Care Homes 1 Limited Director’s Report and Financial Statements Period from 1 January 2018 to 30 June 2018

EDINBURGH, Scotland--(BUSINESS WIRE)--Regulatory News:

Company Registered No: 05771789

CARE HOMES 1 LIMITED

DIRECTOR’S REPORT AND FINANCIAL STATEMENTS

PERIOD FROM 1 JANUARY 2018 TO 30 JUNE 2018

CARE HOMES 1 LIMITED 05771789

CONTENTS	Page
OFFICERS AND PROFESSIONAL ADVISERS	1
DIRECTORS' REPORT	2
PROFIT AND LOSS ACCOUNT	5
STATEMENT OF COMPREHENSIVE INCOME	6
BALANCE SHEET	7
STATEMENT OF CHANGES IN EQUITY	8
NOTES TO THE FINANCIAL STATEMENTS	9

OFFICERS AND PROFESSIONAL ADVISERS

DIRECTORS: S P Nixon

K D Pereira

L E Roberts

SECRETARY: RBS Secretarial Services Limited

REGISTERED OFFICE: 250 Bishopsgate

London

England

EC2M 4AA

Registered in England and Wales

DIRECTORS’ REPORT

The directors of Care Homes 1 Limited (“the Company”) present their report together with the unaudited financial statements for the period from 1 January 2018 to 30 June 2018.

ACTIVITIES AND BUSINESS REVIEW

This Directors' Report has been prepared in accordance with the special provisions available to companies entitled to the small companies exemption and therefore does not include a Strategic Report.

Principal activity

The principal activity of the Company continues to be that of an investment business.

The directors do not anticipate any material change in either the type or level of activities of the Company.

The Company is a subsidiary of The Royal Bank of Scotland Group plc which provides the Company with direction and access to all central resources it needs and determines policies in all key areas such as finance, risk, human resources or environment. For this reason, the directors believe that performance indicators specific to the Company are not necessary or appropriate for an understanding of the development, performance or position of the business. The annual reports of The Royal Bank of Scotland Group plc review these matters on a group basis. Copies can be obtained from Corporate Governance and Regulatory Affairs, The Royal Bank of Scotland Group plc, Gogarburn, Edinburgh, EH12 1HQ, the Registrar of Companies or at www.rbs.com.

FINANCIAL PERFORMANCE

The Company’s financial performance is presented on page 5 to 8.

The operating profit before taxation for the period ended 30 June 2018 was £47,304 (31 December 2017: £15,415). The retained profit for the period ended 30 June 2018 was £47,304 (31 December 2017: £15,415).

At the end of the period ended 30 June 2018 total assets were £122,072,471 (31 December 2017: £126,376,502).

Dividends

The directors do not recommend the payment of a dividend (2017: £nil).

PRINCIPAL RISKS AND UNCERTAINTIES

The Company seeks to minimise its exposure to financial risks.

Management focuses on both the overall balance sheet structure and the control, within prudent limits, of risk arising from mismatches, including currency, maturity, interest rate and liquidity. It is undertaken within limits and other policy parameters set by the RBS Asset and Liability Management Committee (RBS ALCO).

The principal risks associated with the company are as follows:

Operational risk

Operational risks are inherent in the Company’s business. Operational risk losses occur as the result of fraud, human error, missing or inadequately designed processes, failed systems, damage to physical assets, improper behaviour or from external events. The key mitigating processes and controls include risk and control assessment, scenario analysis, loss data collection, new product approval process, key risk indicators, notifiable events process and the self certification process. The implementation of these processes and controls is facilitated and overseen by operational risk teams, with internal audit providing independent evaluation of the control framework.

PRINCIPAL RISKS AND UNCERTAINTIES (continued)

Liquidity risk

Liquidity risk arises where assets and liabilities have different contractual maturities.

Management focuses on risk arising from the mismatch of maturities across the balance sheet and from undrawn commitments and other contingent obligations.

The expected maturity of the Company’s material liabilities is shown in note 11.

Credit risk

The objective of credit risk management is to enable the Company to achieve appropriate risk versus reward performance whilst maintaining credit risk exposure in line with approved appetite for the risk that customers will be unable to meet their obligations to the Company.

