REG - Riverstone Credit - Annual Report and Financial Statements
17/02/2022 07:15
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RNS Number : 9341B Riverstone Credit Opps. Inc PLC 17 February 2022
Riverstone Credit Opportunities Income Plc
Annual Report and Financial Statements
For the year ended 31 December 2021
We lend to companies that build and operate the infrastructure used to
generate, transport, store and distribute both renewable and conventional
sources of energy, and companies that provide services to that infrastructure.
We also lend to companies seeking to facilitate the energy transition by
decarbonising the energy, industrial and agricultural sectors, building
sustainable infrastructure and reducing or sequestering carbon emissions.
We seek to ensure that our investments are having a positive impact on climate
change by structuring each deal as either a green loan or a
sustainability-linked loan, documented using industry best practices.
Company number: 11874946
Riverstone Credit Opportunities Income Plc is an externally managed
closed-ended investment company trading on the Main Market of the London Stock
Exchange.
The Company's Ordinary Shares were admitted to the Specialist Fund Segment of
the London Stock Exchange plc's Main Market and incorporated and registered on
11 March 2019 in England and Wales with an unlimited life.
INVESMENT MANAGER
The Company's Investment Manager is Riverstone Investment Group LLC, which is
controlled by affiliates of Riverstone.
Riverstone is an energy and power-focused private investment firm founded in
2000 by David M. Leuschen and Pierre F. Lapeyre with over $40 billion of
capital raised. Riverstone conducts buyout, growth and credit investments in
the E&P, midstream, energy services, solar, lithium-ion, power and coal
sectors of the global energy industry. With offices in New York, London,
Houston, Mexico City and Amsterdam, the firm has committed approximately $43
billion to 200+ investments in North America, South America, Europe, Africa,
Asia and Australia.
The registered office of the Company is 27-28 Eastcastle Street, London, W1W
8DH.
All capitalised terms are defined in the list of defined terms below unless
separately defined.
Key Financials
2021 2020
NAV as at 31 December $93.30m $95.53m
NAV per Share as at 31 December $1.02 $1.04
Market capitalisation as at 31 December $79.64m $62.50m
Share price at 31 December $0.870 $0.683
Total comprehensive income for year ended 31 December $4.45m $7.43m
Earnings per Share for the year ended 31 December 4.86 cents 7.59 cents
Distribution per share with respect to the year ended 31 December 7.00cents 7.00 cents
Highlights
· The NAV as at 31 December 2021 was $1.02 per share.
· Distribution of 7.00 cents per share approved with respect to the
year ended 31 December 2021.
· Earnings per Share for the year ended 31 December 2021 was 4.86
cents per share.
· 6 investments and 5 full realisations executed in the year ended
31 December 2021.
Chairman's Statement
Greater sustainability focus while maintaining attractive yield
On behalf of the Board, we are very thankful to our Shareholders for their
continued support and are pleased with the overall resiliency of RCOI. The
second half of 2021 continued the momentum seen throughout the first half of
2021 of a vastly improved macro environment and supply and demand
fundamentals. We remain very optimistic about the investment opportunity set,
given the market environment for energy investments is as attractive as we've
seen it since the IPO in May 2019.
RCOI's NAV has remained strong, with the current NAV per share of $1.02 (2020:
$1.04) RCOI's rapid pace of deployment continued throughout the end of 2021,
with 6 deals in total. RCOI has moved focus from upstream exposure, to target
energy infrastructure & infrastructure services and energy transition
investments. This pivot has allowed the portfolio to remain well-diversified
and invested, while also providing steady yield and principal preservation.
In the second half of 2021, there were 2 new investments, Circulus Holdings
and Streamline Innovations. Circulus is a sponsor-backed green loan to a
recycler of low-density polyethylene for use in food-grade packaging,
injection moulding applications, bags, films and other high-end products.
Being classified as a green loan per LSTA guidelines, requires the use of
proceeds be tied to specific green initiatives and carefully tracked to ensure
compliance. Streamline Innovations is a sponsor-backed sustainability-linked
loan to a leader in environmentally advanced treatment solutions and equipment
for hydrogen sulphide in energy, renewable fuels, wastewater, landfill gas,
biogas, and industrial processes. Streamline was our second
sustainability-linked loan, whereby the loan pricing steps up if key
sustainability targets are not achieved. There was also 1 full realisation, of
our community solar investment (Aspen Power Partners) in October with a 36.0
percent gross IRR and 1.27x gross MOIC. Despite recognising an impairment on 1
investment, our NAV and Shareholder distributions have remained healthy. Our
pipeline of investment opportunities continues to remain robust, focused on
green loans and sustainability-lined loans as has been the case for all of our
recent investments.
Performance
As a result of income received from the investment portfolio and changes in
the portfolio's valuations, the Company reported a profit of $4.5 million for
the year ended 31 December 2021 (2020: $7.4m), total approved distributions of
7.00 cents (2020: 7.00 cents) and earnings per share of 4.86 cents (2020: 7.59
cents).
The current unrealised portfolio remains profitable at a 1.13x Gross MOIC.
Characteristics of RCOI's conservative investment strategy, particularly the
focus on conservative LTV, a diversified sector and end-user base, as well as
structured incentives for early repayment, have assisted the portfolio in its
ability to limit the impact of broad market fluctuations on performance.
RCOI has executed 18 direct investments since inception and has cumulatively
invested $160 million of capital since the IPO in May 2019. The Company has
been left modestly underinvested, despite a continually strong pipeline and
favourable macro environment for our strategy. This is due to the success of
our underwriting, leading to earlier than expected refinancing on a number of
transactions. During 2021, the Company was 72 percent invested on average and
was able to deliver a 7 percent yield to our Shareholders. We are excited by
the potential that we see in our investment pipeline and are working hard to
get our remaining cash balance invested and generating income.
As at 31 December 2021, RCOI had committed over 78.9 percent of the Company's
capital to investments and had $65.9 million net invested, equating to 70.0
percent of net capital available, and a cash balance of over $27 million,
including cash held at the Company's SPVs. Capital that has been committed but
not yet invested continues to generate income through undrawn fees.
I am pleased with the direction in which the portfolio is moving, focused on
energy infrastructure and infrastructure services and energy transition
assets, while maintaining consistent returns and steady income. As always, the
Board and RCOI remain vigilantly focused on managing the portfolio to ensure
long-term value creation for our Shareholders.
Reuben Jeffery, III
Chairman
16 February 2022
Strategic Report
The Directors present their Strategic Report for the year ended 31 December
2021. Details of the Directors who held office during the year and as at the
date of this report are given below.
Investment Objective
The Company seeks to generate consistent Shareholder returns predominantly in
the form of income distributions, principally by making senior secured loans
to energy-related companies.
The Company lends to companies working to drive change and deliver solutions
across the energy sector, spanning renewable as well as conventional sources,
with a primary focus on infrastructure assets. The Company's aim is to build a
portfolio that generates an attractive and consistent risk-adjusted return for
investors.
Investment Policy
The Company seeks to achieve its investment objective through investing in a
diversified portfolio of direct and indirect investments in loans, notes,
bonds and other debt instruments, including convertible debt, issued by
Borrowers operating in the energy sector. The Company may also invest in
warrants or other equity interests or instruments received in connection with,
or as a consequence of, an investment in the loans.
Investment Strategy
The Investment Manager seeks to leverage the wider Riverstone platform to
enhance its investment strategy through the synergies gained from being part
of one of the largest dedicated energy focused private equity firms.
The key elements of the Investment Manager's investment strategy in relation
to the Company and its SPVs are summarised below.
Core Strategy - Direct Lending
The Investment Manager will be primarily focused on originating opportunities
from small to middle-sized energy-related companies in what the Riverstone
team call the 'Wedge'; companies too small for the capital markets and without
the conforming credit metrics that allow access to the commercial bank market.
All investments directly originated by the Company's SPVs are expected to
involve providing primary capital to the Borrower, after having completed a
thorough and comprehensive due diligence process. In each case the Riverstone
team will be able to influence terms and conditions. In many cases, direct
investments are expected to be held solely by the Company's SPVs, in some
cases alongside Other Riverstone Funds. In others, the Company's SPVs (and
Other Riverstone Funds) may be a member of a syndicate arranged by a third
party.
The Investment Manager expects that lending investments made directly by the
Company's SPVs will have a contractual duration of three to five years from
inception and an expected duration of one to two years. The maximum term of
any investment made by the Investment Manager will be seven years.
Complimentary Strategies - Capital Relief and Market-Based Opportunities
The Investment Manager may be presented with opportunities to acquire from
banks' so-called 'non-conforming' loans which can no longer be held on bank
balance sheets. The Investment Manager expects that such 'capital relief'
transactions will be secondary in nature, will usually be based on public due
diligence information and will typically not allow the Company to influence
the underlying terms of the relevant investment. The Investment Manager
expects that, in capital relief transactions, the Company may participate as
part of a broader syndicate of third-party lenders. The Investment Manager
expects capital relief transactions made by the Company's SPVs to have a
duration of one to three years from inception and an expected duration of less
than 12 months.
Riverstone believes that the same trends which make it difficult for smaller
Borrowers to access capital markets may create attractive opportunities for
investors such as the Company to acquire syndicated loans and bonds in the
open market at risk-adjusted returns that match or exceed the returns
available from direct lending opportunities. In such circumstances, the
Company's SPVs may make selected investments in the secondary market for
syndicated loans and bonds where the Investment Manager believes that such
instruments offer suitable risk adjusted returns.
The Investment Manager expects market-based opportunities generally to be
secondary in nature, typically to be based on public due diligence information
and may, typically, not allow the Company any influence on the underlying
terms of the investment. The Investment Manager expects market‑based
opportunities will typically involve the Company's SPVs being part of a
broader syndicate of lenders.
Investment Restrictions
The Company observes the following investment restrictions:
· no more than 15 percent of the Company's gross assets will be
exposed to any single Borrower, its parents, subsidiaries and/or sister
subsidiary entities
· at least 85 percent of the Company's gross assets will be invested
directly or indirectly in aggregate, in cash and loans which are secured as to
repayment of principal and payment of interest by a first or second priority
charge over some or all of such entity's assets and cash
· the Company will only invest in an underlying Borrower group,
when that Borrower group has a total indebtedness (including the Company's
investment) of less than 60 percent of the Borrower group's asset base
· the Company will not invest in any undertaking in which Riverstone
Holdings LLC (or any of its subsidiary undertakings) has an equity interest,
other than an undertaking in which the Company and one or more Other
Riverstone Funds hold, or will as a result of the relevant investment hold,
related equity interests acquired at substantially the same time as part of
the same transaction or a series of linked transactions; and
· the maximum term of any investment made by the Company will be
seven years
Each of these investment restrictions will be calculated and applied as at the
time of investment.
DISTRIBUTION policy
Subject to market conditions, applicable law and the Company's performance,
financial position and financial outlook, it is the Directors' intention to
declare distributions to Shareholders on a quarterly basis following
publication of the NAV per Ordinary Share calculated as of the final day of
the relevant quarter.
The Company intends to declare distributions with respect to 100 percent of
its net income (as calculated for UK tax purposes). The Board determines the
percentage of net income to distribute, ensuring that it would be in the
longer-term interests of the Company to do so (for instance, in the event of
any permanent loss of capital by the Company). In any calendar year the
Company may retain an amount equal to up to 15 percent of its net income (as
calculated for UK tax purposes), in accordance with Section 1158 of the
Corporation Tax Act 2010.
The declaration of any distribution will be subject to payment of the
Company's expenses and any legal or regulatory restrictions at the relevant
time. The Company may elect to designate as an 'interest distribution' all or
part of any amount it distributes to Shareholders as distributions.
As disclosed in note 14 to the financial statements, on 16 February 2022 the
Board approved a distribution of 1.7 cents per share with respect to the
quarter ended 31 December 2021, bringing the total distribution declared with
respect to the year to 31 December 2021 to 7.0 cents per share. The record
date for the distribution is 25 February 2022 and the payment date is 25 March
2022.
Structure
The Company makes its investments through its SPVs. Riverstone International
Credit Corp. ('USCo') is a corporation established in the State of Delaware
and is a wholly-owned subsidiary of the Company. USCo, in turn, invests
through Riverstone International Credit - Direct L.P., a limited partnership
established in the State of Delaware in which USCo is the sole limited
partner. Investments may also be made through Riverstone International Credit
L.P., a limited partnership established in the State of Delaware in which the
Company is the sole limited partner. The general partner of each of the
limited partnerships is a member of Riverstone's group.
The Company has contributed or lent substantially all of its Net Issue
Proceeds (net of short-term working capital requirements) to its SPVs which,
in turn, make investments in accordance with the Company's investment policy.
The Investment Manager draws on the resources and expertise of the wider
Riverstone group.
Discount Control
It is the intention of the Board for the Company to buy back its own shares if
the share price is trading at a material discount to NAV, providing that it is
in the interests of Shareholders to do so. Shares which are bought back may be
cancelled or held in treasury.
During the year, the Company did not repurchase or cancel any of its own
shares as part of the discount management measures outlined above (2020:
8,454,617), or issue any treasury shares (2020: nil).
Review of Business and Future Outlook
Details of the underlying portfolio and a review of the business in the year,
together with future outlook are covered in the Investment Manager's Report
below.
There has been no material change to the Company's business as a result of the
UK exiting the European Union as the Company's investments are all based in
the United States.
Key Performance Indicators
The Board believes that the key metrics detailed above, will provide
Shareholders with sufficient information to assess how effectively the Company
is meeting its objectives.
Ongoing Charges
Ongoing charges are an alternative performance measure and the ongoing charges
ratio of the Company is 1.95 percent, calculated as total expenses divided by
the weighted average NAV for the year to 31 December 2021. The weighted
average NAV used in this calculation is the mean of the published quarterly
NAVs for the year, at 31 December 2021 this was $94.2m (2020: $97.0m). Ongoing
charges are made up as follows and have been calculated using the AIC
recommended methodology.
31 December 2021 31 December 2020
$'000 % $'000 %
Profit Share 668 0.71 668 0.69
Directors' fees 179 0.19 164 0.16
Ongoing expenses 991 1.05 992 1.03
Total 1,838 1.95 1,824 1.88
The Investment Manager is entitled to a Profit Share when it meets relevant
performance targets as disclosed in note 12 to the financial statements.
Corporate and Social Responsibility
Environmental, Social and Governance REPORT
The Company utilises the services of Riverstone as the Investment Manager to
take appropriate Environmental, Social and Governance ('ESG') principles into
account in its investment decisions and in the ongoing management of the
portfolio. In order to ensure the robustness of these policies, the Board
engages with the Investment Manager on ESG matters and monitors compliance of
the Company's portfolio companies with this policy. The Board takes its
fiduciary responsibility to Shareholders seriously and engages with Riverstone
on corporate governance matters.
Riverstone published its annual ESG Report in February 2022. The below report
summarises the key elements for investors in the Company. More detail is
included in the full report, which is available on Riverstone's website. Below
is a case study describing ESG in practice within the Company's portfolio.
Statement from the Investment Manager
In so many ways, 2021 was a year in which the importance of ESG issues were
underlined in a way and on a scale we have never seen before. As we emerge
from the second year of the COVID-19 pandemic, the focus on ESG has never been
greater.
Riverstone's focus has been on further enhancing its ESG program by delivering
on the objectives we set ourselves in 2021 - both at firm level as well as
across our investment portfolio - not only by managing material ESG risks but
also by seeking to capitalise on a number of important ESG opportunities.
CONTINUED DECARBONISATION FOCUS
As one of the largest asset managers in the energy, power and infrastructure
sectors, we are acutely aware of the existential threat posed by climate
change and the need to rapidly decarbonise the global economy. This was
underlined in last year's report by the Intergovernmental Panel on Climate
Change (IPCC) which gave us our starkest reminder to date of how fragile our
life on this planet is. This was followed up by the United Nations Climate
Change Conference (COP 26) which made certain achievements (notably around
methane emissions and deforestation) but arguably did not deliver on certain
other key issues.
To us and our firm, the science is very clear - action is required now if we
are to stand a chance of limiting the global temperature rise to 1.5°C above
pre-industrial levels by 2050.
In our businesses, this translates to seeking to reduce the emission of
greenhouse gases (GHGs) while simultaneously implementing ways in which more
carbon can be sequestered from the atmosphere. This is not a straightforward
exercise with some of our portfolio companies but we are encouraged by the
steps a lot of them have taken to decarbonise, as well as their broader ESG
efforts.
PROGRAM ENHANCEMENTS
Outside of our ongoing decarbonisation investment program, another key focus
last year has been working with our existing portfolio companies to help them
improve their approach to ESG risks and opportunities. We have seen an
improvement by the majority of our portfolio against our ESG minimum
expectations and plan to raise the bar on a number of these in 2022. Further,
we have been pleased by the level of sophistication of a number of our
portfolio companies' ESG programs manifested by the increased number of them
making their own voluntary ESG disclosures last year.
ESG INDUSTRY COLLABORATION
Since last year, we have been making a deliberate effort to be more engaged in
the fast-moving dialogue around ESG. As a firm, we are keen to participate in
some of the groups and projects that many of our peers are involved in. We are
a signatory of the UN-supported Principles of Responsible Investment (PRI) but
feel we have more to give in terms of the dialogue around how ESG monitoring
and disclosure will evolve. Last year we became a member of the PRI-supported
Initiative Climat International (iCI) and the Institutional Limited Partners
Association's (ILPA) Diversity In Action initiative. We have also joined the
ILPA-led ESG Data Convergence Project in the hope we can contribute to a
consensus around a standardised set of ESG metrics and procedures to enable us
and other asset managers to gather and disclose better, more informed ESG
data.
LOOKING FORWARD
We are encouraged by the improvements we have made to our ESG program in 2021.
However, we are not complacent and, particularly against the backdrop of the
heightened focus on ESG (and in particular on climate change issues) by the
SEC and other regulators, we recognise there is much more work required, in
partnership with you, our investors, our management teams, regulators and
other important stakeholders. We will continue to prioritise our commitment to
being responsible investors and look forward to providing further updates on
our ESG activities in the year to come.
ESG: 2021 in Review
In our 2020 ESG Report, we established a number of overarching ESG objectives.
Our progress through 2021 against these objectives, and other ESG issues
addressed during the year, are summarised below and presented in more detail
throughout this report.
DUE DILIGENCE AND INITIAL INVESTMENT
· expanded the scope and coverage of our ESG Toolkit to promote
consistency in the way ESG is managed at Riverstone
PORTFOLIO MONITORING
· increased frequency of engagement with portfolio companies on ESG
matters
· marked improvements in performance across portfolio companies
against ESG Minimum Expectations ('ESG-MEs')
· reviewed and expanded our ESG-MEs and metrics for portfolio
companies to launch in 2022
CLIMATE CHANGE
· conducted a gap analysis to determine Riverstone's current position
against the Task Force on Climate-Related Financial Disclosures (TCFD)
recommendations with the intent of setting actions to bring the firm towards
alignment over the next two years
· increased the number of portfolio companies calculating and
reporting their Scope 1 and Scope 2 greenhouse gas (GHG) emissions in line
with our ESG-MEs
· included climate screening in our ESG Toolkit and Investment
Committee template so that it is consistently applied to all new investments
· joined PRI-backed Initiative Climat International (iCl)
ESG REPORTING
· submission of voluntary reporting to PRI
· signed up to the ESG Data Convergence Project
ESG AT RIVERSTONE
· became member of ILPA's Diversity in Action
· instituted internship program with Howard University
· calculated our firm GHG footprint
· roll out of Energy Expansion webcasts on our website with
insights and trends from experts in energy, power, infrastructure and
decarbonisation
While our previous ESG Reports have focused on the ESG program and performance
of our equity portfolio, in this report we also cover our credit portfolio and
steps which we have taken over the last two years to integrate ESG into our
credit fund investments.
Due Diligence & Initial Investment
Riverstone has several tools and methodologies that it can draw upon to
conduct due diligence and identify ESG risks and opportunities early in the
investment process and throughout our ownership.
ESG TOOLKIT
Our proprietary ESG Toolkit was created to integrate ESG practices into our
investment process, starting with pre-investment. In 2021, we expanded the
Toolkit to provide guidance for integrating ESG during ownership through exit.
The Toolkit provides a framework to support our investment teams in
identifying and managing material ESG risks and value creation opportunities
in a consistent manner. It comprises a set of processes, tasks, and templates
for use on all of Riverstone's private equity investments.
ESG MINIMUM EXPECTATIONS
Central to the Toolkit are our ESG-MEs which underpin our ESG program. As part
of the Toolkit enhancements, we changed the ESG-ME1 to cover Diversity and
Inclusion (D&I) more broadly. This is a change from our previous Toolkit
that focused on female representation in leadership and senior positions. We
have also added a new ESG-ME9 requiring portfolio companies to have robust
means to prevent cybersecurity and data theft.
Riverstone has nine ESG Minimum Expectations (ESG-MEs) that are essential to
our ESG program. They are used to screen all potential investments during due
diligence; all our portfolio companies are required to meet or exceed them;
and they are a key consideration for companies to access finance through our
credit fund. We review our ESG-MEs on a continual basis and will add or update
them over time to remain in step with market and LP expectations. In 2022 our
ESG-MEs are as follows:
· ME1: D&I policies and initiatives to promote D&I,
particularly in leadership and senior positions
· ME2 ESG as a standing board agenda item at every board meeting
· ME3 designated responsibility for ESG within senior leadership
· ME4: policies in place to address ESG matters that are relevant
to the company and its industry
· ME5: a means of identifying and managing ESG-related risks
· ME6: a GHG baseline for Scope 1 and Scope 2, and annually
monitoring and reporting GHG emissions
· ME7: having a whistleblower policy/process and hotline in place
· ME8: safety controls relevant to the company's operations
· ME9: having adequate means to prevent cyber-attacks and data
theft
In addition, new key performance indicators (KPIs) have been added to all
ESG-MEs including those set out in the ESG Data Convergence Project.
Our ESG Toolkit is a live document that will be reviewed and updated
periodically with focus on its application to upcoming decarbonisation
investments.
ESG DILIGENCE SCORECARD
A key output for our ESG Toolkit is the ESG diligence scorecard, which is
included in the Investment Committee memo for each potential investment.
This scorecard includes:
· an overall assessment of pre-investment ESG performance
(both generally and against Riverstone's ESG-MEs)
· the scope of and findings from the diligence done
(including key ESG risks and opportunities, observed good practices, and areas
requiring improvement)
· ESG actions required if the investment is
advanced that form part of the 100 day plan
If Riverstone makes an investment, the ESG diligence scorecard is converted
into an ESG monitoring scorecard (see 'ESG Monitoring Scorecards' under
Portfolio Monitoring).
Overall, this approach allows us to identify opportunities for improvement and
take targeted action during the first 100 days of ownership. During this time,
we work with the portfolio company management teams to establish the necessary
policies, plans, and processes to properly manage ESG risks and value creation
opportunities.
Portfolio Monitoring
INCREASED ESG ENGAGEMENT
Our ownership model is based around frequent engagement with management teams
and senior leadership to drive year-on-year performance.
In 2022, we will be raising our expectations around ESG-MEs and performance
KPIs to make sure we remain in step with market trends and LP expectations.
Becoming signatory to the ESG Data Convergence Project is a step towards this
goal. We will also keep a close eye on developments from the IFRS Foundation's
International Sustainability Standards Board's (ISSB) current goal, which is
to produce an authoritative set of ESG standards and consolidate into one
body, two of the leading sustainability standards organisations (namely, the
Climate Disclosure Standards Board and the Value Reporting Foundation).
To facilitate engagement with portfolio companies, as reported in last year's
report, we have nominated one person on each investment team to serve as 'ESG
deal lead' responsible for liaising with portfolio companies on ESG matters
and generally keeping ESG matters on the agenda.
ACCOUNTABILITY
As ESG deal lead, nominated investment team members are accountable for their
respective company's ESG management and performance. The quality of the
engagement by each ESG deal lead is assessed as part of Riverstone's annual
performance reviews which drive decisions around the individual's compensation
and promotion at the firm.
PORTFOLIO ESG REPORTING
In 2021, a direct result of ESG deal leads' increased engagement with
portfolio companies has been an uptick in the number of ESG reports and
disclosures made by our portfolio companies. We expect this trend to continue
through this year.
