213800Z42Y242CIWJ785 2023-01-01 2023-12-31 213800Z42Y242CIWJ785 2022-01-01 2022-12-31 213800Z42Y242CIWJ785 2023-12-31 213800Z42Y242CIWJ785 2022-12-31 213800Z42Y242CIWJ785 2021-12-31 iso4217:EUR iso4217:GBP xbrli:shares iso4217:EUR xbrli:shares
CVC
CVC Income & Growth Limited
Annual Financial Report 31 December 2023
INCOME &
GROWTH LIMITED
Toppan Merrill, London
24-4352-1
This report is printed on
REVIVE 100 Silk 300gsm and
REVIVE 100 Offset 135gsm,
both produced from
100% recycled pulp,
and is FSC® certified.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
1
CONTENTS
FINANCIAL HIGHLIGHTS AND PERFORMANCE SUMMARY
.........................................
2
CHAIRMAN’S STATEMENT
....................................................................................
4
INVESTMENT VEHICLE MANAGER’S REPORT
............................................................
6
STRATEGIC REPORT
...........................................................................................
14
PRINCIPAL RISKS AND UNCERTAINTIES
.................................................................
18
SECTION 172(1) STATEMENT
................................................................................
22
BOARD MEMBERS
............................................................................................
27
DIRECTORS’ REPORT
.........................................................................................
30
- DIRECTORS’ STATEMENT OF RESPONSIBILITIES
.............................................
32
BOARD AND COMMITTEES
.................................................................................
34
DIRECTORS’ REMUNERATION REPORT
..................................................................
41
REPORT OF THE AUDIT COMMITTEE
.....................................................................
43
REPORT OF THE ESG COMMITTEE
........................................................................
47
INDEPENDENT AUDITOR’S REPORT
......................................................................
50
STATEMENT OF COMPREHENSIVE INCOME
...........................................................
60
STATEMENT OF FINANCIAL POSITION
....................................................................
61
STATEMENT OF CHANGES IN NET ASSETS
..............................................................
62
STATEMENT OF CASH FLOWS
..............................................................................
63
NOTES TO THE FINANCIAL STATEMENTS
...............................................................
64
USEFUL INFORMATION FOR SHAREHOLDERS
........................................................
90
GLOSSARY
.....................................................................................................
102
COMPANY INFORMATION
.................................................................................
105
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
2
FINANCIAL HIGHLIGHTS AND PERFORMANCE SUMMARY
Sterling shares
Euro shares
Share price total return
1,2
31 December 2023: 18.08%
(31 December
2022: (6.49)%)
Share price total return
1,2
31 December 2023: 21.95%
(31 December
2022: (8.16)%)
-
15.00%
-
10.00%
-
5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
31/12/201
3
31/12/2
014
31/12/201
5
31/12/2
016
31/1
2/2017
31/12/2
018
31/12/2
019
31/12
/2020
31/12
/2021
31/12/2
022
31/12
/2023
31/12/201
3
31/12/2
014
31/12/201
5
31/12/2
016
31/1
2/2017
31/12
/2018
31/12
/2019
31/12
/2020
31/12
/2021
31/12/2
022
31/12
/2023
-
10.00%
-
5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
Dividend Yield
2
31 December 2023: 8.08%
(31 December
2022: 5.71%)
Dividend Yield
2
31 December 2023: 7.53%
(31 December
2022: 6.40%)
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
31/
12/2013
31/1
2/2014
31/12/201
5
31/12/201
6
31/
12/2017
31
/12/2018
31/12/
2019
31/12/2020
31/12/2
021
31/
12/2022
31/12
/2023
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
3
1/12/2013
3
1/12/2014
31/12/201
5
3
1/12/2016
3
1/12/2017
31
/12/2018
3
1/12/2019
3
1/12/2020
3
1/12/2021
3
1/12/2022
3
1/12/202
3
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
3
FINANCIAL HIGHLIGHTS AND PERFORMANCE SUMMARY (CONTINUED)
3
NAV total return
2
31 December 2023: 22.79%
(31 December
2022: (6.75)%)
NAV total return
2
31 December 2023: 21.69%
(31 December
2022: (8.32)%)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jun-13
Dec-13
Jun-14
Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Jun-21
Dec-21
Jun-22
Dec-22
Jun-23
Dec-23
Euro Shares total return % since inception
Sterling Shares total return % since inception
Credit Suisse Western European High Yield Index (hedged in Euros) Total Return
Credit Suisse Western European Leveraged Loan Index (hedged in Euros) Total Return
NAV total return vs monitored indices
Discount
2
31 December 2023: 9.73%
(31 December
2022: 6.08%)
Premium/Discount
Discount
2
31 December 2023: 7.64%
(31 December
2022: 7.88%)
Premium/Discount
-
30.00%
-
25.00%
-
20.00%
-
15.00%
-
10.00%
-
5.00%
0.00%
5.00%
10.00%
31
/12/2013
31
/12/2014
31
/12/2015
31/
12/2016
31/1
2/2017
31/12/20
18
31/12/20
19
31/12/20
20
31
/12/2021
31/12/2022
3
1/12/2023
-
25.00%
-
20.00%
-
15.00%
-
10.00%
-
5.00%
0.00%
5.00%
31
/12/2013
31
/12/2014
3
1/12/2015
3
1/12/2016
31/1
2/2017
3
1/12/2018
31/12/2019
31/12/2020
31
/12/2021
3
1/12/2022
31/12/20
23
For further information on the Company’s dividend history and total return metrics, refer to the
Useful Information for Shareholders section on pages 96 to 100.
1
Share price is the bid price. Share price source: Bloomberg
2
These are Alternative Performance Measures; refer to pages 97 to 101 for details.
Sterling shares
Euro shares
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
4
CHAIRMAN'S STATEMENT
Introduction
I am pleased to have the opportunity to
report to you on the Company’s performance
and activities in respect of the year ended
31 December 2023, to look forward to 2024, and
to provide some commentary on recent market
events.
Performance
2023 has been a considerably more positive
year for the Company than 2022, as interest
rates across Europe increased substantially
and credit spreads remained at elevated levels.
The full year performance for the Sterling and
Euro share classes showed NAV total return per
share of 22.79% and 21.69% respectively, which
represents the best single year performance
since IPO. The background to those performance
numbers is covered in greater detail in the
Investment Vehicle Manager’s Report. The
Company’s shares responded accordingly, as
shown in the below table:
Sterling shares
Euro shares
Opening share price – 31 December 2022
£0.9200
€0.8200
Closing share price – 31 December 2023
£1.0050
€0.9300
Increase in nominal terms
£0.0850
€0.1100
Increase in percentage terms
9.24%
13.41%
Opening discount to NAV – 31 December 2022
6.08%
7.88%
Closing discount to NAV – 31 December 2023
9.73%
7.64%
Dividend paid – 31 December 2023
£0.08125
€0.07000
Share price total return – 31 December 2023
18.08%
21.95%
Current Market Conditions and Outlook
We have entered 2024 at a time of heightened
geopolitical
risks.
Alongside
the
various
conflicts that are unfortunately underway,
2024 is the year when a significant amount of
the world’s population votes for a new leader
of their country. The impact of these risks and
the uncertainty it brings is being seen in wide
ranging issues from supply chains with the
Red Sea access route being disrupted (shortly
after the Panama Canal disruptions), oil
price uncertainty and consequential impacts
on capital allocators’ investment strategies.
Concurrently, there is the rise of artificial
intelligence and the disruption that the use
of large language model training is having on
business processes and resulting investment
decisions. How this will ultimately impact
inflation and the utilisation of monetary
policy tools by central banks and fiscal policy
by governments remains to be seen, but
this uncertainty, and the impact on market
credit spreads generally, typically presents an
opportunity for this Company to continue to
have a period of above average returns with
higher rates and spreads and a greater variety
of credit opportunities.
Alongside the challenges of inflation and its
management, because of the higher interest
rate environment there are increased risks
of businesses failing and potentially greater
frequency of defaults. Recent commentary
from liquidation specialists and other related
businesses indicate that a growing number
of businesses are under stress due to rising
interest
rates
alongside
increased
energy
costs and other inflationary inputs. Due to a
robust approach to diligence undertaken by
the Investment Vehicle Manager, alongside
the typical large scale EBITDA characteristics
of underlying issuers, defaults are anticipated
on the underlying portfolio to be below index
numbers. In the event of defaults, we are
fortunate that the Investment Vehicle Manager
has historically managed this risk well and
recovered a substantial number of cents in the
Euro, minimising any capital impact.
Towards
late
2023
and
in
early
2024,
contradictory comments along the lines of
‘higher for longer’ and ‘there will be multiple
interest rate reductions during 2024’ have been
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
5
CHAIRMAN'S STATEMENT (CONTINUED)
5
expressed by commentators on the broader
interest rate environment. Already just a few
weeks into the year, resilient inflation figures
and solid economic performance numbers,
particularly in the US, have been released,
deviating from the anticipated downward rates
trend and causing speculators to question
their market positions. Overall, though tighter
conditions are per se attractive for the Company,
as they drive credit spreads higher, feeding
through positively and ultimately increasing
the yield available to investors. Alongside this
environment there is a significant sum of debt
that requires refinancing during 2024 and 2025.
This will require careful management by these
borrowing companies, but to the Investment
Vehicle Manager this presents a number of
opportunities, including variety and higher
spreads.
I mention all of this because I am sure
that investors in the Company will want to
understand how the Board sees the short to
medium term future given recent events. Our
base case is that relevant risk-free rates will
gradually come down during 2024, and credit
spreads will tighten towards the longer term
average.
Corporate Activities & Liquidity
In February 2024 we announced the addition,
in the March 2024 Tender, of an option for
tendering shareholders to offer shares for
placing with third party investors, as an
alternative to having the shares repurchased
by the Company. Further details can be
found in the relevant RNS and associated
documentation.
No further material changes are envisaged,
and no special business will be introduced at
this year’s Annual General Meeting.
Distribution Policy
Shareholders will have seen a number of recent
announcements by the Company in relation to
the distribution policy. The continued positive
trends in the yield metrics that I mentioned
above have enabled the Board to again raise
the Company’s quarterly dividend target and
also to pay a significantly enhanced dividend
in respect of the fourth quarter of 2023. At
Current Market Conditions and Outlook (continued)
the current nominal target dividend levels of
£0.0825 per Sterling share and €0.0725 per
Euro share for 2024, the Company’s Sterling
and Euro shares offer a cash yield of around 7%
and 8% respectively. The cash yield is subject to
changes in the Company’s share price, which
is dependent on movements in the market. No
changes to the nominal target dividend levels
are anticipated for at least the next 12 months.
Conclusion
These are positive times for the Company, and
the Board is encouraged by current prospects.
That said, we are keeping a close eye on the
direction of risk free rates and the impact of
geopolitical factors on the Company’s chosen
markets.
Beyond what I have set out above, the
Company’s Directors have also been active, as
always, in a number of key corporate areas,
including enhancing the Company’s approach
to distribution and embedding the Board’s
recent composition changes. I urge you to
read the individual reports which cover these
matters in more detail. I would like to take
the opportunity to thank my co-Directors, the
portfolio management team at the Investment
Vehicle Manager, our advisors and investment
bankers for their wise counsel, hard work,
diligence and support during the year.
I invite the expression of views and opinions
about the Company, to be directed to the usual
contact points.
Richard Boléat
Chairman
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
6
INVESTMENT VEHICLE MANAGER’S REPORT
The Investment Vehicle Manager presents a review of the underlying Investment Vehicle for the
year ended 31 December 2023 and the outlook for 2024.
I.
Performance 2023
The underlying Investment Vehicle generated 22.8% and 21.7% NAV performance on the GBP and
EUR share classes respectively, which was our strongest year since IPO. The strong performance
was a result of the high coupons the underlying Investment Vehicle is receiving on loans, strong
credit selection and dynamic portfolio management:
1.
Income generation
As a result of rising base rates and widening credit spreads, the annualised net cash flow from
coupon payments has increased over the last 24-month period.
Investment Vehicle Net Cash Interest Income per Company Share (Annualised)
2.
Strong credit selection
In addition to the income generated, the Investment Vehicle also generated strong returns
from the credit opportunities sleeve as dislocations in the market often present interesting
opportunities for a strategy with a flexible mandate.
Attribution by Strategy
1
1
Data as at 31 December 2023. All statistics are unaudited and subject to revision. The information set forth above was
compiled from sources CVC Credit Partners believes to be reliable; however, CVC Credit Partners makes no representations
or guarantees hereby with respect to the accuracy or completeness of such data. For informational purposes only. Past
performance is not an accurate indicator of current or future returns and potential investors should have no expectation
that past performance can or will be replicated in the future.
-
0.04
0.08
0.12
0.16
Q1-22
Q2-22
Q3-22
Q4-22
Q1-23
Q2-23
Q3-23
Q4-23
EUR share class
GBP share class (includes interest uplift on investor fx hedges)
10.5%
3.3%
13.3%
7.2%
-0.3%
-0.4%
-0.9%
-1.3%
22.5%
Net Return
8.7%
Net Return
-5%
0%
5%
10%
15%
20%
25%
30%
2023
Inception to Date (Annualised)
Performing Credit
Credit Opportunities
Cash/Expenses
Fees
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
7
INVESTMENT VEHICLE MANAGER’S REPORT (CONTINUED)
7
3.
Dynamic portfolio management
The Investment Vehicle Manager added considerable exposure to CLO tranches on the back of the
sell-off the underlying Investment Vehicle saw in Q4 2022. During 2023, the Investment Vehicle
Manager reduced exposure to this asset class as spreads tightened, while the allocation to fixed
rate high yield increased over time as inflation started coming down and the market started to
price in some interest rate cuts for 2024.
Asset Class Allocation
II.
Outlook for 2024
The underlying Investment Vehicle started the year with coupon levels at the highest they have
been since the IPO of the Company, so the Investment Vehicle Manager anticipates 2024 to be
another strong year for income as reflected in the Board’s decision to increase the dividend
guidance.
Credit Suisse Western European Leveraged Loan Index – Coupon Levels
2
2
Source: Credit Suisse Western European Leveraged Loan Index. Data as at 31 December 2023.
67%
66%
66%
64%
64%
63%
64%
63%
64%
63%
61%
60%
15%
17%
18%
19%
19%
20%
19%
21%
20%
20%
21%
22%
9%
9%
8%
8%
8%
8%
8%
7%
7%
7%
7%
7%
9%
9%
9%
9%
9%
9%
9%
9%
9%
10%
10%
10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Loans
HY
CLO
Other
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
8
INVESTMENT VEHICLE MANAGER’S REPORT (CONTINUED)
8
2023 benefitted from significant tailwinds following a difficult 2022. While the Investment Vehicle
Manager does not expect 2024 to be a repeat of 2023, the Investment Vehicle Manager still sees
positive momentum in the market:
1.
Inflation has come down from the peaks seen 12 months ago but is still not at the 2% target
that central banks are targeting. As a result, central banks are likely to start cutting base
rates during 2024. This will reduce some of the coupon income the underlying Investment
Vehicle is getting over time. At the time of writing,
3
the market is pricing in ~150 basis points
rate cuts by the European Central Bank in 2024 and ~125 basis points of rate cuts by the Bank
of England in 2024, as illustrated below:
4
2.
Tighter credit spreads leading to refinancings of higher coupon paper. As at 31 December 2023,
the 3 year discount margin on the Credit Suisse Western European Leveraged Loan Index was
505 basis points, considerably lower than at 31 December 2022, when the 3 year discount
margin was 661 basis points. However, this still stands above the 10 year average 3 year
discount margin of 495 basis points.
Overall, the Investment Vehicle Manager anticipates default rates to remain fairly benign in 2024
compared to the longer term average.
Credit Suisse Western European Leveraged Loan Index – Historical Default Rates
5
3
As at 11 January 2024.
4
Source: Bloomberg. Data as at 8 January 2024.
5
Source: Credit Suisse Western European Leveraged Loan Index. LTM default rates based on par amount. Data as at
31 December 2023.
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
4.0
Number of Hikes/cuts Priced In
Implied Policy Rate (%)
Current
25-Jan-24
07-Mar-24
11-Apr-24
06-Jun-24
18-Jul-24
12-Sep-24
17-Oct-24
12-Dec-24
-4.0
-3.5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
4.2
4.4
4.6
4.8
5.0
5.2
Number of Hikes/cuts Priced In
Implied Policy Rate (%)
Current
01-Feb-24
21-Mar-24
09-May-24
20-Jun-24
01-Aug-24
19-Sep-24
07-Nov-24
19-Dec-24
EUR
GBP
Implied Policy Rate (%)
Number of Hikes/Cuts Priced In
0%
1%
2%
3%
4%
5%
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
Loan Default Rate
10Y Loan Default Average
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
9
INVESTMENT VEHICLE MANAGER’S REPORT (CONTINUED)
9
The biggest risk to the 2024 outlook is geopolitical risk. About half of the world’s population is
expected to vote for a new government in 2024, with the US election of course front and centre
of a lot of investors’ minds. However, we are approaching the second anniversary of the Russia/
Ukraine conflict and tensions in the Middle East are also increasing. The Investment Vehicle
Manager has seen that a lot of these events can re-ignite inflation fears, and just in the last few
weeks the spot cost of shipping containers from Asia to Europe has doubled as container vessels
are unable to continue to use the Suez Canal.
III. Portfolio Composition
At the end of December 2023, there were 107 different issuers in the portfolio of the underlying
Investment Vehicle, split 52% / 48% between performing credit and credit opportunities.
Portfolio positioning as at 31 December 2023 shown below:
6
Top 10 Issuers Exposure
Industry Exposure
7
6
As at 31 December 2023. Totals may not add up to 100% due to rounding.
7
Excludes CLO investments.
5.8%
3.2%
3.1%
3.0%
2.7%
2.6%
2.4%
2.3%
2.2%
2.1%
71%
Doncasters
Puccini/Ekaterra
Keter Group
Wella
Hotelbeds
Colouroz
D&G
Douglas (Kirk Beauty)
Medical Depot Holdings (Drive Devilbiss)
Mangrove Luxco (Galapagos Holding)
Other
14%
8%
7%
7%
6%
6%
5%
5%
5%
4%
4%
3%
3%
3%
3%
17%
Healthcare & Pharmaceuticals
Beverage & Food
Travel & Leisure
Chemicals
Diversified/Conglomerate Manufacturing
Construction & Building
Telecommunications
Business Services
Durable Consumer Goods
Retail Stores
Non Durable Consumer Goods
Finance
High Tech Industries
Insurance
Automotive
Other
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
10
INVESTMENT VEHICLE MANAGER’S REPORT (CONTINUED)
10
Geographic Exposure
7
Strategy Split
There are a couple of key themes the Investment Vehicle Manager continues to focus on:
1.
Large issuers with liquid capital structures where the underlying Investment Vehicle can
trade in or out of the position if needed, with c.95% of the portfolio being marked to market
and readily tradable.
7
Excludes CLO investments.
UK
U.S.
Germany
Netherlands
France
Spain
Luxembourg
Denmark
Other EU
Other
3.0%
6.2%
25.5%
17.5%
13.7%
11.6%
10.0%
7.7%
4.4%
0.5%
52%
48%
Performing
Credit Opportunities
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
11
INVESTMENT VEHICLE MANAGER’S REPORT (CONTINUED)
11
Borrower Statistics
8
LTM Revenue
€2.2 billion
LTM EBITDA
€385 million
Total Leverage
5.6x
Enterprise Multiple
10.1x
Loan to Value
55%
2.
Focus on senior secured part of the capital structure to protect downside.
Asset Seniority Breakdown
3.
Even though the underlying Investment Vehicle is largely a floating rate fund, the Investment
Vehicle Manager has increased the underlying Investment Vehicle exposure to fixed rate
bonds given where the underlying Investment Vehicle is in the rates cycle.
Interest Rate Exposure
8
Borrower statistics shown as a weighted average of the portfolio as at 31 December 2023. Excludes CLO, equity and
warrant investments.
Senior Secured
Other
74.9%
25.1%
84%
83%
82%
81%
81%
80%
80%
79%
80%
80%
79%
78%
13%
14%
15%
17%
16%
18%
17%
18%
18%
18%
19%
19%
3%
3%
3%
3%
3%
3%
3%
3%
3%
3%
2%
2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jan-23
Feb-23
Mar-23
Apr-23
May-23
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Floating
Fixed
Other
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
12
INVESTMENT VEHICLE MANAGER’S REPORT (CONTINUED)
12
Below are some other key characteristics for the underlying Investment Vehicle as at
31 December 2023.
Portfolio Characteristics
9
GBP: 13.8%
Current Yield
10
EUR: 12.5%
GBP: 15.4%
Yield to Maturity
10
EUR: 14.1%
Weighted Average Price
11
90.4
IV. Conclusion
After a strong 2023, the Investment Vehicle Manager remains positive about the outlook for
both income and growth in 2024. Total yields on the loan market are still at attractive levels
versus historical yields. As inflation is now materially lower than 12 months ago, the Investment
Vehicle Manager anticipates base rates to come down over time, which will impact the income
generated by the portfolio. The base dividend (excluding top-up) was well covered and the
Investment Vehicle Manager consulted with the Board about the 2024 dividend guidance, which
resulted in an increase in base dividends to £0.0825 and €0.0725 on the GBP and EUR share class
respectively. The credit opportunities sleeve, which historically has generated the capital growth
for the portfolio, has an average cash price of 84.4%, meaning there is upside to the marks on
the portfolio as well. After many years of quantitative easing across many parts of the world, the
Investment Vehicle Manager anticipates there will be structurally more volatility in credit markets:
base rates will fluctuate considerably more, credit spreads will vary over time and defaults are
likely to be higher. This should lead to good income on the portfolio but also opportunities for the
credit opportunities side of the portfolio.
CVC Credit Partners Investment Management Limited
Investment Vehicle Manager
Pieter Staelens
Managing Director, Portfolio Manager
27 March 2024
9
Portfolio characteristics as at 31 December 2023.
10
Includes Investment Vehicle leverage.
11
Average market price of the portfolio weighted against the size of each position.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
13
INVESTMENT VEHICLE MANAGER’S REPORT (CONTINUED)
13
Pieter Staelens
Managing Director, Portfolio Manager
Pieter Staelens joined CVC in 2018. He is a member of
the Performing Credit team and based in London. Prior
to joining CVC, he worked at Janus Henderson Investors
in London where he was involved in various high yield
strategies and a credit long/short strategy.
Pieter is a graduate of the Université Catholique de Louvain
in Belgium. He also holds an MSc in Finance, Economics
and Econometrics from the Cass Business School and an
MBA from the University of Pennsylvania.
Mitchell Glynn
Managing Director, Assistant Portfolio Manager
Mitchell joined CVC in 2013. Mitchell is a member of the
Performing Credit team and based in London. Prior to
joining CVC, he was at Neuberger Berman, where he
worked as an Associate from 2008 in the Non-Investment
Grade team responsible for evaluating investments across
a wide range of industries.
Mitchell holds an MSc in Business Economics and Finance
from Loughborough University. Mitchell attained the
Chartered Financial Analyst designation in 2012.
Past performance is not indicative of future results. There can be no assurance that the Investment
Vehicle will be able to implement its investment strategy, achieve its investment objective or avoid
substantial losses.
Refer to the Useful Information for Shareholders section for the Index Disclaimer.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
14
STRATEGIC REPORT
This Strategic Report is designed to provide
information about the Company’s business and
results for the year ended 31 December 2023.
It should be read in conjunction with the
Chairman’s Statement and the Investment
Vehicle Manager’s Report which gives a detailed
review of investment activities for the year and
an outlook for the future.
Corporate summary
The Company is a closed-ended investment
company limited by shares, registered and
incorporated in Jersey under the Companies
(Jersey) Law 1991 on 20 March 2013, with
registration number 112635. The Company’s
share capital consists of Sterling shares and
Euro shares which are denominated in Sterling
and Euro respectively. The Company’s Sterling
shares and Euro shares are listed on the Official
List of the UK Listing Authority and admitted
to trading on the Main Market of the London
Stock Exchange.
The Company is self-managed as its assets are
managed by the Directors of the Company. The
Directors of the Company have invested the net
proceeds from share issues into the Investment
Vehicle, which is managed by the Investment
Vehicle Manager.
The Company is a member of the AIC and the
ELFA. The Company is regulated by the Jersey
Financial Services Commission.
Significant events during the year ended
31 December 2023
Dividends
On 30 January 2023, the Board announced
a dividend of £0.0250 per Sterling share and
€0.01750 per Euro share, which reflected an
uplift to the previously indicated quarterly
dividend of £0.0150 per Sterling share and
€0.0150 per Euro share.
On 7 March 2023, the Board announced that
the Company’s annual dividend targets were
being increased to £0.0750 per Sterling share
and €0.0700 per Euro share with immediate
effect.
Refer to note 12 for full details on dividend paid
during the year.
Director appointments
On 14 September 2023, Philip Braun was
appointed as a Non-Executive Director of the
Company as part of the Board’s succession
planning. Philip Braun was appointed Chair
of the Audit Committee on 1 January 2024
replacing Mark Tucker who retired from the
Board.
On 22 September 2023, Robert Kirkby was
appointed as a Non-Executive Director of the
Company and Chair-elect of the Board to
replace Richard Boléat who will be stepping
down from the Board at the AGM in April 2024.
Full biographies of all the Directors can be
found on pages 27 to 29 and on the Company’s
website.
AGM
At the AGM held on 2 May 2023, two new
Contractual
Semi-Annual
Tenders
were
presented to shareholders, offering shareholder
liquidity on a net asset value basis. Further
information can be found on the Company’s
website:
https://ig.cvc.com/wp-content/
uploads/2023/09/cvc-2023-agm-notice-and-
tender-circular-final.pdf.
Share conversions
Following requests made by shareholders, the
Company converted a total of 295,233 Sterling
shares into 298,964 Euro shares and 5,660,302
Euro shares into 5,692,752 Sterling shares under
the conversion facility during the year ended
31 December 2023.
Purpose
The Company is an investment company and
its scope is restricted to that activity. In that
context, the Company’s purpose is to provide
investors with sustainable long-term returns by
investing in a diversified portfolio of principally
European corporate debt. In fulfilling the
Company’s
purpose,
the
Board
seeks
to
consider the views of all stakeholders and is
mindful of the impact that the Company has
on wider society.
Investment Objective
The Company’s investment objective is to
provide shareholders with regular income
returns and capital appreciation from a
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
15
STRATEGIC REPORT (CONTINUED)
15
diversified portfolio of predominantly senior
secured loans and other sub-investment grade
corporate credit investments.
Investment Policy
The Company’s investment policy is to invest
predominantly in debt instruments issued by
companies across various industries domiciled,
or with material operations, in Western Europe.
These investments are mainly focused on the
senior secured obligations of such companies,
but investments are also made across the
capital structure of such companies.
The investment policy and the Investment
Vehicle’s investment limits can be found on
the Company’s website: ig.cvc.com/overview/
investment-policy/.
The Board continues to believe that the
investment strategy and policy adopted by
the Investment Vehicle is appropriate for and
is capable of meeting the Company’s current
objectives.
It is the Board’s assessment that the Investment
Vehicle Manager’s resources are appropriate
to properly manage the Investment Vehicle’s
portfolio in the current and anticipated
investment environment.
KPIs
The Board meets regularly to review performance
and risk against a number of key measures. The
Company considers the KPIs to be share price
total return, dividend yield, NAV total return
and the share price premium/discount to NAV.
The KPIs are set out in the Financial Highlights
and Performance Summary section. The KPIs
are considered to be APMs and further details
can be found on pages 97 to 101.
Share price total return and NAV total return
The Board regularly reviews and compares
the NAV and share price of the Company. The
Directors regard the Company’s NAV total
return as being the overall measure of value
delivered to shareholders over the long-term.
Share price total return reflects both changes to
the Company’s share price and dividends paid
to shareholders. NAV total return reflects both
NAV growth of the Company and dividends
paid to shareholders.
