Keele Residential Funding plc
ANNUAL REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEAR ENDED 31 JULY 2023
Registration Number: 03840096 (England & Wales)
Annual Report and Financial Statements for the year ended 31 July 2023
Keele Residential Funding plc
CONTENTS
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page/(s)
OFFICERS, PROFESSIONAL ADVISERS AND INDEPENDENT AUDITORS
1
STRATEGIC REPORT
2-4
DIRECTORS
’ REPORT
5-7
STATEMENT OF DIRECTORS
’ RESPONSIBILITIES
8
INDEPENDENT AUDITOR
S’ REPORT TO THE
MEMBERS OF KEELE
RESIDENTIAL FUNDING PLC
9-16
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
17
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
18
COMPANY STATEMENT OF FINANCIAL POSITION
19-20
CONSOLIDATED STATEMENT OF CASH FLOWS
21
COMPANY STATEMENT OF CASH FLOWS
22
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
23
COMPANY STATEMENT OF CHANGES IN EQUITY
24
NOTES TO THE FINANCIAL STATEMENTS
25-47
Keele Residential Funding plc
DIRECTORS COMPANY INFORMATION
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
1
DIRECTORS
Wilmington Trust SP Services (London) Limited
Daniel Wynne
Christopher Duffy
REGISTERED OFFICE
Third Floor
1 King’s Arms Yard
London,
EC2R 7AF
BANKERS
HSBC Bank Plc
Crown Bank
Hanley
Stoke-On-Trent
Staffordshire
ST1 1DA
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
UNITED KINGDOM
SECRETARY
Wilmington Trust SP Services (London) Limited
Keele Residential Funding plc
STRATEGIC REPORT
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
2
The Directors
present the strategic report for Keele Residential Funding Plc (the “Company”) for the
year
ended 31
July 2023. The
Keele Residential Funding Plc (“KRF)
Group consists of KRF Management
Limited, Keele Residential Funding Plc and KRF Holdings Limited
(the “Group”)
. Keele Residential
Funding plc is a wholly owned subsidiary of KRF Holdings Limited.
PRINCIPAL ACTIVITIES
debt to refurbish and operate student accommodation on the campus of University of Keele (the
As part of the Transaction, the Company entered into a series of legal transaction documents (the
"Transaction Documents")
explained in detail in the prospectus dated 11 July 2007 (the "Prospectus”) under
which the Company issued 137.5 million index-linked guaranteed secured bonds due July 2047 on 13 July
2007 (the "Bonds" or the "Guaranteed Index Linked Secured Bonds"). The payment of the scheduled interest
and principal of the Bonds are unconditionally and irrevocably guaranteed by Assured Guaranty (Europe)
Ltd and are admitted to trading on the official list of the London Stock Exchange.
The Company used the proceeds of the Bonds as (i) consideration for the payment of premium to enter into
lease agreements with the University (the "Lease") under which it acquired a lease of student loan
accommodation and car parking spaces from the University and (ii) to invest in guaranteed investment
contracts ("GICs"). Under the terms of a letting services agreement (the "Letting Services Agreement" or
"LSA") the Company granted licenses to the University to occupy the student accommodation, other than
the units designated annually under the LSA and use the car parking spaces for inflation linked license fees
(the "License Fees"). As further explained in the Significant Accounting Policies in Note 2 to the Financial
Statements, the rights and obligations under the Lease and the LSA have been recognised as a Financial
Asset (the "Financial Asset") under IFRS 9 in the financial statement measured at fair value through profit
and loss.
REVIEW OF BUSINESS AND FUTURE DEVELOPMENTS
The Group’s
loss before tax for the year amounted to £8,406,160 (2022: profit £9,788,545) due to the
increase in finance costs as a result of an increase in inflation rates during the year. The decrease in the
Financial Asset fair value gain compared to the previous year is due to changes in forecasted inflation and
market discount rate. Due to RPI for cash outflows increasing at a faster rate than the equivalent RPI increase
for cash inflows, deferred payments to the University of £1.3 million are included within trade payables from
the year ended 31 July 2022 and £1.7 million from the year ended 31 July 2023. As at 31 July 2023 the
Group had net assets of £22,180,749 (2022: £30,586,905). The gain on the revaluation of the Financial Asset
is £18,713,952 compared with a gain of £24,749,668 in the previous year.
The Directors believe that the accommodation units related to the C
ompany’s
Financial Asset will continue
to attract student tenants at realistic rental rates throughout 2024/25
–
refer to the going concern section
below for further details. Average occupancy of total accommodation units on which the Company receives
its income during the year 2023 was marginally lower than expected covering the occupancy period from
August 2022 to July 2023. This did not affect the Company rental income for the year to 31 July 2023 as the
University continued to pay the contractual obligations under the financial arrangements with the Company.
We expect stability in the future and rental income will continue to be paid inline with the financial
arrangement.
PRINCIPAL RISKS AND UNCERTAINTIES
Low occupancy
rates may affect the University’s ability to make payments
to the Company though this risk
is deemed to be low as the University will have enough funds to manage any shortfall in rental income due
to low occupancy rates, as per the lease agreement. The University has continued to pay all amounts since
inception of the agreements and the income from the University is supported by the occupancy levels that
are not expected to be materially affected in the coming year as the University reports good levels of
recruitment and accommodation occupation for the 2023/24 student year.
Keele Residential Funding plc
STRATEGIC REPORT (continued)
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
3
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
The key business risks affecting the Company come from:
•
Increases in the underlying costs and income related to the movements in underlying inflation rate
due to the inflation rate for income not increasing in line with expenses;
•
Failure to achieve anticipated income from the Financial Asset; and
•
RPI for cash outflows increasing at a faster rate than the equivalent RPI increase for cash inflows
causing deferred payments to the University.
The Directors judge the performance of the business by reference to the overall income achieved from its
Financial Asset.
Finance costs are calculated by reference to the terms of the bonds which form the
underlying funding of the business.
KEY PERFORMANCE INDICATORS
Given the nature of the Company’s activities, the directors consider the key performance indicators of the
Company to be the performance of the Financial Asset and the rating of the Bonds. The payment of the
scheduled interest and principal of the Bonds are unconditionally and irrevocably guaranteed by Assured
Guaranty (Europe) Ltd and are admitted to trading on the official list of the London Stock Exchange. As at
31 July 2023, the Financial Asset increased from 2022 £181,004,598 to 2023 £191,701,550 due to changes
in inflation. The rental income for the financial year ended 31 July 2023 was £12,473,518 (2022:
£11,710,684), rental payment was £5,818,028 (2022: 5,103,563) and licence fee income was £1,361,510
(2022: £1,265,943). The Guaranteed secured bond held by Citibank N.A has a long term credit rating of Aa3
(
Moody’s)
, (2022: Aa3). In the current year, the bond payments were made in line with the contractual
agreement.
SECTION 172(1) STATEMENT
As a special purpose vehicle, the governance structure of the Company and Group is such that the key
policies have been predetermined at the time of issuance. The Directors have had regards to the matters set
out in section 172(1) of the Companies Act 2006 as follows:
•
With reference to subsection (a) concerning the likely consequences of any decision in the long
term: the Transaction Documents have been formulated to achiev
e the Company’s purpose and
business objectives, safeguard the assets and promote the success of the Company with a long term
view and in accordance with relevant securitisation legislation the Company is only permitted to
retain minimal profit.
•
The matters set out in subsections (b)
–
(f) of s172 have limited relevance in the year given the nature
of the Company as a vehicle for holding listed debt. The Directors of the Company have not been
required to make any decision in the year other than routine or administrative decisions.
•
Key stakeholders include Wilmington Trust (provision of Directorship and governance services),
The University (primary source of income) and Assured Guaranty (“Assured Guarantee”)
(insurance guarantor). The Company engages with the key stakeholder on an as required basis to
comply with operational and financial requirements.
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group
’s
and Company’s
activities expose it to two key principal financial risks, Inflation risk and
liquidity risk. More details are provided in Note 18 in respect of the fair value, market risk and interest rate
risk.
Inflation risk
The
Group’s
and Company’s
Guaranteed index linked secured bond provides for contractual payments that
vary in line with the Retail Prices Index (RPI). Increases in the RPI will lead to increased payments by the
Group. This risk is mitigated by the fact that revenue from the Group’s Financial Asset is also linked to RPI
such that increases in contractual p
ayments will be met by an increase in the Group’s revenue.
Keele Residential Funding plc
STRATEGIC REPORT (continued)
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
4
Liquidity risk
The
Group’s
and Company’s
main liquidity risk is that it may not be able to discharge its debt service
liabilities when due as a result of insufficient rental income. The Directors manage this risk by careful
forecasting and transferring any anticipated cash requirements into a Debt service reserve account twice a
year. As at 31 July 2023, this has resulted in an agreement with the University to defer approximately £1.76
million of rental payments owed to the University. Refer to the going concern section in the Directors Report
for further details. There is also guaranteed payments of interest from Assured Guaranty and principal on
the guaranteed secured bonds.
Market risk
Market risk arises from the
Group’s
and Company’s
use of interest-bearing financial instruments. It is the
risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
interest rates due to the Guaranteed Index Linked Secured Bonds being RPI indexed, foreign exchange rates
or inflation risk.
This report was approved by the board of directors and signed on its behalf by:
Daniel Wynne
Director
09 July 2024
Keele Residential Funding plc
DIRECTORS
’
REPORT
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
5
The Directors present their report and the audited financial statements for Keele Residential Funding Plc
(the “Company”) for the
year ended 31 July 2023. The Company is incorporated as a public limited Company
domiciled in the United Kingdom. Keele Residential Funding plc is a wholly owned subsidiary of KRF
Holdings Limited
(the “Parent”)
and KRF Management Limited is a Subsidiary of the Company (the
“
Subsidiary
”)
.
DIRECTORS
The Directors of the Company during the year, and up to the date of signing the financial statements were:
Wilmington Trust SP Services (London) Limited
Daniel Wynne
Christopher Duffy
At the time this report is approved, and during the financial year, the Group has put in place indemnity
insurance for all of the Directors.
GENERAL INFORMATION
The Group is a Public Limited Company, incorporated in the United Kingdom, The address of the registered
office is Wilmington Trust Sp Services (London) Limited, Third Floor, 1 King's Arms Yard, London, EC2R
7AF.
