TIDMAPEF
RNS Number : 8689D
Aberdeen Private Equity Fund Ltd
12 July 2016
ABERDEEN PRIVATE EQUITY FUND LIMITED
AUDITED ANNUAL FINANCIAL REPORT ANNOUNCEMENT
for the year ended 31 March 2016
STRATEGIC REPORT - COMPANY SUMMARY AND FINANCIAL HIGHLIGHTS
Net asset total return{A} Share price total return{A}
2016 +6.6% 2016 +2.3%
2015 +18.2% 2015 +15.5%
--------------------------- ------- ----------------------------- -------
Discount to Net Asset Ongoing charges (excluding
Value performance fee)
2016 34.1% 2016 1.9%
2015 30.8% 2015 1.8%
--------------------------- ------- ----------------------------- -------
Source: Aberdeen Asset Management & Morningstar
{A}Total return represents capital return plus dividends reinvested
on the dividend date.
STRATEGIC REPORT - OVERVIEW OF STRATEGY
Introduction
The Company aims to attract long term private and institutional
investors wanting to benefit from the growth prospects of a
diversified portfolio of PE investments.
The business of the Company is that of an investment company and
the Directors do not envisage any change in this activity in the
foreseeable future.
Duration
The Articles of Incorporation require the Company to propose a
continuation vote at every third Annual General Meeting. The next
continuation resolution, proposing that the Company continue its
business as a closed-ended investment company, will be proposed at
the Annual General Meeting to be held on 13 September 2016.
Investment Objective and Policy
The investment objective of the Company is to maximise total
returns to shareholders, principally through long-term capital
gains. The Company aims to achieve its objective through investment
in a diversified portfolio of PE funds and direct
co-investments.
The Company may also hold direct holdings, as an ancillary part
of its portfolio, in hedge funds, other specialty funds, quoted and
unquoted companies and securities, including fixed interest
securities, cash-equivalent investments and cash.
The Company will not invest more than 10%, in aggregate, of the
value of its gross assets in other investment trusts or investment
companies admitted to the Official List, provided that this
restriction does not apply to investments in any such investment
trusts or investment companies which themselves have stated
investment policies to invest no more than 15% of their gross
assets in other investment trusts or investment companies admitted
to the Official List. In any event, the Company will not invest
more than 15% of its gross assets in other investment trusts or
investment companies admitted to the Official List.
Investment Process and Investment Opportunities
The Manager's key objective is to select PE managers which it
believes will produce, over time, superior risk-adjusted returns in
their chosen investment strategy and which can demonstrate
significant competitive advantages compared with other funds in
their peer group. The focus is on the individual merits of
investments, but the industry and economic environment in which
that manager is operating is also taken into consideration.
The investment process is systematic and disciplined. Due
diligence is at its heart and typically around three to four months
are spent analysing a potential manager, a process which includes a
number of on-site visits with that manager. The process culminates
in the provision of a detailed report that is then presented to,
and discussed by, the Manager's Investment Committee (the
"Investment Committee"), where a selection decision is made on all
potential funds. The Investment Committee has to approve an
investment before it can be recommended to the Company's Board for
approval. The Manager will also conduct operational and legal due
diligence on the potential manager and proposed investment.
On-going monitoring is similarly robust, and includes regular
reviews of market conditions and their potential effect on the
underlying funds and any direct PE investment. In response to the
conclusions drawn from this process, the Investment Committee
recommends to the Company's Board whether or not to retain an
investment.
Asset Allocation
The Company seeks to hold a portfolio of investments which is
broadly diversified by industry sector, investment stage and size
of investment, as well as by strategy. The Company intends to
invest the majority of its portfolio in the buyout, growth capital,
distressed and venture capital funds sectors.
Risk Diversification
The Manager actively monitors the Company's portfolio and
attempts to mitigate risk through diversification. Not more than
20% of the NAV, at the time of investment, is permitted to be
invested in any single investment. If the Company acquires a
portfolio of investments in a single transaction, this limitation
will be applied individually to each of the underlying investments
acquired and not to the portfolio as a whole.
Gearing
On 31 March 2016 the Company entered into a new secured GBP40
million three year committed revolving credit facility, with Lloyds
Bank Plc ("Lloyds") which replaced an expiring GBP15 million
facility from Lloyds. The credit facility is available for general
corporate and working capital purposes including bridging capital
contribution commitments in accordance with the investment policy.
The Company's formal policy with respect to gearing is to ensure
that its aggregate borrowings do not exceed a maximum of 25% of
NAV. During the year to 31 March 2016 and up to the date of this
report, the Company has not made any drawings under the Lloyds
facility. The Company's obligations under the facility are secured
against the Company's assets pursuant the terms of a Guernsey
security agreement and an English security deed.
Key Performance Indicators (KPIs)
The Board uses a number of financial performance measures to
assess the Company's success in achieving its objective and
determine the progress of the Company in pursuing its investment
policy. The main KPIs identified by the Board in relation to the
Company which are considered at each Board meeting are as
follows:
KPI Description
NAV and NAV total The Board considers the Company's NAV total return
return figures to be the best indicator of performance
over time and these are therefore the main indicators
of performance used by the Board. A table showing
the total NAV return over one, three and five years
is shown under Results below.
Share price and The Board also monitors the price at which the Company's
Share price total Shares trade relative to the Company's peer group
return and a number of major indices on a total return
basis over time. Graphs showing the total share
price return against the peer group and major indices
are shown in the Annual Report.
Discount/Premium The discount/premium relative to the NAV per share
to NAV represented by the share price is closely monitored
by the Board. The objective is to minimise fluctuations
in the discount/premium relative to similar investment
companies and in seeking to achieve this objective
the Company may, subject to market conditions and
if considered to be in the best interests of shareholders,
use share buy backs or the issuance of new shares.
A graph showing the share price discount relative
to the NAV is also shown in the Annual Report.
Ongoing Charges The Board monitors the Company's operating costs
Ratio carefully. Ongoing charges for the year and previous
year are disclosed under Results below.
Risk Management
There are a number of risks which, if realised, could have a
material adverse effect on the Company and its financial condition,
performance and prospects. The Board has undertaken a robust review
of the principal risks and uncertainties facing the Company
including those that would threaten its business model, future
performance, solvency or liquidity. Those principal risks are
disclosed in the table below together with a description of the
mitigating actions taken by the Board. The principal risks
associated with an investment in the Company's Shares are published
monthly on the Company's factsheet or they can be found in the
pre-investment disclosure document published by the Manager, both
of which are available on the Company's website. The Board reviews
the risks and uncertainties faced by the Company in the form of a
risk matrix and heat map at its Audit Committee meetings.
Description Mitigating Action
Investment strategy and The Board keeps under review the level
objectives - the setting of discount at which the Company's Shares
of an unattractive strategic trade, in absolute terms and relative to
proposition to the market its peer group, as well as the investment
and the failure to adapt objective and policy. It regularly reviews
to changes in investor the Company's strategy and receives regular
demand may lead to the updates from the Manager and investor relations
Company becoming unattractive reports from the Broker on the market.
to investors, a decreased The Board is updated at each Board meeting
demand for shares and on the make-up of and any movements in
a widening discount. the shareholder register.
Investment portfolio and The Board sets, and monitors, its investment
investment management restrictions and guidelines, and receives
- investing outside of regular Board reports which include performance
the investment restrictions reporting on the implementation of the
and guidelines set by investment policy, the investment process
the Board could result and application of the Board guidelines.
in poor performance and The Manager attends each quarterly Board
inability to meet the meeting.
Company's objectives.
Gearing - increasing the The Company has a GBP40 million credit
level of gearing could facility that may be used to fund future
result in the Company commitments. The Board sets a gearing limit
becoming over-geared, and receives regular updates from the Manager
unable to meet its financial on the assets and liabilities of the Company
obligations, or unable and reviews these at each Board meeting.
to take advantage of potential The Board receives regular reports and
opportunities and any modelling from the Manager on the likely
of these could result pattern of future calls and the expected
in a loss of shareholder rate of realisations from the portfolio.
value.
Financial - the financial The financial risks associated with the
risks associated with Company include overcommitment risk, market
the portfolio could result risk, liquidity risk and credit risk, all
in losses to the Company. of which are mitigated through regular
In addition, failure to consultation with the Manager. The Manager
comply with relevant regulation reports to the Board using a range of forecast
(including Guernsey Company scenarios to determine the impact of future
Law, the Financial Services drawdowns and the likely rate at which
and Markets Act, the Alternative future realisations will generate cash.
Investment Fund Managers The Manager monitors the Company's liquidity
Directive, Accounting on a frequent basis and provides regular
Standards and the FCA's updates to the Board. Further details of
Listing Rules, Disclosure the steps taken to mitigate the financial
and Prospectus Rules) risks associated with the portfolio are
may have an impact on set out in note 20 to the financial statements.
the Company. The Board relies upon its third party service
providers to ensure the Company's compliance
with applicable law and regulations and
from time to time employs external advisers
to advise on specific concerns.
Operational - the Company The Board receives annual reports from
is dependent on third the Manager (ISAE 3402 and six monthly
parties for the provision internal controls reports) and from Ipes
of all systems and services (AAF 01/06) on internal controls and risk
(in particular, those management and receives compliance and
of the Aberdeen Group administration reports at each Board meeting.
and Ipes) and any control It receives assurances from all its significant
failures and gaps in these service providers, as well as back to back
systems and services could assurance from the Manager at least annually.
result in a loss or damage Further details of the internal controls
to the Company. which are in place are set out in the Directors'
Report in the Annual Report.
PE Investment - PE investments Under it investment policy the Company
are long-term in nature may participate in co-investments, acquire
and they may take a considerable secondary investments as well as subscribing
period to be realised. for LP interests. The Manager reviews the
Unquoted investments are valuations produced by the GPs of LP investments
less readily realisable and reports to the Board.
than quoted securities.
Such investments may therefore
carry a higher degree
of risk than quoted securities.
In valuing its investments
the Company relies to
a significant extent on
the accuracy of financial
and other information
the funds in its portfolio
provide to the Manager;
this information is typically
unaudited and updated
on a quarterly or six-monthly
basis.
Promoting the Company
The Board recognises the importance of communicating the
long-term attractions of your Company to prospective investors both
for improving liquidity and enhancing the value and rating of the
Company's Shares. The Board believes an effective way to achieve
this is through subscription to and participation in the
promotional programme run by the Aberdeen Group on behalf of a
number of investment companies under its management. The Company
supports the Aberdeen Group's investor relations programme which
involves regional roadshows, promotional and public relations
campaigns. The purpose of these initiatives is both to communicate
effectively with existing shareholders and to gain new shareholders
with the aim of improving liquidity and enhancing the value and
rating of the Company's Shares. The Company's financial
contribution to the programmes is matched by the Aberdeen Group.
The Aberdeen Group Head of Brand reports at least annually to the
Board giving analysis of the promotional activities as well as
updates on the shareholder register and any changes in the make-up
of that register.
Alternative Investment Fund Managers Directive ("AIFMD")
To comply with the AIFMD, the Company had appointed ASVG as its
AIFM until 29 October 2015, with AFML acting as AIFM from 30
October 2015. The management agreement with AFML complies with the
AIFMD regulatory regime and under this arrangement, AFML has been
appointed to provide investment management, risk management,
administration and promotional services. The Company's portfolio is
managed by AAML by way of a group delegation agreement in place
between AFML and AAML. In addition, AFML has sub-delegated
promotional services to AAML.
AFML has notified the UK Financial Conduct Authority in
accordance with the requirements of the UK National Private
Placement Regime of its intention to market the Company (as a
non-EEA AIF under the Directive) in the UK. The AIFMD requires
AFML, as the AIFM of the Company, to make available to investors
certain information prior to such investors' investment in the
Company. The Company's Pre-investment Disclosure Document ("PIDD")
is available for viewing on the Company's website.
Board Diversity
The Board recognises the importance of having a range of
skilled, experienced individuals with the right knowledge in order
to allow the Board to fulfill its obligations. When Board positions
become available as a result of retirement or resignation, the
Company ensures that a diverse group of candidates is considered.
No new appointments have been made to the Board since 2009, and at
31 March 2016 there were four male Directors. The Board's Statement
on diversity is set out in the Annual Report.
Environmental, Social and Human Rights Issues
The Company has no employees as all its executive functions are
undertaken by the Manager and other service providers. There are no
disclosures to be made in respect of employees. The Company's
socially responsible investment policy is set out in the Annual
Report.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from the
operations of its business, nor does it have direct responsibility
for any other emissions producing sources.
Viability Statement
The Company does not have a formal fixed period strategic plan
but the Board formally considers risks and strategy at least three
times per year. The Board considers the Company to be a long term
investment vehicle, but for the purposes of this viability
statement has decided that a period of five years is an appropriate
period over which to report. The Board considers that this period
is more representative of a typical PE cycle and reflects a balance
between the desirability of looking out over a long term horizon
and the inherent uncertainties involved.
In assessing the viability of the Company over the review period
the Directors have focussed upon the following factors:
- The principal risks detailed in the Strategic Report
- The ongoing relevance of the Company's investment objective in the current environment
- The historical level of demand for the Company's Shares
- The flexibility of the Company's GBP40 million loan facility which matures in March 2019
- Financial modelling including the expected future rate of
drawdowns versus likely rate of realisations under varying market
conditions
Taking into account the Company's current position and the
potential impact of its principal risks and uncertainties, the
Directors have a reasonable expectation that the Company will be
able to continue in operation and meet its liabilities as they fall
due for a period of five years from the date of this Report. In
making this assessment, the Board has considered that factors such
as significant economic or stock market volatility, a substantial
reduction in the liquidity of the portfolio, or changes in investor
sentiment could have an impact on its assessment of the Company's
prospects and viability in the future. In particular the Board
recognises that this assessment makes the assumption that the
resolution to continue the Company, which is put to shareholders at
every third Annual General Meeting ("AGM"), is passed at the AGM on
13 September 2016 and the AGM to be held in 2019, as it was
previously at the AGM held in 2013.