Premium/discount
The Directors review the trading prices of the
Company’s Sterling shares and Euro shares and
compare them against their respective NAVs to
assess volatility in the discount or premium of
the share prices to their NAVs.
Other measures
In addition to the above KPIs, the Board meets
regularly to review the performance and risk
against the below other measures:
Ongoing charges
For the year ended 31 December 2023, the
ongoing charges ratio was 1.77% for the
Company’s Sterling shares (31 December 2022:
1.76%) and 1.82% for the Company’s Euro
shares (31 December 2022: 1.80%). Ongoing
charges are considered to be an APM and
further details can be found on pages 100 to
101.
Diversification
The
Directors
review
the
geographical,
industry, asset and currency diversification of
the underlying Investment Vehicle to ensure
that holdings are in line with the Investment
Vehicle’s prospectus and also to monitor the
diversification risk of the underlying portfolio.
Refer to the Investment Vehicle Manager’s
Report for analysis of the Investment Vehicle
portfolio and note 8 and the ‘Investment
Vehicle portfolio’ section in Useful Information
for Shareholders, for further details regarding
the Investment Vehicle’s risk diversification
policies.
Default rates in Europe and US
The Directors regularly discuss historic and
emerging default risk in Europe and the US
with the Investment Vehicle Manager to help
assess and understand the performance and
prospective performance of the Company.
Performance of the Company may be affected
by the default or perceived credit impairment of
investments held by the Investment Vehicle. A
withdrawal of investment capital, an economic
downturn and/or rising interest rates could
severely disrupt the European and US markets
which could impact the ability of issuers to
repay principal and interest and could adversely
affect the value of the Company’s investment
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
16
STRATEGIC REPORT (CONTINUED)
16
in the Investment Vehicle and by extension, the
Company’s NAV and/or the market price of the
Company’s shares. The Directors hold at least
quarterly discussions with representatives of
the Investment Vehicle Manager to assist in
monitoring the above indicator.
Life of the Company
The
Company
has
an
indefinite
life.
In
accordance with the Articles of Association, the
Directors are required to propose an ordinary
resolution
that
the
Company
continues
its business as a closed-ended investment
company (the “Continuation Resolution”) if
the following occur:
(i)
the Company’s total NAV falls below
€75 million; or
(ii)
the Directors are required to convene
‘class closure meetings’ for all classes of
shares in issue. A class closure meeting
is required if a share class is delisted for
any reason, or, if in any rolling 12-month
period, the average daily closing market
price (as derived from the market data
published by Bloomberg or any successor
market data service thereto) of any class
of shares during such 12-month period is
10% or more below the average NAV per
share (calculated inclusive of current year
income).
If a Continuation Resolution is not passed, the
Directors are required to put forward proposals
within six months for the reconstruction
or reorganisation of the Company to the
shareholders for their approval.
These proposals may or may not involve
winding up the Company and, accordingly,
failure to pass the Continuation Resolution
will not necessarily result in the winding up of
the Company. A failure to pass a Continuation
Resolution may result in the redemption by the
Company of its entire holding of PECs.
Going concern
Under the Listing Rules, the AIC Code and
applicable
regulations,
the
Directors
are
required to satisfy themselves that it is
reasonable to assume that the Company is a
going concern as at the date of approval of the
financial statements.
In making this assessment, the Directors have
reviewed the Company’s budget and cash flow
forecast for the next 12 months from the date
of approval of the financial statements and
considered information regarding climate-
related matters in conjunction with other
uncertainties. On the basis of this review, and
after making due enquiries, the Directors have a
reasonable expectation that the Company has
adequate resources to continue in operational
existence for the period to 27 March 2025,
a period of twelve months from the date of
approval of the financial statements. The
Directors are also satisfied that no material
climate-related matters or uncertainties exist
that cast significant doubt over the Company’s
ability to continue as a going concern.
Viability Statement
Under the AIC Code, the Directors are required
to make a Viability Statement which explains
how they have assessed the prospects of the
Company, over what period they have done
so and why they consider that period to be
appropriate, taking into account the Company’s
current financial position and principal risks.
The principal risks faced by the Company are
described on pages 18 to 21.
The prospects of the Company are driven by
its investment objectives, investment policy
and investment strategy as summarised on
pages 14 to 15, and by the conditions existing in
the markets in which the Company’s ordinary
shares trade and in which the Investment
Vehicle invests and financial markets generally.
In assessing the prospects of the Company,
the Directors have, in addition to taking into
account the principal and emerging risks
facing the Company, taken into account the
Company’s current financial position. Their
assessment has included a robust process
encompassing an examination of the:
(i)
Investment Vehicle Manager’s view of
the
investment
opportunity
and
the
conditions existing in the markets in
which the Investment Vehicle is exposed
and financial markets generally, including
scenario analysis, stress tests and volatility
and return comparisons;
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
17
STRATEGIC REPORT (CONTINUED)
17
(ii)
liquidity and fundamental prospects of
the underlying positions of the Investment
Vehicle;
(iii)
extent to which the Company directly or
indirectly uses gearing;
(iv)
liquidity of the PECs in which the Company
invests; and
(v)
impact on the Company’s viability under
scenarios stemming from the application
of the tender mechanism (as detailed on
pages 84 to 85).
Based on the results of their assessment of the
above processes, and in the absence of any
unforeseen circumstances, the Directors have
concluded that a period of three years from
the date of this statement is an appropriate
period over which to assess the prospects of
the Company as the principal risks, mitigating
controls and investment strategy and policy
are not expected to materially change over
this period. This period reflects the effect of
significant redemption requests received from
shareholders under the tender mechanism,
coupled with no further issuances of ordinary
shares by the Company, before a Continuation
Resolution would be proposed as a result of the
NAV falling below €75 million.
The Directors have a reasonable expectation
that the Company will be able to continue in
operation and meet its liabilities as they fall due
within at least this period of assessment. The
Directors are also of the opinion that given the
information available to them at the date of
these financial statements, the Company will
be able to continue to conduct its commercial
activities in a manner consistent with its
investment objectives for the foreseeable
future.
Social and environmental responsibility
Refer to the ESG Committee Report for details
on the Company’s social and environmental
responsibility.
Investment Vehicle Manager stewardship
The Board continues to believe that the
investment strategy and policy adopted by
the Investment Vehicle is appropriate for and
is capable of meeting the Company’s current
objectives. It is the Board’s assessment that
the Investment Vehicle Manager’s resources
are appropriate to properly manage the
Investment Vehicle’s portfolio in the current
and anticipated investment environment.
This Strategic Report was approved by the
Board of Directors on 27 March 2024 and signed
on its behalf by:
Richard Boléat
Chairman
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
18
PRINCIPAL RISKS AND UNCERTAINTIES
When considering the distribution policy and total return of the Company, the Directors take
account of the risks which have been taken in order to achieve that return. The Directors have
carried out a robust assessment of the principal and emerging risks facing the Company including
those which would threaten its business model, future performance, solvency or liquidity. An
overview of the principal and emerging risks and uncertainties is set out below:
Since the publication of the Company’s Annual Financial Report for the year ended
31 December 2022, the key change to the Company’s principal risks and uncertainties was the
updated wording for geopolitical factors.
Principal Risks
Mitigating Factors
Geopolitical factors
The continuing conflict in Ukraine has to date
had no material effects on the performance
of the Company or on its financial condition.
However, there are a range of reasonably
conceivable scenarios where impacts could
be felt, notably if the conflict were to extend
beyond Ukraine’s borders. In addition, and of
potentially greater impact to the Company,
2023
has
seen
significantly
heightened
tensions in the eastern Mediterranean and
the Middle East. The potential consequences
for the Company’s portfolio interests derive
principally from supply chain disruption
risk caused by rerouting of seaborne cargo
around southern Africa and away from more
efficient routings through the Red Sea. This
has the potential not only to impede efficient
industrial production and retail operations
through delivery delays but may also have
inflationary impacts through additional cost
impacts.
The Company’s exposure to the potential
impacts of the risks identified is limited
by its widely diversified portfolio and its
concentration in large scale issuers that are
well placed to withstand such challenges.
The Board will continue to dialogue with the
Investment Vehicle Manager around such
non-portfolio risks and will report any material
changes to its assessment as appropriate.
Supply and demand
The value of the investments in which the
Company indirectly invests are affected
by the supply of primary issuance and
secondary paper and the continued demand
for such instruments from buy side market
participants. A change in the supply of, or
demand for, underlying investments may
materially affect the performance of the
Company.
The Company has no control over the supply
and demand characteristics of the leveraged
finance markets. However, the Directors are in
regular communication with the Investment
Vehicle
Manager
and
receive
monthly
performance reports and independent data
to assist in monitoring the performance of
the Investment Vehicle and the supply and
demand characteristics of the asset class.
It is the Investment Vehicle’s performance
which is the main driver of the Company’s
performance.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
19
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
19
Principal Risks
Mitigating Factors
Credit risk
The Investment Vehicle invests predominantly
in sub-investment grade European corporate
issuers and therefore credit risk is greater
than would be the case with investments in
investment grade issuers.
The Company and the Investment Vehicle
have investment limits and risk diversification
policies in place to mitigate individual issuer
credit risk. Refer to the Company’s website:
ig.cvc.com/overview/investment-policy/
for
details of the Investment Vehicle’s investment
limits and the Investment Vehicle Manager’s
Report for analysis of the Investment Vehicle
portfolio.
Liquidity
The Company relies on the periodic redemption
mechanism offered by the Investment Vehicle
to realise its investment in PECs, and on
that mechanism operating in a timely and
predictable manner.
The
Investment
Vehicle’s
underlying
investments
are
not
inherently
liquid.
Investments are generally bought and sold by
market participants on a bilateral basis and
any reduction in liquidity caused by a reduction
of demand or market dislocation may have a
negative impact on the Company’s ability to
effectively conduct its periodic redemption
activities.
The Board holds periodic meetings at which
extensive
discussion
of
the
Investment
Vehicle’s portfolio takes place. This includes
consideration of portfolio liquidity. Refer to
note 8.2 for further details.
Foreign exchange risk
Foreign exchange risk is the risk that the
values of the Company’s and the Investment
Vehicle’s assets and liabilities are adversely
affected by changes in the values of foreign
currencies by reference to the Company’s
base currency, the Euro.
The effect of foreign exchange risk at the
Investment Vehicle level is actively managed
by the Board of the Investment Vehicle and
its advisors through hedging arrangements
as detailed in note 8.6. The Board monitors
the NAV per share divergence between the
Sterling and Euro share classes to identify the
impacts of the foreign exchange movement
and interest rate differentials between the
two share classes.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
20
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
20
Principal Risks
Mitigating Factors
Macroeconomic factors
Adverse macroeconomic conditions may have
a material adverse effect on the performance
of the Investment Vehicle’s underlying assets
and liabilities and on the ability of underlying
borrowers to service their ongoing debt
obligations.
Changes in the level of short-term risk-free
rates in the Company’s chosen markets has a
direct impact, both positively and negatively,
on
the
performance
of
the
Company,
depending on the direction of such rates,
given that the Investment Vehicle invests in
predominantly floating rate assets.
The Board is reliant on the active portfolio
management of the Investment Vehicle
Manager
which
monitors
and
manages
each investment on an ongoing basis. Part
of
this
monitoring
includes
considering
macroeconomic, credit specific, event-driven
and environmental and social factors in
respect of each investment. This analysis helps
inform the Investment Vehicle Manager’s
decision to buy, sell or hold each investment.
The Directors are in regular communication
with the Investment Vehicle Manager and
receive monthly performance reports to assist
in monitoring these factors.
The Company’s investment policy is to invest in
predominantly floating rate assets. As a result,
the Company’s performance will improve in
absolute terms during times of rising interest
rates and will decline during times of declining
interest rates. The Investment Vehicle does
not seek to speculate on the direction of such
rates, or hedge its predominantly floating
rate exposure, as this would be inconsistent
with its and the Company’s investment policy.
Capital management risks
Shareholders may seek to redeem their
shareholdings
in
the
Company
using
the
Company’s
periodic
redemption
arrangements, subject to restrictions as
detailed in note 12, which could result in the
NAV of the Company falling below €75 million
and as such, triggering the requirement for
a Continuation Resolution. There is a risk
that a Continuation Resolution will not be
passed which could result in the redemption
by the Company of its entire holding in the
Investment Vehicle.
The Company has placed restrictions within
the tender mechanism that limit the number
of shares that shareholders can redeem
at each tender (refer to note 12 for details
of these restrictions). The Board performs
an annual modelling exercise to determine
whether consecutive tender requests would
prompt a Continuation Resolution and actively
monitors the level of tenders throughout the
year. The Company engages with tendering
shareholders to understand the rationale
behind significant tender requests. The Board
and representatives of the Investment Vehicle
Manager proactively engage with current
and prospective shareholders and seek to
understand their views on the Company.
The engagement and monitoring in place by
the Board allows the Company to be proactive
in identifying any common themes driving
significant tender requests.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
21
PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
21
Principal Risks
Mitigating Factors
ESG Matters
Reputational damage stemming from the
Company’s environmental footprint, deemed
disregard of its use of social capital and
related activities and disclosures failing to
meet the standard expected by shareholders
and regulators.
Financial losses stemming from climate-
related factors adversely impacting the
capital value of securities held within the
Investment Vehicle portfolio and/or the
ability of those companies whose securities
are held to meet their financial obligations
thereunder.
Reputational damage stemming from the
Company’s
association
with
companies
whose
securities
are
held
within
the
Investment Vehicle portfolio and whose ESG
policies, activities or disclosures fail to meet
the standards expected by stakeholders.
The Company continues with its programme to
better understand the views and expectations
of
stakeholders
regarding
ESG-related
matters. This is aided by Vanessa Neill who is
a consultant specialising in sustainability and
is Chair of the ESG Committee.
The ESG Committee interacts with the
Investment Vehicle Manager on ESG matters.
Additionally, the Investment Vehicle Manager
considers ESG factors within the investment
process and the use of the CVC Credit Partners
proprietary ESG scorecard during the due
diligence process as well as ESG assessment
from external providers such as Sustainable
Fitch.
The consideration of such risks is embedded
within the Investment Vehicle Manager’s ESG
policy.
The Company engages with representatives of
the Investment Vehicle Manager on a continual
basis to ensure the policy is appropriate and is
implemented appropriately.
Taxation
There is a risk that revisions to the taxation
of the Investment Vehicle through the
introduction and implementation of new
or amended tax legislation will impact its
ability to continue to deliver current after-tax
returns to the Company.
The Board and the Investment Vehicle take
ongoing advice on all tax compliance matters
relating to the Company and the Investment
Vehicle as necessary and keep all such
developments under review.
The Company may be exposed to additional risks not disclosed above or within the Annual
Financial Report as they are not considered by the Board to be principal or emerging risks. The
Company assesses risks, and the mitigation thereof, on an ongoing basis and as part of its formal
business risk assessment process.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
22
SECTION 172(1) STATEMENT
Through adopting the AIC Code, the Board
acknowledges its duty to comply with section
172 of the UK Companies Act 2006 to act in a
way that promotes the success of the Company
for the benefit of its members as a whole,
having regard to (amongst other things and to
the extent applicable):
a)
the consequences of any decision in the
long-term;
b)
the need to foster business relationships
with suppliers, customers and others;
c)
the
impact
on
community
and
environment;
d)
the maintaining of reputation for high
standards of business conduct; and
e)
acting fairly between members of the
Company.
The Board considers this duty to be inherent
within the culture the Company and a part of
its decision-making process.
Information on how the Board has engaged
with its stakeholders and promoted the success
of the Company, through the decisions it has
taken during the year, whilst having regard to
the above, is outlined below.
The principal decisions on pages 25 to 26
outline decisions taken during the year, which
the Board believes has the greatest impact on
the Company’s long-term success. The Board
considers the factors outlined under section 172
and the wider interests of stakeholders as a
whole in all decisions it takes on behalf of the
Company.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
23
SECTION 172(1) STATEMENT (CONTINUED)
23
Stakeholder engagement
Who
Why we engage
How we engage
Outcome
Shareholders
Shareholders enable the
Company to give effect to
its purpose through the
commitment of risk capital.
Their continued support
is imperative to the effec-
tive implementation of
the Company’s investment
strategy, under the terms of
the Company’s prospectus
as issued from time to time.
The Company’s monthly
fact sheets and market
announcements are
published on the
Company’s website (ig.cvc.
com).
More detailed
communications are
made to shareholders on a
biannual basis through the
publication of the half-
yearly and annual financial
reports.
Representatives of the
Investment Vehicle
Manager hold regular
meetings with both
current and potential
shareholders, whose views
are communicated to the
Board, and periodically host
investor events.
The Board, in conjunction
with the input of the
corporate brokers, has
arranged, and will continue
to periodically arrange,
meetings with shareholders
for the primary purpose
of remaining cognisant of
shareholder views on a wide
range of topics relevant to
their shareholding in the
Company.
During 2023, the Company
appointed Cadarn Capital
Ltd to provide distribution
and investor relations
services to the Company.
Shareholders receive
relevant information
allowing them to make
informed decisions about
their investments.
Shareholders’ views inform
Board decisions.
The Board also seeks
to address pertinent
shareholder queries
in its half-year and
annual financial reports,
together with any other
communications or events
during the year.
Investment
Vehicle
Manager
The Board needs to inform
itself as to the effectiveness
of the operation of the
Investment Vehicle and its
investment programme. In
addition, the Investment
Vehicle Manager provides
investor relations support
to the Company and
the Board works with
the Investment Vehicle
Manager to support the
investor relations function
on a regular basis.
The Investment Vehicle
Manager reports on
the performance of the
Investment Vehicle to the
Board on a regular basis.
In addition, the Board
meets with representatives
of the Investment Vehicle
Manager on a regular basis
to develop and monitor
its sales and marketing
strategy and to discuss
strategic and market issues
generally.
The Company is well
managed, receives
appropriate and timely
advice and guidance and
has an appropriate, open
and transparent relationship
with the Investment Vehicle
Manager.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
24
SECTION 172(1) STATEMENT (CONTINUED)
24
Stakeholder engagement (continued)
Who
Why we engage
How we engage
Outcome
AIC and ELFA
The Board is informed
of the emerging
legislative and regulatory
developments, market
conditions and ESG
initiatives undertaken by
the AIC and ELFA for their
members. Additionally,
the Company gets to
interact with the wider
investment community,
thus identifying trends and
potential opportunities.
The Company is an active
member of the AIC and
Board members regularly
attend and actively
participate in AIC sponsored
events.
Ms Neill is a member of
the AIC’s ESG Forum whose
members are non-executive
directors of investment
companies and meets
approximately three times a
year.
The Company and the
Investment Vehicle Manager
are both active members of
ELFA and actively participate
in ELFA sponsored events.
Ms Neill and Ms Gilbert are
both members of ELFA’s ESG
Committee, which meets
approximately four times a
year.
The Board and
representatives of the
Investment Vehicle
Manager are well
informed and positioned
to identify market trends,
opportunities and emerging
risks as well as expand the
network of the Company.
The AIC is also positioned
to support and promote
investment companies
including the Company.
The AIC ESG forum provides
advice to the AIC on its ESG
initiatives and projects;
relevant ESG regulatory
issues and ESG trends
and developments, which
could impact investment
companies.
Third-party
service
providers
The Board receives
operational, compliance
and associated reports
and gets satisfied as to
the effective operation of
the services, systems and
internal controls operated
by service providers on
behalf of the Company.
The Board oversees the
performance of third-party
service providers. Refer to
pages 38 to 39 for further
information.
The Company’s operations
and internal controls are
effective, efficient and
compliant.
The Board formed a
Management Engagement
Committee on 11 December
2023.
Wider society
As a responsible corporate
citizen, the Company
recognises that its
operations have an
environmental footprint
and an impact on wider
society.
The Board meets
with stakeholders
to remain current in
their understanding of
stakeholder views relating
to environmental and social
matters.
The Board has continued
with its programme to
offset the impact of the
Company’s operations on
the community in which it
operates, as demonstrated
in the decision to engage
with the JNP, having made
a commitment to the value
of £100,000 over a five-year
period, starting in 2020.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
25
SECTION 172(1) STATEMENT (CONTINUED)
25
Principal decisions
Decision
Impact on long-term
success
Stakeholder considerations
Dividend level
changes
Delivering consistent
income distributions to
shareholders.
The Board understands that reliable income distributions
through
dividends
are
of
significant
importance
to
shareholders. During the year ended 31 December 2023, the
annual dividend target was £0.0750 per Sterling share and
€0.0700 per Euro share.
Effective 5 February 2024, annual dividend targets were
increased to £0.0825 per Sterling share and €0.0725 per Euro
share.
The dividend coverage ratio from coupon income, of 1.56x and
1.70x for the GBP and EUR share classes respectively, was a
factor in the Board’s decision to further increase the dividend
target for the next twelve months as detailed above.
The Company’s distribution policy is reviewed on an ongoing
basis, with a key focus being the determination of a stable
level of dividends that, based on market conditions and
expected cash yield, could reasonably be declared without
recourse to capital for a forward-looking period of 12 months.
Director
appointments
Appointment of Philip
Braun and Robert Kirkby
The Board sought candidates with relevant skills, experience
and knowledge for the role of Chair of the Audit Committee
and Chairman of the Board, as assessed by the Company’s
Nomination & Remuneration Committee, and for the purpose
of succession planning.
The Company engaged Cornforth Consulting to conduct this
search and interviewed a shortlist of suitable candidates
before appointing Philip Braun, as Chair-elect of the Audit
Committee and Robert Kirkby, as Chairman-elect of the
Board respectively.
The Board considers that Mr Braun and Mr Kirkby bring
valuable skills to the role and have made valuable
contributions to the Board’s discussions and decision making
since their appointment.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
26
SECTION 172(1) STATEMENT (CONTINUED)
26
Tender
mechanism
Offering shareholders
liquidity on a NAV basis.
The Board is aware of the importance shareholders place on
being able to realise a proportion of their shareholding on a
NAV basis.
To ensure that the tender mechanism continues to be
operated in a way that is in the best interests of the Company
and the shareholder base as a whole, the Board announced
on 1 February 2024 amended terms of the tender mechanism.
On 1 February 2024, the Board announced the addition in the
March 2024 Tender of an option for tendering shareholders
to tender shares for placing with third party investors as an
alternative to having the shares repurchased by the Company.
By participating in the placing, shareholders can realise their
shares and receive the consideration for all successfully
placed shares up to 10 weeks earlier than the consideration
payable for shares repurchased by the Company pursuant
to the March 2024 Tender. Such an outcome will depend on
the extent to which Winterflood Securities Limited identifies
investors willing to buy the shares at a price per share which
is equal to or higher than the floor price set by the Company.
Shares not placed successfully will be repurchased in the
same way as they would be under the current tender terms
and conditions. For more information refer to pages 84 to 85.
Employee engagement
The Company has no employees.
Principal decisions (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
27
BOARD MEMBERS
All the Directors are independent and non-executive.
CHAIRMAN
Richard Michael Boléat.
Appointed 20 March 2013.
Richard qualified as a Chartered Accountant with Coopers
& Lybrand in the United Kingdom in 1987 and subsequently
worked in the Middle East, Africa and the United Kingdom
for a number of commercial and financial services groups,
during which time he acted as a buy-side high yield credit
analyst for an Arabian investment bank.
From 1996 he was a Principal of Channel House, a Jersey
based financial services group, which was acquired by
Capita Group plc in September 2005 and led their financial
services client practice in Jersey until September 2007.
He currently acts as a non-executive director of a number of substantial collective investment and
investment management entities and is active in a number of asset classes including global macro,
leveraged corporate credit, long/short equity, fund of funds and EM real estate. He presently acts
as Chairman of Yatra Capital Limited, listed on NYSE Euronext.
He is personally regulated by the Jersey Financial Services Commission in the conduct of financial
services business and is a member of the Alternative Investment Management Association (AIMA),
the International Corporate Governance Network and the European Corporate Governance
Institute.
CHAIRMAN-ELECT
Robert Kirkby.
Appointed 22 September 2023.
Robert qualified as a Chartered Accountant with KPMG
in the London corporate tax team in 1998. Working for
the Big 4 accounting firms in London, Auckland and
Jersey until 2007 on large multinational clients with an
increasing focus on strategy and transaction work with
trade and private equity buyers. In 2007, Robert joined
Jersey Finance Limited (a Jersey based quango responsible
for marketing and developing the finance industry) as
technical director and deputy CEO. Here he was engaged
between government, industry and regulator to develop
new laws, regulations as well as supporting various
marketing initiatives. These regulations and laws included those appropriate for open and closed
ended fund vehicles in the private or listed arena.
Following this, Robert returned to KPMG to build and lead the KPMG advisory team for ten years in
Jersey, working on a variety of consulting jobs ranging from mergers and acquisitions, valuations,
regulatory matters, strategy and government work. He worked on many multinational jobs with
KPMG colleagues from around the world. During this time, he was also responsible for KPMG
Channel Islands digital services and internal digital development. In addition, he was the lead for
KPMG in the offshore fund administration / trust and corporate sector and offshore lead for risk and
regulatory matters.
Robert currently serves as a non-executive director on Aberdeen Asian Income Fund Ltd and several
other unlisted offshore structures.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
28
BOARD MEMBERS (CONTINUED)
28
DIRECTORS
Philip Braun.
Appointed 14 September 2023.
Philip qualified as a chartered accountant in London in
1996 before moving to join PwC in Jersey in 1997. He spent
nine years within PwC’s audit practice including two
years in PwC’s Sydney office with a focus on investment
management clients. After this he spent two years
with an international fiduciary group, helping with the
establishment of their funds business in Jersey as part of a
wider corporate services group.
Following this he joined BDO in Jersey to establish a
financial services audit practice, leading to him becoming
an audit partner and the head of audit in the Jersey firm,
where he has worked for the last sixteen years. Alongside this he was the firm’s International
Liaison Partner and so was responsible for coordinating BDO Jersey’s response to international
audit engagements and firmwide initiatives, and was also the firms Ethics & Independence Partner,
and was responsible for the firms ongoing compliance with relevant ethical and independence
standards.
Aside from the audit role, he was also responsible for the firm’s business advisory team, which
included the provision of corporate restructuring, liquidations, and transactional due diligence
engagements within the wider advisory team. Philip is a Fellow of the Institute of Chartered
Accountants of England & Wales and is a member of the IOD.
Philip currently serves as a non-executive director to the International Stock Exchange Authority,
the regulatory arm of the International Stock Exchange, as well as several offshore structures and
provides ad hoc consultancy services to local businesses.
Stephanie Carbonneil.
Appointed 21 February 2019.
Stephanie is a seasoned finance professional with extensive
experience in investment management and distribution.
As the head of investment trusts and managing director
at Allianz Global Investors in London, she oversees a circa
£3bn business, handling sales, marketing, accounting,
finance and company secretaries’ desk. She previously
served
as
investment
trusts
business
development
manager at Schroders for several years.
Stephanie has 14 years of experience in investment and
was a senior investment manager at AXA in the UK and at
Pictet in Geneva, as a multi asset funds of funds investment
manager. Her responsibilities encompassed all facets of
portfolio management, including participating in the asset allocation investment committee,
executing tactical allocation decisions, conducting fund selection across various asset classes
including fixed income and alternative.
Throughout her career, she demonstrated a commitment to diversity and inclusion notably
through mentoring in different programs and leading D&I initiatives at AXA.
Stephanie is also currently a trustee and chair of a charity, Grenadine, a Saturday morning French
school.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
29
BOARD MEMBERS (CONTINUED)
29
Esther Gilbert.
Appointed 23 September 2022.
Esther is a consultant specialising in product development
and process enhancement for asset managers and asset
owners. She works with global companies to enhance
their position in the UK market, particularly in relation
to their strategy offering, ESG integration and research
capabilities, across both public and private markets.
Esther’s executive experience was spent investing in
fixed income and alternatives markets, most recently
as Senior Fixed Income Analyst at Investec Wealth &
Investment, a leading UK wealth manager, where she
was integral to the development of the investment
research process including ESG integration, as well as
fixed income portfolio construction.
