REG - Riverstone Credit - Final Results for the Year Ended 31 December 2023
21/02/2024 07:00
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RNS Number : 8393D Riverstone Credit Opps. Inc PLC 21 February 2024
Riverstone Credit Opportunities Income Plc
Full Year Results for the Twelve Months Ended 31 December 2023
Track Record of Strong NAV Total Returns Since May 2019 IPO Continues to Grow
31.57 cents per share Paid in Dividends
40.1% NAV Total Return
Riverstone Credit Opportunities Income ("RCOI" or the "Company"), the
LSE-listed energy infrastructure and energy-transition credit investor, is
pleased to announce strong full year results for the twelve months ended 31
December 2023.
Highlights
· NAV total return of 6.4% for the twelve months to 31 December 2023
and NAV total return of 40.1% since inception in May 2019
· Strong income generation across the portfolio with a profit of $5.7
million registered and distributions over the year of 8.5 cents per share to
investors achieving our stated distributions target
· High income distributions equating to 31.57 cents paid since
inception in May 2019
· Valuation remained stable with a NAV per share at period end of
$1.06 (31 December 2022: $1.08)
· Realised investments show quality of structuring with the total of 18
realisations having delivered an average gross IRR of 17.2% and a net IRR of
12.5%
· An attractive realisation was achieved in the second half of the year
from the Company's loan to Clean Energy Fuels which was fully realised in
December. This achieved a 14.9% gross IRR and 10.8% net IRR
· The Company also successfully refinanced its investment in Streamline
Innovations achieving $2.0 million in profits at closing of the amendment and
extension resulting in a 24% gross IRR and 19% net IRR
· Focus on sustainable investments and delivering measurable
impact with a portfolio almost exclusively comprising independently
accredited green and sustainability linked loans
· Origination strengths demonstrated by scale of capital deployed, $251
million since May 2019
· Strong outlook: the Investment Manager continues to focus on
providing strong returns and dividends to investors in order to deliver the
targeted annual dividend returns of 8-10% on subscribed capital
Reuben Jeffery III, Chairman of RCOI, commented:
"We are delighted to further extend the Company's strong track record of
consistent value creation for shareholders since IPO with total dividends paid
equating to 31.57 cents per share and a NAV total return of 40.1%. The
realisation and refinancing in the second half of the year provide further
evidence of the compelling returns that can be generated by the Company's loan
portfolio, and we are pleased to note that the 18 realisations life to date
made by the Company have delivered an average gross IRR of 17.2% and net IRR
of 12.5%.
We note the Company's forthcoming vote and the Board and investment adviser
remain vigilantly focused on optimising the portfolio to ensure long-term
value creation for our shareholders."
Christopher Abbate and Jamie Brodsky, Co-Founders of Breakwall Capital, the
sub-managers of the portfolio, added:
"We are proud of the Company's track record of value creation demonstrated
once again in this earnings period. The investment adviser has now generated
$251 million of new investments and our pipeline remains strong at Breakwall
driven by the clear international priorities to invest in energy
infrastructure that benefits the global energy transition.
We are proud to deliver a portfolio that has such notable positive
environmental impact through our strategy of lending through bespoke and
independently accredited green and sustainability linked loans. In the ongoing
elevated interest rate environment, we remain confident that the current
market conditions are extremely supportive of the Company's investment
strategy, and we look forward to providing shareholders with further updates
in due course."
For Riverstone Credit Opportunities Income Plc:
Adam Weiss
+1 212 271 2953
J.P. Morgan Cazenove (Corporate Broker) +44 (0)20 7742 4000
William Simmonds
Jérémie Birnbaum
James Bouverat, Liam MacDonald-Raggett (Sales)
For Media Enquiries:
Buchanan
Helen Tarbet Tel: +44 (0) 20 7466 5109
Henry Wilson Tel: +44 (0) 20 7466 5111
Jon Krinks Tel: +44 (0) 20 7466 5199
Verity Parker Tel: +44 (0) 20 7466 5197
Email: rcoi@buchanan.uk.com
About Riverstone Credit Opportunities Income Plc:
RCOI lends 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.
RCOI also lends to companies seeking to facilitate the energy transition by
decarbonizing the energy, industrial and agricultural sectors, building
sustainable infrastructure and reducing or sequestering carbon emissions. The
Company seeks to ensure that its 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.
For further details, see https://www.riverstonecoi.com/
(https://www.riverstonecoi.com/) .
Neither the contents of RCOI's website nor the contents of any website
accessible from hyperlinks on the website (or any other website) is
incorporate into, or forms part of, this announcement.
Riverstone Credit Opportunities Income Plc
Annual Report and Financial Statements
For the year ended 31 December 2023
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 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
Riverstone Credit Opportunities Income Plc is an externally managed
closed-ended investment company listed 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.
INVESTMENT MANAGER
The Company's Investment Manager is Riverstone Investment Group LLC, which is
controlled by affiliates of Riverstone Holdings LLC ("Riverstone").
On 31 December 2023, Riverstone entered into a sub-management agreement with
Breakwall Capital LP ("Breakwall" or "Sub-Manager") for all the credit
vehicles managed by Riverstone.
Riverstone was founded in 2000 and is currently one of the world's largest and
most experienced investment firms focused on energy, power, infrastructure and
decarbonisation. The Firm has raised approximately $45 billion of capital and
committed approximately $45 billion to 200+ investments in North America,
South America, Europe, Africa, Asia and Australia. Headquartered in New York,
Riverstone has built a global platform with additional offices located in
Menlo Park, Houston, London, Amsterdam and Mexico City. Since its founding,
the Firm has grown its presence significantly and currently employs over 76
professionals worldwide.
The registered office of the Company is 5th Floor, 20 Fenchurch Street,
London, England, EC3M 3BY.
Key Financials
2023 2022
NAV as at 31 December $96.02m $98.48m
NAV per Share as at 31 December $1.06 $1.08
Market capitalisation as at 31 December $78.77m $83.54m
Share price at 31 December $0.87 $0.92
Total comprehensive income for year ended 31 December $5.72m $12.85m
Distribution per share with respect to the year ended 31 December 8.5 cents 9.00 cents
Highlights
· The NAV as at 31 December 2023 was $1.06 per share (2022: $1.08
per share).
· Distribution of 8.5 cents per share (2022: 9.00 cents per share)
approved with respect to the year ended 31 December 2023.
· There was one new investment, and two full realisations executed
in the year ended 31 December 2023. The new investment and one of the
realisations during the year related to the refinancing of Streamline
Innovations, with the other realisation being of Clean Energy Fuels Corp
("Clean Energy Fuels" or "CLNE").
Chairman's Statement
Overview
On behalf of the Board, I would like to thank our shareholders for their
ongoing support as we continue to pursue our strategy of generating income and
optimising shareholder value through investing in a high quality portfolio of
loans that help to support the global energy transition.
We are pleased with the financial performance of the Company and the
beneficial impact its loans are having on the journey towards greater
environmental sustainability in global infrastructure. During the second half
of 2023, the Company continued its strong performance from the first half of
the year, posting consistently robust earnings for the period, and remains
well positioned in the current environment. The Company has delivered a NAV
total return of 40.1% to investors since inception in May 2019 and 31.57 cents
of income.
The Company has a unique focus on short duration lending, which benefits from
the current interest rate environment, and the re-balancing of the portfolio
to energy-transition focused investments is now complete. As of 31 December
2023, all of the loans in the portfolio and over 95% of the Company's SPVs'
underlying investments were either Green Loans or Sustainability-Linked Loans.
Therefore, all loans in the Company's portfolio are supporting the advancement
of decarbonisation or enhancing sustainability across the broader energy
complex. A good example of this is the Company's loan to Clean Energy Fuels
in December 2022 which was realised in December 2023. Clean Energy Fuels
growth strategy includes the development of negative carbon intensity
renewable natural gas ("RNG") projects and construction of new RNG fueling
stations for the North American transportation sector. Clean is involved in
the rapid expansion of RNG projects at dairies, which capture fugitive methane
and turn it into a fuel made entirely from organic waste and reduces carbon
emissions exponentially versus diesel.
The Investment Manager's strategy of making senior-secured asset-based loans
has certainly paid off in terms of generating attractive results for
shareholders - but it has also left the Company underinvested at times, just
as interest rates began to rise. A concerted effort was made to alleviate this
issue, while remaining faithful to the Company's strategy, as well as
preserving portfolio diversification and counterparty quality. As an example,
secondary purchases of the Hoover Circular Solutions loan and Seawolf Water
Resources ("Seawolf") loan (which included preferred and common equity) helped
deploy capital into compelling investments very well known to the Investment
Manager and consistent with the Company's overall strategy. Furthermore, in
December 2022, the Company's SPVs entered into a $15 million Revolving Credit
Facility ("RCF") which enables the Company to remain over 100% invested while
still retaining the necessary liquidity to meet ongoing expenses and future
obligations under delay-draw loan commitments. These investments serve to
support earnings capacity for the overall portfolio, while maintaining the
potential to grow distributions over time.
Key Developments
RCOI's NAV has remained stable during 2023, despite considerable market
volatility, with a current NAV per share of $1.06 (31 December 2022: $1.08).
There was one realisation that occurred during the second half of 2023, Clean
Energy Fuels. Clean Energy Fuels was fully realised in December 2023 with a
14.9 per cent gross IRR and a 10.8 per cent net IRR and 1.14x gross MOIC and
1.10x net MOIC respectively. This realisation further strengthens our
compelling track record of attractive realisations with this investment
generating another strong IRR result for our shareholders.
The Company also refinanced its investment in Streamline Innovations. The
Company realised c. $2.0 million of profits at closing of the amendment and
extension resulting in a 24 percent gross IRR (19 percent net IRR) and a 1.3x
gross MOIC (1.2x net MOIC) of the initial investment in Streamline
Innovations.
As part of this amendment and extension closing, the facility was upsized to
$55.0 million, the maturity was extended to December 2026, and economic terms
were adjusted for an estimated all-in yield to maturity of 13 percent to the
Company. Additionally, as part of the amendment, the Company's allocation to
the loan was reduced from $13.8 million to $9.9 million as the result of the
investment manager's allocation policy which aims to allocate each deal based
on the available capital in each fund being invested.
Performance
The Company reported a profit of $5.7 million for the year ending 31 December
2023 (2022: $12.8 million), resulting from income received from the investment
portfolio and changes in the portfolio's valuations. The decrease in profit
for 2023 was driven primarily from the decrease in the unrealised value of
multiple equity positions. Additionally, the Company and its SPVs had fewer
realisations in 2023 than in 2022, which contributed to the decrease in
profit. The Company is paying distributions of 8.5 cents per share to
investors with respect to 2023 (2022: 9.0 cents per share), achieving our
stated distributions target. The Company has now delivered NAV total returns
of 40.1% to investors since inception in May 2019 (6.4% year to date return)
and 31.57 cents of income.
The current unrealised portfolio has an average 1.22x Gross MOIC and 1.15x Net
MOIC. RCOI's investment strategy contains characteristics that enable our
portfolio of current loans to be attractive and structured to be resilient in
challenging and fluctuating market conditions.
RCOI has executed 25 direct investments and participated in two secondary
investments since inception and cumulatively invested $251 million of capital
since the IPO in May 2019. The Company has now realised a total of 18
investments, delivering an average gross IRR of 17.2 per cent and net IRR of
12.5 per cent.
Outlook
The Board is pleased with our diversified and dynamic portfolio of investments
and the current pipeline of new opportunities, which we believe have the
potential to continue to deliver attractive value to shareholders. We are
pleased to retain our focus on decarbonising energy infrastructure and
infrastructure services that contribute a considerable positive environmental
impact. We are finding that businesses at the forefront of energy transition
view our first lien, short-duration, floating rate product as being highly
attractive and a good fit for their development plans.
On 31 December 2023, Riverstone Holdings LLC and their affiliate Riverstone
Investment Group (collectively, "Riverstone") entered into an agreement with
Breakwall Capital LP to provide sub-management services (the "Sub-Management
Agreement") for all credit vehicles managed by Riverstone, including RCOI (the
"Existing Credit Vehicles"). Breakwall is a newly formed independent
asset-management firm regulated by the SEC as a Registered Investment Advisor,
owned and operated by the existing Riverstone Credit Partners team.
We are keenly aware of the persistent discount at which the shares trade, and
the Board does not believe this reflects the value of the portfolio. As ever
we continue to work assiduously with the manager on a number of initiatives to
reduce the discount including active asset management and proactive and
frequent engagement with equity market participants. We are also focused on
the forthcoming realisation election in May 2024. As this election will not
conclude until after the approval of these financial statements the Board
concluded that there is material uncertainty over the Company's ability to
continue as a going concern. The Company looks forward to engaging with
shareholders to understand both their intentions to participate and their
views regarding the future of the Company.
We remind investors that if the Company's Net Asset Value attributable to the
remaining Ordinary Shares falls below $50m as a result of the election, the
Company will amend its investment objectives and policy to adopt a realisation
strategy. As always, the Board and the manager remain vigilantly focused on
optimising the portfolio to ensure long-term value creation for our
shareholders. Further announcements on the upcoming realisation election will
be made in due course.
