Round Hill Music Royalty Fund Limited Annual Report 2022
ANNUAL REPORT
For the year ended 31 December 2022
OVERVIEW
Financial Highlights 1
Portfolio Highlights 2
Chairman’s Statement 3
Statement from the CEO of the Investment Manager 6
Music industry overview 10
STRATEGIC REPORT
Investment Manager’s Report 14
Company overview 14
Portfolio overview 15
Financial review 28
Investment Objective and Investment Policy 36
Environmental, Social and Governance Policy 38
GOVERNANCE
Stakeholders and Section 172 41
Board of Directors 44
Principal Risks and Uncertainties 45
Corporate Governance Statement 49
Audit Committee Report 55
Remuneration Committee Report 58
Directors’ Report 60
Responsibility Statement 62
CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditor’s Report 64
Consolidated statement of financial position 71
Consolidated statement of comprehensive income 72
Consolidated statement of cash flows 73
Consolidated statement of changes in equity 74
Notes to the consolidated financial statements 75
ADDITIONAL INFORMATION
Alternative performance measures 106
Directors and key advisers 107
Glossary 108
NOTICE OF ANNUAL GENERAL MEETING
AGM Notice 114
Notice of General Meeting 115
Explanatory Notes to the Notice of AGM 117
Form of Proxy 119
Defined terms used throughout this Annual Report have the meanings given in the Glossary unless the context otherwise requires.
In addition, the Alternative Performance Measures provide explanations for certain terms used in this Annual Report.
MUSIC ROYALTIES
WITH A PROVEN
TRACK RECORD
HIGHLIGHTS
FOR THE PERIOD ENDED 31 DECEMBER 2022
1 Group Revenue is made up of Royalty income, Investment income and Royalty expenses as detailed on the Consolidated Statement of Comprehensive
Income.
2 Represents the year-on-year growth of the Initial Investments, which includes the First Investment (Round Hill Fund One) and the Carlin Investment, for the
period ended 31 December 2022. Net Publisher Share (“NPS”) is the amount received by the music publisher after deduction of all fees, commissions and
all royalties and other shares of income payable to third parties. Net Label Share (“NLS”) is the amount received by the owner of master recordings after
deduction of all fees, commissions and all royalties and other shares of income payable to third parties.
3 Valuations provided by Citrin Cooperman (incorporating Massarsky Consulting Inc.) for Catalogues and the Investment in Carlin. Includes net recoupable
advances to songwriters of US$3.8 million.
4 The Directors are of the opinion that an Economic NAV provides a meaningful alternative performance measure and the values of Catalogues are based on
fair values produced by an independent valuer, Citrin Cooperman (incorporating Massarsky Consulting, Inc.). This figure is as at 31 December 2022.
5 This is an Alternative Performance Measure, refer to page 106.
6 A measure showing how the Economic Net Asset Value per Ordinary Share has performed over a period of time (in this case from Initial Admission on
13November 2020 to 31 December 2022) taking into account the reinvestment of any dividends or capital gain distributions paid to holders of Ordinary
Shares.
7 Net profit for the period after tax US$493,797 and Amortisation of Catalogues US$17,657,749 divided by the weighted average number of Ordinary Shares
379,106,590 results in the Earnings per share (US$0.0479). This is divided by the Dividend per share (US$0.0488).
8 Calculated in accordance with the AIC recommended methodology.
+32% to US$32.4m
GROUP
REVENUE
1
+15%
+13% to US$602.6m
LIKE-FOR-LIKE NPS/NLS GROWTH
OF INITIAL INVESTMENTS
2
FAIR MARKET VALUE OF
PORTFOLIO
3
+13% to US$519.6m
ECONOMIC NET
ASSET VALUE
4
0.98x
ORDINARY SHARE
DIVIDEND COVER
5,7
1.67%
ONGOING CHARGES
RATIO
5,8
US$1.27
ECONOMIC NET ASSET VALUE
PER ORDINARY SHARE
4
35%
ORDINARY SHARE ECONOMIC
NAV TOTAL RETURN SINCE
INCEPTION
5,6
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 1
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
PORTFOLIO HIGHLIGHTS
AS AT 31 DECEMBER 2022
51
CATALOGUES
120,000+
SONGS
David Coverdale
Alice In Chains
2 new Catalogue acquisitions
INCOME TYPE
31% MASTERS
69% PUBLISHING
GENRE
56% ROCK MUSIC
(based on 31 December 2022
Fair Market Value)
VINTAGE
94% PRE-1950S TO
THE EARLY 2010S
(Based on 2022 Group Revenue)
2 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
On behalf of the Board,
I am pleased to present the
second annual report for
Round Hill Music Royalty
Fund Limited and my
first as Chairman, having
taken up the position in
November 2022.
ROBERT NAYLOR
OVERVIEW
The Company presents an incredible addition to the Main
Market of the London Stock Exchange. The opportunity
to invest in music that is recognised, loved and listened to
around the world, and to play a part in its distribution and
permeation through the Round Hill platform, is truly exciting.
The Investment Manager, Round Hill, under the guidance
of CEO Josh Gruss, was one of the first movers in the
music rights investment class in 2010 and, as a result, it has
almost 15 years of experience in acquiring and managing
music rights. It has a team of around 70 music industry
experts located across key music markets in North America
and Europe, who are deeply knowledgeable and passionate
CHAIRMAN’S STATEMENT
about the industry, as well as being keenly aware of the
special nature of the assets they are working with.
The Company’s Portfolio is comprised of 51 Catalogues,
representing a collection of over 120,000 songs, of carefully
selected evergreen music rights that have been selected
by Round Hill based on their ability to generate resilient
income; deliver a positive performance in an inflationary
environment; and the opportunity to unlock latent potential
leading to revenue growth.
The 51 Catalogues are diversified by income type and
genre, with a majority being Rock music because of its
enduring demand and loyal consumption across various
age groups and geographies. They are also strategically
concentrated in older vintages preceding the early 2010s.
This means that they have already demonstrated durable,
time-tested royalty cash flows that have withstood various
economic cycles. The Portfolio also generates revenue
across a variety of income streams, from the fast-growing
streaming market to radio and live performances as well as
the use of music in TV productions, films and adverts.
FINANCIAL PERFORMANCE
AND VALUATION
Under Round Hill’s stewardship, the Company’s Portfolio
performed exceptionally well in 2022, its second full year
since inception in August 2020. Since IPO, the Company
has delivered an Economic NAV total return of 35%.
Group Revenue
1
for the period increased by just over
32% year-on-year to US$32.4 million (31 December 2021:
US$23.7 million). On a like-for-like basis, excluding the
impact of acquisitions made in 2021 and 2022, income for
the Initial Investments grew 15% year-on-year reflecting the
quality of the underlying Catalogues. A breakdown of the
Group Revenue can be found on page 32.
The fair value of the Portfolio increased over the year by
13%, or US$71.5 million, to US$602.6 million
2
(31 December
2021: US$531.1 million), driven by a combination of Round
Hill’s active rights management approach, underlying
growth and continued recovery following the disruption to
the industry caused by the pandemic. Economic NAV grew
by 13% year-on-year, or US$59.9 million, to US$519.6 million
(31 December 2021: US$459.7 million).
1 The Group Revenue is made up of Royalty income, Investment income and Royalty expenses as detailed on the Consolidated Statement of
Comprehensive Income.
2 Includes net recoupable advances to songwriters of US$3.8 million.
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 3
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
CHAIRMAN’S STATEMENT
CONTINUED
Alongside this positive performance, we are mindful at all
times of the need to keep costs down and the ongoing
charges ratio, calculated in line with AIC guidelines, is 1.67%.
The Board believes there is further potential for a reduction,
which will be kept under assessment in the year ahead.
The valuations on which the financial results are
based derive from a report provided by the Company’s
independent valuer, Citrin Cooperman (incorporating
Massarsky Consulting, Inc). In December 2022, the
Board commissioned FTI Consulting to provide a second
independent valuation which, as announced on 13 April
2023, affirms Citrin Cooperman’s analyses, providing a
useful benchmark and underlining the strength of the
Company’s Portfolio.
Against these assessments of the fair value of the
Company’s investments, we are fully cognisant of the fact
that the Company’s Shares have, like many alternative asset
income funds, been trading at a discount to NAV against
a backdrop of rising interest rates. The Board and the
members of the Investment Manager are strongly aligned
with Shareholders through their combined 3% stake in the
Company and we continue to examine all of the options
available for managing any persistent share price discount.
In December 2022, the Board convened with the Investment
Manager and its advisers to agree on actions that can be
taken in a targeted effort to address the trading discount.
These targeted actions include broadening accessibility to
the Board and the management team and enhancing the
way in which the Company communicates and engages with
the market, including through regional investor roadshows,
the media and its owned assets such as the website and
social media. Efforts in this regard have progressed in
the first quarter of 2023, including the appointment of
Fourth Pillar, which specialises in the music sector, as the
Company’s public relations adviser. Fourth Pillar has been
working with the Company since March 2023 and its remit
will cover all corporate and financial communications for the
Company, including a revamp of the website.
The benefits or otherwise of a share buyback programme
are regularly considered by the Board. The launch of any
such programme will only be undertaken with a keen
analysis of the potential risks and benefits in the context
of the Company’s working capital position and taking into
account any economic or other factors that the Board
considers appropriate at the relevant time. If we were
to move forward with a share buyback programme, the
Company would be required to use its revolving credit
facility to acquire Shares, and the resultant increase in
gearing would have a longer-term impact on dividend cover
and EPS, which could outweigh any potential benefits. The
Directors will therefore consider repurchasing Shares in the
market only if we firmly believe it to be in the Shareholders’
interest as a whole and as a means of effectively correcting
any imbalance between supply and demand for the Shares.
While, in our view, the fair value of the Company’s music
Catalogues are not being reflected by the Share price, as
noted above, they are delivering strongly and we believe
they can continue to do so, meeting the targets set out at
IPO: an annualised dividend yield for 4.5% (based on the
IPO price of US$1.00 per Ordinary Share) and a net total
return of 9% to 11% per annum over the medium term,
giving the Company a sustainable long-term future.
The positive performance and our confidence in the
outlook for the Company, with the dividend now 0.98x
covered, resulted in the Board approving a total dividend
for the 2022 financial year of US$0.045 per Ordinary
Share, reflecting a 4.5% yield in line with the IPO target,
following the Company’s quarterly dividend of US$0.01125
per Ordinary Share for the quarter to 31 December 2022
paid in March 2023. A total of US$0.04875 per Ordinary
Share was paid in 2022 and included a quarterly dividend
of US$0.015 per Ordinary Share, announced on 9 March
2022, comprising US$0.01125 per Ordinary Share for the
quarter to 31 December 2021, together with a further
dividend payment of US$0.00375 per Ordinary Share, being
the balance payable for the initial quarterly dividend for the
quarter to 31 March 2021.
ACTIVITY IN 2022
In the first quarter, two investments were undertaken,
marking the full deployment of the US$86.5 million of
proceeds raised through a share placement in July 2021.
These comprised the full set of rights (i.e., the master and
publishing rights) for the Catalogue of David Coverdale, of
Whitesnake and Deep Purple fame, and a significant majority
of the rights to the American rock band, Alice In Chains.
In July, the Company’s listing was migrated from the
Specialist Fund Segment and admitted to the Premium
Segment of the Main Market of the London Stock Exchange.
The benefits that this can provide include exposure to a
wider pool of investors and a broader shareholder base over
the longer term; enhanced liquidity; and the potential for
inclusion in the FTSE UK Index Series.
4 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
At the Board level, on 1 November 2022, the retirement was
announced of Trevor Bowen as Chairman of the Board with
immediate effect, and my appointment as a non-executive
Director and Chairman of the Company was announced with
effect from the same date. The Board wishes to express
its sincere gratitude for the contributions that Trevor made
to the Company during his time as Chairman, including
oversight of its listing on the London Stock Exchange and
migration to the Premium Segment of the Main Market.
Previous to my appointment, Audrey McNair was
welcomed to the Board as a non-executive Director,
with effect from 20 July 2022. Audrey brings extensive
knowledge of regulatory, governance and investment
management processes and products and has proven an
excellent addition to the Board; we are very pleased to have
the benefit of her experience.
GOVERNANCE
Having taken up the position of Chairman, in early
November I met with Shareholders representing
approximately 70% of the Company’s register, as well
as a number of sell side equity analysts, to listen to
their concerns and overall feedback on the Company’s
performance to date.
I firmly believe in maintaining an open dialogue with
our investors and I and the Board will continue to make
ourselves available, while also giving due attention to views
on where we can further improve as a company.
To this end, transparency and disclosure, together with
consistent communication between reporting periods,
is important and we are always striving to improve where
we can, to enable the investor community to make
informed decisions.
ESG, of which governance is just one pillar, remains
a priority and the Investment Manager continues
to recognise its importance to the Board and our
Shareholders. NorthPeak Advisory, a specialist firm in ESG,
is engaged to assist with Round Hill’s ESG strategy and you
will see from the relevant section in this report that efforts
in this regard have moved along some distance, with a
focus on responsible investment practices, addressing
material environmental and social issues, and Diversity,
Equity and Inclusion.
NOTICE OF AGM
My fellow Directors and I would be pleased to meet with
Shareholders at the Company’s Annual General Meeting
(“AGM”) to be held on 12 June 2023 at 1pm at the offices of
Gowling WLG (UK) LLP, 4 More London Riverside, London,
SE1 2AU. The Notice of AGM which is included on pages 115
and 116 of this report sets out the proposed resolutions,
together with explanatory notes. Members of the Board
and representatives from the Investment Manager will also
be present in person at the AGM to answer questions from
Shareholders.
MARKET AND OUTLOOK
Globally, 2022 was a challenging year for financial markets,
with inflation and interest rates on the rise and events,
including the horrific war in Ukraine, taking their toll.
Despite these macro challenges, the music sector
continued to thrive and the outlook for the music industry
continues to be positive across leading reports and sector
research. Exciting new prospects are also continually
emerging, including in new territories and with new
technology advances, providing increasing opportunities to
license music and grow royalties.
Given these positive structural tailwinds, the quality of
the Company’s time-tested Portfolio of music rights and
the proven experience of the Investment Manager, we
are confident that, even in challenging market conditions,
Round Hill Music Royalty Fund is well positioned to continue
to deliver sustainable revenue and value growth.
Robert Naylor
Chairman
24 April 2023
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 5
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
INTRODUCTION
At Round Hill we care deeply about the music that we
manage. Across our entire business we currently oversee
over 150 Catalogues with more than 330,000 songs and a
combined value of c.US$1.2 billion.
Our diligence and reputation mean we maintain strong
relationships across the industry; we are viewed as a
trusted partner to rightsholders who may be looking
to transfer ownership to a new home; and we are well
networked across the key music and entertainment
markets, which positions us well as we seek to maximise
the visibility and opportunities to use our music. As a
songwriter and musician myself, I am mindful every day
that songs are pieces of art which hold significant value
and this needs to be unlocked in a way that protects the
song’s future value, so ensuring it retains its worth and
appeal over the long term.
Round Hill has been investing in music for almost
15 years and we regard ourselves as pioneers in this
alternative asset class. As one of the first to recognise the
opportunity that music rights present, we strategically
took an investment approach that reduced risk by
selecting Catalogues that already had a proven longevity
and timelessness and investing in them at sensible
multiples. It means that the music we invest in has long
term inherent value and a track record in income delivery,
that we can grow through our team of around 70 experts
that includes specialists in data, synchronisation, licensing
and dealmaking.
The Round Hill Music Royalty Fund benefits from all of
this knowledge and expertise; the Company’s Portfolio
contains some incredible music, which a quick listen to its
‘Top 50 earners’ playlist on Spotify will show, and we are
proud to be custodians of these songs on your behalf.
STATEMENT FROM THE CEO
OF THE INVESTMENT MANAGER
JOSH GRUSS
We are very pleased with
the performance of the
Round Hill Music Royalty
Fund Portfolio over the
course of 2022.
6 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
PORTFOLIO PERFORMANCE AND ACTIVITY
We are very pleased with the performance of the Round
Hill Music Royalty Fund Portfolio over the course of 2022.
We have grown the value of the Portfolio substantially
and much of this growth resulted from our careful, active
management and commercialisation of the Portfolio that
resulted in a 32% uplift in revenues.
Within that, income from the Portfolio’s masters rights
grew by 13%, comparing favourably to the wider industry
where global revenues from recorded music grew by
9%, as reported by IFPI in its Global Music Report.
Synchronisation income increased by 33% year-on-year,
following the hard work of our dedicated team which
secured multiple successful placements across high profile
films, television series and brand campaigns.
Highlights included the following placements:
“All by Myself”, by signer songwriter Eric Carmen, in
advertisements for Adobe Photoshop and the popular
Mexican snacks company, Sabritas;
Spacehog’s “In the Meantime” in the trailer for Marvel
Studios’ Guardians of the Galaxy Volume 3;
“Best Day of my Life” in a Nutella advertisement through
our relationship with Ferrero; and
‘
Alice In Chains’ “Rooster” in the Netflix series, Super
Pumped.
Since the year end, we have also placed our highest value
sync yet for the Company, with Lancôme using “What a
Wonderful World” in its latest campaign. That we have
been able to secure a licensing agreement of this scale
and profile is testament to the hard work, expertise and
experience of our sync team and it is incredibly exciting for
the Company’s Shareholders who can claim a piece of this
iconic project. Placements like this not only secure direct
revenue from the licensing of the song for the campaign,
but also serve to remind audiences of the song’s existence,
or indeed introduce it to new listeners, leading to a
resurgence in streaming, visibility and additional income.
Publishing rights currently account for 69% of the
Company’s income, while the remainder (31%) consists
of masters rights, which are managed diligently by the
Investment Manager’s in-house recorded music arm.
This diversification into recorded music rights allows the
Investment Manager to collect a new set of royalties for
this rights type, generating a new revenue stream for the
Company when recorded music is played and facilitating
revenue growth through active management.
Notably, the Company owns 100% of the masters,
publishing and administration rights to 135 of The
Offspring’s songs, including their 90s anthems “Come
Out and Play”, “Pretty Fly (for a White Guy)” and “Self
Esteem”. Over the year, this Catalogue enjoyed 25%
organic revenue growth. This was supported by the band’s
European and North American tour, which brings new
profile to the music and drives streaming numbers. Round
Hill also proactively sought to leverage this visibility and
renewed appetite for The Offspring’s music by releasing a
Greatest Hits album on vinyl, through Round Hill Records.
Overall, the Portfolio is delivering just as we expected it
to from curation and we are creating new value from its
amazing songs in a sustainable and considered way.
An example of this is the focus we put on enhancing the
quality and management of the data pertaining to the
Company’s rights. Our efforts, which are detailed later in
this report, have already delivered significant upside for
the Company and, in 2022, enabled us to negotiate new
two-year licence agreements with TikTok and Meta on
more favourable terms, resulting in higher digital revenues
in the second half of the year.
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 7
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
8 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
During the year, we used the remaining proceeds from
the US$86.5 million C Share fund raise the Company
completed in July 2021 to further enhance its repertoire, in
line with our strategy of investing in enduring music with
proven recurring revenues:
In January 2022, the Company invested in the music
publishing and master rights for the Catalogue of
frontman to the legendary UK rock band Whitesnake
and Deep Purple lead singer, David Coverdale. The
Catalogue, which stretches back nearly 50 years giving
us a clear view of the income potential of the songs,
includes recordings from Coverdale’s career as a solo
artist and as the frontman of Whitesnake; the master
royalty participation from recordings during Coverdale’s
tenure as the lead singer of Deep Purple; and the music
publishing assets and long-term administration rights for
Coverdale’s neighbouring rights income. Coverdale, who
was inducted into the Rock and Roll Hall of Fame in 2016,
has sold over 40 million albums throughout his career.
In February 2022, the Company acquired a significant
majority of the rights to the legendary and influential
American rock band, Alice In Chains. The investment
covered the publishing and masters rights of this
enduring band, which formed in Seattle in 1987 and
was one of the leaders of the City’s Grunge rock scene,
and comprises 94 compositions and 159 recordings,
including “Rooster” and “Would?” which are now two of
the Portfolio’s top 50 earning songs.
Since then, there has been significant dislocation in
the public equity markets which has constrained the
Company’s ability to raise additional equity. We are
working hard with the Company to address this so that
the Company can look to raise additional capital once the
markets allow. In the meantime, Round Hill’s position in
the market leaves us well placed to monitor opportunities
and possible transactions, as well as trading multiples. In
2022 alone, Round Hill saw over 100 potential investments
passed across our desks and we are seeing multiples in
the 15-22x range. Deal volume in 2022 was down and
a number of high-profile deals failed to close due to an
inability to meet pricing expectations. Sellers pulled deals
when pricing expectations were not met and, as a result,
average transacted deal multiples in 2022 did not contract
meaningfully and remain elevated.
Since the year end, against a challenging market backdrop,
we have negotiated a new banking facility for the
Company with City National Bank on favourable and more
flexible lending terms. This new facility continues to have
a variable interest rate of 2.25% above SOFR and, after
careful review, the Board does not believe it is the right
time to swap out for a fixed interest rate.
For now, our continued focus is on the Portfolio’s current
repertoire, where there is ample opportunity to continue
to drive income. This includes data management, which
underpins the flow of monies around the global music
business. As the music industry has become increasingly
data-driven, it is vitally important for any music business
to standardise and enrich its data set, while sharing it with
other parties involved in the ecosystem. This ensures that
anyone who created, performed on or owns the rights
to the music that has been used or played receives the
royalties and revenues due to them.
STATEMENT FROM THE CEO OF THE INVESTMENT MANAGER
CONTINUED
Coverdale commented:
“I am thrilled beyond words to
joyfully announce that my existing
catalog of works, both songs
and master recordings, which I
have been involved in creating
for over 50 years, is now in
exceptionally safe hands with the
fine people at Round Hill. I look
forward immensely to working
together with Josh Gruss and all
at Round Hill to ensure the legacy
of my existing works for future
generations to enjoy.”
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 9
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
The volume of metadata (the digital data that details
the contents of a song) moving across the entire music
industry is increasing dramatically each year, so it is ever
more important to ensure that our technology is still fit for
purpose and the demands of our business. Round Hill has
made notable progress in upgrading and improving our data
and tech in 2022, which has been a significant project and
has made a direct contribution to the notable increase in the
Company’s digital revenue in the second half of the year.
MUSIC INDUSTRY BACKDROP
The music industry continues to thrive and the investment
opportunity that royalties offer is looking stronger
than ever, underpinned by annual growth in revenues,
expanding monetisation opportunities and positive
regulatory momentum. Importantly, more people are
engaging with music across more platforms than ever
before, as it continues to be accessed, loved and enjoyed
increasingly across the world.
Backing this trend, in its annual Music in the Air Report,
Goldman Sachs raised its music publishing forecasts by
c.9% over the 2022-30 period with higher than predicted
streaming, physical (vinyl, CDs and cassettes) and
performance revenues. For recorded music, forecasts
were raised by 8% for 2023 and by 16% for 2030, mainly
driven by higher streaming revenues, as digital income
powers ahead to fuel industry-wide growth.
Further, as Goldman Sachs confirms, streaming shows
no signs of saturation. Revenues are increasing, due in
large part to the growing number of subscribers. The
IFPI’s Digital Music Report 2022 estimated there to be 589
million “users of paid subscription accounts” at year end,
up from 523 million at 2021’s conclusion, with Goldman
Sachs forecasting 1.26 billion paying subscribers around
the world by 2030.
Alongside this, regulatory changes are promising for the
future direction of royalty payments, particularly in the US,
where legislative rulings have favoured songwriters and
publishers, with a resultant increase in the percentage of
revenues that US streaming services are required to pay to
these rightsholders.
The momentum behind the music industry has never been
more positive and Round Hill Music Royalty Fund, with
its carefully curated and diversified Portfolio, is very well
positioned to benefit from these structural tailwinds.
OUTLOOK AND THE YEAR AHEAD
Music is an exciting and energised place to be working and
invested in. There is an incredible amount of innovation
and technological evolution which is opening up exciting
new opportunities and contributing to the positive outlook
that so many of us share across the business.
Your Company is ideally positioned to benefit from these
positive structural trends; but even without the expected
underlying growth to come, the way in which the Portfolio
has been curated means that it will continue to deliver
income and valuation growth because of the vintage and
durability of its songs.
Finally, I would like to take this opportunity to thank Trevor
Bowen for all his help and support during his term as
Chairman, which was critical to our successful IPO of the
Round Hill Music Royalty Fund. Our new Chairman, Robert
Naylor, is a more than worthy successor and we are very
pleased to be working with someone with such extensive
capital markets and corporate experience. Finally, thank
you to the Shareholders for your ongoing support. You can
be assured that we are working hard on the Shareholders’
behalf and that our focus continues to be on delivering risk
adjusted returns from this special asset class.
Josh Gruss
Founder and CEO of Round Hill Music L.P.
24 April 2023
10 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
GLOBAL MUSIC REVENUE
FORECASTS
MUSIC INDUSTRY
OVERVIEW
MARKET OVERVIEW: A POSITIVE OUTLOOK
FOR A THRIVING MUSIC MARKET
With revenues increasing year-on-
year, new monetisation opportunities
emerging in a digital world, and
positive changes to the regulatory
framework for Copyright, the music
royalty economy is looking healthier
than ever, as the global music market
bounces back from the impact of the
pandemic to thrive in an exciting and
innovative landscape, where more
people are engaging with music across
more platforms than ever before.
The impact of these events is borne out in the growth forecasts
for the industry, all of which position music as an attractive
asset class for investment. In June 2022, Goldman Sachs
Research, in its Music In The Air report, revised its initial global
music revenue forecasts by 5% to US$94.9 billion for 2023 and
by 10% to US$153 billion for 2030, primarily off the back of a
stronger 2021 base where revenues exceeded expectations.
+5%
to
US$94.9bn
for 2023
+10%
to US$153bn
for 2030
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 11
OVERVIEWOVERVIEW
PUBLISHING REVENUES
FROM DIGITAL SOURCES
Music Publishing in 2022
A significant source of revenue for Round Hill Music Royalty Fund
initially flows through performance rights organisations to Round Hill
– this is income which would previously go directly to the songwriters
who have since chosen Round Hill as custodians of their work.
In this sphere, CISAC
1
’s €9.58 billion of global collections represents a 5.8% year-
on-year increase, while their tireless lobbying efforts in countries around the
world serve to protect and enhance the value of music copyright.
The three largest music regions, Canada-USA, Europe and Asia-Pacific, returned
to growth in 2021, according to CISAC’s Global Collections Report 2022.
Publishing revenues from digital sources reported via CISAC grew 27.9% to
€3.12bn, up 49.1% from the pre-pandemic revenue total of 2019. Sharp organic
growth in the streaming market, rising music subscriptions, new and renewed
deals with digital platforms, such as YouTube and TikTok, and continued strong
growth of subscription video on demand (SVOD) helped drive growth.
Changes to US legislation positively affect publishing revenues
In July 2022, the US Copyright Royalty Board (CRB) reaffirmed its decision on the
percentage of revenues that US streaming services have to pay to songwriters
and publishers, ruling that this figure be increased from 10.5% to 15.1% for the
years 2018-2022. Referred to as the CRB III ruling, this represents the highest
rate increase in the history of the CRB, and a hugely significant moment for
the song and the songwriter, bringing this status closer to reflecting their
importance.
The requirement to pay backdated royalties resulted in a net income accrual
for the Company of US$2.3 million in relation to this CRB receipt. This accrual
equates to a revenue increase of c. US$0.0055 per Share. This progress
continued with the latest rate settlement, set at a headline rate of 15.35% to be
phased in over the years 2023-27. It should be noted that these phonorecord
rate increases are theoretically not at the expense of recording artists and labels
(where Round Hill has a vested interest through masters rights acquisitions);
the National Music Publishers’ Association has emphasised that the streaming
services must be the ones to sacrifice part of their portion.