Future
Many of the non-performance related trends likely to affect the
Company in the future are common across all closed ended investment
companies, such as the attractiveness of investment companies as
investment vehicles, the impact of regulatory changes (including
MiFID II and Packaged Retail Investment and Insurance Products) and
the recent changes to the pensions and savings market in the UK.
These factors need to be viewed alongside the outlook for the
Company, both generally and specifically, in relation to the
portfolio. The Board's view on the general outlook for the Company
can be found in the Chairman's Statement, whilst the Manager's
views on the outlook for the portfolio are included in the
Manager's Review.
Howard Myles
Chairman
11 July 2016
STRATEGIC REPORT - CHAIRMAN'S STATEMENT
I am pleased to present to shareholders the Annual Report and
financial statements of the Company for the financial year ended 31
March 2016.
Performance
During the period under review the Net Asset Value ("NAV") per
Share rose by 4.6% to 133.33p. Inclusive of the 2.2p dividend paid
in September 2015, shareholders received a NAV total return of
6.6%.
This NAV performance was driven by both the underlying
investment portfolio and favourable currency movements. The
portfolio, which retains its bias to US dollar denominated assets,
experienced translational gains (in respect of the sterling NAV)
following a strengthening in the US dollar versus sterling over the
period.
Dividend
In 2012 the Board implemented a distribution policy whereby the
Company will return a proportion of the net distributions that it
receives from its investments by way of a dividend to shareholders.
The Board stated then that it intended to distribute approximately
10% of the received distributions (net of recallable distributions)
each year, subject to a minimum of 1p per Share per annum,
regardless of the distributions received. Accordingly, we are
pleased to be able to recommend to shareholders the payment of a
dividend of 2.2p per Share (the same level as last year) which,
subject to approval of shareholders at the AGM on 13 September
2016, will be payable on 16 September 2016 to shareholders on the
register on 19 August 2016.
Going forward, in the absence of unforeseen circumstances, the
Board expects to pay at least the same level of dividend for the
financial year to 31 March 2017.
Share Capital Management
During the period under review no Shares were purchased in the
market. The Board will continue to monitor the level of discount to
NAV at which the shares trade, both in absolute terms and against
the discounts of comparable companies. Accordingly, the Board is
seeking to renew the shareholder authority to buy back up to 14.99%
of the Company's Share capital at the forthcoming Annual General
Meeting.
Discount
On 31 March 2016 the share price discount to NAV stood at 34.1%.
Since the period end the NAV has decreased to 130.47p per Share
(based upon 31 May 2016 figures, our latest available information)
and the discount has narrowed to 32.9%, based on the share price as
at that date.
As I highlighted in our interim review, listed PE discounts to
NAV remain frustratingly wide. Your Board believes this to be
unjustified given the relatively low overall exposure of most
listed PE funds to more cyclical industries such as mining, oil/gas
and banks. NAV growth for the sector has been strong so we continue
to believe the gap should ultimately narrow.
The Company has produced annualized NAV total returns of 8.4%
over the period since the current Manager was appointed([1]) and
has received a growing level of distributions from its portfolio.
In particular, we have continued to see exits of underlying
companies held in our funds come at an aggregate premium to their
most recent valuation. It also produces a yield and for many
shareholders the Company continues to provide diversified access to
the PE market which can otherwise be difficult to achieve. We
believe that over time these factors will have a positive influence
on the market rating of our Shares but the Board is not complacent
on this matter and will continue to work with the Manager on ways
to reduce the current level of discount.
Gearing
On 31 March 2016 the Company entered into a new GBP40m revolving
credit facility with Lloyds Banking Group, an increase from the
previous GBP15m facility. The facility has been renewed at this
higher level to support an increased pace of investment and to
ensure efficient capital usage. It also provides additional
headroom and flexibility in the event that market conditions
deteriorate.
Continuation Vote
In 2011 the Company's Articles of Incorporation were amended to
introduce a three-yearly continuation vote with the first vote
being in 2013. This was passed on 25 September 2013, with support
from 99.9% of the voting shareholders with 74.7% of all
shareholders having voted. At the Annual General Meeting convened
for 13 September 2016 Resolution 7 proposes that the Company
continue as an Investment Company in accordance with Article
126.
In view of the investment returns now being delivered following
the renewal of the investment programme in 2010, the premia to book
value being achieved by our investee funds on exits from underlying
portfolio companies, and the resulting distributions being received
from our portfolio, your Board believes that it is in the
shareholders' interests that the Company continue. Having taken
soundings from our larger shareholders, the Board believes that the
majority of shareholders would not support a discontinuation at
this time because this would lead to a portfolio run off, a process
which is likely to be protracted and where values ultimately
realised may be adversely affected as a result of the Company being
known to be a forced seller of its assets.
Accordingly, your Board recommends that shareholders vote in
favour of the Company's continuation. A further continuation vote
will be held at the Company's AGM in 2019.
Activity Levels
The Manager has been active over the year in redeploying the
Company's strong cash flow into new investments, subject to
dividend distributions in accordance with the new dividend policy.
Four new fund commitments were made:
- Montagu V, a Northern European buyout fund
- MML Capital Partners VI, a fund focused on the UK, US and French lower mid-market
- Latour Capital II, a French lower-mid market fund
- Wisequity IV, an Italian lower mid-market fund
Additionally, the Company made two new co-investments:
- Achilles, a supply chain management business([2])
- Hampshire Trust Bank([3]) (,) a UK based 'challenger' bank
The Company also disposed of its interest in Resonant Music 1
LP. The Resonant fund invested in original music scores and was no
longer deemed a core holding. The sale took place at marginally
above the last received NAV and was non-dilutive.
Subsequent to the year end the Company has also committed to an
additional two funds:
- Northzone VIII, a Nordic focused Venture Capital Fund
- MTS Health Partners IV, a US lower mid-market healthcare fund
In addition to these new primary investments underlying activity
levels have been high, with a number of new companies added to the
portfolio via our underlying funds. We have also seen 46([4]) full
or partial exits, from these funds.
The most significant event within the underlying portfolio was
the exit by the Northzone VI fund of its holding of Avito, a
Russian classified advertising business. This was a full cash exit,
at a significant multiple to its original cost. Avito had been for
some time the Company's largest underlying holding, and this
disposal led to our receiving Euro10.9m.
Our strategy on geographical balance is to retain the
portfolio's US bias, though we do expect to see this reduce over
time as the effect of our more recent commitments to European funds
becomes more pronounced. Whilst valuations in the European lower
mid-market space remain relatively attractive, the Manager will
continue to prioritise the most compelling opportunities from its
global pipeline.
Portfolio Performance
The Board is pleased to note the good NAV performance, which has
again been generated from a wide range of investment vintages.
The Northzone VI fund, discussed above, was the largest
contributor to performance, with positive impact from Avito which
was marked up in the six month period prior to exit. The fund also
saw other holdings being marked up. Northzone was one of the first
new investments made by the investment management team following
the manager change in 2009 and this welcome exit has meant that
distributions from this fund are already now greater than the
amount paid into it.
The Silver Lake Partners III Fund, the HIG Bayside Debt &
LBO Fund, and the Thoma Bravo IX Fund were committed to between
2007 and 2008, and have also helped drive performance with
valuation increases from their remaining underlying
investments.
A number of funds saw negative returns for the period, and these
included Pine Brook Capital Partners and MatlinPatterson Global
Opportunities Partners III, which saw the values of some of their
public equity investments fall in value.
Outlook
In our last Annual Report I expressed some caution on the impact
that higher purchase costs for PE assets might have on future
returns from this asset class.
Whilst we have continued to see elevated pricing levels at the
larger end of the deal spectrum, the average purchase price
multiple for smaller privately owned companies remains relatively
attractive. This has been one of the reasons behind the strategy of
adding investments to the portfolio such as Latour Capital and
Wisequity, and the new co-investments.
Your Board notes the continued rise in PE dry powder([5]) which,
in aggregate, remains at record highs. Within that, dry powder as
relates specifically to Buyout is at 2008 levels([6]) which may
help to underpin current levels of deal pricing. With large proven
PE managers continuing to be able to raise significant amounts of
new commitments from their Limited Partners, there appears to be
continuing strong appetite for this asset class.
Private Equity specific risks relate to familiar themes and
include, but are not limited to, a continuing decline in the
absolute number of PE backed exits since 2014([7]) (in particular a
reduction of exits via Initial Public Offering ("IPO")); the
increased use of "covenant-lite"([8]) loans by PE borrowers; and a
tightening in funding availability for venture-backed investments.
More generally, the UK's June referendum on membership of the
European Union, and the surprise result to 'leave' may introduce
additional layers of uncertainty to nearer term investment
outcomes. Much of this will be focused on currency, particularly
Sterling, and potential contagion issues for European economies.
Your Company's long standing bias to US denominated assets should
position us well however to cope with any sustained UK or European
weakness. Whilst we may see some shorter term downturn in PE
investment activity we believe there will inevitably be compelling
investment opportunities for our recently committed to European
funds as they commence their investing phases. Accordingly we
remain optimistic on the investment portfolio, and its ability to
continue to deliver long term investment performance for
Shareholders.
Howard Myles
Chairman
11 July 2016
STRATEGIC REPORT - MANAGER'S REVIEW
At the end of March 2016, 77.1% of the Company's NAV was
invested in 29 PE funds and 5.8% in six co-investments.
Performance Commentary
The 29 PE funds in the Company's portfolio invest across a wide
range of sectors, geographies and market capitalisations, providing
exposure in aggregate to 338 underlying companies([9]) .
In local currency terms the portfolio generated a total return
of 7.4%([10]) for the period under review. Northzone Ventures VI, a
2010 commitment, was the single largest contributor to performance.
Older vintage portfolios also helped deliver performance. Across
the board the portfolio benefitted from uplifts in carrying value
for ongoing investments and gains on exit (whether by IPO, trade or
secondary sale).
We show below the movement of the Company's investment portfolio
from the opening value to the closing value:([11])
Alongside strong performance from our fund investments, we have
seen continuing momentum from the Company's co-investment
portfolio. Via Mechanics, in particular, has performed well. The
company recorded figures ahead of budget which allowed it to
complete a dividend recapitalisation([12]) during the period. Alain
Afflelou was marked up by Lion Capital based on a returning of
momentum in overall group sales. Dell and Hillman Group (where we
invest alongside Silver Lake and CCMP respectively) have also
continued to perform to plan. We completed on two new
co-investments, Achilles and Hampshire Trust Bank, in October 2015
and February 2016 respectively.
Largest Positive Performance by Fund([13])
Fund Performance
($m)
Northzone Ventures VI L.P. +5.3
Thoma Bravo IX Fund L.P. +2.1
HIG Bayside Debt & LBO Fund
II L.P. +1.9
Longreach Capital Partners
2 L.P. +1.7
Silver Lake Partners III L.P. +1.6
Rest of the portfolio +2.6
Total +15.2
Northzone VI, a European venture fund, performed well over the
period with TrustPilot and iZettle producing significant uplifts in
value. The largest driver of performance however was Avito, which
was sold in November to South African media group, Naspers, in one
of the largest ever venture-backed technology deals([14]) .
Thoma Bravo Fund IX, a US growth and buyout fund, saw all
unrealised investments showing positive performance. InfoVista and
Deltek produced the largest uplifts and Blue Coat Systems posted a
small uplift over its previous carrying value following its sale to
Bain Capital in May 2016.
HIG Bayside Debt & LBO II generated strong performance with
a large proportion of the portfolio producing valuation uplifts
over the period. Investments producing significant increases
included the two largest assets by Fair Market Value ('FMV'),
Surgery Partners, which had an IPO in October 2015, and Caraustar
Industries.
The Longreach Capital Partners 2 portfolio consists of three
investments to date. Over the period, two of these investments, VIA
Mechanics, a leading manufacturer of micro-drilling machines for
printed circuit boards (PCBs), and Primo, a Japanese bridal
jewellery business, produced strong performance and subsequent
valuation increases.
Silver Lake Partners III's performance is attributable to the
uplift in the valuation of its holding in GoDaddy which went public
in the US in April 2015 at a premium to held value. Other valuation
uplifts were produced by Interactive Data Corporation, which was
sold to Intercontinental Exchange during the period, and William
Morris Endeavor Entertainment (WME).
Largest Negative Performance by Fund([15])
Fund Performance
($m)
Oaktree OCM Opportunities Fund VIIb
L.P. -0.5
MatlinPatterson Global Opportunities
Partners III L.P. -0.6
RHO Ventures VI L.P. -0.7
Longreach Capital Partners 1 L.P -0.9
Pine Brook Capital Partners L.P. -1.2
We set out above the five largest negative performers over the
period. Within each of these funds there was no one significant
contributor to negative performance.
Weakness in global energy markets impacted holdings in the
Oaktree OCM Opportunities VIIb, MatlinPatterson Global
Opportunities Partners III L.P and the Pine Brook Capital Partners
funds. The Longreach Capital Partners Ireland 1 and RHO Ventures VI
funds experienced some writedowns in their portfolio.
Portfolio Activity
With a focus on an increased investment pace, the Company was
active over the financial year, making a number of new primary fund
commitments and co-investments whilst executing on one fund
divestiture.
Commitments were made to Montagu V (August 2015, EUR8m), Latour
Capital II (November 2015, EUR10m), MML Capital Partners Fund VI
(December 2015, EUR13m) and Wisequity IV (February 2016, EUR10m).
More information on these investments is provided in the "Private
Equity Portfolio". Two co-investments were also completed into
Achilles, a leader in collaborative supply chain networks, and
Hampshire Trust Bank, a specialist lender targeting the UK
SME([16]) market.
