VPC Specialty Lending Investments PLC
ANNUAL REPORT
AND AUDITED
FINANCIAL STATEMENTS
For the year ended 31 December 2023
VPC SPECIALTY LENDING
INVESTMENTS PLC
INTRODUCTION
Financial Highlights 1
Introduction to the Company and the Group 4
Investment Objectives 4
STRATEGIC REPORT
Chairman’s Statement 6
Investment Manager’s Report 9
Business Model 15
Performance Management 16
Principal Risks 17
Culture 24
Employees, Human Rights, Social 25
and Community Issues
Board Diversity 25
Environmental, Social, and Governance 25
(ESG) Issues
Streamlined Energy and Carbon 25
Reporting (SECR)
INDEPENDENT AUDITORS’ REPORT
Independent Auditors’ Report 27
FINANCIAL STATEMENTS
Consolidated Statement of 36
Financial Position
Consolidated Statement of 38
Comprehensive Income
Consolidated Statement of 40
Changes in Equity
Consolidated Statement of 42
Cash Flows
Parent Company Statement of 44
Financial Position
Parent Company Statement of 45
Changes in Equity
Parent Company Statement of 47
Cash Flows
Notes to the Consolidated 48
Financial Statements
GOVERNANCE
Board of Directors 95
Directors’ Report 96
Corporate Governance Statement 101
Audit and Valuation Committee Report 114
Directors’ Remuneration Report 117
Statement of Directors’ Responsibilities in 122
Respect of the Financial Statements
Regulatory Disclosures 123
SHAREHOLDER INFORMATION
Shareholder Information 125
Definitions of Terms and Alternative 128
Performance Measures
Contact Details of the Advisers 129
CONTENTS
Company Number 9385218
FINANCIAL HIGHLIGHTS
RETURN SUMMARY FOR THE YEAR ENDED 31 DECEMBER 2023
All the terms and alternative performance measures above are defined on page 128.
Inception to Date
Total Shareholder Return
(based on share price)
29.79%
(2022: 38.69%)
Inception to Date
NAV (Cum Income) Return
47.44%
(2022: 56.91%)
Ordinary Share Price
at 31 December 2023
66.20p
(2022: 83.10p)
Net Asset Value per
Ordinary Share
80.91p
(2022: 98.19p)
Discount to NAV
at 31 December 2023
18.18%
(2022: 15.37%)
2023 NAV (Cum Income)
Return
–9.45%
(2022: –6.97%)
Dividends per
Ordinary Share
8.00p
(2022: 8.00p)
Total Shareholder Return
at 31 December 2023
(based on share price)
–10.71%
(2022: –1.19%)
Revenue Return
£25.62 million
(2022: £28.02 million)
Total Net Return
–£25.83 million
(2022: –£22.11 million)
INTRODUCTION
VPC SPECIALTY LENDING INVESTMENTS PLC
1
COMPANY PERFORMANCE
The table below illustrates the Company’s Cumulative NAV return and dividend per share for the last three years from 1January
2021 to 31 December 2023.
1
ORDINARY SHARE PERFORMANCE
The table below illustrates the Company’s Ordinary Share performance over the past three years. The Company’s discount to its
Ordinary Share NAV remained relatively consistent since the start of 2022 with the discount increasing to 20.45% from 15.37%
at the end of 2023 when compared to 2022. The largest discount during the year was 27.40% (2022: 29.39%) while the smallest
discount was 13.32% (2022: 14.63%). The graph below illustrates the movement between the trading price of the Ordinary Shares
and the announced NAV adjusted for dividends declared. Further information on the share price discount management policy
can be found on page 16.
–60.00%
–50.00%
–40.00%
–30.00%
–20.00%
–10.00%
0.00%
10.00%
20.00%
30.00%
Discount
Price
NAV
Price / NAV
(cum income)
Premium / Discount
40.00
50.00
60.00
70.00
80.00
90.00
100.00
110.00
120.00
130.00
Dec-23Sep-23Jun-23Mar-23Dec-22Sep-22Jun-22Mar-22Dec-21Sep-21Jun-21Mar-21Dec-20
NAV Return (%)
Dividends (p)
0
10
20
30
40
50
60
0
10
20
30
40
50
60
Dec-23Sep-23Jun-23Mar-23Dec-22Sep-22Jun-22Mar-22Dec-21Sep-21Jun-21Mar-21Dec-20
Dividend
NAV
INTRODUCTION continued
VPC SPECIALTY LENDING INVESTMENTS PLC
2 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
TOP TEN POSITIONS
The tables below provide a summary of the top ten exposures of the Group, net of gearing, as at 31 December 2023 by both
asset backed lending and equity investment. The summary includes a look-through of the Group’s investments in VPC Synthesis,
L.P. and VPC Offshore Unleveraged Private Debt Fund Feeder, L.P. to illustrate the exposure to underlying Portfolio Companies as
it is a requirement of the investment policy (set out on pages 125 and 126) to consider the application of the restrictions in this
policy on a look-through basis.
ASSET BACKED LENDING INVESTMENT COUNTRY EXPOSURE (£)
Deinde Group, LLC United States 38,087,857
Razor Group GMBH Germany 21,602,947
Perch HQ, LLC United States 19,069,470
FinAccel Pte Ltd Singapore 17,642,647
Heyday Technologies, Inc. United States 13,017,276
Elevate Credit, Inc. United States 9,376,011
Counsel Financial Holdings, LLC United States 8,486,624
Juvo Solutions, LLC United States 8,747,121
Dave, Inc. United States 3,769,775
Moonshot Brands Inc. Latin America 3,593,763
EQUITY INVESTMENT COUNTRY EXPOSURE (£)
WeFox Holding AG Switzerland 19,917,885
Caribbean Financial Group Holdings, L.P. Latin America 11,339,755
L&F Acquisition Holding Fund, L.P. United States 5,737,743
Sunbit, Inc. United States 3,456,842
FinAccel Pte Ltd Singapore 3,194,149
Keller Lenker, LLC United States 2,602,177
West Creek Financial, Inc. United States 2,545,402
VPC Impact Acquisition Holdings United States 2,380,476
Pattern Brands United States 2,012,320
Calumet Capital United States 1,982,177
VPC SPECIALTY LENDING INVESTMENTS PLC
3
INTRODUCTION TO THE COMPANY AND THE GROUP
VPC Specialty Lending Investments PLC (the “Company” or “VSL”) provides asset-backed lending solutions to emerging and
established businesses (“Portfolio Companies”) with the goal of building long-term, sustainable income generation. VSL focuses
on providing capital to vital segments of the economy, which for regulatory and structural reasons are underserved by the
traditional banking industry. Among others, these segments include small business lending, working capital products, consumer
finance and real estate. VSL offers shareholders access to a diversified portfolio of opportunistic credit investments originated by
non-bank lenders with a focus on the rapidly developing technology-enabled lending sector.
The Company’s investing activities are undertaken by Victory Park Capital Advisors, LLC (the “Investment Manager” or “VPC”). VPC
is an established private capital manager headquartered in the United States with a global presence. VPC identifies and finances
emerging and established businesses globally and seeks to provide the Company with attractive yields on its portfolio of credit
investments. VPC offers a differentiated private lending approach by financing Portfolio Companies through asset-backed delayed
draw term loans, which is referred to as “Asset Backed Lending,” designed to limit downside risk while providing shareholders
with strong income returns. Through rigorous due diligence and credit monitoring by the Investment Manager, the Company
generates stable income with significant downside protection.
A summary of the principal terms of the Investment Manager’s appointment and a statement relating to their continuing
appointment can be found on page 113. The investment policy can be found beginning on page 125 of this Annual Report.
Founded in 2007 and headquartered in Chicago, VPC is an SEC-registered investment adviser that has been actively involved in
the financial services marketplace since 2010.
This annual report for the year to 31 December 2023 (the “Annual Report”) includes the results of the Company (also referred to
as the “Parent Company”) and its consolidated subsidiaries (together the “Group”). The Company (No. 9385218) was admitted to
the premium listing segment of the Official List of the Financial Conduct Authority (“FCA”) (the “Official List”) and to trading on
the London Stock Exchange’s main market for listed securities (the “Main Market”) on 17 March 2015, raising £200 million by
completing a placing and offer for subscription (the “Issue”). The Company raised a further £183 million via a C Share issue on
2 October 2015. The C Shares were converted into Ordinary Shares and were admitted to the Official List and to trading on the
Main Market on 4 March 2016.
INVESTMENT OBJECTIVE
The Company’s investment objective is to conduct an orderly realisation of the assets of the Company, to be effected in
a manner that seeks to achieve a balance between returning cash to Shareholders promptly and maximising value.
INVESTMENT POLICY
The Company’s investments will be realised in an orderly manner, that is, with a view to achieving a balance between returning
cash to Shareholders promptly and maximising value.
Until 30 June 2023, the Company could make new investments directly (in aggregate) up to 5%. of its Gross Assets (at the time
of the investment) in consumer loans, SME loans, advances against corporate trade receivables and/or purchases of corporate
trade receivables originated by portfolio companies (“Debt Instruments”).
Following this period, the Company may not make any new investments save that: (a) investments may be made to honour
existing documented contractual commitments to existing portfolio companies as a majority of the Company’s investments are
delayed draw term loans; (b) further investment may be made into the Company’s existing investments without redemption
rights in order to preserve the value of such investments; and (c) realised cash may be invested in cash or cash equivalents,
government or public securities (as defined in the rules of the UK Financial Conduct Authority), money market instruments,
bonds, commercial paper or other debt obligations with banks or other counterparties having a “single A” (or equivalent) or
higher credit rating as determined by any internationally recognized rating agency selected by the directors of the Company
(which may or may not be registered in the European Union) (“Cash Instruments”) pending its return to Shareholders in
accordance with the Company’s investment objective.
Any return of proceeds to the Shareholders will be subject to compliance with existing gearing facilities and hedging
arrangements, payment of expenses and reserves for potential liabilities.
The Company will continue to comply with the restrictions imposed by the Listing Rules.
INTRODUCTION continued
VPC SPECIALTY LENDING INVESTMENTS PLC
4 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
STRATEGIC
REPORT
The Strategic Report comprises a review of the Company’s performance for the year ended 31 December 2023, the
Chairman’s Statement, and Strategy and Business Model, including principal and emerging risks and disclosures on
environmental matters, human rights, employee, social and community issues.
The aim of the Strategic Report is to provide shareholders with the ability to assess how the Directors have performed in
their duty to promote the success of the Company in accordance with section 172 of the Companies Act 2006 (the “Act”) by:
analysing development and performance using appropriate Key Performance Indicators (“KPIs”);
providing a fair and balanced review of the Company and Group’s business;
outlining the principal risks and uncertainties affecting the Company and the Group;
describing how the Company manages these risks;
setting out the Company’s environmental, social and ethical policy;
outlining the main trends and factors likely to affect the future development, performance and position of the
Company’s business; and
setting out the direction in which the Company and the Group is heading.
STRATEGIC REPORT continued
VPC SPECIALTY LENDING INVESTMENTS PLC
6 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
CHAIRMAN’S STATEMENT
The Company faced multiple challenges during 2023. With inflation remaining high in many advanced economies, a major theme
throughout the year was the continued tightening of monetary policy through the raising of interest rates, which constrained
spending by business and consumers. This made for a difficult environment for the Company’s equity portfolio, which continued
to experience setbacks. Additionally, the eCommerce industry experienced various challenges in 2023, including competition
growth, supply-chain interruptions, and increased regulation. The Company’s eCommerce portfolio was negatively affected by
these industry changes, which also detracted from the Company’s performance.
A further challenge was the stubbornly wide discount to net asset value (“NAV”) at which the Company’s shares traded. In its
review of 2023, the Association of Investment Companies (“AIC”) reported that, on average, UK investment trusts traded at a
double-digit discount to NAV for the entire year – the first time that this has happened since 2008.
1
Discounts have been
especially steep for investment trusts that invest in illiquid assets. Although discounts have narrowed from their widest point of
October 2023, they remain in the double digits. The high discount is one of the reasons the Directors recommended the
managed wind-down, which shareholders approved in June.
Despite the unfavourable and uncertain environment, the Company’s core asset-backed lending business continued to perform
well in 2023. This component of the portfolio benefitted from rising short-term interest rates for most of the year because most
of its loans have variable rates. Meanwhile, the negative unrealised capital returns from the equity portfolio were driven by three
main factors: (i) depressed revenues and margin; (ii) marking the equity investments to current exit values; and (iii) reflecting the
impact of terms of mergers within the portfolio as of year-end and reflecting the general downward trend in comparable
multiples. Here, we should note that Victory Park Capital Advisors, LLC (the “Investment Manager” or “VPC”) have a stated policy
of taking a rigorous and conservative approach to valuations. For more information on this, see the Investment Manager’s Report.
2023 HIGHLIGHTS
Gross revenue return of +13.93% offset by a gross capital unrealised loss of –18.34%;
NAV total return of –9.45% for the year and +47.44% from inception to date;
Total Shareholder return of –10.71% for the year and a cumulative return of +29.79% from inception to date;
Robust performance of the asset-backed loan investments;
In December 2023 and January 2024, the Company received full repayment of the debt investments in Applied Data
Finance, LLC, Elevate Credit, Inc., and Koalafi (formerly known as West Creek Financial, LLC). These three investments
returned $38.0 million of gross proceeds to the Company, before required repayments of the Company’s gearing
facility; and
A 24th consecutive quarterly dividend of 2.00p per share for the three-month period to December 2023 in February 2024.
THE COMPANY’S BUSINESS
As in the previous year, the Company experienced divergent performances from the asset-backed lending and equity portfolios.
For the twelve months to the end of December 2023, the NAV per share of the Company decreased by –7.45% on a total return
basis. This return consists of a NAV per share reduction from 98.19p to 80.91p, including 8.00p of dividends paid in 2023 (in line
with the target dividend of 8.00p per year set out in the IPO Prospectus), which were fully covered by the revenue returns during
the year. During the year, the Company’s share price fell from 83.10p to 66.20p.
At the year-end, the Company’s core asset-backed lending business represented 73.0% (67.0% at 31 December 2022) of the total
portfolio. This component of the portfolio has continued to benefit from a secure lending position, targeting minimal capital
losses and a high level of income generation that supports regular dividend payments. Most of the Company’s asset-backed
investments are delayed-draw, floating-rate senior secured loans that may have equity subordination. These investments are
secured by underlying collateral, which consists of consumer loans, small business loans, and alternative assets. The weighted
average coupon on the Company’s asset-backed investments increased from 14.65% as at 31 December 2022 to 16.41% as at
31December 2023, boosted by the sustained rise in short-term interest rates for most of the year. At the year-end, the expected
credit loss (“ECL”) reserve was £6.4 million (£16.4 million at 31 December 2022) on all of the Company’s debt investments.
Although there were significant unrealised losses in the investment portfolio during the year, these occurred as a result of taking
account of market information as it arose, in accordance with the Investment Manager’s strict valuation methodology. The
Investment Manager continues to work with underlying Portfolio Companies (primarily in the FinTech and eCommerce sectors)
as they restructure their balance sheets and evaluate strategic combinations to maximise shareholder value.
1
Investment company 2023 review (updated) | The AIC
VPC SPECIALTY LENDING INVESTMENTS PLC
7
CAPITAL RETURN TO SHAREHOLDERS
At the General Meeting on 12 June 2023, Shareholders approved the following proposed amendments:
To the Company’s investment policy with a view to realising the Company’s assets in an orderly manner that achieves a
balance between maximising the value received from investments and making timely returns of cash to the Company’s
Shareholders; and
To the investment management agreement between the Company and VPC as a consequence of the modification of the
Company’s investment policy (the “Investment Policy”) so as to better align the interests of the Shareholders and the
Investment Manager.
Since then, the Investment Manager has been working, and will continue to work, to exit the Company’s investments in
a manner that maximises Shareholder value in a timely and cost-effective manner.
We are also conscious that our Shareholder register features both institutional and retail investors. The Board therefore explored
mechanisms for structuring the return of capital so that neither investor group is disadvantaged. The option that the Company
decided to pursue is the distribution of capital on a strict pro rata basis. On 15 March 2024, the Company published a Notice of
General Meeting for the proposed adoption of a B Share Scheme to facilitate the return of capital to Shareholders. The General
Meeting was held on 5 April 2024, and the B Share Scheme was approved by Shareholders.
THE COMPANY’S ESG IMPACT
Following the June 2023 General Meeting, the Investment Manager has focused on the realisation of the Company’s assets in an
orderly manner. The Investment Manager continues to operate under its environmental, social and governance (“ESG”) policy and
monitors any ESG risks that it identifies and presents them to their Investment Committee for review. The Investment Manager
is then responsible for developing an action plan to address these risks as required. In addition, the Investment Manager
continues to be a signatory of the United Nations Principles for Responsible Investment, the leading global network for investors
committed to integrating ESG considerations into long-term investment decision-making.
Throughout the realisation process, the Investment Manager continues to ensure ESG considerations remain embedded in its
approach. The Investment Manager continues to emphasise the fair, responsible and ethical treatment of Portfolio Companies. In
some cases, this may require a degree of flexibility. Although most borrowers intend to repay their asset-backed investments at
the stated maturity dates, some have sought renegotiation. In some cases, this best serves the interests of the Company and its
Shareholders by increasing the likelihood of recovering the full value of the investments. Accordingly, the Investment Manager
extended certain debt maturities over the course of 2023. In addition, throughout the realisation process, the Company
continues to have policies and procedures in place to maintain a culture of good governance. These include policies and
procedures relating to all aspects of diversity, equity and inclusion.
OPERATIONAL RESILIENCE
Over the year, eCommerce companies had to contend with a slower growth environment and the effects of the cost-of-living
crisis in many countries. As high interest rates and elevated inflation constrained consumers, companies also had to cope with
strained supply chains. These came under further pressure towards the end of the year, with attacks on shipping in the Red Sea
and drought affecting transit through the Panama Canal. In this environment, many Portfolio Companies continued to engage
in cost-cutting activity and reassess their strategic combinations.
Risk management remains a critical function throughout the realisation process. The Investment Manager maintains
comprehensive operational processes and procedures that support a culture of compliance and institutional best practices.
A team of more than 25 risk and operations professionals proactively assess and monitor Portfolio Companies and related
activities on a daily, weekly or monthly basis using proprietary analytic tools. Technology systems and best-in-class service
providers are used to supplement internal capabilities. The Investment Manager’s expertise and experience in credit and
structuring, ability to navigate uncertain market conditions and emphasis on stringent risk management should facilitate
a disciplined and orderly realisation of the Company’s assets.
BOARD COMPOSITION
During 2023, two directors, Elizabeth Passey and Clive Peggram, retired from the Board. Both had served since the Company was
established in early 2015. As I commented at the time of the 2023 AGM, my fellow directors and I found Elizabeth and Clive’s
wise counsel and experience of the Company hugely valuable, and we thank them again for their contributions on our own
behalf and on the Company’s. The Board has taken the decision to recruit an additional director and the process has started.
OUTLOOK
As interest rates remain elevated and geopolitical uncertainty is likely to persist in the months ahead, we draw some
encouragement from the resilience that the Company has demonstrated over the past two years. In particular in the core
investments in asset-backed securities, the Investment Manager’s credit expertise and the implementation of judicious risk-
management measures have all helped the Company to weather a challenging period while maintaining a high and stable level
of income. The volatility of the unrealised equity portfolio is a challenge, and we are disappointed by its performance. Realising
good value will take some time, but we are also concerned that, as the debt portfolio matures, the equity holdings will likely
constitute a larger portion of total NAV and consequently impact the overall volatility of the portfolio, a risk the Board will seek
to mitigate.
With the realisation process now underway, the Board meets regularly to review the liquidity of unrealised holdings and progress
towards the Company’s revised investment objective. In this, we recognise that flexibility and patience are vital to get value from
individual investments and that arrangements may need to be altered to reflect changing circumstances and market conditions,
including the greater volatility that might arise from a higher proportion of equities. The Board and the Investment Manager will
proceed on a case-by-case and cost-conscious basis. In doing so, we must balance the need to maximise Shareholder value with
the time-sensitive requirements of many of our Shareholders. Throughout this process, we will strive to keep Shareholders
informed of progress and developments as they arise. We are also mindful that where markets are less conducive to liquidity,
the management of risk is crucial.
In recent weeks Shareholders approved the B share scheme for the efficient return of capital to Shareholders and we were
pleased to announce the first such distribution. Meantime, your Board and I would like to thank you for your continued support
as we work towards the successful realisation of the Company’s assets.
Graeme Proudfoot
Chair
23 April 2024
STRATEGIC REPORT continued
VPC SPECIALTY LENDING INVESTMENTS PLC
8 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
9
INVESTMENT MANAGER’S REPORT
ABOUT VPC
The Company’s investment manager is Victory Park Capital Advisors, LLC (the “Investment Manager” or “VPC”), an SEC-registered
and established credit manager. The Investment Manager was founded in 2007 and is headquartered in Chicago, Illinois, with
additional resources in New York, Los Angeles, San Francisco and London. VPC provides custom financing solutions across the
private-capital spectrum, focusing on asset-rich companies with significant corporate governance and strong growth trajectories.
VPC invests in both emerging and established businesses, across various industries in the US and abroad, that often cannot
access traditional sources of capital.
The Investment Manager seeks to partner with businesses that have strong corporate governance structures, compelling growth
trajectories and defensible market positions. As at 29 February 2024, VPC had invested approximately $10.0 billion across more
than 220 investments since inception. The Investment Manager believes that strong return and risk metrics result from a
combination of deep credit and structuring expertise, the ability to navigate uncertain market conditions and a significant
adherence to risk management.
The Investment Manager was founded by Richard Levy and Brendan Carroll, who have worked together for nearly two decades
across multiple credit cycles and market environments. As at 29 February 2024, VPC employed over 55 professionals across its
Investment, Risk and Operations, Legal and Investor Relations teams. For more information, please visit
www.victoryparkcapital.com.
STRATEGY AND BUSINESS MODEL
Protective Deal Structuring
The Company’s asset-backed investments lend against liquidation value and are resilient to significant amounts of
macroeconomic stress. These investments are structured as senior secured, delayed-draw term notes supporting a diversified
pool of collateral where the Portfolio Company contributes first-loss equity capital and VPC advances up to a specified funding
level against collateral that meets strict eligibility criteria. In many cases but not all, VPC has a secured interest in the operating
company and parent.
The Company’s asset-backed investments lend against a narrowly defined and dynamic collateral pool, which reduces adverse
selection risk. Collateral is evaluated regularly to help avoid deterioration of the collateralised assets. If needed, VPC can foreclose
on collateral and control the liquidation of assets to protect its investments. Furthermore, VPC requires the ability to “control
cash” in a blocked account or special-purpose vehicle and underwrites with strong structural protections that ring-fence the
assets.
Typical credit enhancements include first-loss equity subordination, robust covenant packages, extensive reporting requirements
and monitoring, corporate guarantees, first-lien priority, and transparency and control over cash. Additionally, VPC is
predominantly the agent and sole lender in its transactions, which maximises value for the Company.
Through this disciplined approach, VPC aims to align incentives between the Company and its Portfolio Companies, structure
resilient investments to minimise the impact of macroeconomic stress, hold its Portfolio Companies accountable and prepare exit
strategies.
Risk Management
The Investment Manager’s proactive risk management and its culture of compliance are the backbone of its investing ethos. VPC
has over 25 dedicated Risk and Operations professionals who proactively monitor investments daily, weekly or monthly, utilising
sophisticated, technology-driven analytics tools. VPC supplements traditional risk management with highly customised and
advanced portfolio analytics tools for risk management and reporting. Tools leveraged include iLevel, a cloud-based data storage
and analytics platform, and Tableau, a data-visualisation software. VPC’s proprietary Data Analytics and Risk Technology System
(DARTS) aggregates its exposure at the most granular level, which allows for real-time data analysis on an asset, deal and
fund-level basis.