We have continued to conduct annual portfolio company reviews to monitor the
implementation of ESG processes and to assess year-on-year changes in ESG
performance at our portfolio companies. These reviews take place in parallel
with compliance and regulatory-related reviews.
Each ESG deal lead, in partnership with Riverstone's internal legal team, is
responsible for coordinating the completion of the ESG review and providing
feedback on the ESG monitoring scorecards.
ESG MONITORING SCORECARDS
Annual ESG review results for each portfolio company are summarised in an ESG
monitoring scorecard. These scorecards are generated for all companies on an
annual basis. The scorecards include:
· overall ESG rating for the company
· performance against our ESG-MEs and
sector-specific ESG criteria
· summary of ESG practices undertaken
· actions to improve ESG performance during the
calendar year
As more and more of our portfolio companies improve their ESG performance to
an extent that they are meeting or exceeding our ESG-MEs, our focus will shift
to KPIs and how their performance compares to their peers and relevant
benchmarks. Our ambition is to have our portfolio companies be top quartile
ESG performers within their industry peer group.
Riverstone's Portfolio ESG Performance
In 2021 there was a marked improvement in Riverstone's portfolio's performance
against the ESG-MEs (compared to 2020) with some of our portfolio companies
exceeding expectations on all ESG-MEs. While there is some year-on-year
variation in the size and make-up of the portfolio with new investments being
made and certain companies exiting the portfolio, the following progress has
been made:
· all our companies report on female representation at board and
senior leadership level, with some including this information in their own ESG
reporting
· there was a significant increase in companies that have designated
responsibility for ESG matters within their senior leadership and companies
having a means of identifying and managing ESG issues relevant to their
business
· there has been a small uptick in the number of companies that
have ESG as a standing board agenda item
· the number of companies having complete policy coverage of ESG
topics has slightly increased
· there was an incremental improvement in companies having a
whistleblowing process
· the majority of companies have safety controls in place that are
relevant to their operations with a significant number implementing industry
best practices
· there was also a notable increase in the amount of companies
establishing comprehensive controls to identify and proactively manage ESG
risks material to their operations
· there is still progress to be made on GHG inventories and monitoring.
Riverstone has ongoing engagement with select portfolio companies to support
them in meeting minimum expectations for this topic. In 2022 we plan to
partner with an independent carbon consultancy, to measure, track, and report
on the GHG emissions from our portfolio companies
The pace of ESG data reporting is developing fast and we appreciate our
investors' ever-growing appetite for data, specifically around climate change.
Along with participating in the ESG Data Convergence project and ongoing
discussions with investors, we continue to evaluate the need to report
quantitative and actionable data, and are encouraging our portfolio companies
to do the same.
Climate Change
At Riverstone, we recognise climate change and the transition to a low carbon
economy as our biggest risk and our biggest opportunity. This reality is
reflected in the way we conduct our business.
In last year's report we acknowledged the importance of the recommendations
published by the TCFD in helping companies improve transparency on
climate-related risks and opportunities, and over the course of 2021 we have
been working on ways to adopt the framework.
GOVERNANCE
Our ESG Committee comprises a cross-functional set of leaders and our external
ESG advisor, ERM. The Committee is responsible for our climate strategy, our
GHG foot-printing effort, and more broadly our firm's response to climate
change.
At the portfolio level, each of our investment teams has a designated ESG lead
to ensure that climate-related risks and opportunities are appropriately
screened, assessed, and managed throughout the investment process. During
pre-investment, this information is presented to the Investment Committee when
making investment decisions. The ESG leads are supported by the ESG Committee
and ERM as required.
STRATEGY
We have continued to evolve our thinking around our climate strategy which
includes integrating updates to market and regulatory drivers. Our climate
strategy is centred on two broad pillars:
· continuing to invest in the energy transition to low carbon forms of
energy through our decarbonisation platform
· continuing to invest in low carbon forms of energy through our
decarbonisation platform
Our investments in the energy sector and our work with our portfolio companies
enables Riverstone to have a positive impact on the low carbon economy
transition. Management of climate-related risk and opportunity is a core part
of our approach to investing, and is reflected by our growing contributions to
a fair transition in the energy sector, which continues to create new
opportunities for Riverstone.
Over the next two years we will start implementing actions to align ourselves
to the recommendations of the TCFD.
In 2021 we joined Initiative Climat International (iCI), which is led by a
group of leading private equity firms and is supported by the PRI. The purpose
of the iCI is to analyse, manage, and mitigate climate-related financial risk
and GHG emissions in private equity portfolios in line with the
recommendations of the TCFD.
Riverstone recognises the need to collaborate and build industry practice, and
is keen to make a meaningful contribution to iCI. The nature of our
investments can bring a specific insight to the decarbonisation of the energy
sector, from which we will build towards our ambition of becoming a leader in
climate change.
RISK MANAGEMENT
We continue to identify and assess climate-related risks in our portfolio and
for potential future investments. We have updated our ESG Toolkit so that this
is more consistently applied in our investment process. This includes our
climate change screening questionnaire and our Investment Committee templates
requiring identification of climate-related risks and opportunities during our
pre-investment process. These tools actively engage portfolio company
management and help them focus on reducing GHG emissions and managing
climate-related risks and opportunities.
For ownership, this includes the climate scenario analysis that was conducted
for a number of representative companies across sectors and geographies in
which we operate. The assessment covered the risks arising from changes to the
climate itself, as well as the risks and opportunities associated with the low
carbon energy transition. The guidance has helped our investment teams to:
· ensure our portfolio companies are positioned to undertake timely
and appropriate mitigation and management of climate risk
· support our portfolio companies in capturing transition-related
opportunities where they exist
METRICS AND TARGETS
Our strategy also requires us to look at the climate impact of our own
activities. For our firm this means calculating our GHG emissions and looking
for ways to reduce or offset our carbon footprint. Similarly for our
portfolio, one of our ESG-MEs requires portfolio companies to calculate their
GHG baseline for Scope 1 (direct emissions) and Scope 2 (purchased energy),
and annually report and monitor GHG emissions. The number of portfolio
companies that are meeting this ESG-ME fully has increased since last year.
However, we recognise there is room for improvement and it remains a key area
of focus for us. Using the results of the 2021 survey, we will prioritise
companies for engagement and offer additional support to our companies to
establish a complete baseline for our portfolio with a view of setting
credible GHG reduction targets.
Diversity & Inclusion
Riverstone is committed to fostering a culture of D&I throughout our
workforce.
We aim to create an environment within our firm and at our portfolio companies
in which people with diverse backgrounds and perspectives are represented
throughout our business.
Riverstone has implemented several important D&I initiatives this past
year, including:
· becoming a signatory to the ILPA's Diversity in Action
initiative, joining other members of the private equity community who share a
commitment to advancing diversity, equity and inclusion in the industry. The
goal of the initiative is to motivate market participants to engage in the
journey towards becoming more diverse and inclusive and to build momentum
around the adoption of specific actions that advance these objectives
· compiling and reviewing certain demographic data at Riverstone in
accordance with ILPA's Diversity Metrics template to better understand our
workforce and where we can improve
· partnering with Howard University, a Historically Black College
or University, to provide on-campus seminars about our industry and business,
and to provide internship opportunities at Riverstone's U.S. offices
Looking towards the future, Riverstone plans to continue cultivating D&I
initiatives by:
· working with our recruiting firms to ensure that we see diverse
candidate pools and that such firms are adhering to Riverstone's Commitment to
D&I policy
· ongoing evaluation of our training to ensure it focuses on
unconscious bias and provides concrete tools to mitigate the negative effects
of bias
· establishing a set of minimum expectations for our service
providers and requiring each of them to meet our requirements
· maintaining robust and up-to-date anti-discrimination,
anti-harassment, anti-retaliation, and complaint-reporting policies
Riverstone has built a robust cybersecurity platform with the aim of
constantly and comprehensively protecting our systems, our operations and the
data entrusted to us by our investors, employees, portfolio companies and
business partners.
Our cybersecurity team works closely with our senior leadership to develop and
advance the firm's cybersecurity strategy.
We believe that cybersecurity is a team effort - every employee has a
responsibility to help protect the firm and secure its data.
· we conduct regular testing to identify vulnerabilities before
they can be exploited by attackers
· we examine and validate our program annually with third parties,
measuring it against industry standards and established frameworks, such as
the U.S. National Institute of Standards and Technology (NIST), SEC, and FINRA
This risk assessment is extended to third parties deemed critical to the
firm's business.
We also have a comprehensive Cybersecurity Incident Response Plan that is
aligned with the firm's Disaster Recovery & Business Continuity Plan to
ensure that any non-routine events are properly escalated to the firm's
leadership, as well as third-party experts such as retained counsel and
incident response partners, when and where appropriate. These plans are
validated at least annually through a cyber-incident tabletop exercise to
consider the types of decisions that would need to be made in the event of a
cyber-incident.
We have engaged in scenario planning exercises around cyber incidents and
conduct annual business continuity tests. The entire firm is engaged in a
thorough security awareness program. Employees across Riverstone are trained
or enrolled in training when they start at the firm, and we run mandatory
re-training to employees globally on a semi-annual basis.
We also extend our platform to our portfolio companies, with the primary goal
of reducing the frequency and impact of cyber incidents across the portfolio.
Riverstone requires portfolio companies to conduct annual risk assessments to
better understand their cybersecurity deficiencies and allow Riverstone to
assess risk across our portfolio. With this information, we can improve our
companies' overall security posture against the most common attacks that
result in financial losses.
Ethics & Compliance
Riverstone invests in businesses operating in jurisdictions and sectors
considered high risk for bribery and corruption. In these environments,
Riverstone sees anti-corruption compliance as a core component of successful
business. Throughout the investment lifecycle, Riverstone takes steps to help
ensure its portfolio companies operate in a manner consistent with
Riverstone's commitment to sound business ethics and compliant with all
applicable laws. At each stage, Riverstone supports compliance practices that
are consistent with international best practice standards.
Credit Portfolio: ESG Review
Maintaining strong ESG standards is essential for our credit business. We
support our Borrowers in their efforts to reduce their carbon footprints and
make a positive impact in the global campaign to reverse the effects of
climate change.
As credit investors, we have less control over our portfolio companies than
our equity colleagues. However, we strive to increase transparency and
alignment through board observer seats, affirmative covenants, and tying loan
economics to sustainability metrics.
We have implemented a portfolio-wide ESG approach across our existing
investments, recent transactions, and new deal pipeline.
· New Borrowers: New investments are structured as Green Loans or
Sustainability-Linked Loans. ESG metrics are assessed through our risk grid
and our new borrower ESG Questionnaire. During diligence, we often conduct
background checks for key management and governance of a new Borrower. These
tools help us to identify ESG strengths and areas of improvement for our
Structuring and Investment Committees.
· Current Portfolio: Riverstone is supported by ERM to help with
assessment, monitoring, and best practices for our credit portfolio. In
collaboration with ERM, we administer an annual questionnaire and have
developed individual scorecards to measure Riverstone's ESG Minimum
Expectations (ESG-MEs) similar to how we evaluate our private equity
portfolio. For each investment, members of the credit team have been
identified to serve as ESG Deal Leads.
· Going Forward: ESG metrics and standards will continue to be
crucial to our underwriting process and portfolio management. We are working
with our advisers to develop an ESG Toolkit for our credit business to help
each borrower achieve the ESG-MEs during the life of our loan.
To date, Riverstone Credit Partners has committed approximately $240 million
towards investments in decarbonisation and energy transition through our Green
and Sustainability-Linked Loans.
Green Loans and Sustainability-Linked Loans
Riverstone credit investments will be structured and designated as either
'Green Loans' or 'Sustainability-Linked Loans.' Each new opportunity is
evaluated by the team to determine if it meets the Green Loan Principles (GLP)
including (i) use of proceeds, (ii) process for project evaluation and
selection, (iii) management of proceeds, and (iv) reporting.
To the extent the opportunity does not qualify as a Green Loan, the team will
seek to evaluate the sustainability goals of the company and structure the
loan in accordance with the Sustainability-Linked Loan Principles (SLLP). Key
aspects of the SLLP include ensuring:
(i) the Sustainability Performance Targets (SPTs) are set by the company and
not the lender,
(ii) the sustainability goals are measurable and auditable, and
(iii) negative economic consequences are imbedded in the loan documentation
for failing to meet the goals by a specified timeline.
By structuring each new loan as either a Green Loan or a Sustainability-Linked
Loan, we strive to monitor and advance the decarbonisation impact of our
credit portfolio.
Recent Riverstone Credit Partners Green Loans and Sustainability-Linked Loans
Includes approximately $240 million of commitments towards investments in
energy transition and decarbonisation:
Lithium-Ion Battery Manufacturer
§ A lithium-ion battery manufacturing business that plans to commercialise
high performing lithium-ion batteries through the development of a 1 GWh
manufacturing facility in Endicott, NY
§ First US cell supplier not captive to a single automotive OEM
§ $50 million First Lien 'Green Loan,' documented according to the LSTA
Water Infrastructure
§ Blackbuck is a Permian Basin water infrastructure company focused on the
treatment, gathering, recycling, storage and disposal of produced water
§ Diversified asset base consisting of three separate systems underpinned
by long-term, fixed fee contracts
§ Pipeline infrastructure provides a more sustainable, efficient option
versus trucking produced water
§ $50 million First Lien Sustainability-Linked Term Loan
Plastics Recycling Company
§ Sponsor-backed manufacturer of high-quality post-consumer resin (PCR)
pellets made from recycled low-density polyethylene (LDPE) for use in
food-grade packaging, injection moulding applications, bags, films and other
high-end products
§ The company's objective is to build five plants across the US, becoming
the first PCR manufacturer with a national footprint
§ $100 million First Lien Green Loan,' documented according to the LSTA
Equipment Manufacturing & Rental
§ An equipment manufacturing and rental company specialising in the
treatment of H2S in the energy, renewable fuels, municipal wastewater, and
industrial markets
§ The company utilises a patented technology to convert H2S into elemental
sulphur and water to prevent sulphur dioxide emissions; the infrastructure and
technology serve to reduce flared gas
§ $20 million First Lien Sustainability-Linked Term Loan
Community Solar Developer & Distributed Energy Portfolio
§ Serves to co-develop, acquire, construct and manage distributed energy
portfolios in attractive markets across the United States
§ More than 57 megawatts of solar capacity in development
§ $20 million First Lien 'Green Loan,' documented according to the LSTA
ESG in Action
ESG in Practice within RCOI's Portfolio: Circulus Case Study
Circulus is a Houston-based manufacturer of high-quality post-consumer resin
(PCR) pellets made from recycled low-density polyethylene (LDPE) for use in
food-grade packaging, injection moulding applications, bags, films and other
high-end products. Circulus provides a sustainable alternative and solution
for LDPE, which is often destined for single-use applications and currently
landfilled.
An emerging leader in plastics recycling, Circulus is building out a
widespread footprint of plants that utilise advanced technologies with a
multi-step mechanical process to transform lower grade plastic into PCR
suitable for a variety of commercial and industrial applications. The
company's products address sustainability challenges with flexible plastics
and revolutionise the use of PCR for plastic bags, shrink film, pouches,
overwraps, and many more consumer-facing applications.
Key Stats
· Circulus' objective is to build 5 recycling plants across the US
· this will make Circulus the first PCR manufacturer with a
national footprint
· initial Life Cycle Analysis (LCA) shows GHG emissions associated
with production of Circulus' PCR as approximately 88% below that of virgin
resin
· Circulus has recycled 3.6 million pounds of low-density
polyethylene year-to-date
In August 2021, Riverstone funds provided a $100 million green loan to
Circulus. The term loan is structured in compliance with the LSTA Green Loan
Principles, which aim to facilitate and support environmentally sustainable
economic activity by financing eligible projects. The use of proceeds for the
term loan is to build and fund operating expenses for 5 low-density
polyethylene recycling facilities in the US. The loan is supported by equity
invested at closing by Ara Partners, three financial covenants, and contracted
cash flow.
Looking Forward
As Riverstone continues to focus on increasing investment exposure to
opportunities arising from energy transition and decarbonisation, the firm
remains committed to continue growing our ESG program and embedding it in our
culture. In 2022 and beyond, the firm will look to build on the successes of
the past year across five overarching themes.
In parallel we will continue to make progress across the elements of our ESG
program: Risk Management (formerly due diligence and initial investment),
Portfolio Engagement, ESG at Riverstone, and ESG Reporting, and report
progress in next year's ESG report. However, in line with our focus, our
objectives for 2022 and 2023 are centred on our response to climate change:
· complete actions to bring Riverstone into alignment with the TCFD
recommendations
· update and expand our scenario analysis to all portfolio
companies and future investments using the latest climate projections. Use the
results of the analysis to deepen our engagement and build climate resilience.
In addition, support companies to leverage opportunities presented to them by
the energy transition
· continue to calculate our firm's GHG footprint to set targets for
annual reductions
· engage a third party to complete the portfolio GHG footprint and
engage with portfolio companies regarding individual reduction targets
· build ESG capacity at all levels in Riverstone through training
Board Diversity
The Board strongly believes that having diversity in skills, experience and
gender has significant benefits. The Board currently comprises three
Independent Directors based on merit-based qualifications, while also having
gender balance (two male and one female Board members).
The Company's policy on diversity is further detailed in the Corporate
Governance Report below.
Employees and Officers of the Company
The Company does not have any employees and therefore employee policies are
not required. The Directors of the Company are detailed below.
Principal, EMERGING Risks AND UNCERTAINTIES
Under the FCA's Disclosure Guidance and Transparency Rules, the Directors are
required to identify those material risks to which the Company is exposed and
take appropriate steps to mitigate those risks. Risks relating to the Company
are disclosed in the Company's prospectus which is available on the Company's
website.
The Company's assets consist of investments, through SPVs, within the global
energy industry, with a particular focus on opportunities in the global
E&P and midstream energy sub-sectors. Its principal risks are therefore
related to market conditions in the energy sector in general, but also the
particular circumstances of the businesses in which it is invested. The
Investment Manager seeks to mitigate these risks through active asset
management initiatives and by carrying out due diligence work on potential
targets before entering into any investments.
The Board thoroughly considers the process for identifying, evaluating and
managing any significant and emerging risks faced by the Company on an ongoing
basis and has performed a robust assessment of those risks, which are reported
and discussed at Board meetings. The Board ensures that effective controls are
in place to mitigate these risks and that a satisfactory compliance regime
exists to ensure all applicable local and international laws and regulations
are upheld. During the year the Audit and Risk Committee has reviewed and made
minor updates to the Company's principal risks, which are outlined below.
For each material risk, the likelihood and consequences are identified,
management controls and frequency of monitoring are confirmed and results
reported and discussed at the quarterly Board meetings.
The key areas of risk faced by the Company and mitigating factors are
summarised below:
1. The Ordinary Shares may trade at a discount to NAV per Share for
reasons including but not limited to market conditions, liquidity concerns and
actual or expected Company performance. As such, there can be no guarantee
that attempts to mitigate such discount will be successful or that the use of
discount control mechanisms will be possible, advisable or adopted by the
Company. To mitigate this risk, the Investment Manager closely monitors and
identifies the reasons for significant fluctuations, and considers the
Company's share repurchase program when applicable and in the interests of
Shareholders.
2. The ability of the Company to meet the target distribution will depend
on the Investment Manager's ability to find investments that generate
sufficient and consistent yield to support the Target Distribution. The
Investment Manager will identify and manage suitable investments in accordance
with the Investment Policy, market conditions and the economic environment. To
mitigate this risk, the Company's Investment Policy and investment
restrictions enable the Company to build a diversified energy portfolio that
should deliver returns that are in line with the Target Distribution range.
3. The ability of the Company to achieve its investment objectives is
dependent on the Investment Manager sourcing and making appropriate
investments for the Company. Investment returns will depend upon the
Investment Manager's ability to source and make successful investments on
behalf of the Company. To mitigate this risk, the Investment Manager believes
sourcing investments is one of its competitive advantages. The Investment
Manager is well resourced and has access to the wider skills and expertise at
Riverstone whose personnel have years of experience in the global energy
sector.
4. Environmental exposures and existing and proposed environmental
legislation and regulation may adversely affect the operations of Borrowers.
Delay or failure to satisfy any regulatory conditions or other applicable
requirements could prevent the Company from acquiring certain investments or
could hinder the operations of certain Borrowers. To mitigate this risk, The
Investment Manager implements monitoring and quality control procedures to
mitigate the occurrence of any violation of safety/health and environmental
laws. The Investment Manager has a clear ESG policy which is implemented and
reviewed by the Board.
5. The Company's investment objective requires it to invest in loans that
are likely to be both illiquid and scarce. If there is an adverse change in
the underlying credit, then the ability of RCOI to recover value may be
impaired. To mitigate this risk, the Company primarily originates shorter
duration senior secured loans with protective provisions. In some instances
the loans incentivise early repayment.
6. The valuations used to calculate the NAV on a quarterly basis will be
based on the Investment Manager's unaudited estimated fair market values of
the Company's investments and may be based on estimates which could be
inaccurate. To mitigate this risk, the Investment Manager has an extensive
valuation policy and also has engaged the independent valuation services of
Houlihan Lokey on a quarterly basis.
7. In today's global technological environment, the Company, its
investments and its engaged service providers are subject to risks associated
with cyber security. The effective operation of the Investment Manager and the
businesses of Borrowers are likely to be highly dependent on the availability
and operation of complex information and technological systems. To mitigate
this risk, The Audit and Risk Committee Chairman monitors cyber security risk
and best practices and cyber security due diligence is performed on each
potential borrower.
8. The Company may be exposed to fluctuations and volatility in commodity
prices through investments it makes, and adverse changes in global supply and
demand and prices for such commodities may adversely affect the business,
results of operations, and financial condition of the Company. To mitigate
this risk, the Investment Manager intends to create a diversified portfolio
across various energy subsectors, commodity exposures, technologies and
end-markets to provide natural synergies that aim to enhance the overall
stability of the portfolio.
9. The Company will only lend to Borrowers in the global energy sector and
such single industry concentration could affect the Company's ability to
generate returns. Adverse market conditions in the energy sector may delay or
prevent the Company from making appropriate investments. The ongoing
coronavirus pandemic has led to a decline in global commerce and travel,
thereby causing reductions in the near-term demand for energy especially
within oil and gas, and long-term impacts remain unknown for the Company's
Borrowers. To mitigate this risk, the Investment Manager intends to create a
diversified portfolio across various energy subsectors, commodity exposures,
technologies and end-markets to provide natural synergies that aim to enhance
the overall stability of the portfolio.
10. The performance of the Company may be affected by changes to interest
rates and credit spreads. To mitigate this risk, the Investment Manager
assesses credit risk and interest rate risk on an ongoing basis and closely
monitors each investment with the assistance of each respective management
team and the engaged service providers.
Going Concern
The Company's cash balance at 31 December 2021 was $4.9 million, which is
sufficient to cover its existing liabilities of $0.9 million, distribution of
$1.6 million with respect to the quarter ended 31 December 2021 and any
foreseeable expenses in the period from 16 February 2022 to 30 June 2023,
being the period of assessment covered by the Directors.
At 31 December 2021 the cash balances within the SPVs amounted to $22.8
million. Presently, there is no credit facility at the Company or at the SPV
level. Additionally, the underlying SPVs do not have recourse to the Company
for any indebtedness that may occur. The Operating Expenses of the entire
structure are budgeted to be between $1 million and $1.5 million per year not
including taxes. Based on the high end of this range it would take the Company
over eighteen years to run out of cash.
The Company's cash balance is comprised of cash and money market fixed
deposits and the risk of default on the counterparties cash and deposits is
considered extremely low. Due to this the Directors believe there is no
material going concern risk. The major cash outflows of the Company and its
SPVs are expected to be the payment of dividends and expenses, share
repurchases and the acquisition of new assets, both of which are
discretionary. The Company is closed-ended and there is no ability for
investors to withdraw from the Company. The first continuation vote for the
Company will be proposed at Annual General Meeting of the Company to be held
in 2027, on the eighth anniversary of admission.
The COVID-19 pandemic has caused severe disruptions in the global economies
and capital markets. The pandemic may also continue to materially and
adversely impact the performance of the global economy, the Company's
operations, and investments in the future. Given the ongoing nature of the
pandemic, it is currently not possible to determine the potential scale and
scope of the ultimate effects on the global economy, capital markets, and the
Company's operations and investments. As the situation continues to evolve,
this will remain as an additional risk to the Company.