We also sold the Company's commitment in Resonant Music in
February 2016 at marginally above the last NAV. Despite the
attractive business model (royalty income from original music
scores developed for movies and TV series') the fund was no longer
a core holding. Securing NAV on the sale of this fund was
exceptional given that non-mainstream funds such as these typically
price in the secondary funds market at a significant discount to
their NAV.
Calls for New Investments
The Company paid calls of $26.4m over the year in relation to
new investments ($31.5m the previous year)([17]) funding 29 new
underlying investments and a number of follow-on investments.
Five Largest Aggregate Fund Calls (excluding US$m
Co - investments)
A8 A Feeder LP 5.8
MML Capital Partners Fund VI LP 3.2
HIG Bayside Debt & LBO Fund II LP 3.1
Exponent Private Equity Partners III LP 2.7
Resolute Fund III LP 2.0
A8 A Feeder or Apax 8 was able to complete nine new investments
during the period bringing the fund up to 83% drawn. The nine
investments were: Azelis S.A., Shriram City Union, Quality
Distribution, Wehkamp, Idealista, Ideal Protein, Zensar
Technologies, Full Beauty and Assured Partners.
The Company committed to MML Capital Partners VI in December.
MML is a EUR382m fund focusing on small to mid-cap companies in the
UK, France and the US. Having held their first close in 2014, the
fund has been able to deploy capital in five portfolio companies to
date: Luneau Group, CH&Co, Learning Curve, BMB and Iqarus.
As a result of a slower investment pace during its investment
period, HIG Bayside Debt & LBO II has had significant capital
to utilise in its follow-on period. Further capital was invested in
portfolio companies such as JW Resources and WhiteHorse
Finance.
The Company committed to Exponent III in March 2015. The fund
has since completed four deals in Big Bus Tours, BBI Diagnostics,
Wowcher and Photobox.
Resolute Fund III completed the acquisition of DiversiTech
Corporation in May 2015 and was also able to complete four
follow-on investments in its existing portfolio companies.
Distributions
The Company received cash distributions of $42.8m during the
period under review (2015: $39.2m).
Five Largest Aggregate Fund Distributions (excluding US$m
sold investments)
Northzone VI LP 11.4
Thoma Bravo IX Fund LP 4.7
Gores Capital Partners III LP 3.3
Silver Lake Partners III LP 3.1
Tenaya Capital V LP 2.5
Northzone VI completed the sale of Avito, Russia's largest
classified advertising website and the Company's largest single
underlying holding in October 2015. This was significant news for
the Company and for Northzone, allowing for a substantial
de-risking of the Company's overall portfolio, given the risk that
a material ongoing Russian economic exposure might have posed.
A large proportion of Thoma Bravo Fund IX's distributions came
from the sale of the fund's largest investment (by cost), Blue Coat
Systems. Sizeable proceeds were also received in relation to the
fund's investments in Deltek, The Attachmate Group and Local Media
San Diego.
It was a successful year for Gores Capital III which completed
the sale of Therakos to Irish pharmaceutical company Mallinckrodt,
representing the largest sale transaction in the history of Gores
Capital. The fund was also able to complete the sales of Big Strike
and Etrali during the period.
The distributions from Silver Lake Partners III relate to the
sale of Interactive Data Corporation to Intercontinental Exchange.
It also includes significant proceeds from the partial share sell
downs in Alibaba, GoDaddy and Virtu Financial following their IPOs
in September 2014 and April 2015. Contributions also came from the
sale of Hillstone Network.
Tenaya Capital V sold its entire holding in New Relic during the
period. New Relic completed its IPO in December 2014 with Tenaya's
lock-up period ending in June 2015. Furthermore, portfolio company
Baixing Holdings sold its Chinese operating company during the
third quarter generating a material distribution back to the
Company.
Market News and PE Environment
In our last report([18]) we said that whilst the global economic
recovery had continued, various factors had prompted the
International Monetary Fund (IMF) to downgrade their global growth
forecasts for 2015 to 3.1% from 3.3%([19]) . With several potential
headwinds still remaining for the global economy, including the
slowdown in China and low commodity prices it came as no surprise
that the IMF again cut its forecast for 2016 to 3.2% ([20]) in
April. However a degree of balance to economic sentiment remains in
place and with the European Central Bank expanding its monetary
stimulus programme and the US tightening interest rates at a slower
pace than previously anticipated, we remain broadly optimistic,
notwithstanding the 'leave' result from the UK's European Union
membership referendum held in June.
The precise look and feel of Britain's exit (or 'Brexit'), post
the 'leave' result remains to be determined, but it does seem
likely that the UK will experience some form of economic slowdown.
Our UK exposure remains limited, with just one largely UK focused
manager (Exponent) and one co-investment (Hampshire Trust), though
other global funds in our portfolio also own UK based businesses.
In aggregate our underlying UK exposure accounted, at March 31, for
12.8% of the portfolio.
We believe that the immediate impact is likely to be confined to
a slowdown in deal activity, particularly in the UK, and further
Sterling weakness, though this could also serve to increase the
shorter term competitiveness of UK exporters, as well as providing
a currency translation benefit to NAV.
The PE market has seen valuations continuing to rise, though we
note that the share of highly priced deals in Europe (those pricing
at > 12x their EBITDA([21]) ) dropped in 2015, versus
2014.([22]) Q1 2016 also saw both the number of global PE backed
buyout transactions and the aggregate value([23]) of these
transactions fall from the previous quarter, which is a sign that
some of the overheating in this market may be easing. Whilst there
is an element of seasonality in Q1 data, the 69% decline in
aggregate deal value([24]) is the greatest quarter on quarter
decline over the same period we have seen. Given matters Brexit
related, these trends are likely to be exacerbated going forward,
particularly if investors feel that there may be any political
contagion into other European countries.
Trade sales continue to be the most common route for PE
GPs([25]) to exit with the ten largest buyouts in the first quarter
of 2016 exiting in this manner, though the aggregate exit value of
$62bn in the same period was the lowest quarterly aggregate value
of exits over the last 3 years([26]) . IPOs have fallen to a 4 year
low due in part to the volatility seen in financial markets in the
first part of this year though there are signs that we may see some
IPO exit opportunities later in the year.
Fundraising by PE funds has declined from the exceptionally
strong 2014 experienced by the industry. The most recent figures
from Q1 2016 saw 151 PE funds raise a total of $71bn, a 25% fall in
the number of funds and a 6% increase in aggregate capital raised
compared with Q1 in 2015([27]) .
PE dry powder([28]) has continued to rise and the increase in
dry powder globally to $775bn([29]) at the end of Q1 2016
highlights the ongoing challenges that private managers face in
putting money to work. The dry powder issue appears to be a
multi-cycle phenomenon, and will likely test PE GPs' discipline
into the foreseeable future, particular on larger deal sizes. With
nearly half of all investors (with at least 10% of their capital
allocated to PE) still looking to allocate further to the asset
class,([30]) pricing looks set to continue to be an issue for some
time notwithstanding any major public market dislocations or
prolonged fall out from Brexit.
Portfolio Strategy and Outlook
In our Half Yearly Report last year we set out a clear strategy
to remain appropriately diversified, to increase our co-investment
exposure, and in particular, to focus on the global lower
mid-market in terms of primary fund selection. We have since made
good progress in building out the portfolio, with these positions
now being funded from the cash proceeds of the post-2010 vintage
investment programme, as well as continuing distributions from
older vintages.
The co-investment programme is delivering high conviction
investment ideas into the portfolio and serves to mitigate fee
impact from our primary funds programme. Our largest underlying
company position is Via Mechanics, an acquisition by Longreach 2
from Hitachi Ltd, and a pioneer in PCB([31]) machining, and is also
one of our co-investments([32]) . More recent additions to the
co-investment portfolio include Hampshire Trust Bank, a UK
challenger bank([33]) , and Achilles, a UK based supplier
information and supply chain management business. In order to
deliver more targeted exposure to co-investments we have also
increased our typical deal size to c$4-5m, with an objective of
achieving an overall co-investment exposure of around 20-25% of the
portfolio. Our approach to sponsor GPs has also expanded to include
funds owned on behalf of other Aberdeen Group mandates([34]) thus
creating a larger potential investment opportunity set.
The primary funds programme has maintained its velocity with
four new commitments being made in the financial year. This
included MML Capital Partners VI, which we were able to commit to
with that fund already having made five investments. This gave us
visibility on the quality of the portfolio, and our money was able
to be put to work immediately. We continue to aim to identify these
opportunities, thereby helping to reduce unnecessary fee drag
within the overall investment programme.
We are also targeting smaller investment opportunities where the
GP may be experiencing less competition for deals and can take
advantage of more attractive purchase price multiples. We
categorise these as 'harder to find, harder to diligence'
opportunities and see these as a key point of differentiation for
this investment portfolio.
Post the year end we have also been able to approve a new
commitment into MTS Healthcare Partners IV, a New York manager
focused on small buy outs in the healthcare services arena. We have
also recommitted to Northzone (via their Fund VIII) and thus
maintain exposure to this talented Nordic venture capital team who
have already delivered strong performance to this Company via their
Fund VI.
As we look at all areas to improve the effectiveness and impact
of our investment decisions, we have increased our leverage
facility to GBP40m, in order to allow us to increase our investment
pace by using existing cash, but maintaining our historic levels of
overall commitment cover.
We recognise that valuations remain expensive, but as we have
previously noted, many of the managers in our portfolio are well
placed to be able to add value through their operational influence,
and as such we remain supportive long term investors in PE. Brexit
is understandably a very real concern for all investors across all
asset classes, but the 'check' effect that this event may have,
specifically on UK and European deal pricing, may ultimately serve
to be beneficial in taking some of the heat out of this market. As
patient long term investors we welcome the opportunities that may
present themselves to us, and our selected GPs, over the next 12 to
18 months.
Alexander Barr & Colin Burrow
Aberdeen Asset Managers Limited
11 July 2016
STRATEGIC REPORT - RESULTS
As at 31 March 2016
Financial Highlights
31 March 2016 31 March 2015 % change
Total assets{A} (US$'000) 209,135 205,785 +1.6
Total equity shareholders' funds
(net assets) (US$'000) 209,135 205,785 +1.6
Share price (mid market) (pence) 87.88 88.13 -0.3
Net asset value per Share (pence) 133.33 127.41 +4.6
Discount to net asset value 34.1% 30.8%
Dividend and earnings
Return per Share{B} (pence) 4.53 6.29
Dividend per Share (pence) 2.20 2.20
Ongoing charges{C}
Excluding performance fee 1.87% 1.79%
Including performance fee 1.87% 2.57%
{A} Total Assets less current liabilities (before deducting prior
charges). Prior Charges is the name given to all amounts which
would be repayable in the liquidation of the Company prior to any
distribution to the holders of Shares; these comprise borrowings
including debentures, long and short term loans and overdrafts
that are to be used for investment purposes, reciprocal foreign
currency loans, currency facilities to the extent that they are
drawn down, index-linked securities, and all types of preference
or preferred capital and the income shares of split capital trusts,
irrespective of the time until repayment.
{B} Measures the relevant earnings for the year divided by the
weighted average number of shares in issue.
{C} Ongoing charges ratio calculated in accordance with guidance
issued by the AIC as the total of the investment management fee
and administrative expenses divided by the average cum income NAV
throughout the year.
Performance (total return {A})
1 year 3 year 5 year
% return % return % return
Share price +2.3% +6.2% +42.7%
Net asset value +6.6% +25.8% +53.0%
Source: Aberdeen Asset Management
& Morningstar
{A} Total return represents capital return plus dividends reinvested
on the dividend date.
Dividends
Rate Ex dividend Record date Payment date
date
Dividend 2016 2.20p 18 August 2016 19 August 16 September
2016 2016
Dividend 2015 2.20p 20 August 2015 21 August 18 September
2015 2015
Investment Portfolio - Schedule of Investments
As at 31 March 2016
Total Investment
Investments Commitments called/cost{C} Fair Value % of
Private Equity Portfolio{A} US$'000{B} US$'000 US$'000 NAV
Apax 8 (A8-A(feeder)) L.P. EUR 10,000 9,386 11,882 5.7
CCMP Capital Investors III L.P. 15,000 6,701 7,942 3.8
Coller International Partners
V L.P. 15,000 - 3,758 1.8
CVC Capital Partners Asia Pacific
IV L.P. 10,000 869 1,118 0.5
Exponent Private Equity Partners
III L.P. GBP10,000 3,937 3,935 1.9
FFL Parallel Fund IV L.P. 10,000 2,490 2,609 1.3
Goldman Sachs Capital Partners
VI L.P. 15,000 5,618 4,669 2.2
Gores Capital Partners III L.P. 10,000 5,600 5,255 2.5
HIG Bayside Debt & LBO Fund II
L.P. 15,000 9,272 11,834 5.7
Latour Capital II EUR 10,000 54 21 -
Lion Capital Fund III L.P. EUR 10,000 8,748 13,726 6.6
Longreach Capital Partners Ireland
1, L.P. 7,425 8,385 4,266 2.0
Longreach Capital Partners 2
- USD, L.P. 7,500 3,232 6,327 3.0
MatlinPatterson Global Opportunities
Partners III L.P. 10,000 7,351 6,196 3.0
MML Capital Partners Fund VI
L.P. EUR 13,000 3,045 3,368 1.6
Montagu V L.P. EUR 8,000 - - -
Northzone Ventures VI L.P. EUR 10,000 6,197 8,070 3.9
Oaktree OCM Opportunities Fund
VIIb L.P. 15,000 - 1,355 0.7
Pangaea Two Parallel L.P. 5,000 2,221 2,710 1.3
Pine Brook Capital Partners L.P. 10,000 6,292 5,501 2.6
Resolute Fund III L.P. 15,000 3,874 4,845 2.3
RHO Ventures VI L.P. 10,000 9,466 8,035 3.8
Silver Lake Partners III L.P. 15,000 6,231 10,343 4.9
StepStone International Investors
III L.P. (formerly Greenpark
International Investors III L.P.) EUR 14,600 7,032 4,680 2.2
Tenaya Capital V L.P. 12,500 7,075 7,530 3.6
Tenaya Capital VI L.P. 5,000 3,564 3,875 1.9
Thoma Bravo IX Fund L.P. 10,000 1,531 6,590 3.2
Thomas H Lee Parallel Fund VI
L.P. 15,000 5,809 10,543 5.0
Wisequity IV EUR 10,000 - - -
133,980 160,983 77.0
Co-investments{D}
CCMP Co-Invest III A L.P. 1,500 1,500 1,501 0.7
Finvest L.P. GBP2,900 - - -
Lion Seneca Cayman 3 L.P. EUR 810 988 1,273 0.6
Hg Capital 5 Co-Invest 1 L.P. GBP3,000 4,638 4,322 2.1
LVM LP Co-Investment L.P. 1,500 625 2,754 1.3
SLP Denali Co-Invest L.P. 1,242 1,236 2,271 1.1
8,987 12,121 5.8
Total investments 142,967 173,104 82.8
{A} Includes direct investments and co-investments.