The Investment Manager has a dedicated risk management team (“Risk Team”) that operates independently of the investment
team throughout the investment lifecycle. The Risk Team reports directly to the Investment Committee and is overseen by the
Chief Operating Officer. The Risk Team will often travel on-site to meet with Portfolio Companies throughout the duration of the
investment to ensure key metrics are being met and collateral performance is in line with expectations. The Risk Team meets
twice weekly with the Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, General Counsel, Senior Partner and
STRATEGIC REPORT continued
VPC SPECIALTY LENDING INVESTMENTS PLC
10 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
Senior Operations Professionals to discuss any material risk issues and key initiatives. The meetings cover both investment-level
and firm-wide matters. More broadly, the Investment Committee meets two to three times a week to collectively address and
manage potential risks as appropriate. Lastly, the Investment Manager may engage reputable third-party consultants to assess
specific industry-related risks.
REVIEW OF 2023 PERFORMANCE
Last year was another year of economic uncertainty and geopolitical turmoil with the war in Ukraine, tensions between China
and the US, and conflict that erupted once more in the Middle East. Supply chains remained under pressure, and consumers in
many countries had to contend with a continued cost-of-living crisis, in large part precipitated by persistently high inflation. In
response to inflationary pressures, key central banks continued to raise interest rates. The US Federal Reserve increased the
federal funds rate four times over the year, from 4.25%-4.5% to 5.25%-5.5%, although it refrained from further rate hikes after
July. This pause in further rate hikes gave rise to hopes that rates might be cut in 2024, although statements from Federal
Reserve officials have somewhat dampened optimism.
With financing options harder to come by in an environment of higher interest rates, venture capital (“VC”) markets have been
subdued, and VC investors have been cautious. The excitement over generative artificial intelligence meant that other
technology-focused companies struggled to secure funding. Moreover, the collapse of Silicon Valley Bank and the poor
post-flotation performance of several high-profile technology companies added to VC investors’ wariness. Crunchbase reports
that VC funding fell to its lowest level for five years in 2023, with a 38% decline from the previous year. Meanwhile, mergers and
acquisitions (“M&A”) fell to their lowest level for a decade.
Similar to 2022, VPC’s strong performance of its asset-backed lending investments was outweighed by weakness in the equity
portion of the portfolio in 2023. By year-end, the Company’s asset-backed lending investments represented approximately 73.0%
of the total investment portfolio. Here, the Company benefitted from continued increases in short-term interest rates during the
year, which underscore the power of variable-rate loans. The remainder of the investment portfolio comprises the Company’s
equity interests.
The Company completed the year with a NAV total return of –9.45%, a gross revenue return of +13.93% and a gross capital
return of –18.34%. The Company’s revenue return remained in line with expectations, providing a full cash coverage of the 8.00p
per share dividend for Shareholders during the year as set out in the IPO Prospectus (the “Target Dividend”). In February 2024,
the Company declared its 24th consecutive quarterly dividend payment of 2.00p per share for the three months to 31 December
2023, and the dividend was paid to Shareholders in March 2024. The table below outlines the gross revenue and capital returns
by sector (FinTech, eCommerce, Legal Finance and special-purpose acquisition companies (“SPACs”)).
Although capital returns were negative, the FinTech portfolio continued to produce consistently positive revenue returns. Since
the agreement to realise the Company’s assets at the General Meeting held in June 2023, the Investment Manager has achieved
the repayment of several asset-backed FinTech investments. These include the positions in Applied Data Finance, LLC, and, after
the year-end, Elevate Credit, Inc., and Koalafi (formerly known as West Creek Financial, LLC). In the FinTech equity portfolio, the
reduction in unrealised capital returns generally stemmed from marking these investments to year-end exit values, in light of
near-to-medium-term exit opportunities and the depressed VC and M&A environment.
For the Company’s eCommerce assets, the ongoing depression of revenue growth and margins in the overall industry played
a significant role in the adjustment of the fair market value of equity holdings. This arose as consumers came under pressure
from the cost-of-living crisis, and companies had to cope with further disruptions to their supply chains. In certain cases,
Sector
Investment
Exposure
2023 Revenue Return 2023 Capital Return
% of NAV
Pence
per Share
% of NAV
Pence
per Share
FinTech 65% 10.05% 9.87p –10.60% –10.40p
eCommerce 25% 3.35% 3.29p –9.02% –8.85p
Legal Finance 6% 0.53% 0.52p 0.17% 0.17p
SPAC 4% 0.00% 0.00p 1.10% 1.08p
13.93% 13.68p –18.34% –18.01p
VPC SPECIALTY LENDING INVESTMENTS PLC
individual portfolio holdings underperformed expectations, leading to additional adjustments. The Investment Manager is
actively working to mitigate the risks associated with this sector of the portfolio, including exploring strategic combinations,
among other options. Please see the Subsequent Events section below for additional details on specific strategic combinations.
VPC continues to work with its eCommerce Portfolio Companies as they strengthen their balance sheets and evaluate additional
strategic combinations in an effort to maximise Shareholder value.
The Company’s positions in legal finance have continued to perform well, and the Investment Manager continues to evaluate
exit opportunities for these investments.
At the year-end, the Company accrued ECL reserves of £6.4 million (£16.4 million at 31 December 2022). During the year, certain
asset-backed lending investment maturities were extended to reflect changes in the circumstances of the particular investment
or the prevailing market conditions. In each case, these extensions were made to preserve value for the Shareholders, as
disclosed in the General Meeting Circular.
During the realisation process, VPC will continue to draw on its longstanding reputation and relationships with management
teams, industry professionals and experts to determine the most cost-effective distribution mechanisms for maximising
Shareholder value.
COMPANY PERFORMANCE
Below are details of the Company’s Total Returns as a percentage of NAV and pence per share relative to the weighted average
shares outstanding in 2023.
1 January 2023 to 31 December 2023 Total Return (% of NAV)
1 January 2023 to 31 December 2023 Total Return (pence per share)
–4.00%
1.92%
–10.00%
–5.00%
0.00%
5.00%
10.00%
15.00%
Asset Backed
Investment
Revenue
Returns
Operating
Expenses and
Management
Fees
Performance
Fees
Equity
Investment
Capital Returns
Equity
Investment
Revenue
Returns
Finance CostsAsset Backed
Investment
Capital Returns
Tot al
Return
F/X and Other
Returns
11.12%
–9.45%
–6.59%
2.62%
–11.49%
–2.24%
–2.29%
–0.58%
0.00%
–
10.00p
–5.00p
0.00p
5.00p
10.00p
15.00p
Asset Backed
Investment
Revenue
Returns
Operating
Expenses and
Management
Fees
Performance
Fees
Equity
Investment
Capital Returns
Equity
Investment
Revenue
Returns
Finance CostsAsset Backed
Investment
Capital Returns
Tot al
Return
F/X and Other
Returns
11.07p
–9.41p
–6.56p
2.61p
–11.45p
–2.23p
–2.28p
–0.57p
0.00p
11
STRATEGIC REPORT continued
VPC SPECIALTY LENDING INVESTMENTS PLC
12 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
INVESTMENTS
During the year, the investment objective of the Company was amended following Shareholder approval at the General Meeting
in June 2023. Until 30 June 2023, the Company could make new asset-backed lending investments directly (in aggregate) up to
5.0% of its Gross Assets (at the time of the investment) in consumer loans, small-and-medium-sized business loans, advances
against corporate trade receivables and/or purchases of corporate trade receivables originated by Portfolio Companies. During
this period, the Company made new investments of a nominal £3.1 million.
Under the terms agreed for the wind-down, the Investment Manager is not permitted to make any new investments save that:
(i) investments may be made to honour existing documented contractual commitments to existing Portfolio Companies (as a
majority of the Company’s investments are delayed-draw term loans); (ii) further investment may be made into the Company’s
existing investments without redemption rights in order to preserve the value of such investments; and (iii) realised cash may
be invested in cash or cash equivalents, government or public securities (as defined in the rules of the UK Financial Conduct
Authority), money market instruments, bonds, commercial paper or other debt obligations with banks or other counterparties
having a “single A” (or equivalent) or higher credit rating as determined by any internationally recognised rating agency selected
by the Directors of the Company (which may or may not be registered in the European Union) pending its return to Shareholders
in accordance with the Company’s investment objective. During the second half of the year, the Company made follow-on
investments totalling £0.7 million in aggregate and will continue to honour existing documented contractual commitments to
Portfolio Companies as they arise.
The table below reflects the stated maturities of the underlying asset-backed lending investment facilities, as at 31 December
2023, and the amounts shown (in millions) reflect the carrying value of the investments, less the projected paydowns on the
Company’s gearing facility as at the same date. These investments may be held for a longer period than the current stated
maturities with a view to enabling their inherent value to be realised successfully. The strategy for realising individual
investments and repaying the Company’s gearing facility will be flexible and may need to be altered to reflect changes in the
circumstances of a particular investment or in the prevailing market conditions. Subsequent to year end, the Company has
received cash flows as detailed further on page 13 from the company’s asset backed lending investments as they have matured.
The Company will continue to provide this information through the newsletters published on the Company’s website.
Asset-Backed Lending Investments: Profile of Contractual Maturities
less Projected Borrowing Paydowns (£ millions)
As at 31 December 2023
GEARING FACILITY
During the year, the “look-through” gearing ratio decreased as investments were repaid and payments required by the facility
provider were made on the Company-level gearing facility. Having started the year at 0.35x, the look-through gearing ratio
ended the year at 0.17x, which reflects VPC’s conservative approach to liquidity and risk management with the gearing facilities.
After the year-end, the non-recourse gearing facility was repaid following the successful exit of Elevate Credit, Inc.
As the realisation of the Company’s assets progresses, the Company’s level of gearing may increase as a result of further
drawdowns to honour commitments to funds under existing contractual arrangements or revaluations of the portfolio, as well
as the realisation of assets at less than their carrying value. An increased level of gearing would increase Shareholders’ exposure
to realisation values.
£0
£5
£10
£15
£20
£25
£30
£35
Q4
2028
Q3
2028
Q2
2028
Q1
2028
Q4
2027
Q3
2027
Q2
2027
Q1
2027
Q4
2026
Q3
2026
Q2
2026
Q1
2026
Q4
2025
Q3
2025
Q2
2025
Q1
2025
Q4
2024
Q3
2024
Q2
2024
Q1
2024
VPC SPECIALTY LENDING INVESTMENTS PLC
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) INVESTMENT CONSIDERATIONS
The Investment Manager has a long history of commitment to ESG considerations as part of its investment process and firm-wide
operations. VPC believes that integrating ESG principles and prudently identifying and managing ESG-related risks is integral to
its investment process.
As part of its standard risk management process, VPC actively monitors its Portfolio Companies across all dimensions of risk and
performance, including ESG. There is frequent communication with Portfolio Companies, and VPC receives extensive reporting to
identify potential issues. Further, the Investment and Risk teams meet with the Investment Committee at least weekly to discuss
potential ESG concerns and how to address or remediate them.
Concerning any follow-on investments in existing Portfolio Companies or material restructurings of existing investments, VPC will
re-evaluate the ESG risks and communicate any potential incremental ESG risks to the formally designated “ESG Officer” and “ESG
Coordinator”, as well as the Investment Committee, before any such follow-on investment or restructuring.
As it relates to the realisation process, the Investment Manager believes that there are minimal ESG implications of exiting an
asset-backed lending investment. While ESG considerations may not specifically apply to an exit, the ESG Policy prescribes
a process for managing ESG risk throughout the life of an investment.
SUMMARY AND HIGHLIGHTS FOR THE YEAR
The financial and business highlights for the year ended 31 December 2023 are as follows:
February 2023: The Company declared its 20th consecutive dividend of 2.00 pence per share for the three months to
31 December 2022.
May 2023: The General Meeting Circular was announced and published on the Company’s website, inclusive of two
proposals for the managed realisation of the Company’s assets.
June 2023: At the General Meeting, the resolutions put to the meeting, inclusive of two proposals for the Company’s
managed realisation that were approved by Shareholders. The Company announced that at its Annual General Meeting
(“AGM”), all resolutions set out in the Notice of AGM were passed by the requisite majority.
June 2023: The Company declared its 21st consecutive dividend of 2.00 pence per share for the three-month period to
31 March 2023.
July 2023: The Company sold 932,968 shares of Bakkt (NYSE: BKKT) for US$1.6 million, including a realised gain of
US$0.1 million.
August 2023: The Company sold a portion of its remaining equity in Kueski, Inc., for US$0.8 million, including a gain of
US$0.7 million. Additionally, the Company received a paydown of US$5.3 million on CFG Partners Holdings, L.P., which was
used to reduce the outstanding gearing facility.
August 2023: The Company declared its 22nd consecutive dividend of 2.00p per share for the three months to 30 June
2023.
September 2023: The Company received cash inflows totalling US$14.0 million from its asset-backed lending and equity
investments. The proceeds were used to partially reduce the outstanding gearing facility.
November 2023: The Company declared its 23rd consecutive dividend of 2.00p per share for the three months to
30 September 2023.
December 2023: The Company exited its debt investment in Applied Data Finance, LLC. Additionally, the Company exited
a majority of the remaining equity investment in VPC Impact Acquisition Holdings (NYSE: BKKT).
SUBSEQUENT EVENTS
Since the year ended 31 December 2023:
January 2024: The Company exited its debt investments in Elevate Credit, Inc., and Koalafi (formerly known as West Creek
Financial, LLC).
February 2024: The Company declared its 24th consecutive dividend of 2.00p per share for the three months to
31 December 2023.
March 2024: On 4 March 2024, two of the Company’s eCommerce investments, Razor Group (“Razor”) and PerchHQ, LLC
(“Perch”), closed a transaction in which Razor will acquire Perch in an all-stock deal. This acquisition paves the way for Razor
to reach over $1.0 billion in topline revenue in the medium term and adds significant scale to its operations.
13
STRATEGIC REPORT continued
VPC SPECIALTY LENDING INVESTMENTS PLC
14 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
April 2024: On 5 April 2024, the Company held a General Meeting at which shareholders approved the Capital Return
Mechanism. On 9 April 2024, the Board decided to make an initial distribution to shareholders of $15 million, equivalent
to approximately £11.9 million as at the date of release, through the issue and redemption of B Shares.
OUTLOOK
Although interest rates remain at elevated levels, rate cuts may occur in the medium term. The Company’s Portfolio Companies
are typically high-growth businesses that have historically raised their funding through venture capital or private equity, so a
loosening of monetary policy would be positive for improving fundraising opportunities. Much economic and geopolitical
uncertainty remains, however, and market expectations may well meet with disappointment as to the timing and extent of any
rate cuts.
The Investment Manager will take full account of market circumstances in working towards the continued realisation of the
Company’s assets, along with any situations specific to individual Portfolio Companies. In some cases, providing Portfolio
Companies additional time to repay asset-backed lending investments in full will be in the best interests of Portfolio Companies
and Shareholders alike. Though maturity dates may be extended on certain investments, VPC and the Company will look for ways
to potentially exit the investments before the stated maturity date, where possible. VPC will remain focused on mitigating
exogenous credit risks and managing downside protection in the investment portfolio to ensure a timely return of capital to
Shareholders and manage an orderly realisation process.
Victory Park Capital Advisors, LLC
Investment Manager
23 April 2024
VPC SPECIALTY LENDING INVESTMENTS PLC
15
BUSINESS MODEL
COMPANY STATUS
The Company is registered as a public limited company under the Companies Act 2006 and is an investment company under
The Company was incorporated on 12 January 2015 and commenced its operations on 17 March 2015.
The Company has been approved as an investment trust under Sections 1158/1159 of the Corporation Tax Act 2010. The
Directors are of the opinion, under advice, that the Company continues to conduct its affairs as an Approved Investment Trust
under the Investment Trust (Approved Company) (Tax) Regulations 2011.
Under the Investment Management Agreement (“IMA”) dated 26 February 2015 between the Company and the Investment
Manager, the Investment Manager is appointed to act as investment manager and Alternative Investment Fund Manager (“AIFM”)
of the Company with responsibility for portfolio management and risk management of the Company’s investments.
INVESTMENT OBJECTIVE
The Company’s investment objective is to conduct an orderly realisation of the assets of the Company, to be effected in
a manner that seeks to achieve a balance between returning cash to Shareholders promptly and maximising value.
INVESTMENT POLICY
The Company’s investments will be realised in an orderly manner, that is, with a view to achieving a balance between returning
cash to Shareholders promptly and maximising value.
Until 30 June 2023, the Company was able to make new make new investments directly (in aggregate) up to 5 per cent. of its
Gross Assets (at the time of the investment) in consumer loans, SME loans, advances against corporate trade receivables and/or
purchases of corporate trade receivables originated by portfolio companies (“Debt Instruments”).
Following this period, the Company has not been able to make any new investments save that: (a) investments may be made
to honour existing documented contractual commitments to existing portfolio companies as a majority of the Company’s
investments are delayed draw term loans; (b) further investment may be made into the Company’s existing investments without
redemption rights in order to preserve the value of such investments; and (c) realised cash may be invested in cash or cash
equivalents, government or public securities (as defined in the rules of the UK Financial Conduct Authority), money market
instruments, bonds, commercial paper or other debt obligations with banks or other counterparties having a “single A”
(or equivalent) or higher credit rating as determined by any internationally recognized rating agency selected by the directors
of the Company (which may or may not be registered in the European Union) (“Cash Instruments”) pending its return to
Shareholders in accordance with the Company’s investment objective.
Any return of proceeds to the Shareholders will be subject to compliance with existing gearing facilities and hedging
arrangements, payment of expenses and reserves for potential liabilities.
The Company will continue to comply with the restrictions imposed by the Listing Rules.
MANAGEMENT ARRANGEMENTS
The Company has an independent Board of Directors which has appointed Victory Park Capital Advisors, LLC (“VPC” or the
“Investment Manager”), the Company’s Investment Manager, as Alternative Investment Fund Manager (“AIFM”) under the terms
of an Investment Management Agreement (“IMA”) dated 26 February 2015. The IMA is reviewed annually by the Board and may
be terminated by six-months’ notice from either party subject to the provisions for earlier termination as stipulated therein.
Details of the Investment Management fee and performance fees payable to VPC during the period are set out in Note 10 on
pages 83 and 84.
STRATEGIC REPORT continued
VPC SPECIALTY LENDING INVESTMENTS PLC
16 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
PERFORMANCE MANAGEMENT
The Board uses the following KPIs to help assess progress against the Company’s objectives. Further comments on these KPIs
are contained in the Chairman’s Statement and Investment Manager’s Report sections, respectively.
A full description of performance is contained in the Investment Manager’s Report, commencing on page 9.
NAV AND TOTAL RETURN
The Directors regard the Company’s NAV return as a key component to delivering value to shareholders as the Company
manages the wind-down of its remaining assets. Furthermore, the Board believes that in accordance with the Company’s
objective, total return (which includes dividends) is the best measure of the expected value for realisation of the Company’s
investments.
At each meeting, the Board receives reports detailing the Company’s NAV and total return performance, portfolio composition
and related analyses.
DIVIDEND YIELD
The Company intends to distribute at least 85% of its distributable income earned in each financial year by way of dividends.
GEARING RATIO
The aggregate gearing of the Company and any investee entity (on a look-through basis, including borrowing through
securitisation using SPVs) shall not exceed 1.5 times its NAV (1.5x). The Board and Investment Manager monitor the look-through
gearing ratio to ensure it is in line with the investment policy.
SHARE PRICE PREMIUM/DISCOUNT
As a closed-ended listed investment trust, the Company’s share price can and does deviate from its NAV. This results in either a
premium or a discount to NAV. This is another component of the long-term shareholder return. The Board continually monitors
the Company’s premium or discount to NAV and has the ability to issue or buy back shares to limit the volatility of the share
price discount or premium. For more information on the Company’s authorities in relation to its share capital, see page 97.
EXPENSES
The Board is conscious of the impact of expenses on returns and seeks to minimise expenses while ensuring that the Company
receives good service from its suppliers. The industry-wide measure for investment trusts is the ongoing charges ratio. This seeks
to quantify the on-going costs of running the Company. The ongoing charges ratio for 2023 was 2.04%, compared to 1.99% for
2022. This measures the annual normal on-going costs of an investment trust, excluding performance fees, one-off expenses and
dealing costs, as a percentage of the average shareholders’ funds.
VPC SPECIALTY LENDING INVESTMENTS PLC
17
PRINCIPAL RISKS
The Company is exposed to risks that are monitored and actively managed to meet its investment objectives. These include
market risks related to interest rates, currencies and general availability of financing as well as credit and liquidity risks given the
nature of the instruments in which the Company invests. In addition, the underlying Portfolio Companies are exposed to
operational and regulatory risks as this part of the financial services sector remains relatively nascent.
The Directors are ultimately responsible for identifying and controlling risks. Day-to-day management of the risks arising from
the financial instruments held by the Group has been delegated to the Investment Manager of the Company.
The Investment Manager regularly reviews the investment portfolio and industry developments to make sure that any events
impacting the Group are identified and considered. This also ensures that any risks affecting the investment portfolio are
identified and mitigated to the fullest extent possible.
The Board is responsible for the Company’s system of risk management and internal control and for reviewing its effectiveness.
The Board has adopted a detailed matrix of principal risks affecting the Company’s business as an investment trust and has
established associated policies and processes designed to manage and, where possible, mitigate those risks. The matrix is
monitored by the Audit and Valuation Committee quarterly.
This system assists the Board in determining the nature and extent of the risks it is willing to take in achieving its strategic
objectives. Both the principal and emerging risks and the monitoring system are subject to a robust assessment at least annually.
The last review by the Board took place in April 2024 . Although the Board believes that it has a robust framework of internal
controls in place, it can provide only reasonable, and not absolute, assurance against material financial misstatement or loss and
is designed to manage, not eliminate, risk.
Below is a summary of the principal and emerging risks and uncertainties faced by the Company and the Group and actions
taken by the Board and, where appropriate, its Committees, to manage and mitigate these risks and uncertainties. Principal risks
include liquidity risk, credit risk, financing risk, portfolio company risk, regulatory risk and market risk. Business continuity risk,
climate risk and geopolitical risk are all considered to be emerging risks. The non-financial risks comprise of regulatory risk,
business continuity risk and geopolitical risk and the financial risks comprise of liquidity risk, credit risk, financing risk, market
risk and portfolio company risk. These are set out below:
RISK MITIGATION
The Investment Manager manages the Group’s liquidity risk by
investing primarily in a diverse portfolio of assets. As at
31 December 2023, 53% of the loans had a stated maturity
date of less than a year compared to 65% as at 31 December
2022.
In general, the weighted average maturity profile of the
Group’s assets was lower than or equal to the term of the
Group’s corresponding debt facilities which thereby reduced
liquidity risk. Refer to Note 6 of the financial statements for the
maturity profile of the Group’s assets and liabilities.
The Board and the Investment Manager review the investment
portfolio to ensure it is in line with the investment policy,
including restrictions, as outlined on pages 125 and 126. The
Board reviews cash flow forecasts to ensure the group can
meet its liabilities as they fall due.
The Group continuously monitors fluctuations in currency rates.
The Group performs stress tests and liquidity projections to
determine how much cash should be held back to meet
potential future obligations to settle margin calls arising from
foreign exchange hedging.
LIQUIDITY RISK
Liquidity risk is defined as the risk that the Group may not be
able to settle or meet its obligations on time or at a
reasonable price.
A majority of the Company’s investments are in debt and
unlisted equity investments. Investments in unlisted equity, by
their nature, involve a higher degree of valuation and
performance uncertainties and liquidity risks than investments
in listed securities and therefore may be more difficult to
realise in a timely manner.
In the event of adverse economic conditions in which it would
be preferable for the Group to sell certain of its assets, the
Group may not be able to sell a sufficient proportion of its
portfolio because of liquidity constraints. In such
circumstances, the overall returns to the Group from its
investments may be adversely affected.
Additionally, the risk exists that upon a maturity date of the
debt investments that the portfolio company may not be able
to refinance the Company and as a result, the maturity date
may need to be extended to allow for a refinance.
STRATEGIC REPORT continued
VPC SPECIALTY LENDING INVESTMENTS PLC
18 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
RISK MITIGATION
The gearing facility has helped the Group reduce cash drag
associated with the currency hedging portfolio, while also
allowing the Group to meet its liabilities as they fall due.
