Annual Financial Report

Company Registered Number 11678195

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lncommunities Treasury Plc

REPORT AND FINANCIAL STATEMENTS

For the year ended 31 March 2020

CONTENTS

Page Directors, Officers and Professional Advisors.................................................................................................... 1

Strategic Report................................................................................................................................ 2

Directors' Report............................................................................................................................... 7

Independent Auditor's Report to the Members of lncommunities Treasury Plc..................................... 11

Statement of Comprehensive lncome............................................................................................... 16

Statement of Changes in Equity....................................................................................................... 17

Statement of Financial Position........................................................................................................ 18

Notes to the Financial Statements..................................................................................................... 19

DIRECTORS, OFFICERS AND PROFESSIONAL ADVISORS

BOARD OF DIRECTORS

J Ormondroyd (Chair) I Cornelius

J Lawrenuik (from 20.08.20)

G Robinson (Assistant Chief Executive Resources) M Walker (to 12.09.19)

SECRETARY

G Robinson (Assistant Chief Executive Resources)

EXECUTIVE MANAGEMENT TEAM

G L Howley - Group Chief Executive

A Perry - Assistant Chief Executive Asset Management A Reid - Assistant Chief Executive Neighbourhoods

G Robinson - Assistant Chief Executive Resources

REGISTERED OFFICE

The Quays Victoria Street Shipley

West Yorkshire BD17 7BN

AUDITOR

BOO LLP

3 Hardman Street Spinningfields Manchester M33AT

SOLICITORS

In House Legal Team The Quays

Victoria Street Shipley

BD17 7BN

Trowers & Hamlins LLP 3 Bunhill Row

London EC1Y 8YZ

Devonshires LLP 30 Finsbury Circus London

EC2M 7DT

BANKERS

National Westminster Bank Plc The Bank of New York Mellon 1 Market Street London Branch

Bradford One Canada Square

BD1 1EG London E14 5AL

Registered as a public limited company under the Companies Act Number 11678195

REVIEW OF THE BUSINESS

lncommunities Treasury Plc (the 'Company') was formed on 14 November 2018, and is a wholly owned subsidiary of lncommunities Group Limited (the 'Group Company'), its ultimate parent undertaking. The Company operates as a funding vehicle for lncommunities Group Limited and its subsidiaries (the 'Group').

On 21 March 2019, the Company issued a 30-year £250m own name public issue dated senior secured bond (the 'Bond') at a coupon rate of 3.25%. The initial offer to the market was for a principal amount of

£200m of bonds (the 'Principal Amount', the 'Issued Bond') with a principal amount of £50m of bonds retained for later issue (the 'Retained Bond').

The Issued Bond was priced at 99.184% (the 'Bond Issue Price') equivalent to a Discount on Issue of

£1.632m (0.816%). The net funds received were £198.368m (£99.184 per £100 issued).

In arranging the Bond, the Company incurred Bond Issue Costs of £2.218m, which were paid directly from the proceeds of the Bond or by other Group entities. These latter costs were reimbursed by the Company through intercompany accounts.

The Discount on Issue and the Bond Issue Costs are amortised over the term of the Bond. Interest is payable by the Company to the bondholders at a rate of 3.25% on the Principal Amount.

The Bond is secured by way of fixed charges over the housing properties of lncommunities Limited ('lncommunities') (a fellow subsidiary) in favour of Prudential Trustee Company Limited acting as Security Trustee.

The Principal Amount is due for repayment on 21 March 2049.

Following the Bond issue, the Company provided Credit ·Facilities, equal to the amount of the Bond, to lncommunities and Sadeh Lok Limited ('Sadeh Lok') (a fellow subsidiary) (the 'Borrowers'). The Issued Bond was allocated in the ratio 90:10 (lncommunities/Sadeh Lok) and the Retained Bond allocated in the ratio 100:0 (lncommunities/Sadeh Lok). The Credit Facilities are provided under formal Loan Agreements between the Company and the Borrowers. These agreements are not listed.