The Directors and Investment Manager are actively monitoring this and its
potential effect on the Company and its underlying investments. In particular,
they have considered the following specific key potential impacts:
· unavailability of key personnel at the Investment Manager or
Administrator
· increased volatility in the fair value of investments
· disruptions to business activities of the underlying investments;
and
· recoverability of income and principal and allowance for expected
credit losses
In considering the above key potential impacts of COVID-19 on the Company and
its underlying investments, the Investment Manager has assessed these with
reference to the mitigation measures in place. At the Company level, the key
personnel at the Investment Manager and Administrator have successfully
implemented business continuity plans to ensure business disruption is
minimised, including remote working, and all staff are continuing to assume
their day-to-day responsibilities. At the underlying investment level, there
are various risk mitigation plans in place, including the use of social
distancing and personal protective equipment, to ensure business activities
are maintained as far as possible.
As further detailed in note 4 to the financial statements, the Investment
Manager uses a third party valuation provider to perform a full independent
valuation of the underlying investments. The Investment Manager has also
assessed the recoverability of income due from the underlying investee
companies and has no material concerns. Additionally, the Investment Manager
and Directors have considered the cash flow forecast and a reverse stress test
to determine the term over which the Company can remain viable given its
current resources.
Based on the assessment outlined above, including the various risk mitigation
measures in place, the Directors do not consider that the effects of COVID-19
have created a material uncertainty over the assessment of the Company as a
going concern.
On the basis of this review, and after making due enquiries, the Directors
have a reasonable expectation that the Company has adequate resources to
continue in operational existence for at least 16 months to 30 June 2023,
being the period of assessment covered by the Directors. Accordingly, they
continue to adopt the going concern basis in preparing the financial
statements.
Longer Term Viability
As required by the AIC Code, the Directors have assessed the prospects of the
Company over a longer period than required by the going concern provision. The
Company's investments have a maximum term of seven years and are expected to
have a contractual duration of three to five years from inception, therefore
the Board chose to conduct a review for a period of three years to 31 December
2024. On a rolling basis, the Directors will evaluate the outcome of the
investments and the Company's financial position as a whole. While an
unprecedented and long-term decline in the global energy sector could threaten
the Company's performance, it would not necessarily threaten its viability.
In support of this statement, the Directors have taken into account all of the
principal and emerging risks and their mitigation as identified in the
Principal and Emerging Risk and Uncertainties section above, the nature of the
Company's business; including the cash reserves and money market deposits at
the SPVs, the potential of its portfolio of investments to generate future
income and capital proceeds, and the ability of the Directors to minimise the
level of cash outflows, if necessary. The most relevant potential impacts of
the identified Principal, Emerging Risks and Uncertainties on viability were
determined to be:
· the ability of the Company to meet the target distribution will
depend on the Investment Manager's ability to identify and manage suitable
investments in accordance with the Investment Policy
· the Company will only lend to Borrowers in the global energy
sector, and such single industry concentration could affect the Company's
ability to generate returns, and adverse market conditions in that sector may
delay or prevent the Company from making appropriate investments that generate
attractive returns
· the absence of a substantial secondary market and liquidity for
the Company's investments means that the Company may be unable to realise
value from its investments and investors could lose all or part of their
investment
Each quarter, the Board reviews threats to the Company's viability utilising
the risk matrix and updates as required due to recent developments and/or
changes in the global market. The Board
relies on periodic reports provided by the Investment Manager and
Administrator regarding risks faced by the Company. When required, experts are
utilised to gather relevant and necessary information, regarding tax, legal,
and other factors.
The Investment Manager's investment strategy focuses primarily on energy
infrastructure, infrastructure services and energy transition assets which
will play a meaningful role in supporting the traditional, transitioning, and
new participants in the energy sector. New investments will be structured as
green loans or sustainability-linked loans as each borrower seeks to play
their part in moving to a world of lower carbon emissions. In support of this
statement, the Investment Manager conducts background checks for key
management and governance of a new borrower.
The Investment Manager considers the future cash requirements of the Company
before funding portfolio companies. Furthermore, the Board receives regular
updates from the Investment Manager on the Company's cash position, which
allows the Board to maintain its fiduciary responsibility to the Shareholders
and, if required, limit funding for existing commitments.
The Board considered the Company's viability over the three year period, based
on a working capital model prepared by the Investment Manager. The working
capital model forecasts key cash flow drivers such as capital deployment rate,
investment returns, and operating expenses. In connection with the preparation
of the working capital model, capital raises, realisations, and, distribution
payments and/or share repurchases were assumed to not occur during the three
year period, unless already predetermined. In addition, the Board reviews
credit market availability, but no such financing has been assumed.
Based on the aforementioned procedures and the existing internal controls of
the Company and Investment Manager, the Board has concluded there is a
reasonable expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the three-year period of the
assessment.
In support of this statement, the Directors have taken into account all of the
principal risks and their mitigations as identified in the Principal, Emerging
Risks and Uncertainties section above, the nature of the Company's business;
including the cash reserves and money market deposits of the Company and its
SPVs, the potential of its portfolio of investments to generate future income
and capital proceeds, and the ability of the Directors to minimise the level
of cash outflows, if necessary.
Directors' Responsibilities Pursuant to Section 172 of the Companies Act 2006
The Directors are responsible for acting in a way that they consider, in good
faith, is the most likely to promote the success of the Company for the
benefit of its members. In doing so, they should have regard for the needs of
stakeholders and the wider society. Key decisions are those that are either
material to the Company or are significant to any of the Company's key
stakeholders. The Board consider the Company's key stakeholders to be: its
existing and potential new Shareholders, service providers (Investment
Manager, corporate broker, registrar and depositary), investee companies and
suppliers. It should be noted that the Company has no employees, aside from
the Directors.
Engagement with Stakeholders
As further disclosed in the Corporate Governance Report below, the Company
reports to Shareholders in a number of formal ways, including its Annual
Report, Interim Report and regulatory news releases, all of which are approved
by the Board. The AGM, detailed below, is used as a forum for the Board and
Investment manager to communicate Company performance and future plans and
prospects. It is expected members of the Board will be in attendance (subject
to COVID-19 guidance and restrictions at the time of the AGM) and will be
available to answer any Shareholder questions. The Company's website was
updated during the year and contains comprehensive information for
Shareholders and provides regular market commentary. In addition, the
Chairman's, Company Administrator's and Investment Manager's contact email
addresses are also available for Shareholders to contact, outside of the AGM.
The Board invites representatives from the Broker to provide regular analysis
of Shareholder movements, industry changes and contact with investors. The
Board seeks to engage with the Investment Manager and other service providers
in an open manner, encouraging constructive discussion. This approach enhances
service levels and strengthens relationships to receive the highest standard
of service at a competitive cost, ensuring Shareholders interest are best
served.
The below key decisions were made or approved by the Directors during the
year, with the overall aim of promoting the success of the Company while
considering the impact on its members, stakeholders and the wider society as
outlined in the ESG section above.
Investment policy
The Company invests in a diversified portfolio of direct and indirect
investments in loans, notes, bonds and other debt instruments. The Investment
Manager adopts a responsible investing approach which takes into account the
Company's ESG principles and strategy, as outlined in detail in the ESG
sections within the Strategic Report and Investment Manager's Report. The
Board has reviewed and approved the investment policy. The Board and the
Investment Manager monitor the concentration of the investment in the SPVs on
a quarterly basis to ensure compliance with the investment policy. The Company
completed 6 investments (2020: 6) and 5 realisations (2020: 4) during the
year. The Company reports to the Shareholders through regulatory news
releases, using the London Stock Exchange's Regulatory News Service and
Interim and Annual Reports. Any new investments are announced immediately, and
portfolio updates, realisations, valuation updates and distribution
announcements are all communicated in a timely fashion through this means.
The Directors held a dedicated strategy meeting and validated the Company's
policy and strategic approach to close the discount in share price. This
included ensuring alignment with ownership interests, as well as potential
interests in the future. The Directors considered in detail the structure,
costs and promotion of the Company to the secondary market.
Distributions
The Board has reviewed and approved distributions of 7.00 cents per share with
respect to the year (2020: 7.00 cents per share with respect to the year).
Board Committees
The Board's Audit and Risk Committee, Nomination Committee and Management
Engagement Committee continue to ensure a good corporate governance framework
for the Company. The Chairman of each committee will attend the AGM to answer
any questions on their committee's activities.
Share buyback programme
The Board, in consultation with the Investment Manager, regularly monitors the
Company's trading discount percentage. On 30 April 2020 the Board announced
that a share buy-back programme be initiated. The repurchase of shares allows
the Company to return some of its uncommitted capital to Shareholders and
reduce the discount to NAV. The Board has taken the decision to not make any
share buybacks in 2021 (2020: 8,454,617).
Annual General Meeting
The AGM of the Company will be held at 14.30 BST on 18 May 2022 at the offices
of Hogan Lovells International LLP, Atlantic House, Holborn Viaduct, London
EC1A 2FG. Details of the resolutions to be proposed at the AGM, together with
explanations, will appear in the notices of meetings to be distributed to
Shareholders in April 2022. As a matter of good practice, all resolutions will
be conducted on a poll and the results will be announced to the market as soon
as possible after the AGM.
Subject to COVID-19 guidance and restrictions at the time of the AGM, it is
expected that members of the Board will be in attendance and will be available
to answer Shareholder questions.
On behalf of the Board
Reuben Jeffery, III
Chairman
16 February 2022
Investment Manager's Report
ABOUT THE INVESTMENT MANAGER
Appointed in May 2019, the Investment Manager, an affiliate of Riverstone,
will seek to generate consistent Shareholder returns predominantly in the form
of income distributions, principally by making senior secured loans to
energy-related businesses. We lend to companies working to drive change and
deliver solutions across the energy sector, spanning renewable as well as
conventional sources, with a primary focus on infrastructure assets. Our aim
is to build a portfolio that generates an attractive and consistent risk
adjusted return for our investors.
The Company will seek to achieve its investment objective predominantly
through investing in a diversified portfolio of direct and indirect
investments in loans, notes, bonds and other debt instruments, including
convertible debt, issued by Borrowers operating in the energy sector.
Riverstone's investment professionals have a combination of industry
knowledge, financial expertise and operating capabilities. The Company will
also benefit from the guidance and input provided by non-Riverstone Credit
Team members of Riverstone's credit investment committee who will be involved
in the Company's investment process. The Company believes that Riverstone's
global network of deep relationships with management teams, investment banks
and other intermediaries in the energy sector will lead to enhanced sourcing
and deal origination opportunities for the Company.
INVESTMENT STRATEGY
The Investment Manager will seek to leverage the wider Riverstone platform to
enhance its investment strategy through the synergies gained from being part
of one of the largest dedicated energy focused private equity firms.
The key elements of the Investment Manager's investment strategy in relation
to the Company and its SPVs are summarised below.
INVESTMENT PORTFOLIO SUMMARY
The Investment Manager has reviewed numerous opportunities within the
Investment Guidelines since RCOI's admission. As at 31 December 2021, the
Company holds ten direct investments across energy infrastructure and
infrastructure services and energy transition assets as further discussed
below. One realisation occurred during the quarter ended 31 December 2021 and
one new investment also occurred. The Investment Manager continues to maintain
a strong pipeline of investment opportunities and expects to make a number of
further commitments across the infrastructure, infrastructure services and
energy transition sectors. RCOI, when making a new investment, will receive an
allocation of the investment in accordance with the limitations illustrated in
the Company's Investment Restrictions. The determination of what percentage
they will receive will be pro rata to the available capital for all of the RCP
funds that are eligible to participate in the investment.
In the descriptions that follow, yield to maturity is inclusive of all upfront
fees, original issue discounts, drawn spreads and prepayment penalties through
the stated maturity of the loan. Most loans have incentives to be called
early. A portion of the loans have a 'payment-in-kind' feature for drawn
coupons for a limited time period. Similarly, some of the loans have a
'delayed-draw' feature that allows the borrower to call capital over time, but
always with a hard deadline. Loans that are committed are loans with signed
definitive documentation where a structuring fee and/or original issue
discount have been earned and the Company earns an undrawn spread. Loans that
are invested are loans with signed definitive documentation where a
structuring fee and/or original issue discount have been earned, the Company
has funded the loan to the borrower and the Company is earning a drawn coupon.
Project Mariners - RCOI participated in a $140.0 million first lien
delayed-draw term loan for a privately-owned company that provides vessel and
logistic services including tugboat, ship assist, and escort services, and
cargo handling and towing predominantly focused on the energy sector.
The company is headquartered in Houston, TX with navigation centres in
Ingleside, TX, Brownsville, TX, Pascagoula, MS, and Jacksonville, FL as well
as a shipyard and repair facility in Pascagoula, MS. The term loan closed in
July 2019.
At closing, $14.9 million was committed by RCOI which was reduced to $12.2
million via a secondary sale. The first lien term loan has a maturity of July
2022 and an all-in expected yield to maturity of 12.6% on a fully drawn basis.
In April 2020, RCP provided a new $7.0 million pari passu revolver and the
term loan was upsized by $3.0 million to $143.0 million. RCOI committed an
additional $1.0 million to the Revolver and a third party provided the entire
term loan upsize. The term loan upsize has since been cancelled.
Following a sale leaseback in Q1 2021, 15% of outstanding principal, along
with interest and fees at the 109 call premium, was repaid. There was
additional principal paid in Q4 2021, as well as interest and fees.
As at 31 December 2021, the $9.5 million of the remaining $9.9 million
commitment has been invested.
Caliber Midstream - RCOI participated in a $10.0 million upsize of RCP's
commitment to a $65.0 million first lien Holdco term loan for a sponsor-backed
Bakken focused midstream company that provides crude oil and natural gas
gathering and processing, produced water transportation and disposal, and
freshwater sourcing and transportation. RCP closed the initial $65.0 million
financing in June 2018. The term loan upsize closed in August 2019.
At closing, $3.4 million was committed by RCOI. The first lien HoldCo term
loan had a maturity of June 2022 and an all-in expected yield to maturity of
11.8% on a fully drawn basis.
Use of proceeds, combined with an Opco revolving credit facility draw, was to
fund an acquisition.
In March 2021, Caliber Midstream Partners' ('OpCo') largest customer, Nine
Point Energy, terminated their midstream contract with Caliber and
subsequently filed for Chapter 11 bankruptcy. In April 2021, RCOI and other
RCP affiliates purchased a small allocation of the OpCo revolving credit
facility with a maturity in June 2023. In May 2021, RCP and other HoldCo
Lenders completed a recapitalisation of Caliber resulting in HoldCo Term Loan
Lenders receiving substantially all of the equity in HoldCo. Throughout the
remainder of 2021, we have been actively negotiating the terms of a
restructuring and go forward strategy with the first lien bank group led by
Citigroup. We remain focused on maximising value in the investment and expect
the transaction to close in the first quarter of 2022.
As at 31 December 2021, the full $3.9 million commitment has been invested.
EPIC Propane - RCOI participated in a $75.0 million first lien delayed-draw
term loan to a sponsor-backed midstream company that will provide propane
purity offtake transportation to the Houston, TX export market. The term loan
closed in December 2019.
At closing, $14.8 million was committed by RCOI. The first lien term loan has
a maturity of December 2022 and an all-in expected yield to maturity of 11.6%
on a fully drawn basis.
Use of proceeds from the credit facility was for the construction of a new
propane pipeline from Robstown and Corpus Christi, TX to Sweeney, TX.
As at 31 December 2021, the full $14.8 million commitment has been invested.
FS Crude, LLC - RCOI originally participated in a $75 million first lien
delayed-draw term loan for a sponsor-backed midstream company that provides
crude gathering, storage and blending services to a diversified footprint of
producers in the core of the Delaware Basin. The term loan closed in March
2020.
At closing, $13.7 million was committed by RCOI. The first lien term loan
originally had a maturity of March 2023 and an all-in expected yield to
maturity of 11.7% on a fully drawn basis. As part of a fulsome amendment and
in exchange for covenant relief, the Borrower paid down $40 million of
principal as well as interest and fees on 28 December 2020. The remaining $35
million remains in a first lien senior-secured position, of which RCOI's
commitment is $6.4 million. As part of the paydown, the maturity date was
amended to March 2024.
Use of proceeds from the credit facility was to fund construction, operation,
and maintenance costs of the crude system.
As at 31 December 2021, the full $6.4 million commitment has been invested.
Hoover Circular Solutions - RCOI originally participated in a recapitalisation
of a sponsor-backed company that is the leading specialty rental provider of
containers and mobile asset management solutions across the energy,
industrial, refining, and petrochemical industries. The term loan closed
October 2020.
At closing, $7.4 million was committed by RCOI. The first lien term loan has a
maturity of October 2024 and an all-in expected yield to maturity of 10.4% on
a fully drawn basis. Following the sale of the company's offshore business,
$3.2 million of RCOI's outstanding principal was repaid on 3 December 2020,
with the residual $4.2 million investment remaining in a first lien
senior-secured position with sub 3x leverage. A portion of the commitment was
paid down, with interest and fees, in the first half of 2021.
As at 31 December 2021, the remaining $3.8 million commitment has been
invested.
Roaring Fork Midstream - RCOI participated in a $50.0 million first lien
delayed-draw term loan to a sponsor-backed midstream company that owns and
operates pipeline and storage related infrastructure moving natural gas and
oil from the wellhead to market.
At closing on 2 March 2021, $5.9 million was committed by RCOI. The first lien
term loan has a maturity of March 2024 and an expected all-in yield to
maturity of 11.8% for RCOI on a fully-drawn basis.
Use of proceeds from the credit facility was to fund a pipeline acquisition
and growth capex.
As at 31 December 2021, $4.2 million has been invested.
Imperium3 New York, Inc - RCOI participated in a $63.0 million first lien
delayed-draw term loan to a lithium-ion battery company that will
commercialise high performing lithium-ion batteries by developing a
large-scale manufacturing facility in Endicott, NY. In addition to having a
first lien on the manufacturing assets, the credit facility is supported by
two parent guarantors: Charge CCCV ('C4V'), which is a research and
development company based in Binghamton, New York with patented discoveries in
battery composition, and Magnis Energy Technologies Limited ('Magnis') [ASX:
MNS]. Once producing at scale, the company will be the first U.S. battery cell
supplier not captive to an original equipment manufacturer and supply various
underserved industrial end-markets.
At closing on 16 April 2021, $6.8 million was committed by RCOI and $5.4
million was drawn. Following the close 20% of the funded investment was sold
to a third party. The first lien term loan has a maturity of April 2025 and an
estimated all-in yield to maturity of 22.1% for RCOI on a fully-drawn basis.
The yield is made up of upfront fees, a drawn coupon and exit fees that are
higher than the average in the rest of the portfolio.
Use of proceeds was primarily to construct the manufacturing facility.
As at 31 December 2021, $5.4 million has been invested. As at 30 July 2021,
the remaining delayed draw commitment has been cancelled.
Blackbuck Resources - RCOI participated in a $50.0 million first lien
delayed-draw sustainability-linked term loan to a sponsor-backed water
infrastructure company focused on providing E&P operators with a one-stop
shop for all things related to water management, including treatment,
gathering, recycling, storage and disposal. At closing on 30 June 2021, $9.9
million was committed by RCOI. The first lien term loan has a maturity of June
2024 and an estimated all-in yield to maturity of 11.9% for RCOI on a
fully-drawn basis.
The term loan was RCP and RCOI's first investment documented as a
'sustainability-linked loan' per LSTA guidelines, with pricing step-ups tied
to meeting specific sustainability performance targets ('SPTs') set by the
company's board. For Blackbuck, the SPTs were related to the number of
truckloads of water (and the resulting emissions) that could be removed from
the highways from their activities. RCP and RCOI intend to use similar lending
structures for qualifying companies going forward. Proceeds were primarily
used to refinance existing indebtedness and growth capex.
As at 31 December 2021, $8.9 million has been invested.
Circulus Holdings - RCOI participated in a $100.0 million first lien green
term loan to a sponsor-backed recycler of low-density polyethylene ('LDPE')
for use in food-grade packaging, injection moulding applications, bags, films
and other high-end products.
At closing on 23 August 2021, $12.5 million was invested by RCOI. The term
loan has a maturity of August 2024 and an expected all-in yield to maturity of
13.5%. Following the closing, a portion was sold to a third party in Q4 2021.
The term loan was RCP and RCOI's first investment documented as a 'green loan'
per LSTA guidelines, with use of proceeds tied to specific green initiatives
and carefully tracked to ensure compliance. RCP and RCOI intend to use similar
lending structures for qualifying companies going forward.
Use of proceeds was to build additional plants across the US.
As at 31 December 2021, the full remaining commitment of $9.2 million is
invested.
Streamline Innovations - RCOI participated in a $20.0 million first lien
delayed-draw sustainability-linked term loan to a sponsor-backed leader in
environmentally-advanced treatment solutions and equipment for hydrogen
sulphide (H(2)S) in energy, renewable fuels, wastewater, landfill gas, biogas,
and industrial processes.
At closing on 23 November 2021, $6.9 million was committed by RCOI and $1.7
million was drawn at closing. The first lien term loan has a maturity of
November 2024 and an estimated all-in yield to maturity of 11.1 percent for
RCOI on a fully-drawn basis. The term loan is structured as a
sustainability-linked loan, whereby the loan pricing steps up unless a
sustainability target is met that is tied to new construction of H(2)S
treating plants, which eliminate poisonous H(2)S gas and reduce toxic sulphur
dioxide (SO(2)) emissions by eliminating routine flaring.
Use of proceeds was for future construction needs.
As at 31 December 2021, $1.7 million of the $6.9 million commitment has been
invested.
SUBSEQUENT EVENTS AND OUTLOOK
In aggregate, five direct investments were realised during 2021, including two
investments that were originally executed within the past twelve months. The
Investment Manager continues to believe that this is a market where patience
and a disciplined approach to investing are likely to be well rewarded.
The Company has ample capital available for investments across the energy
infrastructure & infrastructure services and energy transition pipeline.
With the much improved commodity price backdrop, less volatility in the
broader market and momentum from our recent deal flow, we anticipate
continuing to provide attractive returns and consistent yield in the
portfolio.
Board of Directors
Reuben Jeffery, III
CHAIRMAN
Mr. Jeffery has a broad range of financial services experience and in addition
brings extensive insight into the US political and regulatory environment. He
is chairman of Sumitomo Mitsui Banking Corporation Americas Holdings, Inc. and
is a former non-executive director of Barclays PLC. He was previously the
President and CEO of Rockefeller Financial Services, Inc. Mr. Jeffery has
served in the US government as Under Secretary of State for Economic, Energy
and Agricultural Affairs, as Chairman of the Commodity Futures Trading
Commission, and as a special assistant to the President on the staff of the
National Security Council.
Before his government service, Mr. Jeffery spent 18 years at Goldman Sachs
& Co where he was Managing Partner of Goldman Sachs in Paris and led the
firm's European Financial Institutions Group in London. Prior to joining
Goldman Sachs, Mr. Jeffery was a corporate attorney with Davis Polk &
Wardwell.
Mr. Jeffery is a graduate of Yale University and holds an M.B.A. and J.D. from
Stanford University.
Emma Davies
DIRECTOR, CHAIR OF AUDIT AND RISK COMMITTEE
Ms. Davies is co-Head of Octopus Ventures.
Ms. Davies has over 20 years' experience as an investor and portfolio manager.
Her most recent role was Head of Direct Investments at Marylebone Partners;
before this she was the Head of Property and Infrastructure at The Wellcome
Trust, where she also helped to manage their public markets portfolio. She was
formerly CIO of Big Society Capital and ran the European investments team for
Perry Capital.
Ms. Davies is a non-executive director of Baillie Gifford European Growth
Trust, EdtechX Holdings Acquisition Corp. and Octopus Future Generations VCT.
Ms. Davies is a graduate of Oxford University and holds an MSc from the London
School of Economics.
Edward Cumming-Bruce
DIRECTOR, CHAIR OF NOMINATION COMMITTEE
Mr. Cumming-Bruce is the Vice Chairman of Gleacher Shacklock LLP, which he
joined in August 2003. Prior to this, he worked for 12 years at Dresdner
Kleinwort Wasserstein where he held a number of senior positions including a
Co-Head of Global Telecoms Investment Banking, Co-Head of UK Investment
Banking and Global Head of Equity Capital Markets.