The Investment Manager monitors the cash balances of the
Group daily to ensure that all ongoing expenses can be paid as
they come due.
There is inherent credit risk in the Group’s investments in credit
assets. However, this is typically mitigated by the significant
first loss protection provided by the Portfolio Company under
the Asset Backed Lending Model and the excess spread
generated by the underlying assets under both models.
The Investment Manager performs a robust analysis during the
underwriting process for all new investments of the Group and
monitors the eligibility of the collateral at least monthly of the
current assets in the Group’s portfolio. This process also
includes due diligence performed by a third-party reviewer
during the underwriting process and subsequent reviews at
least once per year for the Group’s Portfolio Companies.
The Group continuously monitors its existing Portfolio
Companies which span across several asset classes,
geographies (primarily US, UK, Europe, Australia, Asia and Latin
America) and credit bands to ensure diversification and to
mitigate concentration risks.
The Board and the Investment Manager review the investment
portfolio to ensure it is in line with the investment policy,
including restrictions, as outlined on pages 125 and 126. The
Investment Manager monitors performance and underwriting
on an ongoing basis.
This risk is mitigated by limiting borrowings to ring-fenced
SPVs without recourse to the Group and employing gearing in
a disciplined manner.
The Group has maintained a level of gearing throughout the
year significantly below the limit stipulated in the Prospectus as
the Group is primarily invested in the Asset Backed Lending
Model.
The Board and the Investment Manager review the investment
portfolio to ensure it is in line with the investment policy,
including investment restrictions, as outlined on pages 125
and 126.
CREDIT RISK
Credit risk is the risk that one party to a financial instrument
will cause a financial loss for the other party by failing to
discharge an obligation.
The Group’s credit risks arise principally through exposures to
loans acquired by the Group, which are subject to risk of
borrower default. The ability of the Group to earn revenue is
completely dependent upon payments being made by the
borrower, such as adverse movements in financial markets.
LIQUIDITY RISK continued
T
he Group is also exposed to liquidity risk with r
espect to the
requirement to pay margin cash to collateralise forward
foreign exchange contracts used for currency hedging
purposes.
FINANCING RISK
F
inancing risk is the risk that, whilst the use of borrowings by
the Gr
oup should enhance the net asset value of an
investment when the value of an investment’s underlying
assets is rising, it will, however, have the opposite effect when
the underlying asset value is falling. In addition, if an
investment’s income falls for whatever reason, the use of
borrowings will increase the impact of such a fall on the net
revenue of the Group’s investment and accordingly will have
an adverse effect on the ability of the investment to make
distributions to the Group.
VPC SPECIALTY LENDING INVESTMENTS PLC
19
RISK MITIGATION
The Group has a diversified investment portfolio which
significantly reduces the exposure to individual asset price risk.
Detailed portfolio valuations and exposure analysis are
prepared monthly and form the basis for the on-going risk
management and investment decisions. In addition, regular
scenario analysis is undertaken to assess likely downside risks
and sensitivity to broad market changes, as well as assessing
the underlying correlations amongst the separate asset classes.
Exposure to interest rate risk is limited as the underlying credit
assets are typically fully amortising with a maximum maturity
of five years. Furthermore, generally the Group’s Credit Facilities
include a floating interest rate component to the Portfolio
Companies to account for an increase in interest rate risk and
they also have a set floor in the instance that interest rates
were to drop.
The Group mitigates its exposure to currency risk by hedging
exposure between Pound Sterling and any other currencies in
which a significant portion of the Group’s assets may be
denominated.
The Board reviews the price, interest rate and currency risk
with the Investment Manager to ensure that exposure to these
risks are appropriately mitigated but during the wind down,
the Group will not have the same ability to mitigate these risks.
As the Company executes the new investment objective of an
orderly wind-down of the Company, the Board and Investment
Manager are both focused on retaining investment trust status
and distributing at least 85% of the income earned.
The Company continues to review its ESG stance to ensure that
it promotes the values and commitment of the Company. All
decisions taken are made with due consideration to the
long-term sustainability and impact on stakeholders.
The Company has procedures to monitor the status of its
compliance with the relevant requirements to maintain its
Investment Trust status, including receiving and reviewing
information and reporting from the Company Secretary and
other service providers as appropriate.
The Investment Manager has performed an initial high-level
materiality assessment of climate risk across its investment
portfolio as part of its evaluation of overall evaluation of ESG
risks. No material impact on the financial statements has been
identified from the risks arising from climate change through
the work performed by the Investment Manager from this
initial assessment.
As an investment trust, the Company is not required to provide
information in compliance with TCFD.
MARKET RISK
Market risk is the risk of loss arising from movements in
observable market variables such as foreign exchange rates,
equity prices and interest rates. The Group is exposed to
market risk primarily through its Financial Instruments.
The Group is exposed to price risk arising from the
investments held by the Group for which prices in the future
are uncertain. The investments in funds are exposed to market
price risk. Refer to Note 3 in the Financial Statements for
further details on the sensitivity of the Group’s Level 3
investments to price risk.
Interest rate risk arises from the possibility that changes in
interest rates will affect future cash flows or the fair values of
financial instruments.
Currency risk is the risk that the value of net assets will
fluctuate due to changes in foreign exchange rates. Relevant
risk variables are generally movements in the exchange rates
of non-functional currencies in which the Group holds
financial assets and liabilities.
REGULATORY RISK
A
s an investment trust, the Compan
y’s operations are subject
to wide-ranging regulations. The financial services sector
continues to experience significant regulatory change at
national and international levels. Failure to act in accordance
with these regulations could cause fines, censure or other
losses including taxation or reputational loss.
The Association of Investment Companies (AIC) is becoming
increasingly focused on ensuring ESG measures are
implemented within investment companies.
In order to continue to qualify as an investment trust, the
Company must comply with the requirements of Section 1158
of the Corporation Tax Act 2010.
CLIMATE RISK
T
he world is facing unprecedent
ed challenges in the face of
climate change and growing inequality. The FSB Task Force on
Climate-related Financial Disclosures (TCFD) has developed
climate-related financial risk disclosures for companies to
provide information to investors, lenders, insurers, and other
stakeholders.
STRATEGIC REPORT continued
VPC SPECIALTY LENDING INVESTMENTS PLC
20 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
RISK MITIGATION
The Investment Manager has a dedicated risk committee
comprised of senior leadership and key principals. This
committee works with each individual portfolio investment
team to develop a coordinated risk response across the entire
portfolio.
Discussion on the Group’s risk management and internal controls is on page 115.
GEOPOLITICAL RISK
The Group is subject to risks associated with unforeseen
geopolitical events, including war, terrorist attacks, natural
disasters, and ongoing pandemics, which could create
economic, financial, and business disruptions.
VPC SPECIALTY LENDING INVESTMENTS PLC
21
DIRECTORS’ DUTIES
Overview
The Directors’ overarching duty is to act in good faith and in a way that is most likely to promote the success of the Company
as set out in Section 172 of the Companies Act 2006. The Company also considers the principles and guidance of the AIC and
in doing so, directors take into consideration the interests of the various stakeholders of the Company. All decisions made by
the Directors are taken with a long-term view and with the intention of minimising the potential harmful impact on communities
and the environment. The Company seeks to maintain its reputation for high standards of business conduct and fair treatment
of the members of the Company.
Fulfilling this duty naturally supports the Company in achieving its Investment Objective and helps to ensure that all decisions
are made in a responsible and sustainable way. In accordance with the requirements of the Companies (Miscellaneous Reporting)
Regulations 2018, the Company explains how the Directors have discharged their duty under Section 172 below.
To ensure that the Directors are aware of, and understand, their duties they are provided with pertinent information when they
first join the Board as well as receiving regular and ongoing updates and training on the relevant matters. They also have
continued access to the advice and services of the Company Secretary, and when deemed necessary, the Directors can seek
independent professional advice. The schedule of Matters Reserved for the Board, as well as the Terms of Reference of its
Committees are reviewed on an annual basis and further describe Directors’ responsibilities and obligations and include any
statutory and regulatory duties. The Audit and Valuation Committee has responsibility for the ongoing review of the Company’s
risk management systems and internal controls and, to the extent that they are applicable, risks related to the matters set out
in Section 172 are included in the Company’s risk register and are subject to periodic and regular reviews and monitoring. All
Terms of Reference are located on the Company website.
Decision-making
The importance of stakeholder considerations, particularly in the context of decision-making, is considered at every Board
meeting. All discussions involve careful consideration of the longer-term consequences of any decisions and their implications
for stakeholders.
Stakeholders
The Board seeks to understand the needs and priorities of the Company’s stakeholders and these are taken into account during
all its discussions and as part of its decision-making. During the period under review, the Board has continued to discuss and
monitor which parties should be considered as stakeholders of the Company. Following thorough review, it was concluded that,
as the Company is an externally managed investment company and does not have any employees or customers, its key
stakeholders continue to comprise its Shareholders, Investment Manager, portfolio companies and service providers. The section
below discusses why these stakeholders are considered of importance to the Company and the actions taken to ensure that their
interests are taken into account.
IMPORTANCE BOARD ENGAGEMENT
The Company has over 113 shareholders, including institutional
investors. The Board is committed to maintaining open
channels of communication and to engage with shareholders
in a manner which they find most meaningful, in order to gain
an understanding of the views of shareholders. These include:
Annual General Meeting – The Company welcomes
and encourages attendance and participation from
shareholders at the AGM, either in person when able to
or virtually. Shareholders have the opportunity to meet
the Directors and Investment Manager and to address
questions to them directly. Each year, the Investment
Manager attends the AGM and provides a presentation
on the Company’s performance and the future outlook.
The Company values any feedback and questions it may
receive from shareholders ahead of and during the AGM,
and will take action or make changes as and when
appropriate;
SHAREHOLDERS
Continued shareholder support and engagement are critical to
the existence of the business and the delivery of the long-
term strategy of the Company.
STRATEGIC REPORT continued
VPC SPECIALTY LENDING INVESTMENTS PLC
22 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
IMPORTANCE BOARD ENGAGEMENT
SHAREHOLDERS continued
Publications – The Annual Report and Half-Year results
are made available on the Company’s website and the
Annual Report is circulated to shareholders. These
reports provide shareholders with a clear understanding
of the Company’s portfolio and financial position. This
information is supplemented by a monthly factsheet and
quarterly reports which are available on the website and
the publication of which is announced via the stock
exchange. Feedback and/or questions the Company
receives from the shareholders help the Company evolve
its reporting, aiming to render the reports and updates
transparent and understandable;
Shareholder meetings – Unlike trading companies,
shareholder meetings often take the form of meeting
with the Investment Manager rather than members of
the Board. Shareholders are able to meet with the
Investment Manager throughout the year and the
Investment Manager provides information on the
Company. Feedback from all meetings between the
Investment Manager and shareholders is shared with the
Board. The Chair, the Chair of the Audit and Valuation
Committee and other members of the Board are
available to meet with shareholders to understand their
views on governance and the Company’s performance
where they wish to do so. With assistance from the
Investment Manager, the Company’s brothers, and the
Chair seeks meetings with shareholders who might wish
to meet with him;
Shareholder concerns – In the event shareholders wish
to raise issues or concerns with the Directors, they are
welcome to do so at any time by writing to the Chair at
the registered office. Other members of the Board are
also available to shareholders if they have concerns that
have not been addressed through the normal channels;
and
Investor Relations updates – At every Board meeting,
the Directors receive updates from the Company’s
brokers on the share trading activity, share price
performance and any shareholders’ feedback, as well as
an update from the Investment Manager on any
publications. To gain a deeper understanding of the
views of its shareholders and potential investors, the
Investment Manager also meets regularly with
shareholders. Any pertinent feedback is taken into
account when Directors discuss the share capital or the
dividend policy and actioned as and when appropriate.
The willingness of the shareholders, including the
partners and staff of the Investment Manager, to
maintain their holdings over the long-term period is
another way for the Board to gauge how the Company
is meeting its objectives and suggests a presence of a
healthy corporate culture.
VPC SPECIALTY LENDING INVESTMENTS PLC
23
IMPORTANCE BOARD ENGAGEMENT
Maintaining a close and constructive working relationship with
the Investment Manager is crucial as the Board and the
Investment Manager both aim to continue to achieve
consistent, long-term returns in line with its investment
objective. Important components in the collaboration with the
Investment Manager, representative of the Company’s culture
are:
Encouraging open discussion with the Investment
Manager, to ensure continuous feedback and innovative
thinking;
Recognising that the interests of shareholders and the
Investment Manager are for the most part well aligned,
adopting a tone of constructive challenge, balanced
with robust negotiation of the Investment Manager’s
terms of engagement if those interests should not be
fully united;
Encouraging the Investment Manager to meet with
stakeholders to ensure that salient matters are
thoroughly discussed and, overall, ensure adequate
communication channels; and
Willingness to make the Board Members’ experience
available to support the Investment Manager in the
sound long-term development of its business and
resources, recognising that the long-term health of the
Investment Manager is in the interests of shareholders in
the Company.
The relationship with the Investment Manager is fundamental to
ensuring the Company meets its purpose. Day-to-day
engagement with Portfolio Companies is undertaken by the
Investment Manager. Details of how the Investment Manager
carries out portfolio management, as well as information of the
differentiated investment proposition and the proprietary
sourcing and structuring of investments can be found in the
Strategic Report on page 9. The Board receives updates at each
scheduled Board meeting from the Investment Manager on
specific investments including regular valuation reports and
detailed portfolio and returns analyses. The Investment
Manager’s engagement with Portfolio Companies incorporates
recurring due diligence reviews and on-site visits to supplement
regular reporting and management discussion cycles.
OTHER STAKEHOLDERS
The Investment Manager
Holding the Company’s shares offers investors a liquid
investment vehicle through which they can obtain exposure to
VPC’s diversified portfolio of investment opportunities in the
specialty lending market. The Investment Manager’s
performance is critical for the Company to successfully deliver
its investment strategy and meet its objective to provide
shareholders with consistent long-term returns.
Portfolio Companies
T
he Company inv
ests directly and/or indirectly into available
opportunities, including investments in funds managed by the
Investment Manager. Capital is allocated across different
Portfolio Companies to meet the Company’s investment
objectives within the pre-defined portfolio limits and with a
focus on portfolio level diversification.
STRATEGIC REPORT continued
VPC SPECIALTY LENDING INVESTMENTS PLC
24 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
IMPORTANCE BOARD ENGAGEMENT
The Board maintains regular contact with its key external
providers and receives regular reporting from them, both
through the Board and Committee meetings, as well as outside
of the regular meeting cycle. Their advice, as well as their needs
and views are routinely taken into account. The Board, through
the Management Engagement Committee, formally assesses
their performance, fees and continuing appointment annually to
ensure that the key service providers continue to function at an
acceptable level and are appropriately remunerated to deliver
the expected level of service. Where relevant the Audit and
Valuation Committee reviews and evaluates the financial
reporting control environments in place for each service
provider.
The Board recognises that the views, questions from, and
recommendations of many proxy adviser agencies provide a
valuable feedback mechanism and play a part in highlighting
evolving shareholders’ expectations and concerns. When
deemed relevant, the Company will engage with proxy advisers
regarding resolutions that will be proposed to the Company’s
shareholders at AGMs and, based on feedback received,
incorporate appropriate changes to future Annual Reports and
Financial Statements to enhance disclosures.
The Company regularly considers how it meets various
regulatory and statutory obligations and follows voluntary and
best-practice guidance, and how any governance decisions it
makes can have an impact on its stakeholders, both in the
shorter and in the longer-term.
The above mechanisms for engaging with stakeholders are kept under review by the Directors and are discussed on a regular
basis at Board meetings to ensure that they remain effective.
CULTURE
The Directors agree that establishing and maintaining a healthy corporate culture among the Board and in its interaction with
the Investment Manager, shareholders and other stakeholders will support the delivery on its purpose, values, and strategy. The
Board is encouraged to lead by example and exemplify the Company’s culture of openness, debate and integrity through
ongoing dialogue and engagement with its service providers, principally the Investment Manager.
The Board strives to ensure that its culture is in line with the Company’s purpose, values, and strategy. The Company has several
policies and procedures in place to assist with maintaining a culture of good governance including those relating to diversity,
Directors’ conflicts of interest and Directors’ dealings in the Company’s shares. The Board assesses and monitors compliance with
these policies as well as the general culture of the Board through Board meetings and during the annual evaluation process
which is undertaken by each Director (for more information see the performance evaluation section on page 105).
The Board seeks to appoint the best possible service providers and evaluates their remit, performance, and cost effectiveness on
a regular basis as described on page 104. The Board considers the culture of the Investment Manager and other service
providers, including their policies, practices, and behaviour, through regular reporting from these stakeholders and during the
annual review of the performance and continuing appointment of all service providers to ensure there is an alignment in the
long-term objectives. The Investment Manager and other service providers appointment are reviewed annually to ensure these
objectives are met.
The Administrator, the Company Secretary, the
Registrar, the Custodians and the Brokers
In order to function as an investment trust with a premium
listing on the London Stock Exchange, the Company relies on
a diverse range of reputable advisors for support in meeting
all relevant obligations.
Institutional investors and proxy advisors
T
he evolving practice and support (or lack thereof) of proxy
adviser agencies are important to the Directors, as the
Company aims to build a good reputation and maintain high
standards of corporate governance, which contribute to the
long-term sustainable success of the Company.
Regulators
T
he C
ompan
y can only operat
e with the appr
oval of its
regulators who have a legitimate interest in how the Company
operates in the market and treats its shareholders.
VPC SPECIALTY LENDING INVESTMENTS PLC
25
EMPLOYEES, HUMAN RIGHTS, SOCIAL AND COMMUNITY ISSUES
The Board recognises the requirement under the Companies Act 2006 to detail information about human rights, employees, and
community issues, including information about any policies it has in relation to these matters and the effectiveness of these
policies. These requirements do not apply to the Company as it has no employees, all the Directors are non-executive, and it has
outsourced all its functions to third party service providers. The Company has therefore not reported further in respect of these
provisions but does expect its service providers and portfolio companies to respect these requirements.
BOARD DIVERSITY
As at 31 December 2023, the Board of Directors of the Company comprised three male Directors. As at the date of this report
the Board composition remains unchanged. The Board acknowledges the benefits of diversity and remains committed to
ensuring that the Company’s Directors bring a wide range of skills, knowledge, experience, backgrounds and perspectives.
Further details of the Company’s diversity policy are set out on page 110.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) ISSUES
The Company has no employees, property or activities other than investments, so its direct environmental impact is minimal. In
carrying out its activities, and in its relationships, the Company aims to conduct itself responsibly, ethically and fairly. Directors
are mindful of their own carbon footprints if they are required to travel on Company business.
The Board is comprised entirely of non-executive Directors and the day-to-day management of the Company’s business is
delegated to the Investment Manager. The Investment Manager aims to be a responsible investor and believes it is important to
invest in companies that act responsibly in respect of environmental, ethical and social issues.
The Company has no internal operations and therefore no greenhouse gas emissions to report, nor does it have responsibility
for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations
2013, including those within its underlying investment portfolio. However, the AIC is encouraging all member companies to
demonstrate how they are factoring ESG issues into their business practices. The company continues to monitor the guidance
published by the AIC and works towards the drafting of its ESG policy. The business remains conscious of its business decisions
and the Board, supported by its service providers and Investment Manager consider the long-term impact of all decisions and
challenge appropriately.
STREAMLINED ENERGY AND CARBON REPORTING (SECR)
The Company has no employees or property, and it does not combust any fuel or operate any facility and is therefor exempt
from reporting. It does not, therefore, have any greenhouse gas emissions to report from its operations, nor does it have
responsibility for any other emissions producing sources under the Companies Act 2006 (Strategic Report and Directors’ Report)
Regulations 2013, including those within its underlying investment portfolio. Additionally, there are no annual emissions from
the purchase of electricity, heat, steam or cooling by the Company for its own use.
APPROVAL
This Strategic Report has been approved by the Board of Directors and signed on its behalf by:
Graeme Proudfoot
Chair
23 April 2024
INDEPENDENT
AUDITORS’ REPORT
VPC SPECIALTY LENDING INVESTMENTS PLC
27
INDEPENDENT AUDITORS’ REPORT
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF VPC
SPECIALTY LENDING INVESTMENTS PLC
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion, VPC Specialty Lending Investments PLC’s group financial statements and company financial statements (the
“financial statements”):
give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2023 and of the group’s
loss and the group’s and company’s cash flows for the year then ended;
have been properly prepared in accordance with UK-adopted international accounting standards as applied in accordance
with the provisions of the Companies Act 2006; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report and Audited Financial Statements (the “Annual
Report”), which comprise: the Consolidated and Parent Company Statements of Financial Position as at 31 December 2023; the
Consolidated Statement of Comprehensive Income, the Consolidated and Parent Company Statements of Cash Flows, and the
Consolidated and Parent Company Statements of Changes in Equity for the year then ended; and the notes to the financial
statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit and Valuation Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under ISAs (UK) are further described in the Auditors’ 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 remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we
have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not
provided.
We have provided no non-audit services to the company or its controlled undertakings in the period under audit.
Our audit approach
Overview
Audit scope
The scope of our audit and the nature, timing and extent of audit procedures performed were determined based on our risk
assessment, taking into account changes from the prior year, the financial significance of subsidiaries and other qualitative factors.
We executed the planned approach and concluded based on the results of our testing, ensuring that sufficient audit evidence had
been obtained to support our opinion.
Key audit matters
Valuation of investment assets designated as held at fair value through profit or loss (group and company).
Valuation of loans at amortised cost (group).
Materiality
Overall group materiality: £2,300,000 (2022: £2,700,000) based on 1% of Net Asset Value.
Overall company materiality: £2,300,000 (2022: £2,700,000) based on 1% of Net Asset Value.
Performance materiality: £1,720,000 (2022: £2,000,000) (group) and £1,720,000 (2022: £2,000,000) (company).
VPC SPECIALTY LENDING INVESTMENTS PLC
28 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
INDEPENDENT AUDITORS’ REPORT
continued
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the 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) identified by the auditors, including 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, and any comments we
make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
We understood and evaluated the design of controls
overestimating the fair value of level 3 investments.
We understood and evaluated the valuation methodology
applied, by reference to accounting standards and industry
practice, and tested the techniques used to determine the fair
value of investment assets designated as held at fair value
through profit or loss.
With respect to investment in funds, we performed the following
substantive testing on a sample basis:
We agreed the NAV used to calculate the fair value to
audited financial statements and inspected those financial
statements to assess whether the use of NAV as a basis for
fair value was appropriate; and
We obtained the fund partnership agreements and
recalculated the Group’s interest in the funds’ fair value.
With respect to the level 3 equity securities (comprising common
stock, preferred stock, warrants and convertible debt), with the
assistance of our valuation experts, we performed the following:
On a sample basis, we corroborated the accuracy and
reasonableness of inputs and assumptions used in
valuations, including comparison to recent transaction
prices, underlying investment company financial information
and other market performance information.
For certain investments, we determined a reasonable range
for individual assumptions to arrive at a range of acceptable
valuations and we compared the group’s valuations to our
independently derived valuation range.
We further considered whether the judgements made in selecting
the significant assumptions would give rise to indicators of
possible bias.
We evaluated and tested the disclosures over investments made
in the financial statements.
We found that the fair value of investments designated as held at
fair value through profit or loss were consistent with the group’s
accounting policies and supported by the audit evidence we
obtained.
Valuation of investment assets designated as held
at fair value through profit or loss (group and
company)
Refer to the Audit and Valuation Committee Report
‘Significant issues considered by the Audit and Valuation
Committee’; Note 2 Significant Accounting Policies
‘Financial assets and financial liabilities’ and ‘Critical
accounting estimates – valuation of unquoted
investments’; and Note 3 ‘Fair value measurement’.
Investment assets held at fair value by the Group include
investments that are not traded on active markets and for
which valuation requires the use of inputs which are not
readily observable in the market. These are classified as
level 3 under the IFRS 13 fair value hierarchy and comprise
investments in funds of £15.9 million (company
£15.9 million) and equity securities of £58.8 million
(company: nil).