1 CISAC is the representative body of songwriters, composers and authors worldwide: https://www.cisac.org/.
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
+27.9%
to
€3.12bn
STREAMING AS A REVENUE-GENERATING
MACHINE
Music In The Air by Goldman Sachs Research confirmed
streaming as showing no signs of saturation, with revenues
from this format set to grow by an average of 12% per year
between 2021 and 2030 due, in large part, to the number
of subscribers as a percentage of smart phone owners
growing from 11% in 2021 to 20% in 2030.
In 2022, according to The Luminate U.S. Year-End 2022
Report, combined global audio and video streams rose
by 25.6% to 5.3 trillion, driven by a 31.2% uptick in video
song streams. The same report underlined the invaluable
status of streaming, reporting 2022 as the first year that
American consumers played more than 1 trillion streams.
The benchmark was reached in late November, with the
year-end total reaching 1.1 trillion. Streaming’s role as a
dominant driver reached a landmark milestone on 31 March
2023, with global on-demand audio streams from services
like Apple Music and Spotify reaching the 1 trillion mark,
setting a new record for the earliest this threshold has ever
been reached in a single year.
CONSUMPTION OF CATALOGUE MUSIC
GROWS YET AGAIN
The enduring success of ‘catalogue music’, i.e., songs
released more than 18 months ago – was noted as a
recurring trend in the Luminate U.S Year-End Music Report
for 2022. Last year, US consumption of this category of
music grew to 72.2% (or 703.9 million equivalent units)
compared to 270.9 million units for ‘current music’ (i.e.,
new music released within the past 18 months). Around
a third of Spotify’s weekly Top Songs are now catalogue
music tracks, the portion taken up by these songs having
risen by 155% since 2020, and showing no signs of stopping
its upward trajectory. These iconic songs – which form the
mainstay of Round Hill Music Royalty Fund’s Portfolio– have
not only maintained their value, but have found new, bigger
audiences through new forms of music discovery and
powerful sync placements in film and television.
12 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
The global recorded music industry continued its
resurgence and proved its strength against wider
economic turbulence with yet more significant
growth in 2022.
The IFPI’s Global Music Report 2023 showed that
global revenue from recorded music grew by 9% in
2022 to reach US$26.2 billion, an 8th consecutive
year of growth. This is driven by the sustained
success of streaming, comprising two thirds of this
revenue, assisted by a 10.3% growth in subscription
revenue.
The US continues to be the largest single music
market in the world. Here, recorded music revenue
grew by 6% in 2022 to US$15.9 billion, again driven
by a 7% increase in streaming revenue, as reported
by the Recording Industry Association of America
(RIAA). Streaming continues to drive the recovery
of the music industry since its decimation by music
piracy in the 2000s; US recorded music revenue has
now surpassed its previous peak in 1999. There is,
however, no sign of saturation just yet. Adjusted for
inflation, the industry has only reached around two
thirds of its 1999 figure, leaving room for significant
revenue growth in the coming years.
As well as the continued growth of streaming, which
has underpinned the recent success of the music
industry, we continue to see a story of the resilience,
and indeed resurgence, of physical sales, comprising
17.5% of global recorded music revenues in 2022.
This is largely in the form of vinyl: Luminate’s
2022 annual report shows that vinyl album sales
increased by 4.2% in 2022 to 43.5 million units.
Recorded music
+9%
to
US$26.2bn
in 2022
GLOBAL REVENUE FROM
RECORDED MUSIC
CONSUMER SPEND ON MUSIC REMAINS
RESILIENT
Goldman Sachs continued its forecasts by confirming that
spend on music should remain resilient in a higher inflation
and weaker macro environment. The firm’s analysis shows
that music remains one of the most under-monetised
forms of entertainment, with spending still 40% below
its historical peak when adjusted for inflation, while
consumption continues to grow year after year.
A NEW WORLD OF OPPORTUNITY
New platforms for content consumption represent an
opportunity to drive further growth for the music industry
in the coming years.
Emerging social platforms such as TikTok are providing
new routes for consumers to discover music. They allow
younger generations to experience the work of celebrated
songwriters, many of whom have chosen Round Hill as the
custodians of these songs. TikTok is estimated to have paid
roughly US$180m
1
to the recorded music industry in 2021,
and with their revenues expected to rise by two and a half
times to US$10 billion
2
for 2022, there is plenty of room
for this figure to grow. Social platforms represent not only
a new medium of music discovery, but a significant new
opportunity for licensing music. The rise of these short
form video apps has taken music listeners by storm; the
IFPI noted in their Engaging with Music report that 50% of
music fans use apps like TikTok and Triller and that 63% of
people consider music to be a major factor in their time
spent on those apps.
The metaverse has also shown itself to be the source of
huge future opportunities for music licensing. Gaming
platforms such as Roblox, for example, have transformed
their user experience through virtual concerts. After
winning their copyright dispute with Roblox in 2021, the
National Music Publishers’ Association in the US declared
that the settlement, “paves the way for innovative
partnerships between Roblox and publishers that will
offer songwriters new ways to monetize their songs and
catalogues.” With over 65 million daily active users, over
half under the age of 16, Roblox provides an avenue to
license music to huge new audiences, on top of existing
income from music streaming. This opportunity is
particularly acute for catalogue music; Elton John recently
unveiled his own world - Elton John Presents: Beyond the
Yellow Brick Road, combining digital fashion, quizzes, and
interactive challenges set to his music with a series of
virtual concerts made up of his most iconic songs.
Crucially, the licensing of music to these new platforms
seems only to build on global streaming revenue.
Combined with the long-term growth opportunities for
streaming, the potential for subscription prices to rise in a
resilient market, and the global industry efforts to invest in
data management systems and educate creators on the
data management of their songs, the potential for iconic
music to find new audiences, and therefore additional
revenue streams, has never been bigger.
1 https://www.musicbusinessworldwide.com/podcast/tiktok-start-paying-the-music-industry-properly/.
2 https://www.ft.com/content/c4ce8f13-bec0-4cde-a885-7857f0bbb733.
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 13
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
Global On-Demand Audio Song Streams
2022
2021
3.40 trillion
2.74 trillion
Source: Luminate 2022 Year-End Music Report.
Catalogue Share - US Consumption
2022
2021
72.2%
69.8%
Source: Luminate 2022 Year-End Music Report.
INVESTMENT MANAGER’S REPORT
COMPANY OVERVIEW
Round Hill Music Royalty Fund
invests in high quality, evergreen
music Catalogues that have
proven longevity and revenue
streams, with the aim of providing
investors with an attractive level
of regular and growing income
and capital returns, underpinned
by the positive structural drivers
of the global music industry.
The Portfolio is diversified by income stream and music
genre, with value created through the proactive and
careful management and commercialisation of the
repertoire through synchronisation (placement in films,
television series and brand campaigns); licensing; data
cleaning; distribution (including across platforms such
as Amazon Music, Apple Music, Deezer and Spotify);
and monetisation of music when used in content
uploaded to platforms such as TikTok and YouTube.
Its 51 Catalogues, totalling over 120,000 songs, include
music performed by artists such as Alice In Chains,
Bonnie Tyler, Bruno Mars, Céline Dion, Lady A, Louis
Armstrong, The Offspring, The Supremes, Whitesnake
and Wilson Pickett.
The Portfolio of rights includes Copyright interests in a
musical composition or song (which can be the writer’s
share, publisher’s share and / or performance rights);
the rights to the recording of a musical composition
or song (the master recording rights); as well as music
rights and assets that meet the Company’s investment
strategy and objectives, including its 29.14% equity
stake in Carlin.
14 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
INVESTMENT MANAGER’S REPORT:
PORTFOLIO OVERVIEW
2022 saw the further expansion and diversification of the
Portfolio, which now stands strong at 51 unique Catalogues
comprising over 120,000 songs, with the proceeds from the
IPO and subsequent fundraises, totalling US$417 million,
now fully deployed.
Two acquisitions were made over the course of the period.
In January, the Group purchased the Catalogue of David
Coverdale, frontman of the legendary British rock band
Whitesnake, lead singer of Deep Purple and inductee of the
Rock and Roll Hall of Fame, securing the rights to several hit
songs including “Crying in the Rain”, “Fool for your Loving”
and the iconic rock anthem “Here I Go Again”. In February,
the Portfolio was further bolstered with the addition of
the Alice In Chains Catalogue, including Rock staples
“Would?”, “Man in the Box” and “Rooster” and bringing with
them legions of loyal fans the world over who continue to
consume and enjoy the band’s music.
These investments complement the existing Portfolio
which, whilst rooted in Rock, spans multiple genres and
includes the music of a diversified roster of legendary
artists and songwriters who have performed or penned
globally renowned songs such as “All By Myself” (Carmen/
Rachmaninoff), “What A Wonderful World” (Thiele/Weiss)
and “You Can’t Hurry Love” (Holland/Dozier/Holland).
It also includes the 29.14% equity stake in Carlin whose
Catalogue, built up over the last 50 years, includes a vast
repertoire of Rock and Pop classics, such as Elvis’s “Are
you Lonesome Tonight,” “Lollipop” (The Chordettes) and
“Video Killed the Radio Star” (Bruce Woolley & The Camera
Club), as well as Christmas classics “Santa Baby”, “Jingle
Bell Rock” and “Christmas (Baby Please Come Home)”.
Carlin is considered one of the highest quality publishing
Catalogues in existence.
David Coverdale
Alice In Chains
2 new Catalogue acquisitions
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 15
INVESTMENT MANAGER’S REPORT: PORTFOLIO OVERVIEW
CONTINUED
A SOUND INVESTMENT:
PORTFOLIO BREAKDOWN BY INCOME
There are more ways than ever before for people to engage
with music today. According to the IFPI, which represents
the recorded music industry worldwide, consumers
and fans across the globe use more than six different
methods to engage with music, ranging from video and
audio streaming, physical CDs and vinyl and gaming
soundtracks, to radio, television, film and short-form
videos on platforms like TikTok and Meta. These various
forms of music consumption create rich opportunities for
the monetisation of the Group’s Portfolio.
In music, there are two sets of rights in any song: (a) the
publishing rights and (b) the master rights. Publishing
rights refer to the actual music composition (i.e., the
notes, melodies and lyrics). Whoever owns the publishing
rights receives royalties whenever the song is played and
when the composition is reproduced or covered by another
performer. Master rights refer to the sound recording of
the written song or piece of music. These ensure that the
recording artist, record label, recording studio or music
company who owns the master rights receive royalties any
time the recorded song is played, for example, on radio or
television, via streaming services, or in public places like
shops, bars and cafes.
Publishing rights currently account for 69% of the
Company’s income, while the remainder (31%) consists
of master rights, which are managed diligently by the
Investment Manager’s in-house recorded music arm.
This diversification into recorded music rights allows the
Investment Manager to collect a new set of royalties for
this rights type, generating a new revenue stream when
recorded music is played and facilitating revenue growth
through active management.
The ownership of these publishing and master rights
means that the Company can collect the following types
of royalties when its Portfolio is used.
INCOME TYPE
Publishing 73%
Masters 27%
2021
Publishing
69%
Masters
31%
2022
16 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
MASTERS INCOME
The Company’s publishing income was generated through
a diverse range of music uses and licensing agreements.
Performance income accounted for almost half (44%),
with royalties being derived from the use of music in public
via radio and television broadcasts, live concerts and
internet performances, and the playing of music in shops,
bars, restaurants and other public spaces. The Company
enjoyed significant success with sync deals in 2022, with
this form of income accounting for more than a quarter of
publishing revenues (27%), with songs placed in films, TV
productions, video games and advertisements; a selection
of these are highlighted later in the report. Mechanical
streaming remained strong, with 19% of publishing income
being generated through the use of music on interactive
streaming services, with mechanical royalties - which
flow from the sale of digital downloads, CDs and vinyl -
completing the Portfolio income at 9%.
The Company’s masters income, which pertains to the
rights it owns in the recording of a song, were largely
derived from the consumption of music on streaming
services and the sale of CDs, vinyl and digital downloads.
Neighbouring rights – royalties which flow from the use
of recorded music in public and on TV and radio around
the world – accounted for 11% of all masters revenue,
strengthening and diversifying the Company’s overall
Portfolio income.
PUBLISHING INCOME
Performance 50%
Sync 24%
Other 1%
Mechanical Streaming 12%
Mechanical 13%
2021
Performance
44%
Sync
27%
Other
1%
Mechanical Streaming
19%
Mechanical
9%
2022
Label Sales 90%
Neighbouring Rights 9%
Other 1%
2021
Label Sales
88%
Neighbouring Rights
11%
Other
1%
2022
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 17
INVESTMENT MANAGER’S REPORT: PORTFOLIO OVERVIEW
CONTINUED
SOLID AS A ROCK: PORTFOLIO
BREAKDOWN BY GENRE
The Group’s strategic approach to Catalogue
acquisition aims to minimise risk and maximise returns
through its choice of repertoire. This has resulted in a
Portfolio weighting towards Rock music, with the genre
providing a compelling case for investment. Rock songs
represent over half of the Portfolio by value (56%),
including hits from some of the biggest Rock legends in
the world including Alice In Chains, Bush, Supertramp
and The Offspring.
Rock fans are known for their enduring loyalty, resulting
in predictable and steady purchase patterns and
music consumption habits, translating into income
characteristics. These facts are borne out in recent
independent market studies. The Luminate U.S. Year-
End Music Report for 2022 shows that total on-demand
streaming in the US for Rock grew by 14.2% year-on-
year from 2021 to 2022; whilst in the UK – the world’s
third largest music market – Rock was the leading genre
in 2022 for album sales for the fifth consecutive year,
according to All About The Music 2022, the yearbook
from the record industry trade body BPI. Physical
records also remain a favourite format for Rock fans,
boosting the genre’s appeal for investors and offering
an avenue towards positive returns. In 2022, according
to Luminate, over half of vinyl album sales (51.7%) were
Rock titles, meaning the genre sold more in vinyl than
all other genres combined.
Pop, which accounts for 18% of the Portfolio by value,
is considered the most mainstream genre of music;
it has commercial appeal due to its accessibility and
versatility and was named the number one genre
globally by the IFPI in its Engaging with Music report
in 2022. The Company’s Shareholders can be proud to
have an investment in some of the most famous pop
songs and power ballads enjoyed the world over, from
the Backstreet Boys’ “I Want It That Way” (Carlsson/
Max/Norlem) and Bonnie Tyler’s “Total Eclipse of the
Heart” (Steinman) to Celine Dion’s “It’s All Coming Back
To Me Now” (Steinman) and Michael Bolton’s “When A
Man Loves A Woman” (Lewis/Wright).
Rock 45%
Pop 21%
Country 13%
Classic R&B 7%
Other 14%
GENRE (BY FAIR MARKET VALUE)
2021
Rock
56%
Pop
18%
Country
11%
Classic R&B
5%
Other
10%
2022
18 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
Country music, at 11%, accounts for a growing proportion
of the Company’s Portfolio. The genre has always enjoyed
a strong following in the US, but it is becoming increasingly
globalised with its songs and performers enjoying success
outside of its traditional heartlands. The strength and
quality of the genre’s songwriters, many of whom are
represented by the 35-strong Round Hill team based in
the heart of Nashville’s Music City, drive its popularity with
songs that tell stories and resonate the world over.
In the UK, the Official Charts Company reported in March
2023 that Country music has seen the fastest growth of
any genre over the past five years with streams increasing
in the territory by 381%. According to the Country Music
Association, Q4 2022 was especially strong for the
genre, with double-digit growth (12%) being recorded on
streaming services year-over-year and emerging artists
rising to fame through new platforms like TikTok. Amongst
the Top 50 earners in 2022 from the Company’s Portfolio
were American Idol winner Carrie Underwood’s “Before
He Cheats” (Kear/Tompkins) at Number 2, as well as the
platinum-selling Dierks Bentley’s “Drunk On A Plane”
(Kear/Tompkins/Bentley) and Lady A’s “Need You Now”
(Kear/Scott/Haywood/Kelley).
The strategic focus on Rock, combined with the enduring
popularity of Pop music and the growth of Country music,
continues to make the Portfolio an attractive option for
long term investment in music Copyrights and underpins its
secure, recurring and growing revenues.
In April 2023, Round Hill was named the
Independent Publisher of the Year at the Association
of Independent Music Publishers (“AIMP”) Nashville
Country Music Awards, demonstrating its success
in this growing genre. The award is strictly metric
driven, based on the number of Billboard charted
singles, and how many of those singles went to
number 1 on the Country charts. Round Hill emerged
as the clear winner from a short list of high-profile
industry peers.
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 19
WINNER
Independent Publisher of the Year
INVESTMENT MANAGER’S REPORT: PORTFOLIO OVERVIEW
CONTINUED
VINTAGE YEARS: PORTFOLIO
BREAKDOWN BY AGE
In the music industry, ‘catalogue music’ is the term
traditionally given to songs that are over 18 months old.
Music in this category is deemed to offer greater stability
and is considered less susceptible to natural decline
typically seen during its first ten years of release. It also has
a longer track record of income delivery, which enables a
more informed analysis of a song’s future potential and,
therefore, investment decision.
Consumers’ deep engagement with catalogue music versus
‘new’ or ‘current’ music is well understood by the Round Hill
team, with acquisitions primarily focusing on songs recorded
and released in the early 2010s and before. Almost a quarter
of the Group Revenue is derived from music released in
the 1960s, a decade that has produced some of the world’s
most enduring songs including Louis Armstrong’s “What A
Wonderful World” (Thiele/Weiss) and Motown classics from
the Supremes such as “You Can’t Hurry Love” (Holland/
Dozier/Holland) and “You Keep Me Hangin’ On” (Holland/
Dozier/Holland), which all feature in the Company’s Portfolio.
Almost a fifth of Group Revenue (18%) stems from music
from the 90s – an era when everything from grunge, thrash
metal and Britpop, to alternative and indie rock flooded the
charts. Bands like Alice In Chains, Bush and The Offspring,
some of the Company’s top earners, rose to prominence
and their music is still heard and consumed today, more than
thirty years on.
The Luminate U.S. Year-End Music Report for 2022 states
that the total consumption of catalogue music increased by
12.9% in 2022, accounting for 72.2% of all music consumed
in the territory via audio streaming services, downloads,
sales of CDs, vinyl and other physical products and digital
album sales – the continuation of a trend that has seen the
share of current (or “frontline”) music decline.
As such, Round Hill continues to prioritise investments in
timeless Catalogues with a demonstrable history of steady,
consistent cash flows. 94% of the Group’s Revenue in 2022
was from releases ranging from pre-1950 to the early 2010s.
VINTAGE (BY GROUP REVENUE)
Pre-1950s
2%
1950s
3%
1960s
23%
1970s
13%
1980s
12%
1990s
18%
2000s
12%
Early 2010s
11%
Late 2010s
4%
2020s
2%
2022
20 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 21
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
22 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
2022 Top 50 Earners in the Group
Rank Song Title Composers
1
All By Myself Carmen/Rachmaninoff
2
What A Wonderful World Thiele/Weiss
3
Before He Cheats Tompkins/Kear
4
Total Eclipse of The Heart Steinman
5
I Want It That Way Carlsson/Max/Norlem
6
The Kids Aren’t Alright Holland
7
You’re Gonna Go Far, Kid Holland
8
Self Esteem Holland
9
You Can’t Hurry Love Dozier/Holland/Holland
10
Here I Go Again Aldrich/Coverdale
11
Hit Me with Your Best Shot Schwartz
12
Land Of 1000 Dances Kenner
13
The Bones Robbins/Morris/Veltz
14
Owner of a Lonely Heart Anderson/Horn/Rabin/Squire
15
It's All Coming Back to Me Now Steinman
16
I'd Do Anything For Love (But I Won’t Do That) Steinman
17
Happy Together Gordon/Bonner
18
Come Out and Play Holland
19
Gone Away Holland
20
Cherry Pie Cagle/Chamberlin/Dixon/Oswald/Turner
21
When A Man Loves a Woman Lewis/Wright
22
Holding Out for a Hero Steinman/Pitchford
23
Pretty Fly (For a White Guy) Holland
24
Stranglehold Nugent
25
Come See About Me Dozier/Holland/Holland
INVESTMENT MANAGER’S REPORT: PORTFOLIO OVERVIEW
CONTINUED
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 23
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
Rank Song Title Composers
26
Burnin' It Down Tompkins/Clawson/Hubbard/Kelley
27
Why Don’t You Get a Job Holland
28
Best Day of My Life Shelley/Barnett/Rublin/Sanchez/Goodman/Accetta
29
I Can't Help Myself (Sugar Pie, Honey Bunch) Dozier/Holland/Holland
30
I'm Alive Carlsson/Lundin
31
Drunk On A Plane Kear/Tompkins/Bentley
32
Rooster Cantrell
33
You Keep Me Hangin’ On Dozier/Holland/Holland
34
This Is How We Roll Bryan/Hubbard/Kelley/Swindell
35
In The Meantime Langdon
36
Ain’t Too Proud To Beg Holland/Whitfield
37
Go All the Way Carmen
38
Need You Now Kear/Scott/Haywood/Kelley
39
Reach Out I'll Be There Dozier/Holland/Holland
40
Blown Away Tompkins/Kear
41
Cruise Rice/Rice/Hubbard/Kelley/Moi
42
Mah Nà Mah Nà Umiliani
43
Would? Cantrell
44
Bye Bye Bye Carlsson/Lundin/Schulze
45
Where Did Our Love Go Dozier/Holland/Holland
46
I've Got My Mind Set On You Clark
47
Fly Away From Here Chapman/Fredericksen
48
Cat Scratch Fever Nugent
49
Drunk On You Clawson/Kear/Tompkins
50
Marry You Hernandez/Lawrence/Levine
DRIVING THE BEST DEAL FOR INVESTORS
Round Hill, the Company’s Investment Manager, is a
full service, creative music company with more than 70
employees across the main entertainment markets in US
and Europe, including London, Los Angeles, Nashville
and New York. Its experienced team has an established
reputation, a musical pedigree and proven track record
in proactively identifying monetisation opportunities for
the large body of high quality, iconic and commercially
appealing music it owns, manages, or administers, creating
value and returns for shareholders.
Since it was founded in 2010, Round Hill has become
embedded in the global music industry as a partner of
choice for artists and songwriters within the creative
community. Including its private funds, Round Hill
has closed on more than 150 Catalogues acquisitions
representing over 330,000 songs and has grown to more
than US$1.2 billion in assets under management. Round
Hill has developed into a trusted brand, renowned for its
excellent relationships with the music business and the
wider media sector which seeks to license its Catalogues.
Its dynamic and proactive approach to the management
of the Company’s assets – over 120,000 songs across 51
Catalogues – is made possible by the in-house expertise
of its leading professionals in their respective fields. The
combination of the experience, knowledge and skillset its
team has, enabling it to navigate the complex music rights
landscape and the direct relationships developed with users
- or licensees - of music, sets the Investment Manager apart
from others in this space.
INVESTMENT IN TECHNOLOGY AND
ENHANCED DATA MANAGEMENT
SUPPORTS REVENUE GROWTH
The value chain around which music royalties flow in the
industry is underpinned by sophisticated technology
infrastructure and is dependent on quality metadata to
identify who has written on, performed or recorded a song
or who owns the rights. This information supports faster
and more accurate collection of revenues. Simply put,
the industry is driven by data and, as such, investment in
cutting edge IT systems generates operational and cost
efficiencies and helps to maximise revenues.
In recent months, Round Hill has taken significant steps
towards further enhancing the quality and management
of the data pertaining to the rights it owns, manages
or administers, overseen by its in-house data analytics
expert. The Company’s rights data was migrated from a
multi-system, multi-database environment to a single
database, with the project completed ahead of schedule in
February 2023 and providing an opportunity to consolidate,
streamline and enrich its data set.
As the music business has evolved over recent years to being
a data-driven industry, it is vitally important for intellectual
property rights administrators, like Round Hill, to have an
appropriate technology stack and enriched, consistent data,
to facilitate providing data to third parties with ease.
Over the last number of years, the Investment Manager
has been actively driving data enrichment across its rights
portfolios. These efforts have delivered significant upside for
the Company. In 2022, the ability to provide a more complete
Portfolio data set on behalf of the Company to digital
platforms, including Spotify, Tik Tok and Meta, enabled greater
reporting and automated matching, which directly resulted in
higher digital revenues in the second half of the year.
Another notable change in October 2022 was the
partnership the Investment Manager struck with the
leading technology company, Orfium. Used by significant
players in the music industry including major multinational
companies, Orfium’s digital claiming and music recognition
technology is some of the best available. This partnership
allows the Investment Manager to more accurately identify
the use of the music it owns across a plethora of platforms
where individuals upload their own video content, such
as YouTube, and claim royalties for the use of such music,
resulting in higher revenues from these services.
INVESTMENT MANAGER’S REPORT:
PORTFOLIO MANAGEMENT AND PERFORMANCE
24 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NEW FRONTIERS: EMBRACING
INNOVATION TO MAXIMISE REVENUES
As the number of Round Hill’s managed and administered
Catalogues continue to grow, so too do the opportunities
to license the repertoire. The more rights that Round
Hill acquires for the Company and its own private funds,
the more it is seen as a “go to” for trending digital media
platforms to license music.
Music is now being consumed and monetised in more
ways than ever and Round Hill continues to benefit from
the digital boom, both from novel licensing opportunities
that open entirely new sources of revenue, to building on
existing relationships, evolving deal terms and coming
to better relationships with existing licensing partners.
The past year was no exception, and even more licensing
opportunities lie on the horizon, providing opportunities for
revenue growth.
Building on recent successes with shortform video
platforms TikTok and Triller, whereby Round Hill was able to
successfully procure licence fees for utilising the Portfolio
and other music, Round Hill continued to be successful
in enforcement campaigns against Roblox and Twitch,
two online gaming platforms which were not licensed to
use copyrighted music. In the case of Roblox, Round Hill,
in conjunction with its fellow industry publishers and the
NMPA, undertook coordinated action and negotiations
which were successfully concluded between Roblox
and the music publishing industry in October 2021. The
Company subsequently received a settlement payment
from Roblox in February 2022 for past unauthorised usage
of managed and administered content on the platform.
Crucially, this establishes Roblox as a new ongoing source
of licensing income.
With respect to Twitch, Round Hill again played a significant
role in a critical industry-wide effort to agree licensing terms
with the popular Amazon-based streaming platform for the
use of copyrighted music. The agreement reached with
Twitch provided for a licensing payment that was received
by the Company in December 2021 and includes greater
rights for Round Hill to control the use of its managed and
administered content on Twitch going forward.
Round Hill expects increased licensing opportunities to
emerge via its existing partners. Most notably, with the
platforms Tik Tok and Meta expanding, Round Hill has
negotiated new two-year licence agreements with both
platforms, on more favourable terms which have already
benefited the Company.
Round Hill is also in communication with its digital licensing
administrators to further new licensing opportunities,
including SNAP (a short-form video platform), Singa (a
karaoke platform), Apple Fitness+ (a fitness app), and
WithInVR (a virtual reality fitness app). Each represents
entirely new opportunities and revenue sources that
previously did not exist for the Company’s Catalogues.
These initiatives enhance the viability of the Company’s
time-tested Copyrights in the constantly evolving digital
marketplace; the continued monetisation of content; and,
ultimately, the return on investment for the Portfolio and
future acquisitions.
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 25
In the advertising market, songs from the Round Hill
Music Royalty Fund Portfolio could be heard on both
sides of the Atlantic, with “Total Eclipse of the Heart”
(Steinman) being selected to soundtrack the car
manufacturer, Kia’s, Superbowl advert; with Uber Eats
and Porsche also choosing Portfolio songs, “Streets
Favourite” (Morton) and “Aymo” (Jasarevic) respectively,
to bring their Superbowl campaigns to life.
In Europe, the iconic Italian Ferrero brand opted for two
songs, The American Authors’ hit “Best Day of My Life”
(Rublin, Shelley, Sanchez, Barnett) and George Harrison’s
single “Got My Mind Set On You” (Rudy Clark) to promote
Nutella in the market.