{B} All commitments are in US$ unless otherwise stated.
{C} Investments called/cost represents commitments drawn down less
net distributions.
{D} Fair values ascribed to individual co-investments are not disclosed
due to commercial sensitivity.
Fair Value % of
US$'000 NAV
Aberdeen Liquidity Funds
Sterling Fund Income 3,577 1.7
US Dollar Fund Income 23,980 11.5
27,557 13.2
Cash at bank 9,017 4.3
Cash and cash equivalents{E} 36,574 17.5
Other assets less liabilities (543) (0.3)
Net current assets 36,031 17.2
Net assets 209,135 100.0
{E} Represents sum of fixed term deposits, Aberdeen liquidity funds
and cash.
Private Equity Portfolio
As at 31 March 2016
Strategy Geography Fund Size Vintage NAV Weighting
Year
Apax 8 (A8-A (feeder))
L.P. Buyout Global EUR5.8 billion 2012 5.7%
Apax Partners is a large
global private equity
partnership investing
in growth companies across
four key sectors: Consumer,
Healthcare, Services and
Technology and Telecommunications.
The firm has a strong
operational intervention
capability and actively
uses this resource to
help improve operational
efficiencies in their
portfolio companies. This
fund is currently in its
investment period.
CCMP Capital Investors
III L.P. Buyout US US$3.6 billion 2013 3.8%
CCMP is a US (and London)
based private equity business
focusing on predominantly
US mid-market buyout transactions.
They invest across four
sectors: Consumer / Retail,
Industrial, Healthcare
and Energy. The fund is
currently in its investment
period and has made its
first investments.
Coller International Partners
V L.P. Secondaries Global US$4.8 billion 2006 1.8%
Coller Capital is a leading
global investor in the
private equity secondary
market where they seek
to make investments in
both Limited Partnership
interests and portfolios
of private companies.
Coller have also bought
listed private equity
funds at deep discounts
to NAV. This fund was
originally selected for
the portfolio to provide
the Company with vintage
year diversification and
a degree of j-curve mitigation.
The fund has completed
its investment period
but continues to make
follow on investments.
CVC Capital Partners Asia
Pacific IV L.P. Buyout Asia US$3.2 billion 2013 0.5%
CVC Asia is one of the
more established private
equity partnerships in
the Asia-Pacific region.
Founded in 1999, CVC Asia
has now raised four funds.
This, their fourth fund,
will invest in 15-20 control
or significant minority
positions across the Asian
region, equally split
between South East Asia,
China, Japan, Korea, and
other regional markets.
The fund is currently
in its investment period
and has made its first
investments.
Exponent Private Equity Buyout
Partners III L.P. & Growth UK US$1 billion 2015 1.9%
Exponent is a London based
GP, focusing on UK upper
mid-market deals with
an enterprise value ("EV")
of GBP75m to GBP300m.
Most of its transactions
will involve buying UK
domiciled businesses,
though such is the EV
range, many of these businesses
could have significant
overseas elements of manufacturing
and/or sales. The fund
has now made its first
investment and is at the
start of its investment
period.
FFL Parallel Fund IV L.P. Buyout US US$1.5 billion 2014 1.3%
FFL was established in
1997 to undertake buyout
and growth investments
in US-middle market companies
incorporating top down
macro analysis and industry
themes within their four
core sectors: Business
Services, Consumer, Financial
Services and Healthcare.
The fund is at the start
of its investment period
and, at the time of writing,
has made three investments.
Goldman Sachs Capital US$20.3
Partners VI L.P. Buyout Global billion 2006 2.2%
Goldman Sachs Capital
Partners make private
equity investments globally
across all market capitalisations.
This fund did not focus
on any particular sector
and invested in buy-outs,
minority stakes, listed
and unlisted companies
and across a variety of
industries. It also allocated
a proportion of the portfolio
to stressed and distressed
opportunities. The fund
has completed its investment
period and remains in
distribution mode.
Gores Capital Partners
III L.P. Buyout Global GBP2.0 billion 2009 2.5%
Gores is a Los Angeles
based global private equity
business which invests
in both mature and growing
businesses. Its approach
combines experienced merger
and acquisition transaction
capability with a strong
operational angle. It
aims to improve the operating
performance of its portfolio
companies, many of which
are mature or have encountered
growth problems. It typically
sells its investments
to strategic buyers once
the businesses have regained
a sound footing. This
fund has reached the end
of its investment period.
HIG Bayside Debt & LBO
Fund II L.P. Distressed US US$3.0 billion 2008 5.7%
HIG Capital is a global
private equity firm with
a number of distinct businesses,
including Bayside Capital
which invests across several
segments of the primary
and secondary debt capital
markets. Bayside focuses
upon three types of transactions:
1) Debt-for-control investments
in companies' debt obligations
with the intention to
take control; 2) Leveraged
buy-outs of underperforming,
stressed or distressed
companies; and 3) Non-control
distressed debt opportunistic
investments. The fund's
investment period finished
in May 2014 and we now
expect it to move to divestment
mode.
Latour Capital II Buyout France EUR300 million 2015 -
& Growth
Latour Capital is a Paris-based
private equity firm operating
in the small/lower mid-market
in France and neighbouring
French-speaking countries.
It has a strong focus
on business services and
companies that are either
undermanaged or have a
specific competitive advantage.
Investments are typically
in the Enterprise Value
range of EUR30m-EUR200m.
This fund is currently
in its investment period
and has made its first
investment.
Lion Capital Fund III Europe
L.P. Buyout & US EUR1.5 billion 2010 6.6%
Lion Capital is a buyout
manager focused on the
consumer sector, with
a historical bias to Europe
although it has also invested
in the US. We committed
to Lion in order to provide
greater exposure to an
eventual European consumer
recovery, and at a time
of competitive European
transaction valuations.
The fund has invested
at a good pace, and whilst
the fund is still in its
investment period it has
already been able to refinance
and exit some of its underlying
businesses.
Longreach Capital Partners Japan,
Ireland 1, L.P. Buyout North Asia US$750 million 2006 2.0%
Longreach is based in
Hong Kong and invests
in Northern Asia with
a particular focus on
Japan. Its core strategy
is to buy non-core businesses
from Japanese conglomerates
before selling them subsequently
as operationally improved
businesses. It also looks
at investment opportunities
elsewhere in the region
and not necessarily with
Japan connections. The
fund is now past its investment
period, in an approved
formal extension period
and is actively seeking
to divest its remaining
holdings.
Longreach Capital Partners Japan,
2, L.P. Buyout North Asia US$220 million 2012 3.0%
Longreach is based in
Hong Kong and invests
in Northern Asia with
a particular focus on
Japan. Its core strategy
is to buy non-core businesses
from Japanese conglomerates
before selling them subsequently
as operationally improved
businesses. It also looks
at investment opportunities
elsewhere in the region
and not necessarily with
Japan connections. The
fund is currently in its
investment period.
MatlinPatterson Global
Opportunities Partners
III L.P. Distressed Global US$5.0 billion 2007 3.0%
MatlinPatterson is a "distressed
for control" manager investing
on a global basis. The
fund invested in companies
in distressed situations
with the aim of controlling
the financial and operational
restructuring of the company,
and also took minority
positions in stressed
and distressed situations.
The fund has completed
its investment period
although it is still calling
capital for follow on
investments.
MML Capital Partners Fund Europe
VI L.P. Buyout & US EUR382 million 2014 1.6%
MML Capital operates in
an attractive niche within
the lower mid-market in
the UK, US and France.
It has a flexible approach,
partnering with management
teams often on a minority
basis. It uses creative
structuring using junior
debt instruments providing
downside protection whilst
ensuring potential for
strong equity upside through
significant equity stakes.
The fund is currently
in its investment period
has completed its first
investments.
Montagu V L.P. Buyout Europe EUR2.75 2015 -
& Growth billion
Montagu is a prominent
European manager focusing
on growth and buyout deals
in the UK, France, Benelux,
DACH, Nordics and Poland.
Its stock-picking strategy
is backing mid-size market
leading businesses, often
in more defensive sectors.
It has a proven, long-term
origination model based
on relationships which
frequently makes them
management's preferred
bidder. The fund is currently
in its investment period
and has not made its first
investment as at 31 March
2016.
Northzone Ventures VI Venture EUR130.0
L.P. capital Nordics million 2010 3.9%
Northzone primarily invests
in technology companies
either in the Nordic region
or with strong Nordic
components that have global
potential. The management
team looks for opportunities
arising from major market
transformation. It particularly
concentrates on consumer
focused internet services,
new delivery platforms
and network infrastructure.
The fund is still in its
investment period, although
it will now only call
capital to fund follow-on
investments.
Oaktree OCM Opportunities Distressed US$10.9
Fund VIIb L.P. debt Global billion 2007 0.7%
Oaktree is a distressed
debt manager and focuses
on acquiring debt securities
at discounted prices during
stressed and distressed
cycles. The manager is
capable of taking control
and driving the financial
and operational restructuring
if it does not feel that
it is getting the right
value from a transaction.
The fund has now completed
its investment period
and is in active divestment
mode.
Pangaea Two Parallel L.P. Growth Global US$910 million 2011 1.3%
The manager of this fund
is Cartesian Capital,
which was founded in 2006
by Peter Yu and the former
senior management team
from AIG Capital Partners.
The firm is a global,
opportunistic growth capital
investor, with a focus
on emerging markets. The
investment strategy is
based on long-term continuities,
driving economic change
via technology, politics
or demographics. This
fund is still in its investment
period.
Pine Brook Capital Partners US$1.15
L.P. Growth Global billion 2007 2.6%
Pine Brook is a growth
equity manager focusing
on mid-to-large-cap growth
equity investments in
the Energy and Financial
Services sectors. The
fund's strategy was to
invest ahead of current
industry practices and
trends and to then take
advantage of under-served
markets. It is a differentiated
model in as much as it
is willing to invest in
start-up entities albeit
with established management
teams. The fund has now
completed its investment
period and is in active
divestment mode; however,
it will still make selective
follow-on equity injections
to underlying businesses.
Resolute Fund III L.P. Specialist US US$3.2 billion 2013 2.3%
Resolute Fund III is managed
by The Jordan Company,
a US mid-market private
equity business. Its investment
focus covers a wide array
of industries including
Industrial Products and
Services, Energy, Chemical,
Healthcare and Financial
Services. It aims to invest
in companies with an enterprise
value of between $100m
and $2bn and help drive
growth via operational
improvements. The Company
committed to this Fund
in 2014 and it is within
its investment period.
Venture
RHO Ventures VI L.P. capital US US$510 million 2008 3.8%
RHO Ventures takes minority
positions in start-up
entities, principally
in the Technology and
Life Sciences sectors.
The manager takes a top-down
view as to which sectors
have the most favourable
conditions and has taken
a pragmatic approach to
changing investment focus.
The fund has now completed
its investment period
and, although it is still
making follow on investments,
will divest where appropriate.
Silver Lake Partners III Buyout
L.P. & Growth Global US$9.4 billion 2007 4.9%
Silver Lake is a prominent
large cap technology investor.
The firm invests globally
in established, cash-flow
generative businesses
which are leaders in their
respective industries.
Silver Lake acts as a
partner to management
teams, investing with
experienced participants
to take advantage of opportunities
in technology and technology-enabled
industries. The fund has
now completed its investment
period but can still call
for capital to fund follow
on investments.
StepStone International
Investors III L.P. (formerly
Greenpark International EUR732.3
Investors III L.P.) Secondaries Europe million 2006 2.2%
StepStone is a global
private markets firm which
took over the management
of this fund from Greenpark
Capital in 2013. Greenpark's
focus had been on purchasing
limited partnership interests
in private equity funds
on the secondary market
with a focus on Europe.
The holding in this fund
was originally acquired
by the Company to provide
vintage diversification
and some j-curve mitigation.
The fund has now completed
its investment period,
but continues to make
follow on investments
(as capital calls are
made from underlying funds).
Venture
Tenaya Capital V L.P. capital US US$365 million 2007 3.6%
The manager co-invests
in the mid to late stage
rounds of venture financing
of revenue positive, privately
held technology companies
alongside many of the
top-tier venture capital
firms in the US. Its aim
is to diversify across
the technology spectrum,
and to actively manage
those companies in which
it is invested. The fund
has now completed its
investment period.
Venture
Tenaya Capital VI L.P. capital US US$200 million 2012 1.9%
The manager co-invests
in the mid to late stage
rounds of venture financing
of revenue positive, privately
held technology companies
alongside many of the
top-tier venture capital
firms in the US. Its aim
is to diversify across
the technology spectrum,
and to actively manage
those companies in which
it is invested. This fund
is currently in its investment
period.