The Group has no employees (2022: Nil)
FINANCIAL INSTRUMENTS
The Group
’s financial instruments comprise
Financial Asset, cash and liquid resources, Bonds and various
receivables and payables that arise directly from its operations. These financial instruments are classified in
accordance with the principles of IFRS 9, Financial Instruments as described Note 18.
RESULTS AND DIVIDENDS
The trading results for the year and the Company’s and Group’s financial position at the end of the year are
shown in the financial statements.
CHANGE IN ACCOUNTING POLICY
The interest income on the financial asset held at fair value was previously recognised and disclosed
separately from the fair value adjustment in accordance with IFRS 7 as per the directors accounting policy
choice. During the current financial year, the Directors decided to voluntary change the accounting policy
under the terms IAS 8 because they believe it will results in the financial statements providing reliable and
more relevant information. As per the accounting policy change, the Interest income on the financial asset
is no longer recognised and disclosed separately but as part of the fair value adjustment on the financial
asset.
CORPORATE GOVERNANCE
The Directors are responsible for internal control at the Company and Group and for reviewing the
effectiveness of the controls in place.
Procedures have been designed for safeguarding assets against unauthorised use or disposition; for
maintaining proper accounting records; and for the reliability and usefulness of financial information used
within the business or for publication. Such procedures are designed to manage rather than eliminate the risk
of failure to achieve business objectives and can only provide reasonable and not absolute assurance against
material misstatement, errors, losses or fraud. The procedures enable the Company to comply with the
regulatory obligations. For further details, refer to Notes to the financial statements particularly note 18 on
financial risk management.
Keele Residential Funding plc
DIRECTORS
’
REPORT (continued)
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
6
FUTURE DEVELOPMENTS
The directors do not anticipate any significant future development in the foreseeable future.
GOING CONCERN
In order to form a view as to the most appropriate basis of preparation of these financial statements, the
Directors have assessed the likelihood of whether the Company and the Group will be able to continue
trading for at least 12 months from the date of signing of the financial statements versus the likelihood of
either intending to or being forced to either cease trading or place the Company into liquidation.
The ability of the Group to meet its obligations on the Bonds and to meet its operating and administrative
expenses is dependent, principally, on the performance of the Financial Asset. The Bonds are secured over
the Group's assets and cash flows under the Financial Asset, and the Group's ability to pay amounts due on
the Bonds are, in substance, limited to the application of the receipts from the University under the terms of
the legal agreements underlying the Financial Asset.
The annual financial statements of the Group have been prepared on a going concern basis, which
contemplates the realisation of assets and satisfaction of liabilities in the normal course of business.
The Directors of the Group believe that the Group will continue to be in operational existence for the
foreseeable future by meeting its liabilities as they fall due for payment.
The University has advised the Directors that there will be no restrictions on the quantity of rooms available
in its Halls of Residence. Demand levels for the University accommodation are very good and rental flows
to KRF through 2023/24 are expected to be uninterrupted. Occupancy rates as of October 2023 are 99.4%.
It is also anticipated that occupancy levels will be at similar levels for the 2024/25 period.
The Directors have prepared cashflow forecasts that cover at least twelve months from the authorisation of
these financial statements. The Directors have not identified a material uncertainty that may give rise to
significant concern over the ability of the Group and the Company to continue as a going concern. Student
recruitment has been strong for the 2023/24 intake leading to increased assurance on income streams. Early
indications are that student recruitment also remains good for the 2024/25 year. The University has
committed to ensuring that rental payments to the Group will be maintained as per the terms of the Letting
Services Agreement.
Rent payments from the University are expected to continue as anticipated in line with their contractual
obligations.
Due to the current inflationary environment, the Group agreed with the University not to pay the entire
contractual rental payment for the year ended 31
st
July 2023 with approximately £1.76 million being
withheld from The University. This is in addition to a contractual agreement between
Keele Residential
Funding Plc and The University to
defer the settlement of £1.3 million relating to the July 2022 payment.
As at the report signing date, the directors expect defer £664k at 31 July 2024 and also expect to defer £470k
during 2025. The RPI for cash outflows has increased at a faster rate than the equivalent RPI increase for
cash inflows. This mismatch would have resulted in the Group not having sufficient cash inflows to meet its
obligations, hence the deferral of funds to the University.
The University has signed a letter to agree that these amounts will not be called before the bond holder
payments expected in July 2025, which is 12 months from the date of signing, although these deferrals
remain contractually owed. The Directors expect that as inflation stabilises, the impact of inflation on the
Group
’s
cashflow will reduce and the Group to be able to settle the deferred rental payments.
Keele Residential Funding plc
DIRECTORS
’
REPORT (continued)
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
7
GOING CONCERN (continued)
As a result of these agreements and the forecasts, the Group and Company therefore are expected to have
sufficient cash to settle its financial obligations over the going concern period of at least 12 months from the
date of these financial statements.
The Directors note that there has been no change in the principal activities of the business as noted in the
Strategic Report in page 2 nor has there been any change in the contractual relationship between the Group
and The University, other than the deferral of settlement mentioned above. The Directors expect business
activities to remain unchanged for the remaining life of the contract.
No dividend was proposed or paid (2022: Nil)
Further information regarding the
Group’s
financial instruments, related policies and a consideration of its
liquidity and other financing risks can be found in note 18.
STREAMLINED ENERGY AND CARBON REPORTING
The Company is out of the scope of the Streamlined Energy and Carbon Reporting (SECR), as it does not
meet the numerical thresholds in relation to turnover and number of employees.
EVENTS AFTER THE REPORTING PERIOD
There were no subsequent events requiring amendment to these financial statements.
AUDIT INFORMATION
Each of the persons who are Directors at the time when this Directors
’
report is approved has confirmed that:
▪
so far as that Director is aware, there is no relevant audit information of which the Company
’
s auditors
are unaware; and
▪
that Director has taken all the steps that ought to have been taken as a director in order to be aware of
any information needed by the Company
’
s auditors in connection with preparing their report and to
establish that the Company
’
s auditors are aware of that information.
INDEPENDENT AUDITORS
The auditors, PricewaterhouseCoopers LLP, were appointed as auditors of the Company and the Group
during the year under review and are to remain in office until the conclusion of the Company's Annual
General Meeting to approve these Annual Report and Financial Statements. Having indicated their
willingness to continue in office, a resolution that they be re-appointed will be proposed at the annual general
meeting.
This report was approved by the board and signed on its behalf by:
Daniel Wynne
Director
09 July 2024
Keele Residential Funding plc
STATEMENT OF DIRECTORS
’ RESPONSIBILITIES
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
8
Statement of D
irectors’ responsibilities in respect of the
Financial Statements
The directors are responsible for preparing the Annual Report and the financial statements in accordance
with applicable law and regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law
the directors have prepared the group and the Company financial statements in accordance with UK-adopted
international accounting standards.
Under Company law, 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 group and Company and of the profit or loss of the
group for that period. In preparing the financial statements, the directors are required to:
•
select suitable accounting policies and then apply them consistently;
•
state whether applicable UK-adopted international accounting standards have been followed,
subject to any material departures disclosed and explained in the financial statements;
•
make judgements and accounting estimates that are reasonable and prudent; and
•
prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the group and Company will continue in business.
The directors are responsible for safeguarding the assets of the group and Company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are also responsible for keeping adequate accounting records that are sufficient to show and
explain the group’s and
C
ompany’s transactions and disclose with reasonable accuracy at any time the
financial position of the group and Company and enable them to ensure that the financial statements comply
with the Companies Act 2006.
The directors are responsible for the maintenance and integrity of the C
ompany’s website. Legislation in the
United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
In the case of each director in office at the date the directors’ report is approved:
•
so far as the director is aware, there
is no relevant audit information of which the group’s and
C
ompany’s auditors are unaware; and
•
they have taken all the steps that they ought to have taken as a director in order to make themselves
aware of any relevant audit information and to establish th
at the group’s and
C
ompany’s auditors
are aware of that information.
On behalf of the Board
Daniel Wynne
Director
09 July 2024
Type text here
Keele Residential Funding plc
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF KEELE RESIDENTIAL FUNDING
PLC
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
9
Report on the audit of the financial statements
Opinion
In our opinion, Keele Residential Funding plc’s group financial statements and company financial
statements (the
“financial statements”):
●
give a true and fair view of the state of the group’s and of the company’s affairs as at 31
July 2023
and of the group’s
loss
and the group’s and company’s cash flows for the year then ended;
●
have been properly prepared in accordance with UK-adopted international accounting standards as
applied in accordance with the provisions of the Companies Act 2006; and
●
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual report and consolidated financial
statements (the ‘
Annual Report
’)
, which comprise: Consolidated Statement of Financial Position and
Company Statement of Financial Position as at 31 July 2023; Consolidated Statement of
Comprehensive Income, Consolidated Statement of Cash Flows, Company Statement of Cash Flows,
Consolidated Statement of Changes in Equity, Company Statement of Changes in Equity for the year
then ended; and the notes to the financial statements, which include a description of the significant
accounting policies.
Our opinion is consistent with our reporting to the Directors.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”)
and applicable law. Our responsibilities under ISAs
(UK) are further described in the Auditors’
responsibilities for the audit of the financial statements section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to
our audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable
to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance
with these requirements.
To the best of our knowledge and belief, we declare that non-
audit services prohibited by the FRC’s
Ethical Standard were not provided.
We have provided no non-audit services to the company in the period under audit.
Our audit approach
Context
The Company is a special purpose entity ('SPE') that forms part of a funding structure established as
part of an initiative to issue guaranteed index-linked secured bonds to refurbish and operate student
accommodation on the campus of the University of Keele (the 'University') (the 'Transaction'). The
activities of the Company are conducted primarily by reference to a series of legal and transaction
documents (the 'Transaction Documents')
Keele Residential Funding plc
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF KEELE RESIDENTIAL FUNDING
PLC
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
10
Overview
Audit scope
●
The scope of our audit and the nature, timing and extent of audit procedures performed were
determined by our risk assessment and other qualitative factors.
●
We tailored the scope of our audit to ensure that we performed sufficient work to enable us to opine
on the financial statements.