Prior to that she held roles as Portfolio Manager Analyst at AXA IM in London, and Fixed Income
Portfolio Manager at Mitsubishi UFJ Asset Management (UK). Esther is a CFA Charter holder and
holds the CFA Certificate in ESG Investing.
Vanessa Neill.
Appointed 11 January 2022.
Vanessa is an experienced, senior sustainability and
ESG consultant and advisor. She provides insights,
guidance and advice on sustainability and ESG strategy,
operations and communications to organisations.
Vanessa currently advises companies across multiple
sectors, with particular expertise in the financial services
sector including asset management and private equity.
Vanessa’s advisory work for clients is informed by the
latest academic insights, including those drawn from
the Cambridge Institute for Sustainable Leadership
(CISL), where she recently completed a three-year
Postgraduate Masters Level Diploma.
Prior to her studies at CISL, Vanessa was a senior corporate communications professional with
over 20 years of experience. She was formerly a Partner at Kekst CNC, a global leading strategic
communications consultancy, where she co-led the firm’s ESG and Sustainability Steering Group.
Prior to that, she served as Head of Communications for the Investment Banking and Capital
Markets Division at Credit Suisse from 2009 to 2018, where she supported the launch of the Impact
Advisory and Finance Department.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
30
DIRECTORS’ REPORT
The Directors present the Annual Financial
Report for the Company for the year ended
31 December 2023. The results for the year are
set out in these accounts.
Dividend Policy
The
Company’s
dividend
policy
is
to
generate
consistent
income
distributions
to shareholders, at levels consistent with
prevailing market conditions. During the year
ended 31 December 2023, the annual dividend
target was £0.0750 and €0.0700 per Sterling
and Euro share respectively.
Share capital and voting rights
The Company has two classes of ordinary
shares, being Sterling shares and Euro shares.
As at 31 December 2023, the Company
had
118,916,157
(31
December
2022:
129,518,607) Sterling shares and 96,553,753
(31 December 2022: 105,076,336) Euro shares in
issue, excluding shares held in treasury.
As at 31 December 2023, the Company
held
247,533,235
(31
December
2022:
236,506,595) Sterling shares and 52,747,703
(31 December 2022: 44,767,789) Euro shares in
treasury.
Each Sterling share holds 1.17 voting rights
and each Euro share holds 1 voting right. As at
31 December 2023, the total number of voting
rights of the Sterling shares was 139,131,903
(59.03%) and Euro shares was 96,553,753
(40.97%). The total number of voting rights in
the Company was 235,685,656.
Acquisition of own shares
The Board has the authority to purchase its own
shares under the terms and conditions of the
tender mechanism as summarised in note 12.
Details of the shares tendered and repurchased
during the year are also detailed in note 12.
At the AGM held on 2 May 2023, the Company
renewed the general authority to purchase in
the market up to 14.99% of the shares in issue.
This authority expires on the date of the 2024
AGM. During the year the Company did not
purchase any shares in the market.
The Directors will seek renewal of these
authorities from shareholders at the Company’s
2024 AGM on 30 April 2024.
Directors’ interests
The Directors held the following shares in the Company:
Number of
Sterling shares held
Number of
Euro shares held
Director
As at
31 December
2023
As at
31 December
2022
As at
31 December
2023
As at
31 December
2022
Richard Boléat
30,000
30,000
16,590
-
Philip Braun
-
n/a
-
n/a
Stephanie Carbonneil
36,763
22,200
-
-
Esther Gilbert
12,153
7,273
-
-
Robert Kirkby
8,977
n/a
-
n/a
Vanessa Neill
22,585
11,780
-
-
Mark Tucker
50,000
50,000
-
-
Between 1 January 2024 and 27 March 2024, following shares were acquired by Directors;
Director
Date
Number of Sterling shares
Philip Braun
6 February 2024
4,579
Esther Gilbert
22 February 2024
3,977
No Director has any interest in any contract to which the Company is a party.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
31
DIRECTORS’ REPORT (CONTINUED)
31
Shareholders’ interests
In accordance with Chapter 5 of the Disclosure and Transparency Rules (which covers the
acquisition and disposal of major shareholdings and voting rights), the following shareholders
had an interest of greater than 5% in the Company’s issued share capital as at 31 December 2023.
Percentage of
total voting
rights (%)
Investec Wealth & Investment Ltd
10.47
Mizrahi Tefahot Bank
8.75
Clearstream Banking (Luxembourg)
8.46
Brewin Dolphin Wealth Management Ltd (Ireland)
7.92
Fidelity Investments
5.01
Between 1 January 2024 and 27 March 2024 the
Company did not receive any notifications.
Disclosures required under LR 9.8.4R
The Financial Conduct Authority’s Listing Rule
9.8.4R requires that the Company includes
certain information relating to arrangements
made between a controlling shareholder and
the Company, waivers of Director’s fees, and
long-term incentive schemes in force. The
Directors confirm that there are no disclosures
to be made in this regard.
Events after the reporting date
The Directors are not aware of any matters
that might have a significant effect on the
Company in subsequent financial periods not
already disclosed in this report or the attached
financial statements under note 16.
Statement as to disclosure of
information to the auditor
The Directors who held office at the date of
approval of this Directors’ Report confirm
that, so far as they are each aware, there is
no relevant audit information of which the
Company’s auditors are unaware and that they
have taken the steps that they ought to have
taken as Directors to make themselves aware of
any relevant audit information and to establish
that the Company’s auditors are aware of that
information.
Fair, balanced and understandable
In assessing the overall fairness, balance and
understandability of the Annual Financial
Report, including the financial statements, the
Board has performed a comprehensive review
to ensure consistency and overall balance.
AGM
All resolutions proposed at the 2023 AGM held
on 2 May 2023 were passed without significant
votes cast against any of the resolutions.
The Company will hold the 2024 AGM on
30 April 2024. The notice and details of the
resolutions being proposed will be circulated in
a separate letter and will be available shortly
afterwards on the Company’s website (ig.cvc.
com).
Corporate Governance Statement –
Compliance with the AIC Code
The Company has a premium listing on the
London Stock Exchange and is therefore required
to report on how the principles of the UK Code
have been applied. By reporting against the
AIC Code, the Company has met its obligations
under the UK Code and the associated
disclosure requirements under paragraph 9.8.6
of the Listing rules, and as such does not need
to report further issues contained in the UK
Code which are not applicable to the Company.
Being an investment company, a number of the
provisions of the UK Code are not applicable
as the Company has no executive directors or
internal operations.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
32
DIRECTORS’ REPORT (CONTINUED)
32
The AIC Code is available on the AIC website
www.theaic.co.uk. The Company has complied
with all the principles and applicable provisions
of the AIC Code during the year ended
31 December 2023.
As the Company is self-managed, provisions
pertaining to the relationship with managers
are not applicable to the Company. As the
Company is not newly incorporated, provisions
pertaining to new companies are not applicable.
It is noted that Philip Braun and Robert Kirkby
were appointed during the year, and relevant
disclosures have been made in accordance
with the AIC Code.
Set out below is where stakeholders can find
further information within the Annual Financial
Report about how the Company has complied
with the various principles and provisions of
the AIC Code.
1. Board Leadership and Purpose
Purpose
Page 14
Strategy
Pages 14-15
Values and culture
Page 34
Stakeholder Engagement
Pages 23-24
2. Division of Responsibilities
Director Independence
Page 34
Board meetings
Pages 37-38
Management
Engagement
Committee
Page 36
3. Composition, Succession and Evaluation
Nomination and
Remuneration
Committee
Page 36
Director re-election
Page 34
Use of an external
search agency
Page 34
Board evaluation
Pages 36-37
Corporate Governance Statement
– Compliance with the AIC
Code(continued)
4. Audit, Risk and Internal Control
Audit Committee
Page 36
Principal and Emerging
risks
Pages 18-21
Risk management
and internal control
systems
Pages 39-40
Going concern
statement
Page 16
Viability statement
Pages 16-17
5. Remuneration
Directors’
Remuneration Report
Pages 41-42
Directors’ Statement of Responsibilities
The Directors are responsible for preparing
the Annual Financial Report and financial
statements in accordance with applicable
Jersey law and IFRS as adopted by the European
Union.
Jersey Law requires the Directors to prepare
financial statements for each financial year
which give a true and fair view of the state of
affairs of the Company at the end of the year
and of the profit or loss of the Company for
that year.
In preparing these financial statements, the
Directors should:
•
select suitable accounting policies and
apply them consistently;
•
make judgments and estimates that are
reasonable;
•
state
whether
applicable
accounting
standards have been followed, subject
to any material departures disclosed and
explained in the financial statements; and
•
prepare the
financial
statements
on
the going concern basis unless it is
inappropriate
to
presume
that
the
Company will continue in business.
The Directors are responsible for keeping
proper accounting records that disclose, with
reasonable accuracy at any time, the financial
position of the Company and enable them to
ensure that the financial statements comply
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
33
DIRECTORS’ REPORT (CONTINUED)
33
with the Companies (Jersey) Law 1991. They
have general responsibility for taking such steps
as are reasonably open to them to safeguard
the assets of the Company and to prevent and
detect fraud and other irregularities.
The Directors confirm to the best of their
knowledge that:
•
the financial statements, which have
been prepared in accordance with IFRS,
give a true and fair view of the assets,
liabilities, financial position and profit of
the Company; and
•
the Strategic Report includes a fair review
of the development and performance
of the business and the position of the
Company, together with a description of
the principal risks and uncertainties that
they face.
The Annual Report and financial statements,
taken as a whole, are fair, balanced and
understandable and provide the information
necessary for shareholders to assess the
Company’s performance, position, business
model and strategy.
This Directors’ Report was approved by the
Board of Directors on 27 March 2024 and signed
on its behalf by:
Richard Boléat
Chairman
Directors’ Statement of Responsibilities
(continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
34
BOARD AND COMMITTEES
Culture
The Company’s culture is one of openness,
transparency and inclusivity. Respect for the
opinions of its diverse stakeholders features
foremost as does its desire to implement its
operations in a sustainable way, conducive to
the long-term success of the Company.
The Board
As at 31 December 2023, the Board consisted of
the following non-executive directors:
•
Richard Boléat (Chairman, to step down
at the 2024 AGM);
•
Philip Braun (Chair of the Audit Committee
(effective 1 January 2024), appointed
14 September 2023);
•
Stephanie
Carbonneil
(Chair
of
the
Nomination and Remuneration Committee
and SID (effective 1 January 2024));
•
Esther Gilbert (Chair of the Management
Engagement Committee);
•
Robert Kirkby (Chairman – elect, appointed
22 September 2023);
•
Vanessa
Neill
(Chair
of
the
ESG
Committee); and
•
Mark Tucker (Chair of the Audit Committee
and SID, retired 31 December 2023).
All the Directors are independent of the
Investment Vehicle Manager, refer to pages 27
to 29 for the biographies and dates of
appointment for all Directors.
Mark Tucker was the Chair of the Audit
Committee and SID to 31 December 2023.
Effective 1 January 2024, Philip Braun was
appointed as the Chair of the Audit Committee
and Stephanie Carbonneil was appointed
as SID. The SID supports the Chairman and
serves as an alternate point of contact for
stakeholders.
Directors’ appointment, retirement and
rotation
During the year ended 31 December 2023, the
Directors engaged Cornforth Consulting, an
external search consultancy, in their search
for additional Directors to replace Mark Tucker
and Richard Boléat. Cornforth Consulting has
no other connection to the Company or any
individual Director. After careful deliberation,
the Nomination and Remuneration Committee
appointed Robert Kirkby and Philip Braun
to enhance the Board’s skillset and fill the
positions of Chairman and Chair of the Audit
Committee respectively.
Directors have agreed letters of appointment
with the Company. No Director has a service
contract with the Company and Directors’
appointments may be terminated at any
time by one month’s written notice with no
compensation payable at termination upon
leaving office for whatever reason.
Subject to the Articles of Association, Directors
may be appointed by the Board. In compliance
with the AIC Code, the Board has resolved that
all Directors will stand for re-election at each
AGM, including the forthcoming AGM, except
for Richard Boléat.
Board diversity
The Directors recognise the benefits and
effectiveness that diversity, including gender,
age, professional experience and cultural
background, brings to the Board and its
committees and have a strong commitment
to ensuring a correct balance of knowledge,
experience
and
independence.
Board
appointments are based on merit as well as
being an appropriate fit for the Company.
As at 31 December 2023, the Board comprised
of three female and three male Directors (Mark
Tucker has not been included as he retired on
31 December 2023). As the Company has no
employees there is no further requirement to
report in respect of diversity quotas.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
35
BOARD AND COMMITTEES (CONTINUED)
35
The below tables set out the Board’s current composition. The below text compares this against
the targets prescribed by Listing Rule 9.8.6R (9)(a).
Number of
board members
Percentage
of the board
Number of senior positions on the Board (CEO, CFO, SID
and Chair)
1
Men: 3
50%
Chairman – Richard Boléat
Chairman-elect – Robert Kirkby
Chair of the Audit Committee - Philip Braun
Women: 3
50%
Chair of the Nomination and Remuneration Committee
and SID – Stephanie Carbonneil
Chair of the ESG Committee – Vanessa Neill
Chair of the Management Engagement Committee – Esther
Gilbert
Number
of Board
members
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)
6
100%
Chair – Richard Boléat
Chair-Elect – Robert Kirkby
Chair of the Audit
Committee – Philip Braun
Chair of the Nomination
and Remuneration
Committee and SID –
Stephanie Carbonneil
Chair of the ESG
Committee – Vanessa Neill
Chair of the Management
Engagement Committee –
Esther Gilbert
Mixed/Multiple Ethnic Groups
Nil
N/A
N/A
Asian/Asian British
Nil
N/A
N/A
Black/African/Caribbean/Black British
Nil
N/A
N/A
Other ethnic group, including Arab
Nil
N/A
N/A
Not specified/ prefer not to say
Nil
N/A
N/A
1
The Company is a self-managed fund and does not have executive management.
It is noted that at present 50% of the individuals on the Board are female, which is above the
target of 40% prescribed by Listing Rule 9.8.6R (9)(a). At least one of the female directors needs
to have a senior position within the Board. Vanessa Neill chairs the ESG Committee, Stephanie
Carbonneil chairs the Nomination and Remuneration Committee and was appointed as SID when
Mark Tucker retired and Esther Gilbert chairs the Management Engagement Committee.
At present none of the Board members are from minority ethnic backgrounds which is below the
target of one, prescribed by Listing Rule 9.8.6R (9)(a). The Board is mindful of this and alongside
knowledge and expertise, this will be considered when the Board next recruits.
The Board (continued)
Board diversity (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
36
BOARD AND COMMITTEES (CONTINUED)
36
The table below sets out the Board skills matrix.
Director
Appointed
Experience
Qualification
Richard Boléat
2013
I,D,CG,AF
FCA ICAEW
Philip Braun
2023
CG,AF
FCA ICAEW
Stephanie Carbonneil
2019
I,D,CG
MA in Finance, French LLM in Contract
Law, IMC
Esther Gilbert
2022
I,CG,ESG
BA Mathematics with Finance, CFA, IMC,
CFA ESG Investing
Robert Kirkby
2023
CG,AF,ESG
Ma Cantab. FCA ICAEW
Vanessa Neill
2022
I,CG,ESG
Postgraduate Masters Diploma in
Sustainable Business, Cambridge
Institute for Sustainable Leadership
(CISL)
I - Investment
D - Distribution
CG - Corporate Governance
AF - Accounting and Finance
ESG - ESG expertise
The Board (continued)
Board diversity (continued)
Committees
The Board has established four committees,
namely the Audit Committee, Nomination and
Remuneration Committee, ESG Committee
and Management Engagement Committee.
Audit Committee
The Audit Committee membership comprises
all the Directors. The Chairman of the Board is
a member of this Committee (but he does not
chair it) which is considered appropriate given
that he is a Fellow of the Institute of Chartered
Accountants in England and Wales and has
extensive knowledge of the financial services
industry.
The report on the role and activities of this
Committee and its relationship with the
external auditor is set out in the Report of the
Audit Committee on pages 43 to 46.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee
is comprised of Ms Carbonneil, Mr Braun, Mr
Kirkby, Ms Neill and Ms Gilbert, and is chaired
by Ms Carbonneil.
ESG Committee
The ESG Committee is chaired by Ms Neill and
comprises all the Directors.
Management Engagement Committee
The Management Engagement Committee was
formed on 11 December 2023, it is chaired by Ms
Gilbert and comprises all the Directors, its terms
of reference were adopted on 24 January 2024.
The Terms of Reference of all the committees can
be found within the tab ‘Investors Information’
under ‘Governance’ on the Company’s website
(ig.cvc.com).
Board and Committees’ evaluation
The Nomination and Remuneration Committee
undertook
an
internal
evaluation
which
comprised of questionnaires answered by
each Director and discussed at Board level in
respect of overall performance. The results of
this evaluation were positive and a number
of limited recommendations were made to
further enhance the governance practices of
the Company.
The evaluation considered the balance of
skills, experience, independence, knowledge,
diversity (including gender), how the Board
works together as a unit and other factors
relevant to its effectiveness. The evaluation
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
37
BOARD AND COMMITTEES (CONTINUED)
37
also considered the Board’s and Committee’s
performance,
constitution
and
terms
of
reference to ensure that they are operating
effectively.
It is intended that the evaluation will be
externally facilitated every three years. An
external evaluation is scheduled for the end of
this financial year.
Director Remuneration
Refer to the Directors’ Remuneration Report for
details.
Tenure and succession policy
The Board regularly and critically examines
and evaluates its membership and that of its
Committees, and its succession requirements.
In doing so, the Board takes into consideration:
the duration of each member’s appointment;
their
continued
satisfactory
performance;
gender diversity; diversity of social and ethnic
background; diversity of thought and previous
experience; and continued prepossession of the
skills identified by the Board as being essential
to the Company’s long-term success.
In addition, the Board recognises that to carry
out its duties successfully and for the benefit
of the Company’s long-term success and its
stakeholders, corporate knowledge of the type
that is acquired over time, is beneficial to the
Company and its stakeholders. It is against
this backdrop that the policy adopted by the
Company does not include fixed terms of
service for non-executive directors, including
the position of chairman.
Whilst the Board shares the view of the AIC
that long periods of service pose a risk to each
Director’s independence, the Board takes the
view that tenure is not the sole determinant
of independence. The Board believes that Mr
Boléat demonstrates constructive challenge
in his dealings with other Board members and
the Investment Vehicle Manager, and that,
notwithstanding the length of his tenure, Mr
Boléat remains independent in his character
and judgement within his role. Mark Tucker
retired from the Board on 31 December 2023
and Richard Boléat has informed the Company
Committees (continued)
Board and Committees evaluation
(continued)
of his intention is to stand down as Chairman
and as a Director at the 2024 AGM. Robert
Kirkby and Philip Braun have been appointed
to the Board to take on the roles of Chairman
and Chair of the Audit Committee respectively.
Board succession planning is discussed by the
Board, and shareholders will be informed as
and when there are any further developments.
It is also noted that changes to the Board and
the Investment Vehicle Manager personnel
have provided new perspectives within this
business relationship.
In making Board appointments and developing
a succession plan, the Board takes into
consideration the above factors which are
aligned with the principles, provisions and
spirit of the AIC Code and targets prescribed by
Listing Rule 9.8.6R (9)(a) and will ensure that
any appointments to the Board follow a formal,
rigorous and transparent process. This is with
ultimate consideration to ensuring that the
Board and all Committees have an appropriate
mix of skills and experience to best serve the
Company.
The Board continues to welcome the views of
major shareholders on the matter of Board
tenure.
Board meetings
The Board meets periodically throughout the
year. The Investment Vehicle Manager, together
with the Company Secretary, also ensure
that all Directors receive, in a timely manner,
all relevant management, regulatory and
financial information relating to the Company
and the Investment Vehicle portfolio.
The Board applies its primary focus to the
following:
-
investment performance, ensuring that
the investment objective and strategy of
the Company are met;
-
ensuring investment holdings are in line
with the Company’s prospectus;
-
reviewing and monitoring financial risk
management and operating cash flows,
including cash flow forecasts and budgets
for the Company; and
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
38
BOARD AND COMMITTEES (CONTINUED)
38
-
reviewing and monitoring key risks to
which the Company is exposed as set out
in the Principal Risks and Uncertainties
section.
At each relevant meeting, the Board undertakes
reviews of key investment and financial data,
transactions and performance comparisons,
share price and NAV performance, marketing
and shareholder communication strategies,
peer group information and industry issues.
The Board holds regular discussions with
the Investment Vehicle Manager to discuss
performance
of
the
Investment
Vehicle
portfolio, whilst considering ways in which
future share price and overall performance
Board meetings (continued)
can be enhanced. The share tender mechanism
impacts the number of units of PECs that are
to be redeemed to provide the required liquidity
for the shares tendered by shareholders and is
therefore discussed only to that extent, with
the Investment Vehicle Manager.
The Board considers whether the investment
policy continues to meet the Company’s
objectives and notes the change to the
Company’s investment policy to enable a
maximum of 20% of the Investment Vehicle’s
gross assets to be invested in collateralised loan
obligation securities (increased from 7.5%)
which was proposed and received approval at
the Company’s AGM on 18 May 2022.
Director
Board
Meetings
Audit
Committee1
Nomination and
Remuneration
Committee
ESG Committee
Richard Boléat
6/6
4/4
5/5
6/6
Stephanie Carbonneil
6/6
4/4
5/5
6/6
Mark Tucker2
6/6
4/4
5/5
6/6
Vanessa Neill
6/6
4/4
5/5
6/6
Esther Gilbert
6/6
4/4
5/5
6/6
Robert Kirkby3
3/3
1/1
2/2
2/2
Philip Braun⁴
3/3
1/1
2/2
2/2
1 The Audit Committee has a sub-Committee of any two Jersey-based Directors for accounts approval. There was one
audit sub-Committee meeting during the year.
2 Mark Tucker retired from the Board on 31 December
2023.
3 Robert Kirkby was appointed to the Board on 22 September 202
3. His attendance is reported for meetings following his
appointment.
4 Philip Braun was appointed to the Board on 1
4 September 2023. His attendance is reported for meetings following his
appointment.
In addition to these meetings, there were 5 ad-
hoc Board meetings to deal with specific issues
as they arose, and 9 Committee of the Board
meetings held during the year. The Committees
of the Board comprise of any one Jersey based
Director to approve routine matters associated
with the administration of the semi-annual
tender, the share conversions and the dividends.
Monitoring and evaluation of service
providers
The Board reviews the performance of the
Company’s
third-party
service
providers
together with their anti-bribery and corruption
policies to ensure that they comply with the
Corruption (Jersey) Law 2006, the Bribery
Act 2010, the Criminal Finances Act 2017 and
ensure their continued competitiveness and
effectiveness and ensure that performance is
satisfactory and in accordance with the terms
and conditions of the respective appointments.
Attendance at 2023 scheduled meetings of the Board and its Committees
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
39
BOARD AND COMMITTEES (CONTINUED)
39
As part of the Board’s ongoing evaluation
of third-party service providers, it considers
and reviews, on a periodic basis, contractual
arrangements with the major service suppliers
of the Company.
The Directors have adopted a procedure whereby
they are required to report any potential acts
of bribery and corruption in respect of the
Company that come to their attention to the
Company’s compliance officer.
Shareholder communications
An analysis of the substantial shareholders of
the Company’s shares is provided to the Board
on a quarterly basis, as applicable.
The Board views shareholder relations and
communications as a high priority and aims
to have a thorough understanding of the views
of shareholders. The Chairman and the SID
are available for discussion about governance
and strategy with major shareholders and
they communicate shareholders’ expressed
views to the Board. Shareholders wishing to
communicate with the Chairman, or the SID,
may do so by any conventional means. The
Directors welcome the views of all shareholders
and place considerable importance upon them.
The main method of communication with
shareholders
is
through
the
half-yearly
and annual financial reports which aim to
give shareholders a clear and transparent
understanding of the Company’s objectives,
strategy and results. This information is
supplemented by the publication of monthly
fact sheets, and the weekly estimated and
monthly NAV of the Company’s Sterling shares
and Euro shares and on the London Stock
Exchange, via the Regulatory Information
Service.
The Company’s website (ig.cvc.com), which
was refreshed and upgraded during the year,
is regularly updated with monthly fact sheets
and provides further information about the
Company, including the Company’s financial
reports and announcements. The maintenance
and integrity of the Company’s website is
the responsibility of the Directors. Legislation
in Jersey governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
The Board believes that the AGM provides
an
appropriate
forum
for
investors
to
communicate with the Board and encourages
participation. The AGM will be attended by at
least the Chairman and the Chair of the Audit
Committee.
The Board has also instigated a programme of
quarterly investor calls, to allow investors and
other interested parties to receive an update
on the previous quarter’s performance and
market conditions. It also provides a forum
for questions to be posed to the Chairman
and representatives of the Investment Vehicle
Manager.
Financial risk management objectives
and policies
The Board is responsible for the Company’s
system of risk management and internal control
and meets regularly in the form of periodic
Board meetings to assess the effectiveness of
such controls in managing and mitigating risk.
The Board confirms that it has reviewed the
effectiveness of the Company’s system of risk
management and internal control for the year
ended 31 December 2023, and to the date of
approval of this Annual Financial Report. The
Board has taken into consideration the FRC’s
‘Guidance on Risk Management, Internal
Control and Related Financial and Business
Reporting’ to ensure that the Company’s
system of risk management and internal
control is designed and operated effectively,
in line with best practice guidance provided by
the FRC.
The key financial risks that the Directors
believe the Company is exposed to include
credit risk, liquidity risk, market risk, interest
rate risk, valuation risk and foreign currency
risk. Refer to note 8 for reference to financial
risk management disclosures, which explains
in further detail the above risk exposures and
the policies and procedures in place to monitor
and mitigate these risks.
The Administrator has established an internal
control framework to provide reasonable but
not absolute assurance on the effectiveness
of the internal controls operated on behalf of
Monitoring and evaluation of service
providers (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
40
BOARD AND COMMITTEES (CONTINUED)
40
its clients. The effectiveness of these controls
is assessed by the compliance and risk
department of the Administrator on an ongoing
basis and by periodic review by external parties.
The Company’s compliance officer presents an
assessment of their review to the Board in line
with the compliance monitoring programme
on a quarterly basis which has revealed no
matters of concern.
Financial risk management objectives
and policies (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
41
DIRECTORS’ REMUNERATION REPORT
Table of Directors’ Remuneration
Director
Year ended
31 December 2023
Year ended
31 December 2022
Richard Boléat (Chairman)
- Annual Fee
- One-off strategic review fee
£65,000 (€74,741)
-
£65,000 (€76,257)
£15,000 (€17,598)
Philip Braun
1
- Annual Fee
£42,500 (€48,869)
n/a
Stephanie Carbonneil
2
- Annual Fee
- Chair of the Nomination and Remuneration
Committee
- One-off strategic review fee
£42,500 (€48,869)
£5,000 (€5,749)
-
£42,500 (€49,860)
£5,000 (€5,866)
£10,000 (€11,732)
Esther Gilbert
- Annual Fee
- Chair of the Management Engagement Committee
3
£42,500 (€48,869)
-
£42,500 (€49,860)
-
Robert Kirkby
4
- Annual Fee
£42,500 (€48,869)
n/a
Vanessa Neill
- Annual Fee
- Chair of the ESG Committee
- One-off strategic review fee
£42,500 (€48,869)
£5,000 (€5,749)
-
£42,500 (€49,860)
£5,000 (€5,866)
£10,000 (€11,732)
Mark Tucker
- Annual Fee
- SID
- Chair of the Audit Committee
- One-off strategic review fee
£42,500 (€48,869)
£1,250 (€1,437)
£5,000 (€5,749)
-
£42,500 (€49,860)
£1,250 (€1,467)
£5,000 (€5,866)
£10,000 (€11,732)
1
Philip Braun was appointed to the Board on 14 September 2023. Philip Braun was paid £12,604 (€14,493) during the year
ended 31 December 2023. Philip Braun assumed the role of Chair of the Audit Committee on 1 January 2024.