Buyout
Thoma Bravo Fund IX L.P. & Growth US US$823 million 2008 3.2%
Thoma Bravo is a long-established
US equity private equity
business with a focus
on investing in Software,
Services and other Consolidating
Industries. It does this
by identifying talented
management teams operating
in a niche industry segment
upon which additional
acquisitions can be added,
in combination with organic
growth. The fund has completed
its investment period
and is in divestment mode.
Thomas H Lee Parallel
Fund VI L.P. Buyout US US$8.2 billion 2006 5.0%
Thomas H Lee is a long-established
US private equity business
with a focus on investing
in Business & Financial
Services; Consumer & Healthcare;
and Media & Information
services. It uses its
wide network to source
deals and deploy management
teams to operate the businesses.
Thomas H Lee only takes
deals where the valuations
are attractive and where
it believes it will be
possible to grow revenues
by at least high single
digit percentages. The
fund has now completed
its investment period
and whilst it still calls
for capital to fund follow
on investments, it is
in divestment mode.
Wisequity IV Buyout Italy EUR215 million 2016 0.0%
Milan-based Wise is an
established lower mid-market
Italian GP. It invests
in Italian-headquartered
global market leaders
with scope for further
rapid growth both organically
and through acquisitions.
The firm looks to take
a hands-on approach to
value creation working
closely with management
teams, taking on short
term roles within management
if required. The fund
is at the beginning of
its investment period
and has not made its first
investment.
TOP TEN HOLDINGS
As at 31 March 2016
Fair
Book Market NAV
Cost Value Weighting
Holding Strategy US$m US$m %
Lion Capital Fund III
L.P. Buyout 8.7 13.7 6.6
Apax 8 (A8-A(feeder))
L.P. Buyout 9.4 11.9 5.7
HIG Bayside Debt & LBO
Fund II L.P. Distressed 9.3 11.8 5.7
Thomas H Lee Parallel
Fund VI L.P. Buyout 5.8 10.5 5.0
Silver Lake Partners III
L.P. Buyout & Growth 6.2 10.3 4.9
Northzone Ventures VI
L.P. Venture capital 6.2 8.1 3.9
RHO Ventures VI L.P. Venture capital 9.5 8.0 3.8
CCMP Capital Investors
III L.P. Buyout 6.7 7.9 3.8
Tenaya Capital V L.P. Venture capital 7.1 7.5 3.6
Thoma Bravo IX Fund L.P. Buyout & Growth 1.5 6.6 3.2
_____ _____ _____
Top 10 Holdings 70.4 96.5 46.2
_____ _____ _____
EXTRACTS FROM THE DIRECTORS' REPORT
The Directors present their report and the audited financial
statements for the year ended 31 March 2016.
Results and Dividend
Details of the Company's results are shown under Results. The
Company's policy is to distribute approximately 10% of the received
distributions net of recallable distributions each year subject to
a minimum of at least 1p per Share per annum. For the year ended 31
March 2016 the Directors are recommending the payment of a dividend
of 2.2p per Share which, subject to shareholder approval at the AGM
on 13 September 2016, will be payable on 16 September 2016 to
shareholders on the register on 19 August 2016. In the absence of
unforeseen circumstances, the Board expects to pay at least the
same level of dividend for the financial year to 31 March 2017.
Status
The Company is a Guernsey authorised closed-ended investment
company listed on the London Stock Exchange. The Company was
incorporated on 5 January 2007 in Guernsey, Channel Islands with
registered number 46192. Trading in the Company's Shares commenced
on 9 July 2007.
The Company is a member of the Association of Investment
Companies ("AIC").
Individual Savings Accounts
The Company intends to manage its affairs so as to be a
qualifying investment for inclusion in the stocks and shares
component of an Individual Savings Account ('ISA') and it is the
Directors' intention that the Company should continue to be a
qualifying investment.
The Company currently conducts its affairs so that its
securities can be recommended by financial advisers to ordinary
retail investors in accordance with the Financial Conduct
Authority's rules in relation to non-mainstream investment products
and intends to continue to do so for the foreseeable future. The
Company's securities are excluded from the Financial Conduct
Authority's restrictions which apply to non-mainstream pooled
investments (NMPIs) because the Company would qualify as an
investment trust if it were incorporated in the UK.
Share Capital
As at 31 March 2016 there were 109,131,199 Shares in issue.
During the year no Shares were issued or purchased in the market
for cancellation.
Voting Rights
Each Share holds one voting right and shareholders are entitled
to vote on all resolutions which are proposed at general meetings
of the Company. The Shares carry a right to receive dividends. On a
winding up or other return of capital, after meeting the
liabilities of the Company, the surplus assets will be paid to
shareholders in proportion to their shareholdings. There are no
restrictions on the transfer of Shares in the Company other than
certain restrictions which may be applied from time to time by
law.
Management Agreement
In the period up to 29 October 2015 the Company was managed by
ASVG. On 30 October 2015 the management agreement for the Company
was novated to AAML.
Throughout the year under review the Manager has been paid by
the Company a monthly fee equal to:
- one twelfth of 1.5% of the NAV of the Company before deduction
of any performance fee but after deducting liabilities (excluding
from such liabilities the amount of any long-term structured bank
debt approved by the Board) and deducting cash at bank, short-term
deposits and the value of holdings in money market funds; plus
- one twelfth of 0.75% of the value of all cash at bank,
short-term deposits and holdings in money market funds (together
the "Fee")
The Fee is calculated and accrued as at the last business day of
each month and is paid monthly in arrears.
There is also a performance fee element to the management
agreement. Applicable for the year ended 31 March 2016, the
performance fee element of the management fee has been amended and
now incorporates a three year 8% per annum compound return hurdle
rate. In order to earn a performance fee all of the following
criteria must be met in a performance fee year:
- The NAV must have risen by more than 8% in the performance fee year
- The NAV must exceed the high watermark (at which a fee was last paid)
- The NAV must have risen by more than 8% per annum compound
over the previous three performance fee years
The performance fee itself is now calculated at 10% of the NAV
gain above the hurdle rate in the latest performance fee year,
rather than at 10% of the entire NAV gain. Furthermore the total
fees payable to the Manager in any performance period are now
capped at 3% (previously 4.99%). The NAV high watermark in relation
to any future performance fee is 127.41p per Share.
The Directors review the terms of the Agreement on a regular
basis and have confirmed that, owing to the investment skills,
experience and commitment of the Manager, in their opinion the
continuing appointment of AAML, on the terms agreed, is in the
interests of shareholders as a whole.
The Agreement will continue in force until the Company is
wound-up unless and until terminated earlier by either party giving
to the other not less than 12 months' written notice. In certain
circumstances the Agreement may be terminated forthwith by notice
in writing by a party to the other party, including where key
persons depart from the Manager or the Manager is no longer
authorised to carry on investment business in the United
Kingdom.
The Agreement contains indemnities from the Company in favour of
the Manager and its associates which are restricted to exclude
matters arising by reason of the negligence, wilful default, fraud
or breach of the Agreement of or by the Manager or any of its
associates. Furthermore, neither the Manager nor any of its
associates will be liable to the Company for any loss suffered by
the Company in connection with the Agreement, unless the Company
has suffered such loss due to the negligence, wilful default, fraud
or breach of the Agreement of or by the Manager or any of its
associates.
Risk Management
Details of the financial risk management policies and objectives
relative to the use of financial instruments by the Company are set
out in note 20 to the financial statements.
Substantial Interests
The Board has been advised that the following shareholders owned
3% or more of the issued Share capital of the Company at 31 March
2016:
Shareholder Number of Shares held % held
ReAssure Limited 28,470,818 26.1
Hampshire County Council Pension Fund 21,500,000 19.7
Merseyside Pension Fund 18,695,076 17.1
Clients of Aberdeen Asset Managers Limited 5,972,674 5.5
Old Mutual Global Investors 4,705,978 4.3
Subsequent to the year-end the Company has been advised that
clients of Aberdeen Asset Managers are now interested in 5,384,221
Shares representing 4.9% of the issued class of capital.
Corporate Governance
The Company is committed to high standards of corporate
governance. The Board is accountable to the Company's shareholders
for good governance and this statement describes how the Company
applies the principles identified in the UK Corporate Governance
Code ("UK Code") which is available on the Financial Reporting
Council's website: frc.org.uk.
The Board has also considered the principles and recommendations
of the AIC Code of Corporate Governance for Guernsey Domiciled
Investment Companies which was published in February 2015 ("AIC
Guernsey Code") by reference to the AIC Corporate Governance Guide
for Investment Companies ("AIC Guide"). The AIC Guernsey Code, as
explained by the AIC Guide, addresses all the principles set out in
the UK Code, as well as setting out additional principles and
recommendations on issues that are of specific relevance to the
Company. The AIC Guernsey Code also explains that
Guernsey-domiciled investment companies which report against the
AIC Guernsey Code are not required to report separately against the
Guernsey Financial Services Commission ("GFSC") Finance Sector Code
of Corporate Governance ("Guernsey Code"). In addition, the GFSC
required the submission of an assurance statement from companies by
no later than 31 July 2012 to confirm that the Directors have
considered the effectiveness of their corporate governance
practices and are satisfied with their degree of compliance with
the principles of the Guernsey Code, or alternative codes accepted
by the GFSC. The Board confirms that it has considered and approved
the Company's assurance statement which was submitted to the GFSC
on 15 June 2012.
The Board considers that reporting against the principles and
recommendations of the AIC Guernsey Code, and by reference to the
AIC Guide (which incorporates the UK Code), will provide better
information to shareholders.
The Company has complied with the recommendations of the AIC
Guernsey Code and the relevant provisions of the UK Corporate
Governance Code, except as set out below.
The UK Corporate Governance Code includes provisions relating
to:
- the role of the chief executive;
- the appointment of a senior independent director;
- executive directors' remuneration; and,
- and the need for an internal audit function.
For the reasons set out in the AIC Code, and as explained in the
UK Code, the Board considers that these provisions are not relevant
to the position of the Company, being an externally-managed
investment company. In particular, all of the Company's day-to-day
management and administrative functions are outsourced to third
parties. As a result, the Company has no executive Directors,
employees or internal operations. The Company has therefore not
reported further in respect of these provisions. The full text of
the Company's Corporate Governance Statement can be found on the
Company's website, aberdeenprivateequity.co.uk.
Directors
The current Directors are Messrs H Myles, D Copperwaite, P
Hebson and D Staples. Messrs Myles and Hebson will retire by
rotation at the Annual General Meeting and, being eligible, will
offer themselves for re-election.
The Directors submit themselves for re-election every three
years. All Directors are considered to be free from any business or
other relationship that could materially interfere with the
exercise of their independent judgement. Mr Staples was, until
2003, a partner of PwC LLP in the UK ("PwC"). The Board notes that
PwC is a separate partnership to PwC CI LLP which acts as auditors
to the Company and Mr Staples has no financial or other interest in
PwC CI LLP. In view of this the Directors are completely satisfied
that Mr Staples is independent notwithstanding the fact that he is
a former partner of PwC. Mr Staples is also a non executive
director of the General Partner of Apax 8 (A8-A (feeder)) LP in
which the Company has an investment. In accordance with the
Company's policy on the management of possible conflicts of
interest, Mr Staples did not take any part in the Board's
consideration of the decision to invest in Apax 8 and Mr Staples
does not participate in any specific Board discussions relating to
the on-going investment in Apax 8.
Each Director has the requisite high level and range of business
and financial experience which enables the Board to provide clear
and effective leadership and proper stewardship of the Company. The
Board considers that there is a balance of skills and experience
within the Board relevant to the leadership and direction of the
Company and that all Directors contribute effectively.
The Board is committed to improving the opportunities for people
from a diverse range of backgrounds to understand and prepare for
membership of corporate boards. During the period under review an
apprentice was appointed from Board Apprentice Limited, which is a
not-for-profit organisation dedicated to creating a wider pool of
board-ready candidates. For a period of one year, the Board
appointed Katie Hutchins as a Board apprentice, and in that
capacity, she attended all Board and Committee meetings as an
observer for educational purposes. Ms Hutchins received no expenses
or remuneration from the Company and her twelve month term of
appointment came to an end on 1 May 2016.
The Board meets quarterly, with ad hoc meetings in between to
deal with issues as they arise. Mr Hebson is a UK resident. In
order to be eligible to attend a Board meeting a UK resident
Director must be situated outside the UK at the time of the
meeting. The Directors attended the following meetings during the
year ended 31 March 2016 (with their eligibility to attend the
relevant meetings in brackets):
Scheduled Board Other Board Audit AGM Other Com
H Myles 4 (4) 4 (3) 3 (3) 1 (1) 3 (3)
D Staples 4 (4) 4 (4) 3 (3) 1 (1) 3 (3)
D Copperwaite 4 (4) 4 (4) 3 (3) 1 (1) 3 (3)
P Hebson 4 (4) 3 (0) 3 (3) 1 (1) 3 (3)
The Board has a schedule of matters reserved to it for decision
and the requirement for Board approval on these matters is
communicated directly to the senior staff of the Manager. Such
matters include strategy, gearing, treasury and dividend policy.
Full and timely information is provided to the Board to enable the
Directors to function effectively and to discharge their
responsibilities. The Board also reviews the financial statements,
performance and revenue budgets.
Board Committees
The Directors have appointed a number of Committees as set out
below. Copies of their terms of reference, which clearly define the
responsibilities and duties of each Committee, are available on the
website. The terms of reference of each of the Committees are
reviewed and re-assessed by the Board for their adequacy on an
ongoing basis.
Audit Committee
The Audit Committee Report is in the Annual Report.
Management Engagement Committee
The Management Engagement Committee comprises all of the
Directors and is chaired by Mr Copperwaite. The Committee reviews
the performance of the Manager and the investment management and
secretarial agreements and compliance with their terms. The
Committee also reviews the engagement terms of all other material
third party service providers. The terms and conditions of the
Manager's appointment, including an evaluation of fees, are
reviewed by the Committee on an annual basis. The Committee
believes that the continuing appointment of the Manager on the
terms agreed is in the interests of shareholders as a whole.