Mr. Cumming-Bruce has extensive experience advising a range of major European
companies on capital markets and restructuring transactions as well as mergers
and acquisitions. Prior to Dresdner Kleinwort Wasserstein, he worked at
Schroders.
Mr. Cumming-Bruce is a graduate of Oxford University.
Report of the Directors
The Directors present their Annual Report and audited financial statements for
the Company for the year ended 31 December 2021. The Corporate Governance
Report below forms part of this report.
Details of the Directors who held office during the year and as at the date of
this report are given above.
Capital Structure
To enable the Company to obtain a certificate to commence business and to
exercise its borrowing powers under section 761 CA 2006, on 11 March 2019, 1 E
Share of £1 and 50,000 shares of £1 each were allotted to Riverstone
Investment Group LLC and paid up in full, as Management Shares. The E Share
and Management Shares grant the registered holders the right to receive notice
of and to attend but, except where there are no other shares of the Company in
issue, not to speak or vote at any general meeting of the Company. The
Management Shares were redeemed in full on 28 May 2019. The E Shares are not
redeemable.
As at 31 December 2021, the Company's issued share capital comprised
91,545,383 Ordinary Shares (2020: 91,545,383) and 1 E Share (2020: 1).
Ordinary Shareholders are entitled to all distributions paid by the Company
and, on a winding up, provided the Company has satisfied all of its
liabilities, the Shareholders are entitled to all of the surplus assets of the
Company.
Ordinary Shareholders are entitled to attend and vote at all general meetings
of the Company and, on a poll, to one vote for each Ordinary Share held.
Authority to Purchase Own Shares
The current authority of the Company to make market purchases of up to 14.99
percent of its issued share capital expires at the conclusion of the Company's
AGM on 18 May 2022. A special resolution will be proposed at the forthcoming
AGM seeking renewal of such authority until the next AGM (or 18 August 2023,
whichever is earlier). The price paid for the shares will not be less than the
nominal value or more than the maximum amount permitted to be paid in
accordance with the rules of the UK Listing Authority in force at the date of
purchase. This power will be exercised only if, in the opinion of the
Directors, a repurchase would be in the best interests of Shareholders as a
whole. Any shares repurchased under this authority will either be cancelled or
held in treasury at the discretion of the Board for future resale in
appropriate market conditions.
The Directors believe that the renewal of the Company's authority to purchase
shares, as detailed above, is in the best interests of Shareholders as a whole
and therefore recommend Shareholders to vote in favour of this special
resolution.
Major Interests in Shares
Significant shareholdings as at 31 December 2021 are detailed below.
Ordinary Shares held %
31 December 2021
ND Capital Investments 10.92
Newton Investment Management 10.92
Warana Capital 8.62
Staude Capital 8.50
Alder Investment Management 8.19
AXA Investment Management 7.65
Brooks Macdonald Asset Management 7.10
Polar Capital 5.33
Jupiter Asset Management 4.37
Weiss Asset Management 3.82
Metage Capital Management 3.77
In addition, the Company also provides the same information as at 31 January
2022, being the most current information available.
Ordinary Shares held %
31 January 2022
ND Capital Investments 10.92
Newton Investment Management 10.92
Warana Capital 8.62
Staude Capital 8.50
Alder Investment Management 8.19
AXA Investment Management 7.65
Brooks Macdonald Asset Management 7.10
Polar Capital 5.33
Jupiter Asset Management 4.37
Weiss Asset Management 3.82
Metage Capital Management 3.77
Companies Act 2006 Disclosures
In accordance with Schedule 7 of the Large and Medium Sized Companies and
Groups (Accounts and Reports) Regulations 2008, the Directors disclose the
following information:
· the Company's capital structure is detailed in note 8 to the
financial statements and all Shareholders have the same voting rights in
respect of the share capital of the Company, except that the holders of E
Shares have no right to speak or vote at any general meeting of the Company,
unless there are no other shares of the Company in issue. There are no
restrictions on voting rights that the Company is aware of, nor any agreement
between holders of securities that result in restrictions on the transfer of
securities or on voting rights;
· there exist no securities carrying special rights with regard to
the control of the Company;
· the Company does not have an employees' share scheme;
· the rules concerning the appointment and replacement of Directors
are contained in the Company's Articles of Association and the Companies Act
2006;
· there exist no agreements to which the Company is party that may
affect its control following a takeover bid; and
· there exist no agreements between the Company and its Directors
providing for compensation for loss of office that may occur because of a
takeover bid; and
(· )the Directors' responsibilities pursuant to Section 172
of the Companies Act 2006, are as detailed in the Strategic Report.
Investment Trust Status
The Directors intend at all times to conduct the affairs of the Company so as
to enable it to qualify as an investment trust for the purposes of section
1158 of the Corporation Tax Act 2010, as amended and the Investment Trust
(Approved Company) (Tax) Regulations 2011. In particular, the Company must not
retain in respect of any accounting year or period an amount which is greater
than 15 percent of its eligible investment income.
Diversity and Business Review
A business review is detailed in the Investment Manager's Report above and the
Company's policy on diversity is detailed in the Corporate Governance Report
below.
Directors' Indemnity
Directors' and Officers' liability insurance cover is in place in respect of
the Directors. The Company's Articles of Association provide, subject to the
provisions of UK legislation, an indemnity for Directors in respect of costs
which they may incur relating to the defence of any proceedings brought
against them arising out of their positions as Directors, in which they are
acquitted or judgement is given in their favour by the Court.
Except for such indemnity provisions in the Company's Articles of Association
and in the Directors' letters of appointment, there are no qualifying third
party indemnity provisions in force.
Global Greenhouse Gas Emissions
As an investment trust, the Company's own direct environmental impact is
minimal. The Company has no greenhouse gas emissions to report from its
operations, nor does it have responsibility for any other emissions producing
sources under the Companies Act 2006 (Strategic Report and Directors' Reports)
Regulations 2013.
Risks and Risk Management
The Company is exposed to financial risks such as price risk, interest rate
risk, credit risk and liquidity risk and the management and monitoring of
these risks is detailed in note 15 to the financial statements.
Independent Auditor
The Directors will propose the re-appointment of Ernst & Young LLP as the
Company's Auditor and resolutions concerning this and the remuneration of the
Company's Auditor will be proposed at the AGM.
At the time that this report was approved, so far as each of the Directors is
aware:
· there is no relevant audit information of which the Auditor is
unaware; and
· they have taken all the steps they ought to have taken to make
themselves aware of any audit information and to establish that the Auditor is
aware of that information.
Annual Report
As disclosed in the Audit and Risk Committee Report below, the Audit and
Risk Committee has given due consideration that the Annual Report, taken as a
whole, is fair, balanced and understandable. Therefore the Board is of the
opinion that the Annual Report provides the information necessary for
Shareholders to assess the performance, strategy and business model of the
Company.
The Board recommends that the Annual Report, the Report of the Directors and
the Independent Auditor's Report for the year ended 31 December 2021 are
received and adopted by the Shareholders and a resolution concerning this will
be proposed at the AGM.
DiSTRIBUTION
With respect to the quarter ended 31 December 2021 the Board has recommended a
distribution of $1.6 million, equivalent to 1.7 cents per share, as disclosed
in note 14 to the financial statements. This brings the total distribution
declared with respect to the year ended 31 December 2021 to 7.0 cents per
share.
Subsequent Events
There have been no significant subsequent events, other than those disclosed
in note 18 to the financial statements.
Strategic Report
A review of the business and future outlook, going concern statement and the
principal and emerging risks and uncertainties of the Company have not been
included in this report as they are disclosed in the Strategic Report above.
On behalf of the Board
Reuben Jeffery, III
Chairman
16 February 2022
Directors' Remuneration Report
This report has been prepared by the Directors in accordance with the
requirements of the Companies Act 2006 and the Large and Medium-sized
Companies and Groups (Accounts and Reports) Regulations 2008. A resolution to
approve the Directors' Remuneration Report will be proposed at the Company's
AGM on 18 May 2022. At the AGM on 19 May 2021, Shareholders voted 100.0
percent in favour to approve the Directors' Remuneration Report for the year
ended 31 December 2020.
The Company's Auditor is required to give its opinion on the information
provided on Directors' remuneration and this is explained further in its
report to Shareholders below. The remainder of this report is outside the
scope of the external audit.
Annual Statement from the Chairman of the Board
The Board, which is profiled above, consists solely of non-executive Directors
and is considered to be entirely independent. The Board considers at least
annually the level of the Board's fees, in accordance with the AIC Code.
Remuneration Policy
As at the date of this report, the Board comprised three Directors, all of
whom are non-executive. Due to the size of the Company and the Board, there is
not a separate Remuneration Committee. Being wholly comprised of non-executive
Directors, the whole Board considers these matters.
Each Director receives a fixed fee per annum based on their roles and
responsibilities within the Company and the time commitment required. It is
not considered appropriate that Directors' remuneration should be performance
related and none of the Directors are eligible for pension benefits, share
options, long term incentive schemes or other benefits in respect of their
services as non-executive Directors of the Company.
The maximum annual limit of aggregate fees payable to the Directors was set at
the time of the Company's incorporation on 11 March 2019 at £500,000 per
annum. The Chairman is entitled to an additional fee of £10,000 per annum and
the Audit and Risk Committee Chair is entitled to an additional fee of £5,000
per annum. The Board may grant special remuneration to any Director who
performs any special or extra services to, or at, the request of the Company.
The Articles of Association provide that all Directors at the date of the
notice covering each AGM shall retire from office and each Director may offer
themselves for re-election, in accordance with corporate governance best
practice.
All of the Directors have been provided with letters of appointment, subject
to re-election by Shareholders.
A Director's appointment may at any time be terminated by and at the
discretion of either party upon written notice. A Director's appointment will
automatically end without any right to compensation whatsoever if they are not
re-elected by the Shareholders. A Director's appointment may also be
terminated with immediate effect and without compensation in certain other
circumstances. Being non-executive Directors, none of the Directors has a
service contract with the Company.
The Company's Remuneration Policy was approved at its second AGM on 19 May
2021, with Shareholders voting 90.94 percent in favour and 9.06 percent of
votes against. The terms and conditions of appointment of non-executive
Directors are available for inspection from the Company's registered office.
Annual Report on Remuneration (Audited Information)
The table below shows all remuneration earned by each individual Director
during the year:
Paid in the year to 31 December 2021 Change from prior year Paid in the year to 31 December 2020
$ % $
Reuben Jeffery, III (Chairman) - £45k p.a. 61,390 8% 56,821
Emma Davies (Audit & Risk Committee Chair) - £40k p.a. 54,569 8% 50,507
Edward Cumming-Bruce (Nomination Committee Chair) - £35k p.a. 47,748 8% 44,194
Total 163,707 151,522
The Directors total annual remuneration has not changed from prior year. The
percent change detailed above is directly related to foreign exchange rate
movements, as the Directors are paid in GBP.
Amounts paid to Directors as reimbursement of travel and other incidental
expenses during the year were:
Paid in the year to 31 December 2021 Paid in the year to 31 December 2020
$ $
Reuben Jeffery, III 15,551 12,204
Emma Davies - -
Edward Cumming-Bruce - -
Total 15,551 12,204
None of the Directors received any other remuneration or additional
discretionary payments during the year from the Company (2020: $Nil).
Directors' Interests (audited information)
Directors who held office during the year and had interests in the Ordinary
Shares of the Company as at 31 December 2021 are given in the table below.
There were no changes to the interests of each Director as at the date of this
report.
Ordinary Shares of $0.01 each held at 31 December 2021 Ordinary Shares of $0.01 each held at 31 December 2020
Reuben Jeffery, III 100,000 50,000
Emma Davies 45,000 45,000
Edward Cumming-Bruce 50,000 50,000
Relative Importance of Spend on Pay
The remuneration of the Directors with respect to the year totalled $163,707
(2020: $151,522) in comparison to distributions paid or declared to
Shareholders with respect to the year of $6.4 million (2020: $6.7 million).
Company Performance
The graph included in the annual report compares the total return to
Shareholders compared to the AIC Investment Trust Direct Lending sector index,
which is not sector specific to energy. The performance of the AIC Investment
Trust Direct Lending sector index is shown as a market reference for
investors.
On behalf of the Board
Reuben Jeffery, III
Chairman
16 February 2022
Directors' Responsibilities Statement
The Directors are responsible for preparing the Annual 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
Company financial statements in accordance with UK adopted international
accounting standards. 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 for the
Company for that year.
In preparing these 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 they have been prepared in accordance with UK
adopted international accounting standards, subject to any material departures
disclosed and explained in the financial statements;
· prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will continue in
business; and
· prepare a Report of the Directors, a Strategic Report and
Directors' Remuneration Report which comply with the requirements of the
Companies Act 2006.
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. The Directors are responsible for ensuring
that the Annual Report, taken as a whole, is fair, balanced and understandable
and provides the information necessary for Shareholders to assess the
Company's performance, business model and strategy.
Website Publication
The Directors are responsible for ensuring the Annual Report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the UK governing
the preparation and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity of the
Company's website is the responsibility of the Directors. The Directors'
responsibilities also extend to the ongoing integrity of the financial
statements contained therein.
Directors' Responsibilities Pursuant to DTR4
The Directors confirm that to the best of their knowledge:
· the Company's financial statements have been prepared in
accordance with UK adopted international accounting standards and give a true
and fair view of the assets, liabilities, financial position and profit and
loss of the Company; and
· the Annual Report includes a fair review of the development and
performance of the business and the financial position of the Company,
together with a description of the principal and emerging risks and
uncertainties that they face.
On behalf of the Board
Reuben Jeffery, III
Chairman
16 February 2022
Corporate Governance Report
This Corporate Governance Report forms part of the Report of the Directors as
further disclosed above. The Board operates under a framework for corporate
governance which is appropriate for an investment company. The Company is not
required to comply with the UK Listing Rules, however as a matter of good
corporate governance, the Company voluntarily complies with the provisions of
the Listing Rules applicable to closed-ended investment companies.
The Company became a member of the AIC with effect from 28 May 2019 and has
therefore put in place arrangements to comply with the AIC Code and, in
accordance with the AIC Code, complies with the UK Code. The AIC Code and the
AIC Guide are available on the AIC's website, www.theaic.co.uk . The UK Code
is available on the Financial Reporting Council's website, www.frc.org.uk .
The AIC Code, as explained by the AIC Guide, addresses all the principles set
out in the UK Code, as well as setting out additional principles and
recommendations on issues that are of specific relevance to investment
companies such as the Company. The Board considers that reporting against the
principles and recommendations of the AIC Code, by reference to the AIC Guide,
provides better information to Shareholders.
The Company has complied with the recommendations of the AIC Code and the
relevant provisions of the UK Code, except as set out below.
The UK Code includes provisions relating to:
· the role of the chief executive;
· executive directors' remuneration; and
· the need for an internal audit function.
For the reasons set out in the AIC Guide, and as explained in the UK Code, the
Board considers that the above provisions are not currently relevant to the
position of the Company, being an externally managed investment company, which
delegates most day-to-day functions to third parties.
The Company does not have a chief executive or any executive directors. The
Company has not established a separate remuneration committee as the Company
has no executive officers, nor has it established a Senior Independent
Director due to the size of the Board and the Company. The Board is satisfied
that any relevant issues that arise can be properly considered by the Board.
The Company has no employees or internal operations and has therefore not
reported further in respect of these provisions. The need for an internal
audit function is discussed in the Audit and Risk Committee Report.
The Board
The Company is led and controlled by a Board of Directors, which is
collectively responsible for the long-term success of the Company. It does so
by creating and preserving value, and has as its foremost principle, acting in
the interests of Shareholders.
The Company believes that the composition of the Board is a fundamental driver
of its success, as the Board must provide strong and effective leadership of
the Company. The current Board was selected, as their biographies illustrate,
to bring a breadth of knowledge, skills and business experience to the
Company. The non-executive Directors provide independent challenge and review,
bringing wide experience, specific expertise and a fresh objective
perspective.
As at the date of this report, the Board consists of three non-executive
Directors, all of whom are independent of the Company's Investment Manager.
All Directors were appointed on 2 April 2019 and served throughout the year.
The AIC Code requires that Directors be subject to an annual election by
Shareholders, and the Directors comply with this requirement. All of the
Directors shall offer themselves for re-election at the forthcoming AGM.
Having considered their effectiveness, demonstration of commitment to the
role, length of service, attendance at meetings and contribution to the
Board's deliberations, the Board approves the nomination for re-election of
all of the Directors.
At each subsequent AGM of the Company, each of the Directors at the date of
the notice convening the AGM shall retire from office and may offer themselves
for election or re-election by the Shareholders, in accordance with corporate
governance best practice.
The Chairman of the Board is independent and is appointed in accordance with
the Company's Articles of Incorporation. Mr. Jeffery is considered to be
independent because he:
· has no current or historical employment with the Investment
Manager;
· has no current directorships or partnerships in any other
investment funds managed by the Investment Manager; and
· is not an executive of a self-managed company or an ex-employee
who has left the executive team of a self-managed company within the last five
years.
The Board meets at least four times a year for regular, scheduled meetings and
should the nature of the activity of the Company require it, additional
meetings may be held, some at short notice. At each meeting, the Board follows
a formal agenda that covers the business to be discussed. The primary focus at
Board meetings is a review of investment performance and associated matters
such as asset allocation, share price discount/premium management, investor
relations, peer group information, gearing, industry issues and principal and
emerging risks and uncertainties in particular those identified in the
Strategic Report above.
The Board may request to be supplied in a timely manner with information by
the Investment Manager, Administrator, Company Secretary and other advisers in
a form and of a quality to enable it to discharge its duties.
The Company has adopted a share dealing code for the Board and will seek to
ensure compliance by the Board and relevant personnel of the Investment
Manager and other third party service providers with the terms of the share
dealing code.
The Culture
The Board discussed the Company's culture over the course of the year. It was
agreed that the Company's culture is built around that of the Investment
Manager, with a focus on long lasting relationships with a diverse investor
base; sustainable investment excellence; and a world class team demonstrating
extensive industry knowledge. The Board will continue to monitor the Company's
culture on an annual basis through continued engagement with Shareholders and
management.
Diversity Policy
The Board monitors developments in corporate governance to ensure the Board
remains aligned with best practice especially with respect to the increased
focus on diversity. The Board acknowledges the importance of diversity,
including gender, for the effective functioning of the Board and commits to
supporting diversity in the boardroom. It is the Board's ongoing aspiration to
have a well diversified representation. The Board also values diversity of
business skills and experience because Directors with diverse skills sets,
capabilities and experience gained from different geographical backgrounds
enhance the Board by bringing a wide range of perspectives to the Company.
As at the date of this report, the Board comprised two men and one woman, all
non-executive Directors who are considered to be independent of the Investment
Manager and free from any business or other relationship that could materially
interfere with the exercise of their independent judgement.
The Investment Manager has a diverse employee base and continues to dedicate
recruitment resources to increasing diversity across all positions and levels.
Board Tenure and Re-election
As the Company was incorporated on 11 March 2019, there are no issues to be
considered by the Board with respect to long tenure. In accordance with the
AIC Code, in the event that any Director, including the Chairman, shall have
been in office (or on re-election would have been at the end of that term of
office) for more than nine years, the Company will consider further whether
there is a risk that such a Director might reasonably be deemed to have lost
independence through such long service. The Board will consider its
composition and succession planning on an ongoing basis. All Directors will
stand for annual re-election at each AGM. In accordance with the AIC Code, the
Board recognises that Directors serving nine years or more may appear to have
their independence impaired. However, the Board may nonetheless consider
Directors to remain independent and will provide a clear explanation within
future Annual Reports and financial statements as to its reasoning.
A Director who retires at an AGM may, if willing to continue to act, be
elected or re-elected at that meeting. If, at a general meeting at which a
Director retires, the Company neither re-elects that Director nor appoints
another person to the Board in the place of that Director, the retiring
Director shall, if willing to act, be deemed to have been re-elected unless at
the general meeting it is resolved not to fill the vacancy or unless a
resolution for the re-election of the Director is put to the meeting and not
passed. Directors are appointed under letters of appointment.
Duties and Responsibilities
The Board has overall responsibility for the Company's activities, including
reviewing its investment
activity, performance, business conduct and policy. The Directors also review
and supervise the Company's delegates and service providers, including the
Investment Manager.
The Directors may delegate certain functions to other parties. In particular,
the Directors have delegated responsibility for management of the Company's
portfolio of investments to the Investment Manager.
The Board retains direct responsibility for certain matters, including (but
not limited to):
· approving the Company's long term objective and any decisions of
a strategic nature including any change in investment objective, policy and
restrictions, including those which may need to be submitted to Shareholders
for approval;
· reviewing the performance of the Company in light of the
Company's strategy objectives and budgets ensuring that any necessary
corrective action is taken;
· appointing, overall supervision and removal of key service
providers and any material amendments to the agreements or contractual
arrangements with any key delegates or service providers;
· approving quarterly distributions and the Company's distribution
policy;
· approving any transactions with 'related parties' for the
purposes of the Company's voluntary compliance with the applicable sections of
the UK Listing Rules;
· reviewing the Company's valuation policy;
· reviewing the Company's corporate governance arrangements; and
· approving any actual or potential conflicts of interest.
The Directors have access to the advice and services of the Administrator, who
is responsible to the Board for ensuring that Board procedures are followed
and that it complies with applicable law and regulations of the LSE. Where
necessary, in carrying out their duties, the Directors may seek independent
professional advice and services at the expense of the Company. The Company
maintains Directors' and Officers' liability insurance in respect of legal
action against its Directors on an ongoing basis.
The Board's responsibilities for the Annual Report are set out in the
Directors' Responsibilities Statement. The Board has responsibility for
ensuring that the Company keeps proper accounting records which disclose with
reasonable accuracy at any time the financial position of the Company and
which enable it to ensure that the financial statements comply with applicable
regulations. It is the Board's responsibility to present a fair, balanced and
understandable Annual Report, which provides the information necessary for
Shareholders to assess the performance, strategy and business model of the
Company. This responsibility extends to the half-yearly financial reports,
quarterly portfolio valuations and other price-sensitive public reports.
Directors' attendance at Board and Committee Meetings
One of the key criteria the Company uses when selecting non-executive
Directors is their confirmation prior to their appointment that they will be
able to allocate sufficient time to the Company to discharge their
responsibilities in a timely and effective manner.
The Board formally met 13 times during the year.
Directors are encouraged when they are unable to attend a meeting to give the
Chairman their views and comments on matters to be discussed, in advance. In
addition to their meeting commitments, the non-executive Directors also liaise
with the Investment Manager whenever required and there is regular contact
outside the Board meeting schedule.
Attendance is further set out below:
Board Audit and Risk Nomination Management
Meetings Committee Committee Engagement
(max 10) Meetings Meetings Committee Tenure as at 31 December 2021
(max 4) (max 1) Meetings
(max 1)
Director A B A B A B A B
7 7 4 4 1 1 1 1 2 years 9 months
Reuben Jeffery, III
7 7 4 4 1 1 1 1 2 years 9 months
Emma Davies
7 7 4 4 1 1 1 1 2 years 9 months
Edward Cumming-Bruce
Column A: indicated the number of meetings held during the year.
Column B: indicates the number of meetings attended by the Director during the
year.
A quorum is comprised of any two or more members of the Board from time to
time, to perform administrative and other routine functions on behalf of the
Board, subject to such limitations as the Board may expressly impose on this
committee from time to time.
Committees of the Board
The Board believes that it and its committees have an appropriate composition
and blend of skills, experience, independence and diversity of backgrounds to
discharge their duties and responsibilities effectively. The Board is of the
view that no one individual or small group dominates decision-making. The
Board keeps its membership, and that of its committees, under review to ensure
that an acceptable balance is maintained, and that the collective skills and
experience of its members continue to be refreshed. It is satisfied that all
Directors have sufficient time to devote to their roles and that undue
reliance is not placed on any individual.
Each committee of the Board has written terms of reference, approved by the
Board, summarising its objectives, remit and powers, which are available on
the Company's website and reviewed on an annual basis. All committee members
are provided with appropriate induction on joining their respective
committees, as well as on-going access to training. Minutes of all meetings of
the committees are made available to all Directors and feedback from each of
the committees is provided to the Board by the respective committee Chairman
at the next Board meeting. The Chairman of each committee attends the AGM to
answer any questions on their committee's activities.
