Inland ZDP PLC Half-year Report

INLAND ZDP PLC

Half-yearly report

for the six months ended 31 December 2018

The half-yearly report can be accessed via the Inland ZDP PLC pages on the Inland Homes PLC ('Inland') website at http://inlandhomesplc.com/investors/inland-zdp/ or by contacting the Company Secretary on 01494 762450.

COMPANY SUMMARY

Background

Inland ZDP PLC ('INLZ' or the 'Company') was incorporated on 22 November 2012 as a wholly owned subsidiary of Inland.

INLZ was formed especially for the issuing of Zero Dividend Preference Shares ('ZDP' Shares). It raised £8,500,000 before expenses on 20 December 2012 by a placing of 8,500,000 ZDP shares, which are listed on the UK Official List and admitted to trading on the London Stock Exchange. Further issues in subsequent years increased the number of ZDP Shares in issue to 12,444,200 as at 1 July 2018, the beginning of the six month period covered by this interim report.

Pursuant to a loan agreement between INLZ and Inland, INLZ has lent the proceeds received from all the ZDP Share issues to Inland. The loan is non-interest bearing and is repayable three business days before the ZDP share redemption date or, if required by INLZ, at any time prior to that date in order to repay the ZDP Share entitlement. The funds raised form part of the Inland Group's financing arrangements for its property development business.

A contribution agreement between INLZ and Inland has also been made whereby Inland undertakes to contribute such funds as would ensure that INLZ will have in aggregate sufficient assets on the final redemption date to satisfy the final capital entitlement of the ZDP Shares.

INTERIM MANAGEMENT REPORT

The Company was incorporated solely to issue ZDP Shares and has never traded.

With a prospective redemption date of 10 April 2019, the Company considered its options for refinancing the ZDP Shares with its advisers and undertook market soundings, speaking to those ZDP Shareholders with the largest holdings and formulated continuation proposals based on the feedback from investors which were announced on 2 July 2018 and more fully described in a circular posted to ZDP Shareholders containing notices of shareholder meetings on 19 July 2018. The resolutions approving the continuation proposals were passed on 13 August 2018.

In summary the continuation proposals comprised:

· Changing the redemption date of the ZDP Shares from 10 April 2019 to 10 April 2024, extending the life of the ZDP Shares by five years;

· Increasing the Final Capital Entitlement from 155.9 pence to 201.4 pence, giving the holders a return of 5.25 per cent. for the additional five years;

· Amending the loan documentation relating to the loans by ZDPCo to Inland Homes plc to give effect to the above and to remove a gearing covenant test, which overlapped the continuing Cover Ratio test to some extent and implement other less significant changes;

· A tender offer by Panmure Gordon (UK) Limited to acquire ZDP Shares at 150.8 pence, being the price at which arrangements had been made to place ZDP Shares institutional investors; and

· The allotment of new ZDP Shares to the extent that the placing commitments exceeded the number of ZDP Shareholders tendered for sale.

Acceptances of the tender offer amounted to 1,621,923 ZDP Shares and 1,000,000 new ZDP Shares were subscribed by placees raising £1,508,000 in cash for the Company which was lent to Inland Homes plc.

On 16 October 2018, the Company announced the issue of a further 1,488,800 new ZDP Shares for cash at a price of 152.15 pence each. This increased the number of ZDP Shares in issue to 14,933,000.

The accrued Capital Entitlement is based on the original issue price of 100p per ZDP Share as increased over its life to the Final Capital Entitlement. The accrued Capital Entitlement attributable to a ZDP Share as at 30 June 2018 was 147.59 pence. This increased to 148.84 pence on 13 August 2018 at the original accrual rate of 7.3 per cent. per annum. Following the passing of the resolutions by Shareholders on 13 August 2018, the accrual rate changed to 5.49per cent. per annum, being the rate of accrual to the increased Final Capital Entitlement of 201.4 pence on 10 April 2024. Applying that rate for the period from 13 August 2018 to 31 December 2018, the accrued value of a ZDP Share as at 31 December 2018 was 151.79 pence per ZDP Share.

The accounting book value of the ZDP Shares differs from the accrued Capital Entitlement, because ZDP Shares have been issued at various prices and redemption yields and each tranche is booked at its individual issue price and the liability accrued over its life to the Final Capital Entitlement.

I am pleased to report that as at 31 December 2018, Inland had complied with all its covenants under the Loan Note, Contribution Agreement and related security documentation.

The Cover Ratio as at 31 December 2018 has been calculated as follows:

Cover Ratio (Assets / Financial Indebtedness) 2.4 times

Financial Indebtedness is stated net of cash balances and excludes liabilities falling due after 10 October 2024, being six months after the redemption date of the ZDP Shares. The Cover Ratio as at 30 June 2018 was calculated on the basis that, prior to the passing of resolutions to approve the continuation of the ZDP Shares, the Financial Indebtedness calculation used for the Cover Ratio excluded borrowings of £58.7 million repayable after 10 October 2019, resulting in a Cover Ratio of 13.3 times. The main reason for the reduction in the Cover Ratio is the inclusion of borrowings repayable between 10 October 2019 and 10 October 2024 in the Financial Indebtedness.

Capital Entitlement, Assets, Financial Indebtedness and Cover Ratio have been determined as set out in the Prospectus published by Inland ZDP PLC on 14 December 2012, as amended (in the case of the Capital Entitlement) as described in the circular dated 19 July 2018, both of which are available at: http://inlandhomesplc.com/investors/inland-zdp/zdp-reports-and-presentations/.

