developments
may change due to market changes or circumstances arising beyond
the control of the Group. Such changes are reflected in the
assumptions when they occur.
The following are areas of particular significance to the
Group's financial statements and include the use of estimates and
the application of judgement.
Use of estimates, judgements and assumptions (continued)
Key source of estimation uncertainty - fair value of financial
assets at fair value through profit or loss
The determination of fair values based on available market data
requires significant credit judgement by the Group.
Management has applied certain estimated potential impairments
to these financial instruments as of 30 June 2019. For the material
financial instrument positions at 30 June 2019, a combination of
factors was taken into consideration.
In addition to the credit judgement of management related to the
reserves for potential impairment, third party valuations and
analysis were also employed for the material financial instruments
for comparison and consideration. For these third-party valuations,
a weighted average IRR for each platform was used. Included in the
discount analysis by third parties were increased discount rates
for individual non-performing loans. Such valuations considered
actual and market default rate comparisons for the discount rate.
The key estimation uncertainty is considered to be the discount
rate applied in estimating the fair value of financial assets at
fair value through profit or loss; further details are shown in
note 14 to the consolidated financial statements.
Functional and presentation currency
The financial statements are presented in US Dollars ("USD"),
the currency of the primary economic environment in which the
Company operates, the Company's functional currency.
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign currency assets and liabilities are
translated into the functional currency using the exchange rate
prevailing at the date of the Statement of Financial Position.
Financial assets held at fair value through profit or loss
The Group's financial assets consist of loans at fair value
through profit or loss and equity investments in funds. The Group
designated its investment as financial assets at fair value through
profit or loss in accordance with IFRS 9, as the fund is managed
and its performance is evaluated on a fair value basis and the
Group now holds the investments with the intention to sell rather
than to collect contractual cash flows.
Purchases and sales of financial assets are recognised on the
trade date, the date which the Group commits to purchase or sell
the assets and are derecognised when the rights to receive cash
flows from the financial assets have expired or the Group has
transferred substantially all risks and rewards of ownership.
Financial instruments are initially recognised at fair value, and
transaction costs for financial assets carried at fair value
through profit or loss are expensed. Gains and losses arising from
changes in the fair value of the Group's financial instruments are
included in the Statement of Comprehensive Income in the period
which they arise.
Financial liabilities at amortised cost - Zero Dividend
Preference Shares
These were initially recognised at cost, being the fair value of
the consideration received associated with the borrowing net of
direct issue costs. Zero Dividend Preference Shares were
subsequently measured at amortised cost using the effective
interest method. Direct issue costs were amortised using the
effective interest method and were added to the carrying amount of
the Zero Dividend Preference Shares.
Derivative financial instruments
Derivative financial instruments, including short-term forward
currency and swap contracts were classified as held at fair value
through profit or loss, and were classified in current assets or
current liabilities in the Statement of Financial Position.
Derivatives were entered into to reduce the exposure on the foreign
currency loans. Changes in the fair value of derivative financial
instruments were recognised in the Statement of Comprehensive
Income as a capital item. The Group's derivatives were not used for
speculative purposes and hedge accounting is not applied.
Taxation
Investment trusts which have approval as such under section 1158
of the Corporation Taxes Act 2010 are not liable for taxation on
capital gains. The Company has taken advantage of modified UK tax
treatment in respect of its qualifying interest income for an
accounting period and has chosen to designate as an "interest
distribution" all or part of any amount it distributes to the
Shareholders as dividends, to the extent that it has qualifying
interest income for the accounting period. As such, the Company is
able to deduct such interest distributions from its income in
calculating its taxable profit for the relevant accounting period.
It is expected that the Company will have material amounts of
qualifying interest income and therefore may decide to designate
some or all of the dividends payable as interest distributions.
The current tax payable is based on the taxable profit for the
period. Taxable profit differs from net profit as reported in the
Statement of Comprehensive Income because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are never taxable or deductible. The
Company's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted at the Statement of
Financial Position date.
Deferred tax is the tax expected to be payable or recoverable on
temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted
for using the liability method. Deferred tax liabilities are
recognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that
taxable profits will be available against which deductible
temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised based on tax rates that have been enacted or substantively
enacted at the Statement of Financial Position date.