2
Stephanie Carbonneil assumed the role of SID on 1 January 2024.
3
The Management Engagement Committee was formed on 11 December 2023. Esther Gilbert received no additional fee
during the year ended 31 December 2023 as the Chair of the Management Engagement Committee.
4
Robert Kirkby was appointed to the Board on 22 September 2023. Robert Kirkby was paid £11,644 (€13,389) during the
year ended 31 December 2023. Robert Kirkby will assume the role of Chairman following the retirement of Richard Boléat.
Directors receive the above annual fees for
their commitment as Directors. All additional
fees are for additional responsibilities and
time commitments. The Directors are also
reimbursed for their expenses on an ad hoc
basis.
No other remuneration or compensation was
paid or is payable by the Company during the
year to any of the Directors. There has been no
change to the Company’s remuneration policy
as detailed below.
Annual review of Director fees
In
December 2023,
the
Nomination
and
Remuneration
Committee
undertook
its
annual review of the fees paid to the Directors
and compared these with the fees paid by
reasonably comparable listed companies. The
Nomination and Remuneration Committee
concluded that Director fees should increase
by 4.7% effective 1 January 2024, with no
change proposed to the additional fees for
Committee chairs. The Board also agreed that,
going forward, Director’s fee increases would
be linked to the Jersey Retail Price Index. The
Chair of the Nomination and Remuneration
Committee or the Chairman would have
discretion on the level of increase being made.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
42
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
42
Remuneration policy
The determination of the Directors’ fees is a
matter for the Board. The Nomination and
Remuneration
Committee
considers
the
remuneration policy annually to ensure that it
remains appropriately positioned and makes
recommendations to the Board as applicable.
As part of this process, the Directors review the
fees paid to the boards of directors of similar
companies. No Director is involved in decisions
relating to their own remuneration.
Directors are remunerated in the form of fees,
payable quarterly in advance. No Director
has any entitlement to a pension, and the
Company has not awarded any share options or
performance incentives to any of the Directors.
Directors are authorised to claim reasonable
expenses from the Company in relation to the
performance of their duties. The Company’s
policy is that the fees payable to the Directors
should reflect the time spent by the Board on
the Company’s affairs and the responsibilities
borne by the Directors and should be sufficient
to enable high calibre candidates to be
recruited. The policy is for the Chairman and
chairs of committees to be paid a higher fee
than the other Directors in recognition of their
more onerous roles and more time spent. The
Board may amend the level of remuneration
paid within the limits of the Company’s Articles
of Association.
The Company’s Articles of Association limit the
aggregate fees payable to the Directors to a
total of £434,835 (€500,000) per annum.
Statement of consideration of
shareholder views
An ordinary resolution to ratify the Directors’
Remuneration Report will be proposed at the
2024 AGM on 30 April 2024.
Stephanie Carbonneil
Chair of the Nomination and Remuneration
Committee
27 March 2024
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
43
REPORT OF THE AUDIT COMMITTEE
It is my pleasure to present this report describing
the activities of the Audit Committee in respect
of the 2023 financial year.
Membership
The Board appointed Audit Committee operates
within clearly defined Terms of Reference which
are reviewed regularly by the Committee and
amended as required.
The Terms of Reference of all the Committees
can be found within the tab ‘Investors
Information’
under
‘Governance’
on
the
Company’s website (ig.cvc.com).
The
Audit
Committee
comprises
all
the
Directors and each Committee member has
recent and relevant financial experience. The
Audit Committee has competence relevant to
the sector in which the Company operates.
During the year, the Audit Committee formally
convened on four occasions and the members’
attendance record can be found on page 38.
The Audit Committee has been expertly chaired
by Mark Tucker from the inception of the
Company back in 2013, and the Board would
like to thank him for his leadership throughout
his tenure. The Audit Committee has been
chaired by Philip Braun since 1 January 2024.
Role of the Audit Committee
The main role of the Committee is to protect
the interests of the Company’s shareholders
regarding the integrity of the Half-Yearly
Financial Report and the Annual Financial
Report of the Company and manage the
Company’s relationship with the external
auditor.
The Audit Committee’s key duties are:
-
to review and monitor the fairness and
balance of the financial statements of the
Company including its half-year financial
report and annual financial report to
shareholders, reviewing any significant
financial reporting issues and judgements
which they contain;
-
to advise the Board on whether the Audit
Committee believes that the annual
report and accounts, taken as a whole,
is fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Company’s
performance, position, business model
and strategy;
-
to
identify
and
disclose
those
risks
considered by the Committee to be
significant to their financial reporting
process;
-
to consider and make recommendations to
the Board in relation to the appointment,
re-appointment
and
removal
of
the
external auditors and to negotiate their
remuneration and terms of engagement
on audit and non-audit work;
-
to meet regularly with the external auditor
to review their proposed audit programme
of work and the subsequent Audit Report
and to assess the effectiveness of the
audit process and the level of fees paid in
respect of audit and non-audit work; and
-
to annually assess the external Auditor’s
independence, objectivity, effectiveness,
resources and expertise.
The Audit Committee was also instrumental in
an exercise to support the Board in making the
Viability Statement which appears within the
Strategic Report on pages 16 to 17.
Significant risks
The Audit Committee views the below as the key
significant risks to the financial statements:
Title to, and the existence of, the Company’s
investments
Procedures to confirm the Company’s title
to, and the existence of, the Company’s
investments
are
embedded
within
the
Company’s
share
issuance,
conversion,
tender, and dividend declaration processes as
they occur throughout the year and further
processes during the preparation of the
Company’s half year and annual financial
reports. These procedures are executed through
the Company’s Administrator, the Investment
Vehicle Manager and the Administrator of the
Investment Vehicle Manager. Accordingly, title
to, and existence of the Company’s investments
are confirmed by the Board regularly.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
44
REPORT OF THE AUDIT COMMITTEE (CONTINUED)
44
Valuation of Investments
The risk of misstatement due to errors in the
valuation of the Company’s investments is an
issue of significance to the Committee. This risk
is mitigated by regular Board meetings in which
a review of the valuation of the Company’s
investments
is
included. Additionally, the
Audit
Committee
regularly
engages
with
representatives of the Investment Vehicle
Manager and the valuation agent, SS&C, in
order to gain assurances as to the continued
appropriateness of the valuation methodology.
Risk of inappropriate revenue recognition
with respect to investment revenue
The risk of inappropriate revenue recognition
is an issue of significance to the Committee.
This
risk
is
mitigated
by
regular
Board
meetings in which a review of the Company’s
financial reporting is included. Additionally,
the Audit Committee regularly engages with
representatives of the Investment Vehicle
Manager in order to understand the nature
of investment income distributed by the
underlying Investment Vehicle.
External audit process
The Audit Committee met formally with the
Auditor prior to the commencement of the audit
and agreed an audit plan that would adopt a
risk-based approach. The Committee and the
Auditor agreed that a significant portion of the
Audit effort would include an examination of
revenue recognition with respect to investment
income and an examination of the procedures
in place at the Administrator and at the
Investment Vehicle Manager in respect of the
valuation and existence of the Company’s
investments and the underlying portfolio
assets respectively.
Upon completion of the audit, the Audit
Committee discussed the effectiveness of the
audit and concluded that the audit had been
effective on the grounds that:
-
the audit plan had been met;
-
the Auditor had demonstrated a good
understanding of the Company’s business;
-
no risks to audit quality had been
identified;
-
the Auditor demonstrated a robustness
of process and perceptiveness in handling
key accounting issues and judgements;
and
-
all issues that arose during the audit were
satisfactorily resolved.
Additionally, procedures employed by the
Auditors, described above, are viewed by the
Audit Committee as being appropriate and
sufficiently robust for the Committee to gain
sufficient assurance as to the effectiveness of
the audit.
Non-audit services
The Company has adopted a policy such that
the provision of non-audit services by the
Auditor is considered and approved by the
Audit Committee on a case-by-case basis,
taking into account relevant law, regulation,
the Revised Ethical Standard 2019 and other
applicable professional requirements.
The following factors are assessed when
considering the provision of non-audit services
by the Auditor:
-
threats to independence and objectivity
resulting from the provision of such
services and any safeguards in place to
eliminate or reduce those threats to a level
where they would not compromise the
Auditor’s independence and objectivity;
-
the nature of the non-audit services;
-
whether the skills and experience of the
audit firm makes it the most suitable
supplier of the non-audit service; and
-
the fees incurred, or to be incurred, for
non-audit services both for individual
services and in aggregate, relative to the
audit fee, including special terms and
conditions (for example, contingent fee
arrangements).
During the year ended 31 December 2023, the
Auditor was engaged to conduct a review of
the Company’s Half-Yearly Financial Report for
the six months ended 30 June 2023.
The fees for the year-end audit were €91,184
(£79,300) (2022: €84,543 (£72,063)). Fees for
non-audit services were €14,603 (£12,700)
(2022: €12,442 (£10,100)) for the review of the
half year report.
Significant risks (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
45
REPORT OF THE AUDIT COMMITTEE (CONTINUED)
45
Auditor independence
The
Committee
undertakes
an
annual
assessment of the independence of the Auditor
prior to the commencement of the audit, this
includes:
-
discussing with the Auditor the threats to
their independence and the safeguards
applied to mitigate such threats;
-
considering
all
of
the
relationships
between the Company and the Auditor;
-
reviewing and confirming no relationships
between the Company and the Auditor
which could impact independence and
objectivity;
-
reviewing the level of fees paid by the
Company in proportion to the overall fee
income of the firm, office and partner;
and
-
reviewing
the
Auditor’s
policies
and
processes for maintaining independence
and monitoring compliance with relevant
requirements.
Based on the above criteria the Audit Committee
was satisfied as to the independence of the
Auditor during the year ended 31 December 2023
and throughout the course of the audit.
Auditor appointment
The Auditor was appointed on 19 August 2013.
The Audit Committee undertook a detailed
audit tender process in the prior year and the
Committee’s recommendation to the Board
to reappoint of Ernst & Young LLP as the
Company’s auditor was accepted.
The
Audit
Committee
considers
the
reappointment of the external auditor, including
the rotation of the audit engagement partner,
each year. The external auditor is required
to rotate the audit engagement partner
responsible for the Company audit every five
years. This is the fourth year that the current
audit engagement partner, Denise Davidson,
has overseen the audit of the Company (having
first overseen the 31 December 2020 audit).
The Audit Committee reviews a number of
factors when considering proposing the re-
appointment/appointment
of
an
auditor
including:
-
effectiveness and quality of the previous
audit (if applicable);
-
independence;
-
qualification, expertise and resources;
and
-
consideration as to whether it would be
appropriate to recommend an external
audit tender be conducted earlier than the
maximum best practice ten-year period.
After
considering
the
above,
the
Audit
Committee
provided
the
Board
with
its
recommendation that Ernst & Young LLP should
be reappointed as external auditor for the
year ending 31 December 2024. Accordingly, a
resolution proposing the reappointment of the
Auditor will be put to shareholders at the 2024
AGM.
There are no contractual obligations restricting
the Audit Committee’s choice of external
auditor and the Company does not indemnify
its external auditor.
Internal controls
The Board is responsible for ensuring that
suitable systems of risk management and
internal control are implemented by the third-
party service providers to the Company, the
Audit Committee has reviewed the BNP Paribas
S.A. ISAE 3402 report (Report on the description
of controls placed in operation, their design
and operating effectiveness for the period from
1 October 2022 to 30 September 2023) on fund
administration and are pleased to note that no
significant issues were identified. BNP Paribas
S.A. also provided a bridging letter to cover the
period from 1 October 2023 to 31 December 2023,
confirming that there were no reportable issues
to their knowledge during that period.
In accordance with the FRC’s ‘Internal Control:
Guidance to Directors’, and ‘Guidance on Audit
Committees’, the Board confirms that there is
an ongoing process for identifying, evaluating
and managing the significant internal control
risks faced by the Company.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
46
REPORT OF THE AUDIT COMMITTEE (CONTINUED)
46
As the Company does not have any employees
it does not have a ‘whistle blowing’ policy in
place. The Company delegates its day-to-
day administrative operations to third-party
providers who are monitored by the Board and
who report on their policies and procedures to
the Board. Accordingly, the Board believes an
internal audit function is not required.
I welcome feedback from all shareholders as to
the form and content of this Annual Report.
For and on behalf of the Audit Committee:
Philip Braun
Chair of the Audit Committee
27 March 2024
Internal controls (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
47
REPORT OF THE ESG COMMITEE
The Company has identified the growing
importance of responsible investment and
integrating
ESG
considerations
into
the
investment process. It supports CVC Adviser’s
belief that the management of environmental,
social
and
governance
factors
play
an
important part in both risk management
and value creation. The CVC Advisers 2023
annual ESG report provides insight into how
ESG is managed within the overall Group, its
sustainability strategy and core themes and
progress over the last 12 months prior to the
publication.
Governance of ESG
In 2021, the Company established an ESG
Committee to oversee the ESG policies and
processes adopted by the Investment Vehicle
Manager to enable the integration of ESG
factors into the investment process as part of
its due diligence and to oversee the Company’s
ESG disclosures.
ESG is a priority agenda topic at each quarterly
Board meeting and includes regular discussions
with the Investment Vehicle Manager.
The ESG Committee considers ESG risks and
opportunities and continues to:
•
monitor sustainability and ESG regulations
and legislative developments to ensure
that the Company is both compliant,
but also continually working towards
improvements in disclosure of relevant
ESG metrics and targets for the benefit
of investors. It receives ESG policy and
regulation updates from its legal advisors
with a view to continually ensuring best
practice;
•
promote ESG as an item for Directors’
continued professional development in-
line with the Board’s belief that ESG risks
and opportunities are key developments
in the credit industry that the Directors
should keep up-to date with.
In terms of the Company’s own environmental
and social responsibility; the ESG Committee
convenes a meeting with the trustees of the
JNP once a year to better understand how its
funds are utilised (see below).
ESG Strategy
The Company continues to engage with the
Investment Vehicle Manager in order to better
understand and monitor ESG-related risks and
opportunities.
The
Investment
Vehicle
Manager’s
ESG
and investment policies mandate that the
investment management team includes ESG
considerations in the investment process,
where possible, before making an investment.
The Investment Vehicle Manager follows the
ESG Approach, which is adopted by CVC Credit;
which is outlined in the CVC Group ESG Report
and includes a three-step approach: 1) due
diligence; 2) monitoring; 3) engagement.
Due Diligence
For both private and performing credit, the
investment team carries out a due diligence
process by reviewing ESG information provided
by the borrower as well as publicly available
information. Performing Credit also utilises
market standardised data such as the Loan
Syndications and Trading Association and ELFA
questionnaires.
Monitoring
Following the initial investment, CVC analysts
monitor ESG topics using a proprietary scorecard
to systematically assess ESG performance
of borrowers. In addition, investment teams
use an external news aggregator to monitor
ESG-related news relevant to borrowers. Any
material sustainability risks that are raised
by this process are reviewed by the relevant
investment committee.
Engagement
The CVC performing credit team actively
engages with industry groups as part of
the wider industry’s commitment to and
implementation
of
ESG
principles.
When
appropriate, CVC Credit may seek to encourage
companies to improve their ESG disclosures.
The CVC performing credit team has been a
member of ELFA’s ESG Committee since 2020
and has allowed it to proactively advocate for
enhanced disclosure from borrowers as well as
market best practice with regards to ESG.
In 2022, the Investment Vehicle Manager also
partnered with Sustainable Fitch to incorporate
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
48
REPORT OF THE ESG COMMITEE (CONTINUED)
48
data from Sustainable Fitch into the ESG
integration process. Currently, 88 out of 103
issuers of the investment vehicles’ underlying
investments
are
covered
by
Sustainable
Fitch requirements. 4 issuers are work-in-
progress and 11 are yet to be covered by these
requirements.
CVC Credit ESG Performance
Whilst CVC Advisers has been a signatory to the
UN Principles of Responsible Investment (“UN
PRI”) since 2012; in December 2023, CVC Credit
received its first UN PRI assessment score and
achieved 4 (out of 5) stars for each of the
following categories and above median scoring
for all signatories:
•
Policy, Governance, Strategy: 4 Stars
•
Fixed Income – Corporate: 4 Stars
•
Fixed Income – Private Debt: 4 Stars
•
Confidence Building Measures: 4 Stars
ESG Disclosures and Metrics
The ESG Committee believes that climate
change will have material impacts on the
financial performance of companies in which
the Investment Vehicle Manager invests and
on the universe of companies in which the
Investment Vehicle Manager may invest in
the future. The ESG Committee continues to
work with the Investment Vehicle Manager to
monitor the carbon footprint of the portfolio
through analysis from CVC Credit Partners
proprietary ESG scorecard.
While the Company is not within scope of
the
mandatory
climate-related
financial
disclosure requirements, it has been a formal
supporter of the TCFD recommendations since
2018 and expects the companies in which
the Investment Vehicle Manager invests to
make TCFD disclosures, if required. Whilst
the Company is a self-managed alternative
investment fund, it is marketed in the EU by
CVC Credit Partners Investment Management
Limited and therefore; it has been designated
as an Article 6 fund under the Sustainable
Finance Disclosure Regulation.
The ESG Committee has aggregated some
interesting data points from the ESG scorecard,
ESG Strategy (continued)
which evidences that the Investment Vehicle
Manager is integrating ESG in the investment
process and demonstrates that ESG is an
important area of focus for the underlying
issuers as seen in the table below:
Description
Percentage of
Issuers (data
collected)
Percentage of
Portfolio AUM
represented by
data figure
1
Percentage
of investee
companies that
have completed
ESG scorecards
100%
100%
Percentage
of investee
companies that
have senior
leadership
oversight of ESG
76%
81%
Percentage
of investee
companies that
have a disclosable
ESG Policy
69%
75%
Percentage
of investee
companies with
gender diversity of
Board or C-level
management
69%
69%
Percentage
of investee
companies
disclosing in
line with TCFD
recommendations
14%
16%
1
Excludes AUM from third-party managed assets (CLO
Equity and Debt), which comprises 7.1% of the total
portfolio AUM.
During 2023, the Investment Vehicle Manager
undertook engagements with its investee
companies on ESG topics.
Commitment to support the transition
to a low carbon economy
CVC has greenhouses gases (“GHG”) emissions
reduction targets validated by the Science
Based Targets initiative. Scope 1 and 2: CVC
commits to reduce absolute scope 1 and 2
GHG emissions 73% by 2030 from a 2019 base
year. This commitment includes operational
emissions from CVC Credit and CVC Capital.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
49
REPORT OF THE ESG COMMITEE (CONTINUED)
49
The Company’s own Environmental and
Social responsibility
Given the structure of the Company and its
activities, its own direct carbon footprint is
minimal and arises from the Directors’ business
travel for Board meetings. On 26 January 2023, it
was agreed during the ESG Committee meeting
that all Directors should offset their carbon
footprint with effect from 1 February 2023.
The Board has continued to support the
JNP, having made a commitment in 2020
of £100,000 over 5 years. This funding has
supported the refurbishment of the facilities
at the Frances Le Sueur Centre (the “Centre”)
at the JNP to enable a range of organisations
to benefit from environmental education,
wellbeing classes and away days. For the
year ending 2023, 19 organisations (including
Government Departments, NGOs and schools)
enjoyed the benefit of the Centre. In the future,
the JNP will be working with educational
providers in Jersey to enable Governmental and
non-Governmental organisations to utilise the
Centre for work and collaborative projects.
The funds from the Company have also enabled
the installation of solar photovoltaic panels
on the roof of the Centre; which will have
the ability to generate a planned maximum
output of 7Kw of electricity or 4.8 MWh/year.
This investment in renewable energy is already
reaping dividends, as the JNP saw a small
credit in their Q4 2023 electricity bill for the 421
units (421 KWh) of electricity generated and
purchased by the Jersey Electricity Company
via a buy-back agreement with the JNP.
In the future, the Company’s funds will be
directed towards habitat management projects
across the protected land across Jersey. Once
land ownership permissions have been given;
funds will support a grazing project to restore
coastal grasslands and the management of
reedbeds for Jersey’s migratory birds.
Looking forward
The approach to integrating ESG into the
investment process covers the underlying
assets of the Investment Vehicle. As the
Investment Vehicle Manager’s continues to
utilise CVC Credit’s proprietary ESG scorecard
and other third-party tools throughout the due
diligence process prior to investment and the
data from these tools becomes more reliable,
robust and consistent; it is inevitable that there
will be enhancements to the ESG approach. In
addition, the Board will have greater visibility
of ESG factors within the underlying issuers. In
the meantime, the Board will look to provide
updates in the Company’s Annual and Half
Yearly Financial Reports and the Company has
committed to developing further insights on
ESG through:
•
Continuously building its knowledge on ESG
matters and sustainability developments.
It participates in the ESG initiatives of
the industry bodies, in order to inform
the Directors of the latest regulatory
and
legislative
developments
relating
to ESG as well as collaborative industry
developments. It became a member of the
ELFA in 2022 and two Directors (Ms Neill
and Ms Gilbert) are members of ELFA’s
ESG Committee. Ms Neill is also a member
of the ESG forum at the Association of
Investment Companies. Participation in
both these industry ESG forums provides
useful insights on current ESG initiatives
and issues in the investment trust sector
and the debt, loan and CLO markets.
•
Continuing to work with its external
advisors
as
required
to
continuously
develop its ESG strategy.
Vanessa Neill
Chair of the ESG Committee
27 March 2024
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
50
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CVC INCOME &
GROWTH LIMITED
Opinion
We have audited the financial statements of
CVC Income & Growth Limited (the “company”)
for the year ended 31 December 2023 which
comprise the Statement of Comprehensive
Income, the Statement of Financial Position,
the Statement of Changes in Net Assets, the
Statement of Cash Flows, and the related
notes 1 to 17, including a summary of material
accounting policy information. The financial
reporting framework that has been applied
in their preparation is applicable law and
International Financial Reporting Standards as
adopted by the European Union.
In our opinion, the financial statements:
•
give a true and fair view of the state of the
company’s affairs as at 31 December 2023
and of its profit for the year then ended;
•
have been properly prepared in accordance
with International Financial Reporting
Standards as adopted by the European
Union; and
•
have been properly prepared in accordance
with the requirements of the Companies
(Jersey) Law 1991.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (ISAs
(UK)) and applicable law. Our responsibilities
under those standards are further described
in the Auditor’s responsibilities for the audit
of the financial statements section of our
report. We believe that the audit evidence we
have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We are independent of the company in
accordance with the ethical requirements
that are relevant to our audit of the financial
statements, including the UK FRC’s Ethical
Standard as applied to listed public interest
entities, and we have fulfilled our other ethical
responsibilities
in
accordance
with
these
requirements.
The non-audit services prohibited by the FRC’s
Ethical Standard were not provided to the
company and we remain independent of the
company in conducting the audit.
Conclusions relating to going concern
In auditing the financial statements, we have
concluded that the directors’ use of the going
concern basis of accounting in the preparation
of the financial statements is appropriate. Our
evaluation of the directors’ assessment of the
company’s ability to continue to adopt the
going concern basis of accounting included:
•
Ascertaining that the going concern
assessment covers a period of at least
twelve months from the date of approval
of the financial statements. The directors
have
performed
an
assessment
to
27 March 2025 which is least twelve
months from the date of approval of the
financial statements.
•
Reviewing the cash flow and revenue
forecasts which support the directors’
assessment
of
going
concern.
This
involved challenging the sensitivities and
assumptions used in the forecasts.
•
Reviewing the stress testing performed
by the directors’ and assessing whether
the basis on which it was performed was
appropriate
and
adequate,
including
validating assumptions used, that could
have a material impact, by agreeing
these to supporting documentation where
possible.
•
Holding discussions with the directors’ and
the administrator to determine whether,
in their opinion, there is any material
uncertainty
regarding
the
company’s
ability to pay liabilities and commitments
as they fall due and challenging this
assessment through our audit procedures
over the assessment of the company’s
liquidity.
•
Considering
whether
the
directors’
assessment of going concern as included
in the Annual Report, is consistent with
the disclosure in the viability statement.
•
Assessing whether the subsequent events
identified by the directors impact the
company’s ability to continue as a going
concern.
Based on the work we have performed, we
have not identified any material uncertainties
relating
to
events
or
conditions
that,
individually or collectively, may cast significant
doubt on the company’s ability to continue as a
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
51
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CVC INCOME &
GROWTH LIMITED(CONTINUED)
going concern for a period twelve months from
when the financial statements are authorised
for issue.
In relation to the company’s reporting on how
they have applied the UK Corporate Governance
Code, we have nothing material to add or
draw attention to in relation to the directors’
statement in the financial statements about
Conclusions relating to going concern (continued)
whether the directors considered it appropriate
to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of
the directors with respect to going concern
are described in the relevant sections of this
report. However, because not all future events
or conditions can be predicted, this statement
is not a guarantee as to the company’s ability
to continue as a going concern.
Overview of our audit approach
Key audit matters
z
Risk of inappropriate revenue recognition with respect to
investment revenue
z
Risk of incorrect valuation of investments
z
Risk that investments do not exist, including incomplete and
inaccurate investment transactions
Materiality
z
Overall materiality of €2.5m which represents 1% of net assets
attributable to shareholders.
An overview of the scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of
materiality and our allocation of performance
materiality determine our audit scope for the
company. This enables us to form an opinion
on the financial statements. We take into
account size, risk profile, the organisation of
the company and effectiveness of controls,
including controls and changes in the business
environment when assessing the level of work
to be performed.
Climate change
The company has determined that the most
significant
future
impacts
from
climate
change on its operations will be from financial
losses stemming from climate-related factors
adversely impacting the capital value of
securities held within the Investment Vehicle
portfolio and/or the ability of those companies
whose securities are held to meet their financial
obligations thereunder. These are explained on
page 21 in the principal risks and uncertainties,
which form part of the “Other information,”
rather than the audited financial statements.
Our procedures on these disclosures therefore
consisted solely of considering whether they
are materially inconsistent with the financial
statements or our knowledge obtained in
the course of the audit or otherwise appear
to be materially misstated, in line with our
responsibilities on “Other information”.
Our audit effort in considering climate change
on the financial statements was focused on
evaluating whether the effects of climate
risks have been appropriately reflected by
management in reaching their judgements and
in relation to the assessment of the valuation
of investments. As part of this evaluation
we performed our own risk assessment to
determine the risks of material misstatement in
the financial statements from climate change
which needed to be considered in our audit.
Key audit matters
Key audit matters are those matters that,
in our professional judgement, were of most
significance in our audit of the financial
statements of the current period and include
the most significant assessed risks of material
misstatement (whether or not due to fraud)
that we identified. These matters included
those which had the greatest effect on:
the overall audit strategy, the allocation of
resources in the audit; and directing the efforts
of the engagement team. These matters
were addressed in the context of our audit of
the financial statements as a whole, and in
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
52
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CVC INCOME &
GROWTH LIMITED(CONTINUED)
our opinion thereon, and we do not provide a
separate opinion on these matters.
Risk
Our response to the risk
Key observations communicated
to the Audit Committee
Risk
of
inappropriate
revenue recognition with
respect
to
investment
revenue
Refer to Accounting policy
2.9 (page 68) and Note 3
of the Financial Statements
(page 70).
For
the
year
ended
31
December
2023,
the
company
recognised
investment
revenue
of
€19.9m (2022 €14.9m).
The
ability
to
generate
dividend
yield
for
shareholders that is funded
from investment revenue
(rather than capital gains
arising
on
the
disposal
of investments) is a key
strategic objective of the
company.
Investment
revenue
is
primarily generated in the
form of distributions from
the
Investment
Vehicle
(CVC
European
Credit
Opportunities
S.à.r.l.).
Given the importance that
the company’s ability to
generate a consistent level
of
investment
revenue
has
on
the
company’s
dividend yield objectives,
we
consider
that
the
recognition of investment
revenue represents a fraud
risk and thus a significant
risk.
We have performed the following
procedures:
•
Updated our understanding of the
nature of the investment revenue
attributable to the company from
the Investment Vehicle.