On 21 March 2019, the Company made advances under the Credit Facilities to the Borrowers from the Issued Bond of principal amounts of £180m (lncommunities) and £20m (Sadeh Lok). Each principal amount was advanced at a discount, equivalent to a 90:10 (lncommunities/Sadeh Lok) pro rata split of the Discount on Issue of £1.632m, and after loan issue costs, equivalent to a 90:10 (lncommunities/Sadeh Lok) pro rata split of the Bond Issue Costs of £2.218m.

The discount and loan issue costs applied to the principal amounts are amortised over the period of the Credit Facilities, which run until March 2049. Interest is receivable by the Company from the Borrowers at a rate of 3.25% on the principal amounts of the advances.

During the year, the Company charged a management fee to the Borrowers of £35k (2019: £Nil). The Company's profit for the year is £2k (2019: £Nil), and its reserves at the year end are £2k (2019: £Nil).

The Directors are satisfied with the results for the year and expect future results to continue on a similar basis.

KEY PERFORMANCE INDICATORS

The Company is monitored against a defined operating model, which requires the internal recharge of all interest payable and administration costs, ensuring that Company at least breaks even.

SECTION 172 STATEMENT

Section 172 of the Companies Act 2006 requires Directors to take into consideration the interests of stakeholders and other matters in their decision making. The Directors continue to have regard to the interests of the Company's stakeholders, the impact of its activities on the Group's employees, tenants, residents and the community, the environment and the Group's reputation in the housing sector, the region and the wider business environment, when making decisions. In this context, acting in good faith and with the best interests of the Group's employees, tenants, residents, and wider stakeholders, the Directors approve strategic goals that are most likely to promote the success of the Company and the Group over the medium to long term. This is explained in the annual report and engagement with stakeholders as summarised in the table, as follows.

Table 1: Engagement with Stakeholders

The table below shows the key events and decisions made by the Board, the stakeholders they impacted and the associated actions taken by the Directors to engage with the relevant stakeholders. Key events and decisions have been determined by assessing items which are either material for the business or that have a significant impact on one or many categories of stakeholders

Table 2: Key Events, Decisions, Actions and Impacts

FINANCIAL RISK MANAGEMENT

The Board has full responsibility for assessing and managing risk. The Company operates in accordance with the risk management processes of the Group Company. These include the maintenance of a risk management strategy and a risk map. The risk map is considered regularly by the Board of Directors of the Group Company (the 'Group Board') and the Group's Audit and Risk Committee (the 'ARC') to identify the key risks to the business.

The Company's operations expose it to a variety of financial risks that include the effects of interest rate risk, liquidity risk arid credit risk. The Group has in place a risk management strategy and a treasury management policy that seeks to limit any adverse financial impacts associated with the Company's operations by actively managing its debt finance and related finance costs.

Interest Rate Risk

The Company currently borrows funds on a fixed rate basis at 3.25% from the capital markets through its public issue bond. These funds are on-lent to the Borrowers at the same fixed rate of interest. This provides a natural hedge for the Company due; firstly, to the fixed rate of interest on the Bond through to maturity, secondly, the matching of interest rate terms on the borrowing and on-lending, and thirdly, accounting for the Bond at amortised cost, so that any movements in the fair value of the Bond do not impact the Statement of Comprehensive Income

In view of the above, the Company does not bear any interest rate risk, apart from the underlying credit risk of the Borrowers, which is covered below. The Company does not undertake any hedging activities and does not deal in derivatives.

The Borrowers have other debt on fixed and variable interest rates from external providers, which are closely monitored to ensure compliance with covenants. Close monitoring of market movements in interest rates and an active approach towards treasury management takes place within the Group to ensure interest rate risk is properly managed.

Liquidity Risk

Liquidity risk is the risk that the Company might be unable to meet its obligations. The Company lends the full amount of the loans it has borrowed. Accordingly, the Company has assets to fully offset its liabilities, and investment income to offset its interest payable. Cash is monitored by each Group member to ensure funds are available to meet ongoing commitments.

Credit risk

As at 31 March 2020, the Company has on-lent all of its available funds to the Borrowers. Attached to these intercompany borrowings is a financial guarantee by the Borrowers that is secured by first legal mortgages over property assets with a value in excess of the total borrowings.