The carrying amount of deferred tax assets is reviewed at each
Statement of Financial Position date and reduced to the extent that
it is no longer probable that sufficient taxable profits will be
available to allow all or part of the asset to be recovered.
Investment and other income
Investment income and other income are recognised when it is
probable that the economic benefits will flow to the Group and the
amount of revenue can be measured reliably. Income for all interest
bearing financial instruments is accrued on a time basis, by
reference to the principal outstanding and at the effective
interest rate applicable, which is the rate that exactly discounts
estimated future cash receipts through the expected life of the
financial asset to that asset's net carrying amount on initial
recognition.
Dividend income
Dividend income from investments is recognised when the
Shareholders' rights to receive payment have been established.
Dividends payable
Dividends payable on ordinary shares are recognised in the
Statement of Changes in Equity when approved by the Directors in
respect of interim dividends and by the Shareholders if declared as
a final dividend by the Directors at an AGM. As advised to
Shareholders in the Company's circular dated 29 October 2018, the
Board does not intend to make quarterly dividends and will instead
make payments by way of ad-hoc special dividends, where
appropriate, during the course of the managed wind-down process so
that the Company is able to return available cash to Shareholders
as soon as reasonably practicable after cash becomes available in
the portfolio.
Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand and
highly liquid interest-bearing securities with original maturities
of three months or less.
Segmental reporting
An operating segment is a component of the Group that engages in
business activities from which it may earn revenues and incur
expenses. The Directors perform regular reviews of the operating
results of the Group and make decisions using financial information
at the Group level only. Accordingly, the Directors believe that
the Group has only one reportable operating segment.
The Directors are responsible for ensuring that the Group
carries out business activities in line with the transaction
documents. They may delegate some or all of the day-to-day
management of the business, including the decisions to purchase and
sell securities, to other parties both internal and external to the
Group. The decisions of such parties are reviewed on a regular
basis to ensure compliance with the policies and legal
responsibilities of the Directors; therefore the Directors retain
full responsibility as to the major allocation decisions of the
Group.
Earnings per share
The Company presents basic and diluted earnings per share
("EPS") data for its ordinary shares. Basic EPS is calculated by
dividing the profit or loss attributable to ordinary Shareholders
by the weighted average number of ordinary shares outstanding
during the period.
The diluted EPS is the same as the basic EPS as there is
currently no arrangement which could have a dilutive effect on the
Company's ordinary shares.
Share capital and share premium
Ordinary Shares are not redeemable and are classified as equity.
Incremental costs directly attributable to the issue of new shares
are shown in equity as a deduction, net of tax, from the
proceeds.
Expenses (including finance costs)
Expenses are accounted for on an accruals basis and are
recognised in the Statement of Comprehensive Income. Investment
management fee is 100% allocated to revenue. Except for provision
of default and performance fee associated with financial assets at
fair value through profit or loss, which are allocated into capital
and revenue in accordance with SORP, all other expenses are charged
through revenue.
3. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
The Group's financial asset at fair value through profit or loss
represents all its loan investments.
(Unaudited) (Audited)
30 Jun 19 31 Dec 18
(Group) (Group)
USD USD
Opening fair value 176,114,663 29,621,483
Transfer in from Loans held
at amortised cost arising
from reclassification on 1
July 2018 - 248,386,018
Purchases - 6,222,775
Repayments (88,464,992) (68,349,705)
Net gain/(loss) on financial
assets through profit or loss 2,434,680 (39,765,908)
------------- --------------
Closing balance 90,084,351 176,114,663
============= ==============
The financial assets amounting to USD 27,933,672 (31 December
2018: USD 38,307,954) represents assets sold subsequent to the
period-end and therefore, are classified as current assets. The
remaining assets are classified as non-current.
The net gain/(loss) on financial assets at fair value through
profit or loss includes investment income of USD 5,403,920 (31
December 2018: USD 22,647,763).
Following the Company's announcement on 11 June 2018 that it
will move to realise its assets and proceed with an orderly
wind-down process, the Company's business model has changed from
holding financial assets to collect their contractual cash flows to
realising assets, in a prudent manner consistent with the
principles of good investment management with a view to returning
cash to its Shareholders in on orderly manner. Consequently, all
loans which were previously held at amortised cost have been
reclassified as at fair value through profit or loss.