•
Updated our understanding of
how this risk is considered and
managed by the directors, the
Investment
Vehicle
Manager
(CVC Credit Partners Investment
Management Limited) and the
administrator and performed a
walkthrough to assess the design
and implementation of controls.
•
Traced the investment revenue
received in the year to bank
statements.
•
Obtained
income
distribution
notices from the administrator
and agreed these to signed Board
meeting minutes and the income
recorded in the year.
•
Recalculated
the
investment
revenue
attributable
to
the
company from the Investment
Vehicle based on the company’s
ownership
of
the
Investment
Vehicle
and
the
income
distributions
made
by
the
Investment Vehicle during the
year and agreed the revenue to
the audited financial statements
of
the
Investment
Vehicle.
Performed recalculations of the
foreign
currency
translations
from Sterling to Euros.
Based on the work performed, we
have no matters to report to the
Audit Committee.
An overview of the scope of our audit (continued)
Key audit matters
(continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
53
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CVC INCOME &
GROWTH LIMITED(CONTINUED)
Risk
Our response to the risk
Key observations communicated
to the Audit Committee
Risk of incorrect valuation
of investments
Refer to the Report of the
Audit Committee (pages 43
to 46); Accounting policy
2.4 (pages 67 to 68); and
Note 8.5 of the Financial
Statements (pages 80 to 81).
At the year end, the company
held
95,576,319.53
Euro
Preferred Equity Certificates
(‘PECs’) and 117,072,596.24
Sterling
PECs
(2022:
103,934,273.50
Euro
PECs
and 127,666,119.03 Sterling
PECs) with a total value of
€248.6m (2022: €235.0m).
There is a risk that investment
values are misstated or that
valuations
are
incorrectly
calculated
through
errors
in the valuation of the PECs
held by the company.
The valuation of the PECs
is dependent on a range of
factors including the NAV
of the Investment Vehicle
and its underlying portfolio.
The
underlying
portfolio
includes level 3 securities
valued by the Investment
Vehicle Manager, and the
directors of the company
assess whether a liquidity
adjustment should be taken
on the NAV of the Investment
Vehicle when arriving at the
final valuations.
We have performed the following
procedures:
•
Updated our understanding of
how this risk is considered and
managed by the directors and
the Investment Vehicle Manager
by
performing
walkthrough
procedures to assess the design
and implementation of controls.
•
Obtained an understanding of
the administrator’s systems and
controls in respect of investment
valuation
and
performed
walkthrough
procedures
to
confirm the design effectiveness
of the process and key controls.
Additionally,
we
obtained
the ISAE 3402 report and the
related
bridging
letter
from
the administrator to consider
the impact of any significant
deficiencies
identified
in
this
report to our audit.
•
Confirmed
our
understanding,
obtained
through
our
walkthrough procedures, of the
current valuation methodology
used by the Investment Vehicle
Manager.
Based on the work performed, we
have no matters to report to the
Audit Committee.
Key audit matters (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
54
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CVC INCOME &
GROWTH LIMITED(CONTINUED)
Risk
Our response to the risk
Key observations communicated
to the Audit Committee
As the investment valuations
are received directly from the
Investment Vehicle Manager,
who is remunerated by the
Investment Vehicle in the
form of management fees
based on NAV, there is also
a risk the Investment Vehicle
Manager
may
influence
the valuations to meet the
expectations of investors. As
such, we consider that the
risk of incorrect valuation
of
investments
represents
a fraud risk and thus a
significant risk.
•
Reviewed minutes of meetings
of the Board to corroborate the
valuation methodology and data
inputs used and assessed whether
the nature of the information
and
methodology
utilised
is
appropriate.
•
Agreed
the
valuation
of
the
PECs to the audited financial
statements of the Investment
Vehicle, taking into account the
ownership percentages.
•
Assessed
whether
the
year-
end
valuation
of
investments
held by the Investment Vehicle
(underlying the PECs held by the
company) are in accordance with
IFRS 13: Fair value measurement.
•
Considered
the
impact
of
climate change throughout the
procedures
performed
on
the
valuation
of
investments
by
making enquiries of the Board of
the Directors.
•
Considered
and
challenged
whether the Board’s assumptions
around liquidity adjustments to
NAV of the Investment Vehicle are
appropriate by considering the
historic trading and redemption
activity in the Investment Vehicle
and agreeing PEC redemptions to
the bank statements.
Key audit matters (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
55
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CVC INCOME &
GROWTH LIMITED(CONTINUED)
Risk
Our response to the risk
Key observations communicated
to the Audit Committee
Risk that investments do not
exist, including incomplete
and inaccurate investment
transactions
Refer to the Report of the
Audit Committee – per the
financial statements (pages
43 to 46); Accounting policy
2.4 (pages 67 to 68); and
Note
7
of
the
Financial
Statements (pages 71 to 75).
At the year end, the company
held 95,576,319.53 Euro Preferred
Equity Certificates (‘PECs’)
and 117,072,596.24 Sterling
PECs (2022: 103,934,273.50
Euro PECs and 127,666,119.03
Sterling PECs) with a total
value
of
€248.6m
(2022:
€235.0m).
There
is
a
risk
that
investments presented in the
financial statements do not
exist or the company does
not have legal title to these.
The individual investments
are significant in value and
the process that is involved in
the completion of a purchase
or a disposal of the PECs
takes an extended period
of time. As a result, there
is a risk that incomplete or
inaccurate
transactional
information with regards to
the PECs would result in a
material misstatement in the
reported results and financial
position of the company.
We have performed the following
procedures:
•
Updated our understanding of
how this risk is considered and
managed by the directors, the
Investment Vehicle Manager and
the administrator and performed
walkthrough procedures to assess
the design and implementation
of controls.
•
Obtained
the
PEC
registers
independently from the Company
Secretary
of
the
Investment
Vehicle (‘SS&C’) and agreed the
holdings to those disclosed in the
accounts.
•
Agreed a sample of investment
trades in the year to agreements
and traced cash movements to
bank statements.
•
Reviewed the audited financial
statements of the Investment
Vehicle to check the existence and
completeness of the company’s
investment in the PECs, and
agreed the PEC units held by
the company to the Series 4 and
Series 5 PEC units disclosed in the
audited financial statements of
the Investment Vehicle.
•
Reviewed
minutes
of
Board
meetings and other internal reports
for
indications
of
significant
investment
transactions
not
appropriately recorded.
Based on the work performed, we
have no matters to report to the
Audit Committee.
Key audit matters (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
56
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CVC INCOME &
GROWTH LIMITED(CONTINUED)
Our application of materiality
We apply the concept of materiality in planning
and performing the audit, in evaluating the
effect of identified misstatements on the audit
and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement
that, individually or in the aggregate, could
reasonably be expected to influence the
economic decisions of the users of the financial
statements. Materiality provides a basis for
determining the nature and extent of our audit
procedures.
We determined materiality for the company
to be €2.5 million (2022: €2.4 million), which
is 1% (2022: 1%) of net assets attributable
to shareholders. We believe that net assets
attributable to shareholders provides us with is
the most important financial metric on which
shareholders would judge the performance of
the company.
Performance materiality
The application of materiality at the individual
account or balance level. It is set at an amount
to reduce to an appropriately low level the
probability that the aggregate of uncorrected
and
undetected
misstatements
exceeds
materiality.
On the basis of our risk assessments, together
with our assessment of the company’s overall
control environment, our judgement was that
performance materiality was 75% (2022: 75%)
of our planning materiality, namely €1.9m (2022:
€1.8m). We have set performance materiality
at this percentage based on our understanding
of the entity and past experiences with the
audit.
Reporting threshold
An
amount
below
which
identified
misstatements are considered as being clearly
trivial.
We agreed with the Audit Committee that we
would report to them all uncorrected audit
differences in excess of €0.1m (2022: €0.1m)
which is set at 5% of planning materiality, as
well as differences below that threshold that,
in our view, warranted reporting on qualitative
grounds.
We evaluate any uncorrected misstatements
against both the quantitative measures of
materiality discussed above and in light of
other relevant qualitative considerations in
forming our opinion.
Other information
The
other
information
comprises
the
information included in the annual report
pages 2 to 49 and 90 to 105 other than the
financial statements and our auditor’s report
thereon. The directors are responsible for the
other information contained within the annual
report.
Our opinion on the financial statements does
not cover the other information and, except
to the extent otherwise explicitly stated in this
report, we do not express any form of assurance
conclusion thereon.
Our
responsibility
is
to
read
the
other
information and, in doing so, consider whether
the other information is materially inconsistent
with the financial statements or our knowledge
obtained in the course of the audit or
otherwise appears to be materially misstated.
If we identify such material inconsistencies
or apparent material misstatements, we are
required to determine whether this gives rise
to a material misstatement in the financial
statements themselves. If, based on the
work we have performed, we conclude that
there is a material misstatement of the other
information, we are required to report that
fact.
We have nothing to report in this regard.
Matters on which we are required to
report by exception
We have nothing to report in respect of the
following matters in relation to which the
Companies (Jersey) Law 1991 requires us to
report to you if, in our opinion:
•
proper accounting records have not been
kept by the company, or proper returns
adequate for our audit have not been
received from branches not visited by us;
or
•
the financial statements are not in
agreement with the company’s accounting
records and returns; or
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
57
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CVC INCOME &
GROWTH LIMITED(CONTINUED)
•
we have not received all the information
and explanations we require for our audit.
Corporate Governance Statement
We have reviewed the directors’ statement in
relation to going concern, longer-term viability
and that part of the Corporate Governance
Statement
relating
to
the
company’s
compliance with the provisions of the UK
Corporate Governance Code specified for our
review by the Listing Rules.
Based on the work undertaken as part of
our audit, we have concluded that each of
the following elements of the Corporate
Governance Statement is materially consistent
with the financial statements or our knowledge
obtained during the audit:
•
Directors’ statement with regards to the
appropriateness of adopting the going
concern basis of accounting and any
material uncertainties identified set out
on page 16 of the annual financial report;
•
Directors’ explanation as to its assessment
of the company’s prospects, the period
this assessment covers and why the period
is appropriate set out on pages 16 to 17 of
the annual financial report;
•
Directors’ statement on whether it has a
reasonable expectation that the company
will be able to continue in operation and
meets its liabilities set out on page 16 of
the annual financial report;
•
Directors’ statement on fair, balanced and
understandable set out on page 31 of the
annual financial report;
•
Board’s confirmation that it has carried
out a robust assessment of the emerging
and principal risks set out on pages 18 to
21 of the annual financial report;
•
The section of the annual report that
describes the review of effectiveness of
risk management and internal control
systems set out on pages 39 to 40 of the
annual financial report and;
•
The section describing the work of the
audit committee set out on pages 43 to 46
of the annual financial report.
Responsibilities of directors
As explained more fully in the directors’
statement of responsibilities, as set out on
pages 32 to 33 the directors are responsible for
the preparation of the financial statements
and for being satisfied that they give a true
and fair view, and for such internal control as
the directors determine is necessary to enable
the preparation of financial statements that
are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the
directors are responsible for assessing the
company’s ability to continue as a going
concern, disclosing, as applicable, matters
related to going concern and using the
going concern basis of accounting unless
the directors either intend to liquidate the
company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities for the audit of
the financial statements
Our
objectives
are to
obtain
reasonable
assurance
about
whether
the
financial
statements as a whole are free from material
misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will
always detect a material misstatement when
it exists. Misstatements can arise from fraud or
error and are considered material if, individually
or in the aggregate, they could reasonably be
expected to influence the economic decisions
of users taken on the basis of these financial
statements.
Explanation as to what extent the audit
was considered capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances
of non-compliance with laws and regulations.
We
design
procedures
in
line
with
our
responsibilities, outlined above, to detect
irregularities, including fraud. The risk of not
Matters on which we are required to
report by exception (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
58
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CVC INCOME &
GROWTH LIMITED(CONTINUED)
detecting a material misstatement due to
fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery
or intentional misrepresentations, or through
collusion. The extent to which our procedures
are
capable
of
detecting
irregularities,
including fraud is detailed below.
However, the primary responsibility for the
prevention and detection of fraud rests with
both those charged with governance of the
company and management.
•
We obtained an understanding of the
legal and regulatory frameworks that are
applicable to the company and determined
that the most significant are International
Financial Reporting Standards as adopted
by the European Union, the Companies
(Jersey) Law 1991, the UK Corporate
Governance Code (taken in the context of
the AIC Code), and the Listing Rules.
•
We
understood
how
CVC
Income &
Growth Limited is complying with those
frameworks by making enquiries with
the directors including the Chairman of
the Audit Committee. We corroborated
our understanding through our review of
board minutes and board papers provided
to the Audit Committee.
•
We assessed the susceptibility of the
company’s
financial
statements
to
material misstatement, including how
fraud might occur by considering the key
risks impacting the financial statements.
We identified fraud risks in relation to
inappropriate revenue recognition with
respect to investment revenue, including
risk of management override in relation
to inappropriate journal entries, and risk
of incorrect valuation of investments.
Our audit procedures stated above in
the ‘Key audit matters’ section of this
Auditor’s report, including test of journal
entries, were performed to address these
identified fraud risks.
•
Based on this understanding we designed
our audit procedures to identify non-
compliance with such laws and regulations.
Our procedures involved journal entry
testing, with a focus on manual journals,
journals posted around the year end date
and other focused testing procedures.
A further description of our responsibilities
for the audit of the financial statements
is
located
on
the
Financial
Reporting
Council’s website at https://www.frc.org.uk/
auditorsresponsibilities. This description forms
part of our auditor’s report.
Other matters we are required to address
•
Following the recommendation from the
Audit Committee, we were re-appointed
by the company on 18 November 2022 to
audit the financial statements for the year
ending 31 December 2023 and subsequent
financial periods.
The
period
of
total
uninterrupted
engagement including previous renewals
and reappointments is 10 years, covering
the years ending 31 December 2014 to
31 December 2023.
•
The non-audit services prohibited by the
FRC’s Ethical Standard were not provided to
the company and we remain independent
of the company in conducting the audit.
•
The audit opinion is consistent with the
additional report to the Audit Committee.
Use of our report
This report is made solely to the company’s
members, as a body, in accordance with Article
113A of the Companies (Jersey) Law 1991. Our
audit work has been undertaken so that we
might state to the company’s members those
matters we are required to state to them in
an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone
other than the company and the company’s
members as a body, for our audit work, for this
report, or for the opinions we have formed.
Denise Davidson
for and on behalf of Ernst & Young LLP
London
27 March 2024
Explanation as to what extent the audit
was considered capable of detecting
irregularities, including fraud (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
60
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2023
Year ended
31 December
2023
Year ended
31 December
2022
Notes
€
€
Income
Investment revenue
19,928,600
14,901,667
Tender fee revenue
3
206,590
335,621
Bank interest
103,155
22,771
Net gains/(losses) on financial assets held at fair value
through profit or loss
7
31,912,591
(33,535,183)
Foreign exchange gain/(loss) on financial assets held at
fair value through profit or loss
7
2,941,492
(8,497,450)
Foreign exchange (loss)/gain on ordinary shares
12
(2,961,776)
8,642,248
Foreign exchange loss on translation of cash and cash
equivalents
(3,224)
(106,967)
52,127,428
(18,237,293)
Expenses
Operating expenses
4
(1,436,945)
(1,701,289)
(1,436,945)
(1,701,289)
Profit/(loss) before finance costs and taxation
50,690,483
(19,938,582)
Finance costs
Dividends paid
12
(18,948,851)
(13,833,833)
Profit/(loss) before taxation
31,741,632
(33,772,415)
Taxation
-
-
Increase/(Decrease) in net assets attributable to share-
holders from operations
31,741,632
(33,772,415)
Return/(loss) per Sterling share (Sterling equivalent)
12
£0.1198
£(0.1275)
Return/(loss) per Euro share
12
€0.1381
€(0.1440)
All items in the above statement are derived from continuing operations.
The Company has no items of other comprehensive income/(loss).
The notes on pages 64 to 89 form an integral part of these financial statements.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
61
STATEMENT OF FINANCIAL POSITION
As at 31 December 2023
31 December
2023
31 December
2022
Notes
€
€
Assets
Financial assets held at fair value through profit or
loss
7
248,600,415
234,969,326
Prepayments
58,158
50,374
Cash and cash equivalents
1,435,723
2,196,695
Total assets
250,094,296
237,216,395
Liabilities
Payables
9
144,968
377,325
Total liabilities excluding net assets attributable to
shareholders
144,968
377,325
Net assets attributable to shareholders
13
249,949,328
236,839,070
Total liabilities
250,094,296
237,216,395
The financial statements on pages 60 to 89 were approved by the Board of Directors on
27 March 2024 and signed on its behalf by:
Richard Boléat
Philip Braun
Chairman
Chair of the Audit Committee
The notes on pages 64 to 89 form an integral part of these financial statements.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
62
STATEMENT OF CHANGES IN NET ASSETS
For the year ended 31 December 2023
Net assets
attributable to
shareholders
Note
€
As at 1 January 2023
236,839,070
Issuance and subscriptions arising from conversion of ordinary shares
12
533,224
Redemption payments arising on conversion and tender of ordinary
shares
12
(22,126,374)
Increase in net assets attributable to shareholders from operations
31,741,632
Net foreign currency exchange gain on opening ordinary shares
12
2,961,776
As at 31 December 2023
249,949,328
For the year ended 31 December 2022
Net assets
attributable to
shareholders
Note
€
As at 1 January 2022
312,415,699
Issuance and subscriptions arising from conversion of ordinary
shares
12
5,991,717
Redemption payments arising on conversion and tender of ordinary
shares
12
(39,153,683)
Decrease in net assets attributable to shareholders from operations
(33,772,415)
Net foreign currency exchange loss on opening ordinary shares
12
(8,642,248)
As at 31 December 2022
236,839,070
The notes on pages 64 to 89 form an integral part of these financial statements.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
63
STATEMENT OF CASH FLOWS
For the year ended 31 December 2023
Year ended
31 December
2023
Year ended
31 December
2022
Note
€
€
Cash flows from operating activities
Profit/(loss) before taxation
1
31,741,632
(33,772,415)
Adjustments to reconcile profit/(loss) before tax to net
cash flows:
- Net (gains)/losses on investments held at fair value
through profit or loss
7
(31,912,591)
33,535,183
- Foreign exchange (gains)/losses on financial assets
held at fair value through profit or loss
7
(2,941,492)
8,497,450
- Foreign currency exchange loss/(gain) on ordinary
shares
12
2,961,776
(8,642,248)
- Dividends paid
12
18,948,851
13,833,833
- Foreign exchange loss on translation of cash and cash
equivalents
3,224
106,967
Changes in working capital:
- (Increase)/decrease in prepayments
(7,784)
28,008
- (Decrease)/increase in payables
(232,357)
5,735
Net cash provided by operating activities
18,561,259
13,592,513
Cash flows from investing activities
Proceeds from redemption of financial assets held at
fair value through profit or loss
2
7
21,223,747
32,741,194
Net cash provided by investing activities
21,223,747
32,741,194
Cash flows from financing activities
Payments from redemption of ordinary shares
3
12,14
(21,593,903)
(33,198,148)
Dividends paid
12
(18,948,851)
(13,833,833)
Net cash used in financing activities
(40,542,754)
(47,031,981)
Net decrease in cash and cash equivalents in the year
(757,748)
(698,274)
Cash and cash equivalents at beginning of the year
2,196,695
3,001,936
Effect of exchange rate changes on cash and cash
equivalents
(3,224)
(106,967)
Cash and cash equivalents at the end of the year
1,435,723
2,196,695
1
Includes cash receipts relating to income distributions of €19,928,600 (2022: €14,901,667), bank interest of €103,155
(2022: €22,770) and tender fee revenue of €206,590 (2022: €335,621).
2
Cash flows arising from redemptions of financial assets above do not include subscriptions and redemptions arising from
the conversion of €(533,224) (2022: €(5,991,717)) and €532,471 (2022: €5,955,535), respectively, as these transactions have
no associated cash flow.
3
Cash flows arising from the redemption of ordinary shares above does not include subscriptions and redemptions arising
from conversion of €533,224 (2022: €5,991,717) and €(532,471) (2022: €(5,955,535)), respectively, as these transactions
have no associated cash flow.
The notes on pages 64 to 89 form an integral part of these financial statements.
64
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS
1. General information
The Company was incorporated on 20 March 2013 and is registered in Jersey as a closed-ended
investment company with registration number 112635. The Company’s Sterling shares and Euro
shares were admitted to the Official List of the UK Listing Authority and admitted to trading on
the Main Market of the London Stock Exchange on 25 June 2013.
The Company’s registered address is IFC1, The Esplanade, St Helier, Jersey, JE1 4BP.
2. Accounting policies
The principal accounting policies applied in the preparation of these financial statements are set
out below. These policies have been consistently applied to the years presented.
2.1 Basis of preparation
(a) Statement of Compliance
The Annual Financial Report is prepared in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority and with IFRS as adopted by the European
Union which comprise standards and interpretations approved by the International Accounting
Standards Board, and interpretations issued by the International Financial Reporting Standards
Interpretations Committee as approved by the International Accounting Standards Board which
remain in effect. The financial statements give a true and fair view of the Company’s affairs and
comply with the requirements of the Companies (Jersey) Law 1991.
(b) Basis of measurement
These financial statements have been prepared on the historical cost basis except for the
revaluation of financial assets held at fair value through profit or loss and ordinary shares that
are held at amortised cost.
(c) Functional and presentational currency
The Company’s functional currency is the Euro, which is the currency of the primary economic
environment in which it operates. The Company’s performance is evaluated and its liquidity is
managed in Euros. Therefore, the Euro is considered the currency that most faithfully represents
the economic effects of the underlying transactions, events and conditions. The financial
statements are presented in Euros, except where otherwise indicated, and are rounded to the
nearest Euro.
(d) Significant accounting estimates and judgements
The preparation of financial statements in conformity with IFRS requires the Company to make
judgements, estimates and assumptions that affect items reported in the Statement of Financial
Position and Statement of Comprehensive Income and the disclosure of contingent liabilities at
the date of the financial statements. It also requires management to exercise its judgement in
the process of applying the Company’s accounting policies.
Significant accounting judgements
Classification of ordinary shares as a financial liability
During the May 2022 AGM, shareholders reapproved a suspension restriction that allows the
Directors, in their sole discretion, to alter or suspend the tender mechanism. This restriction
allows the Directors to respond to sudden changes in market conditions and the macroeconomic
climate more generally. The Directors’ power is limited by clauses in the circular which limit the
circumstances under which such discretion can be exercised only in relation to material and
adverse changes in market conditions and the macroeconomic environment.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
65
65
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
The Board believe it is appropriate to classify the ordinary shares as a financial liability under IAS
32 – Financial Instruments: Presentation (“IAS 32”) rather than equity as their interpretation of
‘suspend’ is to delay the facility tenders, not to cancel or avoid them permanently. As such, the
obligation to honour redemption requests is delayed rather than negated and the Company has a
contractual obligation to deliver cash and does not have the unconditional right to avoid paying
such cash.
This position has been further supported by legal correspondence whereby the Company’s legal
counsel has confirmed the Directors do not have unfettered ability to cancel a tender under
the facility and could only use their powers in extreme circumstances (e.g., Covid-19 pandemic,
Russia/Ukraine war, etc.) which would not violate the contract between the Directors and the
shareholders in relation to the facility. In the circular, the Company has committed to the tender
mechanism as a key feature and, therefore, if the Directors’ powers are read in the context of the
other representations in the documents, there is an obligation to deliver cash and the Directors
do not have the unconditional right to avoid paying such cash. As such, classification of the
ordinary shares as a liability is deemed appropriate.
Functional currency
As outlined above in note 2.1(c) the Directors have used their judgement to determine that the
Company’s presentational and functional currency is Euro.
Significant accounting estimates
Valuation of financial assets
Valuation of financial assets is also considered a significant estimate and is monitored by the
Board to ensure that judgements, estimates and assumptions made and methodologies applied
are appropriate and in accordance with IFRS 13. The Board believes that it is appropriate to
measure the PECs at the NAV of the investments held in the Investment Vehicle, adjusted for
discount for lack of liquidity if necessary, as the underlying investments held in the Investment
Vehicle are held at fair value. As such the Board applies judgement to determine the liquidity
adjustment necessary in the relevant financial period. Refer to note 2.4(c) for details regarding
fair value estimation of financial assets and note 7 for IFRS 13 disclosures.
(e) Climate change
In preparing the financial statements, the Directors have considered the impact of climate change
on the Company’s financial statements, and in particular in relation to climate change related
issues affecting any of the issuers in which the Investment Vehicle invests, and this is advised to
the Board regularly by the Investment Vehicle Manager. The Directors will continue to monitor the
risks emanating from climate change, including reputational risk, identified in the Principal Risks
and Uncertainties on page 21, and as set out in the ESG Committee Report on pages 47 to 49.
(f) Standards and amendments to existing standards effective from 1 January 2023
There are no standards, amendments to standards or interpretations that are effective for annual
periods beginning on 1 January 2023 that have a material effect on the financial statements of
the Company.
2. Accounting policies (continued)
2.1 Basis of preparation (continued)
Significant accounting judgements (continued)
Classification of ordinary shares as a financial liability (continued)
66
66
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
(g) Standards, amendments and interpretations issued but not yet effective
Standards, amendments and interpretations that become effective in future accounting periods
and have not been adopted by the Company:
 
Effective for periods
International Financial Reporting Standards (IFRS)
beginning on or after
•
Amendments to IAS 1 - Non-Current Liabilities with Covenants
 
and Classification of Liabilities as Current or Non-current
1 January 2024
•
Amendments to IFRS 16 - Lease Liability in a Sale and
 
Leaseback
1 January 2024
•
Amendments to IAS 7 and IFRS 7 - Supplier Finance
 
Arrangements
1 January 2024
Under the amendments to IAS 1 Presentation of Financial Statements the classification of certain
liabilities as current or non-current may change (e.g. convertible debt). In addition, companies
may need to provide new disclosures for liabilities subject to covenants. The Directors believe
that the application of this amendment will not have an impact on the Company’s financial
statements.
IFRS 16 Leases ended sale-and-leaseback transactions as an off-balance sheet financing
proposition. The deals themselves are often highly structured and can be material, especially for
seller-lessees, and accounting for them can be complex. Assessing whether a transaction qualifies
for sale-and-leaseback accounting under IFRS 16 is a key judgement. The Directors believe that the
application of this amendment will not have an impact on the Company’s financial statements.
In response to investors’ calls for more transparency of supplier finance arrangements’ impacts
on the financial statements, IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments:
Disclosures was amended. The amendments introduce additional disclosure requirements for
companies that enter into these arrangements. The Directors believe that the application of this
amendment will not have an impact on the Company’s financial statements.
A number of amendments and interpretations to existing standards have been issued, but are not
yet effective, that are not relevant to the Company’s operations. The Directors believe that the
application of these amendments and interpretations will not impact the Company’s financial
statements when they become effective.
2.2 Going concern
The Directors have reviewed the Company’s budget and cash flow forecast for the next 12 months
from the date of approval of the financial statements and also considered information regarding
climate-related matters in conjunction with other uncertainties. On the basis of this review, and
after making due enquiries, the Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for the period to 27 March 2025, a period
of twelve months from the date of approval of the financial statements, being the period of
assessment covered by the Directors. The Directors are also satisfied that no material climate-
related matters or uncertainties exist that cast significant doubt over the Company’s ability
to continue as a going concern. In making this assessment, the Directors have considered the
impact that Russia’s invasion of Ukraine and the conflict in the Middle East may have on the
Company. Accordingly, they continue to adopt the going concern basis in preparing the financial
statements.
2. Accounting policies (continued)
2.1 Basis of preparation (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
67
67
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2.3 Foreign currency translations
Transactions in foreign currencies are translated to Euro at the foreign exchange rate on the
transaction date. Monetary assets and liabilities denominated in foreign currencies at the
Statement of Financial Position date are translated to Euro at the foreign exchange rate ruling at
that date. Foreign exchange differences arising on translation are recognised in the Statement of
Comprehensive Income.