The Board and its committees are supplied with regular, comprehensive and
timely information in a form and of a quality that enables them to discharge
their duties effectively. All Directors are able to make further enquiries of
management whenever necessary, and have access to the services of the Company
Secretary.
Audit and Risk Committee
The Audit and Risk Committee is chaired by Ms. Davies and comprises all the
non-executive Directors. The Audit and Risk Committee, the Investment Manager,
the Administrator and the external auditor, Ernst & Young LLP, have held
discussions regarding the audit approach and identified risks. The external
auditor attends Audit and Risk Committee meetings and a separate private
meeting is also held routinely to afford them the opportunity of discussions
without the presence of management. The Audit and Risk Committee activities
are contained in the Report of the Audit and Risk Committee below.
Nomination Committee
The Nomination Committee meets at least once a year pursuant to its terms of
reference. The Nomination Committee is chaired by Mr. Cumming-Bruce and
comprises all of the non-executive Directors.
The Nomination Committee is convened for the purpose of considering the
appointment of additional Directors as and when considered appropriate. The
Nomination Committee recognises the continuing importance of planning for the
future and ensuring that succession plans are in place. In considering
appointments to the Board, the Nomination Committee will take into account the
ongoing requirements of the Company and evaluate the balance of skills,
experience, independence, and knowledge of each candidate. Therefore,
appointments will be made on personal merit and against objective criteria
with the aim of bringing new skills and different perspectives to the Board
whilst taking into account the existing balance of knowledge, experience and
diversity.
In the case of candidates for non-executive directorships, care will be taken
to ascertain that they have sufficient time to fulfil their Board and, where
relevant, committee responsibilities. The Board believes that the terms of
reference of the Nomination Committee ensure that it operates in a rigorous
and transparent manner. The Board believes that, as a whole, it comprises an
appropriate balance of skills, experience and knowledge. The Board also
believes that diversity of experience and approach, including gender
diversity, amongst Board members is of great importance and it is the
Company's policy to give careful consideration to issues of Board balance and
diversity when making new appointments.
The Nomination Committee has reviewed the composition, structure and diversity
of the Board, succession planning, the independence of the Directors and
whether each of the Directors has sufficient time available to discharge their
duties effectively. The Committee and the Board confirm that they believe that
the Board has an appropriate mix of skills and backgrounds and was selected
with that in mind, that a majority of Directors should be considered as
independent in accordance with the provisions of the AIC Code and that all
Directors have the time available to discharge their duties effectively.
Accordingly, the Board recommends that Shareholders vote in favour of the
election of all Directors at the upcoming AGM of the Company.
Management Engagement Committee
The Management Engagement Committee is chaired by Mr. Jeffery and comprises
all of the non‑executive Directors. The Management Engagement Committee
meets at least once a year pursuant to its terms of reference.
The Management Engagement Committee provides a formal mechanism for the review
of the performance of the Investment Manager and the Company's other advisers
and service providers. It carries out this review through consideration of a
number of objective and subjective criteria and through a review of the terms
and conditions of the advisers' appointments with the aim of evaluating
performance, identifying any weaknesses and ensuring value for money for the
Shareholders. On 27 October 2021, the Management Engagement Committee formally
reviewed the performance of the Investment Manager and other service providers
and confirmed that performance had been satisfactory to date.
The AIC Code recommends that companies appoint a Remuneration Committee,
however the Board has not deemed this necessary, as being wholly comprised of
non-executive Directors, the whole Board considers these matters.
Board Performance and Evaluation
In accordance with Provision 26 of the AIC Code, the Board is required to
undertake a formal and rigorous evaluation of its performance on an annual
basis. Such an evaluation of the performance of the Board as whole, the Audit
and Risk Committee, the Nomination Committee, the Management Engagement
Committee, individual Directors and the Chairman is carried out under the
mandate of the Nomination Committee. The Board believes that the current mix
of skills, experience, knowledge and age of the Directors is appropriate to
the requirements of the Company.
On 27 October 2021, the Management Engagement Committee conducted an internal
evaluation of the Board, the Audit and Risk Committee and individual
Directors. This was in the form of performance appraisal, questionnaires and
discussion to determine effectiveness and performance in various areas, as
well as the Directors' continued independence and tenure. This process was
facilitated by the Company Secretary. The review concluded that the overall
performance of the Board and Audit and Risk Committee was satisfactory and the
Board was confident in its ability to continue to govern the Company
effectively.
New Directors receive an induction on joining the Board and regularly meet
with the senior management employed by the Investment Manager both formally
and informally to ensure that the Board remains regularly updated on all
issues. All members of the Board are members of professional bodies and serve
on other Boards, which ensures they are kept abreast of the latest technical
developments in their areas of expertise.
The Board arranges for presentations from the Investment Manager, the
Company's brokers and other advisers on matters relevant to the Company's
business. The Board will assess the training needs of Directors on an annual
basis.
Internal Control and Financial Reporting
The Directors acknowledge that they are responsible for establishing and
maintaining the Company's system of internal control and reviewing its
effectiveness. Internal control systems are designed to manage rather than
eliminate the failure to achieve business objectives and can only provide
reasonable but not absolute assurance against material misstatements or loss.
However, the Board's objective is to ensure that the Company has appropriate
systems in place for the identification and management of risks. The Directors
carry out a robust assessment of the principal and emerging risks facing the
Company, including those that would threaten its business model, future
performance, solvency or liquidity. As further explained in the Audit and Risk
Committee Report, the risks of the Company are outlined in a risk matrix which
was reviewed and updated during the year. The Board continually reviews its
policy setting and updates the risk matrix at least quarterly to ensure that
procedures are in place with the intention of identifying, mitigating and
minimising the impact of risks should they crystallise.
The key procedures which have been established to provide internal control are
that:
· the Board has delegated the day-to-day operations of the Company
to the Administrator and Investment Manager; however, it retains
accountability for all functions it delegates;
· the Board clearly defines the duties and responsibilities of the
Company's agents and advisers and appointments are made by the Board after due
and careful consideration. The Board monitors the ongoing performance of such
agents and advisers and will continue to do so through the Management
Engagement Committee;
· the Board monitors the actions of the Investment Manager at
regular Board meetings and is given frequent updates on developments arising
from the operations and strategic direction of the underlying investee
companies;
· the Administrator provides administration and company secretarial
services to the Company.
The Administrator maintains a system of internal control on which they report
to the Board; and
· the Board has reviewed the need for an internal audit function
and has decided that the systems and procedures employed by the Administrator
and Investment Manager, including their own internal controls and procedures,
provide sufficient assurance that an appropriate level of risk management and
internal control, which safeguards Shareholders' investments and the Company's
assets, is maintained. An internal audit function specific to the Company is
therefore considered unnecessary.
Internal controls over financial reporting are designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external reporting purposes. The Administrator and
Investment Manager both operate risk controlled frameworks on an ongoing basis
within a regulated environment. The Administrator formally reports to the
Board quarterly through a compliance report and holds the International
Standard on Assurance Engagements (ISAE) 3402 Type 2 certification. The
certification dates to October 2019, with the period up to 31 December 2021
being covered by a bridging letter that states no material changes in the
internal control environment have been noted. This entails an independent
rigorous examination and testing of their controls and processes. The
Investment Manager formally reports to the Board quarterly including updates
within Riverstone and also engages with the Board on an ad-hoc basis as
required. No weaknesses or failings within the Administrator or Investment
Manager have been identified.
The systems of control referred to above are designed to ensure effectiveness
and efficient operation, internal control and compliance with laws and
regulations. In establishing the systems of internal control, regard is paid
to the materiality of relevant risks, the likelihood of costs being incurred
and costs of control. It follows therefore that the systems of internal
control can only provide reasonable but not absolute assurance against the
risk of material misstatement or loss. This process has been in place for the
year under review and up to the date of approval of this Annual Report and
financial statements. It is reviewed by the Board and is in accordance with
the FRC's internal control publication: Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting.
Investment Management Agreement
The Investment Manager has been appointed as the sole investment manager of
the Company and the SPVs. Pursuant to the Investment Management Agreement, the
Investment Manager has responsibility for and discretion over investing and
managing the Company's and the SPVs' direct and indirect assets, subject to,
and in accordance with, the Company's investment policy. The Investment
Manager is entitled to delegate all or part of its functions under the
Investment Management Agreement to one or more of its affiliates. A summary of
fees paid to the Investment Manager is given in note 12 to the financial
statements.
The Investment Manager's appointment is terminable by the Investment Manager
or the Company on not less than 12 months' notice, such notice not to expire
prior to the third anniversary of Admission. The Investment Management
Agreement may be terminated with immediate effect and without compensation, by
either the Investment Manager or the Company if the other party has gone into
liquidation, administration or receivership or has committed a material breach
of the Investment Management Agreement.
The Company has delegated the provision of all services to external service
providers whose work is overseen by the Management Engagement Committee at its
regular scheduled meetings. Each year, a detailed review of performance
pursuant to their terms of engagement is undertaken by the Management
Engagement Committee.
The Board as a whole reviewed the Company's compliance with the UK Code, the
Listing Rules, the Disclosure Guidance and Transparency Rules and the AIC
Code. In accordance with Listing Rule 15.6.2(2)R and having formally appraised
the performance and resources of the Investment Manager, in the opinion of the
Directors, the continuing appointment of the Investment Manager on the terms
agreed is in the interests of the Shareholders as a whole. The Board is
pleased with the performance of the Investment Manager, based on the selection
of high quality E&P, midstream, energy services, solar, lithium-ion, power
and coal sectors.
Relations with Shareholders
The Board welcomes Shareholders' views and places great importance on
communication with its Shareholders. The Company's AGM provides a forum for
Shareholders to meet and discuss issues with the Directors of the Company. The
Chairman and other Directors are also available to meet with Shareholders at
the AGM to hear their views and discuss any issues or concerns, including in
relation to Board composition, governance and strategy, or at other times, if
required.
The Company reports formally to Shareholders in a number of ways; regulatory
news releases through the London Stock Exchange's Regulatory News Service,
announcements are issued in response to events or routine reporting
obligations. Also, an Interim Report is published each year outlining
performance to 30 June and the Annual Report is published each 31 December
year-end, both of which are available on the Company's website. In addition,
the Company's website contains comprehensive information, including Company
notifications, share information, financial reports, investment objectives and
policy, investor contacts and information on the Board and corporate
governance. Shareholders and other interested parties can subscribe to email
news updates by registering online on the website.
The Directors and Investment Manager receive informal feedback from analysts
and investors, which is presented to the Board by the Company's Broker. The
Company Secretary also receives informal feedback via queries submitted
through the Company's website and these are addressed by the Board, the
Investment Manager or the Company Secretary, where applicable.
Other Stakeholders
The wider stakeholders of the Company comprise its service providers, investee
companies and suppliers and the Board recognises and values these
stakeholders.
As an investment trust with no employees, the Company's relationship with its
service providers, including the Investment Manager, is of particular
importance. Service providers have been selected and engaged based on due
diligence and references including consideration of their internal controls
and expertise. The Company has established a Management Engagement Committee,
who review the performance of each service provider annually and provide
feedback as appropriate, to maintain good working relationships.
The Company's investment helps to ensure that the investee companies have the
resources to perform well, which helps to drive the local economies in which
these companies are located. Responsible investing principles have been
applied to each of the investments made, which ensures that appropriate due
diligence has been conducted and that the terms of the investments are clearly
set out and agreed with investee companies in advance. During the year, the
Investment Manager contacted all Borrowers to make sure that they have the
appropriate plans and resources in place to prioritise the health and safety
of their employees in light of the COVID-19 pandemic, as well as to assess
supply chain disruptions and ensure the normal operations of their business.
The Board recognises that relationships with suppliers are enhanced by prompt
payment and the Company's Administrator, in conjunction with the Investment
Manager, ensures all payments are processed within the contractual terms
agreed with the individual suppliers.
Whistleblowing
The Board has considered arrangements by which staff of the Investment Manager
or Administrator may, in confidence, raise concerns within their respective
organisations about possible improprieties in matters of financial reporting
or other matters. It has concluded that adequate arrangements are in place for
the proportionate and independent investigation of such matters and, where
necessary, for appropriate follow-up action to be taken within their
organisation.
By order of the Board
Reuben Jeffery, III
Chairman
16 February 2022
Audit and Risk Committee Report
The Audit and Risk Committee, chaired by Ms. Emma Davies, operates within
clearly defined terms of reference, which are available from the Company's
website, and include all matters indicated by Disclosure Guidance and
Transparency Rule 7.1, the AIC Code and the UK Code. Its other members are Mr.
Reuben Jeffery, III and Mr. Edward Cumming-Bruce. Members of the Audit and
Risk Committee must be independent of the Company's external auditor and
Investment Manager. Although Mr. Reuben Jeffery, III is Chairman of the
Company, the Board believes that it is appropriate for him to be a member of
the Audit and Risk Committee, given the size of the Company's Board. The Audit
and Risk Committee meets no less than three times in a year, and at such other
times as the Audit and Risk Committee Chair requires, and meets the external
auditor at least once a year.
The Committee members have considerable financial and business experience and
the Board has determined that the membership as a whole has sufficient recent
and relevant sector and financial experience to discharge its responsibilities
and that at least one member has competence in accounting or auditing.
Responsibilities
The main duties of the Audit and Risk Committee are to:
· monitor the integrity of the Company's financial statements and
regulatory announcements relating to its financial performance and review
significant financial reporting judgements;
· report to the Board on the appropriateness of the Company's
accounting policies and practices;
· consider the ongoing assessment of the Company as a going concern
and assessment of longer term viability;
· review the valuations of the Company's investments prepared by
the Investment Manager, and provide a recommendation to the Board on the
valuation of the Company's investments;
· oversee the relationship with the external auditor, including
agreeing its remuneration and terms of engagement, review its reporting,
monitoring its independence, objectivity and effectiveness, ensuring that any
non-audit services are appropriately considered, and making recommendations to
the Board on its appointment, re-appointment or removal, for it to put to the
Shareholders in general meeting;
· monitor and consider annually whether there is a need for the
Company to have its own internal audit function;
· keep under review the effectiveness of the Company's internal
controls, including financial controls and risk management systems;
· review and consider the UK Code, the AIC Code, and the AIC
Guidance on Audit Committees; and
· report to the Board on how it has discharged its
responsibilities.
The Audit and Risk Committee is aware that certain sections of the Annual
Report are not subject to formal statutory audit, including the Chairman's
Statement, the Investment Manager's Report and certain sections of the
Directors' Remuneration Report. Financial information in these sections is
reviewed by the Audit and Risk Committee.
The Audit and Risk Committee is required to report its findings to the Board,
identifying any matters on which it considers that action or improvement is
needed, and make recommendations on the steps to be taken.
The external auditor was invited to attend the Audit and Risk Committee
meetings at which the Annual Report and Interim Financial Report were
considered. They have the opportunity to meet with the Committee without
representatives of the Investment Manager or Administrator being present at
least once per year.
Financial Reporting
The primary role of the Audit and Risk Committee in relation to financial
reporting is to review with the Administrator, the Investment Manager and the
external auditor and report to the Board on the appropriateness of the Annual
Report and financial statements and Interim Financial Report, concentrating
on, amongst other matters:
· the quality and acceptability of accounting policies and
practices;
· the clarity of the disclosures and compliance with financial
reporting standards and relevant financial and governance reporting
requirements;
· material areas in which significant judgements have been applied
or where there has been discussion with the external auditor including going
concern and viability statement;
· whether the Annual Report and financial statements, taken as a
whole, is fair, balanced and understandable and provides the information
necessary for Shareholders to assess the Company's performance, business model
and strategy; and
· any correspondence from regulators in relation to financial
reporting.
To aid its review, the Audit and Risk Committee considers reports from the
Administrator and the Investment Manager and also reports from the external
auditor on the outcomes of its half-year review and annual audit.
Meetings
During the year ended 31 December 2021, the Audit and Risk Committee met four
times formally and there was ongoing liaison and discussion between the
external auditor and the Audit and Risk Committee Chair with regards to the
audit approach and the identified risks.
The matters discussed at those meetings include:
· review of the terms of reference of the Audit and Risk Committee
for approval by the Board;
· review of the accounting policies and format of the financial
statements;
· review and approval of the audit plan of the external auditor;
· discussion and approval of the fee for the external audit;
· detailed review of the valuations of the Company's investment
portfolio and recommendation for approval by the Board;
· detailed review of the Interim Report and quarterly portfolio
valuations, and recommendation for approval by the Board;
· assessment of the independence of the external auditor;
· assessment of the effectiveness of the external audit process as
described below; and
· review of the Company's key risks and internal controls.
The Audit and Risk Committee met on 16 February 2022 to review the results of
the audit and to consider and approve the Annual Report for the year ended 31
December 2021.
Significant Areas of Judgement Considered by the Audit and Risk Committee
The Audit and Risk Committee has determined that a key risk of misstatement of
the Company's financial statements relates to the valuation of its investments
at fair value through profit or loss, in the context of the judgements
necessary to evaluate market values of the underlying investments. There is
also an inherent risk of management override as the Investment Manager's
Profit Share is calculated based on revenue recognition and the NAV, as
disclosed in note 12 to the financial statements. The Investment Manager is
responsible for calculating the NAV with the assistance of the Administrator,
prior to approval by the Board.
In view of the Company's investments and the nature of the assets, no
adjustment to the NAV of the investments has been made, as this is deemed
equivalent to fair value.
The Audit and Risk Committee reviews, considers and, if thought appropriate,
recommends for the purposes of the Company's financial statements, valuations
prepared by the Investment Manager in respect of the investments.
As outlined in note 4 to the financial statements, the total carrying value of
the investments at fair value through profit or loss at 31 December 2021 was
$87.2 million (2020: $88.5 million).
On a quarterly basis, the Investment Manager provides a detailed analysis of
the NAV. This analysis is considered and challenged by the Audit and Risk
Committee and subsequently approved by the Board. The Audit and Risk Committee
has satisfied itself that the key estimates and assumptions used in the
valuation model are appropriate and that the investments have been fairly
valued.
The valuation for each individual investment held by the SPVs is determined by
reference to common industry valuation techniques, including comparable public
market valuation, comparable merger and acquisition transaction valuation, and
discounted cash flow valuation, as detailed in notes 2 and 4 to the financial
statements.
The valuation process and methodology was discussed with the Investment
Manager and with the external auditor at the Audit and Risk Committee meetings
held on 17 February 2021, 16 August 2021 and 16 February 2022. Due to the
illiquid and subjective nature of the Company's investments, the Investment
Manager uses an independent third party valuation provider to prepare
quarterly valuations and has provided a detailed valuation report to the
Company at each quarter.
Profit Share payable to the Investment Manager is based in part on NAV and
calculated in accordance with the Investment Management Agreement, as
summarised in note 12 to the financial statements. The Investment Manager sets
out a schedule of revenue and capital profits on a quarterly and year-to-date
basis, from which the Profit Share payable by the Company may be derived. This
schedule is reviewed by the Administrator quarterly and by the Auditor
semi-annually. As the Audit and Risk Committee comprises all Board members,
the allocation of revenue profits between potential distribution payments to
Shareholders and Profit Share payable to the Investment Manager may be
considered by the full Board at regular Board meetings.
The external auditor has explained the results of its audit work on valuations
in the Independent Auditor's Report. There were no adjustments proposed that
were material in the context of the Annual Report and financial statements as
a whole.
Risk Management
The Board is accountable for carrying out a robust assessment of the principal
and emerging risks facing the Company, including those threatening its
business model, future performance, solvency and liquidity. On behalf of the
Board, the Audit and Risk Committee reviews the effectiveness of the Company's
risk management processes. The Company's risk assessment process and the way
in which significant business risks are managed is a key area of focus for the
Audit and Risk Committee. The work of the Audit and Risk Committee was driven
primarily by the Company's assessment of its principal risks and uncertainties
as set out in the Strategic Report. The Audit and Risk Committee receives
reports from the Investment Manager and Administrator on the Company's risk
evaluation process and reviews changes to significant risks identified.
Internal Audit
The Audit and Risk Committee considers at least once a year whether or not
there is a need for an internal audit function. Currently, the Audit and Risk
Committee does not consider there to be a need for an internal audit function,
given that there are no employees in the Company and all outsourced functions
are with parties who have their own internal controls and procedures.
External Audit
Ernst & Young LLP has been the Company's external auditor since the
Company's incorporation. This is the third year of audit.
The external auditor is required to rotate the audit partner every five years.
There are no contractual obligations restricting the choice of external
auditor and the Company will put the audit services contract out to tender at
least every ten years. Under Companies Law, the re-appointment of the external
auditor is subject to Shareholder approval at the AGM. The Audit and Risk
Committee continues to monitor the performance of the external auditor on an
annual basis and considers its independence and objectivity, taking account of
appropriate guidelines. In addition, the Committee Chair continues to maintain
regular contact with the lead audit partner outside the formal Committee
meeting schedule, not only to discuss formal agenda items for upcoming
meetings, but also to review any other significant matters.
The Audit and Risk Committee reviews the scope and results of the audit, its
cost effectiveness and the independence and objectivity of the external
auditor, with particular regard to the level of any non-audit fees.
Notwithstanding such services, the Audit and Risk Committee considers Ernst
& Young LLP to be independent of the Company and that the provision of
such non-audit services is not a threat to the objectivity and independence of
the conduct of the audit.
To further safeguard the objectivity and independence of the external auditor
from becoming compromised, the Audit and Risk Committee are aware of the
Ethical Standard 2019 that imposes a cap on fees to be charged by a company's
external auditor for non-audit services at 70 percent of the average statutory
audit fees for the previous three years. This precludes Ernst & Young LLP
from providing certain services such as valuation work or the provision of
accounting services and also sets a presumption that Ernst & Young LLP
should only be engaged for non-audit services where they are best placed to
provide those services, for example the interim review and reporting
accountant services. Note 10 details services provided by Ernst & Young
LLP during the year.
To fulfil its responsibility regarding the independence of the external
auditor, the Audit and Risk Committee considers:
discussions with or reports from the external auditor describing its
arrangements to identify, report and manage any conflicts of interest; and
the extent of non-audit services provided by the external auditor.
To assess the effectiveness of the external auditor, the committee reviews:
the external auditor's fulfilment of the agreed audit plan and variations from
it;
discussions or reports highlighting the major issues that arose during the
course of the audit; and
feedback from other service providers evaluating the performance of the audit
team.
Fees paid to the Company's Auditor during the year are as follows:
For the year ended For the year ended
31 December 2021
31 December 2020
$'000 $'000
Fees to the Company's Auditor
for audit of the statutory financial statements 227 216
for other audit related services 27 27
for non-audit services - 16
254 259
Other fees paid to the Company's Auditor for other audit related services of
$27k (2020: $27k) were in relation to a review of the Interim Report and fees
paid for other non-audit services of $nil (2020: $16k) were in relation to
regulatory advisory services.
The Audit and Risk Committee is satisfied with Ernst & Young LLP's
effectiveness and independence as external auditor having considered the
degree of diligence and professional scepticism demonstrated. Having carried
out the review described above, and having satisfied itself that the external
auditor remains independent and effective, the Audit and Risk Committee has
recommended to the Board that Ernst & Young LLP be reappointed as external
auditor for the year ending 31 December 2022.
The Audit and Risk Committee has provided the Board with its recommendation to
the Shareholders on the re-appointment of Ernst & Young LLP as external
auditor for the year ending 31 December 2022. Accordingly, a resolution
proposing the re-appointment of Ernst & Young LLP as the Company's
external auditor will be put to Shareholders at the AGM.
On behalf of the Audit and Risk Committee
Emma Davies
Audit and Risk Committee Chair
16 February 2022
Independent Auditor's Report
to the Members of Riverstone Credit Opportunities Income Plc
Opinion
We have audited the financial statements of Riverstone Credit Opportunities
Income Plc (the 'Company') for the year ended 31 December 2021 which comprise
the Statement of Financial Position, Statement of Comprehensive Income,
Statement of Changes in Equity, Statement of Cash Flows and the related notes
1 to 18, including a summary of significant accounting policies. The financial
reporting framework that has been applied in their preparation is applicable
law and UK adopted international accounting standards.