Fair value estimation
Please refer to the Executive Directors' Report for Princeton
update and note 14 for the valuation of financial assets at fair
value through profit or loss.
4. LOANS HELD AT AMORTISED COST
(Unaudited) (Audited)
30 Jun 19 31 Dec 18
(Group) (Group)
USD USD
Opening balance - 250,993,296
Purchases - 91,163,256
Principal repayments - (85,852,639)
Amortisation of transaction fees - (23,209)
Accrued interest - 643,065
Loans written-off - (7,091,372)
Effect of foreign exchange (2,166,115)
----------------
- 247,666,282
(Provision for) / utilisation of
default allowance-net - 719,736
Transfer out to financial assets
at fair value through profit or
loss arising from reclassification
on 1 July 2018 - (248,386,018)
------------- ----------------
Closing balance - -
============= ================
5. ACCRUED EXPENSES AND OTHER LIABILITIES
(Unaudited) (Audited)
30 Jun 19 31 Dec 18
(Group) (Group)
USD USD
Investment Management fees payable
- note 13 7,405 639,005
Dividend payable 3,508,226 29,797,917
Other payables 2,629,584 1,717,555
------------ -----------
Legal fee payable 655,138 137,540
Interest received in advance 409,022 228,037
Service and premium fee payable 455,494 439,471
Audit fee payable 412,817 184,988
Administration fee payable 104,401 82,429
Registrar fee and Secretary fee
payable 76,087 10,625
Payable to London Stock Exchange - 3,606
Directors' fees payable (note 12) 101,408 128,577
Other payables 415,217 502,282
------------ -----------
6,145,215 32,154,477
============ ===========
6. ZERO DIVID PREFERENCE SHARES
(Unaudited) (Audited)
30 Jun 19 31 Dec 18
(Group) (Group)
USD USD
Opening balance 65,180,787 76,222,019
Amortisation of issue costs during
the period/year 1,090,945 371,437
Amortisation of premium during the
period/year (641,070) (207,195)
Interest expense during the period/year 2,280,788 3,770,242
Purchased by Company - (10,415,132)
Effect of foreign exchange (1,237,952) (4,560,584)
Redemption of ZDP Preference Shares (66,673,498) -
Closing balance - 65,180,787
============= =============
Under RDLZ's Articles of Association, the Directors were
authorised to issue up to 55 million Zero Dividend Preference
shares ("ZDP Shares") for a period of five years from 25 July 2016.
RDLZ issued 53 million ZDP Shares at GBP 0.01 each (the "ZDP
Shares") in 2016. The ZDP Shares had a term of five years and a
final capital entitlement of GBP 127.63 pence per ZDP share on 31
July 2021, this being the ZDP Repayment Date.
As part of the Board's asset realisation process and in meeting
the obligations of the Company to RDLZ, it purchased ZDP Shares to
reduce those obligations in advance of the final ZDP Repayment
Date. As at 14 December 2018, the Company held 7,278,193 ZDP
Shares. The Board passed a resolution to waive the Company's
entitlement to the acquired principal and accrued interest on the
ZDP Shares held by the Company up to 14 December 2018.
The ZDP Shares did not carry the right to vote at general
meetings of ZDP, although they carried the right to vote as a class
on certain proposals, which would be likely to materially affect
their position. Further, ZDP Shares (or any shares or securities
which rank in priority to or pari passu with the ZDP Shares) may be
issued without separate class approval of the ZDP Shareholders
provided that the Directors determine that the ZDP Shares would
have a cover of not less than 2.75 times immediately following such
issue.
As announced by the Company on 20 June 2019, resolutions to
place its subsidiary, RDLZ, into a members' voluntary winding up
and, to amend the amounts payable in respect of the ZDP Shares so
that ZDP Shareholders would receive a revised final capital
entitlement of 121.8887 pence per ZDP Share. These resolutions were
passed at the ZDP Class Meeting and General Meeting of RDLZ held
respectively on 20 June 2019.
On 21 June 2019, the Company paid USD 70,709,889 to third-party
holders of the ZDP Shares. The Group incurred a realised loss on
the early repayment of the ZDP Shares of USD 4,116,612.