The key principles of the group’s Credit Risk Management Framework are set out below:

• approval of all credit exposure is granted prior to any advance or extension of credit;
• an appropriate credit risk assessment of the customer and credit facilities is undertaken prior to approval of credit exposure. This includes a review of, amongst other things, the purpose of credit and sources of repayment, compliance with affordability tests, repayment history, capacity to repay, sensitivity to economic and market developments and risk-adjusted return;
• credit risk authority is delegated by the Board and specifically granted in writing to all individuals involved in the granting of credit approval. In exercising credit authority, the individuals act independently of any related business revenue origination; and
• all credit exposures, once approved, are effectively monitored and managed and reviewed periodically against approved limits. Lower quality exposures are subject to a greater frequency of analysis and assessment.

The Company’s exposure to credit risk is not considered to be material as all significant credit exposures are with RBS companies.

Market risk

Market risk is the potential for loss as a result of adverse changes in risk factors including interest rates and equity prices together with related parameters such as market volatilities.

The Company is exposed to market risk as a result of the assets and liabilities contained within the Company’s balance sheet. There has been no change to the nature of the Company’s exposure to market risks or the manner in which it manages and measures the risk.

The main component of market risk that the Company faces is interest rate risk. The Company manages interest rate risk by monitoring the interest rate profile of its assets and liabilities.

GOING CONCERN

The directors, having a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, have prepared the financial statements on a going concern basis.

DIRECTORS AND SECRETARY

The present directors and secretary, who have served throughout the period except where noted below, are listed on page 1.

From 1 January 2018 to date no changes have taken place.

DIRECTORS' RESPONSIBILITIES STATEMENT

To the best of our knowledge, the financial statements for the period ending 30 June 2018 for the issuer (“Care Homes 1 Limited”) have been prepared in accordance Financial Reporting Standards 101 Reduced Disclosure Framework, and give a true and fair view of the assets, liabilities, financial position and profit of Care Homes 1 Limited. We can also confirm that the Directors’ Report includes a fair review of the development and performance of the business and the position of Care Homes 1 Limited, together with a description of the principal risks and uncertainties that it faces.

This statement addresses section 4.a. (i) of the circular issued by the Commission de Surveillance du Secteur Financier, Luxembourg.

Approved by the Board of Directors and signed on its behalf.

Director

Date:

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CARE HOMES 1 LIMITED

CARE HOMES 1 LIMITED 05771789

PROFIT AND LOSS ACCOUNT
for the period ended 30 June 2018
		6 months ended 30 June 2018	Year ended 31 December 2017	Restated 6 months ended 30 June 2017 ^(1)
Continuing operations	Notes	£	£	£
Revenue	3	2,574,514	5,296,054	2,643,496
Finance costs	5	(2,519,304)	(5,226,966)	(2,557,918)
Administrative expenses		(7,906)	(53,673)	(29,029)
Operating profit before tax		47,304	15,415	56,549
Tax charge	6	-	-	-
Profit for the period		47,304	15,415	56,549

⁽¹⁾ For details of restatement refer to note 16.

The accompanying notes form an integral part of these financial statements.

STATEMENT OF COMPREHENSIVE INCOME
for the period ended 30 June 2018
	6 months ended 30 June 2018	Year ended 31 December 2017	Restated 6 months ended 30 June 2017^(1)
	£	£	£
Profit for the period	47,304	15,415	56,549
Items that will be reclassified subsequently to profit or loss:
Movement on cash flow hedges	(2,770,640)	(4,918,469)	(2,581,665)
Other comprehensive loss before tax	(2,770,640)	(4,918,469)	(2,581,665)
Tax (charge)/credit	(526,421)	934,510	490,517
Other comprehensive loss after tax	(3,297,061)	(3,983,959)	(2,091,148)
Total comprehensive loss for the period	(3,249,757)	(3,968,544)	(2,034,599)

⁽¹⁾ For details of restatement refer to note 16.

The accompanying notes form an integral part of these financial statements.