The Company is dependent on the receipt of funds from the Borrowers to meet its contractual obligations to the bondholders. The credit risk is that the Borrowers fail to reimburse the Company. The Board considers this credit risk to be low given that the Borrowers have strong asset bases that consistently generate operating surpluses. Additionally, the Borrowers are governed and managed by an experienced Group Board and Executive Management Team, and are overseen by a regulator that monitors the financial viability of the business.

Foreign Currency Risk

The Company has no foreign currency transactions, and all of the Company's borrowings, coupons payable, and investment income are denominated in Sterling.

FUTURE DEVELOPMENTS

The Company has a retained bond of £50m. This is considered to be sufficient to support the Group's future plans. The Group and the Company are actively looking at issuing part or all of the retained bond during 2020/21.

APPROVAL

The Strategic Report was approved by the Board on 20 August 2020 and signed on its behalf by:

The Board of Directors (the 'Board') is pleased to present its report and audited financial statements for the year ended 31 March 2020.

LEGAL STATUS

lncommunities Treasury Plc is a public limited company, limited by shares and registered in England and Wales.

The Company's registered office is The Quays, Victoria Street, Shipley, BD17 7BN.

GROUP STRUCTURE

The Company is a wholly owned subsidiary of lncommunities Group Limited (the 'Group Company'). lncommunities Group Limited and its subsidiaries (the 'Group') provide central and strategic services to the Company including; treasury and financial management, information technology, legal services, and governance.

The Company has no subsidiaries.

PRINCIPAL ACTIVITY

The Company operates as a funding vehicle for the Group.

RESULTS FOR THE YEAR

A review of the business is included in the Strategic Report and the results for the year are set out in the financial statements.

GOING CONCERN

The Company will continue its operations as a funding vehicle for the Group and is aware that it is a requirement of the agreements entered into by the Company with respect to the Bond that it continues its existing relationship with the Group Company and the Borrowers.

The Company is dependent on the receipt of funds from the Borrowers to meet its contractual obligations to the bondholders. Each of the Borrowers has a long-term business plan in place, which demonstrates its ability to support its existing debt and meet its obligations. These plans have been adjusted for the likely effects of the Covid-19 pandemic. They have also been stress tested, with particular emphasis placed on examining and evaluating the possible effects of the pandemic. These evaluations found that the Borrowers' long-term business plans were robust and that the effects of the pandemic are likely to be relatively short-term and should not affect the ability of the Borrowers to meet their obligations. Accordingly, no impairment has been recognised in the financial statements in respect of the advances made to the Borrowers under the Credit Facilities.

On this basis, the Board has a reasonable expectation that the Company has adequate resources to continue in operation for the foreseeable future, being a period of twelve months from the date on which the report and financial statements are signed. For this reason, the Board continues to adopt the going concern basis in the financial statements.

BOARD OF DIRECTORS, EXECUTIVE MANAGEMENT TEAM AND EMPLOYEES

The Directors and members of the Executive Management Team who held office during the year and from the year-end to the date of this report are set out on page 1.

During the year M Walker stepped down as a member of the Group Board after serving his permitted nine-year term, and resigned as a Director of the Company. At the year-end, the Board of Directors comprises three members. An additional Director was appointed post year-end. The Directors are either members of the Group Board or members of the Executive Management Team.

The Directors and members of the Executive Management Team form the key management personnel of the Company. The contracts of employment of the members of the Executive Management Team are held by the Group Company and their associated employment and pension costs are absorbed by the Group Company.

Details of the Directors' remuneration and expenses, and relevant details relating to the employment of the members of the Executive Management Team are set out in the Group Company's consolidated report and financial statements.

The Company has no employees.

DIRECTORS' RESPONSIBILITIES IN THE PREPARATION OF THE FINANCIAL STATEMENTS

The Directors are responsible for preparing the Strategic Report, the Directors' Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law).

Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.