Fair value of the investments in funds is estimated using
commonly accepted valuation methodologies, which are
set out in the International Private Equity and Venture
Capital Valuation Guidelines. The fair value of fund
investments held at 31 December 2023 are based on the
net asset value (“NAV”) disclosed in the fund audited
financial statements.
Fair value of equity securities classified as level 3 is
determined using a variety of techniques including
earnings multiples, discounted cash flow analysis and
comparison to recent transactions.
Determining unobservable inputs in fair value
measurement of level 3 investments involves judgement
and is subject to a high degree of estimation uncertainty
such that changes to estimates, assumptions and/or the
judgements made can result, either on an individual
investment or in aggregate, in a material change to the
valuation.
VPC SPECIALTY LENDING INVESTMENTS PLC
29
KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
We understood and evaluated the design of controls over the
estimation of ECLs over loans at amortised cost.
We understood and evaluated the ECL methodology applied, by
reference to accounting standards and industry practice, and
tested the techniques used in estimating the ECL. We performed
substantive testing over the following, with the assistance of our
credit specialists:
We tested the compliance of the ECL methodologies applied
by the group with the requirements of IFRS 9, taking into
account our understanding of the portfolio.
We assessed the appropriateness of the significant
assumptions and methodologies used for models on a
sample basis, including the selection of macroeconomic
scenarios, probabilities assigned to the scenarios and the
severity of the downside macroeconomic scenarios. Our
analysis included assessing the ‘breakeven’ cumulative loss
rates, the impact of a change in severity of the scenarios,
comparison of the scenario assumptions used to actual
experience and the impact of applying alternative
independent data and assumptions, where relevant.
On a sample basis, we tested the appropriateness of
cumulative loss rates relative to historical experience.
On a sample basis, we tested the integrity of the data used
in the models to supporting documentation and tested the
accuracy of the ECL calculations applied in the models by
independently replicating the calculations in the models.
We further considered whether the judgements made in selecting
the significant assumptions would give rise to indicators of
possible bias.
We evaluated and tested the disclosures over loans at amortised
cost less ECL made in the financial statements.
We found that the calculations and assumptions used to estimate
the ECL on loans at amortised cost were supported by the audit
evidence we obtained.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the group and the company, the accounting processes and controls,
and the industry in which they operate.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial
statements. We performed a risk assessment, giving consideration to relevant external and internal factors, including climate
change, economic risks and the Group’s strategy. We also considered our knowledge and experience obtained in the prior year
audits. In particular, we looked at where the Directors made subjective judgements, for example in respect of significant
accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
In establishing the overall approach to the audit, we scoped using the balances included in the financial statements
consolidation pack. We determined the type of work that needed to be performed over the company and subsidiaries (the
‘components’) by us or auditors from PricewaterhouseCoopers LLP Chicago, USA (‘PwC US’) operating under our instruction. Our
interactions with the PwC US auditors included regular communication throughout the audit, including the issuance of
instructions, a review of working papers and formal clearance meetings.
Valuation of loans at amortised cost (group)
Refer to the Audit and Valuation Committee Report
‘Significant issues considered by the Audit and Valuation
Committee’; Note 2 Significant Accounting Policies
‘Financial assets and financial liabilities’ and ‘Critical
accounting estimates - measurement of the expected credit
loss allowance’; and Note 9 ‘Impairment of financial assets
at amortised cost’.
Loans reported at amortised cost amounted to
£161.2 million for the group as at 31 December 2023
(company: nil). The amount is net of the expected credit
loss (“ECL”) allowance of £6.5 million. The determination of
ECL is subject to a high degree of estimation uncertainty
such that changes to key inputs to the estimates made can
result, either on an individual loan or in aggregate, in a
material change to the valuation.
In the context of the current economic outlook,
considerable uncertainty remains around the measurement
of ECL, including, the impact of recent increases in interest
rates and inflation. The significant inputs and assumptions
that we focused on in our audit included those with
greater levels of judgement and for which variations had
the most significant impact on ECL. These were the
following:
The application of portfolio company cumulative loss
rates to portfolio exposures;
The application of forward looking economic
assumptions used in the models, including the
Investment Managers’ assumptions and judgements
relating to a global downside scenario based on
2008 financial crisis data; and
The probability of default applied to the portfolio
exposures.
VPC SPECIALTY LENDING INVESTMENTS PLC
30 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
INDEPENDENT AUDITORS’ REPORT
continued
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand the extent of the potential impact of climate risk on the
group’s and company’s financial statements, and we remained alert when performing our audit procedures for any indicators of
the impact of climate risk. Our procedures did not identify any material impact as a result of climate risk on the group’s and
company’s financial statements.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality.
The range of materiality allocated across components was between £2,180,000 and £2,300,000.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of
our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 75% (2022: 75%) of overall materiality, amounting to £1,720,000
(2022: £2,000,000) for the group financial statements and £1,720,000 (2022: £2,000,000) for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range
was appropriate.
We agreed with the Audit and Valuation Committee that we would report to them misstatements identified during our audit
above £230,000 (group audit) (2022: £270,000) and £230,000 (company audit) (2022: £270,000) as well as misstatements below
those amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going concern
basis of accounting included:
Performing a risk assessment to identify factors that could impact the going concern basis of accounting;
Obtaining and evaluating management’s going concern assessment;
Reviewing the basis on which the directors have made their assessment of the group and company’s ability to continue
as a going concern taking into consideration the impact of the shareholders approval to amend the Company’s investment
objective and investment policy required for an orderly realisation of the assets of the Company;
Understanding and evaluating the group’s financial forecasts and stress testing of those forecasts, including the severity of
the stress scenarios that were used;
Validation of year end financial resources such as cash and interest rate borrowings;
Financial statements – group Financial statements – company
Overall materiality £2,300,000 (2022: £2,700,000). £2,300,000 (2022: £2,700,000).
How we determined it
1% of Net Asset Value (rounded up to the
nearest hundred thousand)
Rationale for benchmark applied
1% of Net Asset Value (rounded up
to the nearest hundred thousand)
We have applied this benchmark, a
generally accepted auditing practice for
investment trust company audits, in the
absence of indicators that an alternative
benchmark would be appropriate and
because we believe this provides an
appropriate basis for our audit.
We have applied this benchmark, a generally
accepted auditing practice for investment trust
company audits, in the absence of indicators
that an alternative benchmark would be
appropriate and because we believe this
provides an appropriate basis for our audit.
VPC SPECIALTY LENDING INVESTMENTS PLC
31
Obtaining and evaluating debt compliance certificates and covenants testing; and
Evaluating the adequacy of the disclosures made in the financial statements in relation to 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 group’s and the company’s ability to continue as a going concern
for a period of at least twelve months from when the financial statements are authorised for issue.
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.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and
the company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections
of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’
report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover
the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated
in this report, any form of assurance thereon.
In connection with our audit of the financial statements, 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
audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based
on these responsibilities.
With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions
and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and
Directors’ Report for the year ended 31 December 2023 is consistent with the financial statements and has been prepared in
accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the
audit, we did not identify any material misstatements in the Strategic report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements 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. Our additional responsibilities with respect to the corporate governance statement as
other information are described in the Reporting on other information section of this report.
VPC SPECIALTY LENDING INVESTMENTS PLC
32 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
INDEPENDENT AUDITORS’ REPORT
continued
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 and our knowledge obtained during the audit, and
we have nothing material to add or draw attention to in relation to:
The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging
risks and an explanation of how these are being managed or mitigated;
The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going
concern basis of accounting in preparing them, and their identification of any material uncertainties to the group’s and
company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial
statements;
The directors’ explanation as to their assessment of the group’s and company’s prospects, the period this assessment covers
and why the period is appropriate; and
The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in
operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group and company was substantially less in
scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering
whether the statement is consistent with the financial statements and our knowledge and understanding of the group and
company and their environment obtained in the course of the audit.
In addition, 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 and our knowledge obtained during the
audit:
The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the group’s and company’s position, performance, business
model and strategy;
The section of the Annual Report that describes the review of effectiveness of risk management and internal control
systems; and
The section of the Annual Report describing the work of the Audit and Valuation Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s
compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the
Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of Directors’ responsibilities in respect of the financial statements, the directors are
responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied
that they give a true and fair view. The directors are also responsible for such internal control as they 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 group’s and 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 group or the company or to cease operations, or have no realistic
alternative but to do so.
Auditors’ 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 auditors’ 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.
VPC SPECIALTY LENDING INVESTMENTS PLC
33
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and
regulations related to UK Listing Rules, and we considered the extent to which non-compliance might have a material effect on
the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements
such as the Companies Act 2006 and UK tax legislation including the Company’s qualification as an investment trust under the
Corporation Tax Act 2010. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls), and determined that the principal risks were related to posting
inappropriate journal entries to increase income and bias in accounting estimates. Audit procedures performed by the
engagement team included:
Discussions with the Investment Manager and the Audit and Valuation Committee, including consideration of known or
suspected instances of non-compliance with laws and regulation and fraud;
Reviewing Board meeting and other relevant committee minutes to identify any significant or unusual transactions or other
matters that could require further investigation;
Challenging assumptions and judgements made by the Directors in their significant accounting estimates and judgements,
in particular in relation to the valuation of investments reported at fair value through profit or loss and valuation of loans
reported at amortised cost;
Identifying and testing journal entries meeting specific fraud criteria, including those posted to certain account
combinations.
Obtaining confirmations from third parties to confirm the existence of a sample of balances; and
Incorporating unpredictability in the selection of the nature, timing and extent of audit procedures performed.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial
statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or
through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations.
We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
OTHER REQUIRED REPORTING
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
we have not obtained all the information and explanations we require for our audit; or
adequate accounting records have not been kept by the company, or returns adequate for our audit have not been
received from branches not visited by us; or
certain disclosures of directors’ remuneration specified by law are not made; or
the company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
VPC SPECIALTY LENDING INVESTMENTS PLC
34 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
INDEPENDENT AUDITORS’ REPORT
continued
Appointment
Following the recommendation of the Audit and Valuation Committee, we were appointed by the members on 24 July 2015 to
audit the financial statements for the period commencing 12 January 2015 and ended 31 December 2015 and subsequent
financial periods. The period of total uninterrupted engagement is nine years, covering the years ended 31 December 2015 to
31 December 2023.
OTHER MATTER
In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial
statements will form part of the ESEF-prepared annual financial report filed on the National Storage Mechanism of the Financial
Conduct Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no
assurance over whether the annual financial report will be prepared using the single electronic format specified in the ESEF RTS.
Claire Sandford (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
23 April 2024
FINANCIAL
STATEMENTS
31 DECEMBER FINANCIAL STATEMENTS | 31 DECEMBER | ||
2023 CONSOLIDATED STATEMENT OF FINANCIAL POSITION | 2022 | ||
NOTES | £ | £ | |
Assets VPC SPECIALTY LENDING INVESTMENTS PLC AS AT 31 DECEMBER 2023 | |||
Cash and cash equivalents | 7 | ||
Cash posted as collateral | 7 | ||
Derivative financial assets | 3,4 | ||
Interest receivable | |||
Dividend and distribution receivable | |||
Management fee receivable | 10 | ||
Other assets and prepaid expenses | |||
Loans at amortised cost | 3,9 | ||
Investment assets designated as held at fair value through profit or loss | 3 | ||
Total assets | |||
Liabilities | |||
Management fee payable | 10 | ||
Derivative financial liabilities | 3,4 | ||
Deferred income | |||
Other liabilities and accrued expenses | |||
Due to broker | |||
Notes payable | 8 See Notes to the consolidated financial statements set out on pages 48 to 93. | ||
Total liabilities | |||
Total assets less total liabilities | 36 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 |
31 DECEMBER | 31 DECEMBER | ||
2023 CONSOLIDATED STATEMENT OF FINANCIAL POSITION | 2022 | ||
NOTES VPC SPECIALTY LENDING INVESTMENTS PLC | £ | £ | |
Capital and reserves AS AT 31 DECEMBER 2023 | |||
Called–up share capital | |||
Share premium account | |||
Other distributable reserve | 14 | ||
Capital reserve | ( | ( | |
Revenue reserve | |||
Currency translation reserve | |||
Total equity attributable to shareholders of the Parent Company | |||
Non–controlling interests | 18 | ||
Total equity | |||
Net Asset Value per Ordinary Share | 12 See Notes to the consolidated financial statements set out on pages 48 to 93. | 37 |
NOTES VPC SPECIALTY LENDING INVESTMENTS PLC FOR THE YEAR ENDED 31 DECEMBER 2023 | £ | £ CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | £ FINANCIAL STATEMENTS continued REVENUE CAPITAL TOTAL | |
Revenue | ||||
Net loss on investments | 5 | ( | ( | |
Foreign exchange loss | ( | ( | ||
Interest income | 5 | |||
Other income | 5 | |||
Total return | ( | ( | ||
Expenses | ||||
Management fee | 10 | |||
Credit impairment losses | 9 | |||
Other expenses | 10 | |||
Total operating expenses | ||||
Finance costs | ||||
Net return on ordinary activities before taxation | ( | ( | ||
Taxation on ordinary activities | 11 | |||
Net return on ordinary activities after taxation | ( | ( | ||
Attributable to: | ||||
Equity shareholders | ( | ( | ||
Non–controlling interests | 18 | |||
Return per Ordinary Share (basic and diluted) | 13 | ( | ( | |
Other comprehensive income | ||||
Currency translation differences | ||||
Total comprehensive income (expense) | ( | ( | ||
Attributable to: | ||||
Equity shareholders | ( | ( | ||
Non–controlling interests | 18 | See Notes to the consolidated financial statements set out on pages 48 to 93. | 38 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 operations. Amounts in Other comprehensive income may be reclassified to profit or loss in future periods. | The total column of this statement represents the Group’s statement of comprehensive income, prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (“AIC”). All items in the above Statement derive from continuing |
NOTES FOR THE YEAR ENDED 31 DECEMBER 2022 | £ VPC SPECIALTY LENDING INVESTMENTS PLC | £ CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | £ REVENUE CAPITAL TOTAL | |
Revenue | ||||
Net loss on investments | 5 | ( | ( | |
Foreign exchange loss | ( | ( | ||
Interest income | 5 | |||
Other income | 5 | |||
Total return | ( | ( | ||
Expenses | ||||
Management fee | 10 | |||
Credit impairment losses | 9 | |||
Other expenses | 10 | |||
Total operating expenses | ||||
Finance costs | ||||
Net return on ordinary activities before taxation | ( | ( | ||
Taxation on ordinary activities | 11 | |||
Net return on ordinary activities after taxation | ( | ( | ||
Attributable to: | ||||
Equity shareholders | ( | ( | ||
Non–controlling interests | 18 | |||
Return per Ordinary Share (basic and diluted) | 13 | ( | ( | |
Other comprehensive income | ||||
Currency translation differences | ||||
Total comprehensive income (expense) | ( | ( | ||
Attributable to: | ||||
Equity shareholders | ( | ( operations. Amounts in Other comprehensive income may be reclassified to profit or loss in future periods. | ||
Non–controlling interests | 18 | See Notes to the consolidated financial statements set out on pages 48 to 93. | 39 The total column of this statement represents the Group’s statement of comprehensive income, prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (“AIC”). All items in the above Statement derive from continuing |
CALLED UP | SHARE | OTHER | CURRENCY | SHARE- TOTAL | NON- | ||||
SHARE | PREMIUM | DISTRIBUTABLE FOR THE YEAR ENDED 31 DECEMBER 2023 | CAPITAL | REVENUE | TRANSLATION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | HOLDERS’ | CONTROLLING | TOTAL FINANCIAL STATEMENTS continued | |
CAPITAL | ACCOUNT | RESERVE | RESERVE | RESERVE | RESERVE | EQUITY | INTERESTS | EQUITY | |
£ | £ | £ | £ | £ | £ | £ | £ | £ | |
Opening balance at 1 January 2022 40 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 | ( | ||||||||
Return on ordinary activities | |||||||||
after taxation | ( | ( | ( | ||||||
Dividends declared and paid | ( | ( | ( | ||||||
Other comprehensive income | |||||||||
Currency translation differences | VPC SPECIALTY LENDING INVESTMENTS PLC | ||||||||
Closing balance at 31 December 2023 | ( See Notes to the consolidated financial statements set out on pages 48 to 93. | The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (“AIC”). |
CALLED UP | SHARE | OTHER | CURRENCY | SHARE- TOTAL | NON- | ||||
SHARE | PREMIUM | DISTRIBUTABLE FOR THE YEAR ENDED 31 DECEMBER 2022 | CAPITAL | REVENUE | TRANSLATION CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | HOLDERS’ | CONTROLLING | TOTAL | |
CAPITAL | ACCOUNT | RESERVE | RESERVE | RESERVE | RESERVE | EQUITY | INTERESTS | EQUITY | |
£ | £ | £ | £ | £ | £ | £ | £ | £ | |
Opening balance at 1 January 2022 | |||||||||
Distributions to non–controlling | |||||||||
interests | ( | ( | |||||||
Return on ordinary activities | |||||||||
after taxation | ( | ( | ( | ||||||
Dividends declared and paid | ( | ( | ( | ||||||
Other comprehensive income | |||||||||
Currency translation differences | |||||||||
Closing balance at 31 December 2022 41 | ( See Notes to the consolidated financial statements set out on pages 48 to 93. | VPC SPECIALTY LENDING INVESTMENTS PLC The supplementary revenue and capital columns are both prepared under guidance published by the Association of Investment Companies (“AIC”). |
RESTATED FINANCIAL STATEMENTS continued | |||
31 DECEMBER CONSOLIDATED STATEMENT OF CASH FLOWS | 31 DECEMBER | ||
2023 | 2022 | ||
NOTES VPC SPECIALTY LENDING INVESTMENTS PLC FOR THE YEAR ENDED 31 DECEMBER 2023 | £ | £ | |
Cash flows from operating activities: | |||
Total comprehensive income (expense) | ( | ( | |
Adjustments for: | |||
– Interest income | ( | ( | |
– Dividend and distribution income | 5 | ( | ( |
– Finance costs | |||
– Exchange losses | |||
Total | ( | ( | |
Loss on investment assets designated as held at fair value through profit or loss | |||
Loss (gain) on derivative financial instruments | ( | ( | |
Increase in management fee receivable | ( | ||
(Increase) decrease in other assets and prepaid expenses | ( | ||
Decrease in performance fee payable | ( | ||
Decrease in management fee payable | ( | ( | |
Decrease in deferred income | ( | ( | |
(Decrease) increase in due to broker | ( | ||
(Decrease) increase in other liabilities and accrued expenses | ( | ||
Interest received | |||
Purchase of loans | ( | ( | |
Redemption or sale of loans | |||
Impairment of loans | |||
Net cash inflow from operating activities | |||
Cash flows from investing activities: | |||
Investment income received | |||
Purchase of investment assets designated as held at fair value through profit or loss | ( | ( | |
Sale of investment assets designated as held at fair value through profit or loss | |||
Decrease of cash posted as collateral | |||
Net cash inflow (outflow) from investing activities | See Notes to the consolidated financial statements set out on pages 48 to 93. | ( 42 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023 |
RESTATED | |||
31 DECEMBER CONSOLIDATED STATEMENT OF CASH FLOWS | 31 DECEMBER | ||
2023 | 2022 | ||
NOTES VPC SPECIALTY LENDING INVESTMENTS PLC FOR THE YEAR ENDED 31 DECEMBER 2023 | £ | £ | |
Cash flows from financing activities: | |||
Dividends distributed | ( | ( | |
Proceeds from note payable | |||
Repayment of note payable | ( | ( | |
Finance costs paid | ( | ( | |
Distributions to non–controlling interests | ( | ||
Net cash outflow from financing activities | ( | ( | |
Net change in cash and cash equivalents | ( | ( | |
Exchange (losses) gains on cash and cash equivalents | ( | ||
Cash and cash equivalents at the beginning of the year | |||
Cash and cash equivalents at the end of the year | 7 See Notes to the consolidated financial statements set out on pages 48 to 93. | 43 |
FINANCIAL STATEMENTS continued
VPC SPECIALTY LENDING INVESTMENTS PLC
44 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
PARENT COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
31 DECEMBER 31 DECEMBER
2023 2022
NOTES £ £
Assets
Cash and cash equivalents 7 6,562,491 14,640,647
Cash posted as collateral 7 699,081 2,222,734
Derivative financial assets 3,4 1,870,615 1,081,849
Interest receivable 13,382,356 5,848,979
Management fee receivable 10 31,146 –
Other current assets and prepaid expenses 2,960,210 3,015,560
Investments in subsidiaries 17 184,812,034 233,951,844
Investment assets designated as held at fair value through profit or loss 3 15,888,315 22,474,910
Total assets 226,206,248 283,236,523
Liabilities
Management fee payable 10 – 97,785
Due to broker – 4,848,569
Derivative financial liabilities 3,4 – 3,283,142
Deferred income – 41,201
Other liabilities and accrued expenses 1,066,097 1,737,420
Total liabilities 1,066,097 10,008,117
Total assets less total liabilities 225,140,151 273,228,406
Equity attributable to Shareholders of the Company
Called-up share capital 20,300,000 20,300,000
Share premium account 161,040,000 161,040,000
Other distributable reserve 14 112,779,146 112,779,146
Capital reserve (98,707,895) (47,260,404)
Revenue reserve 29,728,900 26,369,664
Total equity 225,140,151 273,228,406
Net return for the year ended on ordinary activities after taxation (25,826,144) (22,124,267)
The financial statements on pages 44 to 93 were approved by the Board of Directors on 23 April 2024 and signed on its behalf
by:
Graeme Proudfoot
Chair
23 April 2024
See Notes to the consolidated financial statements set out on pages 48 to 93.
VPC SPECIALTY LENDING INVESTMENTS PLC
45
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
CALLED-UP OTHER
SHARE SHARE DISTRIBUTABLE CAPITAL REVENUE
CAPITAL PREMIUM RESERVE RESERVE RESERVE TOTAL
££££££
Opening balance at 1 January 2023 20,300,000 161,040,000 112,779,146 (47,260,404) 26,369,664 273,228,406
Amounts paid on repurchase of Ordinary Shares ––––––
Return on ordinary activities after taxation – – – (51,447,491) 25,621,347 (25,826,144)
Dividends declared and paid ––––(22,262,111) (22,262,111)
Closing balance at 31 December 2023 20,300,000 161,040,000 112,779,146 (98,707,895) 29,728,900 225,140,151
See Notes to the financial statements set out on pages 48 to 93.
FINANCIAL STATEMENTS continued
VPC SPECIALTY LENDING INVESTMENTS PLC
46 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
PARENT COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
CALLED-UP OTHER
SHARE SHARE DISTRIBUTABLE CAPITAL REVENUE
CAPITAL PREMIUM RESERVE RESERVE RESERVE TOTAL
££££££
Opening balance at 1 January 2022 20,300,000 161,040,000 112,779,146 2,880,271 20,615,367 317,614,784
Amounts paid on repurchase of Ordinary Shares ––––––
Return on ordinary activities after taxation – – – (50,140,675) 28,016,408 (22,124,267)
Dividends declared and paid ––––(22,262,111) (22,262,111)
Closing balance at 31 December 2022 20,300,000 161,040,000 112,779,146 (47,260,404) 26,369,664 273,228,406
See Notes to the financial statements set out on pages 48 to 93.