In a year where Baz Luhrmann’s Elvis biographical film
was winning awards, Aldi selected Elvis’s “A Little Less
Conversation” (Strange, Days) as the music of choice for
the supermarket’s Christmas advert.
The Top 10 Billboard hit “Lola” (Davies) from British Rock
band, The Kinks, was the perfect placement for Jennifer
Aniston’s haircare product line LolaVie; Katy Perry’s
“Waking Up In Vegas” (Carlsson) accompanied the advert
for BEHR’s paint line; and the timeless classic “What A
Wonderful World” (Thiele, Weiss) was licensed for use in
adverts by The Vanguard Group and Biktarvy.
The team worked with Marvel Studios to secure the use
of “In The Meantime” (Royston) by Spacehog in a trailer
for the blockbuster franchise, Guardians of the Galaxy,
Vol. 3, which will be released in May 2023.
The popular miniseries Pam & Tommy which chronicled
the marriage of Pamela Anderson and Mötley Crüe
drummer Tommy Lee, featured “I Would Do Anything
For Love (But I Won’t Do That)” (Steinman) in its main
promotional campaign. This promo utilised the Carlin-
owned master recording of the song as well as the
original recording by Meatloaf.
Media giant Apple utilised Bronze Radio Return’s “Light
Me Up” (Henderson) in its Q1 2022 platform spots; White
Flag” (Reid) by Joseph could be heard in promos for
Amazon Prime’s Hacks, Season 2; and “Happy Together”
(Bonner, Gordon) was used in a trailer for the action-
comedy film The Unbearable Weight of Massive Talent
starring Hollywood actor Nicolas Cage.
INVESTMENT MANAGER’S REPORT:
SYNC SNAPSHOT
GLOBAL LICENSING DEALS WITH MAJOR BRANDS CONTINUE TO DRIVE REVENUE GROWTH
The Company’s popular Catalogues continued to be used,
heard and enjoyed the world over through multiple global
licensing deals with major brand and media partners in 2022.
The Investment Manager proactively seeks out valuable
opportunities to license the Portfolio’s music for use in
adverts, films, television productions, trailers, promos,
and the fast-growing video games sector, providing the
soundtrack to our everyday lives. This activity is referred to
in the industry as synchronisation or “sync”. The Investment
Manager has a dedicated sync team of around 18 talented,
well-connected and music-loving employees, strategically
located in the entertainment and media hotspots of London,
Los Angeles, Nashville and New York.
This area of the business continued to thrive in 2022, with
560 unique songs from across the Company’s entire Portfolio,
used in various sync projects, contributing to a 33% like-for-
like increase in income from this source
1
. These impressive
placements are a testament to the outstanding capabilities
of the team in negotiating various new song placements as
well as renewals and to the quality and marketability of the
Portfolio.
Advertising highlights
Trailer highlights
1 Represents the like-for-like growth of synchronisation income for the Initial Investments.
26 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
SPACEHOG SYNC GENERATES +100% REVENUE GROWTH
Example of a vintage catalogue with current sync success... All it takes is one!
The Spacehog Catalogue includes all of the songs from the
90s English rock band, Spacehog. The Group owns both
the publishing and the master recordings rights to this
collection, allowing the Investment Manager to be the “one
stop shop” from licensing to synchronisation.
In December 2022, the band’s hit song ’In the Meantime’
which topped the US and UK Rock charts in the 90s, was
placed in the trailer for Guardians of the Galaxy Vol. 3. The
film is the next instalment of the incredibly popular films
produced by Marvel Studios.
The trailer for the anticipated blockbuster has already
amassed 27 million views on Youtube. Guardians of the
Galaxy Vol. 3 is the 32nd release in the Marvel Cinematic
Universe and is slated for release in May 2023.
Income generated by the catalogue for the year ending
31 December 2022 increased more than 100%.
Olivia Wilde’s dramatic thriller, Don’t Worry Darling,
featured four Carlin compositions: “Sleep Walk” (Farina,
Farina, Farina), “El Merengue” (Dimanlig, Ramos), “Need
Your Love So Bad” (John, John) and “Who’s Sorry Now”
(Snyder, Kalmar, Ruby).
The ensemble-cast comedy Amsterdam, starring
Christian Bale and Margot Robbie, used the 1930
composition “The Peanut Vendor” (Simons, Gilbert,
Sunshine).
“The Revolution Will Not Be Televised” (Heron), “There
Was a Time” (Hobgood) and “Bye Bye Blackbird”
(Henderson, Dixon) were all featured in the crime drama
and prequel to the Sopranos, The Many Saints of Newark.
In the UK, the Portfolio could be heard in British
productions including Downton Abbey: The New Era,
Allelujah starring Judy Dench and Jennifer Saunders, Mrs.
Harris Goes to Paris and the seasonal Amazon Prime film,
Your Christmas or Mine.
Amongst the many film syncs secured in 2022 were songs
featured in productions by media conglomerates 20th
Century Fox and Warner/HBO; whilst the Portfolio beat
off the competition to appear in Adam Sandler’s comedy,
Home Team, and the Aretha Franklin biopic, Respect.
The Netflix thriller series, The Midnight Club, used
Bush’s “Glycerine” in two episodes, as well as the Carlin
composition, “Seasons In the Sun” (Brel, McKuen);
whilst Harlen Coben’s popular Netflix drama, Stay Close,
featured “What a Wonderful World” (Thiele, Weiss)
and The Animals’ hit “Don’t Let Me Be Misunderstood”
(Benjamin, Ott, Marcus).
“All By Myself” (Carmen) was placed in a season 19 episode
of the US hit animated sitcom, American Dad; whilst Dawn
Penn’s version of “You Don’t Love Me (No No No)” (Penn,
Diddley, Cobbs) was perfectly placed in the fourth and final
season of the British spy thriller, Killing Eve.
The hit drama Atlanta, created by and starring Donald
Glover (Childish Gambino), used “When It’s Time To Go”
(Lee), “Dedicated to the One I Love” (Pauling, Bass) and
“Poinciana” (Simon, Bernier).
Many other syncs were secured for use in television
series such as Gossip Girl, Ru Paul’s Drag Race, Limitless
starring Chris Hemsworth, BBC’s The Pact and more,
across platforms including Apple TV+, Disney+, and
the US TV network Showtime, bringing the Company’s
Catalogues to millions of consumers worldwide.
Film highlights
TV highlights
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 27
28 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
CATALOGUE VALUATIONS
On 6 March 2023, the Company announced that, following
receipt of an independent valuation from Citrin Cooperman
(as at 31 December 2022), its Economic Net Asset Value per
Ordinary Share was US$1.27 and its unaudited IFRS NAV per
Ordinary Share was US$0.93. The Economic NAV increased
over the year by 13%, or US$59.9 million, to US$519.6 million,
while the fair value of the Portfolio (including the Carlin
Interest) was up US$71.5 million (13%) to US$602.6 million
1
.
At the same time, the Board indicated that it had
commissioned a second independent valuation report (the
“FTI Report”) from FTI Consulting (“FTI”). This was reported
to the market on 13 April 2023.
The FTI Report affirmed the valuation prepared by the
Company’s Independent Valuer, Citrin Cooperman, and
provides an additional data point for the market on the fair
value of the Company’s investments.
Citrin Cooperman independent valuation report
Over the twelve months to 31 December 2022, the fair
value of the Portfolio (including the Carlin Interest) was up
13%, or US$71.5 million, to US$602.6 million
1
.
The fair value of the Company’s Carlin Interest, which is
measured at fair value based on the net asset value of
the underlying entity, increased by 6% (US$4.1 million) to
US$67.6 million.
Citrin Cooperman used a discount rate of 8.5% to determine
the fair value of the Company’s Catalogues and the Carlin
Catalogue as at 31 December 2022, which is consistent with
the discount rate used as of 30 June 2022 and 31 December
2021. There were no significant changes to the growth rate
assumptions compared to the previous valuation cycle.
The implied multiple from this year-end valuation is 19.45x.
Citrin Cooperman also offered broader market calibration,
identifying the following multiples of transactions that took
place in 2022 that most closely resemble the assets held by
the Company, as follows:
Genre Vintage Simplified Vintage Multiple
Rock 1960s, 1970s Standards Music 24.15x
Rock 1960s, 1970s, 1980s Standards Music 23.97x
Hip Hop, Pop 1990s Standards Music 17.32x
Country 1970s, 1980s Standards Music 15.70x
Country 1990s, 2000s, 2010s Standards Music 20.40x
Latin, Pop 1990s, 2000s, 2010s Standards Music 23.64x
Country 1970s, 1980s, 1990s Standards Music 17.40x
Pop 1980s, 1990s Standards Music 16.73x
Pop 2000s, 2010s Standards Music 25.46x
Rock, R&B 1960s, 2010s Standards Music 18.76x
Average Multiple 20.35x
FINANCIAL REVIEW
1 Includes net recoupable advances to songwriters of US$3.8 million.
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 29
The Portfolio value increase was driven by year-on-year
organic earnings growth, which was generated by a range of
factors including:
Improved licence fee agreements with digital platforms
such as TikTok and Meta.
Successful synchronisation placements of 560 unique
songs throughout the year.
An uplift in valuations, including the Company’s
largest Portfolio position by fair value, The Offspring
Catalogue, which increased by more than 10%
compared to its half year valuation at 30 June 2022.
Royalty earnings for the iconic Rock band increased by
25% in 2022 compared to 2021.
The receipt of delayed royalty income payments from
the Covid period, due to the lag time in royalty income
payments that can range from 6 to 12 months after
income is earned, as the industry returns to pre-
pandemic levels.
The discount rate used by the Independent Valuer is
sensitive to many factors, including changes in interest rates,
cost of capital, investors’ risk appetite, industry specific risk
and macro risk. The sensitivity to the discount rate used to
determine the fair value of the Catalogues owned directly
by the Group, excluding the Carlin Interest, on the Economic
NAV of the Company is as follows:
-1% discount rate will grow the fair value of the
Catalogues by 20.01% increasing the Economic NAV of
the Group by US$107.062 million, which represents an
increase of 20.60% to the Economic NAV per Ordinary
Share of the Company.
+1% discount rate will reduce the fair value of the
Catalogues by 14.31%, reducing the Economic NAV of
the Group by US$76.526 million, which represents a
decrease of 14.73% to the Economic NAV per Ordinary
Share of the Company.
Details of the sensitivity discount rate used in the valuation
of the Catalogues owned by Carlin, and the impact on the
Economic NAV of the Company at 31 December 2022, are
set out in Note 15 to the Notes of the Consolidated Financial
Statements.
In late August 2022, a joint agreement among songwriters,
publishers and digital services was announced whereby all
three parties intended to submit a joint proposal to the CRB
suggesting that the new 2023 to 2027 on-demand streaming
mechanical rate in the US should be set at a headline rate
of 15.35%. This is slightly up from the most recent 15.1%
rate set in 2022. As the announcement took place after
the Portfolio’s mid-year valuation, the year-end valuations
have been updated to reflect mechanical streaming rates of
15.1%, 15.2%, 15.25%, 15.3%, and 15.35% for the 2023 to
2027 rate period.
FTI Consulting independent valuation report
The FTI Report provides two valuations. One is based on
a transaction using financing with traditional bank debt
and one financed through an asset backed securitisation
(“ABS”) structure. The discount rate that results from the
Weighted Average Cost of Capital (“WACC”) analysis in
the bank debt valuation is 9.25% and the discount rate
that results from the WACC analysis of the ABS valuation
is 8.25%. This compares to a discount rate of 8.50% used
by Citrin Cooperman, the Independent Valuer. FTI applies a
low, mid and high range of valuations.
In its mid case, FTI forecasts that overall Portfolio cash
flow will grow by 7%, 6% and 5% in 2023, 2024 and 2025,
respectively. The FTI growth rates compare to Citrin
Cooperman’s base case assumption of 5% for all income
types (excluding a 2% assumption for ‘Other’ income) in
2023, 2024 and 2025, respectively. While FTI assumes a
higher discount rate, their elevated growth assumptions
largely offset any negative impact. Accordingly, FTI’s
valuation for the traditional bank debt approach results
in an overall variance of just (3)% compared to the Citrin
Cooperman valuation.
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
30 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
The results of the FTI Report are set out below and are based on the mid case valuation.
FTI Bank Financing Structure Valuation (as at 31 December 2022)
Citrin Cooperman
Valuation Implied Multiple FTI Implied Multiple
% increase/
(decrease)
Company’s Portfolio
(excluding Carlin Interest)
US$534,939,570 19.4x US$523,490,000 19.0x (2)%
Carlin Interest US$67,647,500 20.1x US$63,312,040 18.8x (6)%
Overall
1
US$602,587,070 US$586,802,040 (3)%
Discount Rate Applied 8.50% 9.25% 9%
FTI ABS Financing Structure Valuation (as at 31 December 2022)
Citrin Cooperman
Valuation Implied Multiple FTI Implied Multiple
% increase/
(decrease)
Company’s Portfolio
(excluding Carlin Interest)
US$534,939,570 19.4x US$605,641,000 22.0x 13%
Carlin Interest US$67,647,500 20.1x US$72,744,400 21.6x 8%
Overall
1
US$602,587,070 US$678,385,400 13%
Discount Rate Applied 8.50% 8.25% (3)%
FTI’s comprehensive valuation methodology is based on a
combination of the following:
Analysis of by-track, by-source of income historical
performance data;
Identification of non-recurring historical royalty
collections;
Analysis of forecasted revenue for new song releases
and sync placements;
Analysis of trends among vintage, genre and territory
cohorts;
Analysis of administrative contract attrition trends,
statutory reversions or other potential loss of income
events, as necessary; and
FTI’s knowledge of ongoing industry trends, including
the impact of recent legislative and/or regulatory
developments.
FTI benchmarks to the observed long-term trends for
similar music publishing and recorded music Catalogues,
as well as the broader music industry, and prepares an
independent range of valuation indications.
FTI Consulting is a publicly traded business advisory firm
with 7,600+ employees worldwide and a suite of services,
that has a deep music specialisation. It performs valuation
services for many of the music industry players and is
commonly engaged in support of music securitisation
transactions to provide independent financial forecasts and
valuations for underlying music Catalogue assets. In addition
to the forecast and valuation services, FTI is also asked to
provide additional support services to underwriters, ratings
agencies and/or investors, as required.
When announcing the results of the second independent
valuation, Round Hill Music Royalty Fund also provided
additional cross-reference of the implied multiples to recent
transactions using the Shot Tower M&A multiples database.
Shot Tower Capital (“Shot Tower”) is an investment banking
boutique that provides advisory and capital raising services
in the media sector with a specific focus on the music
industry, where it has completed more transactions globally
than any other investment banking firm.
FINANCIAL REVIEW
CONTINUED
1 Includes net recoupable advances to songwriters of US$3.8 million.
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 31
Shot Tower maintains a database of music publishing
Catalogue transactions and the average multiple of
Net Publisher Share (“NPS”) paid in 2022 was 19.4x for
Catalogues that included high quality, iconic Copyrights,
which are the focus of the Company’s investment strategy.
The 19.4x multiple is the raw average including all deals
in Shot Tower’s database for both iconic and non-iconic
Copyrights (for every deal greater than US$20 million).
This is in line with the implied multiples derived from
the valuations provided to the Company by both Citrin
Cooperman and FTI.
NET ASSET VALUE
As at 31 December 2022, the Economic Net Asset Value per
Ordinary Share was US$1.27 and the IFRS NAV per Ordinary
Share was US$0.93. Economic NAV at 31 December 2022
was US$519.6 million, reflecting 13% growth (31 December
2021: US$459.7 million), driven by a combination of Round
Hill’s active rights management approach which delivered
higher revenues, underlying Portfolio valuation growth and
continued recovery following disruption to the industry
caused by the pandemic. Since IPO, the Company has
delivered an Economic NAV total return of 35%.
There are two net asset values reported by the Company.
An IFRS NAV, which is the value, at any date, of the assets
of the Company after deduction of all liabilities determined
in accordance with IFRS. The IFRS NAV reflects the Portfolio
(excluding the Carlin Interest) classified as intangible assets
and measured at amortised cost less any impairment in
accordance with IFRS. The Company’s Carlin Interest is
measured at fair value based on the net asset value of Carlin,
as adjusted for the fair value of the underlying Carlin Catalogue.
An Economic NAV, which at any date, is the Gross Asset
Value less the amount which (to the extent not otherwise
deducted in the calculation of Gross Asset Value), in
accordance with the Company’s latest published valuation
methodology, fairly reflects the amount of the liabilities and
expenses of the Company. The Economic NAV reflects an
adjustment to the IFRS NAV for the Portfolio (excluding the
Carlin Interest) and to the fair value of the Carlin Interest,
based on fair values determined by the Independent Valuer,
Citrin Cooperman (incorporating Massarsky Consulting, Inc).
The Directors are of the opinion that an Economic NAV
provides a meaningful alternative performance measure
and the value of the Portfolio is based on fair values
produced by the Independent Valuer.
Reconciliation of IFRS NAV to Economic NAV
as at 31 December 2022
31 December 2022
US$
IFRS NAV as at 31 December 2022 378,703,914
Amortisation adjustment between Economic NAV and IFRS NAV 17,657,749
Non-cash revenue accruals recognised in terms of IFRS (8,930,892)
Recognition of Catalogue Fair Value in Economic NAV 132,193,000
Economic NAV as at 31 December 2022 519,623,771
32 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
Economic NAV Progression Bridge
The Economic NAV increased by 13% from US$459.7 million at 31 December 2021 to US$519.6 million at 31 December
2022. This improvement was largely due to an increase in the fair value of Catalogues, including Carlin, and an increase in
net income, which was slightly offset by expenses and dividends paid.
31 December 2022
US$
Economic NAV as at 31 December 2021 459,714,298
Increase in fair value of Catalogues 67,892,196
Net income 27,462,884
Finance cost (4,176,777)
Taxation charge (570,535)
Royalty income accruals –
Operating Expenses (11,989,578)
Dividends paid (18,708,717)
Economic NAV as at 31 December 2022 519,623,771
GROUP REVENUE
1
US$ millions 2022 2021
2
YoY % Increase
Group Revenue
1
32.37 24.52 32%
Publishing Revenue 17.00 15.16 12%
Publishing (NPS) 15.71 10.63 48%
Publishing (Accrual movement)
3
1.29 4.53 -72%
Masters Revenue 10.92 6.41 70%
Masters (NLS) 8.86 5.36 65%
Masters (Accrual movement)
4
2.06 1.05 96%
Carlin Investment Income 4.45 2.95 51%
Initial Investments Revenue (NPS/NLS)
5
24.27 21.14 15%
1 Group Revenue is made up of Royalty income, Investment income and Royalty expenses as detailed on the Consolidated Statement of Comprehensive
Income.
2 2021 represents income from the First Investment from February 2021 and the Carlin Investment from April 2021.
3 Includes CRB uplift.
4 Increase in Masters accrual is attributable to Catalogue acquisitions, such as Alice In Chains and David Coverdale.
5 Initial Investments includes full year of the First Investment (Round Hill Fund One) and the Carlin Investment.
FINANCIAL REVIEW
CONTINUED
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 33
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
Revenue is comprised of publishing revenue or Net
Publisher’s Share (“NPS”), recording revenue or Net Label
Share (“NLS”), IFRS accrued income, and the net income
received from the Company’s 29.14% investment in Carlin.
Group Revenue for the 12 months ended 31 December
2022 was US$32.4 million compared to US$24.5 million at
31 December 2021, reflecting a 32% increase.
The 32% increase in Group Revenue is due to several
factors including:
growth from acquisitions made throughout 2021 and 2022;
significant organic growth in 2022 for the Portfolio;
strong synchronisation growth; and
income was not received by the Company during
the full period from incorporation to 31 December
2021 (the “Initial Period”) due to the timing of the
Company’s acquisition of the assets of Round Hill
Fund One, excluding its investment in Carlin (the “First
Investment”), which closed in February 2021, and the
Company’s acquisition of the Carlin Interest, which
closed in April 2021 (the “Carlin Investment”). As
such, the Company did not earn revenue for the First
Investment and the Carlin Investment (together the
“Initial Investments”), over the full Initial Period.
On a like for like basis, the NPS/NLS for the Initial Investments
grew 15% year-on-year. This is comprised of 16% year-on-
year NPS/NLS growth from Catalogues within the First
Investment and 10% year-on-year NPS/NLS growth from
the Carlin Investment. While much of the growth continues
to be driven by streaming, of which part of the mechanical
streaming is through improved licensing fees from Meta and
TikTok, the Initial Investments also saw similar year-over-year
NPS/NLS growth in synchronisation and masters, at 33% and
13%, respectively. Examples of the incredible synchronisation
placements are included in the synchronisation highlights on
page 7 of this Annual Report. The growth in masters income
reflects a significant outperformance of the industry, where
global revenues from recorded music grew by 9% .
ACCRUALS AND RECEIVABLES
As noted above, due to the systematic peculiarities of the
music industry collections and payment ecosystem, there
is an inherent royalty time lag between the time a song is
performed and the revenue being received by the Copyright
owner. This time lag ranges from one to six months for
United States income and, on average, three to 12 months
for non-US income, although it can be up to 24 months.
The revenue accruals booked in 2022 are disclosed in
detail within the accounts receivable and accrued income
in Note 6 of the Consolidated Financial Statements.
Since a material portion of the Group Revenue earned in
2022 continues to be collected into 2023, a 2022 analysis
comparing cash received to revenue accrued will be
undertaken in due course.
DIVIDEND
The Company targets an annualised dividend yield per
Ordinary Share of 4.5% (based on the IPO price of US$1.00
per Ordinary Share) and a total net return of between 9% to
11% per annum over the medium to long term.
During 2022, the Company declared and paid four
dividends, totalling US$0.04875 per Ordinary Share, paid in
quarterly instalments:
March 2022: US$0.015 per Ordinary Share, in relation
to the fourth quarter of 2021, comprising US$0.01125
per Ordinary Share, and an amount of US$0.00375 per
Ordinary Share, being the balance payable for the initial
dividend for the quarter period to 31 March 2021
June 2022: US$0.01125 per Ordinary Share, in relation to
the first quarter of 2022
September 2022: US$0.01125 per Ordinary Share, in
relation to the second quarter of 2022
December 2022: US$0.01125 in December 2022, in
relation to the third quarter of 2022.
Post year-end, on 9 March 2023, the Company declared
a dividend of US$0.01125 for the quarter to 31 December
2022, which was paid on 24 March 2023.
1 The Company may, from time to time, be geared through the use of borrowings. Borrowings would principally be used for investment purposes. Gearing
represented by borrowing will not exceed 25% of Economic NAV, calculated at the point of drawdown, in accordance with the Prospectus.
34 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
As at 31 December 2022, the dividend was 0.98x covered.
The lower dividend cover during the 2022 financial year was
due to the strategic allocation of capital to the acquisitions
of the David Coverdale and Alice In Chains Catalogues.
Following the completion of the acquisitions, the C Shares
were converted into new Ordinary Shares and received a
full dividend in relation to the quarter ended 31 March 2022.
While revenues are expected to continue to demonstrate
strong growth, the full impact of recent successive interest
rate rises is set to result in downward pressure on dividend
cover in 2023. However, it is anticipated that the dividend
will revert to being fully covered by the end of 2024.
OPERATING COSTS
Excluding the amortisation of Catalogues, operating costs
were US$12.0 million for the year (31 December 2021:
US$10.6 million).
Costs mainly comprised investment management,
portfolio administration, legal and professional, audit and
administration fees, in addition to deal expenses incurred
to enhance income streams of existing Catalogues. The
increase is largely due to higher Portfolio administration
fees of US$0.9 million year on year, which is due to an
increase in Net Publisher Share, US$0.5 million of audit
fees for the 2021 audit booked in 2022 and the one-off cost
of US$0.5 million for the move to the Premium Segment
listing on the Main Market of the London Stock Exchange.
DEBT
At 31 December 2022, debt to Economic NAV was modest
at 17.7%, well within the borrowing cap of 25%.
1
The Company had a revolving credit facility (the “Truist
RCF”), which was provided by Truist Securities, Inc.
(“Truist”), with a capacity of US$110 million. The interest
rate on the outstanding balance was levied at a fixed
margin rate of 2.25% per annum based on the applicable
one-month LIBOR rate. In addition, the Truist RCF levied a
commitment fee on the daily unused commitment balance
of the facility at a rate of 0.375% per annum. The Truist RCF
had a term of five years due on the 30 April 2026.
As at 31 December 2022, the Company had approximately
US$10.9 million of cash on hand and approximately US$17.8
million of undrawn credit under the Truist RCF.
Post year-end, on 17 February 2023, the Company entered
into a new revolving credit facility on enhanced and more
flexible terms with City National Bank (the “CNB RCF”),
replacing the Truist RCF which was repaid in full.
The interest rate on the outstanding balance is levied
at a fixed margin rate of 2.25% per annum based on the
applicable one-month Secured Overnight Financing Rate
(“SOFR”) during the period. In addition, the CNB RCF
levies a commitment fee on the daily unused commitment
balance of the facility at a rate of 0.375% per annum for
utilisation of less than 50%, and a rate of 0.25% per annum
for a utilisation of greater than 50%. The CNB RCF has a
term of 3 years and is due on 17 February 2026.
C SHARE CONVERSION
On 11 February 2022, the Board of the Company
announced that the net proceeds of the C Share issue
undertaken in July 2021 were fully invested and, pursuant
to the Company’s Articles, the Board resolved to trigger
the process for the conversion of the C Shares in issue into
Ordinary Shares.
As planned, the C Shares converted into Ordinary Shares
on 11 May 2022. The calculation date for the conversion,
to determine the conversion ratio, was 29 April 2022.
Accordingly, the C Shares converted into new Ordinary
Shares with a conversion ratio of 0.8962 new Ordinary
Share for every one C Share held. Following the conversion,
trading of the C Shares was terminated, and trading of
the newly issued Ordinary Shares commenced. A total of
77,521,300 new Ordinary Shares (including 24 Ordinary
Shares from aggregating fractional entitlements) were
issued in connection with the conversion of the C Shares,
and the Company now has a total of 407,621,300 Ordinary
Shares in issue as at 31 December 2022.
The new Ordinary Shares arising on conversion of the C
Shares rank pari passu with the existing Ordinary Shares for
any dividends or distributions declared after the conversion
date. The holders of the newly converted Ordinary Shares
received their first quarterly dividend in June 2022.
FINANCIAL REVIEW
CONTINUED
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 35
MIGRATION OF LISTING
On 18 July 2022, the Company announced that it had
received confirmation from the FCA that it was eligible
for a premium listing on the Official List. Accordingly,
the Company applied to the FCA and the London Stock
Exchange for a premium listing on the Official List and a
transfer to trading from the Specialist Fund Segment to the
Premium Segment of the Main Market of the London Stock
Exchange in respect of its issued Ordinary Shares.
The Premium Segment of the Main Market is an established
market which is accessible to a wide range of investors.
Accordingly, the Migration is anticipated to result in
a broader investor base over the longer term, which
the Directors believe may enhance the liquidity of the
Company’s Shares in the secondary market. As a company
whose Shares are admitted to the premium listing segment
of the Official List, the Company is now required formally
to comply with the Listing Rules, in particular, Chapter 15 of
the Listing Rules for closed-ended investment funds. Prior
to the Migration, the Company had voluntarily complied
with a number of the Listing Rules.
In addition, the Board has taken steps to facilitate the
Company’s eligibility for inclusion in the FTSE Index which,
it is expected, should help raise the Company’s profile in
the market. In particular, the Company has introduced an
additional market quote for the Ordinary Shares on the
London Stock Exchange denominated in Sterling which
satisfies one of the criteria for inclusion in the Index (the
“Sterling Quote”). The Sterling Quote appears alongside the
Company’s existing US Dollar market quote and there has
been no change to the legal form or nature of the Company’s
issued Ordinary Shares nor to the reporting currency of
the Company’s financial statements (which remains in US
Dollars). The Ordinary Shares traded under either quote
have the same currency exposure, namely US Dollars, and
all dividends continue to be declared and paid in US Dollars.