●
We identified all material classes of transactions, account balances and disclosures including those
that were considered qualitatively material, and conducted our work over those accordingly.
Key audit matters
●
Errors in Accounting for the Transaction (group and company)
●
Valuation of the Financial Asset (group and company)
Materiality
●
Overall group materiality: £2,070,373 based on 1% of Total Assets.
●
Overall company materiality: £2,069,608 based on 1% of Total Assets.
●
Performance materiality: £1,552,780 (group) and £1,552,206 (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material
misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most
significance in the audit of the financial statements of the current period and include the most
significant assessed risks of material misstatement (whether or not due to fraud) identified by the
auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of
resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our
audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Errors in Accounting for the Transaction
(group and company)
The Company is a Special Purpose Entity
(‘SPE’), established for the sole purpose of
issuing index-linked guaranteed secured bonds
(the ‘Bonds’) and using the proceeds to enter
into a series of agreements with the University
of Keele, in order to acquire the Financial
Asset and use the cash-flows of the Financial
Asset to meet interest and principal payments
of the Bonds. The Financial Asset is an
accounting construct and therefore is subject to
In response to this key audit matter, we have:
●
Obtained and evaluated
the relevant
Transaction Documents, and engaged with
our technical accounting to
independently
assess the classification, recognition and
measurement of the Financial Asset under
UK-adopted international accounting
standards;
●
Assessed the accounting of the cash flows
from the Financial Asset and the disclosures
Keele Residential Funding plc
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF KEELE RESIDENTIAL FUNDING
PLC
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
11
relatively complex accounting. We therefore
have focussed our audit on the accounting of
the Transaction, and more specifically the
recognition, classification and measurement of
the Financial Asset under UK-adopted
international accounting standards.
Refer to the following related disclosures in the
Financial Statements:
Note 2.10: Significant Accounting Policies,
Financial Assets
Note 10: Financial Asset
in the financial statements in accordance
with IFRS 7
We have no matters to note in relation to the above
procedures
Valuation of the Financial Asset (group and
company)
The Financial Asset represents the entitlement
to the net of the cash flows received from and
paid to the University as per the Transaction
Documents over the life of the transaction and
is measured at fair value through profit and
loss. The fair value as at the year end is
calculated using a discounted cash flow model
applied to the cash flows under the contractual
agreements underlying the Financial Asset.
There are two key assumptions used in the cash
flow model being the future retail price index
(“RPI”
) which is used to forecast future cash
flows and the market discount rate. Given the
estimation uncertainty associated with the
discount rate used in the valuation of the
Financial Assets, we have determined this to be
a key audit matter.
Refer to the following related disclosures in the
Financial Statements:
Note 10: Financial asset
In response to this key audit matter, we have:
●
Obtained an understanding of the valuation
methodology used to determine the fair
value of the Financial Asset and assess their
appropriateness including key inputs and
assumptions;
●
Tested the
management’s valuation as at
year end including cash flows inputs to
assess if they are consistent with the legal
terms transaction documents.
●
In order to challenge management’s
valuation, we involved our valuation
specialists to develop an independent
expectation of the Financial Asset valuation
as at year end based on the underlying
contractual terms of the Financial asset and
independently sourced discount rate and
inflation assumptions; and
●
Assessed the appropriateness of the
disclosures made in relation to the Financial
Asset.
We have no matters to note in relation to the above
procedures
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an
opinion on the financial statements as a whole, taking into account the structure of the group and the
company, the accounting processes and controls, and the industry in which they operate.
The Group operates solely in the United Kingdom and operates the management of the Financial Asset
through one single segment. Our audit was completed on the group as a single component. The group
audit team performed all the work necessary to issue the audit opinion on the group financial statements
and
company financial statements.
Keele Residential Funding plc
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF KEELE RESIDENTIAL FUNDING
PLC
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
12
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the potential
impact of climate risk on the
group’s and company’s
financial statements, and we remained alert
when performing our audit procedures for any indicators of the impact of climate risk. Our procedures
did not identify any material impact as a result of climate risk on the group’s and company’s financial
statements.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative
thresholds for materiality. These, together with qualitative considerations, helped us to determine the
scope of our audit and the nature, timing and extent of our audit procedures on the individual financial
statement line items and disclosures and in evaluating the effect of misstatements, both individually and
in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole
as follows:
Financial statements - group
Financial statements - company
Overall
materiality
£2,070,373
£2,069,608
How we
determined
it
1% of Total Assets
1% of Total Assets
Rationale
for
benchmark
applied
The Group is an SPE, whose main priority
is to remit the cash received in respect of
its assets so as to repay its liabilities.
The Company is an SPE, whose main
priority is to remit the cash received in
respect of its assets so as to repay its
liabilities.
In respect of Keele Residential Funding plc, which was the sole reporting component in the scope of
our group audit, we allocated a materiality of £ £2,069,000, which is less than our overall group
materiality.
We use performance materiality to reduce to an appropriately low level the probability that the
aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we
use performance materiality in determining the scope of our audit and the nature and extent of our
testing of account balances, classes of transactions and disclosures, for example in determining sample
sizes. Our performance materiality was 75% of overall materiality, amounting to £1,552,780 for the
group financial statements and £1,552,206 for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of
misstatements, risk assessment and aggregation risk and the effectiveness of controls - and concluded
that an amount in the middle of our normal range was appropriate.
We agreed with the Directors that we would report to them misstatements identified during our audit
above £103,519 (group audit) and £103,480 (company audit) as well as misstatements below those
amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group's and the company’s ability to continue to adopt
the going concern basis of accounting included:
Keele Residential Funding plc
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF KEELE RESIDENTIAL FUNDING
PLC
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
13
●
Obtaining and assessing management’s going concern assessment, and the underlying cash flow
forecasts (the ‘Financial Model’), and in particular how it supports management’s assertion that the
Group and the company are expected to have sufficient cash to settler its liabilities over the going
concern period of at least 12 months from the date of the Financial Statements;
●
Agreeing key inputs of the Financial Model to to the underlying Transaction Documents;
●
Testing the consistency of the inputs and assumptions in the Financial Model with those used in the
valuation of the Financial Asset. Details of the work performed over the Valuation of the Financial
Asset can be found in the key audit matter above;
●
Evaluating the appropriateness of the assumptions used in Financial Model Forecasting the cash
flows from operating activities, specifically in respect of the assumption of future the level of
income, inflation and payments due under the Transaction documents and the on rental income,
licence
fee income and rental payments and Bonds and the impact on the Company’s liquidity
position;
●
Testing the accuracy of the formulae within management's Financial Model;
●
Obtaining and reviewing the signed letter from the University agreeing to further defer part of the
operating payments that were due as at 31 July 2022 and 31 July 2023 as well as the expected
operating payment shortfalls within 12 months from the date of the Financial Statements, as
disclosed in the going concern section; considering the nature of the agreement and whether the
amounts deferred
are sufficient to cover any identified cash flow shortfall based on the Group’s
forecast cash flow;.
●
Assessing the appropriateness of the disclosures in the financial statements.
Based on the work we have performed, we have not identified any material uncertainties relating to
events or conditions that, individually or collectively, may cast significant doubt on the group's and the
company’s ability to continue as a going concern for a period of at least
twelve months from when the
financial statements are authorised for issue.
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.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee
as to the group's and the company's ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described
in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial
statements and our auditors’ report t
hereon. The directors are responsible for the other information. Our
opinion on the financial statements does not cover the other information and, accordingly, we do not
express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of
assurance thereon.
In connection with our audit of the financial statements, 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 audit, or otherwise appears to be materially
misstated. If we identify an apparent material inconsistency or material misstatement, we are required
to perform procedures to conclude whether there is a material misstatement of the financial statements
Keele Residential Funding plc
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF KEELE RESIDENTIAL FUNDING
PLC
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
14
or a material misstatement of the other information. 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 based on these responsibilities.
With respect to the Strategic report and Directors' Report, we also considered whether the disclosures
required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to
report certain opinions and matters as described below.
Strategic report and Directors' Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the
Strategic report and Directors' Report for the year ended 31 July 2023 is consistent with the financial
statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained
in the course of the audit, we did not identify any material misstatements in the Strategic report and
Directors' Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors' responsibilities in respect of the financial
statements, the directors are responsible for the preparation of the financial statements in accordance
with the applicable framework and for being satisfied that they give a true and fair view. The directors
are also responsible for such internal control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the
company’s ability to continue as a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the directors either intend to liquidate
the group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial
statements
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.
Based on our understanding of the group and industry, we identified the principal risks of non-
compliance with laws and regulations related to breaches of the listing requirements of the London
Stock Exchange, and we considered the extent to which non-compliance might have a material effect
on the financial statements. We also considered those laws and regulations that have a direct impact on
Keele Residential Funding plc
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF KEELE RESIDENTIAL FUNDING
PLC
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
15
the financial statements such as the Companies Act. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements (including the risk of override of
controls), and determined that the principal risks were related accounting estimates and posting of
inappropriate journal entries. Audit procedures performed by the engagement team included:
●
Making inquiries to those charged with governance in relation to known or suspected instances of
non-compliance with laws and regulation and fraud;
●
Audit procedures performed to address the risk of management override of controls, including
through testing of journal entries and accounting estimates
(because of the risk of management
bias);
●
Audit procedures performed over the valuation of the financial assets held at fair value through profit
and loss can be found in the Key audit matters section above, and;
●
Reviewing minutes of the meetings of the board of directors that occurred during the period and
made enquiries of management.
There are inherent limitations in the audit procedures described above. We are less likely to become
aware of instances of non-compliance with laws and regulations that are not closely related to events
and transactions reflected in the financial statements. Also, the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through
collusion.
Our audit testing might include testing complete populations of certain transactions and balances,
possibly using data auditing techniques. However, it typically involves selecting a limited number of
items for testing, rather than testing complete populations. We will often seek to target particular items
for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable
us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the
FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’
report.
Use of this report
This report, including the opinions, has been prepared for
and only for the company’s members as a
body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We
do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it may come save where expressly agreed by
our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
●
we have not obtained all the information and explanations we require for our audit; or
●
adequate accounting records have not been kept by the company, or returns adequate for our audit
have not been received from branches not visited by us; or
●
certain disclosures of directors’ remuneration specified by law are not made; or
●
the company financial statements are not in agreement with the accounting records and returns.