VPC SPECIALTY LENDING INVESTMENTS PLC
47
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
31 DECEMBER 31 DECEMBER
2023 2022
NOTES £ £
Cash flows from operating activities:
Net return for the year ended on ordinary activities after taxation (25,826,144) (22,124,267)
Adjustments for:
– Interest income (32,007,975) (34,288,810)
– Exchange losses 996,450 1,552,676
Total (56,837,669) (54,860,401)
Unrealised loss (gain) on investment assets designated as held at
fair value through profit or loss 7,511,217 (6,815,010)
Unrealised loss on investments in subsidiaries 38,940,772 47,763,004
Loss (gain) on derivative financial instruments (4,071,908) (35,736,991)
Increase in management fee receivable (31,146) –
Decrease (increase) in other assets and prepaid expenses 55,506 (133,010)
Decrease in performance fee payable – (12,913,280)
Decrease in management fee payable (97,785) (57,614)
(Decrease) increase in due to broker (4,848,569) 4,848,569
Decrease in deferred income (41,201) (133,402)
(Decrease) increase in other liabilities and accrued expenses (306,307) 96,684
Net cash outflow from operating activities (19,727,090) (57,941,451)
Cash flows from investing activities:
Interest received 24,109,426 33,353,829
Purchase of investment assets designated as held at fair value
through profit or loss (955,922) (3,556,974)
Sale of investment assets designated as held at fair value through
profit or loss 31,300 428,164
Purchase of investments in subsidiaries (92,780,274) (48,397,941)
Sales of investment in subsidiaries 105,302,927 106,463,368
Cash posted as collateral 1,523,653 1,910,854
Net cash inflow from investing activities 37,231,110 90,201,300
Cash flows from financing activities
Dividends paid (22,262,111) (22,262,111)
Net cash outflow from financing activities (22,262,111) (22,262,111)
Net change in cash and cash equivalents (4,758,091) 9,997,738
Exchange (losses) gains on cash and cash equivalents (3,320,065) 341,335
Cash and cash equivalents at the beginning of the year 14,640,647 4,301,574
Cash and cash equivalents at the end of the year 7 6,562,491 14,640,647
See Notes to the financial statements set out on pages 48 to 93.
FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
48 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
49
FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
50 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
51
FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
52 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
53
FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
54 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
55
FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
56 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
57
FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
58 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
59
FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
60 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
61
FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
62 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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63
FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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64 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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65
FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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66 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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67
FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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68 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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69
FINANCIAL STATEMENTS continued
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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70 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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71
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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72 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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73
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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74 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
75
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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76 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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77
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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78 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
79
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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80 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
VPC SPECIALTY LENDING INVESTMENTS PLC
81
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82 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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83
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84 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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85
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86 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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87
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88 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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89
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90 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
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91
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VPC SPECIALTY LENDING INVESTMENTS PLC
93
GOVERNANCE
VPC SPECIALTY LENDING INVESTMENTS PLC
95
BOARD OF DIRECTORS
This section forms part of the Directors’ Report.
All Directors are Non-Executive and are independent of the Investment Manager.
GRAEME PROUDFOOT, CHAIR
Appointed 1 December 2020
1,2,3,4
Appointed Chairman 24 June 2021
Independent Non-Executive Director
Graeme Proudfoot spent his executive career at Invesco, latterly as Managing Director, EMEA and CEO of Invesco Pensions. Graeme
joined Invesco in 1992 as a legal advisor and held various roles within the Invesco Group, including General Counsel of Invesco
Global, before moving to take responsibility for several of Invesco’s UK functions, including its investment trust business, which he
led from 1999 until his retirement in 2019. Graeme began his career at Wilde Sapte Solicitors, practising in London and New York.
MARK KATZENELLENBOGEN
Appointed 1 May 2019
1,2,3*,4*
Independent Non-Executive Director
Mark Katzenellenbogen has been involved in financial services for more than 40 years. He began his career in credit and banking
with S.G Warburg before working for the bank’s mergers and acquisitions department in the UK, US and South Africa. Mark
served as CEO of Auden Capital LLP, a London-based corporate finance advisory firm specialising in the investment and wealth
management sector from 2007 to 2023. Mark was a non-executive Director of Oldfield, a long-only value equity manager, from
2005 to 2022. He was appointed as a Trustee of the Conran Foundation in 2022 and serves as Deputy Chair.
OLIVER GRUNDY
Appointed 12 March 2021
1,2*,3,4
Independent Non-Executive Director
Oliver Grundy was an audit partner at Deloitte LLP for 28 years until his retirement in November 2019. He worked both in London
and New York in various roles, including leading Deloitte’s Banking Group team of 35 partners and 500 professionals, before
becoming the audit and advisory partner to significant funds. From 2017 to 2019, Oliver was the Deloitte UK ethics partner, with
responsibility for all whistleblowing and conduct matters as well as the firm’s Public Interest Review Group. During his Deloitte
career, Oliver also held several roles at the Institute of Chartered Accountants of England & Wales (ICAEW), including as Council
member, Disciplinary Committee Tribunal Chairman and serving on the Practice, Risk & Regulation and the Ethics Standards
Committees. Oliver is currently a member of the Red Cross International Medical Fundraising Board.
1 = Management Engagement Committee *Chair of Committee.
2 = Audit & Valuation Committee *Chair of Committee.
3 = Nomination Committee *Chair of Committee.
4 = Disclosure Committee *Chair of Committee .
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
96 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
DIRECTORS’ REPORT
The Directors of the Company are pleased to present the Annual Report for the Company and its subsidiaries (the “Group”) for
the year ended 31 December 2023.
The Corporate Governance Statement, Audit and Valuation Committee Report and the Directors’ Remuneration Report are
included in this Directors’ Report. The Board seeks to understand the needs and priorities of the Company’s stakeholders. The
report can be found within the Strategic Report on pages 21 to 24.
RESULTS AND DIVIDENDS
The interim dividends paid by the Company are set out in Note 15 of the financial statements. A summary of the Company’s
performance during the year is set out in the Strategic Report on pages 6 to 25.
INVESTMENT TRUST STATUS
The Company has received written approval from HM Revenue & Customs (“HMRC”) as an authorised investment trust under
Sections 1158/1159 of the Corporation Tax Act 2010. The Directors are of the opinion that the Company has conducted its affairs
in compliance with such approval and intends to continue doing so.
DIRECTORS
Directors’ Appointments
As at the date of this report, the Board consists of three Non-Executive Directors, all of whom are considered by the Board to
be independent. Biographies of the Directors are set out on page 95 and demonstrate the range of skills and experience each
Director brings to the Board.
The appointment and replacement of Directors is governed by the Company’s Articles of Association (the “Articles”), the
Companies Act 2006, related legislation and Listing Rules. The Articles may be amended by a special resolution of the
Shareholders.
Directors’ Interests
None of the current Directors, or any persons connected with them, had a material interest in the transactions and arrangements
of, or an agreement with, the Investment Manager during the period. The remuneration of the Directors and their beneficial
interests in the Company’s securities are set out in the Directors’ Remuneration Report on pages 117 to 121.
Directors’ Indemnity and Compensation for Loss of Office
Save for such indemnity provisions in the Articles and in Directors’ letters of appointment, there are no qualifying third-party
indemnity provisions in force. The Board has agreed to a procedure by which Directors may seek independent professional
advice if necessary and at the Company’s expense. The Company has also arranged for the appropriate provision of Directors’
and Officers’ Liability Insurance. The Company does not have any arrangements in place with any Director that would provide
compensation for loss of office.
Conflicts of Interest
The Articles provide that the Directors may authorise any actual or potential conflict of interest that may arise, with or without
imposing any conditions that they consider appropriate on the Director. Directors are not able to vote in respect of any contract,
arrangement or transaction in which they have a material interest and in such circumstances, they are not counted in the
quorum. A process has been developed to identify any of the Directors’ potential or actual conflicts of interest. This includes
declaring any potential new conflicts before the start of each Board meeting. The Directors are satisfied that this procedure is
adequate.
Board Changes
During the year, Elizabeth Passey and Clive Peggram reached their ninth year as Directors, having been Directors since the launch
of the Company. In line with best practice in corporate governance, they did not stand for re-election at the AGM held on
23 June 2023.
The Board has expressed its gratitude for their valuable counsel and thanked them for their contributions.
Following these changes, Mark Katzenellenbogen was appointed as Chair of the Disclosure Committee, and Oliver Grundy was
appointed as Chair of the Management Engagement Committee.
VPC SPECIALTY LENDING INVESTMENTS PLC
97
SHARES AND SHAREHOLDERS
Share Capital
The share capital as at 31 December 2023, and rights attaching to the Shares are set out in Note 14 to the financial statements.
As at the date of this report, the Company’s issued share capital consisted of 278,276,392 Ordinary Shares of £0.01 each with
voting rights. In addition, 104,339,273 shares were held in Treasury.
At the Company’s Annual General Meeting (“AGM”) on 23 June 2023. the Shareholders of the Company passed certain resolutions
in relation to the allotment and buyback of its equity securities which remained valid as at 31 December 2023. In summary, these
resolutions were:
An ordinary resolution to issue shares up to an aggregate nominal amount of £278,276, representing approximately 10%
of the issued Ordinary Share capital at the date of the Notice of AGM, excluding shares held in treasury. The Board has
authority to continue to allot shares up until the conclusion of the Company’s next AGM in 2024.
A special resolution authorising the Directors to dis-apply the pre-emption rights of existing Shareholders in relation to
issues of Ordinary Shares (being in respect of Ordinary Shares up to an aggregate nominal amount of £278,276
representing up to 10% of the Company’s issued Ordinary Share capital as at the date of the Notice, excluding shares held
in treasury). This authority shall expire at the conclusion of the Company’s next AGM in 2024.
A special resolution authorising market purchases of Ordinary Shares, provided that the maximum number of Ordinary
Shares authorised to be purchased is up to 41,713,631 ordinary shares, representing 14.99% of the issued Ordinary Shares
at the date of the Notice of AGM, excluding shares held in treasury. This authority shall expire at the conclusion of the
Company’s next AGM in 2024.
No shares were allotted by the Company during the year. Since the year end, no Ordinary Shares have been bought back, and
as at the date of this report, there were 382,615,665 Ordinary Shares in issue, of which 104,339,273 were held in treasury.
At the Company’s AGM in 2024, the Board will seek authority to issue Shares and to renew its authority to purchase Ordinary
Shares.
Shares bought back and held in Treasury will not be sold out of Treasury at a discount wider than the discount at which the
Shares were initially bought back by the Company. The authority to allot new Ordinary Shares, dis-apply pre-emption rights or
for the Company to purchase its own Shares will only be used if the Directors believe it is in the best interests of the Company.
Proposals for these and other authorities sought at the AGM, including their restrictions, will be set out in the Notice of the 2024
AGM.
Except as set out in the Company’s Articles, there are no restrictions concerning the transfer of securities in the Company or on
voting rights; no special rights with regard to control attached to securities; no agreements between holders of securities
regarding their transfer known to the Company; and no agreements which the Company is party to that might affect its control
following a successful takeover bid.
B Share Scheme
After careful consideration, the Board has determined that the adoption of a B Share Scheme is one of the fairest and most
efficient ways of returning capital to Shareholders. The B Share Scheme would allow the Company to return capital on a strict
pro rata basis which would ensure as far as possible that no Shareholder or Shareholder group is disadvantaged. The adoption
of the B Share Scheme would involve the Company issuing redeemable B Shares to Shareholders and redeeming them on the
Redemption Date applicable to that issue of B Shares without further action being required by Shareholders.
The Board believes that returning capital via the B Share Scheme rather than via a tender offer, offers the following significant
benefits to Shareholders:
It reduces costs for the Company, as there should be no need to prepare further circulars to give effect to a future Return
of Capital, which would not be the case with tender offers. Details of each Return of Capital notified to Shareholders will
be by an announcement through the Regulatory Information Service and, subject to any change in existing United
Kingdom tax law (and in contrast to a tender offer where stamp duty at the rate of 0.5 per cent. of the tender price is
payable), no stamp duty would be payable by the Company.
All Shareholders would participate in the redemption process and they would be treated equally. It is likely to be
particularly beneficial for smaller retail Shareholders who may miss the opportunity to participate in a tender offer simply
as a result of failing to make an election to participate.
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
98 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
The proportionate holdings of Shareholders will remain unchanged as a result of the B Share Scheme.
Subject to the Resolutions being passed at the General Meeting, Shareholders will not be required to take any further
action to give effect to a future Return of Capital under the B Share Scheme.
There would be greater certainty for the Company regarding the amount of capital that is able to be returned to
Shareholders, given that unlike tender offers, capital returns under the B Share Scheme would be made to all Shareholders
on a pro rata basis, without the need for an election.
Returns of Capital
The quantum and timing of a Return of Capital to Shareholders following receipt by the Company of the net proceeds of
realisations of investments will be dependent on the repayment and cancellation of the Company’s bank facilities, further
drawdowns to honour commitments to fund under existing contractual arrangements, the Company’s liabilities and general
working capital requirements and sufficient distributable reserves and amounts standing to the credit of the Company’s share
premium account. Accordingly, the quantum and timing of any Return of Capital will be at the discretion of the Board, and
details of each Return of Capital, including the relevant Record Date, Redemption Price and Redemption Date, will be notified
to Shareholders by an announcement through the Regulatory Information Service. Subject to the passing of the Resolutions at
the General meeting, the Board intends to announce the details of an initial Return of Capital under the B Share Scheme shortly
after the General Meeting.
The adoption of a B Share Scheme will not limit the ability of the Company to return cash to Shareholders by using other
mechanisms and, if the B Share Scheme is adopted, the Board will continue to review its efficacy over time. Details of the Board’s
intention to implement the B Share Scheme are set out in the Circular (as defined below).
The Board’s proposal to adopt a B Share Scheme now should not be taken as any indication as to the likely timing or quantum
of any future returns of cash to Shareholders.
Substantial Shareholdings
The Company has been informed of the following notifiable interests as at 31 December 2023 in the Company’s voting rights
under DTR 5. This information was correct at the date of notification. It should be noted that these holdings may have changed
since notified to the Company and may not therefore be wholly accurate statements of actual holdings as at 31 December 2023.
However, notification of any change is not required until the next applicable threshold is crossed.
NUMBER PERCENTAGE OF
SHAREHOLDER OF SHARES VOTING RIGHTS*
SVS Opportunity Fund GP, L.P. 56,256,107 20.22%
Schroders plc 22,400,000 8.05%
Premier Fund Managers Limited 22,165,000 7.97%
Newton Investment Management Limited 12,870,021 4.62%
Metage Funds Limited 8,565,079 3.08%
AXA Investment Managers S.A. 8,250,000 2.96%
* Percentage of voting rights as at 31 December 2023.
The Company has not been notified of the following changes in notifiable interests since 31 December 2023 and up until the
date of this report.
Articles of Association
Any amendments to the Articles of Association must be made by special resolution at a general meeting of the Shareholders.
The Articles of Association were last amended following approval by shareholders at the General Meeting held on 5 April 2024.
The amendments will enable the Company to return capital to shareholders by way of B-share mechanism. See pages 97 and98
for more information on the return of capital to shareholders.
The Annual General Meeting
The Company’s AGM will be held in June 2024, and explanations of the business proposed at the AGM will be contained in the
Notice of that Meeting.
VPC SPECIALTY LENDING INVESTMENTS PLC
99
AUDITORS AND FINANCIAL STATEMENTS
Independent Auditors
The auditors to the Company, PricewaterhouseCoopers LLP (“PwC” or the “Auditors”), were appointed in July 2015. They have
indicated their willingness to continue in office as Auditors of the Company.
The Audit and Valuation Committee has the responsibility for making a recommendation to the Board on the reappointment of
the external auditor. After careful consideration and a review of their effectiveness as external auditor, the Audit and Valuation
Committee has recommended that PwC be reappointed as the Company’s Auditors. Resolutions will, therefore, be proposed at
the forthcoming AGM to re-appoint PwC as Auditors and for the Audit and Valuation Committee to determine PwC’s
remuneration. For more information, refer to the Audit and Valuation Committee Report on pages 114 to 116.
Audit Information
The Directors who held office at the date of this Annual Report confirm that, so far as they are aware, there is no relevant audit
information of which the Company’s Auditors are unaware, and each Director has taken all the steps that he/she ought to have
taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company’s Auditors
are aware of that information. This confirmation is given in accordance with the provisions of Section 418 of the Companies
Act 2006.
Financial Risk Management
The principal financial risks and the Group’s policies for managing these risks are set out on pages 17 to 20.
Subsequent Events
The important subsequent events since 31 December 2023 are included on page 93.
Responsibility for Financial Statements and Going Concern Statement
The Directors have reviewed the financial projections of the Group and Company from the date of this report, which shows that
the Group and Company will be able to generate sufficient cash flows in order to meet its liabilities as they fall due. In assessing
the Group’s and Company’s ability to continue as a going concern, the Directors have considered the Company’s investment
objective, risk management policies, capital management, the monthly NAV and the nature of its portfolio and expenditure
projections.
Additionally, the Directors have considered the risks arising of reduced asset values, adverse economic conditions and the impact
of the managed wind down. The Investment Manager has performed a range of stress tests and demonstrated to the Directors
that even in an adverse scenario of depressed markets, the Group could still generate sufficient funds to meet its liabilities over
the next 12 months. The Directors believe that the Group has adequate resources, an appropriate financial structure, and suitable
management arrangements in place to continue in operational existence for the foreseeable future, being a period of at least
12 months from the date of this report.
Based on their assessment and considerations above, the Directors have concluded that the financial statements of the Group
and Company should continue to be prepared on a going concern basis.
Viability Statement
In accordance with provision 31 of the UK Corporate Governance Code, published by the Financial Reporting Council in July
2018, and as part of an ongoing programme of risk assessment, the Directors have assessed the prospects of the Company to
the extent that they are able, over a three-year period from 31 December 2023. The Directors have chosen a three-year period
as this is viewed as sufficiently long-term to provide Shareholders with a meaningful view without extending the period so far
into the future as to undermine the exercise.
Additionally, as disclosed in the General Meeting circular, the Directors believe that a substantial amount of the Company’s assets
will be realised in three to five years, with the proceeds returned to Shareholders over that expected timeframe. Certain of the
asset-backed investments held by the Group have maturities that extend beyond three years, allowing for the investment cash
flows and expenditures of the Group to be reasonably forecasted as met over this timeframe.
The three-year review considers the Group’s cash flow, cash distributions, including return of proceeds to Shareholders, and other
key financial ratios over the period. The three-year review also makes certain assumptions about the normal level of expenditure
likely to occur and considers the impact on the financing facilities of the Group.
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
100 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
Furthermore, the three-year review period to 31 December 2026 was modelled considering the impact of the approved change
of the Company’s investment policy to conduct an orderly realisation of the assets of the Company, to be effected in a manner
that seeks to achieve a balance between returning cash to Shareholders promptly and maximising value.
As a part of this review, the Directors reviewed a series of stress test scenarios carried out by the Investment Manager, which
assumed a significant fall in income and asset levels, delay in repayment of the asset-backed lending facilities, and various
assumptions on the equity investment portfolio, including the impacts to the Group’s financing facilities and were satisfied with
the result of this analysis.
In making this assessment on the viability of the Group, the Directors have also taken into consideration each of the principal
risks and uncertainties on pages 17 to 20, their mitigants and the impact these might have on the orderly realisation of the
portfolio, future performance, solvency and liquidity. Both the principal risks and the monitoring system are subject to a robust
assessment at least annually.
In addition, the Directors considered the Company’s current financial position and prospects, the composition of the investment
portfolio, the level of outstanding capital commitments, the term structure and availability of borrowings and the ongoing costs
of the business. As part of the approach, due consideration has been given to the uncertainty inherent in financial forecasts, and,
where applicable, as described above, reasonable sensitivities have been applied to the investment portfolio in stress situations.
All the analysis above indicates that due to the anticipated stability and cash-generating nature of the investment portfolio
during most of the realisation period, the asset-backed lending investments should enable the Group to withstand the impacts
outlined above. Based on the assessment of the principal risks, prospects and viability of the Group, the Board confirms that they
have reasonable expectations that the Group will be able to continue operation and meet its liabilities as they fall due over the
three-year period to 31 December 2026.
ADDITIONAL DISCLOSURES
Requirements of the Listing Rules
Listing Rule 9.8.4 requires the Company to include certain information in a single identifiable section of the Annual Report or
a cross-reference table indicating where the information is set out.
The Directors confirm that there are no disclosures to be made in relation to Listing Rule 9.8.4.
Political Donations
The Company made no political donations during the period to organisations either within or outside of the EU. (Period to
31 December 2022: £nil).
Modern Slavery Act
As an investment trust, the Company does not provide goods or services in the normal course of business and does not have
employees nor customers or turnover, so it is therefore not required to make any slavery or human trafficking statement under
the Modern Slavery Act 2015. However, the Company has a zero-tolerance approach to modern slavery and regularly reviews its
investment portfolio to ensure there are no breaches to the Modern Slavery Act.
This Report was approved by the Board of Directors on 23 April 2024 and signed on its behalf by
Link Company Matters Limited
Company Secretary
23 April 2024
VPC SPECIALTY LENDING INVESTMENTS PLC
101
CORPORATE GOVERNANCE STATEMENT
This Corporate Governance Statement forms part of the Directors’ Report and includes the Audit and Valuation Committee
Report and Directors’ Remuneration Report.
APPLICABLE CORPORATE GOVERNANCE CODE
The Company is committed to high standards of corporate governance. This statement, together with the Statement of Directors’
Responsibilities in Respect of the Financial Statements on page 122, indicates how the Company has applied the principles of
recommended governance of the Financial Reporting Council (“FRC”) 2018 UK Corporate Governance Code (the “UK Code”) and
the AIC’s Code of Corporate Governance issued in 2019, (the “AIC Code”), which complements the UK Corporate Governance
Code and provides a framework of best practice for investment trusts.
The Board considers that reporting against the principles and provisions of the AIC Code, which has been endorsed by the FRC,
provides more relevant information to both Shareholders and stakeholders and that by reporting against the AIC Code, the
Company has met its obligations in relation to the UK Code and associated disclosure requirements under paragraph 9.8.6 of the
Listing Rules.
The UK Code is available on the FRC website (https://www.frc.org.uk). The AIC Code is available on the AIC website
(https://www.theaic.co.uk) and includes an explanation of how the AIC Code adapts the principles and provisions set out in the
UK Code to make them relevant for investment companies.
STATEMENT OF COMPLIANCE
The Board is responsible for ensuring the appropriate level of corporate governance and considers that the Company has
complied with the principles and provisions of the AIC Code except as disclosed below:
Provision 14: No senior independent Director has been appointed. All the Directors have different qualities and areas of
expertise on which they lead, and concerns can be conveyed to another Director if Shareholders do not wish to raise
concerns with the Chair of the Board or the Chair of the Audit and Valuation Committee. Any other Director will chair the
Board or Nomination Committee meeting when the annual evaluation of the Chair’s performance, their re-election, or the
recruitment of their successor is discussed;
Provision 23: Directors are not appointed for a specified term, as all Directors are non-executive and the Board believes
that a Director’s performance and their continued contribution to the running of the Company is of greater importance
and relevance to Shareholders than the length of time for which they have served as a Director of the Company. Each
Director is subject to the election and re-election provisions set out in the Articles, which provide that a Director appointed
during the year is required to retire and seek election by Shareholders at the next Annual General Meeting (“AGM”)
following their appointment. Thereafter, the Directors intend to offer themselves for re-election annually; and
Provision 37: As all the Directors are non-executive, the Board is of the view that there is no requirement for a separate
remuneration committee. Directors’ fees will be considered by the Board as a whole within the limits approved by
Shareholders.
THE PRINCIPLES OF THE AIC CODE
The AIC Code is made up of 17 principles split into five sections covering:
Board leadership and purpose;
Division of responsibilities;
Composition, succession and evaluation;
Audit, risk and internal control; and
Remuneration.
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
102 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
BOARD LEADERSHIP AND PURPOSE
The Board considers the long-term sustainable success of the Company, within the
context of the wind down, to be their main focus and all decisions are considered
from this point of view. As outlined below, the Company has a set of core values and
a corporate culture which are embedded into everything the Company does. VPC
takes an interest in how the Portfolio Companies manage environmental, social, and
governance (“ESG”) issues, and the Board and VPC agree that responsible business
practices help generate long-term sustainable returns. VPC and the Board continue
to work on implementing an ESG policy.
As part of this, the opportunities and risks faced by the business are considered,
monitored and assessed on a regular basis, both in terms of potential and emerging
risks that the business may face. More detail regarding the principal risks and
uncertainties and the sustainability of the business model can be found in the
Strategic Report on pages 17 to 20.
The purpose of the Company is the investment objective as set out on page 4. The
strategy that the Board follows in order to achieve this objective is outlined in the
Strategic Report on pages 6 to 25.