Nomination Committee
All appointments to the Board of Directors are considered by the
Nomination Committee which comprises the entire Board and is
chaired by Mr Myles. Possible new Directors are identified against
the requirements of the Company's business and the need to have a
balanced Board. Every Director is entitled to receive appropriate
training as deemed necessary. A Director appointed during the year
is required, under the provisions of the Company's Articles of
Incorporation, to retire and seek election by shareholders at the
next Annual General Meeting. The Articles of Incorporation require
that one third of the Directors retire by rotation at each Annual
General Meeting. The Board's policy is that Directors who have
served more than nine years will submit themselves for annual
re-election on a voluntary basis. The Board's overriding priority
in appointing new Directors to the Board is to identify the
candidate with the best range of skills and experience to
complement existing Directors. The Board recognises the benefits of
diversity in the composition of the Board. When Board positions
become available as a result of retirement or resignation, the
Company will ensure that a diverse group of candidates is
considered.
The Company has put in place the necessary procedures to
conduct, on an annual basis, an appraisal of the Chairman of the
Board, Directors' individual self-evaluation and an evaluation of
the Board as a whole. Following formal performance evaluations, the
performance of each Director, including those seeking re-election
continues to be effective and demonstrates commitment to the role.
Accordingly, the Board has no hesitation in recommending the
re-election of Mr Myles and Mr Hebson at the forthcoming AGM.
Remuneration Committee
A Remuneration Committee has been established comprising the
entire Board and which is chaired by Mr Hebson. The remuneration of
the Directors has been set in order to attract and retain
individuals of a calibre appropriate to the future development of
the Company. The Company's policy on Directors' remuneration,
together with details of the remuneration of each Director, is
detailed in the Directors' Remuneration Report.
Management of Conflicts of Interests
The Board has a procedure in place to deal with a situation
where a Director has a conflict of interest. As part of this
process, the Directors are required to disclose other positions
held and all other conflict situations that may need to be
authorised either in relation to the Director concerned or his or
her connected persons. The Board considers each Director's
situation and decides whether to approve any conflict, taking into
consideration what is in the best interests of the Company and
whether the Director's ability to act in accordance with his or her
wider duties is affected. Each Director is required to notify the
Company Secretary of any potential or actual conflict situations
that will need authorising by the Board. Authorisations given by
the Board are reviewed at each Board meeting.
The Company has a policy of conducting its business in an honest
and ethical manner. The Company takes a zero tolerance approach to
bribery and corruption and has procedures in place that are
proportionate to the Company's circumstances to prevent them. The
Aberdeen Group also adopts a group-wide zero tolerance approach and
has its own detailed policy and procedures in place to prevent
bribery and corruption. Copies of the Aberdeen Group's anti-bribery
and corruption policies are available on its website
aberdeen-asset.com.
Internal Control
The Board is ultimately responsible for the Company's system of
internal control and risk management and for reviewing its
effectiveness. The Board confirms that as at 31 March 2016 there
was an ongoing process for identifying, evaluating and managing the
Company's significant business and operational risks, that it was
in place for the year ended 31 March 2016 and up to the date of
approval of the Annual Report, that it is regularly reviewed by the
Board and accords with the internal control guidance for directors
in the UK Code.
The design, implementation and maintenance of controls and
procedures to safeguard the assets of the Company and to manage its
affairs properly extends to operational and compliance controls and
risk management. The Directors have delegated the investment
management of the Company's assets to the Manager within overall
guidelines, and this embraces implementation of the system of
internal control, including financial, operational and compliance
controls and risk management. Internal control systems are
monitored and supported by the Manager's internal audit function
which undertakes periodic examination of business processes,
including compliance with the terms of the management agreement,
and ensures that recommendations to improve controls are
implemented.
Risks are identified and documented through a risk management
framework by each function within the Manager's activities. Risk is
considered in the context of the FRC and the UK Code guidance, and
includes financial, regulatory, market, operational and
reputational risk. This helps the Manager's internal audit risk
assessment model identify those functions for review. Any
weaknesses identified are reported to the Board, and timetables are
agreed for implementing improvements to systems. The implementation
of any remedial action required is monitored and feedback provided
to the Board. The principal risks and uncertainties facing the
Company are identified in the Strategic Report.
The key components designed to provide effective internal
control are outlined as follows:
- the Board and Manager have agreed clearly defined investment
criteria, specified levels of authority and exposure limits.
Reports on these issues, including performance statistics and
investment valuations, are regularly submitted to the Board;
- the Manager prepares forecasts and management accounts which
allow the Board to assess the Company's activities and review its
performance;
- internal controls reports (ISAE3402 and AAF 01/06) are
reviewed from all key service providers;
- as a matter of course, the Manager's compliance department
continually reviews the Manager's operations; and
- written agreements are in place which specifically define the
roles and responsibilities of the Manager and other third party
service providers.
The Board has considered the need for an internal audit function
but, because of the compliance and internal control systems in
place at the Manager, has decided to place reliance on the
Manager's systems and internal audit procedures. At its meeting in
June 2016, the Audit Committee carried out an annual assessment of
internal controls for the year ended 31 March 2016 by considering
documentation from the Manager, including the internal audit and
compliance functions and taking account of events since 31 March
2016. The results of the assessment were then reported to the Board
at the next Board meeting.
The system of internal control and risk management is designed
to meet the Company's particular needs and the risks to which it is
exposed. Accordingly, the system of internal control and risk is
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.
Relations with Shareholders
The Directors place a great deal of importance on communication
with shareholders. The Manager and the Company's stockbroker aim to
meet larger shareholders at least annually. The Annual Report and
financial statements are widely distributed to other parties who
have an interest in the Company's performance. Shareholders and
investors may obtain up to date information on the Company through
the Manager's freephone information service and the Company's
website (aberdeenprivateequity.co.uk).
The Notice of AGM included within the Annual Report and
financial statements is sent out at least 20 working days in
advance of the meeting. All shareholders have the opportunity to
put questions to the Board or Manager, either formally at the
Company's Annual General Meeting, informally following the meeting
or in writing at any time during the year via the Company
Secretary. The Company Secretary is available to answer general
shareholder queries at any time throughout the year.
The Board recognises and supports the Manager's investor
relations programme which includes active engagement with
substantial shareholders. The Directors make themselves available
to meet substantial shareholders on an ad hoc basis. The Board
receives regular detailed reports and updates on investor relations
from the Manager.
Socially Responsible Investment Policy
The Board is aware of its duty to act in the interests of the
Company and its shareholders. The Board acknowledges that there are
risks associated with investments into privately held companies,
via Limited Partnerships ("LPs"), or direct investment, which fail
to conduct business in a responsible manner. The Directors, through
the Company's Manager, therefore encourage PE General Partners
("GPs") to adhere to best practice across the spectrum of
Environmental, Social and Corporate Governance ("ESG") issues.
The Manager considers a range of material social, environmental
and governance factors in the evaluation of investments into PE
funds and direct investments. Specifically, the investment team
considers these factors in line with the Principles for Responsible
Investment ("PRI"). Aberdeen Asset Management signed the United
Nations Principles for Responsible Investment in 2007. The guide is
now known simply as PRI, which has been specifically designed for
PE. These are used within the diligence process for new fund
investments and in the on-going monitoring of these commitments.
The Manager requests specific information on the process that a GP
uses in its own due diligence to assess the Company's potential
exposure to environmental, social, human capital and governance
risks, as well as financial factors. This helps to ensure a
holistic approach is taken to risk assessment and that these issues
are fully considered within that GP's investment approval process.
Where a particular GP lacks transparency on ESG issues, this will
be taken into account when making an investment recommendation.
Prior to making a commitment, the investment team also undertake
due diligence on how the General Partner approaches the reporting
of ESG issues to investors and other stakeholders, to ensure that
LPs will receive adequate disclosure of any material risks or
issues arising during a fund's life.
The Manager also requests information on how GPs address ESG
issues in their portfolio companies during their period of
ownership. Where material issues arise, the Manager becomes fully
involved in LP decision making where appropriate, and will track
the progress of these issues through to resolution.
Annual General Meeting
The Company's Annual General Meeting is convened for 10.30 a.m.
on 13 September 2016 at the offices of Ipes (Guernsey) Limited, 1
Royal Plaza, Royal Avenue, St Peter Port, Guernsey, GY1 2HL.
Continuation of the Company
The Articles of Incorporation require the Company to propose a
continuation vote at its Annual General Meeting in 2016 and at
every third Annual General Meeting of the Company thereafter.
Accordingly Resolution 7 will be proposed at the Annual General
Meeting convened for 13 September 2016 as an ordinary resolution
requiring a bare majority of votes cast in order for the Company to
continue its business as a closed ended investment company.
Accountability and Audit
The respective responsibilities of the Directors and the
auditors in connection with the financial statements are set out in
the Annual Report.
Independent Auditors
Our independent auditors, PricewaterhouseCoopers CI LLP ("PwC CI
LLP"), have indicated their willingness to remain in office.
Resolution 6 will be proposed as an ordinary resolution at the AGM
to re-appoint PwC CI LLP as independent auditors for the ensuing
year, and to authorise the Directors to determine their
remuneration.
Disapplication of Pre-emption Rights
Resolution 8 will be proposed as a special resolution at the AGM
to provide the Directors with an annual authority to disapply
pre-emption rights in respect of up to 10% of the Share capital
when issuing Shares and/or selling Shares from treasury. This
authority will expire at the conclusion of the AGM in 2017. Any
future issues, or sales of Shares from treasury, will only be
undertaken at a premium to the prevailing NAV per Share.
Purchase of the Company's Securities
As part of the discount control mechanisms, the Board may
consider implementing a Share buy-back (subject to the limitations
to be set out in Resolution 9 in the Notice of the Annual General
Meeting of the Company and all other applicable laws and
regulations) at each quarterly Board meeting should the Shares have
been trading at a discount to NAV of 10% or greater for more than
90 days. The Company has the authority to manage demand flows for
its Shares by purchasing up to 14.99% of the issued Share capital.
Up to 10% may be held within treasury and resold. The remainder
will be cancelled. Annual shareholder approval will be sought to
renew this authority.
Purchases of Shares will only be made through the market for
cash at prices below the prevailing NAV per Share (as last
calculated) when the Directors believe that it would be in the
interests of shareholders generally to do so. No Shares were
repurchased in the year ended 31 March 2016.
At the Annual General Meeting to be held on 13 September 2016,
Resolution 9, a special resolution, will be proposed to renew the
Directors' authority to make market purchases of the Company's
Shares in accordance with the provisions of the Listing Rules of
the Financial Services Authority. Accordingly, the Company will
seek authority to purchase up to 14.99% of the current issued Share
capital. The authority being sought shall expire at the conclusion
of the Annual General Meeting in 2017 unless such authority is
renewed prior to such time. Any Shares purchased in this way will
either be cancelled and the number of Shares will be reduced
accordingly, or the Shares will be held in treasury.
Recommendation
Your Board considers each of the AGM resolutions to be in the
best interests of the Company and its members as a whole.
Accordingly, your Board recommends that shareholders should vote in
favour of each of the resolutions to be proposed at the Annual
General Meeting, as they intend to do in respect of their own
beneficial shareholdings amounting to 105,658 Shares.
Going Concern
The Company's Directors have reviewed the viability and going
concern status of the Company and they believe that the Company has
adequate resources to continue in operational existence for the
foreseeable future. In drawing this conclusion the Directors have
taken account of financial modelling of future drawdowns versus the
rate of realisations provided by the Manager as well as the
availability of the Company's revolving credit facility.
Furthermore, the Directors are recommending shareholders to vote in
favour of the continuation vote and, based upon initial discussions
with the larger shareholders, they believe that the resolution to
continue will be passed. Notwithstanding the resolution being
proposed at the forthcoming Annual General Meeting to approve the
continuation of the Company, the Directors have, at the time of
approving the financial statements, a reasonable expectation that
the Company has adequate resources to continue in operational
existence for the foreseeable future. Thus they continue to adopt
the going concern basis of accounting in preparing the financial
statements. Nevertheless, the Directors are making full disclosure,
as required by accounting standards, to indicate the existence of a
material uncertainty (the continuation vote referred to above),
which may cast significant doubt about the Company's ability to
continue as a going concern. The financial statements do not
include the adjustments that would result if the Company was unable
to continue as a going concern.
Note 20 to the financial statements includes the Company's
objectives, policies and processes for managing its capital; its
financial risk management objectives; details of its financial
instruments and its exposure to credit risk and liquidity risk. The
Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern including reviewing the
level of the Company's assets and significant areas of financial
risk including the level of liquidity, the estimated draw down of
commitments and timing of realisations from the portfolio.
By order of the Board
David Staples
Director
Registered Office:
1 Royal Plaza, Royal Avenue
St Peter Port, Guernsey
GY1 2HL
11 July 2016
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing financial statements
for each financial year which give a true and fair view in
accordance with applicable Guernsey law and International Financial
Reporting Standards, of the state of affairs of the Company and of
the profit or loss of the Company for that year. In preparing the
financial statements, the Directors are required to:
- select suitable accounting policies and apply them consistently;
- make judgements and estimates that are reasonable and prudent;
- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements;
- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
- assess whether the Annual Report and financial statements,
taken as a whole, is 'fair, balanced and understandable'.
The Directors confirm to the best of their knowledge that:
- they have complied with the above requirements in preparing the financial statements;
- there is no relevant audit information of which the Company's auditors are unaware.