BALANCE SHEET
as at 30 June 2018
		As at 30 June 2018	As at 31 December 2017
	Notes	£	£
Current assets
Derivative financial instruments	12	11,638,562	14,527,153
Loans and receivables	7	110,433,379	111,846,675
Cash at bank	8	530	2,674
Total assets		122,072,471	126,376,502
Current liabilities
Deferred tax liability	9	2,024,422	2,550,843
Accrued interest	10	1,115,874	1,174,299
		3,140,296	3,725,142
Non-current liabilities
Debt securities in issue	10	109,908,848	111,431,118
Total liabilities		113,049,144	115,156,260
Equity
Called up share capital	13	10,000	10,000
Cash flow hedge reserve		8,630,430	10,874,649
Profit and loss account		382,897	335,593
Total equity		9,023,327	11,220,242
Total liabilities and equity		122,072,471	126,376,502

The accompanying notes form an integral part of these financial statements.

The financial statements of the Company were approved by the Board of Directors on and signed on it’s behalf by:

Director

STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June 2017
	Share capital	Cash flow hedge reserve	Profit and loss account	Total
	£	£	£	£
At 1 January 2017	10,000	14,858,608	2,955,642	17,824,250
Adjustment	-	-	(2,635,464)	(2,635,464)
At 1 January 2017 (restated) ^(1)	10,000	14,858,608	320,178	15,188,786
Profit for the period	-	-	15,415	15,415
Loss on cash flow hedge	-	(4,918,469)	-	(4,918,469)
Deferred tax	-	934,510	-	934,510
At 31 December 2017	10,000	10,874,649	335,593	11,220,242
Profit for the period	-	-	47,304	47,304
Loss on cash flow hedge	-	(2,770,640)	-	(2,770,640)
Deferred tax	-	526,421	-	526,421
At 30 June 2018	10,000	8,630,430	382,897	9,023,327

⁽¹⁾ For details of restatement refer to note 16.

Total comprehensive loss for the period ended 30 June 2018 of £3,249,757 (period ended 30 June 2017: restated loss of £2,034,599) was wholly attributable to the owners of the Company.

The accompanying notes form an integral part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

1. Accounting policies

a) Preparation and presentation of financial statements

These financial statements are prepared:

• on a going concern basis;
• under Financial Reporting Standard (FRS) 101 Reduced Disclosure Framework in accordance with the recognition and measurement principles of International Financial Reporting Standards issued by the IASB and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB as adopted by the EU (together IFRS); and
• on the historical cost basis except that the following assets and liabilities are stated at their fair value: derivative financial instruments.

The Company meets the definition of a qualifying entity under FRS 100 Application of Financial Reporting Requirements issued by the Financial Reporting Council.

The Company is a private limited company limited by shares which is incorporated in the UK and registered in England and Wales and the financial statements are presented:

• in accordance with the Companies Act 2006:
• in Sterling which is the functional currency of the Company: and
• with the benefit of the disclosure exemptions permitted by FRS 101 with regard to:
• comparative information in respect of certain assets;
• cash-flow statement;
• standards not yet effective; and
• related party transactions.

Where required, equivalent disclosures are given in the group accounts of The Royal Bank of Scotland Group plc, these accounts are available to the public and can be obtained as set out in note 15.

The few changes to IFRS that were effective from 1 January 2018 have had no material effect on the Company’s financial statements for the period ended 30 June 2018.

b) Revenue recognition

Interest income on financial assets that are classified as loans and receivables and interest expense on financial liabilities other than those at fair value are determined using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or financial liabilities and of allocating the interest income or interest expense over the expected life of the asset or liability. The effective interest rate is the rate that exactly discounts estimated future cash flows to the instrument's initial carrying amount. Calculation of the effective interest rate takes into account fees payable or receivable, that are an integral part of the instrument's yield, premiums or discounts on acquisition or issue, early redemption fees and transaction costs. All contractual terms of a financial instrument are considered when estimating future cash flows.

Gains and losses on financial assets that are designated as at fair value through profit or loss are recognised in comprehensive income as they arise.