2.4 Financial instruments
Financial assets
(a) Classification
The Company classifies its investments as financial assets held at fair value through profit or loss.
These financial assets do not possess contractual terms which give rise to cash flows on specified
dates that are solely payments of principal and interest, and therefore these financial assets
default to this classification. Financial assets also include cash and cash equivalents as well as
other receivables which are measured at amortised cost.
(b) Recognition, measurement and derecognition
Purchases and sales of investments are recognised on the trade date – the date on which the
Company commits to purchase or sell the investment. Financial assets at fair value through profit
or loss are measured initially and subsequently at fair value. Transaction costs are expensed as
incurred and movements in fair value are recorded in the Statement of Comprehensive Income.
Financial assets are derecognised when the rights to receive cash flows from the investments
have expired or the Company has transferred substantially all risks and rewards of ownership.
(c) Fair value estimation
Fair value is 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. The Company
holds PECs issued by the Investment Vehicle. These investments are not listed or quoted on any
securities exchange and are not traded regularly and, on this basis, no active market exists.
(d) Valuation process
The Company relies on the board of the Investment Vehicle making fair value estimates
of an equivalent basis to those that would be made under IFRS. As at 31 December 2023, the
Directors reviewed documentary evidence of the valuation of Investment Vehicle investments
and scrutinised fair value estimates used to gain assurances as to the appropriateness and
robustness of the valuation methodology applied by the Investment Vehicle to its underlying
portfolio assets and hence to the Company investments in the Investment Vehicle. Being satisfied
by the appropriateness and robustness of the valuation methodology applied by the Investment
Vehicle, the Directors then incorporated those fair value estimates into the Company’s Statement
of Financial Position without adjustment.
The Directors interviewed representatives of the Investment Vehicle Manager in order to verify
how the PECs are valued and the composition of the NAV of the PECs as of the date of the
Statement of Financial Position.
The Directors are in regular communications with the Investment Vehicle Manager and receive
monthly performance reports from the Investment Vehicle Manager in respect of the Investment
Vehicle and its underlying investments, which are presented to the Directors by the Investment
Vehicle Manager and discussed by these parties.
2. Accounting policies (continued)
68
68
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
The Directors consider the impact of general credit conditions on the valuation of both the PECs
and Investment Vehicle portfolio, as well as specific credit events in the European corporate
environment. The Directors also analyse the Investment Vehicle portfolio in terms of both
investment mix and fair value hierarchy.
Financial Liabilities
(a) Classification
As disclosed in note 2.7, the Company classifies its ordinary shares as financial liabilities held at
amortised cost. Financial liabilities also include payables, excluding accruals, which are also held
at amortised cost.
(b) Recognition, measurement and derecognition
Financial liabilities are recognised initially at fair value plus any directly attributable incremental
costs of acquisition or issue and are subsequently carried at amortised cost. Financial liabilities
are derecognised when the obligation specified in the contract is discharged, cancelled or expires.
Ordinary shares are carried at amortised cost, being the redemption value that an investor can
partially tender their shareholding at, in accordance with the Company’s tender mechanism.
2.5 Operating expenses, placing programme costs and share issue costs
Operating expenses, placing programme costs and share issue costs are recognised on an accruals
basis and are recognised in the Statement of Comprehensive Income.
2.6 Dividends payable
Dividends are recognised as finance costs in the Statement of Comprehensive Income on the
record date.
2.7 Ordinary shares
In accordance with IAS 32 – Financial Instruments: Presentation, the ordinary shares are classified
as a financial liability rather than equity due to the redemption mechanism of the ordinary shares,
in addition to there being two share classes which have different characteristics. Refer to note
2.1(d) for detail on significant accounting judgements regarding the classification of ordinary
shares as a financial liability and note 12 for detail on the characteristics of the two share classes.
2.8 Management shares
The management shares are non-redeemable and the most subordinate share class. Therefore,
management shares are classified as equity. Refer to note 11 for further detail.
2.9 Investment revenue
Investment revenue primarily relates to quarterly income distributions received from the Investment
Vehicle based on income returns and capital appreciation from a diversified portfolio of sub-
investment grade debt instruments. The Company is entitled to receive income distributions every
quarter, which will equate to not less than 75% of the net income of the Company’s investment
in the Investment Vehicle. Investment revenue is recognised in the Statement of Comprehensive
Income when the Company’s right to such income is established.
2. Accounting policies (continued)
2.4 Financial instruments (continued)
Financial assets (continued)
(d) Valuation process (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
69
69
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
2.10 Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with banks. Cash
equivalents are short-term, highly liquid investments, with original maturities of three months
or less that are readily convertible to known amounts of cash and are subject to an insignificant
risk of changes in value.
2.11 Segmental reporting
The Directors view the operations of the Company as one operating segment, being the investment
business. All significant operating decisions are based upon analysis of the Company’s investments
as one segment. The financial results from this segment are equivalent to the financial results
of the Company as a whole, which are evaluated regularly by the Board with insight from the
Investment Vehicle Manager.
2.12 Contingent liabilities and provisions
A contingent liability is a possible obligation depending on whether some uncertain future event
occurs; or a present obligation, but payment is not probable or the amount cannot be measured
reliably. A provision is recognised when:
z
the Company has a present legal or constructive obligation as a result of past events;
z
it is probable that an outflow of resources will be required to settle the obligation; and
z
the amount has been reliably estimated.
2.13 Taxation
Profits arising in the Company for the 2023 year of assessment will be subject to Jersey tax at the
standard corporate income tax rate of 0% (2022: 0%).
2.14 Capital risk management
The Board defines capital as financial resources available to the Company. The Company’s
capital as at 31 December 2023 comprises its net assets attributable to shareholders at a total of
€249,949,328 (2022: €236,839,070).
The Company’s objectives when managing capital are to:
z
safeguard the Company’s ability to continue as a going concern;
z
provide returns for shareholders; and
z
maintain an optimal capital structure to minimise the cost of capital.
The Board monitors the capital adequacy of the Company on an ongoing basis and the Company’s
objectives regarding capital management have been met.
Under the Code of Practice for Alternative Investment Funds and AIF Services Business, the
Company, as a self-managed AIF is required to have an initial capital of at least €300,000. If the
NAV of the Company falls below €75 million, it will trigger the requirement for the Directors to
convene an extraordinary general meeting to propose an ordinary resolution that the Company
continues its business as a closed-ended investment company. Except for the aforementioned,
the Company has no other internally or externally imposed capital requirements.
2. Accounting policies (continued)
70
70
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3. Tender fee revenue
The tender price pursuant to the Company’s tender mechanism is calculated based on the NAV
per share (calculated as at the final business day in each quarter up until, and including, the
March 2022 tender and thereafter (i) as at the final business day of the month of September 2022;
or (ii) as at the final business day of the month of March 2023, or such other date as the Directors
in their absolute discretion may determine from time to time) minus 1.0% of the reference price
(the reference price being £1.00 per Sterling share and €1.00 per Euro share), which is retained
by the Company. The Company recognises retained redemption proceeds of 1% as tender fee
revenue.
During the year ended 31 December 2023, 11,026,640 Sterling shares and 7,979,914 Euro shares
(2022: 18,457,960 Sterling shares and 9,678,734 Euro shares) were tendered by shareholders which
generated tender fee revenue of €206,590 (2022: €335,621). Refer to note 12 for further details on
the tender mechanism.
4. Operating expenses
 
Year ended
Year ended
 
31 December
31 December
 
2023
2022
 
€
€
Directors’ fees (see note 6)
321,113
313,968
Administration fees
248,313
246,133
Professional fees
147,758
404,433
Advisor fees
133,760
167,910
Audit fees
91,184
84,543
Registrar fees
65,349
67,503
Regulatory fees
52,524
53,675
Corporate broker fees
60,199
54,752
Marketing fees
69,396
70,278
Trustee fees
11,039
11,879
Non-audit fees paid to the Auditor
14,603
12,442
Sundry expenses
221,707
213,773
Total operating expenses
1,436,945
1,701,289
Non-audit fees paid to the Auditor
Non-audit fees paid to the Auditor relate to interim review services.
Advisor fees
CVC Credit Partners Investment Services Management Limited (the “Corporate Services Manager”)
provided the services of Mr Justin Atkinson to assist with the marketing and promotion of the
Company’s shares (the “Advisor fees”). The agreement was terminated effective 31 August 2023.
The Corporate Services Manager recharged the Company for Mr Atkinson’s costs until termination.
During 2023, Cadarn Capital Ltd were engaged to provide distribution and investor relations
services to the Company.
Trustee fees
Trustee fees relate to fees paid to the trustee of the Trust which facilitates the conversion of
treasury shares as further described in note 12. As the Trust was not engaged to convert treasury
shares during the year ended 31 December 2023, the Trust did not earn any commission fee income
for providing such services and only received trustee fees.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
71
71
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
5. Finance costs
Dividends paid
Refer to note 12 for further information on dividends paid.
6. Directors’ fees and interests
Annual Director fees are detailed in the Directors’ Remuneration Report.
Refer to note 4 for details of total Directors’ fees for the years ended 31 December 2023 and
31 December 2022 and the Directors’ Remuneration Report for details on fees due to each Director.
Directors’ fees are paid gross of any taxes. Expenses incurred by the Directors are included within
sundry expenses in note 4.
No pension contributions were paid or are payable in respect of any of the Directors.
Richard Boléat acts as the enforcer of the Trust, refer to note 15 for further details.
Directors held the following shares in the Company:
 
Number of
Sterling shares held
 
Number of
 
   
Euro shares held
 
 
As at
As at
As at
As at
 
31 December
31 December
31 December
31 December
Director
2023
2022
2023
2022
Richard Boléat
30,000
30,000
16,590
-
Philip Braun
-
n/a
-
n/a
Stephanie Carbonneil
36,763
22,200
-
-
Esther Gilbert
12,153
7,273
-
-
Robert Kirkby
8,977
n/a
-
n/a
Vanessa Neill
22,585
11,780
-
-
Mark Tucker
1
50,000
50,000
-
-
1
Retired from the Board on 31 December 2023.
Details of Director share purchases after the Statement of Financial Position date can be found
in note 16.
7. Financial assets held at fair value through profit or loss
31 December
31 December
2023
2022
€
€
PECs - Unquoted investment
248,600,415
234,969,326
The PECs are valued taking into consideration a range of factors including the audited NAV of
the Investment Vehicle as well as available financial and trading information of the Investment
Vehicle and of its underlying portfolio; the price of recent transactions of PECs redeemed and
advice received from the Investment Vehicle Manager; and such other factors as the Directors,
in their sole discretion, deem relevant in considering a positive or negative adjustment to the
valuation.
72
72
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Refer below for the reconciliation of PECs from 1 January 2022 to 31 December 2023:
Sterling PECs
Euro PECs
As at 1 January 2022
142,063,595.26
118,672,886.93
Subscriptions
-
-
Monthly conversions
4,137,739.77
(5,210,131.43)
Contractual tenders
(18,535,216.00)
(9,528,482.00)
As at 31 December 2022
127,666,119.03 103,934,273.50
Subscriptions
-
-
Monthly conversions
436,782.21
(546,555.97)
Contractual tenders
(11,030,305.00)
(7,811,398.00)
As at 31 December 2023
117,072,596.24
95,576,319.53
Fair value hierarchy
IFRS 13 requires an analysis of investments valued at fair value based on the reliability and
significance of information used to measure their fair value.
The Company categorises its financial assets and financial liabilities according to the following
fair value hierarchy detailed in IFRS 13, that reflects the significance of the inputs used in
determining their fair values:
Level 1:
Quoted market price (unadjusted) in an active market for an identical instrument.
Level 2:
Valuation techniques based on observable inputs, either directly (i.e., as prices) or
indirectly (i.e., derived from prices). This category includes instruments valued using: quoted
market prices in active markets for similar instruments; quoted prices for identical or similar
instruments in markets that are considered less than active; or other valuation techniques where
all significant inputs are directly or indirectly observable from market data.
Level 3:
Valuation techniques using significant unobservable inputs. This category includes all
instruments where the valuation technique includes inputs not based on observable data and
the unobservable variable inputs have a significant effect on the instrument’s valuation. This
category includes instruments that are valued based on quoted prices for similar instruments
where significant unobservable adjustments or assumptions are required to reflect differences
between the instruments.
Level 1
Level 2
Level 3
Total
As at 31 December 2023
€
€
€
€
Financial assets
Financial assets held at fair value
through profit or loss
-
-
248,600,415
248,600,415
Financial liabilities
Ordinary shares
1
227,650,626
-
-
227,650,626
1
As disclosed in note 2.7, the Company classifies its ordinary shares as financial liabilities held at amortised cost. For
disclosure purposes only, ordinary shares have been disclosed at fair value using the quoted price in accordance with
IFRS 13.
7. Financial assets held at fair value through profit or loss (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
73
73
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Level 1
Level 2
Level 3
Total
As at 31 December 2022
€
€
€
€
Financial assets
Financial assets held at fair value
through profit or loss
-
-
234,969,326
234,969,326
Financial liabilities
Ordinary shares
1
220,750,561
-
-
220,750,561
1
As disclosed in note 2.7, the Company classifies its ordinary shares as financial liabilities held at amortised cost. For
disclosure purposes only, ordinary shares have been disclosed at fair value using the quoted price in accordance with
IFRS 13.
The financial assets held at fair value through profit or loss is the Company’s unquoted investment
in the PECs and is assessed on an ongoing basis by the Board. The valuation of the PECs is detailed
above. The valuation process for the investments held by the Investment Vehicle is detailed in the
‘Investment Vehicle portfolio’ section in Useful Information for Shareholders.
Due to the short-term nature of the payables, their carrying amount is considered to be the same
as their fair value.
The carrying amount of cash and cash equivalents is considered to be the same as their fair value.
Level 3 reconciliation
The following table shows a reconciliation of all movements in the fair value of financial assets
held at fair value through profit or loss categorised within Level 3.
€
Balance as at 1 January 2023
234,969,326
Subscriptions arising from conversion
533,224
Redemption proceeds arising from conversion
(532,471)
Redemption proceeds arising from tenders
(21,223,747)
Net gain on financial assets held at fair value through profit or loss
31,912,591
Foreign exchange gain on financial assets held at fair value through profit or
loss
2,941,492
Balance as at 31 December 2023
248,600,415
Net gain on financial assets held at fair value through profit or loss for the
year ended 31 December 2023
31,912,591
During 2023, there were no reclassifications between levels of the fair value hierarchy.
7. Financial assets held at fair value through profit or loss (continued)
Fair value hierarchy (continued)
74
74
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
€
Balance as at 1 January 2022
309,706,971
Subscriptions arising from conversion
5,991,716
Redemption proceeds arising from conversion
(5,955,535)
Redemption proceeds arising from tenders
(32,741,193)
Net loss on financial assets held at fair value through profit or loss
(33,535,183)
Foreign exchange loss on financial assets held at fair value through profit or loss
(8,497,450)
Balance as at 31 December 2022
234,969,326
Net loss on financial assets held at fair value through profit or loss for the
year ended 31 December 2022
(33,535,183)
During 2022, there were no reclassifications between levels of the fair value hierarchy.
Quantitative information of significant unobservable inputs – Level 3 – PECs
31 December
2023
Valuation
Description
€
technique
Unobservable input
Input used
PECs
248,600,415
Adjusted NAV
Discount for lack of liquidity
0%
31 December
2022
Valuation
Description
€
technique
Unobservable input
Input used
PECs
234,969,326
Adjusted NAV
Discount for lack of liquidity
0%
The Board believes that it is appropriate to measure the PECs at the NAV of the investments held
in the Investment Vehicle, adjusted for discount for lack of liquidity if necessary, as the underlying
investments held in the Investment Vehicle are held at fair value. The Board has concluded that
no adjustment was necessary for the year ended 31 December 2023 (2022: none), given that the
PECs have not been redeemed at a price below the NAV during current and prior periods.
The NAV of the Investment Vehicle attributable to each PEC unit is €1.0280 (2022: €1.0131).
7. Financial assets held at fair value through profit or loss (continued)
Level 3 reconciliation (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
75
75
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Sensitivity analysis to significant changes in unobservable inputs within Level 3
hierarchy – Level 3 – PECs
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 are shown below:
As at 31 December 2023
Effect on fair value
Description
Input
Sensitivity used
€
Discount of lack of
PECs
liquidity
3%
(7,458,012)
As at 31 December 2022
Effect on fair value
Description
Input
Sensitivity used
€
Discount of lack of
PECs
liquidity
3%
(7,049,080)
The sensitivity applied in the analysis above reflects the possible impact of the worst case scenario
in the 0-3% (2022: 0-3%) range that is applicable to the discount for lack of liquidity. This level
of change is considered to be possible based on observation of current market conditions and
historical trends that do not suggest the possibility of a more than 3% decline in the redemption
value when compared to the NAV. Refer to note 2.4 for valuation methodology of PECs.
8. Financial risk management
The main risks arising from the Company’s financial instruments are credit risk, liquidity risk,
market risk, interest rate risk, valuation risk and foreign currency risk.
8.1 Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an
obligation or commitment that it has entered into with the Company. The Board has in place
monitoring procedures in respect of counterparty risk which is reviewed on an ongoing basis.
The Company’s credit risk is attributable to its financial assets at fair value through profit or loss,
financial assets receivable and cash and cash equivalents.
In the opinion of the Board, the carrying amounts of financial assets best represent the maximum
credit risk exposure to the Company. The Company’s financial assets exposed to credit risk
amounted to the following:
31 December
31 December
2023
2022
€
€
Financial assets held at fair value through profit or loss
248,600,415
234,969,326
Cash and cash equivalents
1,435,723
2,196,695
Total assets
250,036,138
237,166,021
7. Financial assets held at fair value through profit or loss (continued)
76
76
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
8.1 Credit risk (continued)
The Company is indirectly exposed to credit risks associated with the investments held by the
Investment Vehicle. These credit risks include (among others): (i) the possibility that earnings of
an underlying issuer may be insufficient to meet its debt service obligations; (ii) an underlying
issuer’s assets declining in value; (iii) the declining creditworthiness of the Investment Vehicle’s
financial counterparties; and (iv) the declining creditworthiness, default and potential for
insolvency of issuers during periods of rising interest rates and/or economic downturn. An
economic downturn and/or rising interest rates could severely disrupt the leveraged finance
market and adversely affect the value of the Investment Vehicle’s investments and the ability
of issuers to repay principal and interest. In turn, this may adversely affect the performance of
the Investment Vehicle and, by extension, the Company’s business, financial condition, results of
operations, NAV and/or the market prices of the ordinary shares.
The Board discusses the creditworthiness of the Investment Vehicle’s underlying portfolio
constituents and banking counterparties (e.g., banks, money market funds and the issuers of
the debt securities) with CVC Credit Partners on a periodic basis.
The Investment Vehicle’s investment portfolio exposure categorised according to the credit rating
of the issuers, is: BB 9%, B 63%, CCC 18% and not rated 10% (31 December 2022: BB 6%, B 65%,
CCC 19% and not rated 10% ). Cash and cash equivalents exposure is with institutions rated A+
100% (31 December 2022: A+ 100%). Derivative financial instruments market value exposure is
with institutions rated A+ 38% and A- 62% (31 December 2022: A+ 100%).
Cash amounts are placed with BNP Paribas S.A., Jersey Branch and Santander Financial Services
plc, Jersey Branch. BNP Paribas S.A., Jersey Branch, is a wholly owned subsidiary of BNP Paribas
Securities Services S.A. which is publicly traded and a constituent of the S&P 500 Index with a
long-standing credit rating of A+ (2022: A+) from Standard & Poor’s. Santander Financial Services
plc, Jersey Branch, is a wholly owned subsidiary of Santander International with a long-term
credit rating of A1 (2022: A1) from Moody’s.
There is no expected credit loss on cash and cash equivalents.
8.2 Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulties in realising assets or otherwise
raising funds to meet financial commitments. Given that the PECs issued by the Investment
Vehicle and held by the Company are not traded on a stock exchange, the Company relies on
the periodic redemption mechanism provided by the Investment Vehicle in order to realise its
investments in the Investment Vehicle, and on mechanisms operating in accordance with their
contracted terms. The Company does not have any control over the redemption mechanism
operated by the Investment Vehicle.
Refer to Principal Risks and Uncertainties on pages 18 to 21 and note 12 for detail regarding the
option available to ordinary shareholders to tender their shares, and the applicable restrictions
around that tender mechanism.
The Company may redeem PECs in accordance with its contracted rights. However, if the
Investment Vehicle receives applications to redeem Investment Vehicle interests in respect of
any redemption date and it determines (in its sole judgement) that there is insufficient liquidity
to make redemptions without prejudicing existing investors in the Investment Vehicle, then the
Investment Vehicle is entitled to suspend or scale down the redemption requests on a pro rata
basis so as to only carry out redemptions that will not prejudice remaining investors.
8. Financial risk management (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
77
77
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
As such, in circumstances where the Company wishes to redeem part or all of its holdings in the
Investment Vehicle, it may not be able to achieve this on a single redemption date. This may also
result in restrictions on the Company’s ability to complete or to conduct the tender mechanism.
In certain circumstances, whether prior to or following a NAV determination date, (being the
Investment Vehicle valuation date), the Investment Vehicle directors may, at their discretion,
suspend all calculations, payments and redemptions of the outstanding Investment Vehicle
interests (including the Company’s Investment Vehicle interests).
In the event of a material adverse event occurring in relation to the Investment Vehicle or the
market in which it operates generally, the ability of the Company to realise its investment and
prevent the possibility of further losses could, therefore, be limited by its restricted ability to realise
its investment in the Investment Vehicle. This delay could materially affect the value of the PECs
and the timing of when the Company is able to realise its investments in the Investment Vehicle,
which may adversely affect the Company’s business, financial condition, results of operations,
NAV and/or the market prices of the ordinary shares.
The table below shows the worst case scenario of the residual contractual maturity of the
Company’s financial liabilities and the best case scenario for the financial assets:
Less than 1 year
1 to 5 years
Total
31 December 2023
€
€
€
Financial assets
Financial assets held at fair value through
profit or loss
1
134,236,322
114,364,093
248,600,415
Cash and cash equivalents
1,435,723
-
1,435,723
Total undiscounted financial assets
135,672,045
114,364,093
250,036,138
Financial liabilities
Payables
(144,968)
-
(144,968)
Ordinary shares
2
(62,487,332)
(187,461,996)
(249,949,328)
Total undiscounted financial liabilities
(62,632,300)
(187,461,996)
(250,094,296)
1
The Company has classified financial assets held at fair value through profit or loss into maturity bands based on the
annual maximum redeemable PECs set by the Investment Vehicle Manager at 50% (2022: 50%) after the expected income
distribution which amounted to €19,872,228 (2022: €14,862,427).
2
The Company has classified the ordinary shares into maturity bands based on the approved limits of the shares redeemable
by the shareholders with the maximum annual limit set at 25% (2022: 25%). Details of the Company’s financial liabilities
in relation to the ordinary shares, which are carried at amortised cost, are set out in note 12. The ordinary shares above
include the lifetime decrease in net assets attributable to the Sterling and Euro shares.
8. Financial risk management (continued)
8.2 Liquidity risk (continued)
78
78
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Less than 1 year
1 to 5 years
Total
31 December 2022
€
€
€
Financial assets
Financial assets held at fair value through
profit or loss
1
124,915,876
110,053,450
234,969,326
Cash and cash equivalents
2,196,695
-
2,196,695
Total undiscounted financial assets
127,112,571
110,053,450
237,166,021
Financial liabilities
Payables
(377,325)
-
(377,325)
Ordinary shares
2
(59,209,767)
(177,629,303)
(236,839,070)
Total undiscounted financial liabilities
(59,587,092)
(177,629,303)
(237,216,395)
1
The Company has classified financial assets held at fair value through profit or loss into maturity bands based on the
annual maximum redeemable PECs set by the Investment Vehicle Manager at 50% (2022: 50%) after the expected income
distribution which amounted to €19,872,228 (2022: €14,862,427).
2
The Company has classified the ordinary shares into maturity bands based on the approved limits of the shares redeemable
by the shareholders with the maximum annual limit set at 25% (2022: 25%). Details of the Company’s financial liabilities
in relation to the ordinary shares, which are carried at amortised cost, are set out in note 12. The ordinary shares above
include the lifetime decrease in net assets attributable to the Sterling and Euro shares.
In the ordinary course of business, the Directors expect the Company’s tender mechanism to be
funded by redemptions from the Investment Vehicle, excepting cumulative tenders received in an
amount equal to or less than £100,000 which may initially, at the discretion of the Directors, be
funded from the Company’s working capital.
8.3 Market risk
Market risk is the risk that the Company’s performance will be adversely affected by changes in
the markets in which it invests. The Company holds a single investment in the form of PECs in the
Investment Vehicle which is the main driver of the Company’s performance.
At the Investment Vehicle level, performance is driven by the portfolio of the Investment Vehicle
and therefore consideration of the market risks to which the Company is exposed should be taken.
The Investment Vehicle is required to hold at least 60% of its gross assets in companies domiciled
in, or with material operations in, Western Europe. As such, the Company and the Investment
Vehicle could be particularly exposed to any deterioration in the current geopolitical and European
economic climate.
In addition, the Investment Vehicle does not have any restrictions on the amount of investments
it can make in a single industry. As such, any significant event which affects a specific industry in
which the Investment Vehicle has significant exposure could materially and adversely affect the
performance of the Investment Vehicle and, by extension, the Company’s ordinary shares.
In order to avoid excessive concentrations of risk, the Investment Vehicle’s private placement
memorandum includes specific guidelines on maintaining a diversified portfolio. These guidelines
are detailed in the ‘investment limits’ and ‘borrowing limits’ sections on the Company’s website:
ig.cvc.com/overview/investment-policy/. The Board receives from third-party service providers
the results of investment and borrowing restriction monitoring exercises performed over the
investment portfolio. During the years ended 31 December 2023 and 31 December 2022, the
Company complied with all investment and borrowing limits.
8. Financial risk management (continued)
8.2 Liquidity risk (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
79
79
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Continued or recurring market deterioration may materially adversely affect the ability of an
issuer whose debt obligations form part of the Investment Vehicle portfolio to service its debts or
refinance its outstanding debt. Further, such financial market disruptions may have a negative
effect on the valuations of the Investment Vehicle investments (and, by extension, on the NAV
and/or the market price of the Company’s ordinary shares), and on liquidity events involving
such Investment Vehicle investments. In the future, non-performing assets in the Investment
Vehicle’s portfolio may cause the value of the Investment Vehicle’s portfolio to decrease (and,
by extension, the NAV and/or the market price of the Company’s ordinary shares to decrease).
Adverse economic conditions may also decrease the value of any security obtained in relation
to any of the Investment Vehicle investments. The Board receives frequent presentations and
reporting at Board meetings from CVC Credit Partners which allows it to monitor the performance
of the Investment Vehicle’s investment portfolio.
Refer below for sensitivity analysis on the Statement of Comprehensive Income and NAV of
the Company if the fair value of the PECs at the year-end increased or decreased by 5% (2022:
5%). This level of change is considered to be possible based on observation of current market
conditions.
31 December 2023
Increase by
Decrease by
Current value
Total
5%
5%
Sterling PECs (Euro equivalent)
€150,351,877
€7,517,594
€(7,517,594)
Euro PECs
€98,248,538
€4,912,427
€(4,912,427)
Financial assets held at fair value through
profit or loss
€248,600,415
€12,430,021
€(12,430,021)
Sterling PECs
£130,344,064
£6,517,203
£(6,517,203)
31 December 2022
Current value
Total
Increase by 5%
Decrease by 5%
Sterling PECs (Euro equivalent)
€140,626,211
€7,031,311
€(7,031,311)
Euro PECs
€94,343,115
€4,717,156
€(4,717,156)
Financial assets held at fair value through
profit or loss
€234,969,326
€11,748,466
€(11,748,466)
Sterling PECs
£124,503,064
£6,225,153
£(6,225,153)
The above calculations are based on the investment valuation at the Statement of Financial
Position date and may not be reflective of future market conditions.