Admission occurred at 8.00 a.m. on 19 July 2022.
The Company’s existing ticker (RHM), ISIN
(GG00BMXNVC81) and SEDOL (BMXNVC8) remained
unchanged. The Sterling Quote has its own ticker (RHMP)
and SEDOL (BM9YL36).
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
36 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
INVESTMENT OBJECTIVE
AND INVESTMENT POLICY
The Company’s Investment Objective is to provide
investors with an attractive level of regular and growing
income and capital returns from investment primarily in
high quality, music intellectual property.
In order to achieve its Investment Objective, the Company
and other members of the Group invest in Copyrights,
together with all such rights and assets considered by the
Investment Manager to be ancillary thereto.
Although the Company will typically seek to acquire
the entirety of a Copyright owner’s interest in a musical
composition or song, the Company may acquire a lesser or
minority interest in a Copyright or Catalogue and enter into
joint venture or other arrangements in respect of the same.
The Company invests in small to medium sized Catalogues
(typically 100-1,000 Copyrights) that are diversified by
artist, genre, decade and royalty type. The Company also
invests predominantly in classic, older Copyrights with
enduring appeal and which experience consistent usage.
Such compositions have generally reached a steady state
of earnings, are stabilised and not subject to the natural
decline in earnings and value that typically occurs within
the initial ten years of a composition’s life.
Typically, the revenue generated by the Copyrights will
comprise:
Performance royalties: generated from public
performance, broadcasting and digital streaming. This
includes: terrestrial and satellite radio and television
broadcasts, live concerts, music in bars, hotels, restaurants,
shops, sporting events, cinemas, YouTube and internet
performances and theatrical performances.
Mechanical royalties: fees the Copyright owner receives
upon the sale of any recording for the use of the underlying
musical composition. Every time a digital download or a
physical CD is sold a mechanical royalty is paid to the owner
of the Copyright.
Synchronisation royalties: collected when the Copyright
is used in films, television programming, advertising,
ringtones and video games.
Digital interactive royalties: digital royalties from
interactive streaming services, such as Spotify and
Apple Music, are considered a hybrid of mechanical and
performance royalties. In the UK and USA, 50% of the
royalty is paid by the streaming service as a performance
royalty to the relevant Performing Rights Organisations
around the world. The remaining 50% is treated as a
mechanical royalty payable to the owner of the Copyright.
Other royalties: for example royalties generated from
print or sheet music, greeting cards, toys and clothing, and
theatre music.
Royalties and fees payable in respect of master recordings:
master recordings are the Copyright in the master recording
of a musical composition or song. They earn synchronisation
royalties and generate income from sales of both physical
and digital records as well as from the streaming services.
Additionally, master recordings earn significant royalties from
digital radio, YouTube and similar streaming platforms.
Neighbouring rights royalties: royalties paid to performers
(both featured and non-featured artists) and rights owners
for the use of their phonographic recordings worldwide.
The Company will seek to acquire both the publishing and
administration rights (being the right to collect royalties
and revenues and commercially exploit the Copyrights)
in Copyrights thereby allowing it not only to collect all or
some portion of the royalty revenues but also to create
value and unlock upside through diligent and creative
Catalogue management.
The majority of the returns derived from the Company’s
investments will be derived from the royalty streams.
However, the Company will seek to enhance returns
through improved royalty collection, pro-active licensing
activity and increased usage and song exposure.
The Company may acquire Copyrights for consideration
comprising cash and/or Shares in the Company. It may also
acquire vehicles (or interests in such vehicles) that own
Catalogues as opposed to the Catalogues themselves. It may
also, subject to the approval of the Board and the Company’s
Shareholders, acquire Copyrights and Catalogues from
the Investment Manager, parties related to the Investment
Manager and funds managed by the Investment Manager.
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 37
The Company has three subsidiaries, the UK Subsidiaries,
each of which is incorporated in the United Kingdom and
holds certain Group assets.
INVESTMENT RESTRICTIONS
The following investment restrictions are observed, and
calculated, where relevant, at the point of investment:
when fully invested, the Portfolio will comprise not less
than 15 Catalogues;
when fully invested, the Portfolio will comprise not less
than 5,000 musical compositions;
the value of Copyrights from a single songwriter will not
represent more than 25% of Economic NAV;
the value of a Copyright in a single song will not
represent more than 20% of Economic NAV;
when fully invested, no more than 20% of the Economic
NAV will be represented by Copyrights that are less than
5 years old; and
the Company will not invest in closed-ended investment
companies or other investment funds.
DIVIDEND POLICY
The Directors will seek to maintain and grow the dividend
over the long term.
The Company intends to pay dividends on a quarterly basis
with dividends typically declared in respect of the quarterly
periods ending March, June, September and December and
paid in June, September, December and March respectively.
Distributions made by the Company may take either the
form of dividend income, or of “qualifying interest income”
which may be designated as interest distributions for
UK tax purposes. UK tax treatment of the Company’s
distributions may vary for a Shareholder depending on the
classification of such distributions.
The Company targets an annualised dividend yield for
Ordinary Shares of 4.5% by reference to the Issue Price of
US$1.00 per Ordinary Share. The Company is targeting a
net total Shareholder return of 9% to 11% per annum over
the medium to long term.
References in this paragraph to “dividends” and
“distributions” are intended to cover both dividend income
and income which is designated as an interest distribution
for UK tax purposes and, therefore, subject to the interest
streaming regime applicable to investment trusts.
Dividends are subject to compliance with the solvency
test prescribed by the Companies Law and, in accordance
with regulation 19 of the UK Investment Trust (Approved
Company) (Tax) Regulations 2011, the Company will not
(except to the extent permitted by those regulations) retain
more than 15% of its income (as calculated for UK tax
purposes) in respect of an accounting period.
The Company continues to anticipate paying to holders
of Ordinary Shares an annualised dividend of 4.5% by
reference to the Company’s IPO Issue Price of US$1.00, for
the financial period to 31 December 2023.
38 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
INTRODUCTION
The Board recognises that its
Shareholders have a growing
interest in the ESG considerations
resulting from the Company’s
business, and appreciates the
importance of ESG to creating
sustainable investments that make
a positive overall contribution to
business and society as a whole.
As neither the Company nor its UK Subsidiaries have
employees or own physical assets and each of the Company’s
Board and the boards of each UK Subsidiary is formed
exclusively of non-executive directors, the Board has taken the
decision to delegate all ESG responsibilities to the Investment
Manager.
Following engagement with certain Shareholders on devising
an ESG strategy for the Company, NorthPeak Advisory,
an external consultant with specialist ESG expertise, was
engaged by Round Hill in 2021 to support the development of
a suitable ESG plan and programme for the Round Hill group.
The Investment Manager has been working closely with
NorthPeak Advisory, which has completed a deep dive
assessment of Round Hill and the investment approach. At
the investment level, this has focused on assessing current
ESG and responsible investment practices within the existing
investment process, formalising the approach being taken
and documenting this in an updated Responsible Investment
Policy. At the Investment Manager level, efforts have focused
on structuring a firm-wide approach towards addressing
material environmental and social issues.
Some highlights of work undertaken so far by the
Investment Manager, reflecting on the overall status of the
firm, are as follows:
ENVIRONMENTAL
Round Hill believes that all businesses have a duty to be
responsible environmental citizens and it will monitor its
environmental footprint (and that of its service providers)
to ensure that environmental practices are aligned with
aspirations.
To gain an understanding of Round Hill’s environmental
footprint, it is in the process of quantifying its carbon
emissions (particularly in relation to travel arrangements),
energy efficiency and waste management. Once Round
Hill has quantified its carbon emissions and wider
environmental impact, it will look to develop an approach
for reducing and potentially offsetting such impacts.
Round Hill moved into a new Nashville building in January
2022 and the office achieved a LEED Silver (Leadership
in Energy and Environmental Design) certification, that
touches on the building’s carbon, energy, water, waste,
transportation, materials, health and indoor environmental
quality. Round Hill continues to replace ageing electrical
equipment to ensure efficient power consumption going
forward. In addition, bottled water is no longer provided,
with staff and visitors encouraged to use the mains water
fountain instead.
Although Round Hill is not in the business of manufacturing
product at scale, it has utilised the Earth’s raw materials in
the production of printed royalty statements for its writers
and artists which has amounted to almost one hundred
thousand pages per annum. With reasonable notice to its
client base, Round Hill switched off the generation of paper
royalty statements in July 2022 and has moved to deliver
such information, along with additional analytics, through
an online Portal to which every writer and artist has been
set up with a unique account.
Round Hill also has an internal Environmental Committee,
known as “Ground Hill”. This group’s mission statement is:
‘To inspire and implement positive environmental
changes both within our organisation and in the
communities we are proud to be a part of.’
In the past year Ground Hill organised a highway clean-
up to improve its local Nashville community, while also
sending out a firm-wide newsletter on how employees can
reduce their own environmental footprint.
Going forward the group, in collaboration with NorthPeak
Advisory, is looking to develop a key performance indicator
driven strategy, while creating a unified approach through
mobilising more people in the firm to participate in both
internal and external environmental initiatives.
ENVIRONMENTAL, SOCIAL
AND GOVERNANCE POLICY
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 39
SOCIAL
As a human capital-intensive business, Round Hill believes
that the manner in which it (and its service providers)
interacts with people, its shareholders, artists, writers,
other wider stakeholders and the community at large are
a good proxy for philosophy of the business. It believes
that an approach to the fair treatment of all stakeholders
can help it to attract and retain high quality employees and
creators that want to partner with Round Hill.
Round Hill will monitor its activities (and those of its service
providers) in terms of their social agenda. This will include
monitoring relationships with people, artists, writers and
the community at large and the extent to which Round Hill
(and its service providers) actively embrace and champion
social initiatives and good causes.
Round Hill has a committed Diversity, Equity and Inclusion
(“DEI”) Committee, comprised of senior staff members and
non-management employees, with representation from every
business unit. The DEI Committee looks to help support the
employees of the firm and recently conducted a firm-wide
employee engagement survey. The DEI Committee was
pleased to receive responses from more than two-thirds of
employees globally and will be reviewing the data and creating
actions going forward in partnership with NorthPeak Advisory.
This roadmap will look to tackle gaps identified to ensure that
efforts are aligned with the needs of Round Hill’s employees.
The DEI Committee has also planned events with the aim of
bringing people together to socialise and discuss important
topics. One of the most popular events has been the
“Women in Music” panel, with female and Black, Indigenous
and People of Colour (“BIPOC”) artists, producers, and
other professionals discussing their experiences in finding
success in the face of underrepresentation and adversity.
The ‘Women in Music’ panel was a one-hour internal panel
open to Round Hill staff, attended by 45 people. The purpose
was threefold: to highlight underserved communities; foster
a spirit of support and collaboration internally as a function of
DEI; and to present an educational opportunity as Round Hill
serves a diverse client base.
Round Hill is committed to mentoring and training individuals
who wish to pursue a career in the music industry. It is focused
on widening the outreach of its existing work experience and
internship programmes to give as wide a section of society as
possible, access into the music industry.
Externally, Round Hill is already involved with the
followinginitiatives:
Ensuring its printed music licensees source their
paper from sustainable, responsible sources, while
committing to ensure the employees at any outsourced
manufacturing plants are paid at minimum a living
wage.
Round Hill has invested in its Client Portal technology
over the past year leading it to switch off the production
of paper royalty statements to writers and artists from
July 2022, saving the production of almost 100,000
pages of paper per annum.
The Josh Gruss/Round Hill Music Endowed Scholarship
Fund at Berklee College of Music, Boston, USA aids
multiple students on an annual basis with financial
assistance in pursuing music business or management
degrees.
GOVERNANCE
Round Hill is committed to good governance disciplines
including in respect of diversity, inclusiveness, transparent
shareholder communication and engagement,
management of conflicts of interest and effective board
management and controls.
Round Hill takes governance responsibilities very seriously,
leveraging external independent services from Blue River
Partners LLC, to support its work in the area of compliance.
‘The four female leaders in their
respective fields (music producer
and engineer, artist, writer and
entertainment lawyer), addressed the
obstacles and stereotypes they faced;
not only as women, but as mothers and
representatives of the LGBTQ, BIPOC
and LATINX communities. Feedback
received from staff was positive and
many were grateful for the speakers’
honesty and openness.’
Madison Norris, EVP Creative Operations and DEI
Committee Member
ENVIRONMENTAL, SOCIAL AND GOVERNANCE POLICY
CONTINUED
40 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
Round Hill has responsibility for implementing the Company’s
investment strategy, the discretionary management of the
Group’s investments and reporting to the Board.
The Board has oversight of the business model and strategy
of the Company. It meets at least four times a year and is
responsible for the ongoing process of identifying, carrying
out a robust assessment of, and managing and mitigating
the principal and emerging risks and uncertainties faced
by the Group. The Board has three committees: the Audit
Committee, the Management Engagement Committee
and the Remuneration Committee, each of which considers
certain matters within their terms of reference before
reporting to the Board, as required.
RESPONSIBLE INVESTMENT
Round Hill formalised its approach towards responsible
investment through creating a Responsible Investment
Policy, available upon request, covering 100% of assets
under management.
Given the asset class invested in, that is, intangible
intellectual property music Copyright assets, Round Hill
is not looking to become a formal signatory to the United
Nations-Supported Principles for Responsible Investment
(the “PRI”) at this time. However, Round Hill supports the
PRI, and looks to live up to the principles, where applicable.
Round Hill is not exposed to traditional ESG risks nor
opportunities, but looks to manage exposure to ESG-themes
such as inequality, social justice, human rights and other
ethical aspects that may be relevant in terms of what the
music content represents and is associated with, as well as
how it treats its creative partners, including artists, writers,
independent publishers, and other third-party holders
such as record companies, managers, lawyers, artists and
repertoire (“A&R”) professionals and estate trustees.
Key elements of Round Hill’s responsible investment
approach include:
Exclusions: Round Hill avoids investing in music content
that may be considered controversial. This extends to the
related creators or artists with whom the music asset is
associated.
ESG Integration: Round Hill conducts an assessment of
key risks, which includes the profile of songwriters and
artists to ensure that they have not been and are not
involved with any controversial activities.
Active Ownership: Round Hill actively manages the
music assets to build a stronger and steady level of
royalty earnings, while maintaining a cooperative and
respectful relationship with writers and artists.
Round Hill has a fiduciary duty to act in the best interests
of its investors and manage its assets with the objective
of achieving optimal returns. It seeks to be a responsible
manager and owner of its assets and places particular
emphasis on building strong relations within the music
industry ecosystem. Round Hill believes that the elements of
its responsible investment approach support the Company
to best understand any potential risks its assets may be
exposed to.
2023 AMBITIONS
Round Hill is pleased with the progress made on ESG matters
in 2022. However, it recognises that a strong ESG approach
needs constant evolution. Therefore, Round Hill has set itself
the following targets for 2023 and is keen to implement and
report on them:
ESG Training – to ensure both management and
employees stay up to date on ESG; firm-wide briefings
will be provided.
DEI Committee – the Committee will look to set up
a roadmap with key targets for 2023. Objectives set
will be clear, actionable and informed through analysis
undertaken on the engagement survey.
Ground Hill – this Committee will look to quantify
Round Hill’s carbon emissions by the end of 2023 and, if
possible, set up a roadmap to lower consumption.
Josh Gruss
Founder and CEO of Round Hill Music L.P.
24 April 2023
Section 172 of the UK Companies Act 2006 applies directly
to UK domiciled companies. Nonetheless the AIC Code
of Corporate Governance (the “AIC Code”) requires that
the matters set out in section 172(1) are reported on by all
companies, irrespective of domicile. This requirement does
not conflict with Guernsey law.
Section 172(1) says that the board of a company has a duty
to promote the success of their company for the benefit of
the members as a whole and, in doing so, have regard to
(amongst other things):
(a) the likely consequences of any decision in the long term;
(b) the interests of the company’s employees;
(c) the need to foster the company’s business relationships
with suppliers, customers and others;
(d) the impact of the company’s operations on the
community and the environment;
(e) the desirability of the company maintaining a reputation
for high standards of business conduct; and
(f) the need to act fairly between members of the company.
The Company has no employees and all of the Directors
are non-executive, so the Board considers that its key
stakeholders are its Shareholders and its service providers.
An intention of the AIC Code, to which the Company fully
subscribes, is that the Board should understand the views
of the Company’s key stakeholders and describe in the
Annual Report how their interests and the matters set out
in section 172 of the UK’s Companies Act 2006 have been
considered in Board discussions and decision-making.
The Board’s engagement with its Shareholders is described
in the section “Dialogue with Shareholders” on pages 53 to
54. All Shareholders are treated equally and no Shareholder
receives preferential treatment. When making decisions
of relevance to Shareholders, the Board considers first and
foremost the likely consequences of their decisions in light
of their duty to act in the best interests of the Company
in the longer term. The Board also considers what is likely
to be in the best interests of Shareholders as a whole,
but does not consider individual Shareholder’s specific
circumstances or desires when making its decisions.
The Company engages third party service providers as the
Company’s Directors are all non-executive directors and the
Company does not have any employees. In addition to the
regular reporting provided by these key service providers,
the Board, via the Management Engagement Committee,
ensures that a review of the performance of these key
service providers is performed on an annual basis. The
services provided by these key service providers are critical
to the ongoing operational performance of the Group. The
Board believes that fostering constructive and collaborative
relationships with the Company’s service providers will
assist in the Board’s promotion of the success of the
Company and other members of the Group for the benefit
of all Shareholders.
The Board considers the interests of all stakeholders and
oversees the activities of the Investment Manager and
other service providers, as further explained below (in the
sub-section “Review of Service Providers”).
As described in detail in the Company’s viability statement
on pages 47 to 48, the Board considers the prospects of
the Company and other members of the Group whenever it
considers the Group’s sustainability. All strategic decisions
are therefore taken with the long-term success of the
Company and other members of the Group in mind and the
Board would take external advice whenever it considered
that such would be beneficial to its decision-making process,
primarily from its retained service providers (including legal
counsel), but also from other external consultants.
The Board recognises that shareholders have a growing
interest in ESG considerations resulting from a company’s
business. Please see more information regarding ESG in the
report on pages 38 to 40.
The Board subscribes to the highest standards of business
conduct and has policies in place to ensure compliance with all
applicable laws and regulations. In addition to the monitoring
of the Company’s compliance with its own obligations, the
Board also monitors compliance by its key service providers
with their own obligations. Each service provider to the Group
is required to have in place suitable policies to ensure that they
maintain high standards of business conduct, treat customers
fairly and are committed to ensuring that high standards of
corporate governance are maintained.
The Board encourages openness and transparency with its
service providers.
STAKEHOLDERS AND
SECTION 172
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 41
MANAGEMENT OF THE GROUP
The Directors are responsible for managing the business
affairs of the Company in accordance with the Company’s
Articles and have overall responsibility for the Group’s
activities, including investment activity. The Company
has delegated management of the Group’s investments
and Portfolio administration to the Investment Manager,
a Delaware limited partnership, with employees located
in Nashville, New York, Los Angeles and London. Each
member of the Group has delegated secretarial and
administrative functions to JTC Fund Solutions (Guernsey)
Limited, which is a company incorporated in Guernsey and
licensed by the GFSC for the provision of administration
services. JTC Registrars Limited is the Company’s Registrar,
Transfer Agent and Payment Agent.
INVESTMENT MANAGER AND PORTFOLIO
ADMINISTRATOR
The Investment Manager has been appointed by the
Company to provide investment management services
to the Group. Pursuant to the Amended and Restated
Investment Management Agreement dated 2 November
2020, the Investment Manager has responsibility to perform
investment management and risk management functions
for the Company and its UK Subsidiaries in accordance
with the Investment Policy, subject to the overall policies,
supervision, review and control of the Board. Subject to
the applicable investment guidelines, the Investment
Manager has discretion to buy, sell, retain or otherwise
deal in the Group’s assets. Subject to certain restrictions,
the Investment Manager is also required to comply with
the regulatory requirements that may apply to it from time
to time as the alternative investment fund manager of the
Company for the purposes of the AIFM Directive.
Pursuant to the Portfolio Administration Agreement
dated 19 October 2020, as supplemented, the Investment
Manager has agreed to administer (on behalf of the
Company and any UK Subsidiaries) the Copyrights owned
by the Company (and any UK Subsidiaries) and, in respect
thereof, the Investment Manager is responsible, subject to
the overall supervision of the Board, for the administration
and commercial exploitation of the Copyrights with full
power and authority on behalf of the Company to i) license
the exploitation of the Copyrights (including in respect
of broadcast and other public performances, mechanical
reproduction, the synchronisation of Copyrights and
the use of Copyrights in connection with merchandising
activities); ii) print, publish and sell alone or together,
printed editions or other reproductions of Copyrights;
iii) collect all royalties, revenues, profits and monies with
respect to the Copyrights; iv) prosecute and defend
litigation in respect of the Copyrights; and v) make
arrangements for, or otherwise adapt or change, any of the
Copyrights.
Also pursuant to the Portfolio Administration Agreement,
the Investment Manager is responsible for ensuring that
the Group’s Copyrights (and all royalties, revenues, profits
and monies generated by them) are readily identifiable and
are segregated from assets of the Investment Manager or
the assets of third parties on whose behalf the Investment
Manager is acting.
During the year the Management Engagement Committee
(“the Committee”) reviewed the performance of the
Investment Manager and whether it had fulfilled the terms
of the Investment Management Agreement and complied
with the Company’s investment policy. The Committee
agreed that the Investment Manager has the required
skills and depth of experience to manage the Company’s
investments. The Committee also concluded that the
performance of the Investment Manager was satisfactory,
and that the continuing appointment of the Investment
Manager was in the best interests of shareholders. The
Committee agreed that the existing fee arrangements and
other contractual terms remained appropriate and further
aligned the Investment Manager’s interest with those of the
Company’s shareholders.
Full details of the fees payable by the Company under the
Investment Management Agreement are set out in note 12
of the Notes to the Consolidated Financial Statements.
CORPORATE BROKER AND FINANCIAL
ADVISER
Cenkos Securities plc acts at the Company’s sole corporate
broker and financial adviser.
SECRETARY AND ADMINISTRATOR
JTC Fund Solutions (Guernsey) Limited is an independent
provider of institutional and private client services to clients
in numerous jurisdictions and is a member of the JTC
Group. See the JTC Group’s website at www.jtcgroup.com.
STAKEHOLDERS AND SECTION 172
CONTINUED
42 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
JTC Fund Solutions (Guernsey) Limited is a Guernsey
incorporated company, which is licensed by the GFSC. JTC
Fund Solutions (Guernsey) Limited provides administration
and secretarial services to the Group pursuant to an
Administration Agreement dated 19 October 2020 with the
Company and separate administration agreements with
each of the UK Subsidiaries, effective from the respective
incorporation dates.
In such capacity, as the secretary (the “Secretary”), it is
responsible for the general secretarial functions required by
the applicable law and assists the Group in its compliance
with its continuing legal and regulatory obligations, as well
as providing advice on good corporate governance and best
practice for a publicly traded company.
The Administrator is also responsible for the Group’s
general administrative functions such as the calculation
of the Economic NAV and the IFRS NAV and for the
preparation of unaudited half-yearly and audited annual
financial reports, subject to the direction and oversight of
the Board.
REGISTRAR
JTC Registrars Limited has been appointed as registrar,
transfer agent and paying agent by the Company pursuant
to a Registrar Agreement dated 19 October 2020. The
Registrar performs all the usual duties of a registrar, transfer
agent and paying agent in relation to the Shares and the
maintenance of the Company’s Share register.
REVIEW OF SERVICE PROVIDERS
With the assistance of the Management Engagement
Committee, the Board keeps under review the performance
of each of the Investment Manager, the Financial Adviser
and Corporate Broker, the Secretary and Administrator and
the Registrar and the powers delegated to each service
provider. In the opinion of the Board, the continuing
appointment of each of the current service providers on
the terms agreed is in the interest of the Company and its
Shareholders as a whole.
A full list of the Group’s service providers is set out on page
107.
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 43
Independent Non-
Executive Director
(Chairman)
Rob has 25 years’ experience in
capital markets. Rob is CEO of
Intuitive Investment Group Plc
(AIM: IIG) and a Non-Executive
Director of Light Science
Technologies Holdings plc (AIM:
LST). Previously Rob was head of
corporate finance and corporate
broking in the investment funds
team at Cenkos Securities plc,
co-head of the investment funds
team at Panmure Gordon (UK)
Limited and head of product
development, in the investment
trust team at JPMorgan Asset
Management Limited. Rob
started his career with Ernst
& Young LLP in 1996 where
he qualified as a chartered
accountant in the investment
management group. Rob is
resident in the United Kingdom.
Independent Non-
Executive Director
Caroline has over 30 years’
experience as a corporate lawyer
and is a Guernsey Advocate.
She retired from private practice
in 2020. After studying law
at St Anne’s College, Oxford,
Caroline trained and qualified as
an English solicitor with Allen &
Overy, where she worked in their
corporate team for nearly nine
years including three years in
their Hong Kong office. Caroline
returned to Guernsey in 1998,
and practised locally, including
as a partner with Ogier and
then Mourant Ozannes. She is
a director of BH Macro Limited,
another Guernsey closed-ended
fund that trades on the London
Stock Exchange under the
tickers LON: BHMG and LON:
BHMU, and Chair of the Board
of Governors of The Ladies’
College. Caroline recently retired
as a member of the Guernsey
Competition and Regulatory
Authority. Caroline is resident
inGuernsey.
Independent Non-
Executive Director
Francis is an experienced media
and music industry professional
and is currently Executive
Vice President of Business
Development at Orfium, a
leader in rights management
solutions. Francis previously
served as Senior Vice President
International for Discovery, and
as Global Head of Licensing
at Spotify, responsible for all
music licensing with record
labels, publishers and collecting
societies. Francis was previously
Global Head of Digital Business
for Universal Music Group for
nearly 10 years, spearheading
recorded music licensing for all
digital music services. He has a
master’s degree in mechanical
engineering from Imperial
College London and is resident in
the United Kingdom.
Independent Non-
Executive Director
Audrey is an experienced director
and is currently a non-executive
director and chair of the Audit
and Risk Committee of Octopus
Renewables Infrastructure Trust
plc, which trades on the London
Stock Exchange under the ticker
LON: ORIT. Previously Audrey has
held the following non-executive
roles – British Friendly Society
where she chaired the risk and
investment committee, Earl
Shilton Building Society where
she chaired the audit, risk and
compliance committee and
Jupiter Emerging and Frontier
Income Trust plc where she was
chair of the audit committee.
In her executive career, across
the buy and sell side in the
City of London, she has gained
extensive knowledge of regulatory
governance and investment
management processes and
products, including having worked
at Aberdeen Asset Management
plc, starting as Head of Internal
Audit (EMEA) and becoming
Global Head of Business Risk
(including operational, IT and
strategic risk) and responsible
for the group’s risk management
framework and internal capital
adequacy assessment. Audrey is
resident in the United Kingdom.
ROBERT NAYLOR
CAROLINE CHAN
FRANCIS KEELING
AUDREY MCNAIR
BOARD OF DIRECTORS
As at 31 December 2022 the Company had four directors,
all of whom were independent and non-executive.
The Board has established an Audit Committee, chaired by Audrey McNair, a
Management Engagement Committee, chaired by Francis Keeling and a Remuneration
Committee, chaired by Caroline Chan.
44 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
CORPORATE INFORMATION
A description of important events which have occurred
during the financial year from 1 January to 31 December
2022 and their impact on the performance of the Company
and its subsidiaries, as shown in this Annual Report which
includes the Chairman’s Statement, the Strategic Report,
the Corporate Governance Statement and the Consolidated
Financial Statements contained on pages 71 to 105, are
incorporated here by reference.