Keele Residential Funding plc
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF KEELE RESIDENTIAL FUNDING
PLC
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
16
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Directors, we were appointed by the members on 11 March 2024
to audit the financial statements for the year ended 31 July 2023 and subsequent financial periods. This
is therefore our first year of uninterrupted engagement.
Other matter
The company is required by the Financial Conduct Authority Disclosure Guidance and Transparency
Rules to include these financial statements in an annual financial report prepared under the structured
digital format required by DTR 4.1.15R - 4.1.18R and filed on the National Storage Mechanism of the
Financial Conduct Authority. This auditors’ report provides no assurance over whether the structured
digital format annual financial report has been prepared in accordance with those requirements.
Jessica Miller (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
9 July 2024
Keele Residential Funding plc
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
17
Note
2023
2022 Restated
Group
Group
£
£
CONTINUING OPERATIONS
Administrative expenses
5
(537,035 )
(330,383 )
Fair value gain on Financial Asset
9
PROFIT FROM OPERATIONS
Finance costs
6
(26,935,105 )
(14,900,657 )
Finance income
7
(LOSS) / PROFIT BEFORE TAX
(8,406,160 )
Income tax expense
8
(LOSS) / PROFIT FOR THE YEAR
(8,406,160 )
TOTAL COMPREHENSIVE (EXPENSE)/INCOME
(8,406,160 )
ATTRIBUTABLE TO:
EQUITY HOLDERS OF THE GROUP
(8,406,160 )
Keele Residential Funding plc
REGISTERED NUMBER: 03840096
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As At 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
18
Note
2023
2022 Restated
Group
Group
ASSETS
£
£
NON-CURRENT ASSETS
Financial Asset held at fair value
through profit or loss
9
Guaranteed investment certificate
11
TOTAL NON-CURRENT ASSETS
CURRENT ASSETS
Financial Asset held at fair value
through profit or loss
9
Trade and other receivables
12
Cash and cash equivalents
13
TOTAL CURRENT ASSETS
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
14
(7,403,812 )
(1,368,320 )
Financial liabilities
15
(5,772,740 )
(5,011,992 )
TOTAL CURRENT LIABILITIES
(13,176,552 )
(6,380,312 )
NON-CURRENT LIABILITIES
Financial liabilities
15
(169,578,226 )
(152,458,392 )
Deferred premium liability
16
(2,101,763 )
(1,999,689 )
TOTAL NON-CURRENT
LIABILITIES
(171,679,989 )
(154,458,081 )
TOTAL LIABILITIES
(184,856,541 )
(160,838,393 )
EQUITY
Share Capital
Retained earnings
20
21
ISSUED CAPITAL AND RESERVES
ATTRIBUTABLE TO EQUITY
HOLDERS
TOTAL EQUITY
Keele Residential Funding plc
REGISTERED NUMBER: 03840096
COMPANY STATEMENT OF FINANCIAL POSITION
At 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
19
Note
2023
2022 Restated
Company
Company
ASSETS
£
£
NON-CURRENT ASSETS
Financial Asset held at fair value through
profit or loss
9
181,941,597
173,173,739
Investment in Subsidiary
10
2
2
Guaranteed investment certificate
11
5,776,399
5,495,863
TOTAL NON-CURRENT ASSETS
187,717,998
178,669,604
CURRENT ASSETS
Financial Asset held at fair value through
profit or loss
9
9,759,953
7,830,859
Trade and other receivables
12
1,387,122
23,083
Cash and cash equivalents
13
8,095,739
4,842,416
TOTAL CURRENT ASSETS
19,242,814
12,696,358
TOTAL ASSETS
206,960,812
191,365,962
LIABILITIES
CURRENT LIABILITIES
Trade and other payables
14
(7,390,800)
(1,362,290)
Financial liabilities
15
(5,772,740)
(5,011,992)
TOTAL CURRENT LIABILITIES
(13,163,540)
(6,374,282)
NON CURRENT LIABILITIES
Financial liabilities
15
(169,578,226)
(152,458,392)
Deferred premium liability
16
(2,101,763)
(1,999,689)
TOTAL NON CURRENT
LIABILITIES
TOTAL LIABILITIES
(171,679,989)
(184,843,529)
(154,458,081)
(160,832,363)
EQUITY
Share capital
20
50,000
50,000
Retained earnings
21
22,067,283
30,483,599
ISSUED CAPITAL AND RESERVES
ATTRIBUTABLE TO EQUITY
HOLDERS
22,117,283
30,533,599
TOTAL EQUITY
22,117,283
30,533,599
Keele Residential Funding plc
REGISTERED NUMBER: 03840096
COMPANY STATEMENT OF FINANCIAL POSITION
At 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
20
As permitted by section 408 of the
Companies Act 2006, the Company’s income statement has not been
included in these financial statements
.
The C
ompany’s
loss for the year was £8,416,316 (2022: profit
£9,773,222).
The financial statements on pages 17 to 48 were approved by the board of Directors and authorised for issue
on 09 July 2024 and were signed on its behalf by:
Daniel Wynne
Director
Type text here
Keele Residential Funding plc
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
21
Note
2023
2022
Group
Group
CASH FLOWS FROM OPERATING ACTIVITIES
£
£
(Loss) / Profit for the year
(8,406,160 )
Adjustments for:
Finance costs
Finance income
(352,028 )
(269,914 )
Fair value gain on Financial Asset
(10,696,952 )
(16,876,604 )
(Increase) in trade and other receivables
(1,364,039 )
(583 )
Increase in trade and other payables
NET CASH GENERATED FROM OPERATIONS
NET CASH FLOW FROM OPERATING
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Finance income
NET CASH FLOW FROM INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Payment made on bonds - principal
(5,063,868 )
(4,335,735 )
Payment made on bonds - interest
(3,888,581 )
(3,541,185 )
NET CASH OUTFLOW USED IN FINANCING
ACTIVITIES
(8,952,449 )
(7,876,920 )
NET INCREASE IN CASH AND CASH
EQUIVALENTS
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE YEAR
CASH AND CASH EQUIVALENTS
AT END OF THE YEAR
13
Keele Residential Funding plc
COMPANY STATEMENT OF CASH FLOWS
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
22
Note
2023
2022
Company
Company
CASH FLOWS FROM OPERATING ACTIVITIES
£
£
(Loss) / Profit for the year
(8,416,316)
9,773,222
Adjustments for:
Finance costs
26,935,105
14,900,657
Finance income
(352,028)
(269,917)
Fair value gain on Financial Asset
(10,696,952)
(16,876,604)
7,469,809
7,527,358
(Increase) in trade and other receivables
(1,364,039)
(583)
Increase in trade and other payables
6,028,510
956,485
NET CASH GENERATED FROM OPERATIONS
12,134,280
8,483,260
NET CASH FLOW FROM OPERATING
ACTIVITIES
12,134,280
8,483,260
CASH FLOWS FROM INVESTING ACTIVITIES
Finance income
71,492
3,006
NET CASH FLOW FROM INVESTING ACTIVITIES
71,492
3,006
CASH FLOWS FROM FINANCING ACTIVITIES
Payment made on bonds
–
principal
(5,063,868)
(4,335,735)
Payment made on bonds - interest
(3,888,581)
(3,541,185)
NET CASH OUTFLOW USED IN FINANCING
ACTIVITIES
(8,952,449)
(7,876,920)
NET INCREASE IN CASH AND CASH
EQUIVALENTS
3,253,323
609,346
CASH AND CASH EQUIVALENTS
AT BEGINNING OF THE YEAR
4,842,416
4,233,070
CASH AND CASH EQUIVALENTS
AT END OF THE YEAR
13
8,095,739
4,842,416
Keele Residential Funding plc
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
23
GROUP
Note
Share
Capital
Retained
Earnings
Total
£
£
£
Balance as at 1 August 2021
Total comprehensive income for the year
Balance as at 31 July 2022
Total comprehensive expense for the year
(8,406,160 )
(8,406,160 )
Balance as at 31 July 2023
20
Keele Residential Funding plc
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
24
COMPANY
Note
Share
Capital
Retained
Earnings
Total
£
£
£
Balance as at 1 August 2021
50,000
20,710,377
20,760,377
Total comprehensive income for the year
-
9,773,222
9,773,222
Balance as at 31 July 2022
50,000
30,483,599
30,533,599
Total comprehensive expense for the year
-
(8,416,317)
(8,416,317)
Balance as at 31 July 2023
20
50,000
22,067,282
22,117,282
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
25
GENERAL INFORMATION
The Company is a public company limited by shares . The registered office is Third Floor ,
1 King’s
transaction documents (the "Transaction Documents" (explained in detail in the prospectus dated 11
July 2007 (the "Prospectus”) under which the Company issued 13
7.5 million index-linked guaranteed
secured bonds due July 2047 on 13 July 2007 (the "Bonds" or the "Guaranteed Index Linked Secured
Bonds"). The payment of the scheduled interest and principal of the Bonds are unconditionally and
irrevocably guaranteed by Assured Guaranty (Europe) Ltd and are admitted to trading on the official
list of the London Stock Exchange.
The Company used the proceeds of the Bonds as (i) consideration for the payment of premium to enter
into lease agreements with the University (the "Lease") under which it acquired a lease of student loan
accommodation and car parking spaces from the University and (ii) to invest in guaranteed investment
contracts ("GICs"). Under the terms of a letting services agreement (the "Letting Services Agreement"
or "LSA") KRF granted licenses to the University to occupy the student accommodation, other than the
units designated annually under the LSA and use the car parking spaces for inflation linked license fees
(the "License Fees"). As further explained in the Significant Accounting Policies in Note 2 to the
Financial Statements, the rights and obligations under the Lease and the LSA have been recognised as
a Financial Asset (the "Financial Asset") under IFRS 9 in the financial statement measured at fair value
SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements
are set out below. These polices have been consistently applied to all the years presented, unless
otherwise stated.
The financial statements have been prepared and approved by the Directors in accordance with UK
- adopted International Accounting Standards ('IFRS') and with the requirements of the Companies
The financial statements are prepared on the historical cost basis except that the Financial Asset is
carried at fair value.