Fees in respect of services are recognised as the right to consideration accrues through the provisions of services to customers. The arrangements are generally contractual and the cost of providing the service is incurred as the service is rendered. The price is usually fixed and always determinable. Fees charged for managing investments are recognised as revenue as the services are provided. Incremental costs that are directly attributable to securing an investment management contract are deferred and charged as expense as the related revenue is recognised.

c) Taxation

Income tax expense or income, comprising current tax and deferred tax, is recorded in the Profit and Loss Account except income tax on items recognised outside profit or loss which is credited or charged to other comprehensive income or to equity as appropriate.

1. Accounting policies (continued)

c) Taxation (continued)

Current tax is income tax payable or recoverable in respect of the taxable profit or loss for the period arising in income or in equity. Provision is made for current tax at rates enacted or substantively enacted at the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable in respect of temporary differences between the carrying amount of an asset or liability for accounting purposes and its carrying amount for tax purposes. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered. Deferred tax is not recognised on temporary differences that arise from initial recognition of an asset or liability in a transaction (other than a business combination) that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is calculated using tax rates expected to apply in the periods when the assets will be realised or the liabilities settled, based on tax rates and laws enacted, or substantively enacted, at the balance sheet date.

d) Cash at bank

Cash at bank comprises interest bearing deposits held with banks.

e) Financial assets

On initial recognition, financial assets are classified into held-for-trading; designated as at fair value through profit or loss; loans and receivables; or available-for-sale financial assets.

Loans and receivables

Non-derivative financial assets with fixed or determinable repayments that are not quoted in an active market are classified as loans and receivables, except those that are classified as available-for-sale or as held-for-trading, or designated as at fair value through profit or loss. Loans and receivables are initially recognised at fair value plus directly related transaction costs. They are subsequently measured at amortised cost using the effective interest method (see policy 1(b)) less any impairment losses.

f) Derivative financial instruments and hedging

The Company uses derivative financial instruments to manage interest rate risk. Such contracts are initially recognised and subsequently measured at fair value.

Any resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

The Company designates its derivatives as hedges of highly probable forecast transactions (cash flow hedges). Changes in fair values of derivative financial instruments which are designated and effective as hedges of cash flows are recognised directly in equity at each balance sheet date and the ineffective portion is recognised immediately in the Profit and Loss Account.

At the inception of the hedge relationship, the Company documented the relationship between the hedging instrument and the hedged item, along with its risk management objectives and its strategy for undertaking the hedge transaction. Furthermore, at the inception of the hedge and on an ongoing basis, the Company documents whether the hedging instrument is highly effective in offsetting changes in cash flows of the hedged item.

Note 12 sets out details of the fair values of the derivative instrument used for hedging purposes. Movements in the hedging reserve in equity are shown in the Statement of Changes in Equity.

g) Financial liabilities

On initial recognition financial liabilities are recognised at fair value and are subsequently measured at amortised cost using the effective interest method (see accounting policy 1(b)).

h) Derecognition

A financial asset is derecognised when the contractual right to receive cash flows from the asset has expired or when it has been transferred and the transfer qualifies for derecognition in accordance with IAS 39 “Financial Instruments: Recognition and Measurement”.

A financial liability is removed from the Balance Sheet when the obligation is discharged, or cancelled, or expires.

2. Critical accounting policies and key sources of estimation uncertainty

The reported results of the Company are sensitive to the accounting policies, assumptions and estimates that underlie the preparation of its financial statements. In accordance with their responsibilities for these financial statements, the factors the directors consider most important to the portrayal of the Company’s performance and financial condition are discussed below.

Fair value - financial instruments

Derivative financial instruments are recognised in the financial statements at fair value. Any gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

3. Revenue
	6 months ended 30 June 2018	Year ended 31 December 2017	6 months ended 30 June 2017
	£	£	£
Interest income	305,533	443,064	228,388
Interest rate swap income	2,268,981	4,852,990	2,415,108
	2,574,514	5,296,054	2,643,496

4. Operating expenses

Staff costs, number of employees and directors’ emoluments

All staff and directors were employed by group companies and the accounts of The Royal Bank of Scotland Group plc which contain full disclosure of employee benefit expenses incurred in the period including share based payments and pensions. The Company has no employees and pays a management fee for services provided by other group companies. The Company does not remunerate directors nor can remuneration from elsewhere in the group be apportioned meaningfully in respect of their services to the Company.