The Company did not receive any payment for the ZDP shares it
owned.
7. SHARE CAPITAL AND SHARE PREMIUM
The table below shows the total issued share capital as at 30
June 2019 and 31 December 2018.
Ordinary Shares
Nominal value Nominal value Number of
shares
GBP USD
Ordinary Shares 309,591 427,300 16,122,931
============== ============== ===========
Voting Rights
Subject to any rights or restrictions attached to any shares, on
a show of hands every Shareholder present in person has one vote
and every proxy present who has been duly appointed by a
Shareholder entitled to vote has one vote, and on a poll every
Shareholder (whether present in person or by proxy) has one vote
for every share of which he is the holder. A Shareholder entitled
to more than one vote need not, if he votes, use all his votes or
cast all the votes he uses the same way. In the case of joint
holders, the vote of the senior holder who tenders a vote, whether
in person or by proxy, shall be accepted to the exclusion of the
vote of the other joint holders, and seniority shall be determined
by the order in which the names of the holders stand in the
Register.
No Shareholder shall be entitled to vote at any general meeting
or at any separate general meeting of the holders of any class of
shares in the Company, either in person or by proxy, in respect of
any share held by him unless all amounts presently payable by him
in respect of that share have been paid.
Variation of Rights and Distribution on Winding Up
If at any time, the share capital of the Company is divided into
different classes of shares, the rights attached to any class may,
unless otherwise provided by the terms of issue of the Shares of
that Class, be varied or abrogated, whether or not the Company is
being wound up, either with the consent in writing of the holders
of not less than three-quarters in nominal value amount of the
issued shares of the affected class, or with the sanction of a
special resolution passed at a separate general meeting of the
holders of the shares of that class (but not otherwise).
At every such separate general meeting the necessary quorum,
other than an adjourned meeting, shall be two persons holding or
representing by proxy at least one-third in nominal amount of the
issued shares of the class in question, and at an adjourned meeting
one person holding shares of the class in questions or his proxy;
any holder of shares of the class in question present in person or
by proxy may demand a poll and the holder of shares of the class in
question shall, on a poll, have one vote in respect of every share
of such class held by him. Where the rights of some only of the
shares of any class are to be varied, the foregoing provisions as
if each group of shares of the class differently treated formed a
separate class whose rights are to be varied.
The Company has no fixed life but, pursuant to the Articles, an
ordinary resolution for the continuation of the Company will be
proposed at the AGM of the Company to be held in 2020 and, if
passed, every five years thereafter. Upon any such resolution not
being passed, proposals will be put forward within three months
after the date of the resolution to the effect that the Company be
wound up, liquidated, reorganised or unitised. If the Company is
wound up, the liquidator may divide among the Shareholders in
specie the whole or any part of the assets of the Company and for
that purpose may value any assets and determine how the division
shall be carried out as between the Shareholders or different
classes of Shareholders.
There was no movement in shares or no shares converted during
the period or the prior year.
8. DIVIDS
Set out below is the total dividend paid in respect of the
financial period:
Per (Unaudited) (Unaudited)
Share
GBP pence
/ USD cents
1 Jan to 1 Jan to
30 Jun 19 30 Jun 18
(Group) (Group)
Ordinary Shares dividends declared USD USD
and paid:
Interim dividends in 2019
(in respect of 31 Dec 2018 results) 17.14 / 21.70 3,500,288 -
Interim dividends in 2018
(in respect of 31 Mar 2018 results) 19.79 / 25.93 - 4,180,676
Interim dividends in 2018
(in respect of 31 Dec 2017 results) 24.14 / 33.61 - 5,419,426
------------ ------------
Total dividends paid during
the period/year 3,500,288 9,600,155
============ ============
The Company intends to distribute at least 85% of its
distributable income earned in each financial year by way of
dividends, in order to maintain its investment trust status.
As advised to Shareholders in the Company's circular dated 29
October 2018, the Board does not intend to make quarterly dividends
and will instead make payments by way of ad-hoc special dividends.
As a result of the early retirement of the ZDP Shares, the
Company's ability to pay further dividends is no longer constrained
by the cover ratio covenant that required the Company to keep 2.75
to asset cover. Accordingly, where appropriate, during the course
of the managed wind-down process, the Company is now able to return
available cash to Shareholders as soon as reasonably
practicable.