We look forward to a promising 2024 and thank you again for your support.
Reuben Jeffery, III
Chairman
20 February 2024
Strategic Report
The Directors present their Strategic Report for the year ended 31 December
2023. 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 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, as well as drive positive action with regard to climate change by
structuring loans as Green Loans or Sustainability-Linked Loans.
Investment Policy
The Company seeks to achieve its investment objective through investing
primarily in a diversified portfolio of direct loans 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.
Investment Strategy
The Investment Manager seeks to leverage the wider Riverstone and Breakwall
platforms to enhance its investment strategy through the opportunities and 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 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.
Complementary 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' and
market-based 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 and market-based transactions, the
Company may participate as part of a broader syndicate of third-party lenders.
The Investment Manager expects these transactions made by the Company's SPVs
to have a contractual duration of one to three years from inception and an
expected duration of less than 12 months.
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 20 February 2024 the
Board approved a distribution of 2.5 cents per share bringing the total
distribution declared with respect to the year to 31 December 2023 to 8.5
cents per share. The record date for the distribution is 1 March 2024 and the
payment date is 22 March 2024.
Structure
The Company makes its investments through its SPVs. Riverstone International
Credit Corp. ('US Corp') is a corporation established in the State of Delaware
and is a wholly-owned subsidiary of the Company. US Corp, in turn, invests
through Riverstone International Credit - Direct L.P., a limited partnership
established in the State of Delaware in which US Corp is the sole limited
partner. Investments may also be made through Riverstone International Credit
L.P, a wholly-owned subsidiary and 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 and Sub-Manager draw on the resources and expertise of
the wider Riverstone and Breakwall groups.
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. The Company and the Board are aware that the
Company's shares are trading at a discount to NAV and has discussed resuming
the buyback programme in 2024.
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.
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 2.27 percent, calculated as total expenses divided by
the weighted average NAV for the year to 31 December 2023. The weighted
average NAV used in this calculation is the mean of the published quarterly
NAVs for the year, at 31 December 2023 this was $96.9m (2022: $96.5m). Ongoing
charges are made up as follows and have been calculated using the AIC
recommended methodology.
31 December 2023 31 December 2022
$'000 % $'000 %
Profit Share 873 0.90 1,679 1.74
Directors' fees and expenses 160 0.16 180 0.19
Ongoing expenses 1,172 1.21 1,269 1.31
Total 2,205 2.27 3,128 3.24
The Investment Manager is entitled to a Profit Share when it meets relevant
performance targets as disclosed in note 12 to the financial statements.
Environmental, Social and Governance REPORT
The Company utilises the services of Riverstone as the Investment Manager and
Breakwall as Sub-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 Borrowers with this policy.
The Board takes its fiduciary responsibility to Shareholders seriously and
engages with Riverstone on corporate governance matters. As Sub-Manager,
Breakwall is required to adhere to Riverstone ESG policies and principles.
Riverstone will publish its annual ESG report in February 2024. The following
sections summarise the key elements of this report including those which could
impact RCOI's current and future investments. More detail is included in the
full report, which is available on Riverstone's website:
https://www.riverstonellc.com/en/responsible-investing/
(https://www.riverstonellc.com/en/responsible-investing/)
Statement from the Investment Manager
In an increasingly complex, challenging, and fast-moving world, Riverstone's
mission as a steward of our investors' capital has remained constant: to
deploy capital in a sustainable manner, focusing on delivering the strongest
possible risk-adjusted returns.
The recent politicisation of ESG issues has created challenges for firms like
ours as we navigate an often-polarised topic. Despite this, we remain
committed to our belief that a consistent, transparent, and authentic approach
to ESG, and its integration across our strategies, funds, and investments, is
a key component to our investment approach.
Since Riverstone was founded nearly 24 years ago, we have always believed that
the success of our business goes beyond financial returns. In almost all of
the companies we have invested in since 2000, a core theme has been those
businesses that implement and institutionalise sound ESG policies and
practices frequently result in core non-financial drivers combining with key
financial drivers to generate better outcomes. Outcomes that are positive in a
financial sense, but also in terms of personnel and communities, partner and
regulatory relationships, and the general health of the planet for future
generations.
We are proud to share our fifth annual ESG report which we believe underscores
our dedication to managing ESG risks and capitalising on climate-related
opportunities presented by the energy transition.
In our 2022 ESG report, we described the important work we undertook measuring
greenhouse gas (GHG) emissions across our portfolio and the physical and
transition climate risks we identified. In our most recent report, having
listened to our investors and with an eye on incoming ESG regulation, such as
the SEC's proposed Climate Disclosure Rule we have focused on the following:
· Revising our ESG policy and in so doing recalibrating and
redefining how we integrate ESG into our day-to-day processes
· Revising our annual ESG questionnaire and stewardship approach to
align with emerging policies, legal frameworks, and industry-recognised best
practices
· Deeper engagement with our portfolio companies on ESG, including
the use of a technology platform to enable the improved collection of accurate
ESG data faster, and updating our portfolio scorecards
· Ongoing training and accountability of our investment
professionals to ensure they not only understand the correlation between ESG
and value creation but also that they are better equipped in a practical sense
to advise and support portfolio companies on their ESG journeys
· Reducing limited partner costs on ESG portfolio monitoring and
reporting through a top-down review of our third-party consultants
As a manager of businesses and assets in the energy sector, our focus on
environmental impact is a key factor, however, we recognise the importance of
a just transition and the critical social and governance factors needed to
achieve this. Transparency, integrity, and trust are the cornerstones of our
governance framework. We hold ourselves and our portfolio companies
accountable to ethical and responsible practices.
Our firm's success to date is intertwined with the wellbeing of the
communities and people with whom we engage every day. We aim to prioritise
fair labour practices, diversity, equity, and inclusion in all our portfolio
companies.
We seek to support causes that align with our values and look to invest in
workforce development by actively engaging with our employees to ensure their
safety and welfare. By fostering strong relationships with our stakeholders
and focusing on the areas in which we know we can make a material impact, we
aim to create shared value for our investors and society at large.
Our commitment to robust ESG principles is not just a business strategy - it
is a fundamental part of our identity. While we realise there is still much
work to be done, we understand that long-term success depends on our ability
to adapt and address the ever-evolving needs of society, the environment, and
our stakeholders. We thank our investors, employees, and partners for sharing
this vision with us, and we look forward to the collective journey ahead,
guided by these principles of responsible and sustainable investing.
Credit Portfolio: ESG Review
Riverstone Credit Partners was launched in 2014 as a specialty energy
infrastructure lender focused on facilitating the growth of conventional,
renewable and what we deem "next generation" energy companies. Having executed
over 60 transactions, equating to approximately $5.3 billion in deal activity,
we consider ourselves seasoned thought leaders in both energy credit and the
energy transition.
Our Approach to Sustainable Credit Investment
Our primary objective is to be exceptional stewards of our investors' capital,
generating returns for our clients, focusing on capital preservation while
also providing creative and credible private debt solutions to help address
the complexities of climate change.
Meeting global net zero goals will require unprecedented levels of investment
in the infrastructure required to generate, transport, store, and distribute
energy. The ongoing global shift away from traditional, largely
hydrocarbon-based energy systems to more sustainable, low-carbon alternatives
will require the construction of new, greener infrastructure. It will also
require significant investment in the decarbonisation of existing energy
infrastructure.
At Riverstone, we believe the most significant and immediate environmental
impact is achieved through capital deployment that accelerates the
decarbonisation of one of the largest emitting sectors - the conventional,
hydrocarbon-based energy economy - in a way that does not sacrifice the
reliability, affordability, and accessibility of energy sources.
Green Loans and Sustainability-Linked Loans
By structuring our investments as either a Green Loan or a
Sustainability-Linked Loan ("SLL") to conventional, renewable and next
generation energy companies, we endeavour to ensure that every investment we
make goes towards enhancing and creating a more sustainable, resilient, and
equitable energy system that addresses the challenges of climate change and
promotes a cleaner and more secure energy future.
Furthermore, with Green Loans or SLLs we have a pre-existing market-recognised
criteria through which investments have to pass and for which borrowers have
to be accountable.
We initially assess if each new opportunity meets the Green Loan Principles
("GLP") - the central tenet of which is the loan must be applied towards a
'green project' which by definition has clear environmental benefits,
including:
• Use of proceeds
• Process for project evaluation and selection
• Management of proceeds
• Reporting
To the extent the opportunity does not qualify as a Green Loan, we will seek
to evaluate the sustainability goals of the borrower and structure the loan in
accordance with the Sustainability-Linked Loan Principles (SLLPs) predicated
on certain material and quantifiable predetermined Sustainability Performance
Targets (SPTs). The SLLPs set out a framework, enabling all market
participants to clearly understand the characteristics of a SLL, based around
five core components, namely the selection of KPIs, the calibration of KPIs,
loan characteristics, reporting and verification. The following are critical
aspects of the SLLP:
• The SPTs are set by the borrower and not the lender
• The sustainability goals are measurable and auditable
• Negative economic consequences are embedded in the loan
documentation for failing to meet the goals by a specified timeline
Each Green Loan or SLL made by us receives independent verification from a
credible third party provider such as a Sustainable Fitch, prior to
finalisation of the loan. In both scenarios, we endeavour to increase
transparency and alignment through the requirement for independent boards,
board observer seats, annual questionnaires and scorecards, affirmative
covenants and loan economics tied to sustainability metrics.
Riverstone Credit Partners: Recent Green and Sustainability-Linked Loan
Transactions
We are committed to directing RCP dollars to facilitate decarbonisation and
net-zero initiatives across the global energy industry. RCP has invested more
than $875 million in Green(1) and Sustainability-Linked Loans.
The below highlights recent fully or partially realised transactions.
Aspen
IM3NY Circulus EPIC
Seawolf HOOVER CS
Overview Community Solar Developer Lithium-Ion Battery Manufacturer Plastics Recycling Propane Pipeline Water Solutions Provider Sustainable Packaging & Bulk Container Solutions
57 MW 10x #1 25% 50% 3 SPTs
Solar capacity in development at closing Lithium-ion battery forecasted growth between 2020 and 2030 Riverstone's first Loan Syndications and Trading Association (LSTA) documented Expected decrease in reportable releases Electrification target metric based on water pump usage Tied to non-fossil fuel energy, waste reduction, and sustainable packaging
"Green Loan"
from pipeline
Facility Size $20 million $63 million $100 million $77 million $126 million $160 million
Closing Dec. 2020 Apr. 2021 Aug. 2021 Sep. 2022 Sept. 2018; Dec. 2022
Secondary
Purchase in
Sep. 2022
Yield to Maturity 13% 23% 14% 12% Restructured as 1L loan, In line with initial
term loan
(+warrants) preferred, and equity
Status Realised Realised Realised Epic I: Realised Partially Realised Hoover I: Realised
Epic II: Unrealised Hoover II: Unrealised
Note: Green Loan Principles (GLPs) have been developed by an experienced
working party, consisting of representatives from leading financial
institutions active in the global syndicated loan markets, with a view to
promoting the development and integrity of the green loan product. The GLPs
comprise voluntary recommended guidelines, to be applied by market
participants on a deal-by-deal basis depending on the underlying
characteristics of the transaction, that seek to promote integrity in the
development of the green loan market by clarifying the instances in which a
loan may be categorized as "green". For more information on the GLPs, please
visit: https://www.lsta.org/content/green-loan-principles
(https://www.lsta.org/content/green-loan-principles)
The below represents recent realised and unrealised Green(1) and
Sustainability-Linked(2) transactions.
Streamline Harland & Wolff
Blackbuck Resources Clean Energy MAX
Overview H(2)S Treating Offshore Wind Fabrication Produced Water Infrastructure Renewable Natural Crude Pipeline & Export Infrastructure
Equipment
Gas ("RNG")
>33 million pounds 50+ 750 trucks per day 100% 1(st)
Sulphur dioxide Company-wide apprenticeships required Eliminated RNG delivered to on-road vehicle customers by 2025 Carbon-neutral crude oil export terminal on the Gulf Coast of Texas
avoided in 2022 by the TR UE Blue Saltwater Disposal
Facility Size $55 million $100 million $57 million $150 million $28 million
Closing Strike I: Nov 2021 Strike III: Jun 2023 Mar. 2022 Jun. 2021 Dec. 2022 Dec. 2022
Upsized Aug. 2022, Oct. 2022, Dec. 2022, Jan. 2023, and Feb 2023 Upsized
Jun. 2022
Yield to Maturity 13% 19% 12% 12% Undisclosed
(+warrants)
Status Strike I: Realised Strike III: Unrealised Unrealised Unrealised Realised Unrealised
Note:
1. Green Loan Principles (GLPs) have been developed by an experienced
working party, consisting of representatives from leading financial
institutions active in the global syndicated loan markets, with a view to
promoting the development and integrity of the green loan product. The GLPs
comprise voluntary recommended guidelines, to be applied by market
participants on a deal-by-deal basis depending on the underlying
characteristics of the transaction, that seek to promote integrity in the
development of the green loan market by clarifying the instances in which a
loan may be categorized as "green". For more information on the GLPs, please
visit: https://www.lsta.org/content/green-loan-principles
2. Sustainability-Linked Loans (SLLs) follow a set of Sustainability
Linked Loan Principles (SLLPs) which were originally published in 2019 and
provide a framework to SLL structures. In order to promote the
development of this product, and underpin its integrity, the APLMA, LMA and
LSTA considered it appropriate to produce guidance on the SLLP, to provide
market practitioners with clarity on their application and approach. For more
information on the SLLP, please visit:
https://www.lsta.org/content/sustainability-linked-loan-principles-sllp
(https://www.lsta.org/content/sustainability-linked-loan-principles-sllp/)
Board Diversity
The RCOI Board strongly believes that having diversity in skills, experience
and gender has significant benefits. The Board consists of individuals from
relevant and complementary backgrounds offering experience in the investment
management of listed funds, as well as in the energy sector from both a public
policy and a commercial perspective. As at the date of this report, the Board
comprised 2 men and 1 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. Currently, the Audit and Risk Committee Chairman
position is held by a woman who represents 33 per cent of Directors on the
Board.