PRINCIPAL AND EMERGING RISKS AND
UNCERTAINTIES
The Board regularly reviews the principal and emerging
risks and uncertainties affecting the Group together with
the mitigating actions at each Board meeting and in greater
depth at the Audit Committee meetings. Throughout 2022
and continuing into 2023 the Board has been working on
developing its risk management framework, assessing
those risks it considers to be the Group’s principal risks and
uncertainties, ensuring these are well understood and are
being managed by the Investment Manager’s and key third
parties’ control framework. The Board has also considered
those risks which are emerging and which may affect the
Group. In this regard whilst the impact of covid on the
music industry and the Group has reduced since 2021,
the geopolitical risk of a ban on the use of social media on
certain platforms and the possible impact to revenue for
music royalty owners has emerged into the risk landscape.
The Board continues to develop its risk appetite in line with
its Investment Policy and strategy.
The risks considered by the Board as the principal risks
facing the Company and the mitigations applied are
summarised below.
PRINCIPAL RISKS AND
UNCERTAINTIES
Potential Impact Mitigation
Company Risks – risk that target returns and the Company objectives are not met over the longer term
Share discount
Where the Shares are trading at a discount to Economic NAV over a prolonged
period, this may erode market confidence and leave Shareholders unable
to achieve the price sought for their underlying investment. This may make
investment in the Company unattractive.
The Board has in place a policy on discounts and where funds are available,
they may consider a share buyback programme. This would be subject to
all applicable legal and regulatory requirements and any economic or other
factors relevant at the time.
Dividend and target returns
The Company may fail to achieve the target returns set out in its Investment
Objective and may be unable to pay its stated annual target dividend which may
harm the financial reputation of the Company.
The Board has delegated discretionary investment management
responsibilities to the Investment Manager. They in turn have significant
experience in music royalties and have acquired a diversified Portfolio of
Catalogues which are generating a strong revenue stream and delivering
real growth to achieve the target returns. The projected revenues are stress
tested and dividend cover and ratios are monitored by the Investment
Manager and reported to the Board.
Communication with Shareholders
The Company may be ineffective in its communication with Shareholders
including failure to meet investor reporting requirements or ineffective marketing
campaigns.
The Board has appointed several experienced key third parties including an
Administrator, a Corporate Broker and Financial Adviser and a public relations
adviser to deal with all aspects of reporting in a timely and effective way with
Shareholders. The Chairman and the Board have met frequently with various
Shareholders to provide details on the Company’s strategy and will continue
to develop the marketing offering of the Company.
Economic and market risks – value of the Company’s assets and cashflow generated may be affected by changes in the economic
and market environment
Interest Rates
The rise in interest rates may impact the Company’s cost base and consequently
revenues may reduce. Rising interest rates may also have an impact on the
assumptions used by the third-party valuer of the Group’s Catalogues, including
the discount rate that may be applied for future valuations. As interest rates rise
the Company may become less attractive as an investment, making it more
difficult to raise new capital. Each of these factors may impact the Company’s
ability to achieve its target returns.
The Board works with the Investment Manager and third parties to ascertain
the potential impact of rising interest rates. Where applicable, mitigating
actions will be taken to reduce the impact including a review of expenses,
refinancing of the CNB RCF and communication with Shareholders to keep
them appraised of developments.
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 45
Potential Impact Mitigation
Inflation
Rising inflation and its impact on day-to-day costs for individuals and businesses
may create challenging conditions for music providers and users of different music
formats (e.g., prices for live performances and rates for subscribers to digital
platforms), which may impact the Company’s ability to achieve its target returns
The Board works with its service providers to monitor and review the impact
of rising inflation on the Company’s business and outlook, particularly in
relation to activities which may be adversely impacted by rising costs of
subscriptions to digital service providers’ platforms. The Board and its
services providers will also monitor the risks and the rising costs of doing
business. The Investment Manager has bought Catalogues which have a
diversified income stream (e.g., publishing, recordings, live, and sync) and
have resilient cash generation which provide a hedge against any inflation
impact on one particular source of income.
Currency
Currency risks may have a material impact on the Company’s performance. The Company may engage in full or partial currency hedging if it
deemsappropriate.
Financial Risks
Valuations
Valuations are by their nature subjective and investors may not have confidence
that they are sufficiently aligned to the market.
An external valuation is performed on the directly owned assets by a third-
party valuer, bi-annually, and provided to the Administrator, with oversight
and approval of such valuations provided by the Investment Manager and
oversight by the Board. The Company’s investment in Carlin (compared to
its direct investment in Catalogues) is determined by a different accounting
methodology, including reliance on Carlin unaudited semi-annual and
audited annual accounts. At 31 December 2022, the Board commissioned a
second independent valuation report, which provided an additional source
of independent analysis on the valuation of the Portfolio.
Debt
The Company’s Investment Policy allows the use of debt subject to limits. The use
of leverage may increase the volatility of the Economic NAV per Ordinary Share
and may increase its investment risk and lead to a breach of covenant.
The Investment Manager provides details of all borrowings and the cost
over an extended time frame to allow the Board to review how the Company
will meet its covenants and overall borrowing limits on an ongoing basis.
The Investment Manager may refinance to achieve better terms where
appropriate. The Company’s leverage policy also keeps borrowing to a 25%
Debt to Economic NAV threshold, which helps minimise volatility exposure
to the Economic NAV.
Operational Risks – items related to people, processes, systems and events which may impact the Company
IT / Cyber
The risks associated with poor controls around information technology leading to
data breaches and/or cyber security being compromised.
A full suite of policies is in place with all key service providers relating to
cyber security and data protection of the information technology provided
to the Company. Any breaches are reported to the Board as well as quarterly
reports provided to the Board on all related information technology issues.
Oversight of third parties
Oversight of delegated functions not conducted effectively and, in terms of
legislative or regulatory requirements, resulting in regulatory sanctions.
Contracts are in place with all service providers. The Administrator will also
perform oversight on delegated functions.
Formal signed agreements are in place and oversight of services provided
are approved and undertaken by the Board.
Periodic service reviews and meetings are held with service providers as
appropriate, including the Board’s Management Engagement Committee
annual review.
Geopolitical – War in Ukraine
The ongoing war in Ukraine and related sanctions may create challenging
conditions for music providers and users of different music formats.
The Board is kept appraised on any related developments regarding
sanctions, by its outsourced Administrator. The Company has a diversified
Portfolio which may help to cushion some of the impact of one particular
revenue stream being put under pressure.
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
46 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
RELATED PARTY TRANSACTIONS
There were no material related party transactions which
took place in 2022, other than those disclosed at note 12 of
the Notes to the Consolidated Financial Statements.
INTERNAL CONTROL AND FINANCIAL
REPORTING
The Board has delegated to the Audit Committee its
responsibility for establishing and maintaining the Group’s
system of risk management and internal controls, which is
reviewed fully for effectiveness on an annual basis. Internal
controls are designed to meet the particular needs of the
Group and the risks to which it is exposed. Accordingly,
the internal control systems are designed to manage
rather than eliminate the risk of failure to achieve business
objectives and by their nature can only provide reasonable
and not absolute assurance against misstatement and loss.
The key procedures which have been established to provide
effective internal controls are as follows:
the Board is responsible for the Group’s systems of risk
management and internal controls and for reviewing
their effectiveness. The Board confirms that through
the Audit Committee there is an on-going process for
identifying, evaluating and monitoring the significant
risks faced by the Group. The internal controls, which
are delegated to the applicable service providers as
appropriate, are designed to meet the Group’s particular
needs and the risks to which it is exposed;
the Board clearly defines the duties and responsibilities
of the Company’s service providers. The appointment
of agents and advisers is conducted by the Board after
consideration of the quality of the parties involved;
the Board regularly reviews the performance of, and
the contractual arrangements with, the Group’s service
providers, agents, advisers;
investment management and Portfolio administration
services are provided to the Group by the Investment
Manager;
corporate broking and financial advisory services are
provided to the Company by the Corporate Broker and
Financial Adviser;
administration (including compliance) and secretarial
services are provided to the Group by the Administrator
and the Secretary;
the Board reviews financial information produced by the
Administrator on a regular basis;
the Board also specifies which matters are reserved
for a decision by the Board and which matters may be
delegated to its service providers.
GOING CONCERN
The Board monitor the capital and liquidity requirements
of the Group on a regular basis. They have also reviewed
cash flow forecasts prepared by the Investment Manager,
which are based in part on assumptions about the future
purchase and returns from existing Catalogues and the
annual operating costs.
The Board has reviewed cash flow projections that detail
revenue and liabilities and will continue to receive cash flow
projections as part of the Group’s reporting and monitoring
processes.
The Group has seen further covid recovery in 2022 as
mentioned previously and has sufficient cash balance as
well as large positive net current assets and net assets at
year end.
After reviewing the cash flow projections and receiving
feedback from the Investment Manager, as well as
considering the principal risks and uncertainties, the Board
believes that the Group has adequate financial resources to
continue its operational existence for the foreseeable future
and at least 12 months from the date of approval of this
Annual Report. The Group therefore continues to adopt the
going concern basis in preparing its Consolidated Financial
Statements.
VIABILITY STATEMENT
The Investment Manager has prepared an assessment
taking into account several risk factors that could affect the
viability of the music business and income to the Company
in the three-year period ending December 31, 2025.
The three-year assessment period is considered
appropriate as: 1) music publishing and recorded music
are expected to grow healthily over the long-term;
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 47
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
2) three years of income is deemed to reflect a normalised
level of income within music publishing; and 3) accurate
and precise external income projections are more readily
available for the next three-year period.
The Group is expected to grow at a stable rate in the medium
and long-term based on past performance and resiliency of
music royalties even during the covid pandemic. The Group
has seen recovery from the covid pandemic during 2022 and
expects further recovery in 2023.
For purposes of stress testing, the Group considered
downside plausible scenarios for this assessment that
could have an impact on income and cash flows in the next
three years. These risk factors include publisher service
providers’ inability to administer rights, inability of CMOs to
license and distribute music, sustained decline in live music
consumption, and standard repertoire falling out of favour
with music streaming consumers.
The Board’s considerations for the conclusion include
the Group’s ability to generate cash flows from operating
activities which was approximately US$14.3 million as of
December 31, 2022 and the Group’s liquidity profile given
the Group had approximately US$10.9 million of cash on
hand and approximately US$17.8 million of undrawn credit
under the Truist RCF as of December 31, 2022.
The Investment Manager’s cash flow forecast for the next
three years incorporates all the risks mentioned above that
could impact the Group’s income in a severe downside
scenario. After reviewing the forecast and considering the
Group’s current financial profile, the Board has a reasonable
expectation that the Group can continue its operations and
meet all operational expense requirements despite a severe
downside scenario applied to its income over the next
threeyears.
PRINCIPAL RISKS AND UNCERTAINTIES
CONTINUED
48 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
The Board has considered the principles and provisions
of the AIC Code, which addresses the principles and
provisions set out in the UK Code, as well as setting out
additional provisions on issues that are of specific relevance
to listed investment companies, such as the Company.
The Board considers that reporting in accordance with the
principles and provisions of the AIC Code, which has been
endorsed by the GFSC, provides more relevant information
to Shareholders.
The GFSC’s Finance Sector Code of Corporate Governance
(the “Code”) applies to the Company. The GFSC has
stated in the Code that companies which report against
the UK Code or the AIC Code are deemed to meet the
requirements of the Code and need take no further action.
Accordingly, as the Company reports against the AIC Code
it will be deemed to meet the requirements of the Code.
A copy of the AIC Code is available on the AIC website
at www.theaic.co.uk/sites/default/files/documents/
AIC2019AICCodeofCorporateGovernanceFeb19.pdf. It
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.
For the reasons set out in the introduction to the AIC Code,
the Board has considered that the UK Code provisions
relating to:
the appointment of a senior independent director;
the role of the chief executive;
executive directors’ remuneration;
the establishment of a nomination committee; and
the need for an internal audit function
are not relevant to the position of the Company, as
an externally managed investment company, and has
therefore not reported further in respect of these matters.
Having reviewed the AIC Code, the Board considers that
it has maintained procedures during the financial period
under review to ensure that it has complied with the
principles and provisions of the AIC Code, subject to the
following provisions with explanations provided further
within this statement:
Provision 22: The Board has decided not to establish
a nomination committee because the Company is a
relatively new investment company and, given the size
of the exclusively non-executive and independent Board,
the Company has no requirement for this committee.
As such, it was deemed appropriate for the whole of the
Board to undertake the responsibilities of a nomination
committee, for at least the next financial year.
Provision 29: whilst he was Chairman of the Board,
Trevor Bowen’s chairmanship of the Audit Committee
was not consistent with the provisions of the AIC
Code. At the time of the IPO, Mr Bowen had the most
recent and relevant financial experience. Since the
launch of the Company, to address the inconsistency
with the AIC Code, the Board and its advisers had been
actively taking steps to identify suitable candidates to
join the Board. On 20 July 2022, Audrey McNair was
appointed to the Board and, upon the resignation of
Mr Bowen from the Board on 1 November 2022, she
was appointed Audit Chair with effect from that date.
Ms McNair has relevant financial experience to chair
the Audit Committee and, since her appointment as
Audit Chair, the Company has been in compliance with
Provision 29 of the AIC Code. Given the size of the
exclusively non-executive and independent Board and
his financial experience, Mr Naylor, Chairman of the
Board, is also a member of the Audit Committee.
Provision 30: The Board has taken the decision that it
would not be of any material benefit for the Group to
appoint an internal auditor, as the Group does not have
any employees and it does not operate any systems of its
own; instead, it relies on the employees and systems of its
external service providers. As such, the Board has decided
that this provision is not relevant to the Company.
CORPORATE GOVERNANCE STATEMENT
Statement of Compliance with the AIC Code, as published in February 2019
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 49
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
BOARD COMPOSITION
The Board comprises four Directors, and their biographies
appear on page 44 demonstrating the wide range of
skills and experience they each bring to the Board. All the
Directors are non-executive and, for the purpose of provision
13 of the AIC Code, all are considered to be independent.
As part of their examination of the independence of the
Board, the Board has concluded that all Directors remain
independent under the principles of the AIC Code.
Robert Naylor is the Chairman.
Apart from Robert Naylor, who is Chief Executive Officer
of Intuitive Investment Group plc and a non-executive
director of Light Science Technologies Holdings plc, which
are both London listed companies, Caroline Chan, who is
a non-executive director of BH Macro Limited, which is a
London listed company, and Audrey McNair, who is a non-
executive director of Octopus Renewables Infrastructure
Trust plc, which is also a London listed company, none of
the Directors have directorships or employments in any
other public company nor do any of the Directors hold
cross-directorships or have significant links with each other
through involvement in any other companies or bodies,
save for their directorships of the UK Subsidiaries.
BOARD SUCCESSION
The Company does not have a nomination committee
given it is a relatively new investment company and, given
the size of the exclusively non-executive and independent
Board, the Company has no requirement for this
committee. The Board therefore takes on the responsibility
of leading the process for appointments, ensuring plans
are in place for orderly succession to the Board, overseeing
the development of a diverse pipeline for succession and
any other matters as they arise. This includes ensuring that
any appointments and succession plans are based on merit
and objective criteria and, within this context, promotes
diversity of gender, social and ethnic backgrounds,
cognitive and personal strengths.
BOARD DIVERSITY
It is the Company’s aim to have an appropriate level
of diversity in the boardroom. The Board considers
diversity generally when making recommendations for
appointments to the Board, taking into account gender,
social and ethnic backgrounds, cognitive and personal
strengths, and experience. The Board welcomes the
recommendations from the FTSE Women Leaders Review
(the successor to the Hampton-Alexander Review) on
gender diversity and the Parker Review about ethnic
representation on boards and is pleased to report that
it is in compliance with these recommendations. The
Company’s priority when making new appointments is
to identify the candidate with the best range of skills,
experience and knowledge to complement those of the
existing Directors.
TENURE
The Board notes that provision 23 of the AIC Code
expects all Directors to be subject to annual re-election.
Accordingly, all Directors will retire and, being eligible, offer
themselves for re-election at each annual general meeting
of the Company. Papers accompanying the resolutions to
elect each Directors will set out the specific reasons why
their contribution is, and continues to be, important to the
Company’s long-term sustainable success.
Directors are able and encouraged to provide statements
to the Board of their concerns and ensure that any items of
concern are recorded in the Board minutes. The Chairman
also encourages all Directors to present their view on
matters in an open forum.
BOARD EVALUATION
The Board is committed to ensuring that on an annual
basis the strengths of the Board are recognised and any
weaknesses are addressed. Each Director has undertaken
to engage with the evaluation process and take appropriate
action when development needs have been identified. An
external facilitation of the performance evaluation will be
considered by the Board on an annual basis. At the Board’s
quarterly meeting held in December 2022, it was noted that
a firm would be instructed to carry out an external Board
evaluation in 2023.
CORPORATE GOVERNANCE STATEMENT
CONTINUED
50 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
The Board conducted a performance evaluation of itself,
its committees and each Director, as required under the
AIC Code. The process was led by the Board and consisted
of each Director completing questionnaires regarding the
performance of the Board as a whole, the Chairman and
the committees. Each Director also completed a self-
assessment questionnaire. The completed questionnaires
were sent to the Board and reviewed and discussed by the
whole Board at the December 2022 quarterly Board meeting.
BOARD MEETINGS
The Board meets in the United Kingdom at least four
times per year to consider the business and affairs of the
Company and the Group for the previous quarter and
the outlook for the coming quarter and beyond, at which
meetings the Directors review the Group’s assets and all
other important issues to ensure control is maintained. At
two of these meetings the Board considers and, if deemed
appropriate, approves the Group’s annual and half yearly
consolidated financial statements.
Between these regular meetings the Board keeps in contact
by email, telephone and video conference as well as meeting
to consider specific matters of a transactional nature.
The Directors are kept fully informed by the Investment
Manager of all matters concerning the Group’s assets and
their financial arrangements, and by the Administrator of all
matters that are relevant to the business of the Group and
which should be brought to the attention of the Directors
and / or the Shareholders. All Directors have direct access
to the Administrator, which is responsible for ensuring that
Board procedures are followed and that there are effective
information flows both within the Board and between the
Board and the Investment Manager.
The Directors also have access to the advice and services of
the Financial Adviser and Corporate Broker as required. The
Directors may also, in the furtherance of their duties, take
independent professional advice at the Group’s expense.
In the financial period under review the Directors held 4 scheduled quarterly Board meetings, 17 ad hoc Board meetings, 6
Audit Committee meetings, 1 Remuneration Committee meeting and 1 Management Engagement Committee meeting in
order to carry out their duties. Directors’ attendance at these meetings was as follows:
Director
Scheduled
Quarterly Board
Meetings
Ad hoc
Board Meetings Audit Committee
Remuneration
Committee
Management
Engagement
Committee
Robert Naylor* 1 of 1 2 of 2 2 of 2 1 of 1 1 of 1
Caroline Chan 4 of 4 16 of 17 6 of 6 1 of 1 1 of 1
Francis Keeling 4 of 4 15 of 17 5 of 6 1 of 1 1 of 1
Audrey McNair** 2 of 2 7 of 8 3 of 3 1 of 1 1 of 1
Trevor Bowen* 3 of 3 15 of 15 4 of 4 0 of 0 0 of 0
*Robert Naylor was appointed Chairman with effect from 1 November 2022 upon the resignation of Trevor Bowen with effect from 1 November 2022.
** Audrey McNair was appointed with effect from 20 July 2022.
No fixed time commitment for Board duties has been
set in each Director’s letter of appointment, as the Board
considers that the time required by Directors may vary
depending on the demands of the Group and any other
events. Therefore, it is required that each Director allocates
sufficient time to the Group to perform their duties
effectively. It is also expected that each Director will attend
all Board meetings and meetings of committees of which
they are a member.
The Chairman has confirmed that he considers the
performance of each other Director, during the financial
year under review, to be satisfactory and that each such
Director demonstrates continued commitment to their
role. The other members of the Board were equally satisfied
that, during the financial year under review, the Chairman
has demonstrated his continued commitment to the role
and has given the time to make himself available at short
notice when the need arose.
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 51
Board Committees
The Board has considered the establishment of a
nomination committee as set out in provision 22 of
the AIC Code. As noted, the Board has concluded that,
given the small size of the exclusively non-executive and
independent Board, the Company has no requirement for
this committee and, instead, the full Board performs this
function.
The Board has established an Audit Committee, a
Remuneration Committee and a Management Engagement
Committee. Details of the activities of each of these
committees are set out below.
Audit Committee
As at the financial year end, the members of the Audit
Committee were Audrey McNair, Francis Keeling, Caroline
Chan and Robert Naylor. Audrey McNair was appointed
Chair of the Audit Committee following the resignation of
Trevor Bowen as Chairman of the Company and Chair of
the Audit Committee, with effect from 1 November 2022.
The Audit Committee has regard to the Guidance on Audit
Committees published by the FRC in September 2012 and
most recently updated in April 2016. The Audit Committee
examines the effectiveness of the Group’s and its service
providers’ internal control systems, as appropriate, the
annual and half-yearly reports and consolidated financial
statements, the external auditor’s remuneration and
engagement, as well as the external auditor’s independence.
The Audit Committee considers the nature, scope and
results of the external auditor’s work and will review it
annually prior to providing a recommendation to the Board
on the reappointment or removal of the external auditor.
When evaluating the external auditor, the Audit Committee
will have regard to a variety of criteria including industry
experience, independence, reasonableness of audit plan,
ability to deliver constructive criticism, effectiveness of
communication with the Board and the Group‘s service
providers, quality control procedures, effectiveness of audit
process and added value beyond assurance in audit opinion.
Auditor independence is maintained through limiting
non-audit services to specific audit-related work that falls
within defined categories; for example, the provision of
advice on the application of IFRS or formal reports for
any Stock Exchange purpose. All engagements with the
external auditor are subject to pre-approval from the Audit
Committee and fully disclosed within the Annual Report
for the relevant period. A new lead audit partner will be
appointed every five years and the Audit Committee
ensures the external auditor has appropriate internal
mechanisms in place to ensure its independence.
The Audit Committee has recommended to the Board that
the reappointment of KPMG as the Company’s external
auditor be proposed to Shareholders at the 2023 annual
general meeting. The Audit Committee will, if appropriate,
consider arranging for the external audit contract to
be tendered in 2030 (being 10 years from the initial
appointment).
The Audit Committee meets in the United Kingdom at least
twice a year, shortly before the Board meets to consider
the Group’s half-yearly and annual consolidated financial
statements, and reports to the Board with its deliberations
and recommendations and also holds an annual audit
planning discussion with the external auditor. The ultimate
responsibility for reviewing and approving the half-yearly
and the annual consolidated financial statements remains
with the Board.
The Audit Committee also operates within clearly defined
terms of reference based on The Chartered Governance
Institute recommended terms, and provides a forum
through which the Group’s external auditor reports to the
Board. The Audit Committee can request information
from the Group’s service providers with the majority of
information being directly sourced from the Investment
Manager, the Secretary, the Administrator and the external
Auditor. The terms of reference of the Audit Committee are
available on the Company’s website and on request from
the Administrator.
CORPORATE GOVERNANCE STATEMENT
CONTINUED
52 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
Key areas covered include the clarity of the Audit
Committee’s role and responsibilities, the balance of skills
among its members and the effectiveness of reporting its
work to the Board. The Board is satisfied that all members
of the Audit Committee have relevant financial experience
and knowledge and ensure that such knowledge remains
up to date. Overall the Board considers that the Audit
Committee has the right composition in terms of expertise
and has effectively undertaken its activities and reported
them to the Board during the year.
During the financial year to 31 December 2022, the Audit
Committee met to consider the Company’s consolidated
financial statements to 31 December 2021 and the half-
yearly report for the period from 1 January to 30 June
2022 and to receive the audit planning report from the
Company’s external Auditor. The report from the Chair of
the Audit Committee is on pages 55 to 57.
Management Engagement Committee
The Management Engagement Committee was established
on 2 October 2020 and consists of all Directors of the
Company, with Francis Keeling acting as Chairman. The
Management Engagement Committee meets at least
once a year and the principal duties of the Management
Engagement Committee are to review the terms of the
agreements between the Company and its key service
providers to ensure that they are competitive, fair
and reasonable for Shareholders, to review and make
recommendations on any proposed amendment or
material breach of those agreements and to monitor and
evaluate the performance of the key service providers
including the on-going suitability of the key service
providers to provide advice to the Company.
During the financial year under review, the Management
Engagement Committee met once to perform a review of
the Company’s service providers.
Remuneration Committee
The Remuneration Committee was established on 21
September 2021 and consists of all Directors of the
Company, with Caroline Chan acting as Chair. The
Remuneration Committee meets at least once a year and
the principal duties of the Remuneration Committee are
to determine and agree the remuneration policy for the
Directors of the Company and the Chairman of the Board,
ensuring it supports strategy and promotes the long-
term success of the Company and remains appropriate
and relevant, to review any proposed changes to the
remuneration of the Directors of the Company, and to
review and consider any additional ad hoc payments to the
Directors of the Company.
During the financial year the Remuneration Committee
met once, to perform a review of the remuneration of the
Directors of the Company.
BRIBERY
The Directors have undertaken to operate the business
in an honest and ethical manner and accordingly take a
zero-tolerance approach to bribery and corruption. The key
components of this approach are implemented as follows:
the Board is committed to acting professionally, fairly
and with integrity in all its business dealings and
relationships;
the Group will implement and enforce effective
procedures to counter bribery; and
the Group requires all its service providers and advisers
to adopt equivalent or similar principles.
DATA PROTECTION
The Group has implemented measures designed to ensure
its compliance with the Data Protection (Bailiwick of
Guernsey) Law, 2017 (as amended) and other applicable
data protection legislation in other jurisdictions. The
Company has also issued a privacy notice explaining the
data it holds, how the data is processed and its procedures.
This notice is available for review and download at the
Company’s website at the following link: https://s3-us-
east-2.amazonaws.com/rhm-assets/u/2020/10/RHMRFL-
Privacy-Notice-final.pdf.
DIALOGUE WITH SHAREHOLDERS
All Shareholders have the right to receive notice of, and
attend, general meetings of the Company, at which one
or more members of the Board will be available to discuss
issues affecting the Group.
The Company reports on the number of votes lodged on
each resolution proposed at an annual general meeting.
This information is published via a regulatory information
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 53
CORPORATE GOVERNANCE STATEMENT
CONTINUED
service and on the Company’s website immediately
following the annual general meeting.
The 2023 AGM will be held on 12 June 2023 at 1pm at
the offices of Gowling WLG (UK) LLP, 4 More London
Riverside, London SE1 2AU. Members of the Board and
representatives from the Investment Manager will also be
present in person at the AGM to answer questions from
Shareholders.
The primary responsibility for Shareholder relations lies with
the Board which has delegated this role to the Company’s
Corporate Broker. The Corporate Broker meets with the
Company’s core Shareholders to discuss the Company and
seek feedback for the benefit of the Board and will continue
to meet with Shareholders on a periodic basis or when
there is significant information pertaining to the Company
which needs to be discussed with Shareholders.
In addition, the Directors are available to enter into dialogue
with Shareholders by telephone or email and the Chairman
is always willing to meet Shareholders, as the Company
believes such communication to be important. Shareholders
also have the opportunity to address questions to the
Chairman and the Audit Committee at the Company’s annual
general meeting. Following the appointment of Robert
Naylor as the new Chairman with effect from 1 November
2022, there was a presentation to institutional Shareholders
where Shareholders were able to ask questions directly to
the Chairman, the Investment Manager and the Corporate
Broker on the Company and its performance.
The Board reviews the Company’s share register at every
quarterly Board meeting to monitor the Company’s
Shareholder profile and seeks to ensure that information
is presented to Shareholders in a fair, balanced and
understandable manner. The Board would also take
action to address any Shareholder concerns. The
Company provides regular updates to Shareholders
through factsheets and annual and half-yearly reports and
consolidated financial statements.
At the Annual General Meeting held on 9 June 2022 all the
resolutions were passed by the requisite majority.
The Directors can be contacted by Shareholders via
correspondence sent to the Company’s registered office or
via the Administrator, if they have any concerns.