In preparing those financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• make judgements and accounting estimates that are reasonable and prudent;

• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Each of the Directors, whose names and functions are listed under the Directors, Officers and Professional Advisors on page 1 confirm that, to the best of each person's knowledge:

• the financial statements, prepared in accordance with United Kingdom Generally Accepted Accounting Practice, give a true and fair view of the assets, liabilities, financial position and result of the Company; and

• the Strategic Report contained in the report and financial statements includes a fair review of the development and performance of the business and the position of the Company together with a description of the principal risks and uncertainties that it faces.

DIRECTORS' AND OFFICERS' INSURANCE

Through the Group Company, the Company maintains Directors' and Officers' liability insurance for the Directors and the members of the Executive Management Team.

ANNUAL GENERAL MEETING

The Annual General Meeting will take place on 17 September 2020.

DISCLOSURE OF INFORMATION TO THE AUDITOR

The Directors who were in office on the date of approval of these financial statements have confirmed, as far as they are aware, that there is no relevant audit information of which the Auditor is unaware. Each of the Directors has confirmed that they have taken all of 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 that it has been communicated to the Auditor.

AUDITOR

During the year, the Group tendered its external audit function and appointed BOO LLP as the Group's and the Company's statutory auditor (the 'Auditor') on 19 December 2019.

APPROVAL

The Directors' Report was approved by the Board on 20 August 2020 and signed on its behalf by:

G Robinson Secretary

Opinion

We have audited the financial statements of lncommunities Treasury PLC (the 'Company') for the year ended 31 March 2020, which comprise the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Financial Position, and the notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

In our opinion the financial statements:

• give a true and fair view of the state of the Company's affairs as at 31 March 2020 and of the Company's profit for the year then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and

• have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to going concern

We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:

• the Directors' use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or

• the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Company's ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our 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) we identified, 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 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.

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the users of the financial statements. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take into account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

In considering individual account balances and classes of transactions we apply a lower level of materiality in order to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality. Performance materiality was set at

£1,178,000, representing 60% of materiality. The level was used to reflect the aggregation risk of errors in the Company.

We agreed with the Audit and Risk Committee that we would report to the committee all individual audit differences identified during the course of our audit in excess of £59,000. We also agreed to report differences below these thresholds that, in our view, warranted reporting on qualitative grounds.

There were no misstatements identified during the course of our audit that were individually, or in aggregate, considered to be material in terms of their absolute monetary value or on qualitative grounds.

An overview of the scope of our audit

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 geographic structure of the Group, the accounting processes and controls and the industry in which the Group operates.

Extent to which the audit is capable of detecting irregularities

The extent to which the audit is capable of detecting irregularities is affected by the inherent difficulty in detecting irregularities, the effectiveness of the entity's controls, and the nature, timing and extent of the audit procedures performed. Irregularities that result from fraud might be inherently more difficult to detect than irregularities that result from error.

As part of the audit we gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates, and considered the risk of acts by the Group that were contrary to applicable laws and regulations, including fraud. We considered the Company's compliance with laws and regulations that have a direct impact on the financial statements such as the Companies Act 2006.

We designed audit procedures at Company level to respond to the risk, recognising that 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 tests included agreeing the financial statement disclosures to underlying supporting documentation, enquiries of the Directors and of management and enquiries of third parties, where information from that third party has been used by the Company in the preparation of the financial statements.

There are inherent limitations in the audit procedures described above and, the further removed non- compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it. We did not identify any key audit matters relating to irregularities, including fraud. As in all of our audits, we also addressed the risk of management override of internal controls, including testing journals and evaluating whether there was evidence of bias by the Directors that represented a risk of material misstatement due to fraud.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.

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 such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements 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 in this regard.

Opinions on other matters prescribed by the Companies Act 2006

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 financial year for which the financial statements are prepared is consistent with the financial statements; and

• the Strategic report and Directors' report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Strategic report or the Directors' report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion;

• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

• the Company's financial statements are not in agreement with the accounting records and returns; or

• certain disclosures of Directors' remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Responsibilities of Directors

As explained more fully in the Directors' Responsibilities statement as set out on page 9, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors 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 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 Company or to cease operations, or have no realistic alternative but to do so.