The Board is cognisant that the percentage of women on the Board is below the
40% target in the FCA diversity guidelines and it also does not currently have
ethnic minority representation. The size of the Board is relatively small in
comparison to the wider FTSE350 indices and therefore provides a greater
challenge in complying with diversity guidelines. This will, however, continue
to be a key focus during future succession planning, whilst ensuring an
appropriate balance of skills and experience in the Board.
The Board recognises the importance of an inclusive and diverse Board in
facilitating a collaborative culture and enhancing the delivery of the
Company's strategic objectives.
In accordance with Listing Rule 9.8.6R(10), as at the date of this report, and
as described above the composition of the Board is as follows:
Number of Board members in scope Percentage of the Board Number of senior positions on the Board (CEO, CFO,
SID and Chair) (1)
Men 2 67% 1
Women 1 33% 1
Not specified/prefer not to say - - -
( )
(1) The positions of CEO and CFO are not applicable to the Company as an
externally managed investment fund. Senior Board positions will continue to be
reviewed.
Number of Board members in scope Percentage of the Board Number of senior positions on the Board (CEO, CFO,
SID and Chair)(1)
White British or other White (including minority-white groups) 3 100% 2
Mixed/Multiple Ethnic Groups - - -
Asian/Asian British - - -
Black/African/Caribbean/ - - -
Black British
Other ethnic group, including Arab - - -
Not specified/prefer not to say - - -
(1) The positions of CEO and CFO are not applicable to the Company as an
externally managed investment fund. Senior Board positions will continue to be
reviewed.
The above information is based on voluntary self-declaration from the
Directors.
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 https:// (https://www.riverstonecoi.com) www.riverstonecoi.com
(https://www.riverstonecoi.com) .
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. In its efforts 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. 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.
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 regularly
discusses any new investment and the investment pipeline for RCOI with the
Board. 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 has usual and customary inspection rights and affirmative
covenants regarding environmental matters contained in credit agreement
documentation. 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. Cyber security due diligence and ongoing monitoring is
performed on each potential and current 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. 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.
11. The Company relies on a third-party provider for the key operational tasks
of the Company. The failure of any service provider to carry out their duty
may have a detrimental effect on the operation of the Company. To mitigate
these risks the Board will review the internal control reports, and consider
business continuity arrangements of the Company.
REALISATION ELECTION
We are keenly aware of the persistent discount at which the shares trade, and
the Board does not believe this reflects the value of the portfolio. As ever
we continue to work assiduously with the manager on a number of initiatives to
reduce the discount including active asset management and proactive and
frequent engagement with equity market participants. We are also focused on
the forthcoming realisation election in May 2024 and look forward to engaging
with shareholders to understand both their intentions to participate and their
views regarding the future of the Company. We remind investors that if the
Company's remaining Ordinary share net asset value falls below $50m as a
result of the election, the Company will amend its investment objectives and
policy to adopt a realisation strategy. As always, the Board and the manager
remain vigilantly focused on optimising the portfolio to ensure long-term
value creation for our shareholders. Further announcements on the upcoming
realisation election will be made in due course.
For the forthcoming realisation election in May 2024, shareholders will vote
whether or not to redesignate their shares on a one for one basis to
realisation shares. The Realisation Share NAV (the NAV attributable to the
realisation shares) and the Ordinary Share NAV (the NAV attributable to the
remaining ordinary shares) will be calculated after the Annual General
Meeting.
If the Realisation Share NAV is below $5.0m, these shares will be repurchased
and the remaining shares will continue as before, and if the Realisation Share
NAV is above $5.0m, the assets and liabilities of the Company will be
allocated pro rata in a Continuation Pool and a Realisation Pool.
Alternatively, if the remaining Ordinary Share NAV is below $50.0m, the
investment objective and investment policy will change to hold the Company's
assets to repayment at maturity without reinvesting any cash realised by the
Company with the aim of making progressive returns of cash to Shareholders as
soon as practicable and ultimately liquidating the Company.
Going Concern
As at 31 December 2023, the cash balance within the Company was $0.6 million
and cash and cash equivalent balances within the SPVs amounted to $8.5
million. The Company currently has existing liabilities of $1.1 million, plus
a distribution payable of $2.3 million with respect to the quarter ended 31
December 2023.
During Q4 2022, Riverstone International Credit - Direct, a wholly owned
subsidiary of the Company entered into a Revolving Credit facility ("RCF" or
"facility") Agreement for $15.0 million with BC Partners. The SPV borrowings
from the facility at 31 December 2023 were $5.0m, leaving the remaining $10.0m
million undrawn commitment for future borrowings. The guarantors are the
Company, Riverstone Credit Opportunities Income Partners - Direct L.L.C., a
Delaware limited liability company and Riverstone Credit Opportunities Income
Partners L.L.C., a Delaware limited liability company. The SPVs are required
to maintain an LTV Ratio below the Covenant LTV of 22%
at each borrowing request date. The LTV Ratio is calculated as the total
outstanding principal and accrued interest on the facility divided by the
aggregate NAV of the SPVs, Riverstone International Credit L.P. and Riverstone
International Credit-Direct L.P. At 31 December 2023, the SPVs were compliant
with the Covenant LTV, with an LTV of ~6% and $10.0m of the undrawn commitment
is available. The SPVs also entered into a money market capital fund with JP
Morgan, earning about 5% interest annually. Cash held at the money market
account is readily transferrable within one business day, and the balance at
31 December 2023 was $15.1 million.
The cash balance of the Company and its SPVs are 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
are no material liquidity or solvency risks for the Company's financial
resources and working capital.
Additionally, the operating expenses of the trust and its SPVs are budgeted to
be between $3.0 million and $3.5 million during the period of assessment
including taxes and interest expense from the SPV facility. Based on the high
end of this range, using all the cash at the SPVs and in the Company, along
with the proceeds invested in the money market capital fund, it would take the
Company and its SPVs' approximately seven years to run out of cash.
The major cash outflows of the Company and its SPVs are expected to be the
payment of distributions and expenses, share repurchases and the acquisition
of new assets, all of which are analysed in the scenarios outlined below based
on timing and covenant compliance.
The Company has assessed multiple case scenarios, including scenarios impacted
by the upcoming realisation election, from base case to the ultimate downside
scenario. In the highly unlikely ultimate downside scenario, where all
unrealised investments are written down to zero and expenses increase by 50%,
the Company and its SPVs will still have sufficient funds to cover their
obligations and continue operating for the going concern period.
The first continuation vote for the Company will be proposed at the AGM of the
Company to be held in May 2027, which is after the going concern period has
ended.
The Directors have concluded the Company's financial statements shall be
prepared on a going concern basis. However, as the realisation election will
not conclude until after the approval of these financial statements, there is
a material uncertainty related to this event that may cast significant doubt
on the Company's ability to continue as a going concern. The financial
statements do not contain the adjustments that would result if the company
were unable to continue as a going concern.
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. The current
weighted average tenor at entry is 3.4 years, therefore the Board chose to
conduct a review for a period of three years to 31 December 2026.
The Company and its SPVs currently hold unrealised investments with stated
maturity dates through the end of 2026, which is the end of the longer term
viability period under assessment. As it currently stands, more than 60% of
the current portfolio tenor is set to mature in 2026. The Company will still
have unrealised investments and sufficient liquidity at the end of the longer
term viability period to operate.
At 31 December 2023, the Company and its SPVs had unfunded commitments of $6.4
million and an unpaid RCF of $5 million. The RCF will be paid down in January
of 2024, and the unfunded commitments are expected to be funded by mid-2024,
both of which would be funded using cash on hand at Riverstone International
Credit - Direct, L.P. ("RIC D") and the JP Morgan money market capital fund.
At 31 December 2023, the total cash held by both of these sources was $23.0
million, which sufficiently covers both obligations.
In addition to cash and cash equivalents currently on hand, all investments
are expected to be realised by the end of the longer term viability period,
providing the Company with more than sufficient cash needs to pay ongoing
expenses over the longer term viability period and meeting quarterly dividend
payments to shareholders. The outcome of the Realisation Election cannot be
determined at this time, and therefore our assessment is subject to
shareholders voting to retain their ordinary shareholding. The Company has
adequate liquidity to continue operations through the longer term viability
period, and it would take the Company and its SPVs approximately seven years
to run out of cash.
The first continuation vote for the Company will be proposed at Annual General
Meeting of the Company to be held in May 2027, which is after the viability
period currently under assessment has ended.
The Directors and the Company note that from the information presented above,
the Company has sufficient liquidity and will continue to hold unrealised
investments to meet its liabilities as they fall due for the longer term
viability. The Company will continue to assess the business in the near term,
as well as the upcoming realisation election, and will have more clarity
around the realisations of the unrealised portfolio in the coming months.
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. The RCF available to the Company's SPVs enables
deployment of increased capital to the Company's attractive pipeline of
Sustainability-Linked and Green Loan opportunities, thereby increasing the
earnings power of the portfolio.
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.
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 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 one new investment (2022: six), and two realisations
(2022: six) during the year. The new investment and one of the realisations
during the year related to the refinancing of Streamline and the other
realisation related to Clean Energy Fuels. 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 8.5 cents per share with
respect to the year (2022: 9.00 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 Company stopped its share buyback programme in August 2022 where between
the period of 30 June 2022 - 31 August 2022 the Company repurchased 740,146
shares. The Company may reinitiate it's share buyback programme in late 2024,
including a tender offer in order to reduce the share price discount to NAV.
Annual General Meeting
The AGM of the Company will be held at 14:00 BST on 22 May 2024 at the offices
of Hogan Lovells International LLP, Atlantic House, Holborn Viaduct, London
EC1A 2FG. In accordance with the Articles of Association, a Realisation
Election will be proposed at the AGM. For the forthcoming realisation
election, shareholders will vote whether or not to redesignate their shares on
a one for one basis to realisation shares. Details of the other resolutions to
be proposed at the AGM, together with explanations, will appear in the notices
of meetings to be distributed to Shareholders in April 2024. 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.
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
20 February 2024
Investment Manager's Report
ABOUT THE INVESTMENT MANAGER
Appointed in May 2019, the Investment Manager, an affiliate of Riverstone
Holdings, seeks to generate consistent shareholder returns predominantly in
the form of income distributions principally by making Green and
Sustainability-Linked, senior secured loans to energy transition businesses.
Loans are classified as Green Loans when they support environmentally
sustainable economic activity and Sustainability-Linked Loans when they
contain sustainability performance targets or other equivalent metrics to be
monitored. RCOI lends to companies working to drive change and deliver better
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, as well as drive positive impact regarding climate
change by structuring loans as Green Loans or Sustainability-Linked Loans.
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.
On 31 December 2023, Riverstone Holdings LLC and their affiliate Riverstone
Investment Group (collectively, "Riverstone") entered into an agreement with
Breakwall Capital LP to provide sub-management services (the "Sub-Management
Agreement") for all credit vehicles managed by Riverstone, including RCOI (the
"Existing Credit Vehicles"). Breakwall is a newly formed independent
asset-management firm regulated by the SEC as a Registered Investment Advisor,
owned and operated by the existing Riverstone Credit Partners team. Services
provided by Breakwall commenced on 31 December 2023.
Under the arrangement, Riverstone will remain the manager of RCOI on the terms
of RCOI's existing management agreement and all aspects of the ongoing
management of the Company, including the day-to-day investment team, will
remain consistent. Breakwall, as Sub-Manager, will be leading any new
investments. In its capacity as Sub-Manager to the Manager, the Sub-Manager
shall recommend to the Manager each and every action to be taken by the
Manager pursuant to the governing agreements of the Existing Credit Vehicles.
There will be no increase in fees payable by RCOI as a result of the modified
arrangements. The Board of RCOI has been involved in discussions and are
confident that the structure of Riverstone as manager and Breakwall as the
future sub-manager will continue to deliver strong returns for shareholders.
Riverstone's investment professionals have a unique combination of industry
knowledge, financial expertise, and operating capabilities. The Company also
benefits from the guidance and input provided by non-Riverstone credit team
members of Riverstone's credit investment committee who are 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 leads to enhanced sourcing and deal
origination opportunities for the Company.