8. Financial risk management (continued)
8.3 Market risk (continued)
80
80
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
8.4 Interest rate risk
Interest rate movements affect the fair value of investments in fixed interest rate securities and
floating rate loans and on the level of income receivable on floating rate loans and cash deposits.
The Company invests in PECs which are non-interest bearing and therefore the majority of the
Company’s interest rate exposure arises indirectly in the fair value of the underlying Investment
Vehicle portfolio which is largely invested in the debt securities of companies domiciled in, or with
material operations in, Western Europe.
As at 31 December 2023, the Investment Vehicle portfolio contained interest bearing financial
assets at fair value through profit or loss of €626.7 million (2022: €587.2 million) and financial
liabilities at fair value through profit or loss of €nil (2022: € nil). Most of these investments in
debt securities carry variable interest rates and have various maturity dates. Interest rate risk on
fixed interest instruments is considered to be part of market risk on fair value and is monitored
by the Board on a monthly basis. In addition, as at 31 December 2023, the Company was exposed
to interest rate risk arising on the Investment Vehicle’s derivative financial instruments of
€2.5 million (2022: €13.6 million), receivables and payables on unsettled trades of €14.9 million
(2022: €4.8 million) and €13.5 million (2022: €20.1 million), respectively, and loans and borrowings
of €155.0 million (2022: €158.1 million).
The Company is also exposed to changes in interest rates on cash and cash equivalents held
directly of €1,435,723 (2022: €2,196,695). The Board considers this risk to be immaterial to the
Company.
8.5 Valuation risk
Valuation risk is the risk that the valuation of the Company’s investments in the Investment
Vehicle PECs, and accordingly the periodic calculation of the NAV of the Company’s Sterling
and Euro shares, does not reflect the true value of the Company’s proportionate interest in the
Investment Vehicle’s underlying investment portfolio.
The Investment Vehicle’s portfolio may at any given time include securities or other financial
instruments or obligations which are very thinly traded, for which no ready market exists or which
are restricted as to their transferability under applicable securities laws. These investments may
be extremely difficult to value accurately.
Further, because of overall size or concentration in particular markets of positions held by the
Investment Vehicle, the value of its investments at which they can be liquidated may differ,
sometimes significantly, from their carrying values. Third-party pricing information may not be
available for certain positions held by the Investment Vehicle and therefore investments held by
the Investment Vehicle may be valued based on valuation techniques using unobservable inputs.
In light of the foregoing, there is a risk that an Investment Vehicle interest holder, such as the
Company, which redeems all or part of its investment while the Investment Vehicle holds such
investments, could be paid an amount less than it would otherwise be paid if the actual value of
the Investment Vehicle’s investment was higher than the value designated for that investment
by the Investment Vehicle. Similarly, there is a risk that a redeeming Investment Vehicle interest
holder might, in effect, be overpaid at the time of the applicable redemption if the actual value
of the Investment Vehicle’s investment was lower than the value designated for that investment
by the Investment Vehicle, in which case the value of the Investment Vehicle interests to the
remaining Investment Vehicle interest holders would be reduced.
The Board of the Investment Vehicle monitors and reviews the PEC valuation process frequently
and the Board of the Company monitors and reviews the Company’s NAV production process
regularly.
8. Financial risk management (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
81
81
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Refer to note 7 for sensitivity analysis to significant changes in unobservable inputs within Level
3 hierarchy of the Company’s investments and underlying investments held by the Investment
Vehicle.
8.6 Foreign currency risk
Foreign currency risk is the risk that the values of the Company’s assets and liabilities are adversely
affected by changes in the values of foreign currencies by reference to the Company’s functional
currency. The functional currency of the Company and the Investment Vehicle is the Euro.
At the Company level, the Sterling and Euro share classes invest into Sterling and Euro PECs,
respectively, and therefore there is no material foreign currency risk at the Company level. The
Company only has exposure to material foreign currency movements at the Investment Vehicle
level.
At the Investment Vehicle level, certain assets are typically denominated in other currencies. The
Investment Vehicle is subject to immaterial foreign currency exchange risks and the value of its
assets may be affected by fluctuations in foreign currency exchange rates. This may, in turn, result
in fluctuations in the value of the Sterling and Euro PECs which would result in similar variances
within the NAV per share of the Sterling shares and Euro shares the issued by the Company, and
so in variations between the market prices of Sterling shares and the Euro shares.
The Investment Vehicle uses a third-party professional foreign exchange manager, who regularly
updates the Board, to seek to fully hedge the foreign currency exposures to which it is exposed.
However, it may not be possible for the Investment Vehicle to hedge against a particular change
or event at an acceptable price or at all. In addition, there can be no assurance that any attempt
to hedge against a particular change or event would be successful, and any such hedging
failure could materially and adversely affect the performance of the Investment Vehicle and, by
extension, the Company’s business, financial condition, results of operations, NAV and/or the
market prices of the ordinary shares.
Subscription monies for Sterling shares issued by the Company have been used to fund subscriptions
for Sterling-denominated PECs and such monies may then be converted to Euro by the Investment
Vehicle for operating purposes. The holders of Sterling shares will therefore be subject to the
foreign currency fluctuations between Sterling and Euro. Although the Investment Vehicle has in
place a hedging programme, there is no guarantee that any such hedging arrangements will be
successful. In addition, the costs and any benefit of hedging such foreign currency exposure will
be allocated solely to the Sterling-denominated PECs (and, as a consequence, indirectly impacts
the Company’s Sterling Shares).
The below information regarding the foreign currency risk for the Investment Vehicle has been
included for informational purposes only.
The following table indicates the currencies to which the Investment Vehicle had significant
exposure as at 31 December 2023 on its financial assets and liabilities. The analysis calculates the
total effect of a reasonably possible movement of the currency rate against the EUR on the net
assets attributable to PEC holders with all other variables held constant and includes the impact
of the hedging programme undertaken by the Investment Vehicle.
8. Financial risk management (continued)
8.5 Valuation risk (continued)
82
82
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Effect on net assets attributable to PEC
holders and on the change in net assets
attributable to PEC holders from operations
Change in
31 December 2023
31 December 2022
Currency
currency rate
€’000
€’000
GBP
10%
153
142
USD
10%
125
197
An equivalent decrease in each of the aforementioned currencies against the EUR would have
resulted in an equivalent but opposite impact.
9. Payables
31 December
31 December
2023
2022
€
€
Advisor fees
-
148,314
Audit fees
41,379
49,089
Administration fees
21,576
21,833
Other payables
82,013
158,089
Total payables
144,968
377,325
10. Contingent liabilities and commitments
As at 31 December 2023, the Company had no contingent liabilities or commitments (2022: nil).
11. Stated capital
Number of
Number of
shares
Stated capital
shares
Stated capital
31 December
31 December
31 December
31 December
2023
2023
2022
2022
€
€
Management shares
2
-
2
-
Management shares
Management shares are non-redeemable, have no par value and no voting rights, and also no
profit allocated to them in the earnings per share calculation.
8. Financial risk management (continued)
8.6 Foreign currency risk (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
83
83
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
12. Ordinary shares
The Company has two classes of ordinary shares, being Sterling shares and Euro shares.
Each Sterling share holds 1.17 voting rights and each Euro share holds 1 voting right. Each share
has no par value.
Number of
Stated capital
Number of
Stated capital
shares
31 December
shares
31 December
31 December
2023
31 December
2022
2023
€
2022
€
Sterling shares
118,916,157
151,390,416
129,518,607
161,549,578
Euro shares
96,553,753
98,295,010
105,076,336
106,767,222
Total
215,469,910
1
249,685,426
2
234,594,943
1
268,316,800
2
1
Excludes 247,533,235 (2022: 236,506,595) Sterling shares and 52,747,703 (2022: 44,767,789) Euro shares held as treasury
shares.
1,2
Excludes €263,902 (2022: (€31,477,730)) relating to the increase (2022: decrease) since inception in net assets
attributable to shareholders from operations.
31 December
31 December
2023
2022
Total
Total
Share movements
€
€
Opening balance
268,316,800
310,121,014
Issue of ordinary shares
-
-
Subscriptions arising from conversion of ordinary shares
533,224
5,991,717
Redemption payments arising from conversion of ordinary shares
(532,471)
(5,955,535)
Redemption payments arising from tenders of ordinary shares
(21,593,903)
(33,198,148)
Foreign currency exchange gain on ordinary shares
2,961,776
(8,642,248)
Closing balance
249,685,426
268,316,800
As at 31 December 2023, the Company had 366,449,392 (inclusive of 247,533,235 treasury shares)
(2022: 366,025,202 (inclusive of 236,506,595 treasury shares)) Sterling shares in issue and
149,301,456 (inclusive of 52,747,703 treasury shares) (2022: 149,844,125 (inclusive of 44,767,789
treasury shares)) Euro shares.
Share conversions
Until 1 June 2022, at the first Business Day of each month (each first Business Day of the relevant
month being a “Conversion Calculation Date”), shareholders could convert shares of any class
into shares of any other class (of which shares were in issue at the relevant time) by giving not
less than 10 Business Days’ notice to the Company in advance of such Conversion Calculation
Date.
With effect from 1 July 2022, at the first Business Days of January and July of each year (each
first Business Day of January or July of each year being a “Share Conversion Calculation Date”),
shareholders can convert shares of any class into shares of any other class (of which shares are
in issue at the relevant time) by giving not less than 10 business days’ notice to the Company in
advance of such Share Conversion Calculation Date, either through submission of the relevant
instruction mechanism (for shareholders holding shares in uncertificated form) or through
submission of a share conversion notice and the return of the relevant share certificate to the
Company’s registrars. This mechanism is subject to regulatory considerations.
84
84
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Such share conversion will be effected on the basis of the ratio of the last reported NAV per share
of the class of shares held (calculated in Euro less the costs of effecting such share conversion
and adjusted to reflect the impact of adjusting any currency hedging arrangements and taking
account of any dividends resolved to be paid), to the last reported NAV per share of the class of
shares into which they will be converted (also calculated in Euro, and each as at the relevant
share Conversion Calculation Date) in each case, for the avoidance of doubt, such Net Asset
Value per share shall be calculated inclusive of accrued income.
During the year no (2022: 250,000) Sterling shares were converted into (2022: 318,897) Euro shares
and 542,669 (2022: 5,580,392) Euro shares were converted into 424,190 (2022: 4,352,393) Sterling
shares.
Treasury share convertor mechanism
At the 2016 Annual General Meeting, the Company requested, and received, shareholder approval
to create a mechanism whereby treasury shares held by the Company be converted from one
currency denomination to another in accordance with the procedure set out in the Articles. As
the conversion cannot take place while the treasury shares are held by the Company, it was
proposed that a facility be created so that some or all of the treasury shares be sold to a related
party, who would be willing to facilitate the conversion of the treasury shares from one currency
denomination to another. The treasury share convertor mechanism was put in place to provide
the Company with a means of converting one class into another to meet demand in the market
from time to time.
Accordingly, on 11 September 2017, the Company established the Trust, a business purpose trust
established under Jersey law. The purpose of the Trust is the facilitation of the conversion of
the treasury shares by the incorporation of a company, Conversion SPV Limited (“Conversion
Vehicle”), who would purchase treasury shares from the Company, convert them into shares
of the other currency denomination and sell those converted shares back to the Company. The
Chairman of the Company was appointed as the enforcer of the Trust.
The treasury share convertor mechanism was not utilised during the year ended 31 December 2023
(2022: not utilised).
Tender mechanism
The Company has, established a tender mechanism that enables shareholders to tender their
shares in the Company in accordance with a stated contracted mechanism.
The Directors believe that the Company’s tender mechanism provides shareholders with additional
liquidity when compared with other listed closed-ended investment companies. The offer of the
Company’s tender mechanism is subject to annual shareholder approval and subject to the terms,
conditions and restrictions as set out in the prospectus.
On 1 February 2024, the Board announced the addition in the March 2024 Tender of an option for
tendering shareholders to tender shares for placing with third party investors as an alternative
to having the shares repurchased by the Company. By participating in the placing, shareholders
have the opportunity to realise their shares and receive the consideration for all successfully
placed shares up to 10 weeks earlier than the consideration payable for shares repurchased by
the Company pursuant to the March 2024 Tender. Such an outcome will depend on the extent to
which Winterflood Securities Limited identifies investors willing to buy the shares at a price per
share which is equal to or higher than the floor price set by the Company (as detailed below).
Shares not placed successfully will be repurchased in the same way as they would be under the
current tender terms and conditions.
12. Ordinary shares (continued)
Share conversions (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
85
85
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
In consideration of its role in the placing in the March 2024 Tender, the Company will pay
Winterflood Securities Limited a commission of 0.5 per cent of the gross proceeds generated by
the placing purchases.
The summary of the placing arrangements incorporated the following:
For the March 2024 Tender:
(i)
Shareholders (other than restricted shareholders) who held shares on the relevant tender
record date may, instead of simply tendering shares for repurchase, elect to have the Shares
be placed by Winterflood Securities Limited with placees.
(ii)
The placing price shall be subject to a floor price per share of an amount equal to 98% of the
last NAV per share published by the Company before the placing closes on 5 March 2024.
(iii)
The consideration for each successful placing will be paid in accordance with the regular
settlement procedures under the tender terms and conditions (as amended and restated on
1 February 2024).
(iv)
Where placees are not willing to take all shares submitted for a placing, shares tendered for
the placing will be scaled back on a pro rata basis.
(v)
All unplaced shares will be deemed to have been tendered for purchase by the Company at
the tender price and will be repurchased in the same way as they would be under the current
tender terms and conditions.
This section should be read in conjunction with the amended and restated tender terms and
conditions which are available on the Company’s website: CVC Income & Growth – Proven dynamic
strategy to deliver cash yield & capital gains.
It is important to note that tenders, if made, are contingent upon certain factors including, but
not limited to, the Company’s ability to finance tender purchases through submitting redemption
requests to the Investment Vehicle to redeem a pro rata amount of Company Investment Vehicle
interests.
Factors, including restrictions at the Investment Vehicle level on the amount of PECs which can be
redeemed, may mean that sufficient Company Investment Vehicle interests cannot be redeemed
and, consequently, tender purchases in any given period may be scaled back on a pro rata basis.
In the absence of the availability of the tender mechanism shareholders wishing to realise their
investment in the Company will be required to dispose of their shares on the stock market.
Accordingly, shareholders’ ability to realise their investment at any particular price and/or time
may be dependent on the existence of a liquid market in the shares.
Liquidity risks associated with the tender mechanism are set out in note 8.2.
During the year 11,026,640 (2022: 18,457,960) Sterling shares and 7,979,914 (2022: 9,678,734) Euro
shares were redeemed as part of the tender mechanism and subsequently held by the Company
in the form of treasury shares. Refer to pages 84 to 85 for details. Treasury shares do not carry any
right to attend or vote at any general meeting of the Company. In addition, the tender mechanism
and the voluntary conversion facility are not available in respect of treasury shares.
12. Ordinary shares (continued)
Tender mechanism (continued)
86
86
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Ad hoc purchase of shares
In addition to the tender mechanism, the Directors seek annual shareholder approval to grant
them the power to make ad hoc market purchases of shares. If such authority is subsequently
granted, the Directors will have complete discretion as to the timing, price and volume of shares
to be purchased. Shareholders should not place any reliance on the willingness or ability of the
Directors so to act. Refer to note 2.1(d) for detail on significant accounting judgements regarding
the classification of ordinary shares as a financial liability.
Dividends
The ordinary shares of each class carry the right to receive all income of the Company attributable
to such class of ordinary share, and to participate in any distribution of such income made
by the Company and within each such class such income shall be divided pari passu among
the shareholders in proportion to the shareholdings of that class. During the years ended
31 December 2023 and 31 December 2022, the Company declared and paid dividends based on
the investment revenue received from the Investment Vehicle during the year.
Refer below for amounts recognised as dividend distributions to ordinary shareholders in the
years ended 31 December 2023 and 31 December 2022.
Ex-dividend
Payment
date
date
£ equivalent
€
Sterling - £0.02500 per share
09/02/2023
03/03/2023
3,237,965
3,723,213
Euro - €0.01750 per share
09/02/2023
03/03/2023
1,838,836
Sterling - £0.01875 per share
11/05/2023
02/06/2023
2,378,198
2,734,599
Euro - €0.01750 per share
11/05/2023
02/06/2023
1,832,221
Sterling - £0.01875 per share
10/08/2023
01/09/2023
2,386,151
2,743,745
Euro - €0.01750 per share
10/08/2023
01/09/2023
1,822,724
Sterling - £0.01875 per share
09/11/2023
01/12/2023
2,229,678
2,563,822
Euro - €0.01750 per share
09/11/2023
01/12/2023
1,689,691
Total for the year ending 31 December 2023
18,948,851
Ex-dividend
Payment
date
date
£ equivalent
€
Sterling - £0.0125 per share
03/02/2022
25/02/2022
1,706,768
2,002,342
Euro - €0.0125 per share
03/02/2022
25/02/2022
1,365,602
Sterling - £0.0125 per share
26/05/2022
17/06/2022
1,672,725
1,962,403
Euro - €0.0125 per share
26/05/2022
17/06/2022
1,342,697
Sterling - £0.01250 per share
04/08/2022
26/08/2022
1,669,600
1,958,737
Euro - €0.01250 per share
04/08/2022
26/08/2022
1,346,683
Sterling - £0.01500 per share
03/11/2022
25/11/2022
1,942,779
2,279,224
Euro - €0.01500 per share
03/11/2022
25/11/2022
1,576,145
Total for the year ending 31 December 2022
13,833,833
Refer to note 16 for details on dividends paid subsequent to the reporting period.
12. Ordinary shares (continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
87
87
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Return per share
31 December
31 December
31 December
31 December
2023
2023
2022
2022
£ equivalent
€
£ equivalent
€
Sterling shares
Increase/(decrease) in net
assets for the year
15,146,339
17,471,304
(16,857,334)
(19,517,848)
Weighted average number
of ordinary shares
126,472,843
126,472,843
129,518,607
129,518,607
Return per share
0.1198
0.1381
(0.1275)
(0.1440)
Euro shares
Increase/(decrease) in net
assets for the year
-
14,270,328
-
(14,254,567)
Weighted average number
of ordinary shares
-
103,301,329
-
105,076,336
Return per share
-
0.1381
-
(0.1440)
Return per share has been calculated on a weighted average basis.
Refer to note 16 for transactions involving the Company’s Sterling or Euro shares between
1 January 2024 and date of approval of these financial statements.
13. NAV per ordinary share
31 December
31 December
2023
2022
Sterling
31 December
Sterling
31 December
equivalent
2023
equivalent
2022
Sterling shares
NAV
£132,399,128
€152,722,394
£126,873,439
€143,303,549
Number of shares in issue
1
118,916,157
118,916,157
129,518,607
129,518,607
NAV per ordinary share
£1.1134
€1.2843
£0.9796
€1.1064
Euro shares
NAV
-
€97,226,934
-
€93,535,520
Number of shares in issue
1
-
96,553,753
-
105,076,336
NAV per ordinary share
-
€1.0070
-
€0.8902
1
excludes shares held in treasury.
12. Ordinary shares (continued)
88
88
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
14. Reconciliation of liabilities arising from financing activities
31 December
31 December
2023
2022
€
€
Opening Balance
236,839,070
312,415,699
Cash flow movements
Payments from redemption of ordinary shares
(21,593,903)
(33,198,148)
Dividends paid
(18,948,851)
(13,833,833)
Profit/(loss) before finance costs and taxation items
18,801,400
13,558,771
Non-cash flow movements
Proceeds from subscriptions arising from conversion of
ordinary shares
533,224
5,991,717
Proceeds from redemptions arising from conversion of
ordinary shares
(532,471)
(5,955,535)
Foreign currency exchange gain/(loss) on ordinary shares
2,961,776
(8,642,248)
Profit/(loss) before finance costs and taxation items
31,889,083
(33,497,353)
Closing Balance
249,949,328
236,839,070
15. Related party disclosure
The Directors are entitled to remuneration for their services and all Directors hold Sterling shares
in the Company. Refer to note 6 for further detail.
Transactions between the Company, the Trust, the Corporate Services Manager and the Conversion
Vehicle are disclosed in note 4 and 12.
Richard Boléat acts as the enforcer of the Trust, a business purpose trust established under Jersey
law and settled by the Company. The role has arisen as a result of the implementation of the
resolution passed at the Company’s Annual General Meeting on 4 April 2016 which authorised the
Company to make arrangements to enable the conversion of treasury shares held by the Company
from time to time from one currency denomination to another. The position is unremunerated
and represents an alignment of interests with those of the Company.
The below information regarding select related party disclosures for the Investment Vehicle has
been included for information purposes only.
As at 31 December 2023, the Investment Vehicle holds debt securities in entities where CVC
Capital Partners also has an interest. These positions were entered into pari passu with third
party investors.
16. Material events after the Statement of Financial Position date
Management has evaluated subsequent events for the Company through 27 March 2024, the date
the financial statements were available to be issued and has concluded that the material events
listed below do not require adjustment of the financial statements.
Share conversion
On 26 January 2024, the Company announced the conversion into Sterling shares of Euro shares
based on the NAVs of the Company’s Sterling and Euro Shares as at 31 December 2023 (using
spot currency exchange rates as at 31 December 2023). The Company received eligible conversion
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
89
89
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
notices from shareholders in respect of 4,687 Sterling shares and 723,284 Euro shares by the
relevant closing date. Accordingly, an application was made for the admission of 566,866 Sterling
shares and 5,980 Euro Shares to the Official List of the UK Listing Authority and the main market
for listed securities of the London Stock Exchange plc. The application became effective and
dealings in the new Sterling shares commenced 31 January 2024.
Dividend declaration and dividend increase
On 30 January 2024, the Company declared a dividend of £0.04125 per Sterling share and €0.0225
per Euro share payable on 1 March 2024 to shareholders on the register as at 9 February 2024.
These amounts reflect an uplift to the previously indicated quarterly dividend of £0.01875 per
Sterling share and €0.0175 per Euro share announced by the Company on 7 March 2023.
On 5 February 2024, the Company announced that the annual dividend targets were being
increased to £0.0825 per Sterling share and €0.0725 per Euro share with immediate effect. This
means that the Company’s quarterly dividends will be increased to £0.020625 per Sterling share
and €0.018125 per Euro share, including the Company’s first quarter 2024 dividends, payable in
the second quarter of 2024.
Addition of placing of shares as part of the March 2024 Tender
On 1 February 2024, the Company announced the addition in the March 2024 Tender of an option
for tendering shareholders to tender shares for placing with third party investors, as an alternative
to having the shares repurchased by the Company. By participating in the placing, shareholders
have the opportunity to realise their shares and receive the consideration for all successfully
placed shares up to 10 weeks earlier than the consideration payable for shares repurchased by the
Company pursuant to the March 2024 Tender.
Director share purchases
On 6 February 2024, Philip Braun purchased 4,579 Sterling shares at a price of £1.084 per share on
the London Stock Exchange.
On 22 February 2024, Esther Gilbert purchased 3,977 Sterling shares at a price of £1.053 per share
on the London Stock Exchange.
Result of semi-annual tender process
On 14 February 2024, the Company announced that it received tender applications for the semi-
annual tender process in respect of the March 2024 Tender. 2,495,798 Sterling shares and 2,251,521
Euro shares were tendered for repurchase by the Company. 50,000 Sterling shares were tendered
for placing with third party investors.
Results of placings in respect of March 2024 Tender
On 6 March 2024, the Company announced that the 50,000 placing shares arising in the March
2024 Tender were not able to be placed by the time of the close of the placing on 5 March 2024.
Accordingly, the 50,000 placing shares will now be deemed to have been tendered for repurchase
by the Company at the tender price pursuant to the tender terms and conditions.
17. Controlling party
In the Directors’ opinion, the Company has no ultimate controlling party.
16. Material events after the Statement of Financial Position date (continued)
Share conversion (continued)
90
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
USEFUL INFORMATION FOR SHAREHOLDERS (UNAUDITED)
Investment Vehicle portfolio
The following information regarding the Investment Vehicle has been included for informational
purposes only.
Listed equity securities and corporate bonds
The fair values of listed equity securities and corporate bonds at the reporting date are based on
quoted market prices or binding dealer price quotations (bid price for long positions and ask price
for short positions), without any deduction for transaction costs. The listed equity securities and
corporate bonds are included within Level 1 of the hierarchy.
Unlisted equities, warrants and debt securities
For all other financial instruments, fair value is determined using valuation techniques.
The Investment Vehicle invests in some unlisted equities, warrants, corporate bonds and other
debt securities. When these instruments are not measured at the quoted price in an active
market, they are valued using observable inputs, initially sourcing broker quotes from a number of
sources and, where this data does not yield a reliable market price, utilising appropriate valuation
techniques, such as recently executed transaction prices in securities of the issuer or comparable
issuers. Adjustments are made to the valuations when necessary to recognise differences in
the instrument’s terms. To the extent that these inputs are observable, the Investment Vehicle
classifies the fair value of these investments as Level 2.
The Investment Vehicle invests in unlisted corporate debt and managed CLOs, including asset
backed securities. These investments are generally not quoted in an active market and may be
subject to restrictions on redemptions such as lock up periods. Transactions in these assets do not
occur on a regular basis. Investments in these debt securities are valued based on a combination
of a third-party pricing service, an appraisal of the performance of the issuing company and
utilising appropriate valuation techniques such as counterparty marks and recently executed
transaction prices in securities of the issuer or comparable issuers. The Investment Vehicle has
classified the fair value of these investments as Level 3 for this financial year.
Forward currency contracts
Foreign currency forward contracts are recognised as contractual commitments on a trade date
basis and are carried at fair value based on quotes obtained from an independent source (e.g.
Bloomberg). Foreign currency forward contracts are commitments to either purchase or sell a
designated currency at a future date for a specified price and are settled in cash. Foreign currency
forward contracts are valued by reference to the forward price at which a new contract of the
same size and remaining maturity could be undertaken at the valuation date. For these financial
instruments, significant inputs are market observable and are included within Level 2.
Valuation process for Level 3 investments
Valuations are the responsibility of the board of the Investment Vehicle, who have engaged the
Investment Vehicle Services Manager, the Investment Vehicle Manager and the independent
service provider to independently value the assets on a monthly basis and perform a price
challenge process. Following the completion of the price challenge process, the Investment
Vehicle Manager presents the valuation of the assets to the Board on a monthly basis, including
a discussion on the assumptions used and significant fair value changes during the year.
Investments in CLOs are primarily valued based on the bid price as provided by the third-party
pricing service and may be amended following consideration of the NAV published by the
administrator of the CLOs. Furthermore, such a NAV is adjusted, when necessary, to reflect the
effect of the time passed since the calculation date, liquidity risk, limitations on redemptions
and other factors. Depending on the fair value level of a CLO’s assets and liabilities, and on the
adjustments needed to the NAV published by that CLO, the Investment Vehicle classifies the fair
value of these investments as Level 3.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
91
91
USEFUL INFORMATION FOR SHAREHOLDERS (UNAUDITED) (CONTINUED)
Investment Vehicle portfolio (continued)
Valuation process for Level 3 investments (continued)
Investments in debt securities for which there are a limited number of broker quotes and for
which no other evidence of liquidity exists, and investments in unlisted equity and private equity
companies that are not quoted in an active market, are classified as Level 3. For debt securities
with a limited number of broker quotes, these are then valued by considering in detail the limited
broker quotes available for evidence of outliers (which may skew the average) which, if existent,
are then removed, and then by calculating the average of the remaining quotes. For debt
securities and unlisted equity or private equity companies for which there are no broker quotes,
the Investment Vehicle Manager produces a pricing memorandum for the Investment Vehicle
drawing on the International Private Equity Valuation guidelines, which is discussed, reviewed
and accepted by the Investment Vehicle Manager’s board and the independent service provider.
If the Investment Vehicle Manager and the independent service provider have difficulty in
establishing an agreed upon valuation for an asset, they will discuss and agree alternative
valuation methods.