5. Finance costs
	6 months ended 30 June 2018	Year ended 31 December 2017	Restated 6 months ended 30 June 2017 ^(1)
	£	£	£
Interest expense on debt securities in issue	2,519,304	5,226,966	2,557,918
^(1) For details of restatement refer to note 16.

6. Tax
		6 months ended 30 June 2018	Year ended 31 December 2017
		£	£
Current tax:
UK corporation tax charge for the period/year		-	-
The actual tax charge/(credit) differs from the expected tax credit computed by applying the blended rate of UK corporation tax of 19% (2017: 19.25%) as follows:
	6 months ended 30 June 2018	Year ended 31 December 2017	Restated 6 months ended 30 June 2017 ^(1)
	£	£	£
Profit on ordinary activities before tax	47,304	15,415	56,549
Expected tax charge	8,988	2,967	10,884
Non deductible items	30,994	-	7,623
Non taxable items from amortisation of premiums on debt securities issued	(675,472)	(571,422)	(289,724)
Transfer pricing adjustment	-	16,282	-
Group relief surrendered for nil consideration	635,490	552,173	271,217
Actual tax charge for the period/year	-	-	-

In recent years the UK Government has steadily reduced the rate of UK Corporation tax, with latest rates substantively enacted at the balance sheet date now standing at 20% with effect from 1 April 2015, 19% from 1 April 2017 and 17% from 1 April 2020. The closing deferred tax assets and liabilities have been calculated taking into account that existing temporary differences may unwind in periods subject to the reduced rates.

⁽¹⁾ For details of restatement refer to note 16.

7. Loans and receivables
	6 months ended 30 June 2018	Year ended 31 December 2017
	£	£
Amounts due from Group undertakings - immediate parent company	110,433,379	111,846,675

Loans and receivables consist of a £110m 6 months deposit with a residual maturity of less than 5 months (2017: £112m 6 months deposit with a residual maturity of less than 5 months).

8. Cash at bank
	6 months ended 30 June 2018	Year ended 31 December 2017
	£	£
Cash at bank - Group	530	2,674

9. Deferred tax
The following represents the deferred tax liabilities recognised by the Company, and the movements thereon.
	Cash flow hedge reserve
	£
At 1 January 2017	3,485,353
Release to equity	(934,510)
At 31 December 2017	2,550,843
Release to equity	(526,421)
At 30 June 2017	2,024,422

10. Debt securities in issue
	6 months ended 30 June 2018	Year ended 31 December 2017
	£	£
Debt securities in issue	109,908,848	111,431,118
Accrued interest	1,115,874	1,174,299
	111,024,722	112,605,417

On 4 December 2006 Care Homes 1 Limited became an obligor in respect of certain debt securities by means of a novation from NHP Group.

Each of these debt securities is denominated in sterling and carries a fixed rate of interest as follows, £60m Class A1 at 8.0% due in 2021, and £40m Class A2 at 8.5% due in 2021. As at the balance sheet date, the total fair value of the debt securities in issue was £119.3m (2017: £125.7m). These debt securities are listed on the Luxembourg Stock Exchange. The debt securities in issue fall within level 2 of the valuation hierarchy methodologies as set out on page 14.

The consideration received on novation was equal to the fair value of these obligations as at the date of novation and was paid in cash by the NHP Group.

11. Financial instruments

Financial assets and liabilities are classified as loans and receivables and derivative instruments are in designated hedge relationships. All financial liabilities are classified as financial liabilities at amortised cost.

The directors consider that, with the exception of debt securities in issue (note 10), the carrying amounts of financial assets and financial liabilities recognised in the financial statements approximate to their fair values. Where the financial instruments are of short maturity, the carrying value is equal to the fair value.

The company's cash at bank and loans and receivables are short term (having a maturity of six months or less); consequently carrying amount approximates fair value.