INVESTMENT STRATEGY
The Investment Manager will continue to leverage the wider Riverstone and
Breakwall platforms to enhance its investment strategy through the
opportunities presented and the synergies gained from being part of one the
largest dedicated energy focused private equity firms.
The key elements of the Investment Manager's investment strategy in relation
to the Company's SPVs are summarised below.
INVESTMENT PORTFOLIO SUMMARY
As of 31 December 2023, the Company holds a diverse portfolio of nine direct
investments across energy infrastructure & infrastructure services and
energy transition assets as further discussed below. In addition, RCOI holds
the warrants of one investment where the loan was fully realised. The Company
completed one new investment and two realisations during the year. The new
investment and one of the realisations during the year related to the
refinancing of Streamline and the other realisation related to Clean Energy
Fuels. The Investment Manager continues to maintain a strong pipeline of
investment opportunities and expects to make further commitments across the
infrastructure, infrastructure services and energy transition sectors. RCOI
will receive an allocation of new investments in accordance with the
limitations illustrated in the Company's Investment Restrictions. The
determination of what percentage received 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 signed with definitive documentation and, 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.
The Investment Manager expects that every loan it makes will advance the cause
of energy transition one way or another. For new green energy infrastructure,
or conversion of older assets to a more sustainable use, we will make Green
Loans. For existing hydrocarbon related businesses, we will make
Sustainability-Linked Loans that tie loan economics to meeting specific
sustainability performance targets. Both structures will be based on LSTA
guidelines and be subject to third party independent opinion from Sustainable
Fitch.
Seawolf Water Resources - RCOI participated in a Sustainability-Linked
secondary investment in a stapled bundle of private securities in Seawolf
Water Resources, a privately held water infrastructure services company with
operations primarily in Loving County, Texas and southern New Mexico. The
investment includes a first lien term loan along with preferred stock and
common equity, collectively at a significant discount to market value.
The investment by RCOI closed on 26 September 2022, and has a maturity of
March 31, 2026, and an estimated all-in yield to maturity on the loan of 10.6
percent to RCOI. The preferred stock and common equity are perpetual in nature
but benefit from excess cash returned to the shareholders from time to time.
Across the term loan, preferred stock, and common equity, RCOI has committed a
total of $9.0 million, reflecting 11.8 per cent of RCOI's overall commitments.
The original total loan size was $84.2 million.
Use of proceeds was to assist in operations in water infrastructure services
across Loving County, Texas, and southern New Mexico.
EPIC Propane ("EPIC") - RCOI amended and extended its investment in EPIC
Propane, a sponsor-backed infrastructure company that provides propane purity
offtake transportation to the Gulf Coast export market. EPIC Propane is part
of the broader EPIC Midstream system that includes over 1,695 miles of crude
oil and natural gas liquids pipelines, collectively referred to as "EPIC".
The amendment closed in September 2022, and the loan's maturity was extended
to September 2026 and the optional prepayment feature was amended to add a
two-year make-whole provision. RCOI has realised c. $1m profits from the
extension. All other material economic terms remain the same. As part of the
amendment, the loan was converted to a Sustainability-Linked Loan and all of
the economics associated with the original transaction were realised,
including the exit premium.
In conjunction with the amendment, RCOI's allocation to the loan was reduced
from $14.8m to $13.9m in order to comply with the Company's diversification
policies.
As of 31 December 2023, the full remaining commitment of $13.9 million has
been invested, reflecting 18.1 percent of RCOI's overall commitments. The
original total loan size from the refinance was $77.0 million.
Hoover Circular Solutions ("Hoover CS") - RCOI upsized and refinanced its
investment in a Sustainability-Linked first lien term loan for Hoover CS, a
leading provider of sustainable packaging and fleet management solutions, that
is paving the way for customers across the chemical, refining and general
industrial-end markets to move away from single-use containers. Sustainable
Fitch, a division of Fitch Group focused on ESG, provided a Second Party
Opinion ("SPO") on the loan.
At closing on 30 November 2022, all of the Borrower's outstanding debt was
refinanced by the new $160 million Sustainability-Linked, first lien term loan
due November 2026.
As part of the new deal allocations, RCOI's commitment was further upsized to
$13.7 million, and the expected returns are in line with the initial
investment.
As of 30 June 2023, the full remaining commitment of $13.7 million has been
invested, reflecting 18.0 per cent of RCOI's overall commitments. The original
total loan size from the refinance was $160.0 million.
Clean Energy Fuels Corp. - RCOI participated in, and obtained an SPO from
Sustainable Fitch on, a new four-year $150 million Sustainability-Linked first
lien term loan (the "Term Loan") to Clean Energy Fuels, the largest provider
of clean fuel for the transportation market.
At close on 22 December 2022, RCOI committed $13.9 million. The first lien
floating rate term loan has a maturity of 22 December 2026 with an all-in
yield to maturity of c.12 per cent for RCOI on a fully drawn basis.
The Company's SPV, Riverstone International Credit - Direct L.P., fully
realised the investment on 12 December 2023 at a gross IRR of 14.9% and a net
IRR of 10.8% and a gross MOIC of 1.14x and a net MOIC of 1.10x.
Max Midstream - RCOI participated in, and obtained an SPO from Sustainable
Fitch on, a new $28.6 million Sustainability-Linked, first lien term loan (the
"Term Loan") to a subsidiary of Max Energy Industrial Holdings US LLC ("Max"),
which is developing the first carbon-neutral crude oil export terminal on the
Gulf Coast of Texas, which it believes will lead to increased market share as
crude consumers globally seek to reduce their overall carbon footprint. At
close on 30 December 2022, RCOI committed $5.0 million.
As of 31 December 2023, the full remaining commitment of $5.0 million has been
invested, reflecting 6.5 per cent of RCOI's overall commitments. The original
total loan size was $28.3 million.
Harland & Wolff - RCOI participated in a $70.0 million first lien Green
Term Loan to this LSE listed infrastructure operator engaged in the
development and operation of strategic maritime assets across the United
Kingdom.
At closing on 9 March 2022, $11.8 million was committed by RCOI and $7.9
million was funded for RCOI's portion of the $23.1 million drawn at close for
the $35.0 million committed facility tranche. The first lien term loan has a
maturity of December 2024 and an estimated all-in yield to maturity of 13.2
per cent for RCOI on a fully-drawn basis. Proceeds from the term loan will be
utilised to fund working capital and capital expenditures associated with the
fabrication of wind turbine generator jackets for the NG Offshore Wind
Project, to repay existing indebtedness, to fund an interest reserve account,
and to pay transaction fees & expenses. The Company will also grant
Riverstone detachable warrants over new ordinary shares in the Company
("Warrants") as part of this transaction. A total of 17.2 million warrants
will be issued to Riverstone, of which 5.1 million warrants are for RCOI,
representing 27.0 per cent of the Company's outstanding warrants.
The term loan has been structured as a Green Loan following the Green Loan
Principles published by the Loan Market Association (''LMA''), the Asia
Pacific Loan Market Association (''APLMA''), and the Loan Syndications &
Trading Association (''LSTA'') and a Sustainability-Linked Loan with
performance indicators focused on social responsibility. Harland & Wolff
is incentivised to upscale its group-wide apprenticeship programme to benefit
the local communities in which it operates. Harland & Wolff plans to build
on its success to date and seeks further contracts within the renewables and
"green maritime" sectors, such as fabrication contracts for offshore wind and
hydrogen projects, new vessel builds, retrofits with sustainability
credentials and other such contracts that would promote the UK Government's
agenda to achieving Net Zero by 2050.
In October and December 2022, RCOI participated in $15.0 million and $7.2
million upsizes of the investment, respectively, bringing RCOI's total
commitment to $14.6m.
As of 31 December 2023, the full remaining commitment of $14.6 million has
been invested, reflecting 19.0 per cent of RCOI's overall commitments. The
original total loan size was $100.0 million including the recent upsizes.
Streamline Innovations - RCOI amended and extended its investment in
Streamline Innovations, a leader in environmentally-advanced treatment
solutions for the removal of hydrogen sulphide (H2S) from natural gas,
renewable fuels, wastewater, and industrial processes. The facility was
structured as a Green Loan with Sustainable Fitch providing a SPO. The SPO
verifies the facility's alignment to the LSTA Green Loan Principles with the
transaction being compliant with the four pillars of the LSTA Green Loan
Principles and aligned with the LSTA category of pollution and prevention.
During Q2 2023, the Company amended and extended its investment in Streamline
Innovations and realised c. $2.0 million of profits at closing of the
amendment and extension resulting in a 24 per cent gross IRR (19 per cent net
IRR) and a 1.3x gross MOIC (1.2x net MOIC) of the initial investment in
Streamline Innovations. As part of this amendment and extension closing, the
facility was upsized to $55.0 million, the maturity was extended to December
2026, and economic terms were adjusted for an estimated all-in yield to
maturity of 13 percent to RCOI. RCOI's allocation to the loan was $9.9
million.
As of 31 December 2023, $3.5 million of the $9.9 million commitment has been
invested, reflecting 13.0 per cent of RCOI's overall commitments. The original
total loan size from the refinance was $55.0 million.
Blackbuck Resources - RCOI participated in a $50.0 million first lien
delayed-draw Sustainability-Linked Term Loan to the 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. The use of proceeds was
primarily to refinance existing indebtedness and growth capex.
In June 2022, the loan was upsized $7.0 million bringing the total facility to
$57.0 million. The proceeds, along with incremental equity, will be used to
fund growth capex associated with new contracts.
Sustainable Fitch, a division of Fitch Group focused on ESG, provided a Second
Party Opinion "SPO") on the Sustainability-Linked Loan to Blackbuck. The SPO
considers the loan to be aligned with the five pillars of the LSTA
Sustainability-Linked Loan Principles.
On 31 March 2023, the remaining available commitment was terminated as per the
availability period termination on the credit agreement.
In December 2023, as part of the amendment and extension, Blackbuck's maturity
was extended to 31 December 2024, and economic terms were adjusted for an
estimated all-in yield to maturity of 17 per cent to RCOI. As part of the
amendment, the current exit premium of 106 was paid, reducing the go forward
exit premium to zero, resulting in c. $0.6 million in profits to be
distributed. In addition, c. $0.1 million of the loan was repaid to RCOI,
resulting in $9.9 million of principal balance outstanding.
As of 31 December 2023, the remaining commitment of $9.7 million has been
invested, reflecting 12.7 per cent of RCOI's overall commitments. The original
total loan size was $55.0 million inclusive of recent termination of the $2.0
million unfunded portion of the upsize.
Imperium3 New York, Inc- RCOI participated in a $63.0 million first lien
delayed-draw term loan to this 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 "C4"), which is a research and development
company based in Binghamton, New York with patented discoveries in battery
composition, and Magnis Energy Technologies Limited "Magni") (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 at closing. Following the close 20 per cent 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 per cent 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.
The use of proceeds was primarily to construct the manufacturing facility.
In April 2022, the Company fully refinanced this loan with a new source of
financing, resulting in a 32.5 per cent realised IRR and 1.25x realised MOIC.
Additionally, the Company will retain our non-dilutable equity Warrants which
provides meaningful upside to this investment.
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 per cent on a fully drawn basis.
Use of proceeds, combined with Caliber Midstream Partners' (''OpCo'') RCF
draw, was to fund an acquisition.
In March 2021, OpCo's 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 RCF 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.
In March 2022, the Company and OpCo lender closed the restructuring with the
OpCo lenders receiving approximately 100% of the equity. Following the
restructuring, new management was hired, a new contract was executed and there
remains increased focus on cost cutting initiatives and new revenue
opportunities. In June 2023, the Priority Liquidity Facility was moved to a
new entity, Caliber MidCo LLC.
In November 2023, the Escrowed proceeds from the restructure in March 2022
were distributed to the lenders.
As of 31 December 2023, the full $4.0 million commitment has been invested,
reflecting 0.9% of RCOI's overall commitments post restructuring. The original
total loan size for the Opco RCF and HoldCo were $129.4 million and $35.1
million, respectively.
SUBSEQUENT EVENTS AND OUTLOOK
In aggregate, two investments were realised during 2023, one of which as part
of a successful refinancing. 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 and create real value for shareholders.
The backdrop for the broader energy sector remains strong, continuing the
trend seen in 2023. Given our focus on energy infrastructure, infrastructure
services and energy transition assets, RCOI is ideally poised to continue to
take advantage of the investment opportunity brought about by the convergence
of two market phenomena, namely the consistent growing demand for sources of
energy and the concurrent need for the global infrastructure industry to meet
global "net-zero" targets.
The two realisations and one amendment and extension made during the year have
resulted in additional proceeds to distribute to investors. As the commodity
market overall remains strong, we are well positioned to continue to provide
stable cashflows and an attractive yield. Additionally, despite the recent
increase in inflation and rise in interest rates, our floating rate loans are
all based on SOFR with floors and don't decline in value as interest rates are
likely to rise.
Based on the current unfunded commitments, recent deal activity, and potential
new investment opportunities, we anticipate continuing to provide attractive
returns and consistent yield in the portfolio in order to optimise shareholder
value.
