Company registration number:
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COMPANY INFORMATION
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CONTENTS
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STRATEGIC REPORT
FOR THE PERIOD ENDED 31 DECEMBER 2021
The directors present their strategic report for Redline Capital Partners (UK) Limited (the “Company”) for the period from 22 September 2020 until 31 December 2021 (the “Relevant Financial Period”). The Company’s registration number is 12896673.
The Company has been in existence since 22 September 2020.
The principal activity of the Company during the Relevant Financial Period was provision of investment advisory services to its sole client - Redline Capital Partners S. A. (“RCP” or the “Fund”). RCP is a specialised investment fund under the form of a société anonyme (Société d'Investissement à Capital Variable - Fonds d'Investissement Spécialisé, SICAV-SIF). RCP is domiciled in Luxembourg. The Fund’s capital is coming from the Company’s ultimate parent, Instacom International S.A. SPF (“Instacom”). The Fund is a public equity fund investing in US listed public equities in the life sciences and healthcare sectors. The Company provides to RCP advice and service in relation to portfolio management of the Fund (including sourcing of new investments; research and financial analysis; and performing due diligence on the new investments) as described in more detail in the Advisory Support Agreement between the two entities. At the end of the Relevant Financial Period, the Company had three employees. The Company has also engaged the services of one non-executive director. During the Relevant Financial Period, there was no staff turnover and the Company added one net employee. On 22 November 2021, the Company became authorised by the Financial Conduct Authority (the “FCA”) as an investment manager. From 1 February 2022, the principal activity of the Company became provision of portfolio management of RCP in its transitioned form of a SICAV-RAIF (Société d’investissement à capital variable – Fonds d’investissement Alternatif Réservé) through a delegated mandate by RCP’s Alternative Investment Fund Manager (AIFM), FundRock Management Company S.A. through an Investment Management Agreement. Staff turnover in the Company is low. After the end of the Relevant Financial Period, there was no net turnover of staff; one employee departed for personal reason and there was an addition of a director as an employee from 1 January 2022. The Company adapted well to the necessity for all staff to work from home due to the COVID-19 pandemic and there have been no disruption to the day-to-day activities of the Company.
The management of the business and the execution of the Company’s strategy are subject to a number of risks.
The principal risks are the discontinuation of the advisory fees received in respect of services provided under the investment services agreement, and senior staff turnover. Both of these risks are substantially mitigated by the ongoing need for active management of the Fund. From 1 January 2022, the Company has also acquired insurance to cover its key persons risks.
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STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2021
The key performance indicators the directors used to monitor performance during the Relevant Financial Period are summarised below:
∙Profit. The Company’s profit at the end of the Relevant Financial Period amounted to £49,487.
∙NAV of the Fund. NAV of the Fund as at end of the Relevant Financial Period amounted to $84.4 million.
∙Staff Retention. The Company hopes to maintain both a culture and remuneration structure which are attractive to the employees.
The Company intends to continue its principal activities of provision of portfolio management services to the Fund.
The company's maximum exposure to credit risk in relation to financial assets arises from its bank balances and other debtors (i.e. RCP). Credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.
The Company's policy on liquidity risk is to ensure that significant cash is available to fund on-going operations. The Company has no external borrowing facilities and is reliant on shareholder support. The Company has issued two million ordinary shares at £1 each to its shareholder after the Relevant Financial Period, which were fully paid up for a total of £2 million.
The Company manages its liquidity and cash flow risk by reviewing cash flow forecasts on a regular basis to identify any liquidity or capital shortfalls.
Conflict in Ukraine
On 24 February 2022, Russia invaded Ukraine. As of the date of this report, the conflict is ongoing. The ongoing conflict and related sanctions targeted against the Russian Federation may have an impact on the UK economy and globally. Although neither the Company nor the Fund it advises have any direct exposure to or investments in Ukraine, Russia or Belarus, some of the shareholders in the ultimate parent company of the Company are connected to Russia. As a result of this connection, the Company is facing some operational difficulties as certain of its service providers have served notices terminating their relationship with the Company. Although this is negatively affecting the Company’s operations, the Directors do not believe that this will prevent the Company from operating as going concern. The Company is planning to either replace the service providers or move some of the relevant services that have been outsourced in-house. In addition, the general economic situation may have an adverse impact on the performance of the Fund and, consequently, the amount of the management fee the Company may charge. At this stage, management is not able to reliably estimate the impact as events are unfolding day-by-day, but given the uncorrelated nature of the Fund’s investments, it is not expected to be severe. UK Sanctions Designations On 13 April 2022, one of the minority shareholders of the Company’s ultimate parent company (the “Designated Individual”) was designated in the UK under the Russia (Sanctions) (EU Exit) Regulations (“UK Sanctions Regulations”).