The Board adopts some key values which are embedded into the culture of the
business and are key to any investment decision made by the Company. These
values and culture also drive how the Board and the relationship with the
Investment Manager proceed. These are:
Ensure all business decisions are made once all potential impacts on
stakeholders are fully understood
Encourage open, honest and collaborative discussions at all levels in Board
meetings, with Shareholders and stakeholders and with third party service
providers
To avoid any potential conflicts of interest.
The values and culture of the business are considered as part of the annual board
evaluation process to ensure that they remain a key focus on which all decisions are
based.
The Board regularly considers the Company’s position, including the balance sheet,
cash flow projections, the availability of funding and the Company’s contractual
commitments. The Company’s objective is to conduct an orderly realisation of the
Company’s assets in a manner that seeks to achieve a balance between returning
cash to Shareholders promptly and maximising value; therefore, one of the measures
the Board considers is the total return per share.
The Board and the Management Engagement Committee assess the performance of
the Investment Manager in a number of different ways, including through the KPIs
set out on page 16.
The Audit and Valuation Committee is responsible for assessing and managing risks,
and further information about how this is done can be found in the Audit and
Valuation Committee Report on pages 114 to 116.
A. A successful company is led by an
effective board, whose role is to
promote the long-term sustainable
success of the company,
generating value for Shareholders
and contributing to wider society.
B. T
he board should establish the
company’
s purpose, values and
strategy and satisfy itself that these
and its culture are aligned. All
Directors must act with integrity,
lead by example and promote the
desired culture.
C. T
he board should ensure that the
necessary resour
ces are in place for
the company to meet its objectives
and measure performance against
them. The board should also
establish a framework of prudent
and effective controls, which
enable risk to be assessed and
managed.
VPC SPECIALTY LENDING INVESTMENTS PLC
103
BOARD LEADERSHIP AND PURPOSE
The Board understands its responsibilities to Shareholders and stakeholders and
considers the opinions of all such parties when making decisions. The Board
considers that other than Shareholders, their other key stakeholders are their
Portfolio Companies, their third-party providers and the Investment Manager in
particular. The Management Engagement Committee considers the relationship with
all third-party providers on at least an annual basis, and there is an ongoing
dialogue with the Investment Manager to ensure views are aligned.
The Board considers the impact any decision will have on all stakeholders to ensure
that they are making a decision that promotes the success of the Company.
In addition, the Directors welcome the views of all Shareholders and place
considerable importance on communications with them. In addition, the Directors
are available to meet Shareholders in person when able to do so or virtually.
Shareholders wishing to communicate with the Chairman or any other member of
the Board may do so by writing to the Company for the attention of the Company
Secretary at the Registered Office.
In accordance with the guidance issued by the Investment Association in the cases
where Shareholder votes against a resolution exceed 20%, the Board must consult
with Shareholders to understand the reasons for their votes. Further information on
the Board’s engagement with Shareholders following the significant votes received
against certain resolutions at the AGM and General Meeting held in 2023 can be
found on page 108.
Representatives of the Investment Manager regularly meet institutional Shareholders
to discuss historical performance to understand their issues and concerns and, if
applicable, to discuss corporate governance issues. The results of such meetings are
reported at the following Board meeting. Regular reports on investor sentiment and
industry issues from the Company’s broker are submitted to the Board.
Any substantive communications regarding any major corporate issues would be
discussed by the Board, taking into account representations from the Investment
Manager, the Auditor, legal advisers, brokers and the Company Secretary.
Further details of the Board’s engagement with Shareholders during the year can be
found in the Strategic Report on pages 21 to 24 and the Chairman’s Statement on
pages 6 to 8.
D. In order for the company to meet
its responsibilities to Shareholders
and stakeholders, the board should
ensure effective engagement with
and encourage participation from
these parties.
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
104 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
DIVISION OF RESPONSIBILITIES
There is a clear division of responsibility between the Chair, the Directors, the
Investment Manager and the Company’s other third-party service providers. The
Chair is responsible for leading the Board, ensuring its effectiveness in all aspects of
its role, and ensuring that all Directors receive accurate, timely, and clear
information. The responsibilities of the Chair are set out in writing and are available
on the Company’s website.
The Board meets regularly throughout the year, and representatives of the
Investment Manager are in attendance, when appropriate, at each meeting and most
Committee meetings.
The Board has agreed on a schedule of matters specifically reserved for decision by
the Board. This includes establishing the investment objectives, strategy and
benchmarks, the permitted types or categories of investments, the markets in which
transactions may be undertaken, the level of permitted gearing and borrowings, the
amount or proportion of the assets that may be invested in any category of
investment or in any one investment, and the Company’s treasury and share
buyback policies.
The Board, at its regular meetings, undertakes reviews of key investment and
financial data, revenue projections and expenses, analyses of asset allocation,
transactions and performance comparisons, share price and net asset value
performance, gearing, marketing and Shareholder communication strategies, the
risks associated with pursuing the investment strategy, peer group information and
industry issues.
The review of each Director’s performance was undertaken by the Chair, and the
review of the Chair’s performance was carried out during the period under review
by the Directors. This concluded that the Directors believed the Chair encouraged
good debate, ensured all Directors were involved in discussions, and that the Board
as a whole was working well. Additional efficiencies and improvements were
identified. The Board conducted a further such exercise in early 2024 under the
direction of Mark Katzenellenbogen.
All of the Directors are non-executive and are independent of the Investment
Manager and the other service providers.
The Chair, Graeme Proudfoot, was independent of the Investment Manager at the
time of his appointment and remains so. The Board is aware of the AIC’s guidance
on this issue and regards Graeme Proudfoot as independent.
Each Director is not a Director of another investment company managed by the
Company’s Investment Manager, nor has any Board member been an employee of
the Company or any of its service providers.
The Board evaluation concluded that each Director provides a valuable contribution
to Board meeting discussions and exercises appropriate levels of challenge and
debate.
As part of the Board evaluation process, the contributions of each Director, as well
as the time commitments made by each board member, are considered and
reviewed. As explained above, it was concluded that each Director provided
appropriate levels of challenge and provided the Company and the Investment
Manager with guidance and advice when required.
The Management Engagement Committee reviews the performance and cost of the
Company’s third-party service providers on an annual basis. More information
regarding the work of the Management Engagement Committee can be found on
page 111.
E. The chair leads the board and is
responsible for its overall
effectiveness in directing the
company. They should demonstrate
objective judgement throughout
their tenure and promote a culture
of openness and debate. In addition,
the chair facilitates constructive
board relations and the effective
contribution of all non-executive
Directors and ensures that Directors
receive accurate, timely and clear
information.
F. T
he board should consist of an
appropriate combination of Dir
ectors
(and, in particular, independent
non-executive Directors) such that no
one individual or small group of
individuals dominates the board’s
decision making.
G. Non-
executive Directors should
have sufficient time to meet their
boar
d responsibilities. They should
provide constructive challenge and
strategic guidance, offer specialist
advice, and hold third party service
providers to account.
VPC SPECIALTY LENDING INVESTMENTS PLC
105
DIVISION OF RESPONSIBILITIES
The Directors have access to the advice and services of the Company Secretary
through its appointed representative, who is responsible to the Board for ensuring
that Board procedures are followed and that applicable rules and regulations are
complied with. The Company Secretary is also responsible for ensuring good
information flows between all parties.
COMPOSITION, SUCCESSION AND EVALUATION
The Nomination Committee will lead the appointment process of new Directors as
and when vacancies arise and review the Board’s ongoing succession plans. More
information regarding the work of the Nomination Committee can be found on
page 111.
The Board has adopted a diversity policy, which acknowledges the benefits of
greater diversity and remains committed to ensuring that the Company’s Directors
bring a wide range of skills, knowledge, experience, backgrounds and perspectives
to the Board. While the Board does not feel that it would be appropriate to set
targets as all appointments are made on merit, the following objectives for the
appointment of Directors have been established:
all Board appointments will be made on merit, in the context of the skills,
knowledge and experience that are needed for the Board to be effective; and
long lists and, ideally, short lists of potential should include diverse candidates of
appropriate merit.
A statement on Chair succession is included on page 111.
Directors' biographical details are set out on page 95 of this Report. These
demonstrate the wide range of skills and experience that they bring to the Board.
Each Director was appointed with a view to having a Board with a good
combination of skills, experience and knowledge. This is reviewed as part of the
annual evaluation process. In the future, when considering new appointments, the
Board will review the skills of the Directors and seek to add persons with
complementary skills or who possess skills and experience which contribute to the
Board’s knowledge or experience and who can devote sufficient time to the
Company to carry out their duties effectively.
Details of the policies on tenure of the Directors and the Chairman can be found
below on page 109 of this Report.
H. The board, supported by the
company secretary, should ensure
that it has the policies, processes,
information, time and resources it
needs in order to function
effectively and efficiently.
I. Appointments t
o the board should
be subject to a f
ormal, rigorous
and transparent procedure, and an
effective succession plan should be
maintained. Both appointments
and succession plans should be
based on merit and objective
criteria and, within this context,
should promote diversity of
gender, social and ethnic
backgrounds, and cognitive and
personal strengths.
J. T
he board and its committees
should have a combination of
sk
ills, experience and knowledge.
Consideration should be given to
the length of service of the board
as a whole and membership
regularly refreshed.
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
106 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
COMPOSITION, SUCCESSION AND EVALUATION
The Board evaluates its own performance and that of its Committees, Chair and
Directors on an annual basis against consistent criteria provided by the Company
Secretary. For the period under review, this was carried out by way of a
questionnaire. The results were reviewed by the Board, including performance
against focus areas and action points; additional areas of focus were identified. The
Chair of the Nomination Committee led the assessment, which covered the
functioning of the Board as a whole, the effectiveness of the Board Committees and
the independence of and contribution made by each Director.
As necessary, the Company Chair discussed the responses with each Director
individually. The Chair absented himself from the Board’s review of his effectiveness
as the Company Chair, and this review was led by the Chair of the Nomination
Committee.
Following this review, the Board is satisfied that the structure, mix of skills and
operation of the Board is effective and relevant for the Company.
It is noted that after the Shareholder vote on the proposed wind down of the
Company, a review of the Board composition took place to ensure that the Board
continues to have the correct mixture of skills, experience, and knowledge to
manage the Company’s affairs. After consultation with Shareholders as well as Board
discussions, the Board decided in late February 2024 to initiate a process to recruit
an additional Director.
The individual performance of each Director standing for election and re-election
has been evaluated, and a recommendation is being made that Shareholders vote in
favour of their election or re-election at the AGM. All Directors will be subject to
annual re-election by Shareholders. More information regarding the proposed
election or re-election of each Director at the 2024 AGM can be found in the
separate AGM circular.
AUDIT, RISK AND INTERNAL CONTROL
The Audit and Valuation Committee has put in place a non-audit services policy,
which ensures that any work outside the scope of the standard audit work requires
prior approval by the Audit and Valuation Committee. This enables the Committee
to ensure that the external auditor remain fully independent.
In addition, the Audit and Valuation Committee carries out a review of the
performance of the external auditor on an annual basis. Feedback from other third
parties, including the Investment Manager, is included as part of this assessment to
ensure the Audit and Valuation Committee takes into account the views of different
parties who have a close working relationship with the external auditor.
Further information regarding the work of the Audit and Valuation Committee can
be found on pages 114 to 116.
The Board and Audit and Valuation Committee have considered the Annual Report
and Financial Statements as a whole and agreed that they believe that the
document presents a fair, balanced and understandable assessment of the
Company’s position and prospects. In particular, they have considered the language
used in the document to ensure unnecessary jargon is avoided. They have also
considered, in particular, the content of the Strategic Report, which provides a clear
outline of the Company’s position and prospects.
L. The board should establish formal
and transparent policies and
procedures to ensure the
independence and effectiveness of
external audit functions and satisfy
itself on the integrity of financial
and narrative statements.
K. Annual evaluation of the boar
d
should consider its composition,
diversit
y and how effectively
members work together to achieve
objectives. Individual evaluation
should demonstrate whether each
Director continues to contribute
effectively.
M. T
he board should present a fair,
balanced and understandable
assessment of the company
’s
position and prospects.
VPC SPECIALTY LENDING INVESTMENTS PLC
107
AUDIT, RISK AND INTERNAL CONTROL
The Audit and Valuation Committee reviews reports from the principal service
providers on compliance, and the internal and financial control systems in operation
and relevant independent audit reports thereon.
The Directors have carried out a review of the effectiveness of the Company’s
systems of internal control as they have operated over the year and up to the date
of approval of the Annual Report. Given the nature of the business, the Company is
reliant on its service providers and their internal controls. The Audit and Valuation
Committee reviews the Investment Manager’s compliance and control systems in
operation insofar as they relate to the affairs of the Company.
As set out in more detail in the Report of the Audit Committee on pages 114 to 116
the Company has in place a system for assessing the adequacy of those controls.
There were no material matters arising from the review of the Company’s controls
that required further investigation, and no significant failings or weaknesses were
identified.
REMUNERATION
As outlined in the Remuneration Report on page 117, the Company follows the
recommendation of the AIC Code that non-executive Directors’ remuneration should
reflect the time commitment and the duties and responsibilities of the role.
All Directors own shares in the Company, all of which were purchased in the open
market and using the Directors’ own resources.
At the Company’s AGM in 2024, Shareholders will be asked to approve changes to
the remuneration policy. The changes will propose that in addition to time
commitment, the duties of Directors and their responsibility, remuneration will also
be compared with the Company’s AIC peer group. The Board believes that it is
appropriate to review against the AIC peer group rather than the wider investment
trust group because it more accurately reflects the nature and complexity of the
Company and its operations.
The Board considers that this revised approach will also ensure that the Company
remains well positioned to attract and retain individuals of a calibre appropriate to
the future development of the Company. All Directors will continue to be ineligible
for bonuses, share options, long-term incentive schemes or other
performance-related benefits as the Board does not believe that this is appropriate
for non-executive Directors.
More information regarding the work of the Remuneration Committee can be found
in the Remuneration Report on pages 117 and 118.
As outlined by the AIC guidance, no Director should be involved in deciding his or her
own remuneration. The remuneration policy outlines that while Directors are not
permitted to decide their own remuneration on an individual basis, Directors are
permitted to discuss their remuneration as there is no separate remuneration
committee.
Changes to Directors’ remuneration will continue to be considered by the Board as a
whole with a review of a range of factors, including a comparison against the AIC peer
group and independent advice obtained from the Company’s service providers.
There is an agreed fee that all non-executive Directors receive (irrespective of
experience or tenure) and an additional fee for the role of Audit and Valuation
Committee Chair. There is also an agreed fee for the role of Chair of the Board. When
discussing the remuneration of the Chair of the Board and the Audit and Valuation
Committee, Directors will not decide their own remuneration.
O. Remuneration policies and practices
should be designed to support
strategy and promote long-term
sustainable success.
N. The board should establish
procedures t
o manage risk, oversee
the internal control framework, and
determine the nature and extent of
the principal and emerging risks
the company is willing to take in
order to achieve its long-term
strategic objectives.
P. A f
ormal and transparent procedure
for developing a remuneration
polic
y should be established. No
Director should be involved in
deciding their own remuneration
outcome.
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
108 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
REMUNERATION
Independent judgement on remuneration shall be maintained by requesting
approval for remuneration in comparison to the Company’s AIC peer group. Other
factors, such as the performance of the Company, time commitments and market
conditions, shall also be factored into any decision-making process.
2023 GENERAL MEETING AND ANNUAL GENERAL MEETING
On 12 June 2023, the Board announced that the resolutions put to the General Meeting of the Company (the “GM”) were
approved by Shareholders and on 23 June 2023, the Board announced that all resolutions proposed at the 2023 Annual General
Meeting of the Company (the “AGM”) had been passed. The AIC Code outlines that investment trusts should consult with
Shareholders if any resolutions receive votes against exceeding 20%.
In the case of the GM, Resolution 2 reached the threshold:
Resolution 2: To amend the terms of the Investment Management Agreement (44.36% against votes received).
And in the case of the AGM, three resolutions reached the threshold:
Resolution 5: Re-election of Graeme Proudfoot as a Director (21.82% against votes received);
Resolution 10: To authorise Directors to allot shares (23.22% against votes received); and
Resolution 11: To authorise the disapplication of pre-emption rights generally (23.39% against votes received).
In line with the AIC Code, the Board provided an update on the engagement the Board had with Shareholders following the
meetings in its Half Year Report released on 29 September 2023. The Board acknowledged the outcome of the votes in its
communications after the meetings and was subsequently in contact with a number of Shareholders to establish the reasons for
their votes against those Resolutions and to assure them that their concerns had been acknowledged. The Board continues to
consult Shareholders regularly and has put in place many suggestions made by Shareholders.
ROLE OF THE BOARD
A management agreement between the Company and the Investment Manager sets out the matters over which the Investment
Manager has authority. This includes management of the Company’s assets and some marketing services. The Board is
collectively responsible for the success of the Company, and a formal schedule of matters reserved to the Board for decision has
been approved, which is available on the Company’s website (https://vpcspecialtylending.com). This includes strategy and
management, Board and committee membership and other appointments, appointment and oversight of delegates, corporate
structure and share capital, remuneration, financial reporting and controls, company contracts, internal controls, corporate
governance and policies.
The Board is responsible for the approval of annual and half-year results and other public documents. It is also responsible for
ensuring that such documents provide a fair, balanced and understandable assessment of the Group’s position and prospects.
The Board’s role is to provide leadership within a framework of prudent and effective controls that enable risk to be assessed
and managed. It is responsible for setting the Company’s standards and values and for ensuring that its obligations to its
Shareholders and other stakeholders are understood and met. The Board sets the Company’s strategic aims (subject to the
Company’s Articles of Association and to such approval of the Shareholders in General Meeting as may be required from time
to time) and ensures that the necessary resources are in place to enable the Company’s objectives to be met.
The Board meets formally at least seven times a year, with additional ad hoc Board or Committee meetings arranged when
required. The Directors have regular contact with the Investment Manager and Company Secretary between formal meetings.
Full and timely information is provided to the Board to enable it to function effectively and to allow Directors to discharge their
responsibilities.
At each meeting, the Directors follow a formal agenda, which includes a review of the Company’s NAV, share price, discount,
financial position, gearing levels, peer group performance, investment performance, asset allocation and transactions and any
other relevant business matters to ensure that control is maintained over the affairs of the Company. The Board monitors
compliance with the investment restrictions required by the FCA and s1158 of the Corporation Tax Act 2010, the Company’s
Q. Directors should exercise
independent judgement and
discretion when authorising
remuneration outcomes, taking
account of company and individual
performance and wider
circumstances.
VPC SPECIALTY LENDING INVESTMENTS PLC
109
objectives, investment, borrowing and hedging policies and reviews the investment strategy. The Board regularly receives reports
from the Investment Manager on marketing and investor relations. The proceedings at all Board and Committee meetings are
recorded by the Company Secretary through a process that allows any Director’s concerns to be recorded in the minutes.
There is an agreed procedure for Directors to take independent professional advice if necessary and at the Company’s expense.
This is in addition to the access that every Director has to the advice and services of the Company Secretary, which is responsible
to the Board for ensuring that Board procedures are followed and that applicable rules and regulations are complied with.
BOARD COMPOSITION
The Board is chaired by Graeme Proudfoot, who was appointed with effect from 24 June 2021. The Board consists of three non-
executive Directors who have all served throughout the period. All current members of the Board are regarded as independent
of the Company’s Investment Manager.
The Directors have a breadth of investment, financial and professional experience relevant to the Company’s business and brief
biographical details of each Director are set out on page 95.
During the period, the Board satisfied itself that all Directors were and remain able to commit sufficient time to discharge their
responsibilities to the Company’s affairs effectively, having given due consideration to their other commitments.
A review of Board composition and balance is included as part of the annual performance evaluation of the Board, details of
which may be found below.
TENURE
Directors are generally initially appointed by the Board until the following AGM when, as required by the Company’s Articles of
Association, they will stand for election by Shareholders. Thereafter, a Director’s appointment is subject to an annual performance
evaluation and the approval of Shareholders at each AGM, in accordance with corporate governance best practice.
Under the Articles of Association, Shareholders may remove a Director before the end of his or her term by passing a special
resolution at a meeting and may, by ordinary resolution, appoint another person who is willing to act as a Director in his or her
place. A special resolution is passed if more than 75% and an ordinary resolution if more than 50% of the votes cast, in person
or by proxy, are in favour of the resolution. In addition, as set out in the Company’s Articles of Association, a person ceases to
be a Director as soon as that person has for more than six consecutive months been absent, without permission of the Directors,
from meetings of Directors held during that period and Directors make a decision to vacate that person’s office. During the
period of review, no Director has missed six consecutive meetings.
In accordance with the above and the AIC Code, all Directors will stand for election or re-election at the 2024 AGM. The
contribution and performance of the Directors seeking election or re-election was reviewed by the Nomination Committee at its
meeting in February 2024, which recommended to the Board their continuing appointment. Biographies of each Director are
available on page 95. It is the Board’s view that the Directors’ biographies illustrate why each Director’s contribution is and
continues to be, important to the Company’s long-term sustainable success.
The Board has adopted a formal tenure policy for Directors based on a continual review of performance. The Board does not
believe that length of service in itself necessarily disqualifies a Director from seeking reappointment but, when making a
recommendation, the Board takes into account the on-going requirements of the UK Corporate Governance Code (the “Code”),
including the need to refresh the Board and its Committees. It is not anticipated that any of the Directors would normally serve
in excess of nine years. In exceptional circumstances, which would be fully explained to Shareholders at the time, a short
extension might be appropriate.
Directors’ tenure is reviewed by the Nomination Committee with the objective of ensuring that the Board complies with the
Code and has the correct mixture of skills, experience and abilities to support the Company’s affairs.
Similarly, it is not anticipated that the Chair will normally serve in excess of nine years. However, given the entirely non-executive
nature of the Board and as the Chair may not be appointed as such at the time of their initial appointment as a Director, in
exceptional circumstances, which would be fully explained at the time, a short extension might be appropriate. As with all
Directors, the continuing appointment of the Chair is subject to on-going review of performance, including a satisfactory annual
evaluation, annual re-election by Shareholders and may be further subject to the particular circumstances of the Company at
the time he or she intends to retire from the Board.
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
110 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
DIVERSITY
The Directors acknowledge the benefits of Board diversity and continual review of the Board’s and individual Directors’
effectiveness while seeking to retain a balance of knowledge of the Company, diversity and continuity in the relationship with
the Investment Manager. The Board has adopted a Diversity Policy in line with its commitment to ensuring that the Company’s
Directors bring a wide range of skills, knowledge, experience, backgrounds and perspectives to the Board.
The Board is aware of the new Listing Rule, which incorporates the recommendations of the Parker Hampton-Alexander Reviews,
which considered how ethnic, cultural and gender diversity could be improved on UK boards. The Board has discussed the new
ethnic diversity disclosures required, namely, that from accounting periods starting on or after 1 April 2022:
at least 40% of individuals on the Board to be women;
at least one senior Board position to be held by a woman; and
at least one individual on the Board to be from a minority ethnic background.
In accordance with Listing Rule 9 Annex 2.1, the below table, in prescribed format, shows the gender of the Directors at the year
end. The data below was collected through self-reporting by the Directors.
Gender identity Number of Percentage on Number of senior
or sex Board members the Board (%) positions on the Board
Men 3 100 1
Women – – –
Not specified/prefer not to say – – –
Number of Percentage on Number of senior
Ethnic background Board members the Board (%) positions on the Board
White British or other White
(including minority white groups) 2 66 1
Mixed/Multiple Ethnic Groups – – –
Asian/Asian British – – –
Black/African/Caribbean/Black British – – –
Other ethnic group, including Arab 1 33 –
Not specified/prefer not to say – – –
The Board is mindful that, at present, it does not comply with the new ethnic and gender representation requirements, and the
Board, via the Nomination Committee, is taking appropriate steps to ensure that Board succession planning takes these diversity
requirements into consideration.
INDUCTION AND TRAINING
On appointment, the Investment Manager and Company Secretary provide new Directors with induction training as appropriate.