We are cognisant of the forthcoming realisation election in May 2024 and look
forward to engaging with shareholders to understand both their intentions to
participate and their views regarding the future of the Company. We remind
investors that if the Company's remaining Ordinary net asset value falls below
$50m as a result of the election, the Company will amend its investment
objectives and policy to adopt a realisation strategy. As always, we remain
vigilantly focused on optimising the portfolio to ensure long-term value
creation for our shareholders.
All capitalised terms are defined in the list of defined terms below unless
separately defined.
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
Emma is the Chief Investment Officer at the Guy's & St Thomas' Foundation
leading the management of their £1bn charitable endowment.
Her previous role was at Octopus Ventures as co-CEO, before which she spent
5 years as a partner at Marylebone Partners, building and leading their direct
investing capability. Emma has a wealth of experience, expertise and networks
from a range of world class investment houses including J.P. Morgan, Perry
Capital, Big Society Capital (where she was the Chief Investment Officer) and
The Wellcome Trust. She has a particular interest and focus on ESG, Impact
and Responsible Investment considerations.
Emma has an MA from Oxford University and an MSc from LSE.
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 2023. 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 2023, the Company's issued share capital comprised
90,805,237 Ordinary Shares (2022: 90,805,237) and 1 E Share (2022: 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 its issued
share capital expires at the conclusion of the Company's AGM on 22 May 2024.
The Company's authority to generally and unconditionally make market purchases
(within the meaning of section 693(4) of the Companies Act 2006) of its
Ordinary Shares of US$0.01 each in the capital of the Company, is subject to
the following conditions:
i. the maximum number of Ordinary Shares authorised to be
purchased is 13,611,705 representing 14.99 per cent of the Company's issued
ordinary share capital as at 29 March 2022;
ii. the minimum price (excluding expenses) which may be paid
for an Ordinary Share is US$0.01;
iii. the maximum price (excluding expenses) which may be paid
for each Ordinary Share is the higher of: (i) an amount equal to 105 per cent
of the average of the middle-market quotations of an Ordinary Share as derived
from the London Stock Exchange Daily Official List for the five business days
immediately preceding the day on which the Ordinary Share is contracted to be
purchased; and (ii) an amount equal to the higher of the price of the last
independent trade of an Ordinary Share and the highest current independent bid
for an Ordinary Share on the trading venue where the purchase is carried out;
iv. the authority shall expire at the close of the AGM of the
Company held in 2024 or on the date which falls 15 months after 18 May 2022,
being the date the resolution was passed, (whichever is earlier); and
v. a contract to purchase Ordinary Shares under the
authority may be made before the expiry of the authority (as per paragraph iv
above), and concluded in whole or in part after the expiry of the authority
(as per paragraph iv above).
Since IPO, 9,194,763 shares were repurchased for a total cash consideration of
US$6,471,738. The buyback programme was paused on 24 August 2022.
A special resolution was passed at the AGM in May 2023 AGM renewing the
authority to purchase shares. 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 2023 are detailed below.
Ordinary Shares held %
31 December 2023
ND Capital Investments Ltd (Tortola) 11.01
Newton Investment Mgt (London) 10.26
Mirabella Financial Services (London) 9.74
AXA Investment Mgrs (London) 8.34
Alder Investment Mgt (London) 8.26
Almitas Capital (Santa Monica) 7.70
Metage Capital Mgt (London) 4.63
Polar Capital (London) 4.50
Jupiter Asset Mgt (London) 4.41
Brooks Macdonald Asset Mgt (London) 4.08
In addition, the Company also provides the same information as at 31 January
2024, being the most current information available.
Ordinary Shares held %
31 January 2024
ND Capital Investments Ltd (Tortola) 11.01
Newton Investment Mgt (London) 10.26
Mirabella Financial Services (London) 9.74
Alder Investment Mgt (London) 8.26
AXA Investment Mgrs (London) 7.60
Almitas Capital (Santa Monica) 7.42
Metage Capital Mgt (London) 4.63
Polar Capital (London) 4.50
Jupiter Asset Mgt (London) 4.41
Brooks Macdonald Asset Mgt (London) 4.08
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;
· Ordinary Shareholders are entitled to all dividends paid by the
Company;
· there exist no agreements to which the Company is party that may
affect its control following a takeover bid;
· 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 below 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. For the same reasons as set out above, the Company has
performed an assessment and considers itself to be a low energy user under the
SECR regulations. The Company, as described in the ESG Report, did undertake a
measurement of GHG emissions across the Company's portfolio companies in 2022.
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 2023 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 2023 the Board has recommended a
distribution of $2.3 million, equivalent to 2.5 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 2023 to 8.5 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.
On behalf of the Board
Reuben Jeffery, III
Chairman
20 February 2024
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 22 May 2024. At the AGM on 18 May 2023, Shareholders voted 98.99
percent in favour to approve the Directors' Remuneration Report for the year
ended 31 December 2022.
The Company's Auditor is required to give its opinion on the information
provided on Directors' remuneration that is specifically marked as audited of
this report and this is explained further in its report to Shareholders. The
remainder of this report is outside the scope of the external audit.
Annual Statement from the Chairman of the Board
The Board 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 third AGM on 18 May
2023, with Shareholders voting 99.89 percent in favour and 0.11 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 2023 Change from prior year Paid in the year to 31 December 2022
$ % $
Reuben Jeffery, III (Chairman) - £45k p.a. 56,097 1% 55,400
Emma Davies (Audit & Risk Committee Chair) - £40k p.a. 49,864 1% 49,245
Edward Cumming-Bruce (Nomination Committee Chair) - £35k p.a. 43,630 1% 43,089
Total 149,591 147,734
The Directors total annual remuneration has not changed from prior year. The
percent change detailed above is directly related to foreign exchange rate
movements in USD, as the Directors are paid in GBP.
The table below (audited information) shows the change in total remuneration
earned by each individual Director over prior years:
2023 2022 2021 2020
% change from prior year
% change from prior year
% change from prior year
% change from prior year
Reuben Jeffery, III (Chairman) - £45k p.a. 1% -10% 8% 32%
Emma Davies (Audit & Risk Committee Chair) - £40k p.a. 1% -10% 8% 32%
Edward Cumming-Bruce (Nomination Committee Chair) - £35k p.a. 1% -10% 8% 32%
Amounts paid to Directors as reimbursement of travel and other incidental
expenses during the year were:
Paid in the year to 31 December 2023 Change from prior year Paid in the year to 31 December 2022
$ % $
Reuben Jeffery, III 10,541 -67% 31,524
Emma Davies - - -
Edward Cumming-Bruce - - -
Total 10,541 31,524
None of the Directors received any other remuneration or additional
discretionary payments during the year from the Company (2022: $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 2023 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 2023 Ordinary Shares of $0.01 each held at 31 December 2022
Reuben Jeffery, III 100,000 100,000
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 $149,591
(2022: $147,734) in comparison to distributions paid or declared to
Shareholders with respect to the year of $7.7 million (2022: $8.2 million).
Company Performance
The performance of the AIC Investment Trust Direct Lending sector index is
shown as a market reference for investors. The Company is primarily involved
in making senior secured loans to energy-related companies through its SPVs.
Comparable peers making debt investments also use direct lending indexes for
benchmarking purposes and so the AIC Investment Trust Direct Lending sector
index is chosen for benchmarking purposes.
On behalf of the Board
Reuben Jeffery, III
Chairman
20 February 2024
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 IAS. 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 in accordance with IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors 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 IAS, 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 DTR4.1
The Directors confirm that to the best of their knowledge:
· the Company's financial statements have been prepared in
accordance with UK-adopted IAS 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
20 February 2024
Corporate Governance Report
This Corporate Governance Report forms part of the Report of the Directors.
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,
https://www.theaic.co.uk (https://www.theaic.co.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 UK Code is available on the
Financial Reporting Council's website, https://www.frc.org.uk
(https://www.frc.org.uk) .
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, whilst having regard to the interests of wider
society.
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, including the Chairman, shall offer themselves for re-election at
the forthcoming AGM. The strong and diverse mix of experienced individuals on
the current Board enables high calibre debate and constructive challenge.
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 Company
Secretary assists the Board and Committee Chairs in agreeing the agenda in
sufficient time before the meeting to enable input from key stakeholders. Care
is taken to ensure that presentation of papers are clear with the appropriate
level of detail to assist the Board and Committees in discharging their
duties. The Board utilises a web-based system which provides ready access to
Board and Committee papers and materials. 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/
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 based on the requirements of the
UK Market Abuse Regulation 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 Board also considers whether the Company has inside information and if an
announcement obligation has arisen. The Board reviews the scope and content of
disclosures in order to ensure that information released to the market by the
Company is appropriate. It is responsible for reviewing the systems,
procedures and controls in place to enable the Company to comply with its
legal and regulatory obligations in relation to inside information.
The Board is also responsible for reviewing and considering any actual or
potential conflicts of interest referred to it in accordance with the
Company's conflicts of interest policy and approving any such conflicts. At
least annually, the Board reviews the adequacy of disclosure to Shareholders
regarding potential conflicts of interest and the effectiveness of the
Company's conflicts of interest policy. In addition, the Board is responsible
for reviewing and approving any related party transactions. Other key matters
requiring Board approval include capital structure, the Company's distribution
policy and changes to the Investment Policy.
In the performance of its duties, the Board is committed to maintaining a good
understanding of the views of Shareholders and considerable importance is
attached to communicating with Shareholders.
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 continues to operate in a respectful, transparent and inclusive
manner, where constructive challenge of opinions is welcomed and differences
of perspectives are encouraged. The Board also undertakes continued
engagement with the Investment Manager and other advisors to ensure that
practices and behaviour throughout the business are aligned with the Company's
purpose and strategy.
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, social and ethnic backgrounds and cognitive and personal
strengths) 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.
The Board recognises the importance of an inclusive and diverse Board in
facilitating a collaborative culture and enhancing the delivery of the
Company's strategic objectives. The Board will continue to monitor and
actively work on ensuring that it maintains and nurtures a Board that is as
diverse as possible. This baseline representation and understanding will help
inform the development of future initiatives on diversity and inclusion.
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.
The Board will consider its composition and succession planning on an ongoing
basis.
The Board recommends that Shareholders vote in favour of the re-election of
all Directors at the upcoming AGM of the Company.
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 strategic objectives and budgets ensuring that any necessary
corrective action is taken;
· ensuring appropriate internal controls and risk management
frameworks are in place to manage and continually assess risk;
· 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 and proposed valuations
of its investments;
· reviewing the Company's corporate governance arrangements;
· providing constructive challenge and strategic guidance and
offering specialist advice; 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 8 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.
The number of meetings of the full Board and Committees in the period year to
31 December 2023 and attendance by each Director is set out below:
Board Audit and Risk Nomination Management
Meetings Committee Committee Engagement
(max 10) Meetings Meetings Committee Tenure as at 31 December 2023
(max 4) (max 1) Meetings
(max 1)
Director A B A B A B A B
8 8 4 4 1 1 1 1 4 years 9 months
Reuben Jeffery, III
8 8 4 4 1 1 1 1 4 years 9 months
Emma Davies
8 7 4 3 1 1 1 0 4 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.
The Board has three standing Committees, being the Audit and Risk Committee,
the Nomination Committee and the Management Engagement Committee. The roles
and responsibilities of each Committee are included in their respective
paragraphs below. 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.
The Company's Audit and Risk Committee, among other things, considers the
appointment, independence and remuneration of the independent auditors and
reviews the financial statements and accounting policies. The principal duties
of the Audit and Risk Committee are to consider the appointment of the
independent auditors, to discuss and agree with the independent auditors the
nature and scope of the audit, to keep under review the scope, results,
quality and effectiveness of the audit and the independence and objectivity of
the independent auditors, and to review the independent auditors' letter of
engagement, Audit Planning Report and Audit Results Report. The Audit and Risk
Committee also monitors and reviews the adequacy and effectiveness of internal
control and risk management systems and advises the Board on the Company's
overall risk appetite. The Audit and Risk Committee meets at least three times
a year.
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. With regard to Board
appointments, the Nomination Committee prepares specifications of the roles
and responsibilities, including expected time commitments, and consideration
is given to the existing experience, knowledge and background of current Board
members, as well as the strategic and business objectives of the Company. The
Committee would then use open advertising and/or an external search
consultancy to facilitate recruitment. 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 while promoting diversity of
gender, and of social and ethnic background. 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 1 November 2022, 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.
Remuneration Committee
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 16 February 2022, 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;
· the Audit and Risk Committee monitors risks, including those of
the Administrator and Investment Manager; 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. 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, and such notice is 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.
SUB-MANAGEMENT AGREEMENT
On 31 December 2023, Riverstone Holdings LLC and their affiliate Riverstone
Investment Group (collectively, "Riverstone") entered into an agreement with
Breakwall Capital LP to provide sub-management services for all credit
vehicles managed by Riverstone, including RCOI. Breakwall is a newly formed
independent asset-management firm regulated by the SEC as a Registered
Investment Advisor, owned and operated by the existing Riverstone Credit
Partners team. Services provided by Breakwall commenced on 31 December 2023.