In accordance with Disclosure and Transparency Rule 4.1.12:
The Directors confirm to the best of their knowledge that:
- the financial statements, prepared in accordance with 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; and
- that in the opinion of the Directors, the Annual Report and
financial statements taken as a whole, is fair, balanced and
understandable and it provides the information necessary to assess
the Company's performance, business model and strategy; and
- the Strategic Report, including the Chairman's Statement and
the Manager's Review, 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 the Company faces.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with The Companies (Guernsey) Law,
2008. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Each Director confirms that, so far as he is aware, there is no
relevant audit information of which the Company's auditors are
unaware, and he has taken all the steps that he ought to have taken
as a Director in order to make himself aware of any relevant audit
information and to establish that the Company's auditors are aware
of that information. Additionally, all important events since the
year end are properly disclosed in the financial statements.
The maintenance and integrity of the Company's website is the
responsibility of the Directors; the work carried out by the
auditors does not involve consideration of the maintenance and
integrity of this website and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the
financial statements since they were initially presented on the
website. Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
For Aberdeen Private Equity Fund Limited
David Staples
Director
11 July 2016
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 March 2016
Year ended Year ended
31 March 2016 31 March 2015
Notes US$'000 US$'000
Gains on investments 13 11,180 16,279
Income 4 78 52
Currency gains/(losses) 40 (505)
Investment management fee 5 (2,833) (2,685)
Performance fee 5 - (1,568)
Other operating expenses 6 (1,211) (1,372)
Tax incurred on distribution
income 7 (142) (46)
_____ _____
Profit attributable to equity
shareholders 7,112 10,155
_____ _____
Earnings per share (sterling
pence) 9 4.53 6.29
_____ _____
The Company does not have any income or expense that is not included
in profit for the year, and therefore the "Profit attributable
to equity shareholders" is also the "Total comprehensive income
for the year", as defined in IAS 1 (revised).
All of the profit and total comprehensive income is attributable
to the equity holders of the Company.
All items in the above statement derive from continuing operations.
The accompanying notes are an integral part of the financial statements.
BALANCE SHEET
As at 31 March 2016
As at As at
31 March 2016 31 March
2015
Notes US$'000 US$'000
Non-current assets
Financial assets held at fair value
through profit or loss 10 173,104 175,125
Current assets
Cash and cash equivalents 36,574 32,649
Tax receivable 7 - 35
Trade and other receivables 14 666 29
_____ _____
37,240 32,713
_____ _____
Creditors: amounts falling due within
one year
Trade and other payables 15 (1,050) (2,053)
Net current assets 36,190 30,660
_____ _____
Creditors: amounts falling due after
more than one year
Trade and other payables 15 (159) -
_____ _____
Net assets 209,135 205,785
_____ _____
Share capital and reserves
Share capital 16 - -
Share premium 16 229,199 229,199
Revenue reserves 17 (20,064) (23,414)
_____ _____
Equity shareholders' funds 209,135 205,785
_____ _____
Net asset value per share (sterling
pence) 18 133.33 127.41
_____ _____
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 March 2016
Share capital Revenue
&
Share premium reserves Total
US$'000 US$'000 US$'000
Balance at 31 March 2015 229,199 (23,414) 205,785
Dividend paid - (3,762) (3,762)
Profit attributable to equity shareholders - 7,112 7,112
_____ _____ _____
Balance at 31 March 2016 229,199 (20,064) 209,135
_____ _____ _____
For the year ended 31 March 2015
Share capital Revenue
&
Share premium reserves Total
US$'000 US$'000 US$'000
Balance at 31 March 2014 229,199 (30,025) 199,174
Dividend paid - (3,544) (3,544)
Profit attributable to equity shareholders - 10,155 10,155
_____ _____ _____
Balance at 31 March 2015 229,199 (23,414) 205,785
_____ _____ _____
The accompanying notes are an integral part of the financial statements.
STATEMENT OF CASH FLOWS
Year ended Year ended
31 March 2016 31 March 2015
US$'000 US$'000
Cash flows from operating activities
Profit for the year 7,112 10,155
Net interest income from cash and cash
equivalents (78) (52)
Gains on investments (11,180) (16,279)
Tax incurred on investment distributions 93 60
Distribution income from investments 2,497 4,932
Realised gains on investee distributions 28,125 13,415
Tax incurred on investment distributions (93) (60)
Realised currency losses on investment
distributions (2,925) (504)
Capital calls in relation to investee
expenses (3,260) (3,069)
Purchases of investments including calls (26,402) (31,520)
Sales of investments and returns of capital 15,166 21,409
(Decrease)/increase in trade and other
payables (844) 1,607
Decrease in trade and other receivables (602) 78
_____ _____
Net cash outflow from operating activities 7,609 172
Cash flows from investing activities
Net interest income from cash and cash
equivalents 78 52
_____ _____
Net cash inflow from investing activities 78 52
Cash flows from financing activities
Equity dividends paid (3,762) (3,544)
_____ _____
Net cash outflow from financing activities (3,762) (3,544)
_____ _____
Net change in cash and cash equivalents
for the year 3,925 (3,320)
_____ _____
Cash and cash equivalents at beginning
of the year 32,649 35,969
_____ _____
Cash and cash equivalents at the end
of the year 36,574 32,649
_____ _____
NOTES TO THE FINANCIAL STATEMENTS:
For the year ended 31 March 2015
1. General information
Aberdeen Private Equity Fund Limited (the "Company") was incorporated
with limited liability and registered in Guernsey on 5 January
2007. The Company's shares were listed on 9 July 2007 whereupon
the Company became a closed-ended investment company, domiciled
in Guernsey. The Company is authorised by the Guernsey Financial
Services Commission.
2. Accounting policies
The following accounting policies have been applied consistently
in dealing with items which are considered material in relation
to the Company's financial statements;
(a) Basis of preparation
The financial statements are prepared on a going concern
basis under the historical cost convention, as modified by
the revaluation of financial assets and financial liabilities
at fair value through profit or loss.
Notwithstanding the resolution being proposed at the forthcoming
Annual General Meeting to approve the continuation of the
Company, the Directors had, at the time of approving the
financial statements, a reasonable expectation that the Company
had adequate resources to continue in operational existence
for the foreseeable future. Thus they have continued to adopt
the going concern basis of accounting in preparing the financial
statements. Further detail is included in the Directors'
Report.
The financial statements are prepared in accordance with
International Financial Reporting Standards ("IFRS") issued
by the International Accounting Standards Board ("IASB"),
and interpretations issued by the International Financial
Reporting Interpretations Committee ("IFRIC").
The preparation of financial statements in conformity with
IFRS requires the use of certain critical accounting estimates
which requires management to exercise its judgement in the
process of applying the accounting policies. Actual results
may differ from these estimates. It is in the area of valuation
of investments where management are required to exercise
judgement in the adoption of critical estimates and judgements
which can impact the carrying values of investments.
At the date of authorisation of these financial statements,
the following Standards and Interpretations were in issue
but not yet effective;
IFRS 7 (amendments) - Financial Instruments: Disclosure (effective
1 January 2016)
IFRS 9 - Financial Instruments (revised, early adoption permitted)
(effective for annual periods beginning on or after 1 January
2018).
IFRS 10 and IAS 28 - Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture (date to be
determined)
IFRS 15 - Revenue from Contracts with Customers (effective
1 January 2018)
IFRS 16 - Leases (effective 1 January 2018)
IAS 1 - Disclosure Initiative (effective 1 January 2016)
IAS 7 - Additional disclosure of changes in liabilities arising
from financial activities (effective 1 January 2017).
IAS 16 and IAS 38 - Clarification of Acceptable Methods of
Depreciation and Amortisation (effective 1 January 2016)
IAS 27 - Equity Method in Separate Financial Statements (effective
1 January 2016)
The Directors do not anticipate that the adoption of these
Standards and Interpretations in future periods will materially
impact the Company's financial results in the period of initial
application although there will be revised presentations
to the Financial Statements and additional disclosures. The
Company intends to adopt the Standards in the reporting period
when they become effective.
(b) Financial assets
i) Classification
A financial asset or financial liability at fair value
through profit or loss is a financial asset or liability
that is classified as held-for-trading or designated at
fair value through profit or loss on inception.
Financial assets that are not held at fair value through
profit or loss include certain balances due from brokers
and accounts receivable. Financial liabilities that are
not at fair value through profit or loss include certain
balances due to brokers and accounts payable.
ii) Recognition
The Company recognises financial assets and financial
liabilities on the date it becomes party to the contractual
provisions of the investment. Purchases and sales of financial
assets and financial liabilities are recognised using
trade date accounting. From trade date, any gains and
losses arising from changes in fair value of the financial
assets or financial liabilities are recorded in the Statement
of Comprehensive Income.
iii) Fair value measurement principles
Financial assets and liabilities are initially recorded
at their transaction price and then measured at fair value
subsequent to initial recognition. Gains and losses arising
from changes in the fair value of the 'financial assets
or financial liabilities at fair value through profit
or loss' category are presented in the Statement of Comprehensive
Income for the period in which they arise.
Financial assets classified as receivables are carried
at amortised cost less any impairment losses. Financial
liabilities, other than those at fair value through profit
or loss, are measured at amortised cost using the effective
interest rate method.
IFRS 13 'Fair Value Measurement' aims to improve consistency
and reduce complexity by providing a precise definition
of fair value and a single source of fair value measurement
and disclosure requirements for use across IFRSs. The
requirements do not extend the use of fair value accounting
but provide guidance on how it should be applied where
its use is already required or permitted by other standards
within IFRS.
iv) Investees
The Company's investments in investees (that is, limited
partnerships, co-investments and companies in the investment
portfolio) are subject to the terms and conditions of
the respective investee's offering documentation. The
investments in the investees are valued based on the reported
Net Asset Value ("NAV") of such assets as determined by
the administrator or General Partner of the investee and
adjusted by the Directors in consultation with the Manager
to take account of concerns such as liquidity so as to
ensure that investments held at fair value through profit
or loss are carried at fair value. The reported NAV is
net of applicable fees and expenses including carried
interest amounts of the investees and the underlying investments
held by each investee are accounted for, as defined in
the respective investee's offering documentation. While
the underlying fund managers may utilise various model-based
approaches to value their investment portfolios, on which
the Company's valuations are based, no such models are
used directly in the preparation of fair values of the
investments. The NAV of investees reported by the administrators
may subsequently be adjusted when such results are subject
to audit and audit adjustments may be material to the
Company.
v) Cash and cash equivalents
Cash and cash equivalents consist principally of cash
on hand, demand deposits and short-term, highly liquid
investments with original maturities of three months or
less.
vi) Listed securities
Listed investments are designated upon initial recognition
as at fair value through profit or loss. Investments are
recognised on the trade date at cost. Listed investments
are derecognised when the right to receive cash flows
from the investments has expired or the Company has transferred
substantially all risks and rewards of ownership. Subsequent
to initial recognition, investments are valued at fair
value which for listed investments is deemed to be last
trade market prices. If an asset or a liability measured
at fair value has a bid price and an ask price, the standard
requires valuation to be based on a price within the bid-ask
spread that is most representative of fair value and allows
the use of mid-market pricing or other pricing conventions
that are used by market participants as a practical expedient
for fair value measurement within a bid-ask spread. On
adoption of the standard, the Company elected to use last
traded price for valuing listed assets, where this falls
between the bid-ask spread. Gains and losses arising from
changes in fair value are presented in the Statement of
Comprehensive Income for the period in which they arise.
(c) Interest income and dividend/distribution income
Interest income on cash and cash equivalents is accrued using
the effective interest method. Dividend income and income
from investees is recognised in gains on investments when
the right to receive payment is established. Dividend income
and income from investees is recognised gross of tax deducted
at source, which is recognised as an operating expense.
(d) Realised and unrealised gains and losses
Realised gains and losses arising on the disposal of investments
are calculated by reference to the proceeds received on disposal
and the average cost attributable to those investments, and
are recognised in the Statement of Comprehensive Income.
Unrealised gains and losses on investments held at fair value
through profit or loss are also recognised in the Statement
of Comprehensive Income.
(e) Foreign currency
i) Functional and presentation currency
The investments which the Company makes are primarily
denominated in US Dollars. The Board of Directors considers
US Dollars as the currency that most faithfully represents
the economic effects of the underlying transactions, events
and conditions. The financial statements are presented
in US Dollars, which is the Company's functional and presentation
currency.
ii) Transactions and balances
Foreign currency transactions are translated into the
functional and presentation currency using the exchange
rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement
of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated
in foreign currencies other than US Dollars are recognised
in the Statement of Comprehensive Income.
(f) Expenses
All expenses recognised in the Statement of Comprehensive
Income are on an accruals basis.
(g) Share issue expenses
Expenses which are directly incurred only on the issue of
shares are written off against the share premium account.
(h) Statement of Cash Flows
For the purpose of the Statement of Cash Flows, the Company
considers balances due to and from banks as cash and cash
equivalents.
(i) Dividends payable
Dividends which are proposed as final dividends for shareholder
approval are recognised upon shareholder approval being granted.
Interim dividends which are declared by the Board and do
not require shareholder approval are recognised upon their
declaration.
(j) Distributions in-specie
Distributions in-specie have been designated upon initial
recognition as at fair value through profit or loss. Thereafter
the assets are valued at fair value and in line with the
relevant accounting policy.
(k) Other receivables and payables
Other receivables do not carry any interest and are short-term
in nature, and are, accordingly, stated at their amortised
cost. Other payables are non-interest bearing and are stated
at their amortised cost.
3. Segmental information
The Company engaged in a single segment of business during the
year: investment in the Private Equity Funds (including direct
and co-investments) portfolio. A reconciliation of movements
in value during the year can be found in notes 10 and 13 where
additional analysis has been provided for the benefit of shareholders.
Whilst the Company details holdings of investments in Private
Equity Funds (including direct and co-investments) and Quoted
Equities, these are considered a single business segment and
are not monitored or reported on separately to management. The
holdings in Quoted Equities were acquired as part of an in-specie
distribution from one of the underlying Private Equity investments
and were not deemed to be a separate activity or investment
strategy of the Company prior to the disposal of the final remaining
holding during the previous financial year. The Company did
not have any holdings in Quoted Equities during the current
year.