9. DERIVATIVE FINANCIAL INSTRUMENTS
(Unaudited) (Audited)
30 Jun 19 31 Dec 18
(Group) (Group)
USD USD
Derivative assets - 412,297
Derivative liabilities - (6,101)
------------- ----------
- 406,196
====================================== ==========
(Unaudited) (Audited)
30 Jun 19 31 Dec 18
Notional (Group) (Group)
Amount USD USD
Derivative assets/(liabilities)
Forward foreign currency contracts - - 87,449
Forward currency swap contracts - - 318,747
---------- ------------- ----------
- - 406,196
========== ================================================== ==========
The Company has entered into various swap and forward contracts
to manage exposure to foreign currency on existing assets. The
notional amounts provided in the table above reflect the aggregate
of individual derivative positions on a gross basis. As at 30 June
2019, the Company no longer held any derivative financial
instruments.
10. BASIC AND DILUTED EARNINGS PER SHARE
The basic and diluted earnings per Ordinary Share is based on
the profit after tax and on 16,122,931 Ordinary Shares, being the
weighted average number of ordinary shares in issue throughout the
period. (31 December 2018: 16,122,931 Ordinary Shares for basic
earnings per share and diluted earnings per share).
11. CASH AND CASH EQUIVALENTS
The components of the Group's cash and cash equivalents are:
(Unaudited) (Audited)
30 Jun 19 31 Dec 18
(Group) (Group)
USD USD
Cash at bank 25,528,408 35,571,114
Cash equivalents 63,475 63,730
------------ -----------
25,591,883 35,634,844
============ ===========
12. RELATED PARTIES
Transactions between the Group and its related parties are
disclosed below.
The Directors, who are the key management personnel of the
Group, are remunerated per annum as follows:
(Unaudited) (Unaudited) (Audited)
30 Jun 19 30 Jun 18 31 Dec 18
(Group) (Group) (Group)
USD USD USD
Chairman 74,208 48,630 130,056
Other Directors' 274,769 83,967 342,039
------------ ------------ ----------
348,977 132,597 472,095
============ ============ ==========
As at 30 June 2019, USD 101,408 (31 December 2018: USD 128,577)
was accrued for Directors' remuneration.
The Company has not made any contribution, to any Directors'
pension scheme and no retirement benefits are otherwise accruing to
any of the Directors under any defined benefit or monthly purchase
scheme for which the Company is liable. There have been no changes
to the aforementioned holding between 31 December 2018 and the date
of this report.
The Group does not have any employees.
The Board delegated responsibility for day-to-day management of
the loans held by the Direct Lending Platforms to Ranger until 12
February 2019. Under the terms of the Investment Management
Agreement, Ranger was entitled to a management fee and a
performance fee together with reimbursement of reasonable expenses
incurred by it in the performance of its duties. Total Investment
Management fees to Ranger for the period amounted to USD nil (31
December 2018: USD 2,675,643). As at 30 June 2019, the Investment
Management fees payable was USD nil (31 December 2018: USD
639,005).
During the period, Ranger received a reimbursement amount of USD
nil for expenses (31 December 2018: USD 209,812). Performance fee
for the period amounted to USD nil (31 December 2018: USD nil). As
at 30 June 2019, the performance fee payable was USD nil (31
December 2018: USD nil).
As at 30 June 2019, Ranger held 4,639 Ordinary Shares
representing 0.03% of the total interest in voting rights of the
Company (31 December 2018: 0.03%).
On 12 February 2019, the Company appointed IFM as its
replacement Alternative Investment Fund Manager ("AIFM"). Under the
terms of the AIFM agreement, the Company shall reimburse IFM for
all documented expenses incurred in the proper performance of its
duties and IFM is entitled to a fixed fee of GBP 70,000 per annum.
Total fees to IFM for the period amounted to USD 56,907. As at 30
June 2019, the fee payable to IFM was USD 7,405.
The Company entered into a Trust Agreement with the Trust on 22
April 2015. The Company, being the sole unitholder, has sole
discretion to declare distributions from the Trust. As at 30 June
2019, amounts owed by undertakings relating to the Trust's net
income was 3,387,066 (31 December 2018: USD 6,434,803).