Under the arrangement, Riverstone will remain the Investment Manager of RCOI
on the terms of RCOI's existing management agreement and all aspects of the
ongoing management of the Company, including the day-to-day investment team,
will remain consistent. Breakwall, as Sub-Manager, will be leading any new
investments. In its capacity as Sub-Manager to the Manager, the Sub-Manager
shall recommend to the Manager each and every action to be taken by the
Manager pursuant to the governing agreements of the Existing Credit Vehicles.
There will be no increase in fees payable by RCOI as a result of the modified
arrangements. The Board of RCOI has been involved and are confident that the
structure of Riverstone as manager and Breakwall as the future sub-manager
will continue to deliver strong returns for shareholders.
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.
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
20 February 2024
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.
Meetings
During the year ended 31 December 2023, 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 20 February 2024 to review the results of
the audit and to consider and approve the Annual Report for the year ended 31
December 2023.
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.
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 2023 was
$94.6 million (2022: $94.6 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 measured at
fair value.
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, 9 August 2023 and 20 February 2024. Due to the illiquid and
subjective nature of the Company's SPV 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.
The external auditor has explained the results of their 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.
The Company has no fixed life, but in accordance with its Articles of
Association, a Realisation Election will be proposed at its AGM in May 2024
where Shareholders will vote if they want to redesignate their shares on a one
for one basis to realisation shares. Having reviewed the Company's financial
position, liabilities principal risks and uncertainties, the Audit and Risk
Committee recommended to the Directors that it was appropriate for the
Directors to prepare the financial statements on the going concern basis,
however noting that the upcoming realisation election creates material
uncertainty relating to going concern.
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 fifth year of audit.
The external auditor is required to rotate the audit partner every five years.
The current Ernst & Young LLP lead audit partner Mike Gaylor started his
tenure in 2019 and his current rotation will end with the audit of the 2023
Annual Report and Financial statements. 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 certain non-audit services at 70 percent of the average
statutory audit fees for the previous three years. This precludes Ernst &
Young LLP from providing any non-audit services not permissible under the
Ethical Standard 2019 which 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. 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 2023
31 December 2022
$'000 $'000
Fees to the Company's Auditor
for audit of the statutory financial statements 255 206
for other audit related services 29 24
284 230
Other fees paid to the Company's Auditor for other audit related services of
$29k (2022: $24k) were in relation to a review of the Interim Report and fees
paid for other non-audit services of $nil (2022: $nil) 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 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 2023. 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
20 February 2024
Statement of Financial Position
As at 31 December 2023
31 December 2023 31 December 2022
Note $'000 $'000
Non-current assets
Investments at fair value through profit or loss 4/5 94,639 94,570
94,639 94,570
Current assets
Loan interest receivable 4 - 1,263
Dividends receivable 4 1,728 3,451
Trade and other receivables 6 97 124
Cash and cash equivalents 627 957
2,452 5,795
Current liabilities
Trade and other payables 7 (1,067) (1,889)
Net current assets 1,385 3,906
Net assets 96,024 98,476
Equity
Share capital 8 908 908
Capital redemption reserve 8 92 92
Other distributable reserves 8 90,528 90,528
Retained earnings 9 4,496 6,948
Total Shareholders' funds 96,024 98,476
Number of Shares in issue at year end 90,805,237 90,805,237
Net assets per share (cents) 13 105.75 108.45
The financial statements of the Company were approved and authorised for issue
by the Board of Directors on 20 February 2024 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 2023
For the year ended For the year ended
31 December 2023
31 December 2022
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 - (1,334) (1,334) - 3,944 3,944
- (1,334) (1,334) - 3,944 3,944
Income
Investment income 4 9,220 - 9,220 11,967 - 11,967
9,220 - 9,220 11,967 - 11,967
Expenses
Directors' fees and expenses 16 (160) - (160) (180) - (180)
Other operating expenses (1,177) - (1,177) (1,269) - (1,269)
Profit share 12 (873) - (873) (1,679) - (1,679)
Total expenses (2,210) - (2,210) (3,128) - (3,128)
Operating profit / (loss) for the year 7,010 (1,334) 5,676 8,839 3,944 12,783
Finance income
Interest income 44 - 44 65 - 65
Total finance income 44 - 44 65 - 65
Profit / (loss) for the year before tax 7,054 (1,334) 5,720 8,904 3,944 12,848
Tax 11 - - - - - -
Profit / (loss) for the year after tax 7,054 (1,334) 5,720 8,904 3,944 12,848
Profit / (loss) and total comprehensive income for the year 7,054 (1,334) 5,720 8,904 3,944 12,848
Profit / (loss) and total comprehensive income attributable to:
Equity holders of the Company 7,054 (1,334) 5,720 8,904 3,944 12,848
Earnings per share
Basic and diluted earnings and loss per Share (cents) 13 (1.47) 6.30 4.32 14.08
7.77 9.76
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 2023
Share capital Capital redemption reserve Other distributable reserves Retained earnings Total
For the year ended
31 December 2023
Note $'000 $'000 $'000 $'000 $'000
Opening net assets attributable to Shareholders 908 92 90,528 6,948 98,476
Repurchase and cancellation of share capital - - - - -
Total comprehensive income for the year - - - 5,720 5,720
Distributions paid in the year 14 - - - (8,172) (8,172)
Closing net assets attributable to Shareholders 908 92 90,528 4,496 96,024
Following the IPO of the Company, the share premium account was cancelled by a
court order dated 16 July 2019. The amount of $97,000 remaining in the share
premium account of the Company at this date was subsequently cancelled and
transferred to other distributable reserves. This may be applied in any manner
in which the Company's profits available for distribution are able to be
applied, as determined in accordance with the Companies Act 2006.
The company's total distributable reserves comprise its other distributable
reserve and retained earnings, excluding unrealised movement on its
investments. After taking account of cumulative unrealised gains of $2.1m and
distributions made, the total amount of reserves that were distributable as at
31 December 2023 were $92.9m.
Details of the Company's retained earnings are shown below in note 9.
For the year ended Share capital Capital redemption reserve Other distributable reserve Retained earnings Total
31 December 2022
Note $'000 $'000 $'000 $'000 $'000
Opening net assets attributable to Shareholders 915 85 91,179 1,121 93,300
Repurchase and cancellation of share capital (7) 7 (651) - (651)
Total comprehensive income for the year - - - 12,848 12,848
Distributions paid in the year 14 - - - (7,021) (7,021)
Closing net assets attributable to Shareholders 908 92 90,528 6,948 98,476
After taking account of cumulative unrealised losses of $3.5m and
distributions made, the total amount of reserves that were distributable as at
31 December 2022 were $94.0m.
The accompanying notes below form an integral part of these financial
statements.
Statement of Cash Flows
For the year ended 31 December 2023
Note For the year ended For the year ended
31 December 2023
31 December 2022((1))
$'000 $'000
Cash flows from operating activities
Profit for the year before tax 5,720 12,848
Adjustments for non-cash transaction in profit for the year before tax:
Interest income (44) (65)
Movement in fair value of investments 4 1,334 (3,944)
Investment income per Statement of Comprehensive Income 4 (9,220) (11,967)
Adjustments for statement of financial position movement:
Movement in payables (822) 991
Movement in receivables 15 (12)
Bank interest received 56 50
Loan interest received 4 5,366 5,520
Dividends received 5,437 3,825
Net cash generated from operating activities 7,842 7,246
Cash flows from investing activities
Investment additions 4 - (16,193)
Investment proceeds 4 - 12,692
Net cash (used in) from investing activities - (3,501)
Cash flows from financing activities
Distributions paid 14 (8,172) (7,021)
Repurchase and cancellation of share capital 8 - (651)
Net cash used in financing activities (8,172) (7,672)
Net movement in cash and cash equivalents during the year (330) (3,927)
Cash and cash equivalents at the beginning of the year 957 4,884
Cash and cash equivalents at the end of the year 627 957
(1) Cash flows from operating activities for the year ended 31 December 2023
are presented by adjusting Profit for the year before tax as opposed to
Operating profit for the year. Cash flows from operating activities for the
year ended 31 December 2022 have been re-presented in the format adopted for
the year ended 31 December 2023.
The accompanying notes below form an integral part of these financial
statements.
Notes to the Financial Statements
For the year ended 31 December 2023
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 provisions
of the Companies Act 2006, with the UK-adopted International Accounting
Standards ("UK-adopted IAS"), the Disclosure Guidance and Transparency Rules
of the United Kingdom's Financial Conduct Authority. Where presentational
guidance set out in the AIC SORP, 2022 edition, is consistent with the
requirements of UK-adopted IAS, 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.
Going Concern
As at 31 December 2023, the cash balance within the Company was $0.6 million,
cash and cash equivalent balances within the SPVs amounted to $8.5
million. The Company currently has existing liabilities of $1.1 million, plus
a distribution payable of $2.3 million with respect to the quarter ended 31
December 2023.
During Q4 2022, Riverstone International Credit - Direct entered into a
Revolving Credit facility ("RCF" or "facility") Agreement for $15.0 million
with BC Partners. The SPV borrowings from the facility at 31 December 2023
were $5.0m, leaving the remaining $10.0m million undrawn commitment for future
borrowings. The guarantors are the Company, Riverstone Credit Opportunities
Income Partners - Direct L.L.C., a Delaware limited liability company and
Riverstone Credit Opportunities Income Partners L.L.C., a Delaware limited
liability company. The SPVs are required to maintain an LTV Ratio below the
Covenant LTV of 22% at each borrowing request date. The LTV Ratio is
calculated as the total outstanding principal and accrued interest on the
facility divided by the aggregate NAV of the SPVs, Riverstone International
Credit L.P. and Riverstone International Credit-Direct L.P. At 31 December
2023, the SPVs were compliant with the Covenant LTV ratio, with an LTV of ~6%
and $10.0 million of the undrawn commitment is available. The SPVs also
entered into a money market capital fund with JP Morgan, earning about 5%
interest annually. Cash held at the money market account is readily
transferrable within one business day, and the balance at 31 December 2023 was
$15.1 million.
The cash balance of the Company and its SPVs are 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
are no material liquidity or solvency risks for the Company's financial
resources and working capital.
Additionally, the operating expenses of the trust and its SPVs are budgeted to
be between $3.0 million and $3.5 million during the period of assessment
including taxes and interest expense from the SPV facility. Based on the high
end of this range, using all the cash at the SPVs and in the Company, along
with the proceeds invested in the money market capital fund, it would take the
Company and its SPVs' approximately seven years to run out of cash.
The major cash outflows of the Company and its SPVs are expected to be the
payment of distributions and expenses, share repurchases and the acquisition
of new assets, all of which are analysed in the scenarios outlined below based
on timing and covenant compliance.
The Company has assessed multiple case scenarios, including scenarios impacted
by the upcoming realisation election, from base case to the ultimate downside
scenario. In the highly unlikely ultimate downside scenario, where all
unrealised investments are written down to zero and expenses increase by 50%,
the Company and its SPVs will still have sufficient funds to cover their
obligations and continue operating for the going concern period.
The first continuation vote for the Company will be proposed at the AGM of the
Company to be held in May 2027, which is after the going concern period has
ended.
For the forthcoming realisation election in May 2024, shareholders will vote
whether or not to redesignate their shares on a one for one basis to
realisation shares. The Realisation Share NAV (the NAV attributable to the
realisation shares) and the Ordinary Share NAV (the NAV attributable to the
remaining ordinary shares) will be calculated after the Annual General
Meeting.
If the Realisation Share NAV is below $5.0m, these shares will be repurchased
and the remaining shares will continue as before, and if the Realisation Share
NAV is above $5.0m, the assets and liabilities of the Company will be
allocated pro rata in a Continuation Pool and a Realisation Pool.
Alternatively, if the remaining Ordinary Share NAV is below $50.0m
(Realisation Share NAV is above $50.0m), the investment objective and
investment policy will change to hold the Company's assets to repayment at
maturity without reinvesting any cash realised by the Company with the aim of
making progressive returns of cash to Shareholders as soon as practicable and
ultimately liquidating the Company. As a result, under this scenario the
Company would cease to be a going concern.
The Directors have concluded the Company's financial statements shall be
prepared on a going concern basis. However, as the realisation election will
not conclude until after the approval of these financial statements, there is
a material uncertainty related to this event that may cast significant doubt
on the Company's ability to continue as a going concern. The financial
statements do not contain the adjustments that would result if the company
were unable to continue as a going concern.
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 normally the transaction price, 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
IAS. The fair value of the SPVs is considered to be their net asset value
incorporating a fair 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 specialist
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.
Capital Redemption Reserve
This is a non-distributable reserve, holding amounts that are transferred
following the purchase of the Company's own share capital out of distributable
reserves.
Distributable Reserves
Distributable reserves are those profits available for the purpose of a
distribution to Ordinary Shareholders. This includes its other distributable
reserve and retained earnings, excluding unrealised movement on its
investments. The Company's retained earnings include the revenue reserve and
the capital reserve. The Revenue reserve is the accumulation of distributable
profit and losses through the statement of comprehensive income and the
capital reserve is an accumulation of unrealised gains and losses in the fair
value of investments.
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. Dividend and interest income is allocated to the Revenue
column and are included within Investment income line on 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.