GOING CONCERN
In order to form a view as to the most appropriate basis of preparation of these financial statements,
the Directors have assessed the likelihood of whether the Company and the Group will be able to
continue trading for at least 12 months from the date of signing of the financial statements versus
the likelihood of either intending to or being forced to either cease trading or place the Company
into liquidation.
The ability of the Group to meet its obligations on the Bonds and to meet its operating and
administrative expenses is dependent, principally, on the performance of the Financial Asset. The
Bonds are secured over the Group's assets and cash flows under the Financial Asset, and the Group's
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
26
ability to pay amounts due on the Bonds are, in substance, limited to the application of the receipts
from the University under the terms of the legal agreements underlying the Financial Asset.
The annual financial statements of the Group have been prepared on a going concern basis, which
contemplates the realisation of assets and satisfaction of liabilities in the normal course of business.
The Directors of the Group believe that the Group will continue to be in operational existence for
the foreseeable future by meeting its liabilities as they fall due for payment.
The University has advised the Directors that there will be no restrictions on the quantity of rooms
available in its Halls of Residence. Demand levels for the University accommodation are very good
and rental flows to KRF through 2023/24 are expected to be uninterrupted. Occupancy rates as of
October 2023 are 99.4%. It is also anticipated that occupancy levels will be at similar levels for the
2024/25 period.
The Directors have prepared cashflow forecasts that cover at least twelve months from the
authorisation of these financial statements.
that may give rise to significant concern over the ability of the Group and the Company to continue
assurance on income streams. Early indications are that student recruitment also remains good for
the 2024/25 year. The University has committed to ensuring that rental payments to the Group will
be maintained as per the terms of the Letting Services Agreement.
Rent payments from the University are expected to continue as anticipated in line with their
contractual obligations.
Due to the current inflationary environment, the Group agreed with the University not to pay the
entire contractual rental payment for the year ended 31st July 2023 with approximately £1.76
million being withheld from The University.
This is in addition to a contractual agreement between
Keele Residential Funding Plc and The University to defer the settlement of £1.3 million relating to
the July 2022 payment. As at the report signing date, the directors expect defer £664k at 31 July
2024 and also expect to defer £470k during 2025. The RPI for cash outflows has increased at a faster
rate than the equivalent RPI increase for cash inflows. This mismatch would have resulted in the
Group not having sufficient cash inflows to meet its obligations, hence the deferral of funds to the
University.
The University has signed a letter to agree that these amounts will not be called before the bond
holder payments expected in July 2025, which is 12 months from the date of signing, although these
deferrals remain contractually owed. The Directors expect that as inflation stabilises, the impact of
inflation on the Group’s cashflow will reduce and the Group to be able to settle the deferred rental
payments.
As a result of these agreements and the forecasts, the Group and Company therefore are expected
to have sufficient cash to settle its financial obligations over the going concern period of at least 12
months from the date of these financial statements.
The Directors note that there has been no change in the principal activities of the business as noted
in the Strategic Report in page 2 nor has there been any change in the contractual relationship
between the Group and The University, other than the deferral of settlement mentioned above. The
Directors expect business activities to remain unchanged for the remaining life of the contract.
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
27
Further information regarding the Group’s financial instruments, related policies and a
The consolidated financial statements incorporate the financial statements of the Company (Keele
Residential Funding Plc) and entities controlled by the Company (KRF Management Limited).
An
investor controls an investee when it is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over
the investee.
The results of subsidiaries acquired or disposed of during the year are included in the consolidated
income statement from the effective date of acquisition or up to the effective date of disposal, as
appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with those used by other members of the Group.
All intra-Group transactions, balances, income and expenses are eliminated in full on
Financing income comprises of interest on positive cash balances and is recognised on an accruals
The Group and the Company operate in only one business segment as defined by IFRS 8 which is
the management of a Financial Asset.
As the income source for the Financial Asset is located
ADMINISTRATION COSTS
The Group and the Company recognises administration costs on an accruals basis.
Finance costs are recognised on an accruals basis calculated by reference to the outstanding
balance, applicable interest rate and term of each relevant to each debt. Finance costs comprise
finance charges on Guaranteed bonds liability using the effective interest method and Deferred
Current taxation
The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit
as reported in the consolidated income statement 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 Group
’s liability for current tax is calculated using tax rates that have been enacted
or substantively enacted by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in
the financial statements and the corresponding tax base used in the computation of taxable profit
and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences, and deferred tax assets are generally recognised
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
28
for all deductible temporary differences to the extent that it is probable that taxable profits will be
available against which those deductible temporary differences can be utilised.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the
period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that
have been enacted or substantively enacted by the balance sheet date.
Tax charge for the period
Current and deferred tax are recognised as an expense or income, except when they relate to items
credited or debited directly toother comprehensive income, in which case the tax is also recognised
The Group classifies its Financial Assets into one of two categories, fair value through profit and
loss or at amortised cost.
The Group’s
Financial Asset representing net student rent receivable from The University is
carried in the balance sheet at fair value with changes in fair value recognised and presented
separately as fair value gain on financial asset in the consolidated statement of comprehensive
income. Financial Asset representing student rent receivable from the University is carried in the
balance sheet at fair value through profit and loss because the mismatch between the RPI re-set
dates of the incoming and outgoing cash flows on the net financial asset. Other than this Financial
Amortised cost
The Group's Financial Assets measured at amortised cost comprise trade and other receivables, a
Guaranteed investment certificate deposit and cash and cash equivalents in the balance sheet. Cash
and cash equivalents include deposits held at call with banks.
These assets arise principally from trading activities and are carried at amortised cost less any
provision for impairment.
Impairment provisions for Financial Assets are recognised based on the simplified approach within
IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During
this process the probability of the non-payment of the Financial Asset is assessed. This probability
is then multiplied by the amount of the expected loss arising from default to determine the lifetime
expected credit loss for the Financial Asset. For trade receivables, which are reported net, such
provisions are recorded in a separate provision account with the loss being recognised within cost
of sales in the consolidated statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the asset is written off against the
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
29
The Group classifies its financial liabilities into one of two categories, depending on the purpose
for which the liability was acquired.
The Group and the Company do not have any financial liabilities measured at fair value through
Amortised Cost
Financial liabilities at amortised costs include the following items: the Guaranteed Index Linked
Secured Bond, bond insurance premiums payable to Assured Guaranty, deferred premium liability
and trade payables net of any transaction costs directly attributable to the issue of the instrument.
The Guaranteed Index Linked Bonds is subsequently measured at amortised costs with a fixed
interest rate of 2.108% and Interest and principal payments RPI indexed
Bond insurance premiums payable to Assured Guaranty and trade payables are subsequently
measured at amortised cost using the effective interest rate method which ensures that any interest
expense over the period to repayment is at a constant rate on the balance of the liability carried in
the balance sheet. For the purposes of each financial liability, interest expense includes initial
transaction costs and any premium payable on redemption, as well as any interest or coupon
SHARE CAPITAL
Financial instruments
issued by the Group are classified as equity only to the extent that they do
PROVISIONS POLICY
A provision is recognised in the balance sheet when the Company has a present legal or
constructive obligation as a result of a past event, that can be reliably measured, and it is probable
that an outflow of economic benefits will be required to settle the obligation. Provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects risks
IMPAIRMENT POLICY
Impairment provisions are recognised based on the simplified approach within IFRS 9 using a
provision matrix in the determination of the lifetime expected credit losses. During this process
the probability of the non-payment of the Financial Asset is assessed. This probability is then
multiplied by the amount of the expected loss arising from default to determine the lifetime
RELATED PARTIES
Contracts between Keele Residential Funding Plc, its subsidiary company KRF Management Ltd,
Wilmington Trust
SP Services (London) Limited and the University of Keele are arm’s length
transactions. Details of any outstanding balances between the parties are disclosed in Related Party
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
30
CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION
UNCERTAINTY
Except for the estimation of the fair value of the Financial Asset, Directors do not believe that they
have had to make any significant estimates in relation to accounting policies in preparing these
financial statements.
A number of assets
included in the Group’s financial statements require measurement at, and /or
disclosure of, fair value.
Financial Assets held at fair value through profit or loss
utilises market observable inputs and data as far as possible. Inputs used in determining fair value
measurements are categorised into different levels based on how observable the inputs used in the
valuation technique utilised are (the ‘fair value hierarchy
) -
-
Level 1
: Quoted prices in active markets for identical items (unadjusted)
-
Level 2
: Observable direct or indirect inputs other than Level 1 inputs
-
Level 3
: Unobservable inputs (i.e. not derived from market data)
The classification of an item into the above levels is based on the lowest level of the inputs used that
has a significant effect on the fair value measurement of the item. Transfers of items between levels
On inception, the Directors assessed the terms of the Bonds and determined that the inflation-linking
mechanism was a closely related embedded derivative that did not need to be recognised and
measured separately under IFRS 9. As a result, the Directors considered two possible approaches to
account for changes in estimated future cash flows for the Loan and the Bonds:
1) Applying the guidance in paragraph B5.4.5 of IFRS9, under which the bond is treated as a floating-
rate debt instrument with the inflation link being part of the floating-rate mechanism; or
2) Applying the guidance in paragraph B5.4.6 of IFRS9, under which the effective interest rate
("EIR") is determined at inception in the same way as above.
The Directors concluded that it best reflected the substance of the Transaction to apply the guidance
in B.5.4.5 which views the EIR as a ‘floating inflation adjusted rate’, similar to SONIA. In this
method, the finance cost recognised in profit or loss is the actual inflation adjusted interest paid during
the year plus the actual increase in principle as adjusted for inflation during the year. As a result, at
the end of each year, the carrying amount is equal to the inflation adjusted amount.
3.1 Valuation of the Financial Asset
The Group will determine annual fair value valuations for its Financial Asset on the basis of the
present value of expected future cash flows. These future cash flows are subject to inflation and
therefore fluctuation over time. The estimate of long term inflation used at 31 July 2023 is based on
the prevailing Bank of England RPI forecast available at the balance sheet date and the Directors do
not believe this to have estimated uncertainty. These cash flows are used to derive a fair value of the
Financial Asset using a discount factor which is estimated with reference to financial instruments of
similar characteristics as well as other factors to take into account the credit risk and liquidity
associated with the Financial Asset and the Directors believe this has estimation uncertainty. The
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
31
RESTATEMENT OF 2022 FIGURES
The interest income on the financial asset held at fair value was previously recognised and disclosed
separately from the fair value adjustment in terms of IFRS 7 as per the directors accounting policy choice.