Auditor's 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 auditor's 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.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at:

https://www.frc.orq.uk/auditorsresponsibilities. This description forms part of our auditor's report.

Use of our report

This report is made solely to the Company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company's members as a body, for our audit work, for this report, or for the opinions we have formed.

Hamid Ghafoor (Senior Statutory Auditor) For and on behalf of BOO LLP, Statutory Auditor Chartered Accountants

3 Hardman Street Spinningfields Manchester

BOO LLP is a limited liability partnership registered ·in England and Wales (with registered number OC305127).

The financial statements were authorised for issue and approved by the Board on 20 August 2020.

G Robinson

Secretary

Company Registered Number 11678195

1. LEGAL STATUS

lncommunities Treasury Plc is a public limited company, limited by shares and registered in England and Wales.

The Company's registered office is The Quays, Victoria Street, Shipley, BD17 7BN.

2. ACCOUNTING POLICIESBASIS OF ACCOUNTING

The financial statements of the Company are prepared in accordance with applicable law and UK Generally Accepted Accounting Principles (UK GAAP), including Financial Reporting Standard 102 (FRS 102) and the requirements of the Companies Act 2006, including the provisions of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008.

The financial statements are prepared under the historical cost convention and presented in Sterling(£) rounded to the nearest whole £1,000, except where otherwise indicated.

GOING CONCERN

The Company's business activities, its current financial position and any factors likely to affect its future development are set out in the Strategic Report.

The Company will continue its operations as a funding vehicle for the Group and is aware that it is a requirement of the agreements entered into by the Company with respect to the Bond that it continues its existing relationship with the Group Company and the Borrowers.

As highlighted above, the Company is dependent on the receipt of funds from the Borrowers to meet its contractual obligations to the bondholders. Each of the Borrowers has a long-term business plan in place, which demonstrates its ability to support its existing debt and meet its obligations. These plans have been adjusted for the likely effects of the Covid-19 pandemic. They have also been stress tested, with particular emphasis placed on examining and evaluating the possible effects of the pandemic. These evaluations found that the Borrowers' long-term business plans were robust and that the effects of the pandemic are likely to be relatively short-term and should not affect the ability of the Borrowers to meet their obligations. Accordingly, no provision or impairment has been recognised in the financial statements in respect of the advances made to the Borrowers under the Credit Facilities.

On this basis, the Board has a reasonable expectation that the Company has adequate resources to continue in operation for the foreseeable future, being a period of twelve months from the date on which the report and financial statements are signed. For this reason, the Board continues to adopt the going concern basis in the financial statements.

DISCLOSURE REQUIREMENTS

Statement of Cash Flows

Under FRS 102 - Section 7, the Company is exempt from the requirement to include a Statement of Cash Flows within its financial statements on the grounds that its ultimate parent undertaking includes the results of the Company in its publicly available consolidated financial statements. The Company has taken advantage of this exemption.

Financial Instruments

Under FRS 102 - Sections 11 and 12, the Company is exempt from the requirement to disclose information on its financial instruments, including; categories of financial instruments, items of income or expenses, net gains or losses, and details of collateral, loan defaults or breaches, hedges, hedge fair value changes recognised in profit or loss and in other comprehensive income, and exposure to and management of financial risks. The Company has taken advantage of this exemption.

Related Party Transactions

Under FRS 102 - Section 33, the Company is exempt from the requirement to disclose transactions with its ultimate parent undertaking and fellow subsidiaries. The Company has taken advantage of this exemption.

SIGNIFICANT JUDGEMENTS AND ESTIMATES

Preparation of the financial statements requires management to make significant judgements and estimates. The items in the financial statements where these judgements and estimates have been made include:

Significant Management Judgements

The following are the significant management judgements made in applying the accounting policies of the Group that have the most significant effect on the financial statements:

Recoverability of lntercompany Debt

lntercompany indebtedness represents almost 100% of the Company's total assets. Accordingly, the receivables and the recoverability of the sums due from fellow Group companies is a key element in Management's consideration of the adoption of the going concern basis of accounting in the preparation of the financial statements. Management has concluded, based on their review of the financial and strategic business plans of the relevant entities, that there is nothing to suggest the sums will not be recoverable in full over the life of the instruments, and hence no associated provisions or impairments are required.