The Company incorporated RDLZ (in liquidation) on 23 June 2016
as a public limited company with limited life and granted an
undertaking to (among other things) subscribe for such number of
ordinary shares in the capital of RDLZ as may be necessary or to
otherwise ensure that RDLZ has sufficient assets to satisfy its
obligations to the ZDP Shareholders and pay any operational costs
incurred by RDLZ. During the period, the Company paid RDLZ's
expenses amounting to 739,326 (2018: USD 416,971 representing
RDLZ's expenses and Share issue costs).
On 25 July 2016, the Company entered into a loan agreement with
RDLZ. Pursuant to this loan agreement, RDLZ, immediately following
the admission of its ZDP Shares, on-lent the proceeds to the
Company. The Company applied these funds towards making investments
in accordance with its investment policy and working capital
purposes.
In the prior year, the Company purchased a total of 7,278,193
ZDP Shares, to which its rights to interest income and accrued
capital entitlement have been waived. No further ZDP Shares were
purchased in the current period.
On 20 June 2019, ZDP Shareholders received a revised final
capital entitlement of 121.8887 pence per ZDP Share and the Company
repaid its loan to RDLZ in order to meet this liability to ZDP
shareholders. Following this, RDLZ, was placed into a members'
voluntary liquidation. The Company did not receive the revised
final capital entitlement for the ZDP Shares it held.
The amount payable to RDLZ that is eliminated upon consolidation
is USD 358,777 and payable to the Trust is USD 94,935,175 (2018:
USD 71,212,412 payable to RDLZ and USD 54,847,439 payable to the
Trust). The amounts payable to RDLZ as at 30 June 2019 relates to
the remaining loan amount held in order to cover any further
outstanding expenses of RDLZ.
13. FEES AND EXPENSES
Management fee
The management fees were payable monthly in arrears and at the
rate of 1/12 of 1.0% per month of NAV (the "Management Fee"). For
the period from Admission until the date on which 80% of the Net
Proceeds have been invested or committed for investment, directly
or indirectly, in Debt Instruments or Direct Lending Company
Equity, the value attributable to any assets of the Group (other
than Debt Instruments or in investments in Direct Lending Company
Equity) held for investment purposes (including any cash) will be
excluded from the calculation of Net Asset Value for the purposes
of determining the Management Fee.
Ranger may have charged a fee based on a percentage of gross
assets (such percentage not to exceed 1.0% and provided that the
aggregate Management Fee payable by the Group shall not exceed an
amount equal to 1.0% of the gross assets of the Company or its
group in aggregate (as applicable)) to any entity which is within
the Company's group (including the Company), provided that such
entity employs leverage for the purpose of its investment policy or
strategy.
Performance fee
Ranger was also entitled to a performance fee calculated by
reference to the movements in the Adjusted NAV since the end of the
Calculation Period (as defined below) in respect of which a
performance fee was last earned or Admission if no performance fee
has yet been earned (the Adjusted NAV at such earlier date being
the "High Water Mark").
The performance fee was be a sum equal to 10% of the amount by
which the Adjusted Net Asset Value at the end of a Calculation
Period exceeds the High-Water Mark.
The Management and Performance fees payable to Ranger were
calculated and paid in US Dollars.
Termination Arrangements
The IMA with Ranger was terminated on 12 February 2019.
Accordingly, the Executive Board manages the activities of the
Company and the wind-down process. On the same day, IFM replaced
Ranger as the Alternative Investment Fund Manager.
14. FINANCIAL RISK MANAGEMENT
Fair value of groups of financial assets that are measured at
fair value on a recurring basis
Some of the Group's financial assets are measured at fair value
as at 30 June 2019. The following table gives information about how
the fair values of the material financial assets are determined, in
particular the valuation techniques and inputs used.