11. Financial instruments (continued)
Valuation hierarchy
The following tables show the financial instruments carried at fair value by hierarchy – level 1, level 2 and level 3:
	Level 1	Level 2	Level 3	Total
As at 30 June 2017	£	£	£	£
Assets
Derivative financial instruments	-	11,638,562	-	11,638,562
	Level 1	Level 2	Level 3	Total
As at 31December 2017	£	£	£	£
Assets
Derivative financial instruments	-	14,527,153	-	14,527,153

Financial assets and liabilities have been classified above according to a valuation hierarchy that reflects the valuation techniques used to determine fair value.

Level 1: valued by reference to unadjusted quoted prices in active markets for identical

assets and liabilities

Level 2: valued by reference to observable market data, other than quoted market prices

Level 3: valuation is based on inputs other than observable market data

The derivative financial instruments recorded at fair value for the Company are all considered Level 2 being valued using pricing models. Inputs for these models are usually observed directly in the market, or derived from observed prices.

The type of instruments that trade in markets that are not considered to be active, but are based on quoted market prices, broker dealer quotations or alternative pricing sources with reasonable levels of price transparency and those instruments values using techniques include most government securities, investment-grade corporate bonds, certain bank and bridge loans, repos and reverse repos, less liquid equities, state and municipal obligations, most physical commodities, certain money market securities and loan commitments and most OTC derivatives.

Market risk – sensitivity analysis

The sensitivity analysis below has been determined based on the Company’s assets and liabilities present in the balance sheet as at the balance sheet date and by reference to a movement in market interest rates reasonably possible in the Company’s next financial reporting period.

If interest rates for the current period had been 100 basis points lower and this movement applied to the assets and liabilities as at the balance sheet date, the profit for the period would have been £2,932 lower (period ending 30 June 2017: £2,643). This would have mainly resulted from lower interest income on variable rate assets and lower interest expense on derivative financial instruments.

The converse is equally true if interest rates had been 100 basis points higher.

Credit risk

The table below provides details of credit exposures for those financial assets neither past due nor impaired:

	6 months ended 30 June 2018	Year ended 31 December 2017
	£	£
Group companies
- Loans and receivables	110,433,379	111,846,675
- Cash at bank	530	2,674
Maximum credit exposure	110,433,909	111,849,349

11. Financial instruments (continued)

Based on counterparty payment history the Company considers all the above financial assets to be of good credit quality.

Financial Liabilities
The following table shows by contractual maturity the undiscounted cash flows payable from the balance sheet date including future interest payments
	0-3 months	3-12 months	1-3 years	3-5 years
As at 30 June 2018	£'000	£'000	£'000	£'000
Debt securities in issue	-	8,200	116,400	-
	0-3 months	3-12 months	1-3 years	3-5 years
As at 31 December 2017	£'000	£'000	£'000	£'000
Debt securities in issue	-	8,200	16,400	104,100

12. Derivative financial instruments

The Company is party to an interest rate swap transaction to hedge exposure to variability in cash flows arising from its floating rate deposits. As at the balance sheet date, the contract had a nominal value of £110.02m (31 December 2017: £111.5m) which amortises over time in line with the asset it hedges. The swap entitles the Company to receive fixed cash flows (based on a rate of 4.8049%) in exchange for variable cash flows based on six month sterling LIBOR. The swap matures in April 2021 and at the balance sheet date had a fair value of £11.6m (31 December 2017: £14.5m). The fair value of the interest rate swap at the reporting date is determined by discounting the future cash flows using the curves at the reporting date. This derivative is designated as a cash flow hedge of the Company’s variable cash flows. The derivative counter-party is RBS.

13. Share capital
	6 months ended 30 June 2018	Year ended 31 December 2017
	£	£
Authorised:
10,000 Ordinary shares of £1 each	10,000	10,000
Allotted, called up and fully paid:
10,000 Ordinary shares of £1 each	10,000	10,000
The Company has one class of ordinary shares which carry no right to fixed income.