The training covers the Company’s investment strategy, policies and practices. The Directors are also given regular briefings on
changes in law and regulatory requirements that affect the Company and the Directors. It is the Chair’s responsibility to ensure
that the Directors have sufficient knowledge to fulfil their role, and Directors are encouraged to attend industry and other
seminars covering issues and developments relevant to investment trust companies. Regular reviews of Directors’ training needs
are carried out by the Chair by means of the evaluation process described below.
The Directors have access to the advice and services of the Company Secretary through its appointed representative, who is
responsible for general secretarial functions and for assisting the Company with compliance with its continuing obligations as a
company listed on the premium segment of the Official List. The Company Secretary is also responsible for ensuring good
information flows between all parties.
VPC SPECIALTY LENDING INVESTMENTS PLC
111
BOARD COMMITTEES
Directors are members of each of the Committees, as this was deemed appropriate given the size and nature of the Board. Each
of the Committees has formal terms of reference established by the Board, which are available on the Company’s website
(https://vpcspecialtylending.com).
Unless invited to attend by the Committee’s Chair or members, only members of the Committees are entitled to be present at
Committee meetings. An outline of the remit of each of the Committees and their activities during the period are set out below.
Audit and Valuation Committee
The Company’s Audit and Valuation Committee meets at least twice during the year and is chaired by Oliver Grundy.
The main responsibilities of the Audit and Valuation Committee are set out below. The Company’s Audit and Valuation
Committee Report is on pages 114 to 116.
The Audit and Valuation Committee is responsible for monitoring the integrity of the financial statements of the Group and any
other formal announcements in relation to its financial performance. On an annual basis, it reviews the adequacy and
effectiveness of the Group’s financial reporting and internal control policies. The Committee reviews the scope, results, cost
effectiveness, independence and objectivity of the external auditor and makes recommendations to the Board in relation to the
appointment, re-appointment and removal of the Company’s Auditor.
Management Engagement Committee
The Management Engagement Committee is chaired by Oliver Grundy and meets at least once a year or more often if required.
The Management Engagement Committee is principally responsible for reasonably satisfying itself that the IMA is fair and its
terms remain appropriate, relevant, competitive and sensible.
It also reviews the systems put in place by the Investment Manager, including those relating to compliance. It annually reviews
the performance and fees of the Investment Manager in order to make a recommendation to the Board regarding its continued
appointment. In addition, it reviews and considers the appointment and remuneration of providers of services to the Company.
During the year, the Management Engagement Committee met once to consider the performance of the service providers and
Investment Manager. Following the recommendation from the Management Engagement Committee, the Board agreed that the
continuing appointment of the Investment Manager on the current terms (as summarised on pages 112 and 113 was in the
interest of the Shareholders as a whole. This is primarily driven by the Investment Manager’s extensive experience and impressive
track record in the asset-backed lending sector.
Nomination Committee
The Nomination Committee is chaired by Mark Katzenellenbogen and meets at least once a year or more often if required. The
Nomination Committee is responsible for considering the structure, size and composition of the Board. It considers
recommendations to Shareholders concerning the (re)election of the Directors and is also responsible for considering succession
planning.
The Nomination Committee is also responsible for conducting an annual performance evaluation of the Board, the Board’s
Committees, and individual Directors. The results of the annual performance review are reviewed by the Committee, and
appropriate recommendations are made to the Board.
During the period, the Nomination Committee met four times.
Disclosure Committee
In response to the Market Abuse Regulation, the Board has established a Disclosure Committee. The principal role of the
Committee is to monitor the implementation of procedures for identifying inside information when it arises and ensuring the
Company complies with its disclosure and other obligations in respect of such inside information.
The Disclosure Committee is chaired by Mark Katzenellenbogen. The other members are any one of the other independent
non-executive Directors and a senior executive of the investment manager. The performance of the Investment Manager in its
submissions to the Disclosure Committee forms part of the overall review of the performance of the Investment Manager by the
Management Engagement Committee. Since the last Annual Report, the Disclosure Committee has not met as a separate entity,
but disclosure issues are regularly discussed at Board Meetings, and related decisions are taken in relation to dealing with
restrictions and non-public material information. The Investment Manager regularly provided papers and updated the Board on
items as they related to the Market Abuse Regulation as a part of the Board meetings.
The need for a Disclosure Committee meeting is assessed at the end of each Board meeting.
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
112 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
BOARD AND COMMITTEE MEETING ATTENDANCE
The Board has at least seven scheduled meetings a year and meets more often if required. Directors’ attendance at Board and
Committee meetings held during the year to 31 December 2023 is set out in the below table:
AUDIT AND MANAGEMENT
VALUATION ENGAGEMENT NOMINATION
DIRECTOR BOARD
1
COMMITTEE
1
COMMITTEE
1
COMMITTEE
1
Oliver Grundy 11 (11) 6 (6) 1 (1) 2 (2)
Mark Katzenellenbogen 10 (11) 6 (6) 1 (1) 2 (2)
Elizabeth Passey 6 (7) 3 (3) Nil 1 (1)
Clive Peggram 7 (7) 3 (3) Nil 1 (1)
Graeme Proudfoot 11 (11) 6 (6) 1 (1) 2 (2)
BOARD RESPONSIBILITIES AND RELATIONSHIP WITH INVESTMENT MANAGER
The Board has overall responsibility for the Company’s activities, including the review of investment activity and performance
and the control and supervision of all suppliers of services to the Company, including the Investment Manager. It is also
responsible for the determination of the Company’s investment policy and strategy and the Company’s system of internal and
financial controls, including ensuring that commercial risks and financing needs are properly considered and that the obligations
of a public limited company are adhered to.
To assist the Board in the day-to-day operations of the Company, arrangements have been put in place to delegate authority for
the performance of day-to-day operations of the Company to the Investment Manager and other third-party service providers.
The Board has appointed the Investment Manager to manage the Company’s investment portfolio within guidelines set by the
Board. The Investment Manager has been actively involved in the asset-backed lending marketplace and has made investments
and commitments across multiple Portfolio Companies, geographies (US, UK, Europe and Caribbean), products (consumer and
business) and structures (senior credit facilities).
The Investment Manager is in frequent contact with the Board and supplies the Directors with regular updates on the Company’s
activities and detailed reports at each Board meeting.
Summary of Investment Management Agreement
Under the IMA dated 26 February 2015 between the Company and the Investment Manager, the Investment Manager is
appointed to act as investment manager and Alternative Investment Fund Manager (“AIFM”) of the Company with responsibility
for portfolio management and risk management of the Company’s investments.
Under the terms of the IMA, the Investment Manager is entitled to a management fee together with reimbursement of all
reasonable costs and expenses incurred by it in the performance of its duties. The Investment Manager is also entitled to a
performance fee in certain circumstances (see further below). Further documentation of the fees is included in Note 10 of the
financial statements on pages 83 and 84.
The IMA shall continue in force until and unless terminated by any party giving to the other not less than six months’ notice in
writing to terminate the same. The Management Agreement may be terminated with immediate effect on the occurrence of
certain events, including insolvency or material breach of agreement. The Company has given an indemnity in favour of the
Investment Manager in respect of the Investment Manager’s potential losses in carrying on its responsibilities under the IMA.
In 2016, the Company and the Investment Manager agreed on an amendment to the IMA. Under the revised agreement, the
Investment Manager agreed to invest 20% of its monthly management fee received from the Company into shares in the
Company at the prevailing market price on an on-going basis, provided that the shares are trading at a discount to the prevailing
net asset value and the Investment Manager does not hold more than 10% of the voting rights of the Company. Since 2016, the
Investment Manager has acquired 4,496,991 Ordinary Shares in the Company through this mechanism.
1
The number in brackets denotes the number of meetings each Director was entitled to attend. In addition, during the course of the year the
Board delegated to a sub-committee specific remit for consideration and recommendation but with the final responsibility in these areas remaining
with the Board.
VPC SPECIALTY LENDING INVESTMENTS PLC
113
In 2017, the Company and Investment Manager agreed to the introduction of a performance hurdle in respect of the
performance fees payable to the Investment Manager. With effect from 1 May 2017, the payment of any performance fees to the
Investment Manager is conditional on the Company achieving at least a 5.0% per annum total return for Shareholders relative
to a 30 April 2017 High Water Mark.
In 2023, the Company and Investment Manager agreed on an amendment to the IMA, making changes to both the performance
fee and management fee. The performance fee was restructured so that a fee will only be earned after the High Water Mark NAV
Amount is returned to the Shareholders through the orderly realisation of the Company’s assets with effect from 1 January 2023.
The management fee was restructured to remove the requirement from 2016 to invest 20% of the management fee to purchase
shares in the Company at the prevailing market price and that the management fee would be subject to a minimum amount
once the Net Asset Value is reduced to less than £50 million over a three-year period. These amendments to the IMA were
approved by Shareholders at the General Meeting on 12 June 2023 date.
Continuing appointment of the Investment Manager
It is considered that the Investment Manager has executed the Company’s investment strategy according to the Board’s
expectations. Accordingly, the Directors believe that the continuing appointment of Victory Park Capital Advisors, LLC as the
Investment Manager of the Company, on the terms agreed, is in the best interests of the Company and its Shareholders as
a whole.
This statement was approved by the Board of Directors and signed on its behalf by:
Link Company Matters Limited
Company Secretary
23 April 2024
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
114 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
AUDIT AND VALUATION COMMITTEE REPORT
MEMBERSHIP OF THE COMMITTEE
The Audit and Valuation Committee (the “Committee”) meets at least two times a year and met six times during 2023. All the
Directors are members of the Committee, and Oliver Grundy is the Chair. At least one member of the Committee has recent and
relevant financial experience, and the Committee as a whole has competence relevant to the sector within which the Company
operates. Representatives of the Auditors also attend and present at meetings of the Committee. The other Directors considered that
it was appropriate for Graeme Proudfoot as Chair of the Board to be a member of, but not chair, the Committee due to the Board’s
small size, the lack of perceived conflict of interest, and because the other Directors believe that Graeme Proudfoot continues to be
independent. The Investment Manager’s management team also attends meetings of the Committee by invitation.
THE ROLE OF THE AUDIT AND VALUATION COMMITTEE
The responsibilities of the Committee are set out in the AIC Code, Disclosure Guidance and Transparency Rule 7.1 and the
Committee’s terms of reference. These include that it shall:
monitor the integrity of the financial statements of the Group and any other formal announcements relating to its financial
performance;
review and challenge, where necessary, the Group’s financial statements;
review annually the adequacy and effectiveness of the Group’s financial reporting and internal control policies and
procedures, including related reporting;
review the Investment Manager’s whistleblowing procedures, adequacy and effectiveness of the compliance function and
its financial viability when required;
review the adequacy and security of the Group’s arrangements for its contractors to raise concerns, the Group’s service
providers’ procedures for detecting fraud, the Group’s systems and controls for the prevention of bribery and receive
reports on non-compliance;
review all reports on the Group from the Investment Manager’s operational control function and consider annually whether
there is a need for an internal audit function;
oversee the relationship with the external auditor, including considering and making recommendations to the Board in
relation to their appointment, reappointment and removal, including in relation to any tender for the audit service,
including approval of audit fees and non-audit services and fees;
recommend valuations of the Group’s investments to the Board and monitor the integrity of the recommended valuations
made by the Investment Manager;
review the content of the annual report and financial statements and advise the Board on whether taken as a whole, it is
fair, balanced and understandable and provides the information necessary for Shareholders to assess the Group’s
performance, business model and strategy;
report formally to the Board on its proceedings after each meeting on all matters within its duties and responsibilities and
shall also formally report to the Board on how it has discharged its responsibilities; and
review and recommend to the Board for approval the Company’s dividend.
MATTERS CONSIDERED IN THE YEAR
The principal matters considered by the Committee were as follows:
the internal controls, including cyber security and risk management of the Group and Investment Manager;
the Auditors’ fees;
the timetable for the approval, announcement and distribution of dividends;
the valuation of loans and equity, including valuation policy;
the plan for the audit of the Group’s Annual Financial Statements;
the Group’s half-year financial statements and Annual Financial Statements;
making recommendations to the Board regarding interim dividend payments;
key risks in relation to the Group’s financial statements (see page 116 for more details);
the Group’s expected credit loss reserving policy;
the Group’s non-audit services policy;
the Viability and Going Concern statements, particularly in the light of the managed wind down of the company;
its own performance as a Committee and its terms of reference; and
the review of investee companies and their association to Russia.
VPC SPECIALTY LENDING INVESTMENTS PLC
115
INTERNAL AUDIT
The Board has considered the need for an internal audit function, and it has decided that the systems and procedures employed
by the Investment Manager and the other third-party providers in relation to the Group give sufficient assurance that a sound
system of internal control, which safeguards the Group’s assets, is maintained. An internal audit function specific to the Group is
therefore considered unnecessary. The requirement, however, will be re-visited on an annual basis in accordance with the
Committee’s terms of reference.
RISK MANAGEMENT AND INTERNAL CONTROLS
The Committee is responsible for satisfying itself that the accounting and internal control systems of the Company, the
Investment Manager and other service providers are appropriate and adequate. The Committee has received reports from the
Investment Manager for the purpose of reviewing the control mechanisms in place, and the Committee is satisfied that the
relevant legal and regulatory requirements have been met. The Committee is also responsible for ensuring that compliance is
under proper review and is provided with an update and reports from the Investment Manager at regular Committee meetings.
Risk is inherent in the Group’s activities, and accordingly, the Company has established a risk map consisting of the key risks and
controls in place to mitigate those risks. The risk map provides a basis for the Committee and the Board to monitor the effective
operation of the controls and to update the matrix when new risks are identified.
The Investment Manager is responsible for operating the Group’s internal system of control and for initially reviewing its
effectiveness. Such systems are, however, designed to minimise risk rather than eliminate risk; they can provide only reasonable
and not absolute assurance against material misstatement of loss. The Management Engagement Committee carries out reviews
at least annually of the performance of the Investment Manager as well as the other service providers appointed by the Group.
The following are the key components which the Group has in place to provide effective internal control:
The Board has agreed to clearly defined investment criteria and platform restrictions, which specify levels of authority and
exposure limits. The Investment Manager regularly reports to the Audit and Valuation Committee on compliance with these
criteria.
The Board has a procedure to ensure that the Company can continue to be approved as an investment company by
complying with sections 1158/1159 of the Corporation Tax Act 2010.
The Investment Manager and Administrator prepare forecasts and management accounts covering investment activities
and financial matters, which allow the Committee to assess the Group’s activities and review its performance.
Contractual arrangements with the Investment Manager and other third-party service providers are in place, which
specifically define their roles and responsibilities to the Group.
The services and controls of the Investment Manager and other third-party service providers are subject to review by the
Management Engagement Committee on an on-going basis. Regular reports are provided to the Board by the
Administrator and the Depositary.
The Investment Manager’s operations and compliance departments continually review the Investment Manager’s operations and
report to the Committee. The Investment Manager works with the Committee to comply in all material respects with rules and
requirements of governmental authorities (as modified or re-enacted from time to time) applicable to it and obtain appropriate
advice with a view to assisting the Company in its compliance with the laws, rules and regulations (including, without limit, those
relating to environmental matters) prevailing in each jurisdiction in which the Group may invest.
The Committee recognises that these control systems can only be designed to manage, rather than eliminate, the risk of failure
to achieve business objectives and to provide reasonable, but not absolute, assurance against material misstatement or loss.
Discussion of the Group’s principal risks is on pages 17 to 20.
EXTERNAL AUDIT
The Company’s Auditors, PricewaterhouseCoopers LLP (“PwC”), were appointed in 2015. The Committee monitors the Company’s
relationship with the Auditors and has discussed and considered their independence and objectivity. The Auditors also provide
confirmation that they are independent within the meaning of all regulatory and professional requirements and that objectivity
of the audit is not impaired. The Committee is, therefore, satisfied that PwC was independent, especially considering the term of
appointment to date, and will continue to monitor this position. Under the Financial Reporting Council’s regulations, the Company
is required to re-tender, at the latest, by 2025. The Committee intends to retender within this timeframe. Ethical standards
generally require the rotation of the lead audit partner every five years for a listed client. Claire Sandford has acted as lead audit
partner since 2020.
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
116 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
The Auditors are invited to attend Committee meetings and meet with the Committee and its Chair without the presence of the
Investment Manager. After the external audit has been completed, the Committee obtains feedback on the conduct of the audit.
Following the completion of the audit, the Committee reviewed PwC’s effectiveness by:
discussing the overall risk-based audit process and the audit procedures taken to address the identified significant risks;
considering feedback on the audit provided by the Investment Manager and the Administrator; and
considering the experience, involvement of specialists and continuity of the audit team, including the audit partner.
The Audit and Valuation Committee has considered the significant risks identified by the audit team during the audit of the
financial statements for the year. The feedback provided by the Investment Manager and by the Administrator regarding the
audit team’s performance on the audit is positive. The Committee acknowledged that the audit team, including the audit partner,
comprised staff with appropriate levels of knowledge and experience of the investment trust sector. Accordingly, the Committee
has recommended to the Board that PwC be re-appointed as Auditors at the forthcoming AGM. PwC has confirmed its
willingness to continue in office.
AUDIT FEES AND NON-AUDIT SERVICES
The breakdown of fees between audit services and non-audit services for the period is provided in Note 10 of the financial
statements. There were no non-audit services rendered during the year.
The Committee reviews and approves in advance the provision of non-audit services during the year by the Auditors, taking into
account the recommendations of the Financial Reporting Council. There were no non-audit services provided during the year,
and the Committee does not believe there was any impediment to the Auditors’ objectivity and independence from doing this
work during the period.
SIGNIFICANT ISSUES CONSIDERED BY THE AUDIT AND VALUATION COMMITTEE
After discussion with the Investment Manager and the Auditors, the Committee determined that the significant issues considered
by the Committee in the context of the Group’s financial statements were:
SIGNIFICANT AREA HOW ADDRESSED
Investments that are unlisted or not actively traded are valued using a variety of techniques
to determine a fair value, as set out in the accounting policies note on beginning on
page 48, and all such valuations are carefully reviewed by the Investment Manager’s
valuation committee as well as the Committee. Actively traded listed investments are valued
using stock exchange prices provided by third party pricing vendors.
The Investment Manager values the loans at amortised cost and monitors the performance
and repayment of the loans to assess whether any expected credit losses exist, as set out
in the accounting policies note beginning on page 48. The valuation approach has been
reviewed by the Investment Manager’s valuation committee as well as the Committee.
Fraud in income recognition The Investment Manager recognises income as revenue return provided that the underlying
assets of the investments comprise solely income generating loans, or investments in
lending Portfolio Companies which themselves generate net interest income. The
Committee has reviewed income recognition with the Investment Manager and has inquired
with the Auditors regarding the testing performed over income recognition and the
conclusions reached.
These issues were discussed with the Investment Manager and the Auditors at the time the Committee reviewed and agreed to
the Audit plan for the year. After full consideration, the Committee was also content with the judgements made by the
Investment Manager in respect of the key risks.
For and on behalf of the Audit and Valuation Committee
Oliver Grundy
Audit and Valuation Committee, Chair
23 April 2024
Valuation of unquoted
investments reported at fair
value through profit or loss.
Expected credit losses on loans
r
eported at amortised c
ost
VPC SPECIALTY LENDING INVESTMENTS PLC
117
DIRECTORS’ REMUNERATION REPORT
ANNUAL STATEMENT FROM THE CHAIR
This Directors’ Remuneration Report for the year ended 31 December 2023 has been prepared in accordance with Schedule 8 of
the Large and Medium-Sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 and, alongside this
Annual Statement, comprises two separate parts: the Annual Report on Remuneration and the Directors’ Remuneration Report.
The Annual Report on Remuneration sets out payments made to the Directors during the period. This report, including this
Annual Statement, is subject to an advisory vote by Ordinary Resolution at the Company’s forthcoming AGM. The Directors’
Remuneration Report is forward-looking and was approved by Shareholders at the Company’s last AGM in June 2022. The
resolution at the 2022 AGM to approve the Directors’ Remuneration Report was passed with 99.95% of the votes ‘for’. The current
Shareholder approved policy governs the remuneration of the Directors for a period of three years, expiring at the AGM in 2023
(and was passed with 99.95% of the votes ‘for’). Any views expressed by Shareholders on the remuneration being paid to
Directors will be taken into consideration by the Board.
At the 2023 AGM, Shareholders approved some procedural changes to the Directors’ Remuneration Policy set out below.
A resolution to approve the policy must be put to Shareholders at least every three years, the current policy having been
approved by Shareholders at the 2023 AGM.
During the year, the Directors reviewed the need for the Company to have a separate Remuneration Committee. Due to the
nature and structure of the Company, it was agreed that the role and duties of a Remuneration Committee can continue to be
fulfilled by the Board.
The Directors of the Company are all Non-Executive and receive a fee per annum, which for the year ended 31 December 2023
was £55,000 for the Chair and £33,000 for the other Directors. The Chair is entitled to a higher fee to reflect the additional work
required to carry out the role. The Chair of the Audit and Valuation Committee receives an additional fee of £5,500 per annum
for taking on this responsibility. Throughout 2023, no Director received any additional fees in addition to the salary.
DIRECTORS’ REMUNERATION POLICY
The components of the remuneration package for the Company’s Non-Executive Directors, which comprise the Directors’
Remuneration Policy, are set out below:
REMUNERATION TYPE DESCRIPTION AND APPROACH TO DETERMINATION
Fixed fees The Directors are permitted to discuss but not to decide their own remuneration fee.
Directors’ decisions on remuneration are guided by a number of factors and with guidance
from the Company’s brokers, and Company Secretary. Directors’ remuneration is also
considered with regard to time commitment, the Company’s AIC peer group and other
economic factors impacting the Company.
These fees shall not exceed £500,000 per annum, divided between the Directors as they
may determine.
Additional fees If any Director, being willing and having been called upon to do so, shall render or perform
extra or special services of any kind, including services on any Committee of the Board, or
shall travel or reside abroad for any business or purposes of the Company, he or she shall be
entitled to receive such sum as the Board may think fit for expenses, and also such
remuneration as the Board may think fit, either as a fixed sum or as a percentage of profits or
otherwise, and such remuneration may, as the Board shall determine, be either in addition to
or in substitution for any other remuneration he or she may be entitled to receive.
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
118 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
REMUNERATION TYPE DESCRIPTION AND APPROACH TO DETERMINATION
Expenses The Directors shall be entitled to be paid all expenses properly incurred by them in
connection with their attendance at Director or Shareholder meetings or otherwise in
connection with the discharge of their duties as Directors of the Company.
Other Directors are not eligible for bonuses, share options, long-term incentives schemes or other
performance-related benefits. There are no pension arrangements in place for the Directors
of the Company.
Directors’ fee levels
RATE AS AT
COMPONENT ROLE 31 DECEMBER 2023 PURPOSE OF REMUNERATION
Annual fee Chair of the Board £55,000 Commitment as Chair of the Board
1
Annual fee Non-executive Director £33,000 Commitment as non-executive Director
2
Additional fee Chair of the Audit & Valuation Committee £5,500 For additional responsibilities and time
commitments
3
Additional fee All Directors Nil No additional payments were made in 2023
4
The Board’s policy is that the remuneration of all non-executive Directors should reflect the experience of the Board as a whole
and be determined with reference to comparable organisations and appointments. The level of remuneration reflects the specific
circumstances of the Company, the duties and responsibilities of the Directors, and the value and amount of time committed to
the Company’s affairs. The Board notes that the remuneration of the non-executive Directors may be subject to review in the
future to ensure that the future needs and development of the Company are met.
The Directors hold their office in accordance with the Company’s Articles of Association and their appointment letters. No
Director has a service contract with the Company, and there are no notice periods. On termination of their appointment,
Directors should only be entitled to accrued fees as at the date of termination, together with reimbursement of any expenses
properly incurred to that date.
Fees of any new Director appointed will be on the above basis and are likely to be in-line with the fees of existing Directors.