In our opinion, the financial statements:
· give a true and fair view of the Company's affairs as at 31
December 2021 and of its profit for the year then ended;
· have been properly prepared in accordance with UK adopted
international accounting standards; 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 believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
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 as applied to listed public interest
entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
The non-audit services prohibited by the FRC's Ethical Standard were not
provided to the Company and we remain independent of the Company in conducting
the audit.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors'
use of the going concern basis of accounting in the preparation of the
financial statements is appropriate. Our evaluation of the Directors'
assessment of the Company's ability to continue to adopt the going concern
basis of accounting included the following procedures:
· We confirmed our understanding of the Directors' going concern
assessment process and also engaged with the Directors and the Investment
Manager early to determine if all key factors were considered in their
assessment.
· We inspected the Directors' assessment of going concern,
including the cashflow forecast, for the period to 30 June 2023 which is at
least twelve months from the date the financial statements were authorised for
issue. In preparing the cashflow forecast, the Company has concluded that it
is able to continue to meet its ongoing costs as they fall due.
We reviewed the factors and assumptions, including the impact of the COVID-19
pandemic and climate change, as applied to the cashflow forecast. We
considered the appropriateness
· of the methods used to calculate the cashflow forecast and
determined, through testing of the methodology and calculations, that the
methods, inputs and assumptions utilised were appropriate to be able to make
an assessment for the Company.
· We considered the mitigating factors included in the cashflow
forecast that are within the control of the Company. We reviewed the Company's
assessment of the stress testing performed and reverse stress testing
considerations, assessing the likelihood of the occurrence of the reverse test
scenario.
· We reviewed the Company's going concern disclosures included in
the Annual Report in order to assess that the disclosures were appropriate and
in conformity with the reporting standards.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Company's ability to continue
as a going concern for the period to 30 June 2023, which is at least twelve
months from when the financial statements are authorised for issue.
In relation to the Company's reporting on how they have applied the UK
Corporate Governance Code, we have nothing material to add or draw attention
to in relation to the Directors' statement in the financial statements about
whether the Directors considered it appropriate to adopt the going concern
basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to
going concern are described in the relevant sections of this report. However,
because not all future events or conditions can be predicted, this statement
is not a guarantee as to the Company's ability to continue as a going concern.
Overview of our audit approach
Key audit matters · Risk of incorrect calculation and allocation of the profit share
payable to the Investment Manager
· Risk of incorrect valuation of investments and resulting impact
on the Statement of Comprehensive Income
· Risk of incomplete or inaccurate revenue recognition with respect
to payment in kind ('PIK') interest
Materiality · Overall materiality of £934k which represents 1% of net assets.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation
of performance materiality determine our audit scope for the Company. This
enables us to form an opinion on the financial statements. We take into
account size, risk profile, the organisation of the Company and effectiveness
of controls, including controls and changes in the business environment when
assessing the level of work to be performed.
As a result of COVID-19, we were unable to meet physically with the Investment
Manager, management's valuation specialists, Administrator and Directors
during the course of our audit. These meetings were conducted virtually and
all audit queries were discussed over video conferencing. The audit team
encountered no difficulties in connecting virtually.
Climate change
There has been increasing interest from stakeholders as to how climate change
will impact the Company. The Company has determined that the most significant
future impacts from climate change on its operations may be from environmental
exposures and existing and proposed environmental legislation and regulation
that may adversely affect the operations of investee companies. These are
explained in the principal risks and uncertainties section, which form part of
the 'Other information,' rather than the audited financial statements. Our
procedures on these disclosures therefore consisted solely of considering
whether they are materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit or otherwise appear to be
materially misstated.
As explained in note 3, governmental and societal responses to climate change
risks are still developing, and are interdependent upon each other, and
consequently financial statements cannot capture all possible future outcomes
as these are not yet known. The degree of certainty of these changes may also
mean that they cannot be taken into account when estimating asset and
liability valuations and the timing of future cash flows under the
requirements of UK adopted international accounting standards.
Our audit effort in considering climate change was focused on ensuring that
the effects of climate risks disclosed above have been appropriately reflected
in the significant assumptions used in estimating the valuation of
investments. Details of our procedures and findings are included in our key
audit matters below. We also challenged the Directors' considerations of
climate change in their assessment of going concern and viability and
associated disclosures.
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) that we identified. These matters
included 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 our opinion thereon, and we do not
provide a separate opinion on these matters.
Risk Our response to the risk Key observations communicated to the Audit and Risk Committee
Risk of incorrect calculation and allocation of the profit share payable to We have performed the following procedures: The results of our audit procedures identified no material misstatement in
the Investment Manager (2021: $668k, 2020: $668k)
relation to the incorrect calculation and allocation of the profit share
We obtained an understanding of the Investment Manager and Administrator's payable to the Investment Manager.
Refer to the Audit and Risk Committee Report; Accounting policies; and note 12 processes and controls surrounding the profit share calculation, by performing
of the financial statements. our walkthrough procedures to evaluate the design and implementation of
controls.
Per the terms of the Investment Management Agreement ('IMA') and the
prospectus ('the agreements'), a profit share is payable to the Investment With the assistance of EY modelling specialists, we verified the model is
Manager at a rate of 20% where the Company's distributable income exceeds an consistent with the terms outlined in the agreement, which remain unchanged
amount equal to 4% of the Company's capital. An additional profit share of 10% from the prior year.
is payable where the Company's distributable income exceeds an amount equal to
8% of the Company's capital. The profit share is payable quarterly with an We recalculated the profit share payable to the Investment Manager for the
annual reconciliation in the last quarter of the year. The annual profit share year and agreed the key inputs to underlying financial records and the
payable is subject to a cap of 5% of net asset value and a potential agreements.
adjustment in the event the Company suffers a capital loss.
We verified that each of the performance conditions laid out in the agreements
As the agreements are open to interpretation, there is a risk that the model have been met, by comparing the Company's distributable income to the
used to calculate the profit share payable does not accurately reflect the Company's capital and testing the profit share amount relative to the cap. We
terms of the agreements. There is also an incentive and opportunity for the verified that no capital loss adjustment was required.
Investment Manager to manipulate the model to increase the profit share
payable. The Investment Manager does not receive any remuneration other than We agreed the quarterly profit share accruals posted to the general ledger to
the profit share. the profit share model calculation.
We confirmed that the profit share had been appropriately allocated to the
revenue column of the Statement of Comprehensive Income with respect to the
nature of the Company's income receipts to date and the basis of calculation
for the profit share.
Risk Our response to the risk Key observations communicated to the Audit and Risk Committee
Risk of incorrect valuation of investments and resulting impact on the We obtained an understanding of the Investment Manager's processes and The results of our audit procedures identified no material misstatement in
Statement of Comprehensive Income ($87,125k, 2020: $88,548k) controls surrounding the trade processing and valuation of investments by relation to the incorrect valuation of investments and resulting impact on the
performing our walkthrough procedures to evaluate the design and Statement of Comprehensive Income.
Refer to the Audit and Risk Committee Report ; Accounting policies; and note 4 implementation of controls.
of the financial statements.
We performed the following procedures for a sample of investments, engaging
The Company invests, via other wholly owned entities, in senior secured loans the assistance of EY valuation specialists:
and other unlisted securities issued by borrowers operating in the energy
sector. · We obtained the valuation models for the related assets to assess
whether the valuation methodology adopted is consistent with the requirements
Third party valuation specialists prepare valuations in accordance with of IFRS 13 and IPEV guidelines.
International Financial Reporting Standard 13 ('IFRS 13') Fair Value
Measurement and International Private Equity and Venture Capital Valuation · We challenged the appropriateness of assumptions used in the
('IPEV) guidelines with certain inputs determined by the Investment Manager application of the valuation models including the discount rate used in the
and are reported to the Board quarterly. yield analysis.
The valuation of the investments is material, complex and includes judgments · We verified key inputs used within the valuation models to
and significant estimates, including the impact of climate change on supporting documentation including valuation reports, credit agreements and
significant assumptions. There is a risk that the valuation of investments is paydown notices.
materially misstated. There is also an incentive and opportunity for the
Investment Manager to inflate the investment valuations. · We performed comparative calculations and compared our results to
the valuations determined by the Investment Manager.
Risk Our response to the risk Key observations communicated to the Audit and Risk Committee
Unrealised gains or losses are calculated as the difference between the fair · We performed back testing of the prospective financial
value of the investment and the book cost and contribute to a significant information ('PFI') for the investee companies to assess if the current year
portion of the capital returns in the Statement of Comprehensive Income. PFI is appropriate.
We have considered the continued impact of COVID-19 and climate change
throughout the procedures performed on the valuation of investments, by
challenging whether the valuation methodologies and assumptions used are
appropriate.
We agreed the investment valuation movements posted to the general ledger to
our year-end valuation work. We also recalculated the unrealised
gains/(losses) for the period, considering our procedures performed over the
valuation of investments.
Risk of incomplete or inaccurate revenue recognition with respect to PIK We have performed the following procedures: The results of our audit procedures identified no material misstatement in
interest (2021: nil, 2020: nil)
relation to the incomplete or inaccurate revenue recognition with respect to
We obtained an understanding of the Investment Manager and Administrator's PIK interest.
Refer to the Accounting policies; and note 4 of the financial statements. processes and controls surrounding the calculation and recognition of PIK
interest by performing our walkthrough procedures to evaluate the design and
A loan has been made to Riverstone International Credit Corporation ('RICC') implementation of controls.
which accrues interest at a rate of 9.27% per annum. Interest is also
receivable from the loans made, via the SPVs, to investee companies. There is We confirmed that no PIK interest had been recorded at the Company level by
the possibility for interest to be paid in the form of a payment-in-kind performing the following procedures:
('PIK') at both Company and investee company level.
· We reviewed the Company loan schedule and verified that there
were no outstanding PIK balances due at the year end.
Risk Our response to the risk Key observations communicated to the Audit and Risk Committee
Due to the nature of the underlying investee companies there is a degree of · We recalculated the interest income, vouching key inputs to the
estimation required to assess the likelihood that any PIK interest accrued supporting loan agreement and interest income received to bank statements. We
will be recoverable with repayment of the principal loan. There is therefore a compared this to the amount recorded per the financial statements.
risk that any PIK interest accrued may not be fully realisable.
· We vouched a sample of cash interest repayments in the year to
The Company's investment objective is to generate consistent Shareholder bank statements.
returns, and it is therefore important that revenue is accurately recognised
in order for investors to assess whether the Company is meeting this For the PIK interest accrued at an investee company level:
objective.
· We obtained the Administrator's calculations of PIK interest.
· We agreed key inputs to underlying executed loan agreements.
· We recalculated the expected PIK interest and compared this to
the amount recorded by the Administrator.
In order to assess reasonableness and recoverability of the accrued PIK
interest, we assessed the performance of the underlying investee companies,
with reference to our procedures performed over the valuation of investments.
Our key audit matters are consistent with those reported in our 2020 Auditor's
Report.
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in
evaluating the effect of identified misstatements on the audit and in forming
our audit opinion.
Materiality
The magnitude of an omission or misstatement that, individually or in the
aggregate, could reasonably be expected to influence the economic decisions of
the users of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
We determined materiality for the Company to be $934k (2020: $955k), which is
1% (2020: 1%) of net assets. We believe that net assets provide us with the
most relevant measure of Company performance to the stakeholders of the
Company.
Performance materiality
The application of materiality at the individual account or balance level. It
is set at an amount to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements exceeds
materiality.
On the basis of our risk assessments, together with our assessment of the
Company's overall control environment, our judgement was that performance
materiality was 75% (2020: 75%) of our planning materiality, namely $700k
(2020: $716k). We have set performance materiality at this percentage based on
the fact that there were no material prior year misstatements. We have also
confirmed that the control environment is consistent with the prior year and
there have been no significant changes in circumstances.
Reporting threshold
An amount below which identified misstatements are considered as being clearly
trivial.
We agreed with the Audit and Risk Committee that we would report to them all
uncorrected audit differences in excess of $47k (2020: $48k), which is set at
5% of planning materiality, as well as differences below that threshold that,
in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative
measures of materiality discussed above and in light of other relevant
qualitative considerations in forming our opinion.
Other information
The other information comprises the information included in the Annual Report,
other than the financial statements and our Auditor's Report thereon. The
Directors are responsible for the other information contained within the
Annual Report.
Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in this report, we do
not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit or otherwise
appears to be materially misstated. If we identify such material
inconsistencies or apparent material misstatements, we are required to
determine whether there is a material misstatement in the financial statements
themselves 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 the 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 the part of the Directors' Remuneration Report to be audited
has been properly prepared in accordance with 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 the
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 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 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.
Corporate Governance Statement
As the Company is listed on the Specialist Fund Segment of the London Stock
Exchange, the Directors have voluntarily complied with the UK Corporate
Governance Code (the 'Code') and have prepared a Corporate Governance
Statement in accordance with the Disclosure Guidance and Transparency Rules of
the Financial Conduct Authority ('FCA').
The Listing Rules require us to review the Directors' statement in relation to
going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the Company's compliance with the provisions of the UK
Corporate Governance Statement specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each
of the following elements of the Corporate Governance Statement is materially
consistent with the financial statements or our knowledge obtained during the
audit:
· Directors' statement with regards to the appropriateness of
adopting the going concern basis of accounting and any material uncertainties
identified set out above;
· Directors' explanation as to its assessment of the Company's
prospects, the period this assessment covers and why the period is appropriate
set out above;
· Directors' statement on fair, balanced and understandable set out
above;
· Board's confirmation that it has carried out a robust assessment
of the emerging and principal risks set out above;
· The section of the Annual Report that describes the review of
effectiveness of risk management and internal control systems set out above;
and;
· The section describing the work of the Audit and Risk Committee
set out above.
Responsibilities of Directors
As explained more fully in the Directors' Responsibilities Statement set out
above, 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.
Explanation as to what extent the audit was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect irregularities, including fraud. 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. The
extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud
rests with both those charged with governance of the Company and management.
· We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Company and determined that the most
significant are UK adopted international accounting standards, the Companies
Act 2006, the UK Corporate Governance Code, Section 1158 of the Corporation
Tax Act 2010, the Association of Investment Companies' Code and Statement of
Recommended Practice and The Companies (Miscellaneous Reporting) Regulations
2018.
· We understood how the Company is complying with those frameworks
through discussions with the Audit and Risk Committee and Company Secretary
and review of Board minutes and the Company's documented policies and
procedures.
· We assessed the susceptibility of the Company's financial
statements to material misstatement, including how fraud might occur by
considering the key risks impacting the financial statements. We identified
fraud and management override risk in relation to the incorrect calculation
and allocation of the profit share payable to the Investment Manager and in
relation to the incorrect valuation of investments. Further discussion of our
approach is set out in the section on key audit matters above.
· Based on this understanding we designed our audit procedures to
identify non-compliance with such laws and regulations. Our procedures
involved review of the Company Secretary's reporting to the Directors with
respect to the application of the documented policies and procedures and
review of the financial statements to ensure compliance with the reporting
requirements of the Company.
A further description of our responsibilities for the audit of the financial
statements is located on the Financial Reporting Council's website at
www.frc.org.uk/auditorsresponsibilities. This description forms part of our
Auditor's Report.
Other matters we are required to address
· Following the recommendation from the Audit and Risk Committee
we were appointed by the Company on 2 April 2019 to audit the financial
statements for the year ending 31 December 2019 and subsequent financial
periods. We signed an engagement letter on 24 October 2019.
The period of total uninterrupted engagement including previous renewals and
reappointments is three years, covering the years ending 31 December 2019 to
31 December 2021.
· The non-audit services prohibited by the FRC's Ethical Standard
were not provided to the Company and we remain independent of the Company in
conducting the audit.
· The audit opinion is consistent with the additional report to
the Audit and Risk Committee.
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.
Mike Gaylor (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
16 February 2022
Notes:
1. The maintenance and integrity of the Riverstone Credit Opportunities Income
Plc web site is the responsibility of the Directors; the work carried out by
the auditors does not involve consideration of these matters and, accordingly,
the auditors accept no responsibility for any changes that may have occurred
to the financial statements since they were initially presented on the web
site.
2. Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in other
jurisdictions.
Statement of Financial Position
As at 31 December 2021
31 December 2021 31 December 2020
Note $'000 $'000
Non-current assets
Investments at fair value through profit or loss 4 87,125 88,548
87,125 88,548
Current assets
Loan interest receivable 4 1,418 1,315
Dividends receivable 4 674 1,135
Trade and other receivables 6 97 84
Cash and cash equivalents 4,884 5,374
7,073 7,908
Current liabilities
Trade and other payables 7 (898) (926)
Net current assets 6,175 6,982
Net assets 93,300 95,530
Equity
Share capital 8 915 915
Capital redemption reserve 8 85 85
Other distributable reserves 8 91,179 91,179
Retained earnings 9 1,121 3,351
Total Shareholders' funds 93,300 95,530
Number of Shares in issue at year end 91,545,383 91,545,383
Basic and diluted net assets per Share (cents) 13 101.92 104.35
The financial statements of the Company were approved and authorised for issue
by the Board of Directors on 16 February 2022 and signed on its behalf by:
Reuben Jeffery,
III
Emma Davies
Chairman
Director
Company number: 11874946
The accompanying notes below form an integral part of these financial
statements.
Statement of Comprehensive Income
For the year ended 31 December 2021
For the year ended For the year ended
31 December 2021
31 December 2020
Note Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
Investment (loss)/gain
Change in fair value of investments at fair value through profit or loss 4 - (1,986) (1,986) - 742 742
- (1,986) (1,986) - 742 742
Income
Investment income 4 8,274 - 8,274 8,460 - 8,460
8,274 - 8,274 8,460 - 8,460
Expenses
Directors' fees and expenses 16 (179) - (179) (164) - (164)
Other operating expenses (991) - (991) (992) - (992)
Profit share 12 (668) - (668) (668) - (668)
Total expenses (1,838) - (1,838) (1,824) - (1,824)
Operating profit / (loss) for the year 6,436 (1,986) 4,450 6,636 742 7,378
Finance income
Interest income 1 - 1 55 - 55
Total finance income 1 - 1 55 - 55
Profit / (loss) for the year before tax 6,437 (1,986) 4,451 6,691 742 7,433
Tax 11 - - - - - -
Profit / (loss) for the year after tax 6,437 (1,986) 4,451 6,691 742 7,433
Profit / (loss) and total comprehensive income for the year 6,437 (1,986) 4,451 6,691 742 7,433
Profit / (loss) and total comprehensive income attributable to:
Equity holders of the Company 6,437 (1,986) 4,451 6,691 742 7,433
Earnings per share
Basic and diluted earnings and loss per Share (cents) 13 7.03 (2.17) 4.86 6.83 0.76 7.59
All 'Revenue' and 'Capital' items in the above statement derive from
continuing operations. No operations were acquired or discontinued in the
year.
The 'Total' column of this statement is the profit and loss account of the
Company and the 'Revenue' and 'Capital' columns represent supplementary
information prepared under guidance issued by the Association of Investment
Companies. Profit for the year after tax also represents Total Comprehensive
Income.
The accompanying notes below form an integral part of these financial
statements.
Statement of Changes in Equity
For the year ended 31 December 2021
For the year ended Share capital Capital redemption reserve Other distributable reserves Retained earnings Total
31 December 2021
Note $'000 $'000 $'000 $'000 $'000
Opening net assets attributable to Shareholders 915 85 91,179 3,351 95,530
Total comprehensive income for the year - - - 4,451 4,451
Distributions paid in the year 14 - - - (6,681) (6,681)
Closing net assets attributable to Shareholders 915 85 91,179 1,121 93,300
After taking account of cumulative unrealised losses of $0.5m on the capital
reserve, other distributable reserves and distributions made, the total
reserves distributable by way of a distribution as at 31 December 2021 were
$92.8m.
For the year ended Share capital Capital redemption reserve Other distributable reserves Retained earnings Total
31 December 2020
$'000 $'000 $'000 $'000 $'000
Opening net assets attributable to Shareholders 1,000 - 97,000 3,351 101,351
Repurchase and cancellation of share capital (85) 85 (5,821) - (5,821)
Total comprehensive income for the year - - - 7,433 7,433
Distributions paid in the year 14 - - - (7,433) (7,433)
Closing net assets attributable to Shareholders 915 85 91,179 3,351 95,530
After taking account of cumulative unrealised gains of $1.5m on the capital
reserve, other distributable reserves and distributions made, the total
reserves distributable by way of a distribution as at 31 December 2020 were
$93.0m.
The accompanying notes below form an integral part of these financial
statements.
Statement of Cash Flows
For the year ended 31 December 2021
Note For the year ended For the year ended
31 December 2021
31 December 2020
$'000 $'000
Cash flows from operating activities
Operating profit for the financial year 4,450 7,378
Adjustments for:
Movement in fair value of investments 4 1,986 (742)
Investment income 4 (8,274) (8,460)
Movement in payables (28) 600
Movement in receivables (13) (4)
Loan interest received 4 5,464 6,429
Dividends received 3,168 1,830
Bank interest received 1 77
Net cash generated from operating activities 6,754 7,108
Cash flows from investing activities
Investment additions 4 (563) -
Investment proceeds 4 - 2,971
Net cash (used in) / generated from investing activities (563) 2,971
Cash flows from financing activities
Distributions paid 14 (6,681) (7,433)
Repurchase and cancellation of share capital 8 - (5,821)
Net cash used in financing activities (6,681) (13,254)
Net movement in cash and cash equivalents during the year (490) (3,175)
Cash and cash equivalents at the beginning of the year 5,374 8,549
Cash and cash equivalents at the end of the year 4,884 5,374
The accompanying notes below form an integral part of these financial
statements.
Notes to the Financial Statements
For the year ended 31 December 2021
1. General Information
The Company was incorporated and registered in England and Wales on 11 March
2019 with registered number 11874946 as a public company limited by shares
under the Companies Act 2006
(the ''Act''). The principal legislation under which the Company operates is
the Act. The Directors intend, at all times, to conduct the affairs of the
Company so as to enable it to qualify as an investment trust for the purposes
of section 1158 of the Corporation Tax Act 2010, as amended.
2. Significant accounting policies
Basis of preparation
The financial statements have been prepared in accordance with the UK adopted
international accounting standards. Where presentational guidance set out in
the AIC SORP, 2021 edition, is consistent with the requirements of UK adopted
international accounting standards, the Directors have sought to prepare the
financial statements on a basis compliant with the recommendations of the AIC
SORP. In particular, supplementary information which analyses the Statement of
Comprehensive Income between items of a revenue and capital nature has been
presented alongside the total Statement of Comprehensive Income.
The annual financial statements have been prepared on the historical cost
basis, as modified for the measurement of certain financial instruments at
fair value through profit or loss. The principal accounting policies are set
out below.
Foreign currencies
The functional currency of the Company is US Dollar reflecting the primary
economic environment in which the Company operates, where most transactions
are expected to take place in US Dollar. Additionally, the Ordinary Shares of
the Company are listed in US Dollar.
The Company has chosen US Dollar as its presentation currency for financial
reporting purposes.
Transactions during the year, including income and expenses, are translated
into US Dollar at the rate of exchange prevailing on the date of the
transaction. Monetary assets and liabilities denominated in currencies other
than US Dollar are retranslated at the functional currency rate of exchange
ruling at the reporting date. Non-monetary items that are measured in terms of
historical cost in a currency other than US Dollar are translated using the
exchange rates as at the dates of the initial transactions.
Non-monetary items measured at fair value in a currency other than US Dollar
are translated using the exchange rates at the date when the fair value was
determined. Foreign currency transaction gains and losses on financial
instruments classified as at fair value through profit or loss are included in
profit or loss in the Statement of Comprehensive Income as part of the 'Change
in fair value of investments at fair value through profit or loss'. Exchange
differences on other financial instruments were immaterial and have been
included as other operating expenses in the Statement of Comprehensive Income.
Financial instruments
In accordance with IFRS 9, financial assets and financial liabilities are
recognised in the Company's Statement of Financial Position when the Company
becomes a party to the contractual provisions of the instrument.
Financial assets
When financial assets are recognised initially, they are measured at fair
value. Fair value is defined as the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.
a) Investments at fair value through profit or loss
i. Classification and measurement
The Company's investments are classified as held at fair value through profit
or loss as they are managed in a portfolio of assets on a fair value basis.