Loan Platform Valuation Technique Significant Unobservable Relationship and
Input Sensitivity of
Unobservable Inputs
to Fair Value
-------------- --------------------------- ------------------------- -------------------------
Vehicle The VSC platform, This platform was No sensitivity
Services was not valued as refinanced in August can be presented
Contract the platform was 2019 and received as the residual
Platform refinanced and our USD 27.9 million. value of USD 235,000
(VSC) outstanding position The remaining NAV was not derived
was completely paid will be reduced with the DCS method.
off prior to Duff to USD 235,000. Duff & Phelps
& Phelps completing However, there supported this
their analysis. are continuing value as a residual
efforts to collect value in the event
previously reserved of a sale of the
debt of USD 4.5 underperforming
million. unit with no measurable
collateral value.
-------------- --------------------------- ------------------------- -------------------------
SME Loans RDL engaged third Discount rate determined The higher the
Platform party qualified valuers by reference to discount rate,
to perform the valuation, the SME Platform the lower fair
primarily applying loan was dependent value.
the Discounted Cash on loan status
Flow Method. Management and remaining term. If the discount
worked closely with The weighted average rate was 2 percent
the qualified external discount rate ranged higher/lower while
valuers to establish from 8% to 18%. all other variables
the appropriate valuation were held constant,
techniques and inputs the carrying amount
to the model. The for the SME platform
valuers were allowed would decrease/
direct contact with increase by USD
the platform to validate 285,890 approximately.
the data used in
the valuation.
-------------- --------------------------- ------------------------- -------------------------
Real Estate RDL engaged third Discount rate determined If the discount
Loans party qualified valuers by reference to rate was 2 percent
Platform to perform the valuation, the Real Estate higher/lower while
primarily applying Loans Platform all other variables
the Discounted Cash loan was dependent were held constant,
Flow Method. Management on loan status the carrying amount
worked closely with and remaining term. for the Real Estate
the qualified external The weighted average Loans platform
valuers to establish discount rate ranged would decrease/
the appropriate valuation from 8% to 10%. increase by USD
techniques and inputs 68,281 approximately.
to the model. The
valuers were allowed
direct contact with
the platform to validate
the data used in
the valuation.
-------------- ---------------------------
Fair value hierarchy
The fair values of the financial assets held at fair value
through profit and loss were derived from:
a) Loan Investments - A valuation report by a third party valuer
or proceeds received from sale post period-end or amount estimated
to be recoverable by the Board; and
b) Princeton - estimated potential recovery from the investment.
The fair values of cash and cash equivalents, funds receivable
from/payable to Direct Lending Platforms, prepayments and other
receivables, and accrued expenses and other liabilities are
estimated to be approximately equal to their carrying values due to
their short-term nature.
IFRS 13 "Fair Value Measurement" ("IFRS 13") defines a fair
value hierarchy that prioritises the inputs to valuation techniques
used to measure fair value. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for
identical assets and liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). The
three levels of fair value hierarchy under IFRS 13 are as
follows:
Level 1: Inputs that reflect unadjusted quoted prices in active
markets for identical assets and liabilities at the valuation
date;
Level 2: Inputs other than quoted prices included in Level 1
that are observable for the assets or liability either directly (as
prices) or indirectly (derived from prices), including inputs from
markets that are not considered to be active; and
Level 3: Inputs that are not based upon observable market
data.
Inputs are used in applying the various valuation techniques and
broadly refer to the assumptions that market participants use to
make valuation decisions, including assumptions about risk. The
main input parameters for this model are the default rate (the
value rises when the default rate is lower, and decreases when the
default rate is higher), the interest rate (the value rises when
the interest rate is higher, and drops when the interest rate is
lower), and the discount rate (the value rises when the discount
rate is lower, and drops when discount rate is higher). A financial
instrument's level within the fair value hierarchy is based on the
lowest level of any input that is significant to the fair value
measurement.
However, the determination of what constitutes "observable"
requires significant judgement by the Directors. The Directors
consider observable data to be market data which is readily
available, regularly distributed or updated, reliable and
verifiable, not proprietary, provided by multiple independent
sources that are actively involved in the relevant market.
The categorisation of a financial instrument within the
hierarchy is based upon the pricing transparency of the financial
instruments and does not necessarily correspond to the Group's
perceived risk inherent in such financial instruments.