14. Capital resources

The Company’s capital consists of equity comprising issued share capital, retained earnings and loans from Group undertakings. The Company is a member of The Royal Bank of Scotland Group of companies which has regulatory disciplines over the use of capital. In the management of capital resources, the Company is governed by the Group’s policy which is to maintain a strong capital base. The Company is separately regulated and has complied with the FSA’s capital requirements throughout the period. As part of the governance of the Company the capital position is actively managed and regularly reviewed with necessary action taken as required.

15. Related parties

UK Government

The UK Government through HM Treasury is the ultimate controlling party of The Royal Bank of Scotland Group plc. Its shareholding is managed by UK Financial Investments Limited, a company it wholly-owns and as a result, the UK Government and UK Government controlled bodies are related parties of the Company.

The Company enters into transactions with these bodies on an arms’ length basis; they include the payment of: taxes including UK corporation tax and value added tax; national insurance contributions; local authority rates; and regulatory fees and levies; together with banking transactions such as loans and deposits undertaken in the normal course of banker-customer relationships.

Group companies
At 30 June 2018
The Company's immediate parent was:	Care Homes Holdings Limited
The smallest consolidated accounts including the company were prepared by:	NatWest Markets plc
The ultimate parent company was:	The Royal Bank of Scotland Group plc

The amount of related party balances are shown in note 7, 8 and 12.

All parent companies are incorporated in the UK. Copies of their accounts may be obtained from Corporate Governance and Regulatory Affairs, The Royal Bank of Scotland, Gogarburn, PO Box 1000, Edinburgh EH12 1HQ.

Capital Support Deed

The Company, together with other members of The Royal Bank of Scotland Group plc, is party to a capital support deed (CSD). Under the terms of the CSD, the Company may be required, if compatible with its legal obligations, to make distributions on, or repurchase or redeem, its ordinary shares. The amount of this obligation is limited to the Company’s capital resources in excess of the capital and financial resources needed to meet its regulatory requirements. The Company may also be obliged to make onward distribution to its ordinary shareholders of dividends or other capital distributions received from subsidiaries that are party to the CSD. The CSD also provides that, in certain circumstances, funding received by the Company from other parties to the CSD becomes immediately repayable, such repayment being limited to the Company’s available resources.

16. Restatement

As a result of adjusting for the difference in amortisation from straight line to the effective interest rate method for financial liabilities, the prior year’s financial statements have been restated.

The following line items and notes 5, 6, 10 and 11 have been impacted by the restatement.

• Finance cost
• Debt securities in issue
• Profit & Loss account (equity)
• Financial Instruments

The effects of restatement have been shown below:

16. Restatement (continued)
PROFIT AND LOSS ACCOUNT
for the 6 months period ended 30 June 2017
	30 June 2017 previously reported	Adjustment	Restated 30 June 2017
Income from continuing operations	£	£	£
Revenue	2,643,496	-	2,643,496
Finance costs	(2,784,273)	226,355	(2,557,918)
Administrative expenses	(29,029)	-	(29,029)
Operating (loss)/profit before tax	(169,806)	226,355	56,549
Tax charge	-	-	-
(Loss)/profit for the financial year	(169,806)	226,355	56,549

STATEMENT OF COMPREHENSIVE INCOME
for the 6 months period ended 30 June 2017
	30 June 2017 previously reported	Adjustment	Restated 30 June 2017
	£	£	£
(Loss)/profit for the financial year	(169,806)	226,355	56,549
Items that will be reclassified subsequently to profit or loss:
Movement on cash flow hedges	(2,581,665)	-	(2,581,665)
Other comprehensive loss before tax	(2,581,665)	-	(2,581,665)
Tax credit	490,517	-	490,517
Other comprehensive loss after tax	(2,091,148)	-	(2,091,148)
Total comprehensive loss for the year	(2,260,954)	226,355	(2,034,599)

STATEMENT OF CHANGES IN EQUITY
for the 6 months period ended 30 June 2017
	Share capital	Cash flow hedge reserve	Profit and loss account	Total
	£	£	£	£
At 1 January 2017	10,000	14,858,608	2,955,642	17,824,250
Adjustment	-	-	(2,635,464)	(2,635,464)
At 1 January 2017 (restated)	10,000	14,858,608	320,178	15,188,786