54 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
MEMBERSHIP
Audrey McNair, Chair of the Audit Committee
Caroline Chan, Non-executive Director
Francis Keeling, Non-executive Director
Robert Naylor, Non-executive Director
KEY DUTIES
The Audit Committee’s key duties are as follows:
reviewing and monitoring the integrity of the
Group’s financial statements and financial results
announcements, and reviewing significant financial
reporting judgements contained therein, and
monitoring compliance with relevant statutory and
listing requirements;
reporting to the Board on the appropriateness of the
Group’s accounting policies and practices including
critical accounting policies and practices;
advising the Board on whether the Group’s annual
report and consolidated financial statements, taken as a
whole, is fair, balanced and understandable and provides
the information necessary for Shareholders to assess
the Group’s performance, business model and strategy;
overseeing the relationship with the external auditor and
reviewing the effectiveness of the external audit process;
conducting a tender process and making
recommendations to the Board, for it to put to the
Shareholders for their approval in general meeting, in
relation to the appointment, reappointment and removal
of the external auditor and to approve the remuneration
and terms of engagement of the external auditor;
reviewing and monitoring the external auditor’s
independence and objectivity;
reviewing and monitoring the systems of internal
controls and risk management operated by the Group
and by the Group’s principal service providers;
reviewing annually whether an internal audit function is
required;
developing and implementing policy on the
engagement of the external auditor to supply non-
audit services, taking into account relevant ethical
guidance regarding the provision of non-audit services
by the external auditor; and to report to the Board,
identifying any matters in respect of which it considers
that action or improvement is needed and making
recommendations as to the steps to be taken; and
reporting to the Board on how it has discharged its
responsibilities.
AUDIT COMMITTEE MEETINGS
The Audit Committee meets in the United Kingdom at least
twice a year. The Audit Committee reports to the Board on
its activities and on matters of particular relevance to the
Board in the conduct of its work.
MAIN ACTIVITIES OF THE COMMITTEE
DURING THE PERIOD
The Audit Committee assisted the Board in carrying
out its responsibilities in relation to financial reporting
requirements, compliance and the assessment of internal
controls. The Audit Committee also managed the Group’s
relationship with the external Auditor.
FAIR, BALANCED AND UNDERSTANDABLE
In order to comply with the AIC Code, the Board has
requested that the Audit Committee advise them on
whether it believes that this Annual Report and the
Consolidated Financial Statements, taken as a whole,
are fair, balanced and understandable and provide the
information necessary for Shareholders to assess the
Group’s position, performance, business model and
strategy.
FINANCIAL REPORTING AND
SIGNIFICANT ISSUES
The Audit Committee’s primary role in relation to financial
reporting is to review, with its service providers and
the external auditor, the appropriateness of the half-
yearly and annual financial statements, the significant
financial reporting issues and the accounting policies and
disclosures in the consolidated financial statements.
AUDIT COMMITTEE REPORT
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 55
The Audit Committee has considered the key risks
identified as being significant to this Annual Report and the
Consolidated Financial Statements, the most appropriate
treatment and disclosure of any new significant issues
identified during the audit, as well as any recommendations
or observations made by the external Auditor. To aid its
review, the Audit Committee considered reports prepared
by external service providers and reports from the external
Auditor on the outcome of their annual audit.
The significant issues considered by the Audit Committee
in relation to this Annual Report and the Consolidated
Financial Statements and how these were addressed were
as set out in the next section.
PRIMARY AREAS OF JUDGEMENT AND
ESTIMATION
The Board, alongside the Investment Manager, is involved
in various estimates and judgements, as noted below:
Estimating royalty income for each Catalogue in order
to evaluate investment potential. These conclusions are
based on the Investment Manager’s extensive reports
and management accounts, which include historical
earnings as well as industry growth projections released
by trusted third parties;
The Investment Manager calculates accruals by
analysing prior period royalty statements. As royalties
are cyclical outside of one-time events, the Investment
Manager believes this is an appropriate approach. The
Board discusses the methodology with the Investment
Manager;
The Board has assessed the useful life of each
Catalogue’s assets directly owned by the Group to be
20years (16 years in 2021), and amortises its intangibles
as such;
The Investment Manager assesses the collectability
of royalty income receivables and advances annually
to determine whether an impairment needs to be
recorded; and
Discounted cash flow models prepared by the
Independent Valuer on a bi-annual basis are used
to determine the valuation of each Catalogue using
assumptions that are subject to the Independent
Valuer’s judgement (see Note 4 of the Notes to the
Consolidated Financial Statements). The Independent
Valuer is appointed by the Board and the valuations,
for directly owned Catalogues, are subject to oversight
and approval by the Investment Manager and the
Board’sapproval. See Note 15 of the Notes to the
Consolidated Financial Statements for treatment of the
Carlin Interest.
INTERNAL CONTROLS
The Audit Committee has made due enquiry of the internal
controls of the Administrator and the Investment Manager.
The Audit Committee is satisfied with the controls currently
implemented by the Administrator and the Investment
Manager and will continue to review them regularly. The
Audit Committee has also requested the Administrator
and the Investment Manager each keeps the Company
informed of any in-house developments and improved
internal control procedures effected.
INTERNAL AUDIT
The Group does not have any employees and does not
operate any systems of its own, relying instead on the
employees and systems of its external service providers.
The Board has therefore taken the decision that it would
not be of any material benefit for the Group to appoint an
internal auditor and that, as it considers that the particular
provision in the UK Code and the AIC Code is not relevant
to the Company, it will not comply with it.
EXTERNAL AUDIT
The effectiveness of the external audit process is
dependent on appropriate audit risk identification at the
start of the audit cycle. The Audit Committee received
from the external Auditor a detailed audit plan, identifying
their assessment of the key risks. For the period of review,
the primary risks identified were in respect of revenue
recognition and both the carrying value and fair value of the
Catalogues.
AUDIT COMMITTEE REPORT
CONTINUED
56 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
Using its collective skills, the Audit Committee evaluated
the effectiveness of the audit process in addressing the
matters raised through the reporting it received from the
external Auditor at the conclusion of the audit.
In particular the Audit Committee formally appraises the
external Auditor against the following criteria:
Independence
Ethics and conflicts
Knowledge and experience
Challenge
Promptness
Cost
Overall quality of service
In addition the Audit Committee sought feedback from
the Investment Manager and the Administrator on the
effectiveness of the audit process.
Having completed the evaluation, the Audit Committee
was satisfied with the effectiveness, including performance
and objectivity and independence of KPMG and the overall
effectiveness of the external audit process.
The Audit Committee will hold meetings with the external
Auditor to provide additional opportunity for open dialogue
and feedback from the external Auditor. If felt necessary,
Audit Committee members will meet with the external
Auditor without the Administrator and the Investment
Manager being present.
APPOINTMENT AND INDEPENDENCE
The Audit Committee will consider the reappointment of
the external Auditor, including the rotation of the audit
partner, each year and will also evaluate their independence
on an on-going basis.
KPMG was initially appointed as the Company’s
independent auditor on 5 August 2020 and they were
re-appointed by the Company’s Shareholders at the
Company’s annual general meeting on 9 June 2022.
The fees payable to KPMG for audit services to the Group
are £425,700. The only non-audit service provided by
KPMG were in relation to its review of the Group’s Interim
Report for which it was paid fees of £50,000 and an agreed
procedure for the C Share conversion for which it was paid
fees of £15,000. Due to timing of when the audits of the
subsidiaries for the period ended 2021 was conducted, the
audit fees for these engagements were not captured in the
2021 group disclosure.
2022
(GBP)
2021
(GBP)
Audit of Company 297,500 350,000
Audit in respect of Custody filing 70,200 78,000
Audit of subsidiary companies 58,000 88,500
Total Audit 425,700 516,500
Interim Review engagement 50,000 75,000
Agreed upon procedure for
CShare conversion
15,000 -
Total Fees 490,700 591,500
The amounts have been translated in the Consolidated
Statement of Comprehensive Income at a foreign exchange
rate on payment/transaction date.
The Audit Committee has recommended to the Board that
the reappointment of KPMG as the Company’s external
auditor be proposed to the Shareholders at the 2023 annual
general meeting.
The Audit Committee will, if appropriate, consider arranging
for the external audit contract to be tendered in 2030
(being ten years from the initial appointment). The external
Auditor is required to rotate the audit partner responsible
for the audit every five years. The current lead audit partner
has been in place since the 2021 half-yearly review.
There are no contractual obligations restricting the
Audit Committee’s choice of external auditor. The Audit
Committee continues to consider the audit tendering
provisions outlined in the AIC Code, of which it is
supportive.
AUDIT COMMITTEE EVALUATION
Our activities formed part of the internal review of Board
effectiveness for the financial year and was performed in
December 2022.
Audrey McNair
Chairman of the Audit Committee
24 April 2023
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 57
REMUNERATION COMMITTEE REPORT
OVERVIEW
In accordance with the Company’s Articles, the Directors shall determine the Directors’ fees payable, provided that
the aggregate amount of such fees paid in respect of services rendered to the Company shall not exceed £400,000
(US$482,160) per annum, after the limit in the Articles was increased from £300,000 (US$407,461) per annum, by an
ordinary resolution adopted at the Annual General Meeting of the Company held on 9 June 2022.
Directors are also entitled to re-imbursement of out-of-pocket expenses incurred in connection with the performance of their
duties or in attending meetings of the Board or of any committees or general meetings of the Company.
Directors’ and Officers’ liability insurance cover is also maintained by the Company on behalf of the Directors.
DIRECTORS’ REMUNERATION
Fees paid to the Directors, all of whom are non-executive directors, in the year were:
Fixed Fee
£
Committee
Chair fee
£
Gross total
£
Robert Naylor* (Chairman of the Board) 12,500 - 12,500
Audrey McNair** (Chair of the Audit Committee) 29,084 833 29,917
Trevor Bowen*** (Chairman of the Board and
Chair of the Audit Committee) 62,500 4,167 66,667
Caroline Chan (Chair of the Remuneration Committee) 65,000 5,000 70,000
Francis Keeling (Chair of the Management Committee) 65,000 5,000 70,000
The amounts have been translated in the Consolidated Statement of Comprehensive Income at a foreign exchange rate on
payment/transaction date.
* Robert Naylor was appointed Chairman of the Board with effect from 1 November 2022.
** Audrey McNair was appointed as a Director of the Company with effect from 20 July 2022 and as Audit Chair from 1 November 2022.
*** Trevor Bowen resigned as Chairman of the Board and Chair of the Audit Committee with effect from 1 November 2022.
The Directors do not receive a separate fee for being a director of each of the UK Subsidiaries.
Following a discussion at the Remuneration Committee meeting in December 2022 it was recommended to and later agreed
by the Board that Directors’ remuneration should remain unaltered as it was considered that the current level of annual
remuneration reflects the asset sector and their current workload. The current Directors’ fees are as follows:
Fixed Fee
£
Committee
Chair fee
£
Gross total
£
Gross total
US$
Robert Naylor 75,000 - 75,000 90,405
Audrey McNair 65,000 5,000 70,000 84,378
Caroline Chan 65,000 5,000 70,000 84,378
Francis Keeling 65,000 5,000 70,000 84,378
Exchange rate as at 31 December 2022 - US$1.2054
58 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
At the Remuneration Committee meeting held in
December 2022, it was also determined that external
remuneration consultants were not required to review
Directors’ fees for 2023 but that, in 2023, an external party
would be appointed to carry out a non-executive director
remuneration benchmarking exercise and a firm would be
instructed to carry out an external Board evaluation. The
total amount of Directors’ remuneration to be paid in 2023
is currently anticipated to be £285,000 (US$343,539).
All Directors receive an annual fee and there are no share
options or other performance related benefits available to
them. Further details of the Directors’ fees are disclosed
in note 12 on page 97 of the Notes to the Consolidated
Financial Statements.
The terms and conditions of appointment of the non-
executive Directors are available for inspection at the
Company’s registered office by prior arrangement with the
Secretary.
At the time of writing no Director has a contract of service
with the Group, nor are any such contracts proposed. There
were also no outstanding loans or guarantees between the
Group and any Director as at the end of 2022 nor as at the
date of this report.
SUMS PAID TO THIRD PARTIES
No fees were paid to third parties for services as non-
executive directors.
DIRECTORS’ INTEREST IN SHARES
The interests in Ordinary Shares of the Company held by
persons discharging the role of Director and their persons
closely associated are shown below:
Number of
Ordinary Shares
held as at
31 December 2022
Number of
Ordinary Shares
held as at the
date of this report
Robert Naylor
1
50,000 50,000
Caroline Chan 50,000 50,000
Francis Keeling 75,000 75,000
Audrey McNair 28,697 28,697
On behalf of the Remuneration Committee
Caroline Chan
Chairman of the Remuneration Committee
24 April 2023
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 59
1 As at 31 December 2022, Robert Naylor’s wife held 50,000 Ordinary Shares (31 December 2021: Nil).
DIRECTORS’ REPORT
The Directors present their Annual
Report of the Group for the period
from 1 January to 31 December 2022.
PRINCIPAL ACTIVITIES AND BUSINESS
REVIEW
A description of important events that have occurred
during the financial year, their impact on the Consolidated
Financial Statements and a description of the principal and
emerging risks and uncertainties facing the Group, together
with an indication of important events that have occurred
since the end of the financial year and are likely to affect the
Group’s future development, are included in the Company
Overview, the Chairman’s Statement, the Investment
Manager’s Report, this Directors’ Report, the Principal Risks
and Uncertainties section on pages 45 to 46, the Audit
Committee Report and the Notes to the Consolidated
Financial Statements contained on pages 71 to 105, all of
which are incorporated herein by reference.
STATUS
The Company is a Guernsey company with registered
number 68002. Following the IPO, the Company’s Ordinary
Shares were admitted to trading on the Specialist Fund
Segment of the Main Market of the London Stock Exchange
on 13 November 2020. With effect from 19 July 2022 the
Company transferred trading of its Ordinary Shares from
the Specialist Fund Segment to the Premium Segment of
the Main Market of the London Stock Exchange.
DIRECTORS
The Directors in office are shown on page 44. All Directors
remain in office as at the date of approval of this Annual
Report. Further details of the Directors’ responsibilities are
given on pages 62 to 63.
MANAGEMENT OF CONFLICTS
OF INTEREST
The Company has established guidelines to ensure
management of conflicts of interest. The Board considers
the Directors conflicts of interest at each Board meeting by
reviewing a schedule of each Director’s other directorships
and other interests held. Each Director is required to notify the
Secretary and Administrator of any potential, or actual, conflict
situations that would need to be considered by the Board.
RESULTS AND DIVIDENDS
The financial results of the Group for the financial year are
set out on pages 71 to 105.
The Company declared and paid the following dividends
during the financial year:
Announcement Date Payment Date
Dividend
Ordinary
per Share
9 March 2022 25 March 2022 US$0.015
25 May 2022 14 June 2022 US$0.01125
1 September 2022 16 September 2022 US$0.01125
24 November 2022 12 December 2022 US$0.01125
On 9 March 2022, the Company announced a quarterly
dividend of US$0.015 per Ordinary Share, comprising
US$0.01125 per Ordinary Share for the quarter to
31 December 2021, together with a further dividend
payment of US$0.00375 per Ordinary Share, being the
balance payable for the initial quarterly dividend for the
quarter to 31 March 2021.
On 9 March 2023, the Company announced a quarterly
dividend of US$0 . 01125 per Ordinary Share for the quarter to
31 December 2022. The payment date was 24 March 2023.
RELATED PARTIES
There were no events or changes in the related parties
during the financial year which had or could have had a
material impact on the financial position of the Group,
other than those disclosed in note 12 to the Consolidated
Financial Statements.
60 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
SUBSTANTIAL SHAREHOLDINGS
As of 31 December 2022, the following Shareholders had notified the Company that they held or controlled 5% or more of
the total voting rights of the Company in issue:
Holder
Number of
Ordinary Shares
% of
voting rights
M&G Investments 43,413,427 10.65%
Fidelity International 40,578,885 9.96%
CCLA Investment Management 37,327,942 9.16%
Schroder Investment Management 36,249,301 8.89%
Brooks Macdonald 23,443,366 5.75%
Close Brothers Asset Management 22,123,411 5.43%
Between the end of the financial year and the date of this report the only substantial shareholding to have changed
significantly is that of M&G Investments which has reduced to 39,755,677 Ordinary Shares representing 9.75% of voting
rights.
DISCLOSURE OF INFORMATION TO THE AUDITOR
The Directors who held office at the date of approval of this Annual Report confirm, in accordance with the provisions of
Section 249 of the Companies Law that, so far as they are each aware, there is no relevant audit information of which the
Company’s Auditor is unaware; and each Director has taken all the steps that they ought to have taken as a Director to make
themselves aware of any relevant audit information and to establish that the Company’s Auditor is aware of that information.
AUDITOR
KPMG has expressed its willingness to continue in office as auditor, and the Audit Committee has recommended their
reappointment. A resolution proposing KPMG’s reappointment will be submitted at the forthcoming annual general
meeting on 12 June 2023 to be held pursuant to section 199 of the Companies Law.
Signed on behalf of the board:
Robert Naylor
Chairman
24 April 2023
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 61
RESPONSIBILITY STATEMENT
Statement of Directors’ responsibilities in
respect of the Annual Report and Consolidated
Financial Statements
The Directors are responsible for preparing the Annual
Report and Consolidated Financial Statements in
accordance with applicable law and regulations. The
Companies Law requires the Directors to prepare an annual
report and financial statements for each financial year.
Under the Companies Law, the Directors have elected
to prepare the Consolidated Financial Statements in
accordance with International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting
Standards Board, and applicable law. Under the Companies
Law, the Directors must not approve the Consolidated
Financial Statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Company
and of its profit or loss for that period.
In preparing these Consolidated Financial Statements, the
Directors are required to:
select suitable accounting policies and then apply them
consistently;
make judgements and estimates that are reasonable,
relevant and reliable;
state whether applicable accounting standards have
been followed, subject to any material departures
disclosed and explained in the Consolidated Financial
Statements;
assess the Group’s and the Company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern; and
use the going concern basis of accounting unless they
either intend to liquidate the Group or the Company or
to cease operations or have no realistic alternative but
to do so.
The Directors are responsible for keeping proper
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the
Company and enable them to ensure that its Consolidated
Financial Statements comply with the Companies Law.
They are responsible for such internal control as they
determine is necessary to enable the preparation of the
Consolidated Financial Statements that are free from
material misstatement, whether due to fraud or error,
and have general responsibility for taking such steps as
are reasonably open to them to safeguard the assets
of the Group and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website (https://www.
roundhillmusicroyaltyfund.com). Legislation in Guernsey
governing the preparation and dissemination of the
Consolidated Financial Statements may differ from
legislation in other jurisdictions.
The Directors who hold office at the date of approval
of this Directors’ Report confirm that, so far as they are
aware, there is no relevant audit information of which the
Company’s Auditor is unaware, and that each Director has
taken all the steps they ought to have taken as a Director to
make themselves aware of any relevant audit information
and to establish that the Company’s Auditor is aware of that
information.
62 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
Responsibility statement of the Directors
in respect of the Annual Report
We, the Directors, confirm that, to the best of our
knowledge:
the Consolidated Financial Statements, prepared in
accordance with IFRS, the applicable set of accounting
standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the
Company;
the Annual Report includes a fair review of the
development and performance of the business and the
position of the Company, together with a description of
the principal risks and uncertainties that they face; and
the Annual Report and Consolidated Financial
Statements include information required by the
FCA ensuring that the Company complies with the
provisions of the Listing Rules and the Disclosure
Guidelines and Transparency Rules of the FCA. As a
company whose Shares are admitted to the premium
listing segment of the Official List, the Company is now
required formally to comply with the Listing Rules, in
particular, Chapter 15 of the Listing Rules for closed-
ended investment funds. Prior to its migration to the
Premium Segment, the Company had voluntarily
complied with a number of the Listing Rules. The
Company complies with those provisions of the Listing
Rules and the Disclosure Guidelines and Transparency
Rules of the FCA, save as noted in the Corporate
Governance Statement of the Annual Report. There
is no additional information that is required to be
disclosed under Listing Rules 9.8.4.
We, the Directors, consider the Annual Report and
Consolidated Financial Statements, taken as a whole,
are fair, balanced and understandable and provide the
information necessary for Shareholders to assess the
Company’s position and performance, business model and
strategy.
Signed on behalf of the Board of Directors of the Company
Rob Naylor Francis Keeling
Director Director
24 April 2023
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 63
Our opinion is unmodified
We have audited the consolidated financial statements of Round Hill Music Royalty Fund Limited (the “Company”) and its
subsidiaries (together, the “Group”), which comprise the consolidated statement of financial position as at 31 December
2022, the consolidated statements of comprehensive income, cash flows and changes in equity for the year then ended
and notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements:
give a true and fair view of the financial position of the Group as at 31 December 2022, and of the Group’s financial
performance and cash flows for the year then ended;
are prepared in accordance with International Financial Reporting Standards; and
comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the
Company and Group in accordance with, UK ethical requirements including the FRC Ethical Standard as required by the
Crown Dependencies’ Audit Rules and Guidance. We believe that the audit evidence we have obtained is a sufficient and
appropriate basis for our opinion.
Key audit matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the
consolidated financial statements and include the most significant assessed risks of material misstatement (whether or not
due to fraud) identified by us, 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 were addressed in the context of
our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters were as follows (2021: no
change):
The risk Our response
Revenue recognition
$36,663,895 (2021: $29,863,023)
Refer to the Audit Committee report (pages 55 to 57), note 2 Accounting Policies, note 3 Significant Accounting Judgements,
Estimates and Assumptions and note 9 Royalty Income.
Basis:
The Group earns revenue from the catalogues of songs in
which it owns interests. Revenues take the form of royalties,
license fees and other income, including mechanical
royalties, performance royalties, and synchronisation fees.
Revenue is collected by independent portfolio
administrators and royalty collection agents (together the
“Collection Agents”) and is reported and paid by them on a
periodic basis. These contractual arrangements entered into
by the Group with the Collection Agents may be complex in
nature.
Our audit procedures included:
Control evaluation:
We tested the design and implementation of the controls over
revenue recognition.
Assessing principles:
We assessed the Group’s revenue recognition accounting policies
for compliance with International Financial Reporting Standards
(“IFRS”), and in particular IFRS 15 “Revenue from Contracts with
Customers”.
INDEPENDENT AUDITOR’S REPORT TO THE
MEMBERS OF ROUND HILL MUSIC ROYALTY
FUND LIMITED
64 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
The risk Our response
Revenue recognition Continued
Additionally, the Collection Agents’ may report on a non-
coterminous basis with the Group’s period end. Therefore
the directors make an estimate of the revenue accrued to
the Group at the period end. The directors seek the input of
the Investment Manager in making these revenue accruals
which are based on an analysis of each catalogue’s revenue
history and performance trends. This involves significant
judgement and estimation uncertainty.
Risk
There is a risk of error in that revenue may be incorrectly
recognised in the accounting records of the Group. There is
also a fraud risk attached to accrued revenue given that the
significant judgements applied and estimation uncertainty
inherent in determining the accrual are susceptible to
management bias.
Tests of detail - Revenue:
We have assessed the contractual basis for recognising revenue
from each catalogue of songs on acquisition by reading and
understanding the catalogue agreements.
We used a combination of data matching routines and manual
procedures to agree the gross royalty income received from
Collection Agents to underlying bank records.
To support our data matching routine procedures, we reconciled a
randomly chosen selection of Collection Agent statements from the
ledger to the revenues recognized by the Group.
Tests of detail - Revenue accrual:
We evaluated the methodology applied by the Investment Manager
in calculating the year end revenue accrual against market practice
and the requirements of IFRS.
We evaluated the relevance and reliability of the underlying
information used by the Investment Manager in the calculation of
the revenue accrual, by comparing this to the revenue data which
we audited.
We evaluated the reasonableness of the revenue accrual
assumptions by considering consistency with historical payment
patterns of revenue receipts.
We tested the mathematical accuracy of the calculation.
We compared Collection Agents statements and cash receipts
received subsequent to the year end to the amounts accrued for
revenue at year end.
Assessing disclosures:
We also considered the adequacy of the Group’s disclosure (note
3) in relation to the use of Significant Accounting Judgements,
Estimates and Assumptions and Royalty Income (note 9).
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 65
The risk Our response
Carrying value and fair value disclosure of intangible assets
Carrying value $381,338,110 (2021: $303,386,321)
Fair value $531,188,855 (2021:$371,764,135) Refer to the Audit Committee report (pages 55 to 57), note 2 Accounting Policies,
note 3 Significant Accounting Judgements, Estimates and Assumptions and note 4 Catalogues.
Basis:
The Group’s catalogues of songs are classified as
intangible assets and are required to be held at cost less
impairment and amortised over their useful life. As a result,
the catalogues of songs are subject to an impairment
assessment when an indicator of impairment is identified.
The determination of the useful life of each catalogue
requires the application of significant judgement by the
directors with input from the Investment Manager.
The Board engaged an Independent Valuer to value the
Group’s catalogues of songs.
The valuation incorporates assumptions that are subject to
significant judgement and estimation uncertainty including
future catalogue revenue, aggregate catalogue maturity and
the discount rate applied.
The directors use the fair value as an input into their
consideration of the impairment assessment of the
catalogues of songs. The directors also use the fair value to
calculate and voluntarily disclose the Group’s Economic Net
Asset Value.
Risk:
As the catalogues of songs are significant to the Net Asset
Value of the Group and due to the inherent estimation
uncertainty required to determine the useful life, to perform
impairment assessments and determine the fair value of
those catalogues of songs, these matters collectively give
rise to a risk of error.
Our audit procedures included:
Control evaluation:
We tested the design and implementation of the control in place
over the valuation of intangible assets, to support the impairment
assessment performed by management.
Assessing principles:
We assessed the Group’s intangible asset recognition and
impairment accounting policies for compliance with IFRS, and in
particular IAS 38 “Intangible Assets”.
Tests of detail - carrying value:
For all new catalogues of songs, we obtained and read the purchase
agreements entered into by the Group to evaluate whether they
had been accounted for in accordance with IAS 38. We agreed
the corresponding acquisition costs as detailed in the purchase
agreements to underlying contracts and bank statements.
We assessed the useful life assumption made by the directors by
comparing this for reasonableness to available industry information.
We independently recalculated the carrying value using the useful
life determined by the directors to ensure mathematical accuracy of
the calculation and adherence with the Group’s accounting policies.
We obtained, discussed and challenged the directors and the
Investment Manger on their impairment assessment undertaken
with respect to the catalogue of songs.
Tests of detail - fair value and impairment:
We obtained the valuation model from the Independent Valuer and,
with the support of our KPMG valuation specialist, we:
Confirmed the independence of the Independent Valuer, and
evaluated their experience, competence and objectivity. We
assessed the methodology applied by the Independent Valuer
against market practice and the requirements of applicable
accounting standards.
Obtained the underlying information used by the Independent
Valuer, assessed its relevance and reliability, and compared this
to historical financial information provided by management and
available market data.
Tested the valuation model for integrity, logic and material formula errors.
Evaluated the reasonableness of key assumptions applied by the
Independent Valuer to available independent industry benchmarks.
Assessing disclosures:
We also considered the adequacy of the Group’s disclosure (note
3) in relation to the use of Significant Accounting Judgements,
Estimates and Assumptions and Catalogues (note 4).
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ROUND HILL MUSIC ROYALTY FUND LIMITED
CONTINUED
66 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
Our application of materiality and an overview of the
scope of our audit
Materiality for the consolidated financial statements as
a whole was set at $3.8m determined with reference to
a benchmark of group net assets of $378.7m, of which it
represents approximately 1.0%.
In line with our audit methodology, our procedures on
individual account balances and disclosures were performed
to a lower threshold, performance materiality, so as to
reduce to an acceptable level the risk that individually
immaterial misstatements in individual account balances
add up to a material amount across the financial statements
as a whole. Performance materiality for the Group was set at
65% of materiality for the financial statements as a whole,
which equates to $2.47m. We applied this percentage in our
determination of performance materiality because we did
not identify any factors indicating an elevated level of risk.