During the current financial year, the Directors decided to voluntary change the accounting policy in terms
IAS 8 because they believe it will result in the financial statements providing reliable and more relevant
information. As per the accounting policy change, the Interest income on the financial asset is no longer
recognised and disclosed separately but as part of the fair value adjustment on the financial asset. This change
in accounting policy is considered to be material and thus the Directors consider it appropriate to adjust the
prior year financial statement line items as detailed below;
July 2022 as | July 2022 | ||
previously reported | Restatement | as restated | |
Revenue | 7,873,064 | (7,873,064) | - |
Fair value gain on financial asset | 16,876,604 | 7,873,064 | 24,749,668 |
The results of the restatement did not have any impact on the overall profit and loss for the year ended 31
ADMINISTRATIVE EXPENSES
2023 | 2022 | |
Group | Group | |
£ | £ | |
Management charges | 90,574 | 83,180 |
Property agency - L&P | 10,942 | 12,600 |
Insurance | 15,431 | 9,356 |
Legal and professional | 4,390 | 87 |
Trustee fees | 6,000 | 6,000 |
Audit & Tax fees | 236,139 | 58,743 |
Accounts - non audit | 61,536 | 53,980 |
Bank charges | 21,733 | 1,746 |
Rating Agencies | 65,242 | 81,797 |
Wilmington Sec Charges | 25,048 | 22,894 |
537,035 | 330,383 |
FINANCE COSTS
Group
2023 | 2022 | |
£ | £ | |
Interest on Bonds | 3,778,141 | 3,442,592 |
Accretion on Bonds (RPI only) | 22,693,016 | 11,004,956 |
Amortisation of bond transaction costs | 297,846 | 297,846 |
Interest on Assured Guaranty Limited (“AGL”) liability | 64,028 | 58,147 |
Interest on deferred premium liability | 102,074 | 97,116 |
26,935,105 | 14,900,657 |
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
32
FINANCE INCOME
Group
2023 | 2022 | |
£ | £ | |
Interest on short and long term cash balances | 352,028 | 269,917 |
INCOME TAX CREDIT
Group
2023 | 2022 | |
£ | £ | |
Recognised in the income statement: | ||
Current tax | - | - |
Deferred tax: | ||
Origination and reversal of temporary | ||
differences | - | - |
Effect of tax rate change on opening balance | - | - |
Total deferred tax | - | - |
Total tax (expense)/credit in income statement | - | - |
Reconciliation of effective tax rate
2023 | 2022 | |
£ | £ | |
Group (loss) / profit before tax | (8,416,160) | 9,788,545 |
Tax using the UK corporation tax rate of 21.01% based on the tax | ||
rate of 25% since April 2023 (2022:19%) | 1,768,268 | (1,859,824) |
EFFECT OF:
Unprovided bought forward losses | 548,474 | |
Annual allowance on lease premiums paid | 186,162 | 168,352 |
Other timing differences | (3,180,625) | |
Other permanent differences | 1,226,195 | 1,142,998 |
Total current tax charge/credit and effective rate of tax | - | - |
The Group is not recognising in the accounts gross deferred tax assets arising on brought forward non-
trade loan relationship and excess management expenses of £47,710,983 (2022: £44,424,481).
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
33
The Group is not recognising the deferred tax asset in the balance sheet as there is insufficient evidence
FINANCIAL ASSET
Group & Company
2023 | 2022 | |
Restated | ||
£ | £ | |
Fair value | ||
At beginning of year | 181,004,598 | 164,127,994 |
Rental income | (12,473,518) | (11,710,684) |
Rental Payment | 5,818,028 | 5,103,563 |
Licence Fee income | (1,361,510) | (1,265,943) |
Fair value gain on Financial Asset | 18,713,952 | 24,749,668 |
At end of year | 191,701,550 | 181,004,598 |
Financial asset fair value- current portion | 9,759,953 | 7,830,859 |
Financial asset fair value- non- current portion | 181,941,597 | 173,173,739 |
Total Financial Asset Value | 191,701,550 | 181,004,598 |
The Financial Asset is measured at fair value at the balance sheet date. Gains or losses arising from
changes in the fair value of Financial Asset are included in (loss)/profit for the year in which they arise.
The fair value of the Group
’s
Financial Asset at 31 July 2023 and 2022 has been arrived at on the basis
of a valuation based on the net rental income from the asset including licence income, and the value of
the liability to the University which operates and maintains the student accommodation. The cashflows
underlying the Financial Asset valuation also considers the impact of inflation on these expected
cashflows. The discount rate used in the valuation is considered in more detail in note 3.1 as a key input
in the estimate of the fair value of the Financial Asset.
If the discount rate increases by 0.01%, the fair value of the financial asset will increase by £2,106,705.
If the discount rate decreases by 0.01%, the fair value of the financial asset will decrease £2,139,548.
INVESTMENT IN SUBSIDIARY
Company
Detail of the parent
company’s subsidiary at 31 July 20
23 is as follows:
Name of the company | Principal | Place of | Proportion | Proportion | Cost of |
activity | incorporation | of shares | of voting | acquisition | |
acquired | rights | ||||
£ | |||||
KRF Management Limited | Management | England & | 100% | 100% | 587,500 |
Services | Wales |
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
34
The registered office of KRF Management Limited is Third Floor, 1 King
’
s Arms Yard, London, EC2R
7AF.
The acquisition cost was fully impaired in the accounts to 31
st
July 2007. The nominal value of the acquired
shared capital of £2 is included as a non-current asset in the Company balance sheet. This is eliminated on
GUARANTEED INVESTMENT CERTIFICATE
On the Issue Date, part of the monies from the proceeds of the Bonds will be invested in guaranteed
investment contracts ("GICs") which is intended to generate an amount required to pay the Deferred
Premium liability disclosed in note 16.
Group & Company
2023 | 2022 | |
£ | £ | |
Guaranteed investment certificate | 5,776,399 | 5,495,863 |
The Company has acquired a Guaranteed investment certificate, which will mature in 2029. This investment
will be used to pay the deferred premium liability (disclosed in Note 16). Under the terms of the lease
agreement with the University, a portion of the premium due under the lease agreement is deferred to be
paid in 2029. The long term cash investment is a guaranteed investment contract which will return the
TRADE AND OTHER RECEIVABLES
2023 | 2022 | |
£ | £ | |
Amounts falling due within one year: | ||
Prepayments and accrued income | 1,387,122 | 23,080 |
1,387,122 | 23,080 |
Company
2023 | 2022 | |
£ | £ | |
Amounts falling due within one year: | ||
Prepayments and accrued income | 1,387,122 | 23,083 |
1,387,122 | 23,083 |
£1,351,785 of the prepayments and accrued income balance as at 31 July 2023 is in relation to the licence
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
35
CASH AND CASH EQUIVALENTS
2023 | 2022 | |
£ | £ | |
Cash at bank and in hand | 8,172,219 | 4,901,757 |
Company
2023 | 2022 | |
£ | £ | |
Cash at bank and in hand | 8,095,739 | 4,842,416 |
and cash equivalents, but their use is restricted as set out in the Transaction Documents. As the cash can only
be used to meet certain specific liabilities and is not available to be used with discretion, it is viewed as
TRADE AND OTHER PAYABLES
2023 | 2022 | |
Group | £ | £ |
Trade payables | 7,210,887 | 1,312,000 |
Accruals and deferred income | 192,925 | 56,320 |
7,403,812 | 1,368,320 |
Company
2023 | 2022 | |
£ | £ | |
Trade payables | 7,210,887 | 1,312,000 |
Accruals and deferred income | 179,913 | 50,290 |
7,390,800 | 1,362,290 |
The amount disclosed under Trade Payables includes deferred payments to the University of £1.3 million
from year ended 31 July 2022, and the rental payment due of £5.8 million for year ended 31 July 2023
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
36
FINANCIAL LIABILITIES
Group & Company
This note provides information about the contractual terms of the Company
’s
interest-bearing loans and
borrowings.
For more information about the C
ompany’s exposure to interest rate
and other risks see
note 18.
Current | Non-Current | |||
2023 | 2022 | 2023 | 2022 | |
£ | £ | £ | £ | |
Guaranteed secured bond (see note 15.1) | 5,708,882 | 4,949,267 | 168,232,201 | 151,064,822 |
Assured Guaranty Liability (see note | ||||
15.2) | 63,858 | 62,725 | 1,346,025 | 1,393,570 |
5,772,740 | 5,011,992 | 169,578,226 | 152,458,392 | |
The guaranteed secure bond is shown net of unamortised loan transaction costs of £6,999,404 (2022
£7,297,251).
15.1.
GUARANTEED INDEX LINKED SECURED BOND
During July 2007 the Company recalled the previous fixed rate bonds and issued new 2.108%
guaranteed index linked secured bonds. Interest and principal payments are made half yearly with
increases in bond payments linked to RPI. The principal is repayable by instalments, which
commenced in January 2008, in accordance with the amortisation schedule set out in the Transaction
Documents. The final maturity date and final repayments are due in 2047.
The interest and capital
repayments have been spread over the repayment period.
At 31 July 2023 the principal outstanding on the bonds, on a cash-paid basis, was £101,556,307
(2022: £104,492,239).
The above liability is secured by a charge created between Keele Residential Funding plc and
Citibank, N.A., as trustee for the beneficiaries. This is to secure all obligations which the Group
may have at any time with the security trustee, on its own account or as trustee to the beneficiaries,
or any other beneficiaries, including obligations under the terms of the debenture loan detailed
above.
A second charge was also created between the Company, Citibank, N.A. and Assured Guaranty
(UK) Ltd (AGL), the amount secured being all obligations which the Company may at any time
have to Citibank (whether on its own account or as trustee for the beneficiaries) or any other
beneficiaries under or pursuant to finance documents including those relating to the issue of the
above bonds, which shall include without limitation any obligations of the Company to AGL which
may from time to time arise by way of subrogation.