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STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2021
The Directors are of the view that that Designated Individual does not “control” (as defined in the UK Sanctions Regulations) the Company and, therefore, the Company should not be affected by the designation.
Following the designation, the Company has retained an independent firm of solicitors, Corker Binning Limited (“Corker Binning”), to perform the analysis as to whether the Company is controlled by the Designated Individual and provide legal opinion to this effect. Corker Binning had no previous involvement with the Company or its affiliates and was able to approach the task independently. Neither the Directors nor the management have instructed Corker Binning to reach a particular view. Following an extensive analysis of the corporate documents and after conducting interviews of the Directors and management, Corker Binning came to the conclusion that the Company was not controlled by the Designated Individual and is therefore not itself indirectly designated. However, notwithstanding the above, the Company is facing certain operational difficulties following the designation. Most importantly, the Company’s corporate bank (Barclays PLC) has taken a risk averse approach and has frozen the Company’s bank accounts until the Company receives a formal confirmation of its status from the Office of the Financial Sanctions Implementation (the “OFSI”), the UK regulator responsible for sanctions implementation. As a result, the Company has been unable to pay salaries to its employees, pay its service providers or make the relevant contributions to the HMRC. Immediately following the designation, the Company reached out to the OFSI and requested confirmation that it is not indirectly designated under the UK Sanctions Regulations. Although a substantive response has not been obtained as at the date of this report, on 19 July 2022, the OFSI confirmed to the Company that it does not require any further information regarding the Company’s request. The OFSI has also confirmed that they understand the urgency of the request and that the Company’s query has been prioritised. Therefore, it is currently the Directors’ expectation that the OFSI will issue the requested confirmation shortly and the Company will be able to resume its normal operations thereafter, including the settlement of outstanding salaries, taxes and other payables. However, if the OFSI were to come to a different conclusion, the Company’s operations will be restricted to those for which it is able to receive an appropriate licence from the OFSI, likely a material reduction from the current level. In this event, the Directors fully expect that a licence would also be granted to permit settlement of all accrued liabilities. The Directors note that although the employees have not received their salaries since March 2022, there have been no resignations linked to the designation or associated aftermath from any of the team members. Similarly, the Fund continues to perform well, and the management fee continues to accrue to the Company. The Company continues to have sufficient funds to meet its liabilities and obligations as they fall due and to operate on a going concern basis.
The board of directors of the Company consider that they have fulfilled their individual and collective duty under section 172(1) of the Companies Act 2006 to act in the way they consider, in good faith, would be most likely to promote the success of the Company for the benefit of shareholders as a whole and in doing so, have regard to a number of broader matters which are set out below.
The principal factors affecting the Company’s employees and stakeholders is the failure to ensure adequate investment performance of the Fund and the failure to generate meaningful revenues which could put the future of the Company at risk. The Company carefully selects its suppliers and counterparties. The Directors understand that the decisions made regarding the Company will affect all employees, so the employees are kept informed of developments and informed in future plans. Given the Company’s size, a collaborative environment is not difficult to achieve and it is part of the Company’s corporate culture.
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STRATEGIC REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2021
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE PERIOD ENDED 31 DECEMBER 2021
The Directors present their report and the financial statements for the period ended 31 December 2021.
The Directors are responsible for preparing the Strategic report, the Directors' report and the financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
∙select suitable accounting policies for the Company's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The profit for the period, after taxation, amounted to £49,487.
The Directors did not propose any dividends.
The Directors who served during the period were:
The Company intends to continue its principal activities of provision of portfolio management services to the Fund.
The Company has chosen in accordance with Section 414C(II) of the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 to set out within the Company’s Strategic Report, the information required by Schedule 7 of the Large and Medium Sized Companies and Groups (Accounts and Reports) Regulation 2008. This includes information that would have been included in the business review, details of the principal risks and uncertainties and the company's approach to compliance with Section 172(1) of the Companies Act 2006.
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DIRECTORS' REPORT (CONTINUED)
FOR THE PERIOD ENDED 31 DECEMBER 2021
Please refer to the Strategic Report.