The following tables include the fair value hierarchy of the
Group's financial assets and liabilities designated at fair value
through profit or loss:
Level 1 Level 2 Level 3 Total
30 Jun 19 (unaudited)
(USD) (USD) (USD) (USD)
Financial assets - 27,933,672 62,150,679 90,084,351
Financial liabilities - - - -
Level 1 Level 2 Level 3 Total
31 Dec 18
(audited) (USD) (USD) (USD) (USD)
Financial assets - 38,720,251 137,806,709 176,526,960
Financial liabilities - 6,101 - 6,101
A reconciliation of financial instruments in Level 3 is set out
below:
30 Jun 19 31 Dec 18
(Group) (Group)
USD USD
Opening balance 137,806,709 29,624,483
Purchases / Additions - 6,222,775
Disposals / Redemptions (50,079,986) (68,349,705)
Transfer out of Level 3 (27,933,672) (38,307,954)
Transfer into Level 3 - 248,386,018
Net gain on financial assets 2,357,628 (39,765,908)
Closing balance 62,150,679 137,806,709
14. OPERATING SEGMENTS
Geographical information
The Group is managed as a single asset management business,
being the investment of the Group's capital in financial assets
comprising Debt Instruments and loans originated by Direct Lending
Platforms.
The chief operating decision maker is the Board of Directors.
Under IFRS 8, the Group is required to disclose the geographical
location of revenue and amounts of non-current assets other than
financial instruments.
Revenues
The Group's revenues are currently generated from the United
States of America ("USA"), United Kingdom ("UK") and Canada. The
total investment income generated from the USA, UK and Canada
amounted to USD 4,798,750, USD 77,558 and USD 527,612, respectively
(2018: USA, UK and Canada amounted to USD 16,266,025, USD 4,637,666
and USD 1,744,072 respectively).
Non-current assets
The Group does not have non-current assets other than the
financial assets at fair value through profit or loss.
16. SUBSEQUENT EVENTS
On 5 August 2019, following the restructuring efforts, the
Company received USD 27.9 million for the sale of the entire
Vehicle Services Contract Platform as a result of a refinancing
with a new lender. A separate USD 4.5 million loan remains
outstanding to the manager of the platform and is the subject of
ongoing re-financing negotiations.
On 8 August 2019, the Directors approved the payment of Special
Dividend on the ordinary shares of USD 309.32 cents (GBP 255.00
pence) per Ordinary Share at a total amount of USD 49,871,466. The
Special Dividend was paid on the 30 August 2019 and 13% of the
Special Dividend was designated as an interest distribution to its
Shareholders in order to maintain its investment trust status, and
87% was designated as a dividend distribution.
COMPANY INFORMATION
Directors
Brendan Hawthorne
Dominik Dolenec
Brett Miller
Gregory Share
Joseph (Joe) Kenary
Nicholas (Nick) Paris (appointed 20 May 2019)
Company Secretary and Registered Office
Link Company Matters Limited
6 Floor, 65 Gresham Street
London
EC2V 7NQ
United Kingdom
Registrar
Link Asset Services
The Registry, 34 Beckenham Road
Kent
BR3 4TU
United Kingdom
Investment Manager and Alternative Investment Fund Manager
(until 12 February 2019)
Ranger Alternative Management II, LP
2828 N. Harwood Street Suite 1900
Dallas, Texas
United States
Alternative Investment Fund Manager (from 12 February 2019)
IFM
Sarnia House, Le Truchot
St Peter Port, Guernsey
GY1 1GR
Channel Islands
Broker
Liberum Capital Limited Level 12, Ropemaker Place
25 Ropemaker Street
London
EC2Y 9LY
United Kingdom
Administrator
Sanne Fiduciary Services Limited
IFC 5
St Helier, Jersey
JE1 1ST
Channel Islands
English and US Securities Law Legal Adviser
Travers Smith LLP
10 Snow Hill
London
EC1A 2AL
United Kingdom
Sidley Austin LLP
25 Basinghall Street
London
EC2V 5HA
United Kingdom
www.rdlrealisationplc.co.uk
National Storage Mechanism
A copy of the Half-Yearly Report will be submitted to the
National Storage Mechanism ("NSM") and will be available for
inspection at the NSM, which is situated
at:www.morningstar.co.uk/uk/nsm.
LEI: 549300VGZSKYQ7C2U221
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
IR ZBLFXKKFEBBD
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September 30, 2019 11:07 ET (15:07 GMT)
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