Significant Management Estimates

No significant estimates have been made by management in the preparation of these financial statements.

TURNOVER AND REVENUE RECOGNITION AND OPERATING COSTS

The Company's turnover represents management fees at a rate agreed with and charged to the Borrowers. Revenue is recognised in the financial year to which it relates.

Operating costs are made up of professional fees and bank charges incurred in carrying out the operations of the Company and providing funds to the Borrowers.

BOND AND LOAN DISCOUNT ON ISSUE AND ISSUE COSTS

Bond and Loan Discount on Issue

Management has considered how bond and loan discount on issue should be dealt with in the financial statements and determined that these should be written off over the life of the respective instruments using the effective interest rate method.

Bond and Loan Issue Costs

Management has considered how bond and loan issue costs should be dealt with in the financial statements and determined that these should be written off over the life of the respective financial instruments in equal annual instalments.

FINANCE INCOME AND COSTS

Finance income and costs are recognised on an accruals basis in the Statement of Comprehensive Income.

FINANCIAL INSTRUMENTS AND FINANCIAL ASSETS AND LIABILITIES

Financial assets and liabilities are recognised when the Company becomes a party to the contractual provisions of the instrument, and are offset only when the Company currently has a legally enforceable right to set off the recognised amounts and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Financial assets and liabilities are classified into specified categories. The classification depends on the nature and purpose of the financial assets and liabilities and is determined at the time of recognition.

'Basic financial assets' include loans to and amounts owed by Group undertakings, and cash at bank and in hand, and are initially measured at the transaction price, including any transaction costs, and are subsequently carried at amortised cost using the effective interest method, unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest.

Financial assets measured at amortised cost are assessed for indicators of impairment at the end of each reporting period. If an asset is considered to be impaired, the impairment loss is calculated, this being the difference between the carrying amount and the estimated future cash flows discounted at the asset's original effective interest rate, and recognised in the Statement of Comprehensive Income.

'Basic financial liabilities' include accruals and deferred income, and amounts due to bondholders (see below), and are recognised at the transaction price, including transaction costs. Transaction costs are written off over the period of the related borrowings.

Financial instruments are accounted for as financial assets and liabilities and are classified as such according to the substance of the contractual arrangements entered into. Financial instruments, which meet the criteria of a 'basic financial instrument' as defined in FRS 102 - Section 11, are measured initially at their transaction price and subsequently measured at amortised cost.

Bonds are classed as a 'basic financial liability' as they meet the criteria for 'basic financial instruments' under Section 11.9 of FRS 102. They are initially recognised at the transaction price, including any discount on issue and transaction costs, and subsequently measured at amortised cost using the effective interest method. Coupons payable are also classed as 'basic financial liabilities' and are recognised on the basis of the effective interest method, and are included in finance costs, with any discount on issue and transaction costs being written off over the life of the bond.

The Company's financial instruments, which are the Credit Facilities provided under formal Loan Agreements by the Company to lncommunities and Sadeh Lok (fellow subsidiaries), and the Bond issued by the Company on 21 March 2019, have been accounted for as 'basic financial instruments'.

FIXED ASSETS INVESTMENTS

The loans to Group undertakings are classified as fixed asset investments in view of the 30-year maturity period. These loans are held at amortised cost using the effective interest rate method to write off the discount on issue over the life of the loans, and equal annual instalments to write off the loan issue costs.

DEBTORS

Short-term debtors are measured at transaction price, less any impairment.

LIQUID RESOURCES

The Company maintains its available cash resources in a bank current account and, or readily disposable current asset investments.

CREDITORS

Short-term creditors are measured at the transaction price.

3. TURNOVER AND OPERATING COSTS

Turnover of £35k (2019: £Nil) represents management fees charged to the Borrowers.