As a financial liability other than at fair value through profit or loss, the Group’s guaranteed index
linked secured bond liability is measured at amortised cost with the transaction costs amortised on
a straight line basis because the financial liability is a floating rate instruments linked to inflation.
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
37
15.2.
ASSURED GUARANTEE LIABILITY
A financial guarantee fee is payable in instalments to Assured Guaranty Limited
(“
AGL
”)
with
regards to the new issued 2.108% guaranteed index linked secured bonds. Payments are made half
yearly. The amount is repayable by instalments, which commenced in August 2007 and the final
amounts to be repaid in 2047.
The above amount in note 15 has been derived at 31 July 2023 using
GROUP/COMPANY DEFERRED PREMIUM LIABILITY
In line with current accounting practise, a provision should be recognised on the balance sheet relating
to the stamp duty land tax liability due on the lease to the University as a deferred transaction cost.
£ | |
Balance 31 st July 2022 | (1,999,689) |
Interest on deferred premium | (102,074) |
Balance as at 31 st July 2023 | (2,101,763) |
The Company has a Guaranteed investment certificate in place dating from 2007 which matures in
December 2029 (Note 11). The lease agreement between the University and the Company stipulates that
part of lease premium will be deferred to be paid in December 2029. This resulted in the deferred
CAPITAL RISK MANAGEMENT
Neither Group nor Company are subject to externally imposed capital requirements.
Capital is considered to comprise share capital and retained earnings; balances and movements in
which are reported in the Statement of Changes in Equity.
The Group’s assets and liabilities are constructed such that cash inflows and outflows are equalise
d
over the life of the contracts related mainly to the Financial Asset and 2.108% Guaranteed Index
Linked Secured Bonds. Any balance on retained earnings is timing differences resulting from
differing accounting treatments applied to the assets and liabilities. No active management of capital
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
38
FINANCIAL INSTRUMENTS
18.1.
CATEGORIES OF FINANCIAL INSTRUMENTS
FINANCIAL ASSETS
GROUP
2023 | |||
Fair Value | At | Total | |
through Profit | Amortised | ||
or Loss | Cost | ||
£ | £ | £ | |
Financial Asset held at fair value | 191,701,550 | - | 191,701,550 |
through profit and loss | |||
Cash and cash equivalents | - | 8,172,219 | 8,172,219 |
Trade and other receivables | - | 1,387,122 | 1,387,122 |
Guaranteed investment certificate | - | 5,776,399 | 5,776,399 |
191,701,550 | 15,335,740 | 207,037,290 |
2022 | |||
Fair Value | At | Total | |
through Profit | Amortised | ||
& Loss | Cost | ||
£ | £ | £ | |
Financial Asset | 181,004,598 | - | 181,004,598 |
Cash and cash equivalents | - | 4,901,757 | 4,901,757 |
Trade and other receivables | - | 23,080 | 23,080 |
Guaranteed investment certificate | - | 5,495,863 | 5,495,863 |
181,004,598 | 10,420,703 | 191,425,301 |
COMPANY
2023 | |||
Fair Value | At | Total | |
through Profit | Amortised | ||
& Loss | Cost | ||
£ | £ | £ | |
Financial Asset held at fair value | 191,701,550 | - | 191,701,550 |
through profit and loss | |||
Cash and cash equivalents | - | 8,095,739 | 8,095,739 |
Trade and other receivables | - | 1,387,122 | 1,387,122 |
Guaranteed investment certificate | - | 5,776,399 | 5,776,399 |
191,701,550 | 15,259,260 | 206,960,810 |
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
39
2022 | |||
Fair Value | At | Total | |
through Profit | Amortised | ||
& Loss | Cost | ||
£ | £ | £ | |
Financial Asset held at fair value | 181,004,598 | - | 181,004,598 |
through profit and loss | |||
Cash and cash equivalents | - | 4,842,416 | 4,842,416 |
Trade and other receivables | - | 23,083 | 23,083 |
Guaranteed investment certificate | - | 5,495,863 | 5,495,863 |
181,004,598 | 10,361,362 | 191,365,960 |
FINANCIAL LIABILITIES
GROUP
2023 | |||
Fair Value | Other | ||
through | Financial | Total | |
Profit & Loss | Liabilities | ||
£ | £ | £ | |
Trade and other payables | - | (7,403,812) | (7,403,812) |
Guaranteed index linked secured bond | - | (173,941,083) | (173,941,083) |
Deferred premium liability | (2,101,763) | (2,101,763) | |
Assured Guaranty Liability | - | (1,409,883) | (1,409,883) |
- | (184,856,541) | (184,856,541) |
2022 | |||
Fair Value | Other | ||
through Profit | Financial | Total | |
& Loss | Liabilities £ | ||
£ | £ | ||
Trade and other payables | - | (1,368,320) | (1,368,320) |
Guaranteed index linked secured bond | - | (156,014,089) | (156,014,089) |
Deferred premium liability | (1,999,689) | (1,999,689) | |
Assured Guaranty Liability | - | (1,456,295) | (1,456,295) |
- | (160,838,393) | (160,838,393) |
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
40
FINANCIAL LIABILITIES
COMPANY
2023 | |||
Fair Value | Other | ||
through | Financial | Total | |
Profit & Loss | Liabilities | ||
£ | £ | £ | |
Trade and other payables | - | (7,390,800) | (7,390,800) |
Guaranteed index linked secured bond | - | (173,941,083) | (173,941,083) |
Deferred premium liability | (2,101,763) | (2,101,763) | |
Assured Guaranty Liability | - | (1,409,883) | (1,409,883) |
- | (184,843,529) | (184,843,529) |
2022 | |||
Fair Value | Other | ||
through | Financial | Total | |
Profit & | Liabilities | ||
Loss | |||
£ | £ | £ | |
Trade and other payables | (1,362,290) | (1,362,290) | |
Guaranteed index linked secured bond | - | (156,014,089) | (156,014,089) |
Deferred premium liability | (1,999,689) | (1,999,689) | |
Assured Guaranty Liability | - | (1,456,295) | (1,456,295) |
(160,832,363) | (160,832,363) |
FINANCIAL RISK MANAGEMENT
The Group
’s
debt exposes it to liquidity, interest rate and market risk.
The Group
’s investments
expose it to credit risk. The policies and strategies for managing these risks are summarised as
follows:
Market risk
Market risk arises from the
Group’s
and Company’s
use of interest-bearing financial
instruments. It is the risk that the fair value or future cash flows of a financial instrument
will fluctuate because of changes in interest rates due to the Guaranteed Index Linked
Secured Bonds being RPI
indexed, foreign exchange rates or inflation risk.
Inflation risk
The Group’s
and Company’s
Guaranteed index linked secured bond provides for
contractual payments that vary in line with the Retail Prices Index (RPI). Increases in the
RPI will lead to increased payments by the Group. This risk is mitigated by the fact that
revenue
from the Group’s
Financial Asset is also linked to RPI such that increases in
contractual
payments will be met by an increase in the Group’s
revenue.
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
41
All of the
Group’s
and Company’s
assets and liabilities are denominated in Sterling (“£”),
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a
financial instrument fails to meet its contractual obligations.
The
Group’s
and Company’s
significant Financial Asset is the Financial Asset, held at fair
value in the accounts at £191,701,550. The credit risk on these funds relates to the
University
’s obligation
to collect and transfer rent to the Company. The maximum exposure
to credit risk on the Financial Asset is £191,701,550 (2022: £181,004,598). The risk is
mitigated by the fact that the University is obliged to pay any shortfalls in the collection of
students rent. Other credit risk applies to the Group
’
s bank balance and Guaranteed
investment certificate. The maximum exposure to credit risk is the bank and Guaranteed
investment certificate of £8,172,219 (2022: £4,901,757) and £5,776,399 (2022:
£5,495,863) respectively. No collateral is held. There is no expected credit loss expectation
Liquidity risk
Liquidity risk arises from the
Group’s
and Company’s
management of working capital and
the finance charges and principal repayments on its debt instruments. It is the risk that the
Group will encounter difficulty in meeting its financial obligations as they fall due. The
Directors manage this risk by careful forecasting and transferring any anticipated cash
requirements into a Debt service reserve account twice a year.
This has resulted in an
agreement to defer approximately £1.76 million of rental payments owed to the University.
Refer to the going concern section for further details.
The
Group’s
debt and other liabilities commit it to future cash outflows. The funds to meet
these commitments will be provided by cash inflows from the Group’s
Financial Asset.
The security of the cash inflows from the Financial Asset is addressed in the credit risk note
18.2.2.
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
42
The following table sets out the contractual maturities (representing undiscounted contractual
cashflows) of financial liabilities.