We reported to the Audit Committee any corrected or
uncorrected identified misstatements exceeding $0.11m, in
addition to other identified misstatements that warranted
reporting on qualitative grounds.
Our audit of the Group was undertaken to the materiality
level specified above, which has informed our identification
of significant risks of material misstatement and the
associated audit procedures performed in those areas as
detailed above.
The group team performed the audit of the Group as if it
was a single aggregated set of financial information. The
audit was performed using the materiality level set out
above and covered 100% of total group revenue, total group
profit before tax, and total group assets and liabilities.
Going concern
The directors have prepared the consolidated financial
statements on the going concern basis as they do not
intend to liquidate the Group or the Company or to cease
their operations, and as they have concluded that the
Group and the Company’s financial position means that
this is realistic. They have also concluded that there are no
material uncertainties that could have cast significant doubt
over their ability to continue as a going concern for at least a
year from the date of approval of the consolidated financial
statements (the “going concern period”).
In our evaluation of the directors’ conclusions, we
considered the inherent risks to the Group and the
Company’s business model and analysed how those
risks might affect the Group and the Company’s financial
resources or ability to continue operations over the going
concern period. The risk that we considered most likely to
affect the Group and the Company’s financial resources
or ability to continue operations over this period was the
availability of capital to meet operating costs and other
financial commitments.
We considered whether this risk could plausibly affect the
liquidity in the going concern period by comparing severe,
but plausible downside scenarios that could arise from
this risk against the level of available financial resources
indicated by the Company’s financial forecasts.
We considered whether the going concern disclosure in
note 2.3 to the financial statements gives a full and accurate
description of the directors’ assessment of going concern.
Our conclusions based on this work:
we consider that the directors’ use of the going
concern basis of accounting in the preparation of the
consolidated financial statements is appropriate;
we have not identified, and concur with the directors’
assessment that there is not a material uncertainty
related to events or conditions that, individually or
collectively, may cast significant doubt on the Group and
the Company’s ability to continue as a going concern for
the going concern period; and
we found the going concern disclosure in the notes to
the consolidated financial statements to be acceptable.
However, as we cannot predict all future events or
conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that
were reasonable at the time they were made, the above
conclusions are not a guarantee that the Group and the
Company will continue in operation.
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 67
Fraud and breaches of laws and regulations – ability
to detect
Identifying and responding to risks of material
misstatement due to fraud
To identify risks of material misstatement due to fraud
(“fraud risks”) we assessed events or conditions that could
indicate an incentive or pressure to commit fraud or provide
an opportunity to commit fraud. Our risk assessment
procedures included:
enquiring of management as to the Group’s policies
and procedures to prevent and detect fraud as well as
enquiring whether management have knowledge of any
actual, suspected or alleged fraud;
reading minutes of meetings of those charged with
governance; and
using analytical procedures to identify any unusual or
unexpected relationships.
As required by auditing standards, and taking into account
possible incentives or pressures to misstate performance
and our overall knowledge of the control environment, we
perform procedures to address the risk of management
override of controls and the risk of fraudulent revenue
recognition in relation to the period end revenue accrual,
and the risk that management may be in a position to make
inappropriate accounting entries. We did not identify any
additional fraud risks.
We performed procedures including:
identifying journal entries and other adjustments to
test based on risk criteria and comparing any identified
entries to supporting documentation;
incorporating an element of unpredictability in our audit
procedures; and
assessing significant accounting estimates for bias.
Further detail in respect of revenue recognition accrual is set
out in the key audit matter section of this report.
Identifying and responding to risks of material
misstatement due to non-compliance with laws and
regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on
the consolidated financial statements from our sector
experience and through discussion with management (as
required by auditing standards), and from inspection of the
Group’s regulatory and legal correspondence, if any, and
discussed with management the policies and procedures
regarding compliance with laws and regulations. As the
Group is regulated, our assessment of risks involved gaining
an understanding of the control environment including
the entity’s procedures for complying with regulatory
requirements.
The Group is subject to laws and regulations that directly
affect the consolidated financial statements including
financial reporting legislation and taxation legislation and
we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial
statement items.
The Group is subject to other laws and regulations where
the consequences of non-compliance could have a material
effect on amounts or disclosures in the consolidated
financial statements, for instance through the imposition
of fines or litigation or impacts on the Group and the
Company’s ability to operate. We identified financial services
regulation as being the area most likely to have such an
effect, recognising the regulated nature of the Group’s
activities and its legal form. Auditing standards limit the
required audit procedures to identify non-compliance with
these laws and regulations to enquiry of management
and inspection of regulatory and legal correspondence, if
any. Therefore if a breach of operational regulations is not
disclosed to us or evident from relevant correspondence, an
audit will not detect that breach.
Context of the ability of the audit to detect fraud or
breaches of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some
material misstatements in the consolidated financial
statements, even though we have properly planned and
performed our audit in accordance with auditing standards.
For example, the further removed non-compliance with
laws and regulations is from the events and transactions
reflected in the consolidated financial statements, the less
likely the inherently limited procedures required by auditing
standards would identify it.
In addition, as with any audit, there remains a higher risk
of non-detection of fraud, as this may involve collusion,
forgery, intentional omissions, misrepresentations, or the
override of internal controls. Our audit procedures are
designed to detect material misstatement. We are not
responsible for preventing non-compliance or fraud and
cannot be expected to detect non-compliance with all laws
and regulations.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ROUND HILL MUSIC ROYALTY FUND LIMITED
CONTINUED
68 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
Other information
The directors are responsible for the other information.
The other information comprises the information included
in the annual report but does not include the consolidated
financial statements and our auditor’s report thereon. Our
opinion on the consolidated financial statements does not
cover the other information and we do not express an audit
opinion or any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other
information and, in doing so, consider whether the other
information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit,
or otherwise appears to be materially misstated. 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 in
this regard.
Disclosures of emerging and principal risks and
longer term viability
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
disclosures in respect of emerging and principal risks and
the viability statement, and the consolidated financial
statements and our audit knowledge. We have nothing
material to add or draw attention to in relation to:
the directors’ confirmation within the Viability Statement
(pages 47 to 48) that they have carried out a robust
assessment of the emerging and principal risks facing
the Group, including those that would threaten its
business model, future performance, solvency or
liquidity;
the emerging and principal risks disclosures describing
these risks and explaining how they are being managed
or mitigated;
the directors’ explanation in the Viability Statement
(pages 47 to 48) as to how they have assessed the
prospects of the Group, over what period they have
done so and why they consider that period to be
appropriate, and their statement as to whether they
have a reasonable expectation that the Group will be
able to continue in operation and meet its liabilities
as they fall due over the period of their assessment,
including any related disclosures drawing attention to
any necessary qualifications or assumptions.
We are also required to review the Viability Statement, set
out on pages 47 to 48 under the Listing Rules. Based on
the above procedures, we have concluded that the above
disclosures are materially consistent with the consolidated
financial statements and our audit knowledge.
Corporate governance disclosures
We are required to perform procedures to identify whether
there is a material inconsistency between the directors’
corporate governance disclosures and the consolidated
financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of
the following is materially consistent with the consolidated
financial statements and our audit knowledge:
the directors’ statement that they consider that the
annual report and consolidated financial statements
taken as a whole is fair, balanced and understandable,
and provides the information necessary for shareholders
to assess the Company’s position and performance,
business model and strategy;
the section of the annual report describing the work of
the Audit Committee, including the significant issues
that the audit committee considered in relation to
the financial statements, and how these issues were
addressed; and
the section of the annual report that describes the
review of the effectiveness of the Company’s risk
management and internal control systems.
We are required to review the part of Corporate Governance
Statement relating to the Company’s compliance with the
provisions of the UK Corporate Governance Code specified
by the Listing Rules for our review. We have nothing to
report in this respect.
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 69
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF ROUND HILL MUSIC ROYALTY FUND LIMITED
CONTINUED
We have nothing to report on other matters on
which we are required to report by exception
We have nothing to report in respect of the following
matters where the Companies (Guernsey) Law, 2008
requires us to report to you if, in our opinion:
the Company has not kept proper accounting records; or
the consolidated financial statements are not in
agreement with the accounting records; or
we have not received all the information and
explanations, which to the best of our knowledge and
belief are necessary for the purpose of our audit.
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on pages
62 and 63, the directors are responsible for: the preparation
of the consolidated financial statements including being
satisfied that they give a true and fair view; such internal
control as they determine is necessary to enable the
preparation of consolidated financial statements that are
free from material misstatement, whether due to fraud
or error; assessing the Group and 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 they either intend to
liquidate the Group or the Company or to cease operations,
or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud
or error, and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of assurance, but does
not 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 aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of the consolidated
financial statements.
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and restrictions on its use
by persons other than the Company’s members, as a
body
This report is made solely to the Company’s members, as
a body, in accordance with section 262 of the Companies
(Guernsey) Law, 2008. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s
members, as a body, for our audit work, for this report, or
for the opinions we have formed.
Dermot Dempsey
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
25 April 2023
70 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
As at 31 December 2022
Note
31 December 2022
US$
31 December 2021
US$
Assets
Current assets
Cash and cash equivalents 5 10 ,881,314 81, 961,446
Accounts receivable and accrued income 6 20 ,878, 835 19 , 048,866
Total current assets 31,760 ,149 101,010 ,312
Non-current assets
Catalogues 4 381,338,110 303,386,321
Financial assets at fair value through profit or loss 15 67 ,647 ,500 63,57 0,487
Accrued royalty income 6 4,151,696 –
Total non-current assets 453,137 ,306 366, 956,808
Total assets 484, 897 ,455 467 , 96 7 ,120
Liabilities
Current liabilities
Accounts payable and accrued expenses 7 13,890 , 952 11,126,894
Interest payable 18 1,454,499 –
Taxation payable 19 57 4,424 –
Total current liabilities 15, 919 ,875 11,126,894
Non-current liabilities
Bank loan 18 90 ,273,666 59 , 921,393
Total non-current liabilities 90,273,666 59 , 921,393
Total liabilities 106,193,541 71, 048,287
Equity
Share capital 8 409 ,206,185 409 ,206,185
Retained earnings (30 ,502,271 ) (12,287 ,352 )
Total equity 378, 703, 914 396, 918,833
Total liabilities and equity 484,897 ,455 467 ,967 ,120
IFRS Net Asset Value per Ordinary Share USD 11 0 .9 3 0.9 5
Economic Net Asset Value per Ordinary Share USD 11 1.27 1.12
IFRS Net Asset Value per C Share USD 11 – 0.9 7
Economic Net Asset Value per C Share USD 11 – 1.03
The accompanying notes form an integral part of these Consolidated Financial Statements.
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 71
CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
For the year from 1 January 2022 to 31 December 2022
Note
1 January 2022 to
31 December 2022
US$
5 August 2020 to
31 December 2021
US$
Income
Royalty income 9 36,663,895 29 ,863, 023
Investment income 16 4,452,125 2, 951, 051
Royalty expenses (8, 7 43,585 ) (8,290 ,160 )
Investment expenses – (833,7 47 )
Fair value gain on financial assets at fair value through profit and loss 15 2,515, 756 3,527 ,283
Net income 34,888,191 27 ,217 ,450
Expenses
Administration fees 13 491,588 309 ,188
Audit and interim review fees 21 1,110 ,859 276,755
Amortisation of Catalogues 4 17 ,657 ,7 49 17 , 933, 023
Broker fees 97 ,624 76,699
Director fees 12 330 ,575 444,271
Legal and professional fees 915,731 1,715,739
Investment management fees 12 4,044,553 3, 959 ,452
Portfolio administration fees 12 2,791, 815 1,870 , 027
Other operating expenses 20 2,206,588 1, 935,265
Total operating expenses 29 ,647 ,082 28,520 ,419
Operating profit/(loss) for the year/period before finance and tax
expenses
Finance Costs 18 (4,176,777 ) (1, 096,383 )
Net profit/(loss) for the year/period before tax 1,064,332 (2,399 ,352 )
Taxation 19 (57 0 ,535 ) –
Net profit/(loss) for the year/period
Total comprehensive gain/(loss) for the year/period
Basic and diluted gain/(loss) per Ordinary Share (US Dollars) 14 0.0 1 (0. 00 )
Basic and diluted loss per C Share (US Dollars) 14 (0 .07 ) (0. 05 )
All activities derive from continuing operations.
The accompanying notes form an integral part of these Consolidated Financial Statements.
72 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
CONSOLIDATED STATEMENT
OF CASH FLOWS
For the year from 1 January 2022 to 31 December 2022
Note
1 January 2022 to
31 December 2022
US$
5 August 2020 to
31 December 2021
US$
Cash flows generated from operating activities
Net profit/(loss) for the year/period 493, 797 (2,399 ,352 )
Adjustments:
Amortisation of Catalogues 4 17 ,657 ,7 49 17 , 933, 023
Fair value gains on financial assets at fair value through profit or loss 15 (2,515,756 ) (3,527 ,283 )
Investment income 16 (4,452,125 ) –
Amortisation of capitalized borrowing costs 18 431,712 222,393
Interest on bank loan capital drawn 18 3,692,678 791,406
Facility charges on unutilised bank loan 18 52,387 82,584
Changes in:
Increase in current taxation payable 19 57 4,424 –
Increase in accounts receivable and accrued income 6 (5,126,111 ) (19 ,048 ,866 )
Increase in accounts payable and accrued expenses 7 3,539 ,7 49 6,182, 035
Net cash flows from operating activities 14,348,504 235, 940
Cash flows used in investing activities
Purchase of financial assets at fair value through profit or loss 15 (1,561,257 ) (60 , 043,204 )
Investment income distribution received 3,596,570 –
Purchase of Catalogues (96,385,228 ) (316,37 4,485 )
Net cash flows used in investing activities (94,349 , 915 ) (376,417 ,689 )
Cash flows generated from financing activities
Proceeds from bank loan 18 30 , 000, 000 60, 000, 000
Arrangement fees paid on bank loan facility 18 (79 ,439 ) (301, 000 )
Interest paid on bank loan capital drawn 18 (2,238 ,179 ) (791,406 )
Facility charges paid on unutilised bank loan 18 (52,387 ) (82,584 )
Proceeds from shares issued 8 – 417 , 061, 000
Share issue costs paid 8 – (7 ,854,815 )
Dividends paid 17 (18,708 ,716 ) (9 ,888, 000 )
Net cash flows from financing activities 8, 921,279 458,143,195
Net movement in cash and cash equivalents (71,080 ,132 ) 81, 96 1,446
Cash and cash equivalents at beginning of the year/period 81, 96 1,446 –
Cash and cash equivalents at end of the year/period 5 10 ,881,314 81, 96 1,446
The accompanying notes form an integral part of these Consolidated Financial Statements.
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 73
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
For the year from 1 January 2022 to 31 December 2022
Notes
Ordinary
Share Capital
US$
C Share
Capital
US$
Retained Earnings
Ordinary Share
Capital
US$
Retained
Earnings
C Share Capital
US$
Total Equity
US$
As at 1 January 2022 324,142,236 85,063, 949 (10 , 946,141 ) (1,341,211 ) 396, 918, 833
Proceeds from shares issued 8 – – – – –
C Share conversion 85,063, 949 (85, 063, 949 ) (3,6 15,717 ) 3,6 15,717 –
Profit/(loss) for the year – – 2,768 ,303 (2,27 4,506 ) 493,797
Dividends declared 17 – – (18, 708, 716 ) – (18 ,708, 716 )
Balance at 31 December 2022 409 ,206,185 – (30 ,502,271 ) – 378 ,703, 914
For the period from incorporation on 5 August 2020 to 31 December 2021
Notes
Ordinary
Share Capital
US$
C Share
Capital
US$
Retained Earnings
Ordinary Share
Capital
US$
Retained
Earnings
C Share Capital
US$
Total Equity
US$
As at 5 August 2020 – – – – –
Proceeds from shares issued 8 330 ,561, 000 86,500, 000 – – 417 ,06 1,000
Share issue costs 8 (6,418, 764 ) (1,436,051 ) – – (7 ,854,815 )
Loss for the period – – (1, 058,141 ) (1,341,211 ) (2,399 ,352 )
Dividends declared 17 – – (9 ,888, 000 ) – (9 ,888, 000 )
Balance at 31 December 2021 324,142,236 85,063, 949 (10, 946,141 ) (1,341,211 ) 396, 918,833
The accompanying notes form an integral part of these Consolidated Financial Statements.
74 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
1. CORPORATE INFORMATION
within the meaning of Section 1158 of the Corporation Tax Act 2010.
The Company’s Investment Objective is to provide investors with an attractive level of regular and growing income and
capital returns from investment primarily in high quality, music intellectual property.
The Company has appointed Round Hill Music LP (“Round Hill Music”) as its investment manager (the “Investment
Manager”) to manage its assets on a discretionary basis. Round Hill Music is a fully integrated owner and operator of
music Copyright properties, focusing on sourcing iconic Copyrights that it believes have an established place in culture, a
history of stable royalties and potential for future exploitation. Round Hill Music is also responsible for the administration
of the Company’s assets including the collection of royalties. On 11 November 2020, the Company completed an initial
public offering and, on 13 November 2020, listed its Ordinary Shares on the Specialist Fund Segment of the London Stock
Exchange where it traded under the symbol “RHM”.
On 18 July 2022, the Company announced that it had received confirmation from the FCA that it was eligible for a premium
listing on the Official List. The Company’s 407,621,300 Ordinary Shares were admitted to trading on the Premium Segment
of the Main Market of the London Stock Exchange on 19 July 2022. The Company’s original ticker “RHM” remained
unchanged. A sterling quote for the Ordinary Shares was introduced at the same, with the ticker “RHMP”.
These Consolidated Financial Statements of the Company and its subsidiaries (together, the “Group”) have been prepared
for the year ended 31 December 2022 (2021: for the period from incorporation on 5 August 2020 to 31 December 2021).
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
76 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
78 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
80 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
82 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
84 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
86 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
88 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
90 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
92 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
94 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
96 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 97
13. MATERIAL AGREEMENTS
Administration Agreement
Pursuant to the Administration Agreement, JTC Fund Solutions (Guernsey) Limited has been appointed as Administrator
of the Company. The Administrator is responsible for the day-to-day administration of the Company and the subsidiaries
which accede to the Administration Agreement including but not limited to any general secretarial functions required. For
the purposes of the RCIS Rules, the Administrator is the designated manager of the Company. Investors should note that it
is not possible for the Administrator to provide any investment advice to investors.
Under the terms of the Administration Agreement between the Administrator and the Company, the Administrator is
entitled to an annual fee of GBP120,060 plus an ad valorem fee of 0.05% calculated on the Company’s assets in excess
of GBP300 million (plus fees for the subsidiaries) for services such as administration, accounting, corporate secretarial,
corporate governance, regulatory compliance and stock exchange continuing obligations.
Administration fees for the year amounted to US$491,588 which includes ad hoc and out of scope
work performed during the year (period ended 31 December 2021: US$309,188) of which US$244,198
(2021: US$25,767) was outstanding at 31 December 2022.
Registrar Agreement
JTC Registrars Limited has been appointed as registrar to the Company pursuant to the Registrar Agreement. In such
capacity, the Registrar will be responsible for the transfer and settlement of Shares held in certificated and uncertificated
form. The Registrar is also entitled to reimbursement of all out-of-pocket costs, expenses and charges properly incurred on
behalf of the Company, under the terms of the Registrar Agreement. The Registrar is entitled to an annual fee of the higher
of GBP6,000 (US$7,232), GBP2,500 (US$3,014) per register and GBP2.00 per Shareholder, together with a UK transfer agent
facility fee of GBP2,000 (US$2,411) per annum.
Registrar fees for the year amounted to US$26,507 (period ended 31 December 2021: US$29,179) of which
US$1,244 (2021: US$1,636) was outstanding at 31 December 2022.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
98 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
100 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
17. DIVIDENDS DECLARED
The below dividends were declared and paid to holders of fully paid Ordinary Shares in issue at the time of declaration,
during the year (period) ended 31 December:
Date of declared dividend
US$ per
Ordinary Share
Total dividend
US$
9 March 2022 0 . 01500 4,951,499
25 May 2022 0 . 01125 4,585,739
1 September 2022 0 . 01125 4,585,739
24 November 2022 0 .01125 4,585,739
Total for the year ended 31 December 2022 18,708,716
Date of declared dividend
US$ per
Ordinary Share
Total dividend
US$
21 May 2021 0 . 00750 2,460,750
20 August 2021 0 . 01125 3,713,625
18 November 2021 0 . 01125 3,713,625
Total for 5 August 2020 to 31 December 2021
9,888,000
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 101
18. BANK LOAN
The following table provides a reconciliation of the movement in the bank loan to cash flows arising from financing activities
during the year (period):
1 January 2022 to
31 December 2022
US$
5 August 2020 to
31 December 2021
US$
Opening balance 59,921,393 –
Changes from financing activities
Capital drawn during the year / period 30,000,000 60,000,000
Arrangement fees paid on bank loan capital drawn (79,439) (301,000)
Interest paid on bank loan facility (2,238,179) (791,406)
Facility charges paid on unutilised bank loan (52,387) (82,584)
87,551,388 58,825,010
Other changes
Amortisation of borrowing costs 431,712 222,393
Accrued borrowing costs 2,290,566 873,990
90,273,666 59,921,393
Carrying loan balance
Interest payable – current 1,454,499 –
Bank loan 90,273,666 59,921,393
Total 91,728,165 59,921,393
In April 2021, the Group entered into a US$82 million revolving credit facility (the “RCF”), provided by Truist Securities, Inc.
(“Truist”). Subsequently, the Group was able to tap into an additional US$28 million from the RCF at the end of 2021. The
Prospectus allows the Group to borrow up to 25 per cent of Economic NAV, calculated at the point of draw down.
In August 2022 the credit agreement between Group and the Truist Bank (as Administrative Agent) was approved which
amended certain terms of the previous credit agreement. As a result of the amended Credit Agreement, an additional
US$500,000 facility was drawn down on 31 August 2022. Please note that the drawdown proceeds were paid directly from
Truist to the Agency Services and hence has not been shown in the above table. Arrangement fees were paid by the Agency
Services to Truist in respect of the facility, these are also not reflected in the above table.
The aggregate outstanding RCF balance was US$92.2 million as at 31 December 2022. The interest rate on the outstanding
capital was levied at a fixed rate of 2.25% per annum plus a margin adjustment based on the applicable London interbank
offered interest rate during the period. In addition, the RCF levied a commitment fee on the daily unused commitment
balance of facility at a rate of 0.375% per annum. The full repayment of the loan was due on the 30 April 2026.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
102 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
104 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year 1 January 2022 to 31 December 2022
CONTINUED
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 105
106 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
ALTERNATIVE PERFORMANCE MEASURES
(UNAUDITED)
Alternative Performance
Measure Definition Reason for use
Adjusted Operating Expenses Total operating expenses (US$29,647,082) less
amortisation of Catalogues (US$17,657,749).
An indicator of the Company’s operational
expenses after removing amortisation
Average Economic NAV Average of the Economic NAV as at
31December 2022 (US$519,623,771),
30September 2022 (US$480,958,425),
30June 2022 (US$480,675,595), 31 March
2022 (US$452,996,517)
The average was taken given that share
issuance has grown rapidly over the year
Dividend Cover Net profit for the period after tax
US$493,797 and Amortisation of Catalogues
US$17,657,749 divided by the weighted
average number of Ordinary Shares
379,106,590 results in the Earnings per share
(US$0.0479). This is divided by the Dividend
per share (US$0.0488).
A strong indicator of the Company’s ability to
pay a dividend from retained earnings.
EBITDA Net profit for the period before tax
(US$1,064,332), amortisation of Catalogues
(US$17,657,749) and loan interest and facility
charges (US$4,176,777)
Indicator of performance and profitability
of the entity, after removal of accounting
adjustments
EPS excluding total amortisation Net profit for the period after tax attributable
to Ordinary Shares (US$2,768,303) excluding
amortisation of Catalogues (US$17,657,749)
divided by the weighted average number of
Ordinary Shares in issue (379,106,590)
The operating profit adjusted for Amortisation
aligns with the Economic NAV which reflects
that the values of Catalogues are based on fair
values produced by the Portfolio Independent
Valuer
Leveraged Free Cash Flow Net cash from operating activities
(US$14,348,504) less the purchase of other
assets (US$0).
A good indicator of the cash position of the
Company and the availability of cash flows to
fund interest and dividend payments
NAV Return Latest published Economic NAV per share
(US$1.27) increase as a percentage of the
initial published Economic NAV per Ordinary
Share (US$1.08) equals a 17.6 % increase
To show how the assets have performed over
time
Net Debt Loan facility amount utilised (US$90,273,666)
less cash held at bank (US$10,881,314)
Liquidity metric used to determine how well a
company can pay all of its debts if they were
due immediately
Ongoing Charges Ratio Ongoing Charges Ratio measures the
regular, recurring annual costs of running the
Company (excluding the cost of acquisition
or disposal of investments, financing charges
and gains or losses arising on investments),
expressed as a percentage of average net
assets, calculated in accordance with AIC’s
methodology.
To monitor the expenses, which are likely to
recur, relative to the fund size over time
Total NAV Return Economic NAV per Ordinary Share as at
31December 2022 (US$1.27) plus cumulative
dividends paid up to 31 December 2022
(US$0.07875), divided by the Issue price
per Ordinary Share at Initial Admission as at
13November 2020 (US$1)
To show how the assets have performed since
IPO to Shareholders
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 107
DIRECTORS AND KEY ADVISERS
DIRECTORS
(all non-executive)
Robert Naylor (Chairman)
(appointed 1 November 2022)
Caroline Chan
Francis Keeling
Audrey McNair
(appointed 20 July 2022)
Trevor Bowen
(resigned 1 November 2022)
INVESTMENT MANAGER AND
PORTFOLIO ADMINISTRATOR
Round Hill Music LP
818 18th Ave South
Suite 940
Nashville, TN
32703 USA
REGISTRAR
JTC Registrars Limited
Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey
GY1 2HT
FINANCIAL ADVISER &
CORPORATE BROKER
Cenkos Securities PLC
6-8 Tokenhouse Yard
London
EC2R 7AS
SOLICITORS TO THE COMPANY
(AS TO ENGLISH LAW)
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
REGISTERED OFFICE
PRINCIPAL BANKERS
Lloyds Bank International
P.O. Box 53
1 Smith Street
St Peter Port
Guernsey GY1 4BD
ADMINISTRATOR AND SECRETARY
JTC Fund Solutions (Guernsey) Limited
Ground Floor
Dorey Court
Admiral Park
St Peter Port
Guernsey
GY1 2HT
INDEPENDENT AUDITOR
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
ADVOCATES TO THE COMPANY
(AS TO GUERNSEY LAW)
Carey Olsen (Guernsey)
Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
108 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
GLOSSARY
The following definitions apply throughout this Annual Report unless the context requires otherwise:
Administration Agreement the administration agreement between the Company and the Administrator (or
the separate administration between each UK Subsidiary and the Administrator, as
the case may be)
Administrator JTC Fund Solutions (Guernsey) Limited
AIC the Association of Investment Companies
AIC Code the AIC Code of Corporate Governance published by the AIC from time to time
AIFM Directive Directive 2011/61/EU of the European Parliament and of the Council on Alternative
Investment Fund Managers as amended from time to time
AIMP the Association of Independent Music Publishers
Annual Report the Company’s annual report for the period 1 January to 31 December 2022
Articles the articles of incorporation of the Company as amended from time to time
ASCAP the American Society of Composers, Authors and Publishers
Audit Committee the audit committee of the Board
Auditor or KPMG KPMG Channel Islands Limited
Average Market Capitalisation as described in paragraph 4 of Part 3 of the Prospectus
BMI Broadcast Music, Inc.