Financial assets held at fair value through profit or loss are initially
recognised at fair value, which is taken to be their cost, and are
subsequently valued at fair value.
ii. Fair value estimation
The SPVs hold and manage the Company's underlying investments, which are
valued at fair value, based on IPEV Valuation Guidelines and the UK adopted
international accounting standards. The fair value of the SPVs is considered
to be their net asset value incorporating a valuation of the underlying
investments. The Directors believe that this is appropriate, as:
· the underlying investments within the SPVs are held on a fair
value basis as described below and have taken into account risks to fair
value, inclusive of liquidity discounts, through appropriate discount rates;
· the Company wholly owns the SPVs and thus is entitled to all of
their economic rights; and
· the Directors take all these items into consideration and would
make adjustments to net asset value, if deemed necessary.
Valuation process
The Investment Manager is responsible for proposing the valuation of the
assets held by the Company through the SPVs and the Directors are responsible
for reviewing the Company's valuation policy and approving the valuations.
Valuation adviser
Due to the illiquid and subjective nature of the Company's underlying
investments, the Investment Manager uses a third party valuation provider to
perform a full independent valuation of the underlying investments. This
includes the third party valuation provider selecting the valuation
methodology and/or comparable companies; identifying the cash flows and
appropriate discount rate utilised in a yield analysis; and providing a final
value range to the Investment Manager. The valuation adviser independently
values the assets and provides analyses to support the methodology in addition
to presenting calculations used to generate output.
b) Cash and cash equivalents
Cash includes cash on hand and demand deposits. Cash equivalents comprise
other short-term highly liquid investments with an original maturity of three
months or less that are readily convertible to a known amount of cash and are
subject to an insignificant risk of changes in value.
Cash and cash equivalents are used for cash management purposes, primarily for
the payment of expenses and distributions.
c) Trade receivables
Trade receivables are classified as financial assets at amortised cost. They
are measured at amortised cost less impairment assessed using the simplified
approach of the expected credit loss model based on current circumstances and
expectations of future losses.
A financial asset is derecognised (in whole or in part) either:
· when the Company has transferred substantially all the risks and
rewards of ownership; or
· when it has neither transferred nor retained substantially all
the risks and rewards and when it no longer has control over the assets or a
portion of the asset; or
· when the contractual right to receive cash flow has expired.
Financial liabilities
a) Trade payables
Trade payables are classified as financial liabilities at amortised cost.
Equity
The Company's Ordinary Shares are classified as equity and upon issuance, the
fair value of the consideration received is included in equity. All other
share issue costs of the Company, which were otherwise chargeable to equity,
were borne by the Investment Manager.
Repurchase of Ordinary Shares for cancellation
The cost of repurchasing Ordinary Shares including the related stamp duty and
transactions costs is charged to the 'Other distributable reserves' and dealt
with in the Statement of Changes in Equity. Share repurchase transactions are
accounted for on a trade date basis. The nominal value of ordinary share
capital repurchased and cancelled is transferred out of 'Share capital' and
into the 'Capital redemption reserve'.
Distributions
Distributions payable are recognised as distributions in the financial
statements when the Company's obligation to make payment has been established.
Income recognition
Dividend income is recognised when the Company's entitlement to receive
payment is established. Interest income is recognised on an accruals basis.
Interest income due, but not received, is capitalised with the principal
amount of the loan and may subsequently be reclassed as loan interest
receivable, when the distribution is imminent. Dividend and interest income is
allocated to Revenue within the Statement of Comprehensive Income.
Expenses
Expenses include legal, accounting, auditing and other operating expenses.
They are recognised on an accruals basis in the Statement of Comprehensive
Income in the year in which they are incurred.
Expenses are charged through the Revenue account except those which are
capital in nature, including those which are incidental to the acquisition,
disposal or enhancement of an investment, which are accounted for through the
Capital account.
Taxation
It is the intention of the Directors to conduct the affairs of the Company so
that it satisfies the conditions in section 1158 Corporation Tax Act 2010 and
the Investment Trust (Approved Company) (Tax) Regulations 2011 for it to be
approved by HMRC as an investment trust.
In respect of each accounting period for which the Company is and continues to
be approved by HMRC as an investment trust, the Company will be exempt from UK
corporation tax on its chargeable gains and its capital profits from creditor
loan relationships. The Company will, however, be subject to UK corporation
tax on its income (currently at a rate of 19 percent).
In principle, the Company will be liable to UK corporation tax on its dividend
income. However, there are broad-ranging exemptions from this charge which
would be expected to be applicable in respect of most of the dividends the
Company may receive.
A company that is an approved investment trust in respect of an accounting
period is able to take advantage of modified UK tax treatment in respect of
its ''qualifying interest income'' for an accounting period. It is expected
that the Company will have material amounts of qualifying interest income and
that it may, therefore, decide to designate some or all of the dividends paid
in respect of a given accounting period as interest distributions.
To the extent that the Company receives income from, or realises amounts on
the disposal of, investments in foreign countries it may be subject to foreign
withholding or other taxation in those jurisdictions. To the extent it relates
to income, this foreign tax may, to the extent not relievable under a double
tax treaty, be able to be treated as an expense for UK corporation tax
purposes, or it may be treated as a credit against UK corporation tax up to
certain limits and subject to certain conditions.
Deferred tax is the tax expected to be payable or recoverable on temporary
differences between the carrying amounts of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation
of taxable profit. 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 taxable profits will be available against
which deductible temporary differences can be utilised.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments, except where the Company is able to control the timing
of the reversal of the difference and it is probable that the temporary
difference will not reverse in the foreseeable future. Deferred tax is
calculated at the tax rates that are expected to apply in the period when the
liability is settled or the asset is realised. Deferred tax is charged or
credited to the Statement of Comprehensive Income except when it relates to
items charged or credited directly to equity, in which case the deferred tax
is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off tax assets against tax liabilities and when they
relate to income taxes levied by the same taxation authority and the Company
intends to settle its current tax assets and liabilities on a net basis.
Deferred tax assets and liabilities are not discounted.
Going Concern
The Company's cash balance at 31 December 2021 was $4.9 million, which is
sufficient to cover its existing liabilities of $0.9 million, distribution of
$1.6 million with respect to the quarter ended 31 December 2021 and any
foreseeable expenses in the period from 16 February 2022 to 30 June 2023,
being the period of assessment covered by the Directors.
The cash balances within the SPVs amounted to $22.8 million. Presently there
is no credit facility at the Company or at the SPV level. Additionally, the
underlying SPVs do not have recourse to the Company for any indebtedness that
may occur. The Operating Expenses of the entire structure are budgeted to be
between $1 million and $1.5 million per year not including taxes. Based on the
high end of this range it would take the Company over eighteen years to run
out of cash.
As further detailed in note 4 to the financial statements, the Investment
Manager uses a third party valuation provider to perform a full independent
valuation of the underlying investments. The Investment Manager has also
assessed the recoverability of income due from the underlying investee
companies and has no material concerns. Additionally, the Investment Manager
and Directors have considered the cash flow forecast and a reverse stress test
to determine the term over which the Company can remain viable given its
current resources.
The Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for at least the period from 16
February 2022 to 30 June 2023, being the period of assessment covered by the
Directors. In making this assessment, they have considered the effects of
COVID-19 as outlined in the Strategic Report above, including the various risk
mitigation measures in place and do not consider this to have a material
impact on the assessment of the Company as a going concern. Accordingly, the
Company continues to adopt the going concern basis of accounting in preparing
the financial statements.
Segmental reporting
The chief operating decision-maker, who is responsible for allocating
resources and assessing performance of the operating segments, has been
identified as the Board of Directors, as a whole. The key measure of
performance used by the Board to assess the Company's performance and to
allocate resources is the Company's Net Asset Value, as calculated under UK
adopted international accounting standards, and therefore no reconciliation is
required between the measure of profit or loss used by the Board and that
contained in the Annual Report.
For management purposes, the Company is organised into one main operating
segment, which invests through its SPVs in a diversified portfolio of debt
instruments, issued by Borrowers operating in the energy sector.
All of the Company's current income is derived from within the United States.
All of the Company's non-current assets are located in the United States.
Due to the Company's nature, it has no customers.
New and amended standards and interpretations not applied
Accounting standards and interpretations have been published and will be
mandatory for the Company's accounting periods beginning on or after 1 January
2022 or later periods. The following are the new or amended accounting
standards or interpretations applicable to the Company:
· amendments to IAS 1 'Presentation of financial statements' on
classification of liabilities, effective for annual periods beginning on or
after 1 January 2023
· amendments to IAS 1 'Presentation of financial statements' and
IFRS Practice Statement 2 on disclosure of accounting policies, effective for
annual periods beginning on or after 1 January 2023
The impact of these amendments is not expected to be material to the reported
results and financial position of the Company.
3. Significant accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses.
Estimates and judgements are continually evaluated and are based on management
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
Judgements
In the process of applying the Company's accounting policies, management has
made the following judgements, which have the most significant effect on the
amounts recognised in the financial statements:
Assessment as an Investment Entity
IFRS 10 'Consolidated Financial Statements' sets out the following three
essential criteria that must be met, if a company is to be considered as an
Investment Entity:
1. it must obtain funds from multiple investors for the purpose of
providing those investors with investment management services;
2. it must commit to its investors that its business purpose is to invest
funds solely for returns from capital appreciation, investment income, or
both; and
3. it must measure and evaluate the performance of substantially all of
its investments on a fair value basis.
In satisfying the second essential criteria, the notion of an investment time
frame is critical and an Investment Entity should have an exit strategy for
the realisation of its investments. Also as set out in IFRS 10, further
consideration should be given to the typical characteristics of an Investment
Entity, which are that:
· it should have more than one investment, to diversify the risk
portfolio and maximise returns;
· it should have multiple investors, who pool their funds to
maximise investment opportunities;
· it should have investors that are not related parties of the
entity; and
· it should have ownership interests in the form of equity or
similar interests.
The Directors are of the opinion that the Company meets the essential criteria
and typical characteristics of an Investment Entity. Therefore the SPVs are
measured at fair value through profit or loss, in accordance with IFRS 9
'Financial Instruments'. Fair value is measured in accordance with IFRS 13
'Fair Value Measurement'.
Assessment of the SPVs as structured entities
The Company considers the SPVs to be structured entities as defined by IFRS 12
'Disclosure of Interests in Other Entities'. Transfer of funds by the SPVs to
the Company is determined by the Investment Manager. The risks associated with
the Company's investment in the SPVs are disclosed in note 15. The summarised
financial information for the Company's investment in the SPVs is disclosed in
note 4.
Estimates and assumptions
The area involving a high degree of judgement or complexity and where
assumptions and estimates are significant to the financial statements has been
identified as the risk of misstatement of the valuation of the investments
(see note 4). Revisions to accounting estimates are recognised in the year in
which the estimate is revised and in any future years affected. The Board's
determination of whether a discount or premium should be applied to the net
asset value of the SPV involves a degree of judgement due to the nature of the
underlying investments and other assets and liabilities and the valuation
techniques and procedures adopted by the SPV.
The resulting accounting estimates will, by definition, seldom equal the
related actual results.
Climate change
In preparing the financial statements, the Directors have considered the
impact of climate change, particularly in the context of the climate change
risks identified in the ESG Report section of the Strategic Report.
In preparing the financial statements, the Directors have considered the
medium and longer term cash flow impacts of climate change on a number of key
estimates within the financial statements, including:
· the estimates of future cash flows used in impairment assessments
of the fair value of investments; and
· the estimates of future profitability used in the assessment of
distributable income and profit share.
These considerations did not have a material impact on the financial reporting
judgements and estimates in the current year. This reflects the conclusion
that climate change is not expected to have a significant impact on the
Company's short-term cash flows including those considered in the going
concern and viability assessments.
4. Investments at fair value through profit or loss
The table below shows the reconciliation of the movements of level 3 assets
during the year.
For the year ended For the year ended 31 December 2020
31 December 2021
Loans Equity Total Loans Equity Total
$'000 $'000 $'000 $'000 $'000 $'000
Opening balance 60,049 28,499 88,548 62,864 28,677 91,541
Repayment of capitalised interest - - - (764) - (764)
Investment addition / (proceeds) - 563 563 (2,051) (920) (2,971)
Unrealised movement in fair value of investments - (1,986) (1,986) - 742 742
60,049 27,076 87,125 60,049 28,499 88,548
The Company's investment in its SPVs comprises a loan investment and an equity
investment, as set out above. The SPVs invest in a diversified portfolio of
direct and indirect investments in loans, notes, bonds and other debt
instruments.
Interest receivable on the loan investment at 31 December 2021 was $1.4m
(2020: $1.3m) and the dividend receivable on the equity investment at 31
December 2021 was $0.7m (31 December 2020: $1.1m). As at 31 December 2021, the
total unfunded commitments of the Company by its SPV investments is $8.4m
(2020: $4.2m).
Reconciliation of investment income recognised in the year
For the year ended For the year ended
31 December 2021
31 December 2020
$'000 $'000
Movement in loan interest receivable at year end 103 (170)
Loan interest received as cash 5,464 5,665
Total loan interest recognised in the year 5,567 5,495
Dividend income 2,707 2,965
Total investment income recognised in the year 8,274 8,460
Total cash received in relation to interest income in the year was $5.5m
(2020: $6.4m). This comprises $5.5m (2020: $5.7m) of loan interest recognised
in the year and $nil (2020: $0.8m) of amounts capitalised in the prior period.
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level. The level of
fair value hierarchy within the financial assets or financial liabilities is
determined on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the following 3 levels:
• Level 1 - quoted prices (unadjusted) in active markets for identical
assets or liabilities;
· Level 2 - inputs other than quoted prices included within Level 1
that are observable for the assets or liabilities, either directly (i.e. as
prices) or indirectly (i.e. derived from prices); and
· Level 3 - inputs for assets or liabilities that are not based on
observable market data (unobservable inputs).
The determination of what constitutes 'observable' requires significant
judgement by the Company. The Directors consider observable data to be market
data that is readily available, regularly distributed or updated, reliable and
verifiable, not proprietary, and provided by independent sources that are
actively involved in the relevant market.
The only financial instruments held at fair value are the instruments held by
the Company in the SPVs, which are fair valued at each reporting date. The
Company's investments have been classified within level 3 as the investments
are not traded and contain unobservable inputs. The Company's investments are
all considered to be level 3 assets.
Due to the nature of the investments, they are always expected to be
classified as level 3. There have been no transfers between levels during the
year (2020: none). Any transfers between the levels would be accounted for on
the last day of each financial period.
Valuation methodology and process
The Directors base the fair value of investment in the SPVs on the fair value
of their assets and liabilities, adjusted if necessary, to reflect liquidity,
future commitments, and other specific factors of the SPVs and Investment
Manager. This is based on the components within the SPVs, principally the
value of the SPVs' investments, in addition to cash and short-term money
market fixed deposits. Any fluctuation in the value of the SPVs' investments
held will directly impact on the value of the Company's investment in the
SPVs.
The SPVs' investments are valued using the techniques described in the
Company's valuation policy, as outlined in note 2. The Investment Manager's
assessment of fair value of investments held by the SPVs is determined in
accordance with IPEV Valuation Guidelines. When valuing the SPVs' investments,
the Investment Manager reviews information provided by the underlying investee
companies and other business partners and applies IPEV methodologies, to
estimate a fair value as at the date of the Statement of Financial Position.
Initially, acquisitions are valued at cost. Subsequently, and as appropriate,
the Investment Manager values the investments on a quarterly basis using
common industry valuation techniques, including comparable public market
valuation, comparable merger and acquisition transaction valuation and
discounted cash flow valuation. The techniques used in determining the fair
value of the Company's investments through its SPVs are selected on an
investment by investment basis so as to maximise the use of market based
observable inputs. These techniques also reflect the impact of primary and
transition risks on the portfolio, although the impact of the risks are
minimal as the maximum investment period is seven years. As disclosed in note
2, due to the illiquid and subjective nature of the Company's underlying
investments, the Investment Manager uses a third party valuation provider to
perform a full independent valuation of the underlying investments.
Quantitative information of significant unobservable inputs - Level 3 - SPV
31 December 2021 Valuation Unobservable Range / weighted
Description technique input average
$'000 $'000
SPV 87,125 Adjusted net asset value NAV 87,125
Discount for lack of liquidity 0%
The Directors believe that it is appropriate to measure the SPVs at their
adjusted net asset value, incorporating a valuation of the underlying
investments which has taken into account risks to fair value, inclusive of
liquidity discounts, through appropriate discount rates.
Sensitivity analysis to significant changes in unobservable inputs within
Level 3 hierarchy
The significant unobservable inputs used in the fair value measurement
categorised within Level 3 of the fair value hierarchy together with a
quantitative sensitivity analysis as at 31 December 2021 are as shown below:
Sensitivity Effect on
Description Input used fair value
$'000
SPV Discount for lack of liquidity +/- 3% -/+2,614
The Company's valuation policy is compliant with both UK adopted international
accounting standards and IPEV Valuation Guidelines and is applied
consistently. As the Company's investments are generally not publicly quoted,
valuations require meaningful judgement to establish a range of values, and
the ultimate value at which an investment is realised may differ from its most
recent valuation and the difference may be significant.
For the year ended 31 December 2021, the valuations of the Company's
investments, through its SPVs, are detailed in the Investment Manager's
Report.
The below table shows fair value sensitivities to a 100 BPS increase in the
discount rate used for each industry as at 31 December 2021.
Investment Type Investments at Fair Value as at 31 December 2021 Valuation technique(s) Unobservable input(s) Range Weighted Average ((a)) Fair value sensitivity to a 100 bps increase in the discount rate Fair Value Sensitivity to a 0.5x decrease in the EBITDA/Revenue multiple
Industry $'000 Low High $'000 $'000
Midstream Senior Secured Loans 26,462 Discounted Cash Flow Discount rate 10% 12% 11% (358) NA
Equity Recovery Approach EBITDA multiple 7.0x 7.0x 7.0x NA -
Infrastructure Senior Secured Loans 31,916 Discounted Cash Flow Discount rate 8% 18% 13% (390) NA
Services Equity Rights Waterfall Approach NA NA NA NA NA NA
Energy Senior Secured Loans 7,336 Discounted Cash Flow Discount rate 8% 49% 23% (198) NA
Transition Equity Public Comparables EBITDA multiple 33.0x 38.0x 35.5x NA (21)
Public Comparables Revenue multiple 7.0x 7.5x 7.3x NA (21)
Waterfall Approach NA NA NA NA NA NA
65,714 ( ) (946) (42)
( )
((a)) Calculated based on fair values. Weighted average is not applicable for
industry categories with only one investment.
((b) )The difference between the fair value of the SPVs of $87.1m and the fair
value of the underlying investments at 31 December 2021 is due to cash
balances of $22.8m and residual liabilities of $1.4m, held within the SPVs.
The below table shows fair value sensitivities to a 100 BPS increase in the
discount rate used for each industry as at 31 December 2020.
Industry Investment Type Investments at Fair Value as at 31 December 2020 Valuation technique(s) Unobservable input(s) Range Weighted Average ((a)) Fair value sensitivity to a 100 bps increase in the discount rate
$'000 Low High $'000
Exploration & Production Senior Secured Loans 20,757 Discounted cash flow Discount rate 11% 15% 13% (149)
Midstream Senior Secured Loans 31,320 Discounted cash flow Discount rate 9% 20% 13% (369)
Equity 33 Public Comparable EBITDA multiple 6.5x 8.0x 7.3x
Infrastructure Services Senior Secured Loans 15,366 Discounted cash flow Discount rate 7% 19% 13% (197)
Equity Rights 268 Appraisal value NA NA NA NA
Energy Transition Senior Secured Loans 3,367 Latest round of financing NA NA NA NA NA
71,111((b)) (715)
((a)) Calculated based on fair values. Weighted average is not applicable for
industry categories with only one investment.
((b) )The difference between the fair value of the SPVs of $88,548k and the
fair value of the underlying investments at 31 December 2020 is due to cash
balances of $19,228k and residual liabilities of $1,791k, held within the
SPVs.
5. Unconsolidated subsidiaries
The following table shows subsidiaries of the Company. As the Company is
regarded as an Investment Entity as referred to in note 3, these subsidiaries
have not been consolidated in the preparation of the financial statements:
Investment Place of business Ownership interest as at 31 December 2021 Ownership interest as at 31 December 2020
Held directly
Riverstone International Credit Corp. USA 100% 100%
Riverstone International Credit L.P. USA 100% 100%
Held indirectly
Riverstone International Credit - Direct L.P. USA 100% 100%
The registered office of the above subsidiaries is c/o The Corporation Trust
Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801.
The amounts invested in the Company's unconsolidated subsidiaries during the
year and their carrying value at 31 December 2021 are as outlined in note 4.
This comprised $86,805,000 invested in Riverstone International Credit Corp.
at 31 December 2021 (2020: $88,548,000), which was subsequently transferred to
Riverstone International Credit - Direct L.P. to fund underlying investments.
In addition, this comprised of $321,000 invested in Riverstone International
Credit LP (Delaware) at 31 December 2021 (2020: $nil) to fund underlying
investments. During the year, $nil (2020: $22,109,000) was invested in
Riverstone International Credit L.P. to fund underlying investments, and $nil
(2020: $22,109,000) was returned to the Company following the realisation of
its underlying investments. As at 31 December 2021, the amount invested in
Riverstone International Credit L.P. was $563,000 (2020: $nil). The Company
intends to fund further underlying investments through its unconsolidated
subsidiaries.
There are no restrictions on the ability of the Company's unconsolidated
subsidiaries to transfer funds in the form of cash dividends or repayment of
loans.
6. Trade and other receivables
31 December 2021 31 December 2020
$'000 $'000
Prepayments 76 56
VAT receivable 21 26
Debtors - 2
97 84
7. Trade and other payables
31 December 2021 31 December 2020
$'000 $'000
Profit share payable 668 668
Other payables 230 258
898 926
8. Share capital and reserves
Date Issued and fully paid Number of shares issued Share capital Capital redemption reserve Other distributable reserves Total
GBP £'000 £'000 £'000 £'000
1 January 2021 1 - - - -
31 December 2021 1 - - - -
USD $'000 $'000 $'000 $'000
1 January 2021 91,545,383 915 85 91,179 92,179
31 December 2021 91,545,383 915 85 91,179 92,179
As at 31 December 2021 the Company's issued share capital comprises 91,545,383
Ordinary Shares (2020: 91,545,383) and 1 E Share (2020: 1). Ordinary
Shareholders are entitled to all distributions paid by the Company and, on a
winding up, provided the Company has satisfied all of its liabilities, the
Shareholders are entitled to all of the surplus assets of the Company.
During the year, the Company did not repurchase Ordinary Shares as part of its
buy-back programme (31 December 2020: 8,454,617).
9. Retained earnings
For the year ended For the year ended
31 December 2021
31 December 2020
Revenue reserve Capital reserve Total Revenue reserve Capital reserve Total
$'000 $'000 $'000 $'000 $'000 $'000
Opening balance 1,832 1,519 3,351 2,574 777 3,351
Profit and total comprehensive income in the year 6,437 (1,986) 4,451 6,691 742 7,433
Distributions paid in the year (6,681) - (6,681) (7,433) -
(7,433)
Closing balance 1,588 (467) 1,121 1,832 1,519 3,351
10. Audit fees
Other operating expenses include fees payable to the Company's Auditor, which
can be analysed as follows:
For the year ended For the year ended
31 December 2021
31 December 2020
$'000 $'000
Fees to the Company's Auditor
for audit of the statutory financial statements 227 216
for other audit related services 27 27
for non-audit services - 16
254 259
Other fees paid to the Company's Auditor for other audit related services of
$27 (2020: $27k) were in relation to a review of the Interim Report and fees
paid for other non-audit services of $nil (2020: $16k).
11. Tax
As an investment trust, the Company is exempt from UK corporation tax on
capital gains arising on the disposal of shares. Capital profits from its loan
relationships are exempt from UK tax where the profits are accounted for
through the Capital column of the Statement of Comprehensive Income, in
accordance with the AIC SORP.
The Company has made a streaming election to HMRC in respect of distributions
and is entitled to deduct interest distributions paid out of income profits
arising from its loan relationships in computing its UK corporation tax
liability. Therefore, no tax liability has been recognised in the financial
statements.