Group | ||||||
Financial | ||||||
Liabilities | ||||||
Total | ||||||
At 31 July | Carrying | |||||
2023 | Up to 1 Year | 1-2 Years | 3 – 5 Years | Over 5 Years | Total Liability | Value |
£ | £ | £ | £ | £ | £ | |
Trade and | ||||||
other | ||||||
payables | 7,403,812 | - | - | - | 7,403,812 | 7,403,812 |
Guaranteed | ||||||
index | ||||||
linked | ||||||
secured | ||||||
bond | 5,708,882 | 6,056,262 | 20,456,076 | 231,288,975 | 263,510,195 | 173,941,083 |
Deferred | ||||||
Premium | ||||||
Liability | - | - | - | 2,101,763 | 2,101,763 | 2,101,763 |
Assured | ||||||
Guaranty | ||||||
Liability | 116,431 | 115,605 | 339,274 | 1,278,245 | 1,849,555 | 1,409,883 |
13,229,125 | 6,171,867 | 20,795,350 | 234,668,983 | 274,865,325 | 184,856,541 |
Total | ||||||
At 31 July | Carrying | |||||
2022 | Up to 1 Year | 1-2 Years | 3 – 5 Years | Over 5 Years | Total Liability | Value |
£ | £ | £ | £ | £ | £ | |
Trade and | ||||||
other | ||||||
payables | 1,368,320 | - | - | - | 1,368,320 | 1,368,320 |
Guaranteed | ||||||
index | ||||||
linked | ||||||
secured | ||||||
bond | 7,774,268 | 8,731,158 | 28,331,754 | 281,351,280 | 326,188,460 | 156,014,089 |
Deferred | ||||||
Premium | ||||||
Liability | - | - | - | 1,999,689 | 1,999,689 | 1,999,689 |
Assured | ||||||
Guaranty | ||||||
Liability | 100,656 | 109,012 | 326,545 | 1,416,165 | 1,952,378 | 1,456,295 |
9,243,244 | 8,840,170 | 28,658,299 | 284,767,134 | 331,508,847 | 160,838,393 |
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
43
Company
Financial
Liabilities
Total | ||||||
At 31 July | Carrying | |||||
2023 | Up to 1 Year | 1-2 Years | 3 – 5 Years | Over 5 Years | Total Liability | Value |
£ | £ | £ | £ | £ | £ | |
Trade and | ||||||
other | ||||||
payables | 7,390,800 | - | - | - | 7,390,800 | 7,390,800 |
Guaranteed | ||||||
index | ||||||
linked | ||||||
secured | ||||||
bond | 5,708,882 | 6,056,262 | 20,456,076 | 231,288,975 | 263,510,195 | 173,941,083 |
Deferred | ||||||
Premium | ||||||
Liability | - | - | - | 2,101,763 | 2,101,763 | 2,101,763 |
Assured | ||||||
Guaranty | ||||||
Liability | 116,431 | 115,605 | 339,274 | 1,278,245 | 1,849,555 | 1,409,883 |
13,216,113 | 6,171,867 | 20,795,350 | 234,668,983 | 274,852,313 | 184,843,529 |
Total | ||||||
At 31 July | Carrying | |||||
2022 | Up to 1 Year | 1-2 Years | 3 – 5 Years | Over 5 Years | Total Liability | Value |
£ | £ | £ | £ | £ | £ | |
Trade and | ||||||
other | ||||||
payables | 1,362,290 | - | - | - | 1,362,290 | 1,362,290 |
Guaranteed | ||||||
index | ||||||
linked | ||||||
secured | ||||||
bond | 7,774,268 | 8,731,158 | 28,331,754 | 281,351,280 | 326,188,460 | 156,014,089 |
Deferred | ||||||
Premium | ||||||
Liability | - | - | - | 1,999,689 | 1,999,689 | 1,999,689 |
Assured | ||||||
Guaranty | ||||||
Liability | 100,656 | 109,012 | 326,545 | 1,416,165 | 1,952,378 | 1,456,295 |
9,237,214 | 8,840,170 | 28,658,299 | 284,767,134 | 331,502,817 | 160,832,363 |
UNDRAWN COMMITTED BORROWING FACILITIES
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
44
FAIR VALUE OF FINANCIAL INSTRUMENTS
GROUP
The comparison of book and fair values of all the Group’s
Financial Assets and liabilities at the
year-end is set out below:
| 2023 | 2022 | |||
Carrying | Fair | Carrying | Fair | |
Amount | value | amount | value | |
£ | £ | £ | £ | |
Financial Asset held at fair value | 191,701,550 | 191,701,550 | 181,004,598 | 181,004,598 |
through profit or loss | ||||
Cash at bank and in hand | 8,172,219 | 8,172,219 | 4,901,757 | 4,901,757 |
Guaranteed investment certificate | 5,776,399 | 5,776,399 | 5,495,863 | 5,495,863 |
Trade and other receivables | 1,387,222 | 1,387,222 | 23,080 | 23,080 |
Trade and other payables | (7,403,812) | (7,403,812) | (1,368,320) | (1,368,320) |
Guaranteed index linked secure bond | (173,941,083) | (183,730,085) | (156,014,089) | (216,287,963) |
Deferred premium liability | (2,101,763) | (2,101,763) | (1,999,689) | (1,999,689) |
Assured Guaranty Liability | (1,409,883) | (1,409,883) | (1,456,295) | (1,456,295) |
22,180,849 | 12,391,847 | 30,586,908 | (29,686,966) | |
COMPANY
The comparison of book and fair values of all the Company
’s
Financial Assets and liabilities at the
year-end is set out below:
| 2023 | 2022 | |||
Carrying | Fair | Carrying | Fair | |
amount | value | amount | value | |
£ | £ | £ | £ | |
Financial Asset held at fair value | 191,701,550 | 191,701,550 | 181,004,598 | 181,004,598 |
through profit or loss | ||||
Cash at bank and in hand | 8,095,739 | 8,095,739 | 4,842,416 | 4,842,416 |
Guaranteed investment certificate | 5,776,399 | 5,776,399 | 5,495,863 | 5,495,863 |
Trade and other receivables | 1,387,222 | 1,387,222 | 23,083 | 23,083 |
Trade and other payables | (7,390,800) | (7,390,800) | (1,362,290) | (1,362,290) |
Guaranteed index linked secure bond | (173,941,083) | (183,730,085) | (156,014,089) | (216,287,963) |
Deferred premium liability | (2,101,763) | (2,101,763) | (1,999,689) | (1,999,689) |
Assured Guaranty Liability | (1,409,883) | (1,409,883) | (1,456,295) | (1,456,295) |
22,117,381 | 12,328,379 | 30,533,597 | (29,740,277) | |
The following methods and assumptions were used in estimating fair values for financial instruments:
Short-term borrowings, cash and deposits approximate to book value due to their short maturities.
For bank
and other loans, carrying fixed rates of interest, included within long term borrowings, the repayments which
the Company is committed to make have been discounted at the relevant interest rates applicable at 31 July
2023 and 31 July 2022.
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
45
Guaranteed index linked secured bonds, included at fair value have been valued using published RPI at 31
July 2023 and 31 July 2022.
Level 1 | Level 2 | Level 3 | ||||
Group | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
and | £ | £ | £ | £ | £ | £ |
Company | ||||||
Financial | ||||||
Assets held at fair | - | - | - | - | - | - |
value | ||||||
Financial | ||||||
Asset held | ||||||
at fair | ||||||
value | - | - | - | - | 191,701,550 | 181,004,598 |
through | ||||||
profit or | ||||||
loss | ||||||
The valuation technique and significant unobservable inputs used in determining the fair value
measurement of level 2 & 3 financial instruments, as well as inter-relationship between key unobservable
inputs and fair value, are set out in the table below:
Financial Instrument | Valuation techniques | Significant | Inter-relationship |
used | unobservable inputs | between key | |
(level 3 only) | unobservable inputs | ||
and fair value | |||
Financial Asset | The net of revenues | -Rental income from | The present value of |
generated by the asset | the University | these inputs is used to | |
less associated costs | -Licence income from | drive the fair value | |
are used to derive a | the University | calculation. | |
fair value using a | -Rental payment to | ||
discount factor. | the University | ||
Cash and deposits | The carrying amount | Not applicable | |
of cash & deposits | |||
approximates its fair | |||
value | |||
Trade and other | The carrying amount | Not applicable | |
receivables & | of short term trade | ||
payables | receivable and | ||
payables | |||
approximates its fair | |||
values. | |||
Index linked bond | Guaranteed index | Not applicable | |
linked secured bonds, | |||
included at fair value | |||
have been valued | |||
using market price in | |||
the London stock | |||
exchange at 31 July | |||
2023. |
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
46
NOTE SUPPORTING CASH FLOW STATEMENT
Group & Company
Non-cash transactions from bond financing activities are shown in the reconciliation of liabilities
from financing transactions set out below.
Financial Liabilities
Note 15
2023 | 2022 | |
£ | £ | |
Opening balance | 157,470,384 | 150,543,763 |
Cash flows | (8,952,449) | (7,876,920) |
Non cash flows: | ||
Interest on Bonds | 3,778,141 | 3,442,592 |
Accretion on Bonds | 22,693,016 | 11,004,956 |
Costs Amortisation | 361,874 | 355,993 |
Closing balance | 175,350,966 | 157,470,384 |
GROUP AND COMPANY SHARE CAPITAL
GROUP
Allotted and called up share | |
capital of £1 each | |
Number | |
At beginning and end of year | 50,000 |
COMPANY
Allotted and called up share | |
capital of £1 each | |
Number | |
At beginning and end of year | 50,000 |
Each of the ordinary shares carries one vote per share and is entitled to dividends at the discretion
Keele Residential Funding plc
NOTES TO THE FINANCIAL STATEMENTS (continued)
For the year ended 31 July 2023
Registration Number: 03840096
Annual Report and Financial Statements for the year ended 31 July 2023
Page
47
RETAINED EARNIINGS
CAPITAL COMMITMENTS
RELATED PARTY TRANSACTIONS
During the year £97,179 (2022: £89,010), inclusive of VAT, was charged by Wilmington Trust SP
Services (London) Limited for corporate services provided to Keele Residential Funding Plc and
£11,459 (2022: £10,473) was charged by Wilmington Trust SP Services (London) Limited for corporate
services provided to KRF Management Limited. The University charged Keele Residential Funding
Plc £61,536 (2022: £53,980) and KRF Management Ltd £8,205 (2022: £7,197) for accounting and
administration services. Both Mr C Duffy and Mr D Wynne, directors of the Company, are also an
employee of Wilmington Trust SP Services (London) Limited. Mr D Wynne is also a director of
Wilmington Trust SP Services (London) Limited.
At the year-end a balance of £Nil (2022: Nil) was due to Wilmington Trust SP Services (London)
Limited, £Nil (2022: Nil) was due by Keele Residential Funding Plc to KRF Management Ltd, £Nil
(2022: Nil) was due by KRF Management Ltd to Keele Residential Funding Plc and £7,191,564 (2022:
£1,312,000) was due by KRF Residential Funding Plc to The University.
Wilmington Trust SP Services (London) Limited is a Director of Keele Residential Funding plc and Mr
D Wynne
CONTINGENT LIABILITIES
ULTIMATE CONTROLLING PARTY
Keele Residential Funding plc’s
Parent company is KRF Holdings Limited
Holdings Limited consolidated accounts can be obtained from Companies House Cardiff.
Keele Holdings Limited, the immediate parent of the Company, holds the shares of Keele Residential
Funding Plc.
For accounting purposes, the Company's controlling party is considered to be the University of Keele,
on the basis that this entity holds the majority of the exposure to variability associated with the Financial
POST BALANCE SHEET EVENTS