Profit Share
Profit share is recognised on an accrual basis in the statement of
Comprehensive Income for the year and is based on the Company's income. The
Profit Share is payable quarterly, at the same time as the Company pays its
distributions. It is subject to an annual reconciliation in the last quarter
of each year.
The amount payable in respect of the annual Profit Share is as detailed in
note 12.
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 25 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 distributions 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 distribution
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 provided on all temporary differences at the balance sheet
date between the tax basis of assets and liabilities and their carrying amount
for financial reporting purposes. Deferred tax is calculated at the tax rates
that are expected to apply to the year when a liability is settled or an asset
is realised, based on tax rates (and tax laws) that have been enacted or
substantively enacted at the balance sheet date.
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 IAS, 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 are mandatory
for the Company's accounting periods beginning on or after 1 January 2023 or
later periods. The following are the new or amended accounting standards or
interpretations applicable to the Company:
· Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of
Accounting policies (effective for annual periods beginning on or after 1
January 2023);
· Amendments to IAS 8 - Definition of Accounting Estimates (issued
on 12 February 2021 and effective for annual periods beginning on or after 1
January 2023); and
The impact of these amendments were not material to the reported results and
financial position of the Company.
Certain new accounting standards and amendments to accounting standards have
been published that are not mandatory for 31 December 2023 reporting periods
and have not been early adopted by the Company. These new or amended standards
are not expected to have a material impact on the entity in the current or
future reporting periods and on foreseeable future transactions.
· IFRS S1 - General Requirements for Disclosure of
Sustainability-related Financial Information (effective for annual periods
beginning on or after 1 January 2024);
· IFRS S2 - Climate-related Disclosures (effective for annual
periods beginning on or after 1 January 2024); and
· IAS 1 - Classification of Liabilities as Current or Non-current
and Non-current Liabilities with Covenants (effective for annual periods
beginning on or after 1 January 2024).
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 criterion, 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 as noted above. 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'.
Judgement on Valuation of investments in SPVs
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.
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.
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.
As disclosed in the Strategic Report, the Company's positioning and long-term
investment strategy is now focused towards energy-transition investments in
either Green Loans or Sustainability-Linked Loans, supporting the advancement
of decarbonisation and enhancing sustainability.
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 the assessment of 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 financial
assets during the year.
For the year ended For the year ended
31 December 2023
31 December 2022
Loans Equity Total Loans Equity Total
$'000 $'000 $'000 $'000 $'000 $'000
Opening balance 59,397 35,173 94,570 60,049 27,076 87,125
Restructuring - - - 213 (213) -
Investment additions - - - 7,893 16,239 24,132
Investment proceeds - - - (8,758) (11,873) (20,631)
Loan interest receivable 1,403 - 1,403 - - -
Unrealised movement in fair value of investments - (1,334) (1,334) - 3,944 3,944
60,800 33,839 94,639 59,397 35,173 94,570
As set out above the Company's investment in Riverstone International Credit
Corp. comprises of a loan investment and an equity investment and the
investment in Riverstone International Credit L.P. comprises of an equity
investment. 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 2023 was $1.4m
(2022: $1.3m) and is included in investments at fair value through profit and
loss. The unrealised movement in fair value of investments was shown in the
Change in fair value of investments at fair value through profit or loss in
the Condensed Statement of Comprehensive Income.
The dividend receivable on the equity investment at 31 December 2023 was $1.7m
(31 December 2022: $3.5m). The total unfunded commitments of the Company's
SPVs' investments as at 31 December 2023 is $6.4m (31 December 2022: $7.5m).
Reconciliation of investment income recognised in the year
For the year ended For the year ended
31 December 2023
31 December 2022
$'000 $'000
Movement in loan interest receivable at year end 140 (155)
Loan interest received as cash 5,366 5,520
Total loan interest recognised in the year 5,506 5,365
Dividend income 3,714 6,602
Total investment income recognised in the year 9,220 11,967
Total cash received in relation to interest income in the year was $5.4m
(2022: $5.5m). This comprises $5.4m (2022: $5.5m) of loan interest recognised
in the year and $nil (2022: $nil) 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 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.
There have been no transfers between levels during the year (2022: 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 fair value, which is normally the
transaction price. 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 2023 Valuation Unobservable Range / weighted
Description technique input average
$'000 $'000
SPV 94,639 Adjusted net asset value NAV 94,639
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 2023 are as shown below:
Sensitivity Effect on
Description Input used fair value
$'000
SPV Discount for lack of liquidity +/- 3% -/+2,839
The Company's valuation policy is compliant with both UK-adopted IAS 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 2023, 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 and 0.5x multiple decrease used for each industry as at 31
December 2023.
Fair Value Sensitivity to a 100 bps Increase In the Discount Rate
(In Thousands)
Investments at Fair Value as of 31 December 2023
(In Thousands)
Range
Industry Valuation technique(s) Unobservable input(s) Low High Weighted average (a)
Infrastructure 29,097 Discounted cash flow Discount rate 7% 13% 9% 349
Recovery Approach EBITDA multiple 2.75x 7.50x
Infrastructure 35,446 Discounted cash flow Discount rate 7% 51% 21% (689)
Services Option Pricing Model Risk Free Rate 4% 4% NA
Energy 8 Implied Equity Value NA NA NA 0% -
Transition
Services 12,119 Discounted cash flow Discount Rate 6% 7% 3% (1,100)
Public comparables EBITDA multiple 5.00x 6.00x
Waterfall Approach NA NA NA
$76,669 $ (1,441)
((a)) The difference between the fair value of the SPVs of $94.6m and the fair
value of the underlying investments at 31 December 2023 is due to cash
balances of $8.5m, an unsettled trade receivable of $3.2m, a money market
investment of $15.1m and residual liabilities including the RCF of $8.9m, 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 2022.
Fair Value Sensitivity
Investments at to a 100 bps Increase
Fair Value as of
31 December 2022 Range In the Discount Rate
Industry (In Thousands) Valuation technique(s) Unobservable input(s) Low High (In Thousands)
Infrastructure 29,998 Discounted cash flow Discount rate 6% 14% (457)
Recovery Approach EBITDA multiple 6.5x 6.5x
Latest round of financing NA NA NA
Infrastructure 36,101 Discounted cash flow Discount rate (610)
Services 8% 12%
Option Pricing Model Risk Free Rate 4% 4%
Energy 16,560 Public comparables EBITDA multiple 4.0x 8.0x (783)
Transition Public comparables Revenue multiple 1.3x 4.0x
Latest round of financing NA NA NA
Services 13,022 Discounted cash flow Discount Rate 6% 7% (666)
Public comparables EBITDA multiple 6.5x 7.5x
Waterfall Approach NA NA NA
$ 95,681((a)) $ (2,516)
((a) ) The difference between the fair value of the SPVs of $94.6m and the
fair value of the underlying investments at 31 December 2022 is due to cash
balances of $6.7m and residual liabilities including the RCF of $7.7m, 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 2023 Ownership interest as at 31 December 2022
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.
Riverstone International Credit Corp. had a net asset value of $28.6m at 31
December 2023 (2022: $30.0m) with a profit of $1.7m (2022: $9.6m)
The amounts invested in the Company's unconsolidated subsidiaries during the
year and their carrying value at 31 December 2023 are as outlined in note 4,
comprising:
31 December 2023 31 December 2022
Riverstone International Credit Corp. Riverstone International Credit L.P. Total Riverstone International Credit Corp. Riverstone International Credit L.P. Total
$'000 $'000 $'000 $'000 $'000 $'000
Opening balance at 1 January 89,384 5,186 94,570 86,805 320 87,125
Restructure of investments - - - 309 (309) -
Investment additions - - - 11,439 12,693 24,132
Investment realisations - - - (12,692) (7,939) (20,631)
Loan Interest receivable 1,403 - 1,403 - - -
Movement in fair value (1,381) 47 (1,334) 3,523 421 3,944
Closing balance at 31 December 89,406 5,233 94,639 89,384 5,186 94,570
On 7 December 2022, the Company's SPVs entered a senior secured RCF agreement
for $15.0 million to enter into new commitments ahead of anticipated
realisations, enabling the Company to minimise the drag on returns of
uninvested capital. The borrowers as defined per the RCF are Riverstone
International Credit - Direct L.P. and Riverstone International Credit L.P.,
and the guarantors are the Company, Riverstone Credit Opportunities Income
Partners - Direct L.L.C., a Delaware limited liability company and Riverstone
Credit Opportunities Income Partners L.L.C., a Delaware limited liability
company. The first $5.0 million of the senior secured RCF was drawn at 31
December 2023
and the remaining $10.0 million undrawn commitment is available for future
borrowings. Pursuant to the RCF agreement, the interest rate per annum on each
borrowing under the RCF can be referenced to SOFR + 6.50% with a 100bps SOFR
floor.
During 2023, the SPVs borrowed $nil million, incurred $nil million in fees and
$0.9m in interest. Interest is recorded in the interest expense at the SPV
level and is also included in the SPVs' net asset value. The interest rate on
2023 borrowings was SOFR plus 6.50%.
There are no restrictions on the ability of the Company's unconsolidated
subsidiaries to transfer funds in the form of cash distributions or repayment
of loans. All of the Company's interest income and dividend income is
receivable directly from the Company's SPVs.
6. Trade and other receivables
31 December 2023 31 December 2022
$'000 $'000
Prepayments 72 76
VAT receivable 22 33
Bank interest receivable 3 15
97 124
7. Trade and other payables
31 December 2023 31 December 2022
$'000 $'000
Profit share payable 879 1,685
Other payables 188 204
1,067 1,889
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 2023 1 - - - -
31 December 2023 1 - - - -
USD $'000 $'000 $'000 $'000
1 January 2023 90,805,237 908 92 90,528 91,528
31 December 2023 90,805,237 908 92 90,528 91,528
As at 31 December 2023 the Company's authorised and issued share capital
comprises 90,805,237 Ordinary Shares at $0.01 per share and 1 E Share at $1
per share. 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. E shares are non-redeemable shares and 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 (either in person
or by proxy) at any general meeting of the Company.
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 2022 1 - - - -
31 December 2022 1 - - - -
USD $'000 $'000 $'000 $'000
1 January 2022 91,545,383 915 85 91,179 92,179
Repurchase and cancellation of Ordinary Shares (740,146) (7) 7 (651) (651)
31 December 2022 90,805,237 908 92 90,528 91,528
As at 31 December 2022 the Company's authorised and issued share capital
comprises 90,805,237 Ordinary Shares at $0.01 per share and 1 E Share at $1
per share.
During 2022, the Company repurchased and cancelled 740,146 Ordinary Shares as
part of its buy-back programme. Further details regarding the Company's
purchase of its own shares are in the Chairman's Statement.
9. Retained earnings
For the year ended For the year ended
31 December 2023
31 December 2022
Revenue reserve Capital reserve Total Revenue reserve Capital reserve Total
$'000 $'000 $'000 $'000 $'000 $'000
Opening balance 3,471 3,477 6,948 1,588 (467) 1,121
Profit / (loss) and total comprehensive income in the year 7,054 (1,334) 5,720 8,904 3,944 12,848
Distributions paid in the year (8,172) - (8,172) (7,021) - (7,021)
Closing balance 2,353 2,143 4,496 3,471 3,477 6,948
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 2023
31 December 2022
$'000 $'000
Fees to the Company's Auditor
for audit of the statutory financial statements 255 206
for other audit related services 29 24
284 230
Other fees paid to the Company's Auditor for other audit related services of
$29k (2022: $24k) were in relation to a review of the Interim Report. There
were nil fees paid for other non-audit services in the year (2022: $nil).
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 2023
31 December 2022
Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
UK Corporation tax charge on profits for the year at 19%/25% (2022: 19%) - - - - - -
For the year ended For the year ended
31 December 2023
31 December 2022
Revenue Capital Total Revenue Capital Total
$'000 $'000 $'000 $'000 $'000 $'000
Return on ordinary activities before taxation 7,054 (1,334) 5,720 8,904 3,944 12,848
Profit on ordinary activities multiplied by standard rate of corporation tax 1,658 (313) 1,344 1,692 749 2,441
in the UK of 19%/25% (2022: 19%)
Effects of:
Non-taxable investment gains / (losses) on investments - 313 313 - (749) (749)
Non-taxable dividend income (873) - (873) (1,254) - (1,254)
Tax deductible interest distributions (1,299) - (1,299) (438) - (438)
Movement in deferred tax not recognised 514 - 514 - - -
Total tax charge - - - - - -
As at 31 December 2023 the Company has excess management expenses of
$5,274,713 that are available to offset future taxable revenue. A deferred tax
asset of $1,318,678 measured at the standard corporation tax rate of 25% has
not been recognised in respect of these expenses since the Directors believe
that, due to the tax deductibility of interest distributions, there will be no
taxable profits in the future against which the deferred tax asset can be
offset.
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.
Taxes are based on the UK Corporate tax rates which existed as of the balance
sheet date which was 25%. The main rate of corporation tax changed from 19% to
25% from 1 April 2023 for companies with profits over £250,000.
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 $873k (2022:
$1,679k).