For the year ended For the year ended
31 December 2021
31 December 2020
Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
UK Corporation tax charge on profits for the year at 19% (2020: 19%) - - - - - -
For the year ended For the year ended
31 December 2021
31 December 2020
Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
Return on ordinary activities before taxation 6,437 (1,986) 4,451 6,691 742 7,433
Profit / (loss) on ordinary activities multiplied by standard rate of 1,223 (377) 846 1,271 141 1,412
corporation tax in the UK of 19% (2020: 19%)
Effects of:
Non-taxable investment losses / (gains) - 377 377 - (141) (141)
on investments
Non-taxable dividend income (514) - (514) (563) - (563)
Tax deductible interest distributions (709) - (709) (708) - (708)
Total tax charge - - - - - -
As at 31 December 2021 the Company had no unprovided deferred tax assets or
liabilities. At that date, based on current estimates and including the
accumulation of net allowable losses, the Company had no unrelieved losses.
Deferred tax is not provided on capital gains and losses arising on the
revaluation or disposal of investments because the Company meets (and intends
to continue to meet for the foreseeable future) the conditions for approval as
an Investment Trust company.
On 3 March 2021, as part of the Spring Budget announcement, the UK Government
announced that the corporation tax rate will increase from 19% to 25% (for
companies with profits over £250,000), from 5 April 2023.
12. Profit Share
Under the Investment Management Agreement, the Investment Manager will not
charge any base or other ongoing management fees, but will be entitled to
reimbursement of reasonable expenses incurred by it in the performance of its
duties. The Investment Manager will receive from the Company, a Profit Share
based on the Company's income, as calculated for UK tax purposes and the
Company's Capital Account. The Profit Share will be payable quarterly at the
same time as the Company pays its distributions, subject to an annual
reconciliation in the last quarter of each year.
The amount payable in respect of the annual Profit Share will be:
a) an amount equal to 20 percent of the amount by which the Distributable
Income exceeds an amount equal to 4 percent of the Company's Capital Amount;
plus
b) an additional amount equal to 10 percent of the amount by which the
Distributable Income exceeds an amount equal to 8 percent of the Capital
Amount.
The Capital Amount is equal to the gross proceeds of the issue of Ordinary
Shares at IPO, plus the net proceeds of any future issues of Ordinary Shares,
less any amounts expended by the Company on share repurchases and redemptions
or, following the option to be given to Shareholders around the time of the
Company's AGM in 2024 to elect to convert all or some of their shares into
Realisation Shares.
Annual reconciliation and cap
At the end of the Company's financial year, the Profit Share will undergo an
annual reconciliation. In the event that the annual reconciliation results in
a reduction of the aggregate Profit Share payable to the Investment Manager,
the Profit Share payable in the fourth quarter will be reduced to no less than
zero by the relevant amount, with any remaining reduction carried forward to
Profit Shares otherwise payable in respect of future quarters. In addition,
the amount payable to the Investment Manager as a Profit Share in any year
will be limited to a maximum of 5 percent of the prevailing NAV.
Capital loss adjustment
If, in any financial year the Company suffers a capital loss which
(disregarding the impact of any distributions paid or payable by the Company)
causes the closing Net Asset Value per Ordinary Share for the year to fall
below the lower of: (a) US$1.00; or (b) the closing Net Asset Value per
Ordinary Share for the prior year, then the amount of the Distributable Income
for the year equal to the amount by which the capital loss causes the Net
Asset Value to fall below that threshold amount will be ignored for the
purposes of calculating the Profit Share for that year. If the amount by which
the capital loss causes the Net Asset Value to fall below the threshold amount
is greater than the Distributable Income for the year, then the amount of any
excess will be carried forward to following years until it is set off against
Distributable Income in full. The capital loss test will be applied as a part
of the annual reconciliation of the Profit Share.
Amounts paid or accrued as Profit Share during the year were $668k (2020:
$668k).
13. Earnings per share and Net assets per share
Earnings per share
For the year ended For the year ended
31 December 2021
31 December 2020
Revenue Capital Total Revenue Capital Total
Profit/(loss) attributable to equity holders of the Company - $'000 6,437 (1,986) 4,451 6,691 742 7,433
Weighted average number of Ordinary Shares in issue 91,545,383 97,980,36
0
Basic and diluted earnings and loss per Share from continuing operations in 7.03 (2.17) 4.86 6.83 0.76 7.59
the year (cents)
There are no dilutive shares in issue.
Net assets per share
31 December 2021 31 December 2020
Net assets - $'000 93,300 95,530
Number of Ordinary Shares issued 91,545,383 91,545,383
Basic and diluted net assets per Share (cents) 101.92 104.35
14. Distributions declared with respect to the year
2021 2020
Distribution per share Total distribution Distribution per share Total distribution
Distributions paid during the year cents $'000 cents $'000
With respect to the year ended 31 December 2020 (2019) 2.00 1,831 2.57 2,570
With respect to the quarter ended 31 March 1.70 1,556 1.80 1,751
With respect to the quarter ended 30 June 1.80 1,647 1.80 1,751
With respect to the quarter ended 30 September 1.80 1,647 1.40 1,361
7.30 6,681 7.57 7,433
2021 2020
Distribution per share Total distribution Distribution per share Total distribution
Distributions declared after 31 December 2021 and not accrued in the year cents $'000 cents $'000
With respect to the quarter ended 31 December 1.70 1,556 2.00 1,831
On 16 February 2022, the Board approved a distribution of 1.7 cents per share
with respect to the quarter ended 31 December 2021. The record date for the
distribution is 25 February 2022 and the payment date is 25 March 2022.
15. Financial risk management
Financial risk management objectives
The Company's investing activities, through its investment in the SPVs,
intentionally expose it to various types of risks that are associated with the
underlying investee companies of the SPVs. The Company makes the investment in
order to generate returns in accordance with its investment policy and
objectives.
The most important types of financial risks to which the Company is exposed
are market risk (including price, interest rate and foreign currency risk),
liquidity risk and credit risk. The Board of Directors has overall
responsibility for the determination of the Company's risk management and sets
policy to manage that risk at an acceptable level to achieve those objectives.
The policy and process for measuring and mitigating each of the main risks are
described below.
The Investment Manager and the Administrator provide advice to the Company
which allows it to monitor and manage financial risks relating to its
operations through internal risk reports which analyse exposures by degree and
magnitude of risks. The Investment Manager and the Administrator report to the
Board on a quarterly basis.
Categories of financial instruments
For financial assets and liabilities carried at amortised cost, the Directors
are of the opinion that their carrying value approximates to their fair value
31 December 2021 31 December 2020
$'000 $'000
Financial assets
Investment at fair value through profit or loss:
Investment in the SPVs 87,125 88,548
Other financial assets:
Cash and cash equivalents 4,884 5,374
Loan interest receivable 1,418 1,315
Dividends receivable 674 1,135
Trade and other receivables 97 84
Financial liabilities
Financial liabilities:
Trade and other payables (898) (926)
Capital risk management
The Company manages its capital to ensure that it will be able to continue as
a going concern while maximising the capital return to Shareholders. The
capital structure of the Company consists of issued share capital, retained
earnings and other distributable reserves, as stated in the Statement of
Financial Position.
In order to maintain or adjust the capital structure, the Company may buy back
shares or issue new shares. There are no external capital requirements imposed
on the Company.
During the year ended 31 December 2021, the Company had no borrowings (2020:
$nil).
The Company's investment policy is set out in the Strategic Report.
Market risk
Market risk includes price risk, foreign currency risk and interest rate risk.
a) Price risk
The underlying investments held by the SPVs present a potential risk of loss
of capital to the SPVs and hence to the Company. The Company invests through
the SPVs and as outlined in note 4, investments in the SPVs are in the form of
senior loans and equity with protective provisions in place. Price risk arises
from uncertainty about future prices of underlying financial investments held
by the SPVs. As at 31 December 2021, the fair value of investments, excluding
cash and cash equivalents, was $64,345k (2020: $69,320k) and a 3 percent
increase / (decrease) (2020: 3 percent) in the price of investments with all
other variables held constant would result in a change to the fair value of
investments of + / - $1,930 (2020: $2,080k). A change in interest rates could
have an impact on the price risk associated with the underlying investee
companies, which is factored into the fair value of investments. Please refer
to note 4 for quantitative information about the fair value measurements of
the Company's Level 3 investments.
The SPVs are exposed to a variety of risks which may have an impact on the
carrying value of the Company's investments. The SPVs' risk factors are set
out in (a)(i) to (a)(iii) below.
i. Not actively traded
The SPVs' investments are not generally traded in an active market but are
indirectly exposed to market price risk arising from uncertainties about
future values of the investments held. The underlying investments of the SPVs
vary as to industry sub-sector, geographic distribution of operations and
size, all of which may impact the susceptibility of their valuation to
uncertainty.
ii. Concentration
The Company, through the SPVs, invests in the energy sector, with a particular
focus on businesses that engage in oil and gas E&P and midstream
investments in that sector. This means that the Company is exposed to the
concentration risk of only making investments in the energy sector, which
concentration risk may further relate to sub-sector, geography, and the
relative size of an investment or other factors. Whilst the Company is subject
to the investment and diversification restrictions in its investment policy,
within those limits, material concentrations of investments may arise.
Although the investments are in the same industry, this risk is managed
through careful selection of investments within the specified limits of the
investment policy. The investments are monitored on a regular basis by the
Investment Manager.
The Board and the Investment Manager monitor the concentration of the
investment in the SPVs on a quarterly basis to ensure compliance with the
investment policy.
iii. Liquidity
The Company's liquidity risk lies with its SPVs as the amount of cash invested
through the SPVs in the underlying investments is dynamic in nature. The SPVs
will maintain flexibility in funding by keeping sufficient liquidity in cash
and cash equivalents, which may be invested on a temporary basis in line with
the cash management policy as agreed by the Board from time to time.
As at 31 December 2021, $22.8 million or 20.0 percent (2020: $19.2 million or
16.4 percent) of the SPVs' financial assets, were money market fixed deposits
and cash balances held on deposit with several A- or higher rated banks.
b) Foreign currency risk
The Company has exposure to foreign currency risk due to the payment of some
expenses in Pounds Sterling. Consequently, the Company is exposed to risks
that the exchange rate of its currency relative to other foreign currencies
may change in a manner that has an adverse effect on the value of that portion
of the Company's assets or liabilities denominated in currencies other than
the US Dollar. Any exposure to foreign currency risk at the underlying
investment level is captured within price risk.
The following table sets out, in US Dollars, the Company's total exposure to
foreign currency risk and the net exposure to foreign currencies of the
monetary assets and liabilities:
As at 31 December 2021
$ £ Total
$'000 $'000 $'000
Non-current assets
Investments at fair value through profit or loss 87,125 - 87,125
Total non-current assets 87,125 - 87,125
Current assets
Loan interest receivable 1,418 - 1,418
Trade and other receivables 76 21 97
Dividends receivable 674 - 674
Cash and cash equivalents 4,883 1 4,884
Total current assets 7,051 22 7,073
Current liabilities
Trade and other payables (896) (2) (898)
Total current liabilities (896) (2) (898)
Total net assets 93,280 20 93,300
As at 31 December 2020 $ £ Total
$'000 $'000 $'000
Non-current assets
Investments at fair value through profit or loss 88,548 - 88,548
Total non-current assets 88,548 - 88,548
Current assets
Loan interest receivable 1,315 - 1,315
Dividends receivable 1,135 - 1,135
Trade and other receivables 58 26 84
Cash and cash equivalents 5,374 - 5,374
Total current assets 7,882 26 7,908
Current liabilities
Trade and other payables (921) (5) (926)
Total current liabilities (921) (5) (926)
Total net assets 95,509 21 95,530
The Directors do not consider that the foreign currency exchange risk at the
balance sheet date is material and therefore sensitivity analysis for the
foreign currency risk has not been provided.
c) Interest rate risk
The Company's exposure to interest rate risk relates to the Company's cash and
cash equivalents held directly and through the Company's SPVs. The Company is
subject to risk due to fluctuations in the prevailing levels of market
interest rates. Any excess cash and cash equivalents are invested at
short-term market interest rates. As at the date of the Statement of Financial
Position, the majority of the SPV's cash and cash equivalents were held on
interest bearing fixed deposit accounts. Any exposure to interest rate risk at
the underlying investment level is captured within price risk.
The Company has no other interest-bearing assets or liabilities as at the
reporting date. As a consequence, the Company is only exposed to variable
market interest rate risk. As at 31 December 2021, cash balance held by the
Company (including cash held at the SPVs) was $27.7 million (2020: $24.6
million). A 0.5 percent (2020:0.5 percent) increase / (decrease) in interest
rates with all other variables held constant would result in a change to
interest received of + / - $138,319 (2020: $123,011) per annum.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of
Directors.
Liquidity risk is defined as the risk that the Company may not be able to
settle or meet its obligations on time or at a reasonable price. The Company's
liabilities are made up of estimated accruals and trade creditors which are
due to be settled within three months of the year end.
The Company adopts a prudent approach to liquidity management and through the
preparation of budgets and cash flow forecasts maintains sufficient cash
reserves to meet its obligations.
Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Company. Any
exposure to credit risk at the underlying investment level is captured within
price risk.
The carrying value of the investment in the SPVs as at 31 December 2021 was
$87.1 million (2020: $88.5 million).
Financial assets mainly consist of cash and cash equivalents and investments
at fair value through profit or loss. The Company's risk on liquid funds is
reduced because it can only deposit monies with institutions with a minimum
credit rating of 'A'. The Company mitigates its credit risk exposure on its
investments at fair value through profit or loss by the exercise of due
diligence on the counterparties of the SPVs and the Investment Manager.
The table below shows the material cash balances and the credit rating for the
counterparties used by the Company at the year-end date:
31 December 2021 31 December 2020
Location Rating $'000 Location Rating $'000
Counterparty
JPMorgan Chase Bank USA A- 4,884 USA A- 5,374
The Company's maximum exposure to loss of capital at the year end is shown
below:
Carrying value and maximum exposure
31 December 2021 31 December 2020
$'000 $'000
31 December 2021
Investment at fair value through profit or loss
Investments in the SPVs 87,125 88,548
Other financial assets (including cash and equivalents but excluding 6,997 7,852
prepayments)
Gearing
As at the date of these financial statements the Company has no gearing (2020:
none).
16. Related party transactions
Directors
The Company has three non-executive Directors. Directors' fees for the year
ended 31 December 2021 amounted to $164k (2020: $152k), of which $nil was
outstanding at year end (2020: $nil). Amounts paid to Directors as
reimbursement of travel and other incidental expenses during the year amounted
to $15k (2020: $12k), of which $nil was outstanding at year end (2020: $nil).
The Chairman increased his shareholding in the Company by 50k shares, the
total shareholding is now 100k, as disclosed in the Directors' Remuneration
Report.
SPVs
In 2019, the Company provided a loan to the US Corp. of $62.1m which accrues
interest at 9.27 percent. Any interest that is unable to be repaid at each
quarter end is capitalised and added to the loan balance. Total interest in
relation to the year was $5.6m (2020: $5.5m) of which $5.5m was received in
cash (2020: $5.7m), $nil was capitalised (2020: $nil) and $1.4m remained
outstanding at 31 December 2021 and received on 11 January 2022 (31 December
2020: $1.3m outstanding, received on 19 January 2021). During the year, $nil
(2020: $0.8m) of previously capitalised interest was repaid and the balance on
the loan investment at 31 December 2021 was $60.1m (2020: $60.1m).
The Company's other investments in its SPVs are made via equity shareholdings
as disclosed in note 4.
Investment Manager
The Investment Manager is an affiliate of Riverstone and provides advice to
the Company on the origination and completion of new investments, the
management of the portfolio and on realisations, as well as on funding
requirements, subject to Board approval. For the provision of services under
the Investment Management Agreement, the Investment Manager earns a Profit
Share, as detailed in note 12. The Investment Manager is entitled to
reimbursement of any reasonable expenses incurred in relation to management of
the Company and amounts reimbursed during the year were $31k (2020: $115k).
Jamie Brodsky, a partner of the IM and portfolio manager of RCOI, purchased
30k shares during the year (2020: nil).
17 Ultimate controlling party
In the opinion of the Board, on the basis of the shareholdings advised to
them, the Company has no ultimate controlling party.
18 Subsequent events
With the exception of dividends declared and disclosed in note 14, there are
no other material subsequent events.
Glossary of Capitalised Defined Terms
Administrator means Ocorian Administration UK Limited
Admission means admission of the Ordinary Shares on 28 May 2019, to the
Official List and/or admission to trading on the Specialist Fund Segment of
the London Stock Exchange, as the context may require
AGM means Annual General Meeting
AIC means the Association of Investment Companies
AIC Code means the AIC Code of Corporate Governance
AIC SORP means the Statement of Recommended Practice issued by the AIC in
November 2014 and updated in January 2017 for the Financial Statements of
Investment Trust Companies and Venture Capital Trusts
Annual Report means the Company's yearly report and financial statements for
the year ended31 December 2021
Auditor means Ernst & Young LLP or EY
Board means the Directors of the Company
Borrower means entities operating in the energy sector that issue loans,
notes, bonds, and other debt instruments including convertible debt
CA means the Companies Act 2006 which forms the primary source of UK company
law
Capital Amount means the amount of gross proceeds of the IPO, plus the net
proceeds of any future issues of Ordinary Shares, less any amounts expended by
the Company on share repurchases and redemptions or, following a Realisation
Election, attributable to Realisation Shares
Company or RCOI means Riverstone Credit Opportunities Income Plc
D&C means drilling and completion
D&I means Diversity and Inclusion
Directors means the Directors of the Company
Distributable Income means the Company's income, as calculated for UK tax
purposes
DTR means the Disclosure Guidance and Transparency Rules sourcebook issued by
the Financial Conduct Authority
ESG means environmental, social and governance.
ESG-ME means ESG Minimum Expectations
E&P means exploration and production
FCA means the UK Financial Conduct Authority (or its successor bodies)
GHG mean greenhouse gases
IFRS means the International Financial Reporting Standards, being the
principles-based accounting standards, interpretations and the framework by
that name issued by the International Accounting Standards Board.
ILPA means Institutional Limited Partners Association
Investment Management Agreement means the Investment Management Agreement
entered into between the Investment Manager and the Company
Investment Manager means Riverstone Investment Group LLC
IPCC means Intergovernmental Panel on Climate Change
IPEV Valuation Guidelines means the International Private Equity and Venture
Capital Valuation Guidelines
IPO means the initial public offering of shares by a private company to the
public
IRR means internal rate of return
ISSB means International Sustainability Standards Board
LCA means Life Cycle Analysis
LDPE means low-density polyethylene
Listing Rules means the listing rules made by the UK Listing Authority under
Section 73A of the Financial Services and Markets Act 2000
London Stock Exchange or LSE means London Stock Exchange plc
LSTA means Loan Syndications & Trading Association
LTV means loan to value ratio
Main Market means the main market of the London Stock Exchange
MOIC mean multiple on invested capital
NAV or Net Asset Value means the value of the assets of the Company less its
liabilities as calculated in accordance with the Company's valuation policy
and expressed in US dollars
Ordinary Shares means ordinary shares of $0.01 in the capital of the Company
issued and designated as 'Ordinary Shares' and having the rights, restrictions
and entitlements set out in the Company's articles of incorporation
Other Riverstone Funds means other Riverstone-sponsored, controlled or managed
entities, which are or may in the future be managed or advised by the
Investment Manager or one or more of its affiliates, excluding the SPV
PIK means payment in kind
Profit Share means the payments to which the Investment Manager is entitled in
the circumstances and as described in the notes to the financial statements
RBL means reserved base loan
RCP means Riverstone Credit Partners
RCOI mean Riverstone Credit Opportunities Income plc or the Company.
Riverstone means Riverstone Investment Group LLC or the Investment Manager
Realisation Shares means realisation shares of US$0.01 in the capital of the
Company, as defined in the prospectus
SPV means any intermediate holding or investing entities that the Company may
establish from time to time for the purposes of efficient portfolio management
and to assist with tax planning generally and any subsidiary undertaking of
the Company from time to time
Specialist Fund Segment means the Specialist Fund Segment of the London Stock
Exchange's Main Market
TCFD means the Task Force on Climate-Related Financial Disclosures
Toolkit means the Riverstone ESG Toolkit
UK or United Kingdom means the United Kingdom of Great Britain and Northern
Ireland
UK Code means the UK Corporate Governance Code issued by the FRC
US or United States means the United States of America, its territories and
possessions, any state of the United States and the District of Columbia
US Corp. means Riverstone International Credit Corp.
Directors and General Information
Directors
Reuben Jeffery, III (Chairman) (appointed 2 April 2019)
Emma Davies (Audit and Risk Committee Chair) (appointed 2 April 2019)
Edward Cumming-Bruce (Nomination Committee Chair) (appointed 2 April 2019)
all independent and of the registered office below
Registered Office Website: www.riverstonecoi.com (http://www.riverstonecoi.com)
27-28 Eastcastle Street ISIN GB00BJHPS390
London Ticker RCOI
W1W 8DH Sedol BJHPS39
Registered Company Number 11874946
Investment Manager Registrar
Riverstone Investment Group LLC Link Asset Services
c/o The Corporation Trust Company The Registry
Corporation Trust Center 34 Beckenham Road
1209 Orange Street Beckenham
Wilmington Kent
Delaware 19801 BR3 4TU
Company Secretary and Administrator Sole Bookrunner
Ocorian Administration (UK) Limited J.P. Morgan Securities plc
27/28 Eastcastle Street 25 Bank Street
London Canary Wharf
W1W 8DH London
E14 5JP
Independent Auditor Receiving Agent
Ernst & Young LLP Link Asset Services
25 Churchill Place Corporate Actions
London The Registry
E14 5EY 34 Beckenham Road
Beckenham
Kent
Legal Adviser to the Company BR3 4TU
Hogan Lovells LLP
Atlantic House
50 Holborn Viaduct
London
EC1A 2FG
Principal Banker and Custodian
J.P. Morgan Chase Bank, N.A.
270 Park Avenue
New York
NY 10017-2014
Swiss supplement
ADDITIONAL INFORMATION FOR INVESTORS IN SWITZERLAND
This Swiss Supplement is supplemental to, forms part of and should be read in
conjunction with the annual report for the half year ended December 31, 2021
for Riverstone Credit Opportunities Income Plc (the 'Fund').
The Fund has appointed Société Générale as Swiss Representative and Paying
Agent. The Confidential Memorandum, the Articles of Association as well as the
annual report of the Fund can be obtained free of charge from the
representative in Switzerland, Société Générale, Paris, Zurich Branch,
Talacker 50, P.O. Box 5070, CH-8021 Zurich. The paying agent of the Fund in
Switzerland is Société Générale, Paris, Zurich Branch, Talacker 50, P.O.
Box 5070, CH-8021 Zurich. The Company may offer Shares only to qualified
investors in Switzerland. In respect of the Shares distributed in and from
Switzerland, the place of performance and jurisdiction is the registered
office of the Swiss Representative.
Cautionary Statement
The Chairman's Statement and Investment Manager's Report have been prepared
solely to provide additional information for Shareholders to assess the
Company's strategies and the potential for those strategies to succeed. These
should not be relied on by any other party or for any other purpose.
The Chairman's Statement and Investment Manager's Report may include
statements that are, or may be deemed to be, 'forward-looking statements'.
These forward-looking statements can be identified by the use of
forward-looking terminology, including the terms 'believes', 'estimates',
'anticipates', 'expects', 'intends', 'may', 'will' or 'should' or, in each
case, their negative or other variations or comparable terminology.
These forward-looking statements include all matters that are not historical
facts. They appear in a number of places throughout this document and include
statements regarding the intentions, beliefs or current expectations of the
Directors and the Investment Manager, concerning, amongst other things, the
investment objectives and investment policy, financing strategies, investment
performance, results of operations, financial condition, liquidity, prospects,
and distribution policy of the Company and the markets in which it invests.
By their nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not
occur in the future. Forward-looking statements are not guarantees of future
performance.
The Company's actual investment performance, results of operations, financial
condition, liquidity, distribution policy and the development of its financing
strategies may differ materially from the impression created by the
forward-looking statements contained in this document.
Subject to their legal and regulatory obligations, the Directors and the
Investment Manager expressly disclaim any obligations to update or revise any
forward-looking statement contained herein to reflect any change in
expectations with regard thereto or any change in events, conditions or
circumstances on which any statement is based.
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