The auditors, Menzies LLP, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF REDLINE CAPITAL PARTNERS (UK) LIMITED
We have audited the financial statements of Redline Capital Partners (UK) Limited (the 'Company') for the period ended 31 December 2021, which comprise the Statement of comprehensive income, the Statement of financial position, the Statement of cash flows, the Statement of changes in equity and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We draw attention to note 2.2 in the financial statements, which indicates that following the Russia / Ukraine conflict, the Company has had difficulties with some of its service providers including its bank account. As stated in note 2.2, these events or conditions, along with the other matters as set forth in note 2.2, indicate that a material uncertainty exists that may cast significant doubt on the Company's ability to continue as a going concern. Our opinion is not modified in respect of this matter.
In auditing the financial statements, we have concluded that the Directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors' assessment of the Company's ability to continue to adopt the going concern basis of accounting included discussion with management as to their future abilities to meet its financial requirements.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF REDLINE CAPITAL PARTNERS (UK) LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' report thereon. The Directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Strategic report and the Directors' report for the financial period for which the financial statements are prepared is consistent with the financial statements; and
∙the Strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors' report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF REDLINE CAPITAL PARTNERS (UK) LIMITED (CONTINUED)
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an Auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation. We determined that the following laws and regulations were most significant:
∙The Companies Act 2006;
∙Financial Reporting Standard 102;
∙UK employment legislation;
∙UK health and safety legislation;
∙General Data Protection Regulations;
∙UK tax legislation;
∙General Prudential Sourcebook (GENPRU); and
∙Prudential sourcebook for Banks, Building Societies and Investment Firms (BIPRU).
We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
We understood how the Company is complying with those legal and regulatory frameworks by, making inquiries to management, those responsible for legal and compliance procedures and the company secretary.
The engagement partner assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. The assessment did not identify any issues in this area.
We assessed the susceptibility of the Company financial statements to material misstatement, including how fraud
might occur. Audit procedures performed by the engagement team included:
∙Identifying and assessing the measures management has in place to prevent and detect fraud;
∙Understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process;
∙Challenging assumptions and judgments made by management in its significant accounting estimates; and
∙Identifying and testing journal entries, in particular any journal entries posted with unusual account combinations.
As a result of the above procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas:
∙The use of management override of controls to manipulate results, or to cause the Group to enter into transactions not in its best interests; or
∙Posting of unusual journals and complex transactions.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF REDLINE CAPITAL PARTNERS (UK) LIMITED (CONTINUED)
This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an Auditors' report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.
for and on behalf of
Chartered Accountants
Statutory Auditor
Lynton House
7-12 Tavistock Square
London
WC1H 9LT
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STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 31 DECEMBER 2021
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STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2021
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 16 to 22 form part of these financial statements.
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STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD ENDED 31 DECEMBER 2021
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STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 31 DECEMBER 2021
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ANALYSIS OF NET DEBT
FOR THE PERIOD ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
Redline Capital Partners (UK) Limited is a private company limited by shares incorporated in England & Wales under the Companies Act 2006. The address of the registered office is disclosed on the Company Information page.
The principal activity is set out in the Strategic Report. The Company's functional and presentational currency is GBP.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires management to exercise judgement in applying the Company's accounting policies (see note 3).
The following principal accounting policies have been applied:
As discussed in the Strategic Report, some of the shareholders in the ultimate parent company of the Company are connected to Russia. As a result of this connection, the Company is facing some operational difficulties as certain of its service providers have served notices terminating their relationship with the Company.
Although this is negatively affecting the Company’s operations, the Directors do not believe that this will prevent the Company from operating as going concern. The Company is planning to either replace the service providers or move some of the relevant services that have been outsourced in-house. Therefore, the Directors consider the Company to continue as a going concern. the period to which the services are provided.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
2.Accounting policies (continued)
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
Depreciation is provided on the following basis:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
The Directors do not consider there to be any critical accounting estimates nor any significant judgements
The whole of the turnover is attributable to the provision of services to entities in Luxembourg.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
8.Taxation (continued)
There are no factors expected to affect future tax charges.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31 DECEMBER 2021
On 25 October 2021 £500,000 of ordinary shares were issues at par.
Following the year end, 2,000,000 shares have been issued at par.
Profit and loss account
The Company's immediate and ultimate parent company is Instacom International S.A. SPF, a company registered in Luxembourg.
There is not considered to be one controlling party.
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