Nishith Malde FCA

Chairman, Inland ZDP PLC

Registered in England No: 8303612 19 March 2019

PRINCIPAL RISKS

The principal risks facing the Company are substantially unchanged since the date of the Company's Annual Report for the period ended 30 June 2018 and continue to relate to the risk of Inland Homes plc being unable to satisfy its obligations to INLZ under the Loan Agreement and Contribution Agreement. These comprise liquidity risk, and credit risk as set out in note 9 of the Annual Report.

In addition, and due to the Company's dependence on Inland Homes plc to repay the loan and provide a contribution to meet the capital entitlement of the ZDP Shareholders, certain other risks faced by the Inland Group are considered to apply to INLZ as set out in the Prospectus published by INLZ on 14 December 2012. These comprise operational risks (eg planning and environmental) which may be specific to individual sites and risks associated with the housebuilding sector (such as falling house prices or variations in the availability of credit for buyers). The Prospectus may be found at http://inlandhomesplc.com/investors/inland-zdp/zdp-reports-and-presentations/.

In particular, the Inland Group's business includes the purchase of land whose development potential is subject to a variety of risks, including the risk of planning consents being refused, contested at considerable expense and / or delayed. Such risks could, depending on their scale and timing, reduce or delay Inland's ability to honour its obligations under the Contribution Agreement or the Loan Agreement, however there is over a year before the date when the Company is due to pay the Final Capital Entitlements and no events have occurred which suggest any increase in the risk of a breach of the terms of the Contribution Agreement or the Loan Agreement. The Company's directors consider that none of the events which have occurred pose any increase in the risks facing the Company.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF-YEARLY REPORT

We confirm that to the best of our knowledge:

• the condensed set of financial statements has been prepared in compliance with the IAS34 'Interim Financial Reporting' and gives a true and fair view of the assets, liabilities and financial position of the Company; and

• the interim management report and notes to the half-yearly report include a fair view of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of the important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions described in the last Annual Report that could do so.

This half-yearly report was approved by the Board of Directors on 26 March 2018 and the above responsibility statement was signed on its behalf by Nishith Malde, Chairman.

STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 31 December 2018

The total column of this statement is the statement of comprehensive income of the Company, prepared in accordance with International Financial Reporting Standards ('IFRS'), as adopted by the EU.

All items in the above statement derive from continuing operations.

STATEMENT OF FINANCIAL POSITION

as at 31 December 2018

STATEMENT OF CASHFLOWS

for the six months ended 31 December 2018

NOTES TO THE HALF-YEARLY REPORT

for the six months ended 31 December 2018

1. General information

The financial information contained in this half-yearly report does not constitute statutory financial statements as defined in Section 434 of the Companies Act 2006. The statutory financial statements for the year ended

30 June 2018, which contained an unqualified auditors' report, have been lodged with the Registrar of Companies and did not contain a statement required under the Companies Act 2006. These statutory financial statements were prepared under International Financial Reporting Standards.

The financial information of the Company for the period ended 31 December 2018 has also been consolidated into the results of Inland for the six months ended 31 December 2018.

This half-yearly report has not been audited or reviewed by the Company's Auditors.

This half-yearly report has been prepared using accounting policies set out in note 1 of the Company's audited financial statements for the year ended 30 June 2019.

2. Taxation

The charge for taxation is based on the taxable profits for the period. Taxable profit differs from profit before tax as reported in the Statement of Comprehensive Income because it excludes items of income or expenses that are never taxable or deductible. The Company's liability for tax is calculated using rates that have been enacted or substantively enacted by the reporting date.

3. Going concern

The Company will fulfil its obligations to ZDP Shareholders through the Contribution Agreement it has with Inland. The contribution from Inland will provide the funds to pay the Capital Entitlement of the ZDP Shareholders when it falls due. The main risk the Company faces is, therefore, that Inland would not have sufficient assets to repay the loan and to make a contribution to fulfil the amount of the Capital Entitlement due to ZDP Shareholders. Covenants are in place between Inland and the Company, which ensure that Inland will not undertake certain actions in relation to both itself and the Company.

All operating expenses of the Company are borne by Inland.

Due to the Company's dependence on Inland to repay the loan and provide a contribution to meet the Capital Entitlement of the ZDP Shareholders, other risks faced by the Company are considered to be the same as for Inland. Please see the paragraph headed Principal Risks above for further information.

Inland has considerable financial resources and therefore the directors believe that the Company is well placed to manage its business risks and also believe that Inland will have sufficient resources to continue in operational existence for the foreseeable future. Accordingly, they have prepared this half-yearly report on the going concern basis.

4. Related party transactions

The loan to Inland Homes PLC is interest free and is repayable on the ZDP repayment date (see corporate summary above) or immediately upon an event of default. At 31 December 2018, the loan to the ultimate parent company was £22,853,000 (2017: £17,914,000).

Sources of further information:

The Company's ZDP Shares are standard listed and are traded on the Main Market of the London Stock Exchange.

The Company's ZDP Asset Cover is released via the London Stock Exchange's Regulatory News Service on a quarterly basis.

Information about the Company and Inland can be obtained on the Inland Group's website: www.inlandhomesplc.com.

Registrar enquiries:

The register for the ZDP Shares is now maintained by Link Registrars Limited. In the event of queries regarding your holding, please contact the Registrar on 03716 640300. Changes of name and/or address must be notified in writing to the Registrar.

Neither the contents of Inland's website nor the contents of any website accessible from hyperlinks on this announcement (or any other website) is incorporated into, or forms part of, this announcement.