Board the board of Directors of the Company or any duly constituted committee thereof
BIPOC Black, Indigenous, and people of colour
BPI British Phonographic Industry
Carlin RH Carlin Holdings LLC
Carlin Interest the Company’s 29.14% ownership and voting rights in Carlin
Carlin Investment the Company’s acquisition of a 29.14% interest in Carlin from Round Hill Fund One
Catalogue one or more Copyrights acquired from a single songwriter or recording artist
Cenkos Cenkos Securities plc
certificated not in uncertificated form
CISAC the Confederation of Societies of Authors and Composers
Code the GFSC’s Finance Sector Code of Corporate Governance
Companies Law the Companies (Guernsey) Law, 2008 as amended
Company Round Hill Music Royalty Fund Limited
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 109
Collective Management entities that manage rights on behalf of multiple rights owners and have the ability
Organisations or CMOs to issue a single licence to licensees on behalf of those right owners. Examples
include BMI, MCPS, PPL and PRS
Copyright a songwriter’s copyright interest (which comprises their writer’s share, their
publisher’s share and their performance rights) together with the rights in the
recording of the musical composition or song (known as the master recording
rights) to include, where the context so requires, any one or more of such
interests or rights or any part of such interests or rights
Corporate Broker Cenkos, the Company’s sole corporate broker
Corporation Tax Act 2010 Corporation Tax Act 2010 and any statutory modification or re-enactment thereof
for the time being in force
CNB City National Bank
CNB RCF the revolving credit facility provided to the Group by CNB
CRB Copyright Royalty Board
CREST the computerised settlement system operated by Euroclear which facilitates the
transfer of title to shares in uncertificated form
CREST Regulations the Uncertificated Securities (Guernsey) Regulations 2009 (SI 2009 No. 48) as
amended from time to time
C Shares C shares of no par value each in the capital of the Company and “C Share” shall be
construed accordingly
Data Protection the Data Protection (Bailiwick of Guernsey) Law, 2017 and any other legislation in
(Bailiwick of Guernsey) Law, 2017 Guernsey concerning data protection
DCF Discounted Cash Flow, a valuation approach
DEI Diversity, Equity and Inclusion
digital music platforms Digital service providers or platforms such as Spotify or Apple Music
or DMPs or digital platforms
or digital service providers or DSPs
Directors the directors from time to time of the Company and “Director” is to be construed
accordingly
Disclosure Guidance and the disclosure guidance published by the FCA and the transparency rules made by
Transparency Rules the Financial Conduct Authority under section 73 of FSMA as amended from time
to time
Economic NAV at any date, the Gross Asset Value less the amount which (to the extent not
otherwise deducted in the calculation of Gross Asset Value), in accordance with
the Company’s latest published valuation methodology, fairly reflects the amount
of the liabilities and expenses of the Company
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ADDITIONAL
INFORMATION
110 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
Economic Net Asset Value per at any time the Economic NAV attributable to the Ordinary Shares divided by the
Ordinary Share or Economic NAV number of Ordinary Shares in issue (other than Ordinary Shares held in treasury)
per Ordinary Share or Economic at the date of the calculation
NAV per Share
EPS earnings per Share
ESG Environmental, Social and Governance
Euro or € the lawful currency of the EU
Excess Return as described in paragraph 4 of Part 3 of the Prospectus
FCA the Financial Conduct Authority or any successor authority
Financial Adviser Cenkos, the Company’s sole financial adviser
First Investment the Company’s acquisition of the assets of Round Hill Fund One (excluding its
holding in Carlin)
FTI Report the second independent valuation report for 31 December 2022 valuations
provided by FTI Consulting
FVTOCI fair value through other comprehensive income
FVTPL fair value through profit and loss
GFSC the Guernsey Financial Services Commission
Gross Asset Value at any date, the aggregate of:
i. the value of all the investments of the Company as determined by the Directors
and calculated in the case of Copyrights by reference to an independent valuer’s
determination of the appropriate current value for such Copyrights, which is
to be calculated in accordance with the Company’s latest published valuation
methodology, among other things, as regards the fair market value of the
Copyrights; and
ii. the amount which, in accordance with the Company’s latest published valuation
methodology, fairly reflects the value of all other assets of the Company
Group the Company and its UK Subsidiaries and any other subsidiaries from time to time
Group Revenue total combined revenue comprising income from the Portfolio
High Watermark as described in paragraph 4 of Part 3 of the Prospectus
IFPI the International Federation of the Phonographic Industry, an organisation that
represents the interests of the recording industry worldwide
IFRS International Financial Reporting Standards
IFRS NAV the value, as at any date, of the assets of the Company after deduction of all
liabilities determined in accordance with IFRS
Independent Valuer Citrin Cooperman (incorporating Massarsky Consulting, Inc.)
GLOSSARY CONTINUED
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 111
Initial Admission admission of the Ordinary Shares, issued pursuant to the IPO, to trading on the
Specialist Fund Segment
Initial Investments the First Investment and the Carlin Investment
Initial Period the period from the Company’s incorporation to 31 December 2021
Investment Income income from the Carlin Interest
Investment Management Agreement the investment management agreement between the Company and the
Investment Manager, as amended from time to time
Investment Manager or Round Hill Music LP, the Company’s investment manager
Round Hill or Round Hill Music
Investment Objective the Company’s investment objective as set out in Part 1 of the Prospectus
Investment Policy the Company’s investment policy as set out in Part 1 of the Prospectus
IPO the Company’s initial public offering
Issue Price US$1.00 per Ordinary Share
Listing Rules the listing rules made by the FCA under section 73A of FSMA as amended from
time to time
LEED (Leadership in Energy and Environmental Design) is the world’s most widely used
green building certification system
LIBOR London Interbank offered interest rate
London Stock Exchange London Stock Exchange plc
Luminate a data and analytics provider to the music business and consumers, formerly
known as MRC Data
Main Market the London Stock Exchange’s main market for listed securities
Management Engagement Committee the management engagement committee established by the Board
Management Fee the management fee payable to the Investment Manager as described in
paragraph 4 of Part 3 of the Prospectus
Mechanical Copyright Protection UK’s CMO for handling mechanical rights on behalf of publishers and writers
Society or MCPS owned by the UK’s Music Publishers’ Association
Migration the Company’s transfer of its listing and trading of its Ordinary Shares to the
Premium Segment
MRO a Mechanical Rights Organisation which collects mechanical royalties
neighbouring rights royalties paid to performers (both featured and non-featured artists) and rights
owners for the use of their phonographic recordings worldwide
net income the aggregate of royalty income, royalty expenses, investment income and related
expenses and gains on financial assets at fair value through profit and loss
net proceeds the proceeds of the Initial Issue or a Subsequent Placing (as the case may be) after
deduction of costs and expenses
GLOSSARY CONTINUED
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112 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
NMPA National Music Publishers’ Association, a trade association for the American music
publishing industry
NLS Net Label Share is the amount received by the owner of master recordings after
deduction of all fees, commissions and all royalties and other shares of income
payable to third parties.
NPS Net Publisher’s Share is the amount received by the music publisher after
deduction of all fees, commissions and all royalties and other shares of income
payable to third parties
offer for subscription the offer for subscription of Ordinary Shares at the Issue Price on the terms set out
in the Prospectus
Ordinary Shares ordinary shares of no par value each in the capital of the Company and “Ordinary
Share” shall be construed accordingly
Performance Fee the performance fee payable to the Investment Manager as described in paragraph
4 of Part 3 of the Prospectus
Performance Fee Calculation Date as described in paragraph 4 of Part 3 of the Prospectus
Performance Hurdle Price has the meaning set out in paragraph 4 of Part 3 of the Prospectus
Performance Period Average as described in paragraph 4 of Part 3 of the Prospectus
Market Capitalisation
Performance Rights Organisations Performance Rights Organisations such as ASCAP and PRS for Music which collect
or PROs royalties on behalf of the owners of Copyrights
Performance Share Price as described in paragraph 4 of Part 3 of the Prospectus
Placing Programme the placing programme of Shares incorporating any Subsequent Placing as
described in the Prospectus
POI Law the Protection of Investors (Bailiwick of Guernsey) Law, 2020, as amended
Portfolio the Group’s total portfolio of investments from time to time including its Carlin
Interest. Carlin is a single Catalogue held in a standalone operating company
entity.
Portfolio Administration Agreement the portfolio administration agreement between, inter alios, the Company and the
Investment Manager, as amended from time to time
PPL Phonographic Performance Limited, a UK based music licensing company
Premium Segment the Premium Segment of the Main Market
PRO a performance rights organisation
Prospectus the Company’s prospectus dated 19 October 2020, as amended by its
supplementary prospectus dated 3 November 2020
PRS PRS for Music Limited, a UK PRO
GLOSSARY CONTINUED
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 113
RCIS Rules the Registered Collective Investment Scheme Rules 2021
Registrar JTC Registrars Limited
Registrar Agreement the registrar agreement between the Company and the Registrar
Regulatory Information Service or RIS a service authorised by the FCA to release regulatory announcements to the
London Stock Exchange
RHMRF1 Limited, RHMRF2 Limited each a wholly owned UK Subsidiary of the Company
and RHMRF3 Limited
RIAA the Recording Industry Association of America
Round Hill Fund One Round Hill Music Royalty Fund LP, a Delaware limited partnership of which Round
Hill is the investment manager
Secretary JTC Fund Solutions (Guernsey) Limited
Shareholder a holder of Shares
Shares the Ordinary Shares and/or the C Shares, as the context may require
SOFR secured overnight financing rate
song includes a composition
Specialist Fund Segment or SFS the Specialist Fund Segment of the Main Market
SPPI solely payments of principal and interest on the principal
Sterling or GBP or £ or pence the lawful currency of the United Kingdom
Subsequent Placing any placing of Shares pursuant to the Placing Programme
Truist Truist Securities, Inc.
Truist RCF the revolving credit facility provided to the Group by Truist Securities, Inc. which
has been replaced by the CNB RCF
UK Code the UK Corporate Governance Code as published by the Financial Reporting
Council from time-to-time
UK Subsidiaries UK subsidiaries of the Company incorporated from time to time to hold assets of
the Company, currently RHMRF 1 Limited, RHMRF 2 Limited and RHMRF3 Limited
uncertificated or in a share recorded on the Company’s Share register as being held in uncertificated
uncertificated form form in CREST and title to which, by virtue of the CREST Regulations, may be
transferred by means of CREST
United Kingdom or UK the United Kingdom of Great Britain and Northern Ireland
United States of America, the United States of America, its territories and possessions, any state of the
United States, USA or U.S. United States of America and the District of Columbia
US Dollar or USD or US$ or cent the lawful currency of the United States of America
US GAAP US Generally Accepted Accounting Principles
GLOSSARY CONTINUED
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ADDITIONAL
INFORMATION
114 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
AGM NOTICE
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to any
aspect of the proposals referred to in this document or as to the action you should take, you are advised to consult
your stockbroker, solicitor, accountant, or other professional adviser. If you have sold or otherwise transferred all
your shares in Round Hill Music Royalty Fund Limited (the “Company”), please pass this document together with
the accompanying documents to the purchaser or transferee, or to the person who arranged the sale or transfer for
transmission to the person who now holds shares in the Company.
24 April 2023
Dear Shareholder,
You will find set out on pages 115 and 116 the notice convening the Company’s annual general meeting (the “AGM”) to be
held at 1.00 p.m. (UK time) on Monday, 12 June 2023 at the offices of Gowling WLG (UK) LLP, 4 More London Riverside,
London SE1 2AU, United Kingdom.
An explanation of the resolutions for consideration at the AGM can be found on pages 117 and 118.
The Board welcomes Shareholders to attend the AGM, however, those who cannot attend in person are encouraged to vote
by the return of a Form of Proxy.
The Company strongly encourages all shareholders to exercise their votes in respect of the meeting in advance and to
submit any questions they may have to the Company’s Secretary at gsycosec.listed@jtcgroup.com. Voting by proxy will
ensure that your votes are registered.
The Board considers that the resolutions being proposed at the AGM are in the best interests of the Company and
its Shareholders as a whole. Accordingly, the Board unanimously recommends all Shareholders vote in favour of the
resolutions. The Directors intend to vote in favour of the Resolutions being proposed at the AGM in respect of their own
beneficial holdings of Shares which, in aggregate, amount to 203,697 ordinary shares, representing 0.05 per cent. of the
issued share capital of the Company as at the date of this document.
Yours faithfully,
Robert Naylor
Chairman
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 115
NOTICE OF GENERAL MEETING
Notice is hereby given that Round Hill Music Royalty Fund Limited’s (the “Company”) annual general meeting (the “AGM”)
will be held at the offices of Gowling WLG (UK) LLP, 4 More London Riverside, London SE1 2AU, United Kingdom, on
Monday, 12 June 2023 at 1.00 p.m. (UK time) for the following purposes:
ORDINARY BUSINESS: ORDINARY RESOLUTIONS
1. To receive the Annual Report and Audited Consolidated Financial Statements of the Company for the year ended 31
December 2022.
2. That the Directors’ remuneration for the period ended 31 December 2022 as provided on pages 58 to 59 of the Annual
Report be approved.
3. To re-appoint KPMG Channel Islands Limited as auditor of the Company, to hold office until the conclusion of the next
annual general meeting to be held in 2024.
4. That the directors be authorised to agree the remuneration of KPMG Channel Islands Limited.
5. To re-elect Caroline Chan as a director of the Company.
6. To re-elect Francis Keeling as a director of the Company.
7. To elect Robert Naylor as a director of the Company.
8. To elect Audrey McNair as a director of the Company.
9. That the Company’s dividend policy be approved.
SPECIAL BUSINESS: ORDINARY RESOLUTION
10. To resolve that the Company be generally and, subject as hereinafter appears, unconditionally authorised, in accordance
with section 315(1)(a) of The Companies (Guernsey) Law, 2008 (as amended) (the “Companies Law”), to make market
acquisitions (within the meaning of section 316 of the Companies Law) of ordinary shares in the capital of the Company,
and to cancel such shares or hold such ordinary shares as treasury shares, provided that:
i) the maximum number of shares hereby authorised to be purchased shall be up to an aggregate of 61,102,432 shares
or such number as shall represent 14.99 per cent of the ordinary shares in issue as at the date of the AGM, whichever
is less (in either case excluding shares held in treasury);
ii) the maximum price which may be paid for an ordinary share must not be more than the higher of (i) an amount equal
to 105 per cent. of the average of the mid-market values of an ordinary share taken from the London Stock Exchange
Daily Official List for the five business days before the purchase is made; and (ii) the higher of the price of the last
independent trade or the highest current independent bid for ordinary shares on the London Stock Exchange at the
time the purchase is carried out; and
iii) the minimum price that may be paid for an ordinary share is not less than US$0.01;
and that the authority conferred by this resolution shall expire on the earlier of 12 December 2024 or the date of the next
annual general meeting of the Company (except in relation to the purchase of ordinary shares concluded before such
date and which would be executed wholly or partly after such date).
11. That the Company may send or supply documents or information to members by making them available on a website.
BY ORDER OF THE BOARD
JTC Fund Solutions (Guernsey) Limited
Secretary
24 April 2023
OVERVIEW
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
116 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
Notes:
• In accordance with the Company’s Articles of Incorporation, the Chairman of the Board or, failing him, another director,
will preside as chairman of the AGM.
• Ordinary Resolutions: To be passed, these resolutions require a simple majority of the votes cast by those members
voting in person or by proxy or by corporate representative at the AGM to be cast in favour.
• A member entitled to attend and vote at the AGM is entitled to appoint one or more proxies to attend and vote instead
of him or her. A proxy need not be a member of the Company. Completion and return of the form of proxy will not
preclude members from attending and voting at the meeting, if they so wish.
• More than one proxy may be appointed provided each proxy is appointed to exercise the rights attached to different
shares.
• To be valid the form of proxy, together with the original power of attorney or other authority, if any, under which it is
executed (or a notarially certified copy of such power of authority) must be deposited with the Company’s agent, for this
purpose being JTC Registrars Limited, PO Box 156, Ground Floor, Dorey Court, Admiral Park, St Peter Port, Guernsey
GY1 4EU, not less than 48 hours before the time for holding the AGM or any adjourned AGM (excluding any part of a day
that is not a business day in Guernsey). A form of proxy is enclosed with this notice.
• All persons recorded on the register of shareholders as holding shares in the Company, under the ISIN GG00BMXNVC81
(ordinary shares), as at close of business on Thursday, 8 June 2023 or, if the AGM is adjourned by more than 24 hours,
as at close of business on the business day before the day of any adjourned AGM, shall be entitled to attend and vote
(in person, by proxy or by corporate representative) at the meeting and shall on a poll be entitled to one vote per share
held. Changes to entries on the register of members after that time shall be disregarded in determining the rights of any
person to attend or vote at the AGM.
• Where there are joint registered holders of any shares, any one of such persons shall have the right of voting in respect
of such shares but if more than one such person is present at the AGM in person or by proxy the person whose name
stands first on the register of shareholders shall alone be entitled to vote.
• On a poll, votes may be given either personally, by proxy or by corporate representative and a shareholder entitled to
more than one vote need not use all his votes or cast all the votes he uses in the same way.
• Any corporation which is a shareholder may by resolution of its directors or other governing body authorise such person
as it thinks fit to act as its representative at the AGM. Any person so authorised shall be entitled to exercise on behalf of
the corporation which he represents the same powers (other than to appoint a proxy) as that corporation could exercise
if it were an individual shareholder.
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 117
At the AGM there are eleven ordinary resolutions which shareholders will be asked to consider and, if thought fit, approve.
An explanation of each of these resolutions is given below. All resolutions are proposed as ordinary resolutions. An
ordinary resolution requires more than 50 per cent. of votes cast at the AGM on that resolution to be cast in favour of it for
the resolution to be passed.
ORDINARY RESOLUTIONS
Resolution 1: Annual Report and Consolidated Financial Statements for the year ended 31 December 2022
The Annual Report and Consolidated Financial Statements for the year ended 31 December 2022 will be presented to the
Annual General Meeting and shareholders will be given an opportunity at the meeting to ask questions. At the end of the
discussion shareholders will be invited to receive the Annual Report and Consolidated Financial Statements.
Resolutions 2: Directors’ remuneration report
The Company has included details of its Directors’ remuneration within the Annual Report 2022 on pages 58 to 59 and an
ordinary resolution will be put to Shareholders seeking approval of the Directors’ remuneration and will be advisory only.
Resolutions 3 and 4 (inclusive): Appointment of Auditor and remuneration
KPMG Channel Islands Limited has indicated that they are willing to continue to be the auditor of the Company for next
year. You are therefore asked to approve their re-appointment, to hold office until the conclusion of the next annual general
meeting to be held in 2024 as required under section 199 of the Companies Law, and to authorise the directors of the
Company to determine the auditor’s remuneration.
Resolutions 5 to 6 (inclusive): Re-election of Directors
In accordance with the AIC Code of Corporate Governance, all directors are subject to annual re-election. Accordingly,
at the AGM, Caroline Chan and Francis Keeling will each retire and, being eligible, offer themselves for re-election. Their
biographies follow:
Caroline Chan
Caroline has over 30 years’ experience as a corporate lawyer and is a Guernsey Advocate. She retired from private practice
in 2020. After studying law at St Anne’s College, Oxford, Caroline trained and qualified as an English solicitor with Allen
& Overy, where she worked in their corporate team for nearly nine years including three years in their Hong Kong office.
Caroline returned to Guernsey in 1998, and practised locally, including as a partner with Ogier and then Mourant Ozannes.
She is a director of BH Macro Limited, another Guernsey closed-ended fund that trades on the London Stock Exchange, and
Chair of the Board of Governors of The Ladies’ College. Caroline recently retired as a member of the Guernsey Competition
and Regulatory Authority. Caroline is resident in Guernsey.
Francis Keeling
Francis is an experienced media and music industry professional and is currently Executive Vice President of Business
Development at Orfium, a leader in rights management solutions. Francis previously served as SVP International for
Discovery, and as Global Head of Licensing at Spotify, responsible for all music licensing with record labels, publishers and
collecting societies. Francis was previously Global Head of Digital Business for Universal Music Group for nearly 10 years,
spearheading recorded music licensing for all digital music services. He has a master’s degree in mechanical engineering
from Imperial College London, and is resident in the United Kingdom.
Resolutions 7 to 8 (inclusive): Election of Directors
Robert Naylor
Robert was appointed as Chairman of the Company with effect from 1 November 2022 and offers himself for election.
EXPLANATORY NOTES TO THE NOTICE OF AGM
OVERVIEW
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INFORMATION
118 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
Robert has 25 years’ experience in capital markets. Robert was most recently at Cenkos Securities plc as head of corporate
finance and corporate broking in the investment funds team. Prior to this Robert has held roles as co-head of the
investment funds team at Panmure Gordon (UK) Ltd and executive director, head of product development in the investment
trust team at JPMorgan Asset Management Ltd. Robert has advised a number of public Healthcare and Life Science
companies including BBI Holdings plc, Collagen Solutions plc, EKF Diagnostic Holdings plc, Scancell Holdings plc, Yourgene
Health plc (previously Premaitha Health plc) and Immunodiagnostics Systems Holdings plc. Robert started his career with
Ernst & Young LLP in 1996 where he qualified as a chartered accountant in the investment management group. Robert
is Chief Executive Officer of Intuitive Investments Group plc and non-executive director of Light Science Technologies
Holdings plc. Robert is a resident in the United Kingdom.
Audrey McNair
Audrey was appointed a director of the Company with effect from 20 July 2022 and as Audit Chair from 1 November 2022
and offers herself for election.
Audrey is an experienced director and is currently a non-Executive director and chair of the Audit and Risk Committee
of Octopus Renewables Infrastructure Trust plc. Previously Audrey has held the following non-executive roles – British
Friendly Society where she chaired the risk and investment committee, Earl Shilton Building Society where she chaired the
audit, risk and compliance committee and Jupiter Emerging and Frontier Income Trust plc where she was chair of the audit
committee. In her executive career, across the buy and sell side in the City of London, she has gained extensive knowledge
of regulatory governance and investment management processes and products, including having worked at Aberdeen
Asset Management plc, starting as Head of Internal Audit (EMEA) and becoming Global Head of Business Risk (including
operational, IT and strategic risk) and responsible for the group’s risk management framework and internal capital adequacy
assessment. Audrey is resident in the United Kingdom.
Resolution 9: Approval of dividend policy
Interim dividends do not require shareholder approval under the Companies (Guernsey) Law, 2008, as amended. However,
the Board wishes to afford the Shareholders the ability to approve the Company’s dividend policy, as set out in the
Prospectus and summarised in the Chairman’s Statement on pages 3 to 5 of the Annual Report. As interim dividends have
already been and should continue to be declared and paid, this is an advisory vote, rather than a binding vote.
Resolution 10: Market Acquisitions by the Company of its own shares
The directors had been granted general authority to purchase in the market up to 14.99 per cent. of the ordinary shares in
issue at the 2022 AGM with such authority expiring on the conclusion of the Company’s 2023 annual general meeting and
the directors intend to seek annual renewal of this authority at each annual general meeting.
As such, at the AGM the directors are seeking authorisation to purchase up to an aggregate of 61,102,432 ordinary shares
or such number as shall represent 14.99 per cent of the ordinary shares in issue as at the date of the AGM, whichever is
less (in either case excluding shares held in treasury). The authority conferred by this resolution shall expire on the earlier
of 12 December 2024 or the date of the next annual general meeting of the Company (except in relation to the purchase of
ordinary shares concluded before such date and which would be executed wholly or partly after such date). Any ordinary
shares acquired by the Company may be cancelled or held in treasury.
Resolution 11: Electronic communications
In accordance with section 6.1.8 of the FCA’s Disclosure Guidance and Transparency Rules, the Company is proposing
a resolution to allow the Company to communicate with shareholders via electronic means, specifically by posting
documents to the Company’s website. Subject to the passing of the resolution, the Company will be writing to shareholders
to request their consent for the use of electronic communications.
ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022 / 119
ROUND HILL MUSIC ROYALTY FUND LIMITED (the “Company”)
(Registration number 68002)
FORM OF PROXY
Form of proxy for use at the annual general meeting (the “AGM”) of the Company to be held at 1.00 p.m. (UK time) on
Monday, 12 June 2023 at the offices of Gowling WLG (UK) LLP, 4 More London Riverside, London SE1 2AU, United Kingdom.
I/WE………………………………….......................................................................................................................(Block Letters)
OF.............................................................................................................................................(Address in block Letters)
being [a] member[s] of the Company and holder(s) of ordinary shares, hereby appoint the chairman of the AGM *or
…………………………………………………………………………………as my / our proxy to vote for me / us on my / our behalf, as
directed below on the resolutions to be proposed at the AGM and at any adjournment thereof.
*Note: If it is desired to appoint as proxy any person other than the Chairman of the AGM, his / her name and address
should be inserted in the relevant place and reference to the Chairman of the AGM deleted and the alteration initialled.
I / WE direct the proxy to vote on the resolutions as follows:
Ordinary Business: Ordinary Resolutions FOR AGAINST WITHHELD
1. To receive the Annual Report and Audited Consolidated Financial
Statements of the Company for the year ended 31 December
2022.
2. That the Directors’ remuneration for the period ended
31December 2022 as provided on pages 58 to 59 of the Annual
Report be approved.
3. To re-appoint KPMG Channel Islands Limited as auditor of the
Company, to hold office until the conclusion of the next annual
general meeting to be held in 2024.
4. That the directors be authorised to agree the auditor’s
remuneration.
5. To re-elect Caroline Chan as a director of the Company.
6. To re-elect Francis Keeling as a director of the Company.
7. To elect Robert Naylor as a director of the Company.
8. To elect Audrey McNair as a director of the Company.
9. That the Company’s dividend policy be approved.
Special Business: Ordinary Resolution FOR AGAINST WITHHELD
10. To resolve that the Company be authorised, in accordance
with Section 315(1)(a) of the Companies Law, to make market
acquisitions of shares in the capital of the Company on the terms
set out in the notice of AGM.
11. That the Company may send or supply documents or information
to members by making them available on a website.
Please indicate with an X in the appropriate space how you wish your vote to be cast. On receipt of the form duly executed
and in the absence of a specific direction, your proxy will vote or abstain as he or she thinks fit on the resolutions. Unless
the number of shares voted via this form of proxy is specified, all shares will be voted as indicated above.
Signed: .………………………………………… Dated……………………………………….....
STRATEGIC
REPORT
GOVERNANCE
FINANCIAL
STATEMENTS
ADDITIONAL
INFORMATION
OVERVIEW
120 / ROUND HILL MUSIC ROYALTY FUND LIMITED / ANNUAL REPORT 2022
Notes:
1. If the shareholder is a corporation, this form must be executed under its common seal or under the hand of its duly
authorised officer or attorney.
2. The signature of any one of joint holders will be sufficient, but the names of all joint holders should be stated.
3. Any alterations to this proxy should be initialled by the person who signs it.
4. The “Vote Withheld” option is provided to enable you to abstain on any particular resolution. However, it should be
noted that a “Vote Withheld” is not a vote in law and will not be counted in the calculation of the proportion of the votes
‘For’ and ‘Against’ a resolution.
5. To be valid this form of proxy, together with the power of attorney or other authority, if any, under which it is executed
(or a notarially certified copy of such power of authority) must be deposited with the Company’s agent, for this purpose
being JTC Registrars Limited, PO Box 156, Ground Floor, Dorey Court, Admiral Park, St Peter Port, Guernsey GY1 4EU
not less than 48 hours before the time for holding the AGM or any adjourned AGM (excluding any part of a day that is
not a business day in Guernsey).
6. To appoint more than one proxy you may photocopy this form. Please indicate the proxy holder’s name and the number
of shares in relation to which they are authorised to act as your proxy (which, in aggregate, should not exceed the
number of shares held by you). Please also indicate if the proxy instruction is of multiple instructions being given. All
forms must be signed and should be returned together in the same envelope.
7. In the event that a form of proxy is returned without an indication as to how the proxy shall vote on the resolutions, the
proxy will exercise his discretion as to whether and, if so, how he votes.
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Round Hill Music Royalty Fund Limited Annual Report 2022