Operating costs of £32k (2019: £Nil) are made up of professional fees and bank charges incurred in carrying out the operations of the Company and providing funds to the Borrowers.

For 2019, Auditor's remuneration for audit and any other non-audit services was borne by the ultimate parent undertaking and was disclosed in that company's consolidated report and financial statements.

7. BOARD OF DIRECTORS, EXECUTIVE MANAGEMENT TEAM, AND EMPLOYEES

The Directors and members of the Executive Management Team who held office during the year and from the year-end to the date of this report are set out on page 1.

During the year M Walker stepped down as a member of the Group Board after serving his permitted nine-year term, and resigned as a Director of the Company. At the year-end, the Board of Directors comprises three members. An additional Director was appointed post year-end. The Directors are either members of the Group Board or members of the Executive Management Team.

The Directors and members of the Executive Management Team form the key management personnel of the Company. The contracts of employment of the members of the Executive Management Team are held by the Group Company and their associated employment and pension costs are absorbed by the Group Company.

Details of the Directors' remuneration and expenses, and relevant details relating to the employment of the members of the Executive Management Team are set out in the Group Company's consolidated report and financial statements.

The Company has no employees.

8. TAXATION

Current tax:

UK Corporation tax on profit for the year

2020 2019

£'000 £'000

1

Total current tax 1

Factors affecting the tax charge for the year:

The tax assessed for the year is different from the standard rate of corporation tax in the UK. The differences are explained below:

The Company provides Credit Facilities to lncommunities Limited ('lncommunities') and Sadeh Lok Limited ('Sadeh Lok') (fellow subsidiaries) (the 'Borrowers') under formal Loan Agreements between the Company and the Borrowers.

The Company has made advances under these Credit Facilities to the Borrowers of principal amounts totalling £200m. These principal amounts are advanced at a discount and after loan issue costs totalling £3.85m. These advances are in the ratio 90:10 (lncommunities/Sadeh Lok).

The discount and loan issue costs are amortised over the period of the Credit Facilities, which run until March 2049.

Interest is receivable by the Company from the Borrowers at a rate of 3.25% on the principal amounts.

Details of the facilities and advances and the corresponding bond issue are set out in the Strategic Report and Note 13. The related accounting policies are set out in Note 2.

Amounts owed by Group undertakings include £37.5k in respect of amounts owed by the Group Company for unpaid share capital (Note 14.).

On 21 March 2019, the Company issued a 30-year, £250m own name public issue dated senior secured bond (the 'Bond') at a coupon rate of 3.25%. The initial offer to the market was for a principal amount of £200m of bonds (the 'Principal Amount', the 'Issued Bond') with a principal amount of £50m of bonds retained for later issue (the 'Retained Bond').

The Issued Bond was priced at 99.184% (the 'Bond Issue Price') equivalent to a Discount on Issue of £1.632m (0.816%). The net funds received were £198.368m (£99.184 per £100 issued).

In arranging the Bond, the Company incurred Bond Issue Costs of £2.218m, which were paid directly from the proceeds of the Bond or by other Group entities. These latter costs were reimbursed by the Company through intercompany accounts.

The Discount on Issue and the Bond Issue Costs are amortised over the term of the Bond. Interest is payable by the Company to the bondholders at a rate of 3.25% on the Principal Amount.

The Bond is secured by way of fixed charges over the housing properties of lncommunities Limited (a fellow subsidiary) in favour of Prudential Trustee Company Limited acting as Security Trustee.

The Company's share capital is made up of 50,000 ordinary shares of £1 each, allotted, called-up, and partly paid at £0.25 each.

15. RELATED PARTY TRANSACTIONS

The Company has taken advantage of the exemption under FRS 102 - Section 33, not to disclose transactions with its ultimate parent undertaking and fellow subsidiaries.

On this basis, the Company has no related party transactions that are required to be disclosed.

16. ULTIMATE PARENT UNDERTAKING

The Company's ultimate parent undertaking is lncommunities Group Limited. Its report and consolidated financial statements for the year ended 31 March 2020 are available from Companies House, Crown Way, Cardiff, CF14 3UZ.