Fees payable in respect of subsequent periods will be determined following an annual review. The Company has no employees
other than its Directors, who are all Non-Executive. When considering the level of fees, the Board will evaluate the contribution
and responsibilities of each Director and the time spent on the Company’s affairs. Following approval of the Directors’
Remuneration Policy by Shareholders at the AGM in June 2023, the Company believes the remuneration of Directors to be
appropriate given the nature of the Company. The remuneration of Directors will be reviewed against its AIC peer group
organisations with reference to the specific circumstances of the Company and the time committed by the Directors to the
Company’s affairs. The current fees are also within the limits set out in the Company’s Articles of Association, which prohibit the
total aggregate annual fees payable to the Directors in respect of any financial period to exceed £500,000 per annum. Any views
expressed by Shareholders on the fees being paid to Directors would be taken into consideration by the Board.
1
The Chair of the Board is paid a higher fee than the other Directors to reflect the more onerous role.
2
The Company’s Articles of Association limit the aggregate fees payable to the Board of Directors to £500,000 per annum.
3
The Chair of the Audit & Valuation Committee is paid a higher fee than the other Directors to reflect the more onerous role.
4
Additional fees would only be paid in exceptional circumstances in relation to the performance of extra or special services.
VPC SPECIALTY LENDING INVESTMENTS PLC
119
ANNUAL REPORT ON REMUNERATION
Service Contracts Obligations and Payment on Loss of Office
No Director has a service contract with the Company and, as such, is not entitled to compensation payments upon termination
of their appointment or loss of office.
Total Remuneration Paid to Each Director (Audited)
31 DECEMBER 31 DECEMBER
2023 2022
DIRECTORS’ REMUNERATION £ £
Oliver Grundy
1
38,500 38,500
Mark Katzenellenbogen 33,000 33,000
Clive Peggram
2
8,250 33,000
Elizabeth Passey
3
8,250 33,000
Graeme Proudfoot
4
55,000 55,000
Total 143,000 192,500
The annual percentage change in remuneration paid to the Directors is set out in the table below:
31 DECEMBER 31 DECEMBER % CHANGE % CHANGE % CHANGE
DIRECTORS’ 2023 2022 FROM FROM OVER 5 YEARS
REMUNERATION £ £ 2022 TO 2023 2021 TO 2022 ROLLING TO 2023
5
Oliver Grundy
6
38,500 38,500 0 27 0
Mark Katzenellenbogen
7
33,000 33,000 0 –11 0
Clive Peggram
8
8,250 33,000 –75 –5 10
Elizabeth Passey 8,250 33,000 –75 0 10
Graeme Proudfoot 55,000 55,000 0 24 67
No Director is eligible for any pension entitlements.
1
Oliver Grundy was appointed as a Director on 12 March 2021.
2
Clive Peggram resigned as a Director on 23 June 2023.
3
Elizabeth Passey resigned as a Director on 23 June 2023.
4
Graeme Proudfoot was appointed as Chair of the Board at the Company’s AGM in 2021.
5
Based on full year adjusted figures.
6
Oliver Grundy was appointed as a Director on 12 March 2021.
7
Mark Katzenellenbogen was paid an additional fee for work done in 2021.
8
Clive Peggram was paid an additional fee for work done in 2021.
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
120 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
Share Price Total Return
The graph below compares the Shareholder return on the Company’s Shares compared to that of the FTSE All-Share Total Return
Index (“ASX Total Return Index”) from 16 March 2015 to 31 December 2023. The Board has adopted this measure for the
Company’s performance as there is no widely used comparative benchmark for the underlying credit assets that the Company
invests in.
VSL vs ASX Total Return Index
Source: Bloomberg.
This graph assumes that on the respective placing dates, £100 was invested in the Ordinary Shares and the FTSE All-Share Total
Return Index. The graphs also assume the reinvestment of all cash dividends received prior to any tax effect at the closing share
price on the day the dividend was paid.
Relative Importance of Spend on Pay
The table below shows the proportion of the Company’s income spent on pay.
2023 2022
££
Total Directors’ Remuneration 143,000 192,500
Total Share Buyback Nil Nil
Total Dividend Payments 22,262,111 22,262,111
The 2023 total dividend payments above include the fourth quarter dividend to be paid in the first quarter of 2024. Refer to
Note 15 in the financial statements for further disclosures on the total dividend payments.
Remuneration Advisors
The Board has not sought the advice or service by any outside person in respect of its consideration of the Directors’
remuneration.
60
70
80
90
100
110
120
130
140
150
160
Dec-23
Sep-23
Jun-23
Mar-23
Dec-22
Sep-22
Jun-22
Dec-21
Sep-21
Jun-21
Mar-21
Dec-20
Sep-20
Jun-20
Mar-20
Dec-19
Sep-19
Jun-19
Mar-19
Dec-18
Sep-18
Jun-18
Mar-18
Dec-17
Sep-17
Jun-17
Mar-17
Dec-16
Sep-16
Jun-16
Mar-16
Dec-15
Sep-15
Jun-15
Mar-15
VSL LN Equity ASXTR Index
VPC SPECIALTY LENDING INVESTMENTS PLC
121
Directors’ Interests (Audited)
There is no requirement under the Company’s Articles of Association or letters of appointment for Directors to hold shares in
the Company.
The interests of the Directors in the shares of the Company at the end of the period under review were as follows:
31 DECEMBER 31 DECEMBER
DIRECTOR 2023 2022
Oliver Grundy Number of Ordinary Shares 30,000 30,000
Mark Katzenellenbogen Number of Ordinary Shares 215,000 215,000
Graeme Proudfoot Number of Ordinary Shares 130,000 130,000
Implementation of Policy in the Next Year
There are no changes proposed to the remuneration policy in the next year.
Amendments to the remuneration policy will be proposed to Shareholders at the 2024 AGM. The changes to the remuneration
policy will seek approval for:
Directors will be permitted to discuss but not decide their own remuneration; and
Any discussions on Directors’ remuneration shall take into consideration comparative data retrieved and reviewed against
the Company’s AIC peer group.
The Directors believe that the changes proposed to the remuneration policy will continue to enable the Company to attract and
retain individuals of a calibre appropriate to the future development of the Company. It shall also promote increased
transparency with remuneration supported by factual data obtained from the industry peer group.
Approval
On behalf of the Board and in accordance with Part 2 of Schedule 8 of the Large and Medium-sized Companies and Groups
(Accounts and Reports) (Amendment) Regulations 2013, I confirm that the above Report on Remuneration Implementation
summarises, as applicable, for the year to 31 December 2023:
the major decisions on Directors’ remuneration;
any substantial changes relating to Directors’ remuneration made during the year; and
the context in which the changes, if any, occurred and decisions have been taken.
This report was approved by the Board of Directors on 23 April 2024 and signed on its behalf by
Graeme Proudfoot
Chair
23 April 2024
GOVERNANCE continued
VPC SPECIALTY LENDING INVESTMENTS PLC
122 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE
FINANCIAL STATEMENTS
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law
and regulation.
Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have
prepared the group and the company financial statements in accordance with UK-adopted international accounting standards.
Under company law, Directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the group and company and of the profit or loss of the group for that period. In preparing the
financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently;
state whether applicable UK-adopted international accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
make judgements and accounting estimates that are reasonable and prudent; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and
company will continue in business.
The Directors are responsible for safeguarding the assets of the group and company and, hence, for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
The Directors are also responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s
and Company’s transactions and disclose with reasonable accuracy at any time the financial position of the group and company
and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies
Act 2006.
The Directors are responsible for the maintenance and integrity of the company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
DIRECTORS’ CONFIRMATIONS
The Directors consider that the Annual Report and the financial statements, taken as a whole, are fair, balanced and understandable
and provide the information necessary for Shareholders to assess the Group’s and Company’s position and performance, business
model and strategy.
Each of the Directors, whose names and functions are listed in Strategic Report and Directors’ Report, confirm that, to the best of
their knowledge:
the group and company financial statements, which have been prepared in accordance with UK-adopted international
accounting standards, give a true and fair view of the assets, liabilities and financial position of the group and company
and of the loss of the group; and
the Strategic Report and Directors’ Report includes a fair review of the development and performance of the business and
the position of the group and company, together with a description of the principal risks and uncertainties that it faces.
For and on behalf of the Board:
Graeme Proudfoot
Chair
23 April 2024
VPC SPECIALTY LENDING INVESTMENTS PLC
123
REGULATORY DISCLOSURES
AIFMD DISCLOSURES
In accordance with the Alternative Investment Fund Managers Directive (“AIFMD”), the Company is an Alternative Investment
Fund (“AIF”) and has appointed Victory Park Capital Advisors, LLC as its Alternative Investment Fund Manager (the “AIFM”) to
provide portfolio management and risk management services to the Company in accordance with the IMA.
The Company is categorised as an externally managed European Economic Area (“EEA”) domiciled AIF for the purposes of the
AIFMD. Since the Investment Manager is a non-EEA AIFM, the Investment Manager is only subject to the AIFMD to the extent
that it markets an EEA AIF in the EEA. Accordingly, the Investment Manager is required to make only certain financial and non-
financial disclosures.
REPORT ON REMUNERATION
AIFMs are obliged to publish certain information for investors and prospective investors, and that information may be found
either in this annual report or on the Company’s website. Any information on remuneration not already disclosed in the
remuneration report will be provided to investors on request.
RISK DISCLOSURES
The financial risk disclosures relating to risk framework, gearing and liquidity risk, as required in accordance with the AIFMD, are
set out on pages 17 to 20 and in Note 6 of the financial statements.
PRE-INVESTMENT DISCLOSURES
The AIFMD requires certain information to be made available to investors in AIFs before they invest and requires that material
changes to this information be disclosed in the annual report of each AIF. The Company’s prospectus, which sets out information
on the Company’s investment strategy and policies, gearing, risk, liquidity, administration, management, fees, conflicts of interest
and other Shareholder information, is available on the Company’s website. There have been no material changes to this
information requiring disclosure. Any information requiring immediate disclosure pursuant to the AIFMD will be disclosed to the
London Stock Exchange through a primary information provider.
INFORMATION TO BE DISCLOSED IN ACCORDANCE WITH LISTING RULE 9.8.4R
The following table provides cross-references to where the relevant required information by Listing Rule 9.8.4R for the Period is
disclosed.
SECTION LISTING RULE REQUIREMENT LOCATION
9.8.4 (1) Not applicable
9.8.4 (2) Information required in relation to the publication of unaudited financial information. Not applicable
9.8.4 (4) Details of any long-term incentive schemes. Not applicable
9.8.4 (5), (6) Not applicable
9.8.4 (7) Details of any non-pre-emptive issues of equity for cash. Not applicable
9.8.4 (8) Not applicable
9.8.4 (9) Details of parent participation in a placing by a listed subsidiary. Not applicable
9.8.4 (10)
9.8.4 (11) Not applicable
9.8.4 (12), (13) Details of waiver of dividends by a Shareholder. Not applicable
9.8.4 (14) Board statement in respect of relationship agreement with the controlling Shareholder. Not applicable
A statement of the amount of interest capitalised during the period under review and
details of any related tax relief.
Details of any arrangements under which a Director has waived emoluments or agreed
t
o waive any future emoluments fr
om the company.
Details of any non-pre-emptive issues of equity for cash by any unlisted major
subsidiary undertaking.
Details of an
y contract of significance with the Company (or one of its subsidiaries)
with respect to which a Direc
tor or controlling Shareholder is material interested.
Not applicable
Details of any contract of significance for the provision of services to the Company (or
one of its subsidiaries) by a controlling Shareholder
.
SHAREHOLDER
INFORMATION
125
VPC SPECIALTY LENDING INVESTMENTS PLC
SHAREHOLDER INFORMATION
INVESTMENT OBJECTIVE
The Company’s investment objective is to conduct an orderly realisation of the assets of the Company, to be effected in
a manner that seeks to achieve a balance between returning cash to Shareholders promptly and maximising value.
INVESTMENT POLICY
The Company’s investments will be realised in an orderly manner, that is, with a view to achieving a balance between returning
cash to Shareholders promptly and maximising value.
Until 30 June 2023, the Company was able to make new investments directly (in aggregate) up to 5 percent of its Gross Assets
(at the time of the investment) in consumer loans, SME loans, advances against corporate trade receivables and/or purchases of
corporate trade receivables originated by portfolio companies (“Debt Instruments”).
Following this period, the Company may not make any new investments save that: (a) investments may be made to honour
existing documented contractual commitments to existing Portfolio Companies as a majority of the Company’s investments are
delayed draw term loans; (b) further investment may be made into the Company’s existing investments without redemption
rights in order to preserve the value of such investments; and (c) realised cash may be invested in cash or cash equivalents,
government or public securities (as defined in the rules of the UK Financial Conduct Authority), money market instruments,
bonds, commercial paper or other debt obligations with banks or other counterparties having a “single A” (or equivalent) or
higher credit rating as determined by any internationally recognized rating agency selected by the Directors of the Company
(which may or may not be registered in the European Union) (“Cash Instruments”) pending its return to Shareholders in
accordance with the Company’s investment objective.
Any return of proceeds to the Shareholders will be subject to compliance with existing gearing facilities and hedging
arrangements, payment of expenses and reserves for potential liabilities.
The Company will continue to comply with the restrictions imposed by the Listing Rules.
INVESTMENT RESTRICTIONS
The following investment limits and restrictions apply to the Company, to ensure that the diversification of the Company’s
portfolio is maintained, and that concentration risk is limited.
PLATFORM RESTRICTIONS
Subject to the following, the Company generally does not intend to invest more than 20% of its Gross Assets in Debt Instruments
(net of any gearing ring-fenced within any SPV which would be without recourse to the Company), originated by, and/or Credit
Facilities and equity instruments in, any single Portfolio Company, calculated at the time of investment. All such aggregate
exposure to any single Portfolio Company (including investments via an SPV) will always be subject to an absolute maximum,
calculated at the time of investment, of 25% of the Company’s Gross Assets.
ASSET CLASS RESTRICTIONS
Single loans acquired by the Company will typically be for a term no longer than five years.
The Company will not invest more than 20% of its Gross Assets, at the time of investment, via any single investment fund
investing in Debt Instruments and Credit Facilities. In any event, the Company will not invest, in aggregate, more than 60% of
its Gross Assets, at the time of investment, in investment funds that invest in Debt Instruments and Credit Facilities.
The Company will not invest more than 10% of its Gross Assets, at the time of investment, in other listed closed-ended
investment funds, whether managed by the Investment Manager or not, except that this restriction shall not apply to
investments in listed closed-ended investment funds which themselves have stated investment policies to invest no more than
15% of their gross assets in other listed closed-ended investment funds.
126 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
SHAREHOLDER INFORMATION
continued
VPC SPECIALTY LENDING INVESTMENTS PLC
The following restrictions apply, in each case at the time of investment by the Company, to both Debt Instruments acquired by
the Company via wholly-owned SPVs or partially-owned SPVs on a proportionate basis under the Marketplace Model, on a
look-through basis under the Asset Backed Lending Model and to any Debt Instruments held by another investment fund in
which the Company invests:
No single consumer loan acquired by the Company shall exceed 0.25% of its Gross Assets.
No single SME loan acquired by the Company shall exceed 5.0% of its Gross Assets. For the avoidance of doubt, Credit
Facilities entered into directly with Portfolio Companies are not considered SME loans.
No single trade receivable asset acquired by the Company shall exceed 5.0% of its Gross Assets.
OTHER RESTRICTIONS
The Company’s un-invested or surplus capital or assets may be invested in Cash Instruments for cash management purposes and
with a view to enhancing returns to Shareholders or mitigating credit exposure.
Where appropriate, the Company will ensure that any SPV used by it to acquire or receive (by way of assignment or otherwise)
any loans to UK consumers shall first obtain the appropriate authorisation from the FCA for consumer credit business.
BORROWING POLICY
Borrowings may be employed at the level of the Company and at the level of any investee entity (including any other investment
fund in which the Company invests or any SPV that may be established by the Company in connection with obtaining gearing
against any of its assets).
The Company may, in connection with seeking such gearing or securitising its loans, seek to assign existing assets to one or
more SPVs and/or seek to acquire loans using an SPV.
The Company may establish SPVs in connection with obtaining gearing against any of its assets or in connection with the
securitisation of its loans (as set out further below). It intends to use SPVs for these purposes to seek to protect the geared
portfolio from group level bankruptcy or financing risks.
The aggregate leverage of the Company and any investee entity (on a look-through basis, including borrowing through
securitisation using SPVs) shall not exceed 1.5 times its NAV (1.5x).
As is customary in financing transactions of this nature, the particular SPV will be the borrower and the Company may from time
to time be required to guarantee or indemnify a third-party lender for losses incurred as a result of certain “bad boy” acts of the
SPV or the Company, typically including fraud or wilful misrepresentation or causing the SPV voluntarily to file for bankruptcy
protection. Any such arrangement will be treated as ‘non-recourse’ with respect to the Company provided that any such
obligation of the Company shall not extend to guaranteeing or indemnifying Ordinary portfolio losses or the value of the
collateral provided by the SPV.
SHARE REGISTER ENQUIRIES
For Shareholder enquiries, please contact the Company’s registrar, Link Group on +44 (0) 371 664 0391.
Calls are charged at the standard geographic rate and will vary by provider. Calls outside the United Kingdom will be charged at the
applicable international rate. Lines are open between 09:00 – 17:30, Monday to Friday (excluding public holidays in England and Wales).
SHARE CAPITAL AND NET ASSET VALUE INFORMATION
Ordinary £0.01 Shares 278,276,392
SEDOL Number BVG6X43
ISIN Number GB00BVG6X439
SHARE PRICES
The Company’s shares are listed on the London Stock Exchange.
127
VPC SPECIALTY LENDING INVESTMENTS PLC
ANNUAL AND HALF-YEARLY REPORTS
Copies of the Annual and Half-Yearly Reports are available from the Investment Manager on and are available on the Company’s
website http://vpcspecialtylending.com.
PROVISIONAL FINANCIAL CALENDAR
June 2024 Annual General Meeting
July 2024 Payment of interim dividend to 31 March 2023
30 June 2024 Half-year End
September 2024 Announcement of half-yearly results
October 2024 Payment of interim dividend to 30 June 2023
December 2024 Payment of interim dividend to 30 September 2023
31 December 2024 Year End
DIVIDENDS
The following table summarises the amounts recognised as distributions to equity Shareholders relating to 2023:
£
2023 interim dividend of 2.00 pence per Ordinary Share paid on 27 July 2023 5,565,527
2023 interim dividend of 2.00 pence per Ordinary Share paid on 28 September 2023 5,565,528
2023 interim dividend of 2.00 pence per Ordinary Share paid on 21 December 2023 5,565,528
2023 interim dividend of 2.00 pence per Ordinary Share paid on 29 March 2024 5,565,528
Total 22,262,111
128 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
SHAREHOLDER INFORMATION
continued
VPC SPECIALTY LENDING INVESTMENTS PLC
DEFINITIONS OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES
The Group uses the terms and alternative performance measures below to present a measure of profitability which is aligned
with the requirements of our investors and potential investors, to draw out meaningful subtotals of revenues and earnings and
to provide additional information not required for disclosure under accounting standards to assist users of the financial
statements in gauging the profit levels of the Group. Alternative performance measures are used to improve the comparability
of information between reporting periods, either by adjusting for uncontrollable or one-off factors which that impact IFRS
measures or, by aggregating measures, to aid the user in understanding the activity taking place. The Strategic Report includes
both statutory and adjusted measures, the latter of which, reflects the underlying performance of the business and provides a
more meaningful comparison of how the business is managed. APMs are not considered to be a substitute for IFRS measures
but provide additional insight on the performance of the business. All terms and performance measures relate to past
performance:
Discount to NAV – Calculated as the difference in the NAV (Cum Income) per Ordinary Share and the Ordinary Share price
divided by the NAV Cum (Income) per Ordinary Share.
Dividend Yield on Average NAV – Calculated as the dividends declared during 2023 divided by the average Net Asset Value
(Cum Income) of the Company for the year.
Gross Returns – The gross revenue and gross capital returns represent the return on Shareholder’s funds per share on
investments of the Company before operating and other expenses of the Company.
Look-Through Gearing Ratio – The aggregate gearing of the Company and any investee entity (on a look through basis,
including borrowing through securitisations using SPVs) shall not exceed 1.50 times its NAV (1.5x).
NAV (Cum Income) or NAV or Net Asset Value – The value of assets of the Company less liabilities determined in accordance
with the accounting principles adopted by the Company.
NAV (Cum Income) Return – The theoretical total return on Shareholders’ funds per share reflecting the change in NAV
assuming that dividends paid to Shareholders were reinvested at NAV at the time dividend was announced.
Inception to
2023 Calculation 2022 Calculation Date Calculation
(A) Closing NAV (Cum Income) per share 80.91p 98.19p 80.91p
(B) Opening NAV (Cum Income) per share 98.19p 114.14p 98.00p
(C) Dividends declared and paid 8.00p 8.00p 63.59p
D = (A – B + C) / B –9.45% –6.97% 47.44%
NAV per Share (Cum Income) – The NAV (Cum Income) divided by the number of shares in issue.
Net Returns – Represents the return on Shareholder’s funds per share on investments of the Company after operating and other
expenses of the Company.
Ongoing Charges Ratio – Ongoing charges represent the management fee and all other operating expenses, excluding finance
costs, transaction costs and any performance fee payable, expressed as a percentage of the average net asset values during the
year.
2023 Calculation 2022 Calculation
(A) Ongoing Charges £5,286,800 £5,911,749
(B) Average Net Asset Value £258,982,620 £296,360,140
C = A / B 2.04% 1.99%
Premium/(Discount) to NAV (Cum Income) – The amount by which the share price of the Company is either higher (at a
premium) or lower (at a discount) than the NAV per Share (Cum Income), expressed as a percentage of the NAV per share.
Share Price – Closing share price at month end (excluding dividends reinvested).
Total Shareholder Return – Calculated as the change in the traded share price from 31 December 2023 to 31 December 2022
plus the dividends declared in 2023 divided by the traded share price as at 31 December 2022.
129
VPC SPECIALTY LENDING INVESTMENTS PLC
Inception to
2023 Calculation 2022 Calculation Date Calculation
(A) Closing Ordinary Share price 66.20p 83.10p 66.20p
(B) Opening Ordinary Share price 83.10p 92.20p 100.00p
(C) Dividends declared and paid 8.00p 8.00p 63.59p
D = (A – B + C) / B –10.71% –1.19% 29.79%
Trailing Twelve Month Dividend Yield – Calculated as the total dividends declared over the last 12 months as at 31 December
2023 divided by the 31 December 2023 closing share price.
CONTACT DETAILS OF THE ADVISERS
Directors Oliver Grundy
Mark Katzenellenbogen
Graeme Proudfoot
all of the registered office below
Registered Office Central Square
29 Wellington Street
Leeds LS1 4DU
United Kingdom
Company Number 9385218
Website Address https://vpcspecialtylending.com
Corporate Brokers Jefferies International Limited
100 Bishpsgate
London EC2N 4JL
United Kingdom
Winterflood Securities Limited
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
Investment Manager and AIFM Victory Park Capital Advisors, LLC
150 North Riverside Plaza, Suite 5200
Chicago
IL 60606
United States
Company Secretary Link Company Matters Limited
6th Floor
65 Gresham Street
London EC2V 7NQ
United Kingdom
Administrator Citco Fund Administration (Cayman Islands) Limited
3 Second Street, Harborside Plaza 10, 6th Floor
Jersey City
NJ 07302
United States
130 ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2023
SHAREHOLDER INFORMATION
continued
VPC SPECIALTY LENDING INVESTMENTS PLC
Registrar Link Group
Central Square
29 Wellington Street
Leeds
LS1 4DL
United Kingdom
PR Advisor Montfort Communications
Chelsea Harbour
109 Harbour Yard
London
SW10 0XD
United Kingdom
Custodians Merrill Lynch, Pierce, Fenner & Smith Incorporated
101 California Street
San Francisco
CA 94111
United States
English Legal Adviser to the Company Stephenson Harwood LLP
1 Finsbury Circus
London
EC2M 7SH
United Kingdom
Independent Auditors PricewaterhouseCoopers LLP
7 More London Riverside
London
SE1 2RT
United Kingdom
VPC Specialty Lending Investments PLC