13. Earnings per share and Net assets per share
Earnings per share
For the year ended For the year ended
31 December 2023
31 December 2022
Revenue Capital Total Revenue Capital Total
Profit/(loss) attributable to equity holders of the Company - $'000 7,054 (1,334) 5,720 8,904 3,944 12,848
Weighted average number of Ordinary Shares in issue 90,805,237 91,202,984
Basic and diluted earnings and loss per Share from continuing operations in 7.77 (1.47) 6.30 9.76 4.32 14.08
the year (cents)
There are no dilutive shares in issue.
Net assets per share
31 December 2023 31 December 2022
Net assets - $'000 96,024 98,476
Number of Ordinary Shares issued 90,805,237 90,805,237
Net assets per Share (cents) 105.75 108.45
14. Distributions declared with respect to the year
2023 2022
Distribution per share Total distribution Distribution per share Total distribution
Distributions paid during the year cents $'000 cents $'000
With respect to the period ended 31 December 2022 3.00 2,724 1.70 1,556
With respect to the quarter ended 31 March 2.00 1,816 2.00 1,831
With respect to the quarter ended 30 June 2.00 1,816 2.00 1,818
With respect to the quarter ended 30 September 2.00 1,816 2.00 1,816
9.00 8,172 7.70 7,021
2023 2022
Distribution per share Total distribution Distribution per share Total distribution
Distributions declared after 31 December 2023 and not accrued in the period cents $'000 cents $'000
With respect to the quarter ended 31 December 2.5 2,291 3.00 2,746
2.5 2,291 3.00 2,746
On 20 February 2024, the Board approved a distribution of 2.5 cents per share
in respect to the quarter ended 31 December 2023. The record date for the
distribution is 1 March 2024 and the payment date is 22 March 2024.
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 their fair value.
31 December 2023 31 December 2022
$'000 $'000
Financial assets
Investment at fair value through profit or loss:
Investment in the SPVs 94,639 94,570
Other financial assets:
Cash and cash equivalents 627 957
Loan interest receivable - 1,263
Dividends receivable 1,728 3,451
Trade and other receivables 97 124
Financial liabilities
Financial liabilities:
Trade and other payables (1,067) (1,889)
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 2023, the Company had $nil borrowings (2022:
$nil). The Company's SPVs had no new borrowings during the year, with
borrowings remaining $5m as at 31 December 2023 (2022: $5m).
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 2023, the fair value of investments, excluding
cash and cash equivalents of SPVs, was $71,013k (2022: $87,879k) and a 3
percent increase / (decrease) (2022: 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 + / - $2,130k (2022: $2,636k). 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 their
borrowings, cash and cash equivalents. Cash and cash equivalents 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 2023, $23.6 million or 25 percent (2022: $6.7 million or 7.0
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 2023 $ £ Total
$'000 $'000 $'000
Non-current assets
Investments at fair value through profit or loss 94,639 - 94,639
Total-non current assets 94,639 - 94,639
Current assets
Loan interest receivable - - -
Trade and other receivables 75 22 97
Dividends receivable 1,728 - 1,728
Cash and cash equivalents 626 1 627
Total current assets 2,429 23 2,452
Current liabilities
Trade and other payables (1,064) (3) (1,067)
Total current liabilities (1,064) (3) (1,067)
Total net assets 96,004 20 96,024
As at 31 December 2022 $ £ Total
$'000 $'000 $'000
Non-current assets
Investments at fair value through profit or loss 94,570 - 94,570
Total non-current assets 94,570 - 94,570
Current assets
Loan interest receivable 1,263 - 1,263
Trade and other receivables 91 33 124
Dividends receivable 3,451 - 3,451
Cash and cash equivalents 956 1 957
Total current assets 5,761 34 5,795
Current liabilities
Trade and other payables (1,883) (6) (1,889)
Total current liabilities (1,883) (6) (1,889)
Total net assets 98,448 28 98,476
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 as well as
interest expense on the Revolving Credit Facility held at the Company's SPV.
The Company's loan to Riverstone International Credit Corp. does not bear an
interest rate risk due to it being a fixed rate loan. 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 SPVs' 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 2023, cash balance held by the
Company (including cash held at the SPVs) was $24.2 million (2022: $7.7
million). A 1.0 percent (2022: 1.0 percent) increase / (decrease) in interest
rates with all other variables held constant would result in a change to
interest received of + / - $242,532 (2022: $76,480) per annum. As at 31
December 2023, the RCF held by the Company's SPVs was $5m (2022: $5m). A 1.0
percent (2022: 1.0 percent) increase/ (decrease) in interest rate with all
other variables held would result in in a change to interest paid +/- of
$50,000 (2022: $50,000).
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.
Riverstone Credit Opportunities Income PLC is the guarantor for the Revolving
Credit Facility. The SPVs are required to maintain a LTV Ratio above the
Covenant LTV of 22% at each borrowing request date. The LTV Ratio is
calculated as the total outstanding principal and accrued interest on the
facility divided by the Aggregate NAV. At 31 December 2023, the SPVs were
compliant with the Covenant LTV and the full amount of the undrawn commitment
is available.
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. The Company's SPVs has a Revolving Credit
Facility of $15m, with an undrawn amount as at 31 December 2023 of $10m (2022:
$10m). Cash balances held by the Company (including cash held at the SPVs) was
$24.2 million (2022: $7.7 million). This enables the Company to remain over
100% invested while still retaining the necessary liquidity to meet ongoing
expenses and future obligations under delay-draw loan commitments.
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 underlying investments held by the SPVs as at 31
December 2023 was $76.7 million (2022: $95.7 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 2023 31 December 2022
Location Rating $'000 Location Rating $'000
Counterparty
JPMorgan Chase Bank USA A- 627 USA A- 957
The Company's maximum exposure to loss of capital at the year end is shown
below:
Carrying value and maximum exposure
31 December 2023 31 December 2022
$'000 $'000
31 December 2023
Investment at fair value through profit or loss
Investments in the SPVs 94,639 94,570
Other financial assets (including cash and equivalents but excluding 2,380 5,719
prepayments)
Gearing
As at the date of these financial statements the Company has no gearing (2022:
none).
16. Related Party Transactions
Directors
The Company has three non-executive Directors. Directors' fees for the year
ended 31 December 2023 amounted to $150k (2022: $148k), of which $nil was
outstanding at year end (2022: $nil). Amounts paid to Directors as
reimbursement of travel and other incidental expenses during the year amounted
to $10k (2022: $32k), of which $nil was outstanding at year end (2022: $nil).
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 $5.5m (2022: $5.4m) of which $4.1m was received in
cash (2022: $5.5m), $nil was capitalised (2022: $nil) and $1.4m remained
outstanding at 31 December 2023 and will be received on 22 March 2024 (31
December 2022: $1.3m outstanding, received on 16 February 2023). The balance
on the loan investment at 31 December 2023 was $59.4m (2022: $59.4m). The
Company's has equity investments, the balance of these equity investments at
31 December 2023 was $33.8m (2022: $35.2m) During the year the equity
investments had a fair value movement of $1.3m (2022 : $3.9m).
During 2022, the SPVs entered into a Revolving Credit Facility ("facility")
Agreement for $15.0 million with BC Partners. The SPV borrowings from the
facility at 31 December 2023 were $5 million, leaving the remaining $10
million undrawn commitment for future borrowings. The guarantors are the
Company, Riverstone Credit Opportunities Income Partners - Direct L.L.C., a
Delaware limited liability company and Riverstone Credit Opportunities Income
Partners L.L.C., a Delaware limited liability company. The SPVs are required
to maintain a LTV Ratio below the Covenant LTV of 22% at each borrowing
request date.
The LTV Ratio is calculated as the total outstanding principal and accrued
interest on the facility divided by the Aggregate NAV. At 31 December 2023,
the SPVs were compliant with the Covenant LTV and the full amount of the
undrawn commitment is available.
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
$261k (2022: $190k). Christopher Abbate, a partner of the IM and portfolio
manager of RCOI, purchased nil shares during the year (2022: 5k). Jamie
Brodsky, also a partner of the Investment Manager and portfolio manager of
RCOI, purchased nil shares during the period (2022: nil).
15. 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.
16. Subsequent events
On 12 January 2024, the outstanding $5m Revolving Credit Facility held through
the Company's SPV Riverstone International Credit- Direct L.P. was paid in
full. The RCF remains in place for any future drawdowns.
With the exception of distributions 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 ended 31 December 2023
APLMA means Asia Pacific Loan Market Association
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
Breakwall means Breakwall Capital LP
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
Clean Energy Fuels or CLNE means Clean Energy Fuels Corp.
Company or RCOI means Riverstone Credit Opportunities Income Plc
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
EPIC means Epic Propane
ESG means environmental, social and governance
E&P means exploration and production
FCA means the UK Financial Conduct Authority (or its successor bodies)
Firm or Investment Manager means Riverstone Investment Group LLC
GHG mean greenhouse gases
GREEN LOAN means to align lending and environmental objectives. It refers to
any type of loan instrument made available exclusively to finance or
re-finance, in whole or in part, new and/or existing eligible Green Projects.
Green loans must align with the four components of the Green Loan Principles.
We strive to enhance the decarbonisation impact of our credit portfolio and
advance the energy transition infrastructure
GREEN LOAN PRINCIPLES means a clear framework of the characteristics of a
Green Loan with four core components 1. Use of Proceeds, 2. Process for the
Project Evaluation and Selection, 3. Management of Proceeds and 4. Reporting.
The Green Loan principles promote the development and integrity of the Green
Loan product through leading financial institutions active in the global loan
markets. Green Loan Principles (GLP) have been developed by an experienced
working party, consisting of representatives from leading financial
institutions active in the global syndicated loan markets, with a view to
promoting the development and integrity of the Green Loan product. The GLP
comprise voluntary recommended guidelines, to be applied by market
participants on a deal-by-deal basis depending on the underlying
characteristics of the transaction, which seek to promote integrity in the
development of the Green Loan market by clarifying the instances in which a
loan may be categorised as "green"
Hoover CS means Hoover Circular Solution
IAS means the international accounting standards
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.
Investment Management Agreement means the Investment Management Agreement
entered into between the Investment Manager and the Company
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
Listing Rules means the listing rules made by the UK Listing Authority under
Section 73A of the Financial Services and Markets Act 2000
LMA means Loan Market Association
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
MAX means Max Energy Industrial Holdings US LLC
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
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
RCF or Facility means Revolving Credit Facility
RCP means Riverstone Credit Partners
RCOI mean Riverstone Credit Opportunities Income plc or the Company.
RIC D means Riverstone International Credit - Direct, L.P.
Riverstone means Riverstone Investment Group LLC or the Investment Manager
RNG means Riverstone Natural Gas
Realisation Shares means realisation shares of US$0.01 in the capital of the
Company, as defined in the prospectus
Seawolf means Seawolf Water Resources
Specialist Fund Segment means the Specialist Fund Segment of the London Stock
Exchange's Main Market
SPT means Sustainable performance targets
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
Sub-Manager means Breakwall Capital LP
Sustainability-Linked Loans or SLL means a loan with the aim to facilitate and
support environmentally and socially sustainable economic activity and growth.
We seek to enhance the decarbonisation impact of our credit portfolio and
enhance the energy transition infrastructure. Sustainability-Linked Loans
follow a set of Sustainability-Linked Loan Principles (SLLP) which were
originally published in 2019 and provide a framework to Sustainability-Linked
Loan structures. In order to promote the development of this product, and
underpin its integrity, the APLMA, LMA and LSTA considered it appropriate to
produce Guidance on the SLLP, to provide market practitioners with clarity on
their application and approach
Sustainability-Linked Loan Principles (SLLP) means principles originally
published in 2019 and provide a framework to Sustainability-Linked Loan
structures
TCFD means the Task Force on Climate-Related Financial Disclosures
Term Loan means Sustainability-Linked first lien term loan
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.
Warrants means detachable warrants over new ordinary shares in the Company
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 to 15 February 2023 Website: www.riverstonecoi.com
27-28 Eastcastle Street ISIN GB00BJHPS390
London Ticker RCOI
W1W 8DH Sedol BJHPS39
Registered Company Number 11874946
Registered Office from 16 February 2023
5th Floor Registrar
20 Fenchurch Street Link Asset Services
London The Registry
EC3M 3BY Central Square
29 Wellington Street
Investment Manager Leeds
Riverstone Investment Group LLC LS1 4DL
c/o The Corporation Trust Company
Corporation Trust Center Sole Bookrunner
1209 Orange Street J.P. Morgan Securities plc
Wilmington 25 Bank Street
Delaware 19801 Canary Wharf
London
Company Secretary and Administrator E14 5JP
Ocorian Administration (UK) Limited
5th Floor Receiving Agent
20 Fenchurch Street Link Asset Services
London Corporate Actions
EC3M 3BY The Registry
Central Square
Independent Auditor 29 Wellington Street
Ernst & Young LLP Leeds
25 Churchill Place LS1 4DL
London
E14 5EY Principal Banker and Custodian
J.P. Morgan Chase Bank, N.A.
Legal Adviser to the Company 270 Park Avenue
Hogan Lovells LLP New York
Atlantic House NY 10017-2014
50 Holborn Viaduct
Sub-investment Manager
Breakwall Capital LP
174 Bellevue Avenue, Suite 200-A
Newport, RI 02840
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 31 December 2023
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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