The below disclosures have been included to provide an insight to shareholders of the asset class
mix held by the Investment Vehicle portfolio. It is important to note that as at 31 December 2023,
the Company held a 50.55% (2022: 52.04%) interest in the net assets of the Investment Vehicle.
The disclosures have not been apportioned according to the Company’s PEC holding, as the Board
believes to do so would be misleading and not an accurate representation of the Company’s
investment in the Investment Vehicle.
The following tables detail the investment holding of the Company at the Investment Vehicle
level, categorising these assets according to the fair value hierarchy in accordance with IFRS
13 and detailing the quantitative information of significant unobservable inputs of the Level 3
investments held.
Financial assets at fair value through profit or loss
Level 1
Level 2
Level 3
Total
31 December 2023
€’000
€’000
€’000
€’000
Financial assets
Equity securities
Equities and warrants
-
-
15,534
15,534
Debt securities
Corporate bonds and other debt
securities
136,089
303,227
140,548
579,864
CLOs
-
-
46,882
46,882
Derivative financial instruments
Forward currency contracts
-
2,487
-
2,487
Total
136,089
305,714
202,964
644,767
92
92
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
USEFUL INFORMATION FOR SHAREHOLDERS (UNAUDITED) (CONTINUED)
Level 1
Level 2
Level 3
Total
31 December 2022
€’000
€’000
€’000
€’000
Financial assets
Equity securities
Equities and warrants
-
-
18,641
18,641
Debt securities
Corporate bonds and other debt
securities
90,208
301,035
144,364
535,607
CLOs
-
-
51,617
51,617
Derivative financial instruments
Forward currency contracts
-
13,555
-
13,555
Total
90,208
314,590
214,622
619,420
Transfers between Level 2 and Level 3
Since 2020, there has been an increase in macroeconomic volatility, driven by a global pandemic,
conflict in Ukraine and Israel, high inflation and rising base rates. However, despite the volatility,
liquidity in the secondary market continued to be adequate and the Investment Vehicle Manager
has been able to continue to trade uninterrupted.
The Investment Manager believes that the impact of climate change, interest rate changes
and other geopolitical risks is accurately reflected in the valuations. There have been no new
or additional risks arising that would not already have been considered and monitored by the
Investment Vehicle Manager.
In 2023, there were investments reclassified from Level 2 to Level 3 having a market value of EUR
27.3 million (2022: EUR 44.6 million). In 2023, there were investments reclassified from Level 3 to
Level 2 having a market value of EUR 35.4 million (2022: EUR 4.1 million).
Investment Vehicle portfolio (continued)
Financial assets at fair value through profit or loss
(continued)
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
93
93
USEFUL INFORMATION FOR SHAREHOLDERS (UNAUDITED) (CONTINUED)
Investment Vehicle portfolio (continued)
Level 3 reconciliation
The following table shows a reconciliation of all movements in the fair value of financial
instruments categorised within Level 3 between the beginning and the end of the reporting year.
Corporate
bonds and
Equities and
other debt
Warrants
securities
CLOs
Total
€’000
€’000
€’000
€’000
Balance as at 1 January 2022
9,637
89,216
33,307
132,160
Recategorisation
-
7,351
(7,351)
-
Total gains/(losses) in statement
of comprehensive income during
the year
9,006
(10,307)
(11,970)
(13,271)
Purchases/subscriptions
10,187
39,891
39,343
89,421
Sales/redemptions
(10,189)
(22,243)
(1,712)
(34,144)
Transfers into and out of Level 3
-
40,456
-
40,456
Balance as at 31 December 2022
18,641
144,364
51,617
214,622
Total gains/(losses) in statement
of comprehensive income during
the year
(3,640)
(1,532)
8,824
3,652
Purchases/subscriptions
533
58,413
9,317
68,263
Sales/redemptions
-
(52,627)
(22,876)
(75,503)
Transfers into and out of Level 3
-
(8,070)
-
(8,070)
Balance as at 31 December 2023
15,534
140,548
46,882
202,964
Total unrealised losses and gains
at 31 December 2022 included
in statement of comprehensive
income for assets held at the end
of the year
9,048
(11,616)
(11,999)
(14,567)
Total unrealised losses and gains
at 31 December 2023 included
in statement of comprehensive
income for assets held at the end
of the year
(3,640)
(2,629)
9,520
3,251
94
94
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
USEFUL INFORMATION FOR SHAREHOLDERS (UNAUDITED) (CONTINUED)
Investment Vehicle portfolio (continued)
Quantitative information of significant unobservable inputs – Level 3
31 December
Range
2023
Valuation
(weighted
Description
€’000
technique
Unobservable input
average)
Equities and warrants
3,545
Broker quotes /
Discount to broker
N/A
other methods
quotes / valuation
method
Equities and warrants
11,989 Asset sale value
Transaction price
N/A
constituents
Equities and warrants
-
Earnings-
Market multiples
6.3x-6.3x
multiple
Corporate bonds and other
8,480Discounted Cash
Yield
7.2% – 10.0%
debt securities
Flow
Corporate bonds and other
132,067
Broker quotes /
Cost of market
N/A
debt securities
other methods
transactions /
Management
information
CLOs
46,882
Broker quotes /
Specific valuations of
N/A
other methods
the industry: expert
valuation
31 December
Range
2022
Valuation
(weighted
Description
€’000
technique
Unobservable input
average)
Equities and warrants
2,952
Broker quotes /
Discount to broker
N/A
other methods
quotes / valuation
method
Equities and warrants
15,689
Asset value
Valuation method
N/A
approach
Corporate bonds and other
16,596 Discounted Cash
Yield
8.15% – 12.3%
debt securities
Flow
Corporate bonds and other
127,768
Broker quotes /
Cost of market
N/A
debt securities
other methods
transactions /
multiple of listed
companies /
management
information
CLOs
51,617
Broker quotes /
Specific valuations of
N/A
other methods
the industry: expert
valuation
The board of the Investment Vehicle Manager and CPIM have valued the CLO positions at bid-
price as at 31 December 2023 and 31 December 2022, as they believe this is the most appropriate
value for these positions. The board of the Investment Vehicle and CPIM believe that where
certain credit facilities are classified as Level 3 due to limited number of broker quotes, there is
still sufficient supporting evidence of liquidity to value these at an undiscounted bid price.
The above categorisations and descriptions of valuation technique and unobservable inputs,
including ranges, may vary year-on-year due to changes or evolutions in valuation techniques as
well as the addition or removal of positions due to trade activity or transfers to or from Level 3.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
95
95
USEFUL INFORMATION FOR SHAREHOLDERS (UNAUDITED) (CONTINUED)
Investment Vehicle portfolio (continued)
Sensitivity analysis to significant changes in unobservable inputs within Level 3 hierarchy –
Level 3
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 are as shown below:
31 December 2023
Effect on fair
Description
Input
Sensitivity used
value €’000
Equities and warrants
Discount to broker quotes /
20%
1,265 / (1,265)
valuation method
Equities and warrants
Transaction price constituents
N/A
N/A
Equities and warrants
Market multiples
1x
60/(-)
Corporate bonds and other
Yield
2.5%
(466)/ 506
debt securities
Corporate bonds and other
Cost of market transactions /
10% 13,207 / (13,207)
debt securities
management information
CLOs
Specific valuations of the
20%
9,376 / (9,376)
industry: expert valuation
31 December 2022
Effect on fair
Description
Input
Sensitivity used
value €’000
Equities and warrants
Discount to broker quotes /
20%
1,144 / (1,147)
valuation method
Equities and warrants
Valuation method
20%
811 / (816)
Corporate bonds and other
Yield
2.5%
(575) / 616
debt securities
Corporate bonds and other
Cost of market transactions /
10%
12,777 / (12,777)
debt securities
Multiple of listed companies /
Management information
CLOs
Specific valuations of the
20% 10,323 / (10,323)
industry: expert valuation
The above categorisations, unobservable inputs and use of sensitivities may vary year-on-year due
to changes or evolutions in valuation techniques as well as the addition or removal of positions
due to trade activity or transfers to or from Level 3.
The below information details loans and borrowings for the Investment Vehicle.
Effective
31 December
31 December
interest rate
2023
2022
(EIR, %)
Maturity
€’000
€’000
Loan – Bank
(principal: €157.5 million)
5.32%
28-Jul-25
154,964
157,328
Interest on loan - bank
1,526
763
Total
156,490
158,091
96
96
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
USEFUL INFORMATION FOR SHAREHOLDERS (UNAUDITED) (CONTINUED)
Investment Vehicle portfolio (continued)
Sensitivity analysis to significant changes in unobservable inputs within Level 3 hierarchy –
Level 3 (continued)
On 28 July 2022, the existing facility was fully paid and closed out and a new credit facility
agreement was entered into by the Investment Vehicle with a different finance provider. The new
loan facility has a maturity date of 28 July 2025 and a rate of interest of (a) Margin of 0.95%; and
(b) 3-Month Euribor floor 0% payable on a quarterly basis.
The facility includes a covenant that a maximum of 20% of the Investment Vehicle ’s Gross Assets
(as defined in the PPM) is invested or shall be invested in structured finance securities at any
time. As at year-end, the Investment Vehicle had an exposure to structured finance securities
(CLOs) of 7.27% (2022: 8.33%).
The financing bank has collateral to the loans held by the Investment Vehicle, and to high yield
bonds (to the extent that these are not subject to a repurchase agreement), as well as to the cash
accounts (excluding custody accounts).
Dividend history
Total dividend paid
Total dividend paid
Year ended
per Sterling share
per Euro share
2014
£0.03500
€0.03500
2015
£0.05000
€0.05000
2016
£0.06250
€0.06250
2017
£0.05250
€0.05250
2018
£0.05500
€0.05500
2019
£0.05500
€0.05500
2020
£0.04875
€0.04875
2021
£0.04750
€0.04750
2022
£0.05250
€0.05250
2023
£0.08125
€0.07000
AIFMD report
The Company (which is a non- EU) AIF for the purposes of the AIFM Directive and related regimes
in European Economic Area member states) is a self-managed fund and therefore acts as the
deemed AIFM of the Company. The Company is authorised as an Alternative Investment Fund
Services Business as defined under Article 2(11) of the Financial Services (Jersey) Law 1998 and,
as such, fulfils the role of Alternative Investment Fund Manager.
In 2014, the Company registered with the Jersey Financial Services Commission, being the
Company’s competent regulatory authority, as a self-managed non-EU AIF, and has registered
with the UK Financial Conduct Authority, under the relevant NPPR.
In 2015, the Company registered with the Finnish Financial Supervisory Authority, Belgium
Financial Services and Markets Authority, Danish Finanstilsynet, Luxembourg Commission de
Surveillance du Secteur Finacier and Swedish Finansinspektionen, under the relevant NPPR of
each jurisdiction.
In 2017, the Company registered with Central Bank of Ireland, under the relevant NPPR.
As the Company is non-EU domiciled, no depositary has been appointed in line with the AIFM
Directive, however BNP Paribas S.A., Jersey Branch has been appointed to act as custodian.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
97
97
USEFUL INFORMATION FOR SHAREHOLDERS (UNAUDITED) (CONTINUED)
AIFMD report (continued)
Information relating to the current risk profile of the Company and the risk management systems
employed by the Company to manage those risks, as required under paragraph 4(c) of Article 23
of the AIFM Directive, is set out in note 8 – financial risk management. Refer to pages 18 to 21 for
the Board’s assessment of the principal risks and uncertainties facing the Company.
AIFM remuneration
The total fees paid to the Board by the Company are disclosed within the Directors’ Remuneration
Report and in note 4.
Article 22(2)(e) and 22(2)(f) of the AIFM Directive is not deemed applicable as the AIFM has no
staff. No other remuneration costs have been incurred with the exception of those costs incurred
by the Board as referenced above.
Index Disclaimer
The
Credit Suisse Western European Leveraged Loan Index
is an unmanaged market value-
weighted index representing the investable universe of the U.S. dollar and Western European
currencies-denominated leverage loan market. The index reflects reinvestment of all distributions
and changes in market prices. The index inception is January 1998.
The indices are provided for informational purposes and comparison only and differ from the fund
shown in their strategy, investment restrictions and guidelines. Indexes are unmanaged and do
not reflect the deduction of fees and expenses payable by the fund. Other market return data
also does not reflect the deduction of fees and expenses, which will reduce an investor’s returns.
Investments cannot be made directly in an index.
Benchmarks and financial indices are shown for illustrative purposes only and are provided for
the purpose of making general market data available as a point of reference only. Information
related to indices and benchmarks, has been provided by and/or is based on third party sources
and, although believed to be reliable, has not been independently verified. Such benchmarks
and financial indices may not be available for direct investment, may be unmanaged, assume
reinvestment of income, do not reflect the impact of any trading commissions and costs,
management or performance fees, and have limitations when used for comparison or other
purposes because they, among other reasons, may have different trading strategy, volatility,
credit, or other material characteristics (such as limitations on the number and types of
securities or instruments). The Fund’s investment objective is not restricted to the securities and
instruments comprising any one index. No representation is made that any benchmark or index
is an appropriate measure for comparison.
Alternative Performance Measures disclosure
In accordance with ESMA Guidelines on APMs, the Board has considered what APMs are included in
the Annual Financial Report, including the financial statements, which require further clarification.
An APM is defined as a financial measure of historical or future financial performance, financial
position, or cash flows, other than a financial measure defined or specified in the applicable
financial reporting framework. APMs included in the financial statements, which are unaudited
and outside the scope of IFRS, are deemed to be as follows:
98
98
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
USEFUL INFORMATION FOR SHAREHOLDERS (UNAUDITED) (CONTINUED)
Alternative Performance Measures disclosure (continued)
Share price total return
The share price total return is expressed as a percentage of the change in the Sterling and Euro
share price during the year, including the annual dividend paid during the year.
31 December 2023
31 December 2022
Sterling
Sterling
shares
Euro shares
shares
Euro shares
Opening share price (A)
£0.9200
€0.8200
£1.0400
€0.9500
Closing share price (B)
£1.0050
€0.9300
£0.9200
€0.8200
Annual dividend per share (C)
£0.0813
€0.0700
£0.0525
€0.0525
Share price total return (D=((B-
A+C)/A))
18.08%
21.95%
(6.49)%
(8.16)%
Dividend yield
The dividend yield is the dividend per Sterling and Euro share expressed as a percentage of the
Sterling and Euro share price (bid price).
31 December
31 December
2023
2022
Sterling shares
Annual dividend per Sterling share
£0.08125
£0.05250
Share price (bid price)
£1.00500
£0.9200
Dividend yield
1
8.08%
5.71%
Euro shares
Annual dividend per Euro share
€0.07000
€0.05250
Share price (bid price)
€0.93000
€0.8200
Dividend yield
1
7.53%
6.40%
1
Annual dividend yield per Sterling share and Euro share as at 31 December 2023 and 31 December 2022 is based on the
four quarterly dividends announced and paid by the Company during the 12 months prior to the year end as applicable.
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
99
99
USEFUL INFORMATION FOR SHAREHOLDERS (UNAUDITED) (CONTINUED)
Alternative Performance Measures disclosure (continued)
NAV Total Return
The Company’s Sterling share and Euro share NAV capital return is calculated by dividing the
difference between the closing NAV per share and the opening NAV per share by the opening
NAV per share. The income return is calculated by adding each dividend paid back to the NAV
per share on the ex-dividend date (being the date dividends are deducted from the NAV of the
Company). This amplifies the value of each dividend paid by the capital return and demonstrates
the effect of reinvesting dividends back into the Company at the ex-dividend date. The total
return is then determined by adding the capital and income return. The total return calculations
are presented below.
Annual
Annual
dividend
31 December
dividend
31 December
Sterling share
per share
2023
per share
2022
Opening NAV per share
£0.9796
£1.1058
Closing NAV per share
£1.1134
£0.9796
Capital return
13.66%
(11.41)%
Income return
£0.08125
9.13%
£0.05250
4.66%
Total return
22.79%
(6.75)%
Euro share
Opening NAV per share
€0.8902
€1.0266
Closing NAV per share
€1.0070
€0.8902
Capital return
13.12%
(13.29)%
Income return
€0.07000
8.57%
€0.05250
4.97%
Total return
21.69%
(8.32)%
NAV total return vs monitored indices
The NAV total return measures how the NAV per Sterling share and Euro share has performed over
a period of time, taking into account both capital returns and dividends paid to shareholders.
The Company quotes NAV total return as a percentage change from a certain point in time,
such as the initial issuance of Sterling and Euro shares or the beginning of the period, to the
latest reporting date, being 31 December 2023 in this instance. It assumes that dividends paid to
shareholders are reinvested back into the Company therefore future NAV gains are not diminished
by the paying of dividends.
100
100
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
USEFUL INFORMATION FOR SHAREHOLDERS (UNAUDITED) (CONTINUED)
Alternative Performance Measures disclosure (continued)
NAV total return vs monitored indices (continued)
The Board monitors the Company’s NAV total return against the Credit Suisse Western European
High Yield Index (hedged in Euros) total return and Credit Suisse Western European Leveraged
Loan Index (hedged in Euros) total return. The total return results for both the Company’s NAV
and the monitored indices over certain time periods are presented below:
Since
3 Months
6 Months
12 Months
inception
Sterling NAV Total Return
2.94%
10.10%
22.79%
9.32%
Euro NAV Total Return
2.66%
9.42%
21.69%
(1.55)%
Credit Suisse Western European
High Yield Index (hedged in Euros)
Total Return
5.39%
7.11%
12.50%
45.92%
Credit Suisse Western European
Leveraged Loan Index (hedged in
Euros) Total Return
1.83%
5.42%
12.46%
47.66%
Discount
The NAV per share is the value of the Company’s assets, less any liabilities it has, divided by the
total number of Sterling and Euro shares. However, because the Company’s ordinary shares are
traded on the London Stock Exchange’s Main Market, the share price may be higher or lower than
the NAV. The difference is known as a premium or discount. The Company’s premium or discount
to NAV is calculated by expressing the difference between the period end respective share class
price (bid price) and the period end respective share class NAV per share as a percentage of the
respective NAV per share.
At 31 December 2023, the Company’s Sterling shares and Euro shares traded at £1.0050 (2022:
£0.9200) and €0.9300 (2022: €0.8200), respectively. The Sterling shares traded at a discount of
9.73% (2022: 6.08% discount) to the NAV per Sterling share of £1.1134 (2022: £0.9796) and the
Euro shares traded at a discount of 7.64% (2022: 7.88% discount) to the NAV per Euro share of
€1.0070 (2022: €0.8902).
Ongoing charges
The Company has chosen the AIC’s methodology for calculating an ongoing charges figure. In
line with the AIC’s recommended guidance on ongoing charges, the ongoing charges include the
Company’s operating expenses and a relevant proportion of the Investment Vehicle’s operating
expenses, excluding finance costs, share issue or buyback costs and non-recurring legal and
professional fees, expressed as a percentage of the average of the weekly net assets during the
year; refer below for further details. The Company’s ongoing charges ratio for the year ended
31 December 2023 was 1.79% (2022: 1.78%). The Company’s ongoing charges ratio is based on
annualised ongoing charges of €4,530,036 (2022: €4,681,787) divided by average NAV in the year
of €253,436,313 (2022: €263,566,986).
Calculating ongoing charges
The ongoing charges are based on actual costs incurred in the year excluding any non-recurring
fees in accordance with the AIC methodology. Expense items have been excluded in the calculation
of the ongoing charges figure when they are not deemed to meet the following AIC definition:
“Ongoing charges are those expenses of a type which are likely to recur in the foreseeable future,
whether charged to capital or revenue, and which relate to the operation of the investment
company as a collective fund, excluding the costs of acquisition/disposal of investments, financing
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
101
101
USEFUL INFORMATION FOR SHAREHOLDERS (UNAUDITED) (CONTINUED)
charges and gains/losses arising on investments. Ongoing charges are based on costs incurred in
the year as being the best estimate of future costs.”
Ongoing charges methodology
2
In accordance with the recommended methodology for the calculation of an ongoing charge
figure published by the AIC, the Company has incorporated, in addition to a relevant portion of
the Investment Vehicle management fee,
3
a relevant proportion Investment Vehicle operating
expenses (that would be considered ongoing charges under the AIC methodology) into its
own ongoing charges figure. For the avoidance of doubt, the ongoing charges ratio includes
the Company’s pro-rata share of the Investment Vehicle management fee, custodian and
administration expenses and other general expenses but excludes interest costs and performance
fees.
Refer below for ongoing charges reconciliation:
31 December
31 December
2023
2022
€
€
Total operating expenses for the year
1,436,945
1,701,287
Expenses excluded from the calculation of ongoing charges
figures, in accordance with AIC’s methodology:
Professional fees
(92,597)
(263,961)
Total ongoing charges for the year (excluding Investment
Vehicle operating expenses and management fee)
1,344,348
1,437,326
Add: Investment Vehicle operating expenses
947,462
916,140
Add: Investment Vehicle management fee
3
2,238,226
2,328,320
Total ongoing charges for the year (including Investment
Vehicle operating expenses and management fee)
4,530,036
4,681,787
31 December 2023
31 December 2022
Sterling
Sterling
shares
Euro shares
shares
Euro shares
Ongoing charges ratio
1.77%
1.82%
1.76%
1.80%
2
The Company’s ongoing charges are considered to be APMs and differ to the ongoing costs disclosed within the Company’s
KIDs which follows the methodology prescribed by EU rules. For example, the ongoing costs disclosed in the Company’s
KIDs include interest expense and are based on average ongoing charges over the past three years whereas the ongoing
charges ratio disclosed in this report do not include interest expense and are based on ongoing charges incurred during
the year ended 2023 only. The Company’s most current KIDs and an accompanying explanatory note reconciling the two
different ratios are available on the Company’s website (https://ig.cvc.com/key-information-documents/).
3
The Investment Vehicle management fee is 0.90%, which reduces by a further 5 basis points each time the Investment
Vehicle’s NAV exceeds €500m, €750m and €1bn respectively, to a minimum of 0.75% per annum.
Alternative Performance Measures disclosure (continued)
102
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
GLOSSARY
Administrator
BNP Paribas S.A., Jersey Branch
Advisor fees
Cost of services provided by Mr Justin Atkinson to assist with the
marketing and promotion of the Company’s shares
AGM
Annual General Meeting
AIC
Association of Investment Companies
AIC Code
AIC Code of Corporate Governance, February 2021
AIF
Alternative Investment Fund
AIFM
Alternative Investment Fund Manager
APMs
Alternative Performance Measures
Auditor
Ernst & Young LLP
Borrowing Limit
Up to an amount equal to 100% of the NAV of the Investment
Vehicle at the time of borrowing
CEO
Chief Executive Officer
CFO
Chief Finance Officer
CLOs
Collateralised Loan Obligations
Company
CVC Income & Growth Limited
Continuation Resolution
An ordinary resolution proposed by the Directors that the
Company continue its business as a closed-ended investment
company
Conversion Vehicle
Conversion SPV Limited
CPIM
CVC Credit Partners Investment Services Management Limited
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
103
103
GLOSSARY (CONTINUED)
Credit Opportunities
Refers to investments where CVC Credit Partners anticipates
an event in a specific credit is likely to have a positive impact
on the value of its investment. This may include events such
as a repayment event before maturity, a deleveraging event, a
change to the economics of the instrument such as increased
margin and/or fees or fundamental or sentiment driven
change in the value. CVC Credit Partners seeks relative value
opportunities which involve situations where market technicals
have diverged from credit fundamentals often driven by selling
by mandate constrained investors, CLO managers or hedge funds
rebalancing their portfolios, macro views affecting different
credit instrument types or sales by banks. CVC Credit Partners
has additional flexibility compared to mandate-constrained
capital and believes these assets have potential for capital gains
and early cash flow generation based on the acquisition prices
CVC Group
CVC Group being CVC Credit Partners and CVC Credit Partners
Group Holding Foundation, together with its direct and indirect
subsidiaries and their respective affiliates and excluding any
funds managed and/or advised by the CVC Group
DTRs
Disclosure Guidance and Transparency Rules
EEA
European Economic Area
EBITDA
Earnings before interest, taxes, depreciation, and amortisation
ELFA
European Leveraged Finance Association
Enterprise Multiple
Enterprise value divided by EBITDA
ESG
Environmental, Social and Governance
EU
European Union
FRC
Financial Reporting Council
IFRS
International Financial Reporting Standards
IFRS 13
IFRS 13 – Fair Value Measurement
IPO
Initial Public Offering on 25 June 2013
Investment Vehicle
Compartment A of CVC European Credit Opportunities S.à r.l.
Investment Vehicle
Manager (CVC Credit
Partners)
CVC Credit Partners Investment Management Limited
104
104
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
GLOSSARY (CONTINUED)
Investment Vehicle Services
Manager
CVC Credit Partners Investment Services Management Limited
JNP
Jersey National Park
KID
Key Information Document
KPIs
Key Performance Indicators
Loan to Value
Total leverage divided by Enterprise Multiple
LTM
Last twelve months
NAV
Net Asset Value
NPPRs
National Private Placement Regimes
PECs
Preferred Equity Certificates
Performing Credit
Generally refers to senior secured loans and senior secured high
yield bonds sourced in both the primary and secondary markets.
The investment decision is primarily driven by a portfolio decision
around liquidity, cash yield and volatility
PRI
Principles for Responsible Investment
SID
Senior Independent Director
TCFD
Task Force on Climate-Related Financial Disclosures
Trust
CVC Credit Partners European Opportunities Limited Purpose
Trust
Total Leverage
Total debt divided by EBITDA
UK Code
The UK Corporate Governance Code 2018
Viability Statement
A statement made by the Directors explaining how they assessed
the prospects of the Company, over which period they have done
so and why they consider that period to be appropriate
CVC INCOME & GROWTH LIMITED ANNUAL FINANCIAL REPORT 31 DECEMBER 2023
105
COMPANY INFORMATION
Registered Office
IFC1, The Esplanade
St Helier, Jersey
JE1 4BP
Advocates to the Company
(as to Jersey law)
Bedell Cristin
26 New Street
St Helier, Jersey
JE2 3RA
Investment Vehicle Manager
CVC Credit Partners Investment
Management Limited
111 Strand, London
WC2R 0AG
Custodian
BNP Paribas S.A.,
Jersey Branch
1
IFC1, The Esplanade
St Helier, Jersey
JE1 4BP
Corporate Services Manager
CVC Credit Partners Investment Services
Management Limited
27 Esplanade,
St Helier, Jersey
JE1 1SG
Auditor
Ernst & Young LLP
25 Churchill Place
Canary Wharf
London
E14 5EY
Corporate Brokers
Goldman Sachs International
Peterborough Court,
133 Fleet Street
London
EC4A 2BB
Administrator and Company Secretary
BNP Paribas S.A.,
Jersey Branch
1
IFC1, The Esplanade
St Helier, Jersey
JE1 4BP
Winterflood Securities Limited
The Atrium Building
Cannon Bridge House
25 Dowgate Hill
London
EC4R 2GA
Registrar
Computershare Investor Services (Jersey) Limited
13 Castle Street
St Helier, Jersey
JE1 1ES
Solicitors to the Company
(as to English law)
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London
EC2A 2EG
Distribution and Investor Relations Adviser to
the Company
Cadarn Capital Ltd
1 Fore Street Avenue
London
EC2Y 9DT
1
BNP Paribas S.A., Jersey Branch is regulated by the Jersey Financial Services Commission.
For Investors in Switzerland:
The Prospectus, the Memorandum and Articles of Association as well as the annual and half-yearly
financial reports of the Company may be obtained free of charge from the Swiss Representative.
In respect of the shares distributed in and from Switzerland to qualified investors, the place of
performance and the place of jurisdiction is at the registered office of the Swiss Representative.
Swiss Representative: First Independent Fund Services Ltd., Feldeggstrasse 12, CH-8008 Zurich,
Switzerland.
Swiss Paying Agent: Helvetische Bank AG, Seefeldstrasse 215, CH-8008 Zurich, Switzerland.
ig.cvc.com
CVC Income & Growth Limited