The Company is domiciled in Guernsey. All of the Company's income
from investments is from underlying investments that are incorporated
in countries other than Guernsey.
The Company has a diversified portfolio of investments and in
accordance with the Company's investment policy no single investment
may account for more than 20% of the Company's net assets at
the date of investment.
2016 2015
4. Income US$'000 US$'000
Net interest income from cash and cash
equivalents 78 52
_____ _____
2016 2015
5. Management fees US$'000 US$'000
Investment management fee 2,833 2,685
_____ _____
During the year ASVG provided management services to the Company
until 30 October 2015. Following an acquisition by AAM PLC of
the remaining shares in ASVG, the Company was managed by AFML
with effect from 30 October 2015. AFML also acts as the alternative
investment fund manager (AIFM) of the Company and delegates
the portfolio management of the Company to AAML.
Under the terms of the management agreement the basis of the
monthly fee to be paid to the Manager is equal to one-twelfth
of 1.5% of the NAV of the Company before deduction of any performance
fee but after deducting liabilities (excluding from such liabilities
the amount of any long-term structured bank debt approved by
the Board) and deducting cash at bank, short-term deposits and
the value of holdings in money market funds plus one-twelfth
of 0.75% of the value of all cash at bank, short-term deposits
and holdings in money market funds. The fee is calculated and
accrued as at the last business day of each month and is paid
monthly in arrears. At 31 March 2016 US$239,000 was outstanding
(31 March 2015 - US$239,000).
At the time of the launch of the Company the previous manager
entered into agreements to share part of its management fee
with certain shareholders that had subscribed to the original
offer. These arrangements are continuing to the extent that
original shareholders have remained continuously interested
in the Company's shares.
2016 2015
US$'000 US$'000
Performance fee - 1,568
_____ _____
In addition, the Manager is entitled to a performance fee subject
to certain conditions.
In order to earn a performance fee all of the following criteria
must be met in a performance fee period:
* the NAV must have risen by more than 8% in the
performance fee period;
* the NAV must exceed the high watermark (at which a
performance fee was last paid); and
* the NAV must have risen by more than 8% per annum
compounded over the previous three performance
periods.
The performance fee itself is calculated at 10% of the NAV gain
above the hurdle rate in the performance period. Furthermore,
the total fees payable to the Manager in any performance period
is capped at 3% of NAV. As at 31 March 2016 US$nil was payable
(31 March 2015 - US$1,568,000).
2016 2015
6. Other operating expenses US$'000 US$'000
Administration fees{A} 176 192
Auditors' fees:
* audit 74 80
* for review of the interim report 22 26
* for taxation services{B} - 61
Bank charges 4 5
Brokerage fees 52 56
Custody fees 15 18
Depositary fees 19 31
Directors' fees 195 237
Directors' and officers' insurance 18 24
Legal and professional fees{C} 195 197
Loan facility fees 206 269
Printing and communication{D} 136 91
Travel expenses 10 11
Listing fee 14 9
Registrar's fees 40 31
Regulatory fees 12 7
Subscription fees 19 19
Other expenses 4 8
_____ _____
1,211 1,372
_____ _____
{A} The Administrator is paid by the Company a fee of GBP105,000
(US$176,000) per annum plus disbursements. The contract notice
period is 90 days. At 31 March 2016 GBP29,000 (US$42,000) was
outstanding (31 March 2015 - GBP28,000 (US$41,000)).
{B} During the year ended 31 March 2015 certain taxation services
include tax planning and advice in respect of determining the
Company's reporting obligations in the US as a result of taxes
being incurred on distributions were undertaken by PwC US. These
services were approved by the Audit Committee and appropriate
safeguards put in place to ensure the auditors' independence
was not impacted. The auditors are PwC CI LLP and the Audit
Committee notes that PwC CI LLP is a separate network firm from
PwC US. Subsequent to the completion of these services by PwC
US the Company engaged Ernst & Young LLP to undertake taxation
services.
{C} Included within the total are costs of US$nil (2015 - US$100,000)
attributable to the renewal of the loan facility and costs of
US$37,000 (2015 - US$62,000) related to taxation services provided
by Ernst & Young LLP and PWC US respectively.
{D} Included in the total are costs attributable to the Company's
agreement with AAML ('AAML') for the provision of promotional
activities in relation to the Company's participation in the
Aberdeen Investment Trust Share Plan and ISA. The total fees
paid and payable under the agreement were GBP74,000 (2015 -
GBP40,000) and the sum due to AAM at the year end was GBP45,000
(2015 - GBP6,000).
7. Taxation
The Company is subject to federal and state tax on effectively
connected income ("ECI") received from certain of its underlying
portfolio holdings in the US. Such taxes are deducted by the
investee from income before being paid to the Company. Upon
filing the Company's annual tax return with US authorities the
Company will be able to assess whether any ECI tax paid on its
behalf may be recoverable. Nil was identified as recoverable
at 31 March 2016 (31 March 2015 - US$35,000). In certain circumstances,
the Company is also in a position to receive recoverable withholding
taxes on distribution income from underlying holdings. During
the year ended 31 March 2016, the Company incurred state taxes
of US$49,000 and withholding tax expenses of US$248,000 and
received withholding tax refunds of US$155,000, therefore amounting
to a net tax expense for the year of US$142,000. The Company
is domiciled and registered for taxation purposes in Guernsey
where it pays an annual exempt status fee (which is currently
GBP1,200) under The Income Tax (Exempt Bodies) (Guernsey) Ordinances
1989 (as amended). Consequently, the Company does not pay income
or corporation taxes there and, other than in the US as noted
above, does not currently suffer such taxes anywhere else.
2016 2015
8. Dividends US$'000 US$'000
Proposed dividend for 2016 - 2.20p (2015
- 2.20p) 3,451 3,553
_____ _____
The proposed dividend for 2016 has not been included as a liability
in these financial statements as it is subject to shareholders'
approval at the Annual General Meeting which is scheduled for
13 September 2016 (2015 - US$ nil).
9. Earnings per share
The basic earnings per share is calculated by dividing the return
attributable to shareholders of GBP4,948,000 (US$7,112,000);
(2015 - GBP6,861,000) (US$10,155,000)) by 109,131,199 (2015
- 109,131,199) shares, the weighted average number of shares
in issue during the year. There were no potentially dilutive
shares in issue at 31 March 2016 (31 March 2015 - nil). Whilst
the Company has chosen to report basic earnings per share in
a currency other than its functional and presentation currency
as supplementary information it has complied with the requirements
of IFRS including the translation method.
2016 2015
Private Equity Quoted Private Equity
Funds Equities Funds Total
10. Financial assets at US$'000 US$'000 US$'000 US$'000
fair value through profit
or loss
Cost at beginning of
year 131,609 391 128,830 129,221
Additions 26,402 414 31,106 31,520
Disposals and return
of capital (15,166) (851) (20,558) (21,409)
Realised gains/(losses)
on investments 122 46 (7,769) (7,723)
_____ _____ _____ _____
Cost at end of year 142,967 - 131,609 131,609
Unrealised gains on
investments 30,137 - 43,516 43,516
_____ _____ _____ _____
Fair value at end of
year 173,104 - 175,125 175,125
_____ _____ _____ _____
As at 31 March 2016 (2015 - same) there was one operating segment,
being Private Equity Funds (including direct and co-investments).
11. Unconsolidated structured entities
The Company invests in investment funds and has assessed whether
these investees should be classified as unconsolidated structured
entities in accordance with IFRS 12 - Disclosure of Interests
in Other Entities. These investees are closed-end private equity
limited partnerships or investment companies which invest in
underlying companies for the purposes of capital appreciation.
These entities are generally financed through committed capital
from limited partners or shareholders, with cash being drawn
down for financing investment activity. The Company has considered
the voting rights and other similar rights afforded to investors
in these investees, including the rights to remove the General
Partner or liquidate the investee. The Company has concluded
that these rights or the contractual agreement with the General
Partner is the dominant factor in controlling the investees.
As at 31 March 2016, the Company's maximum exposure to loss
attributable to these entities comprises the current carrying
value of the assets, along with the uncalled committed capital
relating to those investments, as summarised below:
31 March 2016 31 March 2015
US$'000 US$'000
Financial assets held at fair value
through profit or loss 173,104 175,125
Uncalled commitments 122,816 92,422
________ ________
Maximum loss exposure 295,920 267,547
________ ________
12. Fair value hierarchy
IFRS 7 'Financial Instruments: Disclosures' requires an entity
to classify fair value measurements using a fair value hierarchy
that reflects the subjectivity of the inputs used in making
measurements.
Fair value estimation
The Company has adopted IFRS 13 'Fair Value Measurement'. The
fair value of financial assets and liabilities traded in active
markets is based on quoted market prices at the close of trading
on the period end. If a significant movement in fair value occurs
immediately subsequent to the close of trading on the period
end date, valuation techniques will be applied to determine
the fair value. An active market is a market in which transactions
for the asset or liability take place with sufficient frequency
and volume to provide pricing information on an ongoing basis.
Investments in private equity funds, including co-investments,
may not have a readily available market and are therefore valued
based on the fair value of each private equity fund as reported
by the respective General Partner as per the capital account
summary statement, normally updated and received on a calendar
quarterly basis, which includes estimates made by those General
Partners. The Board and Manager believe that this value, in
most cases, represents fair value as of the relevant statement
date, although, if other factors lead the Board or Manager to
conclude that the fair value attributed by the General Partner
does not match their estimate of actual fair value, the Board
and Manager will adjust the value of the investment from the
General Partner's estimate. The Board and Manager estimate fair
value using publicly available information and the most recent
financial information provided by the General Partners, as adjusted
for cash flows since the date of the most recent financial information.
As the key input into the model is official valuation statements,
we do not consider it appropriate to put forward a sensitivity
analysis on the basis insufficient benefit is likely to be derived
by the end user. 97% by value of the portfolio has been valued
using 31 March 2016 quarter-end valuations and 3% has been valued
using an estimate of value at 31 March 2016.
The Company has classified fair value measurements using a fair
value hierarchy that reflects the significance of the inputs
used in making the measurements. The fair value hierarchy has
the following levels:
Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities;
Level 2: inputs other than quoted prices included within Level
1 that are observable for the assets or liability, either directly
(ie as prices) or indirectly (ie derived from prices); and
Level 3: inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined
on the basis of the lowest level input that is significant to
the fair value measurement of the instrument in its entirety.
For this purpose, the significance of an input is assessed against
the fair value measurement in its entirety. If a fair value
measurement uses observable inputs that require significant
adjustment based on unobservable inputs, that measurement is
a level 3 measurement. Assessing the significance of a particular
input to the fair value measurement in its entirety requires
judgement, considering factors specific to the financial asset
or liability.
The determination of what constitutes "observable" requires
significant judgement by the Directors in consultation with
the Manager. The Directors consider observable data to be that
market data that is readily available, regularly distributed
or updated, reliable and verifiable, not proprietary, and provided
by independent sources that are actively involved in the relevant
market.
The following tables summarise by level within the fair value
hierarchy the Company's financial assets and liabilities at
fair value as follows:
Level 1 Level 2 Level 3 Total
31 March 2016 US$'000 US$'000 US$'000 US$'000
Financial assets at fair value
through profit and loss - - 173,104 173,104
_____ _____ ______ _______
Level 1 Level 2 Level 3 Total
31 March 2015 US$'000 US$'000 US$'000 US$'000
Financial assets at fair value
through profit and loss - - 175,125 175,125
_____ _____ _______ _______
A reconciliation of fair value measurements in Level 3 is set
out in the following table (Private Equity Funds includes co-investments):
Private Equity
Funds
Year ended 31 March 2016 US$'000
Opening balance 175,125
Purchases including calls 26,402
Sales and return of capital (15,166)
Total gains or losses on investments included in
Statement of Comprehensive Income:
- on assets sold 122
- on assets held at the year end (13,379)
_______
173,104
_______
Private Equity
Funds
Year ended 31 March 2015 US$'000
Opening balance 162,981
Purchases including calls 31,106
Sales and return of capital (20,558)
Total gains or losses on investments included in
Statement of Comprehensive Income:
- on assets sold (7,769)
- on assets held at the year end 9,365
_______
175,125
_______
13. Net changes in fair value of financial assets at fair value through
profit or loss
The net realised and unrealised investment gain or loss from
financial assets at fair value through profit or loss shown in
the Statement of Comprehensive Income is analysed as follows:
2016 2015
US$'000 US$'000
Unrealised (losses)/gains on investments (13,379) 9,228
Capital calls in relation to investee expenses{A} (3,260) (3,069)
Realised gains/(losses) on disposal of investments 122 (7,723)
Realised gains on investee distributions 28,125 13,415
Realised currency losses on investee distributions (2,925) (504)
Distribution income from investments 2,497 4,932
_____ _____
11,180 16,279
_____ _____
{A} Capital call expenses relate to management fees and other
expenses paid to investees.
2016 2015
14. Trade and other receivables US$'000 US$'000
Prepayments 654 25
Accrued interest 12 4
_____ _____
666 29
_____ _____
The fair value of trade and other receivables approximates carrying
value due to the short-term nature of these instruments.
2016 2015
15. Trade and other payables US$'000 US$'000
Due within one year
Management fees 239 239
Performance fee - 1,568
Loan facility arrangement fee 474 -
Other expenses 337 246
_____ _____
1,050 2,053
_____ _____
Due after more than one year
Loan facility arrangement fee 159 -
_____ _____
The fair value of trade payables approximates carrying value
due to the short-term maturity of these instruments.
2016 2015
16. Share capital and share premium US$'000 US$'000
Share capital
Management shares
Authorised: 10,000 shares of GBP1 each
2 Management shares of GBP1 each - -
_____ _____
- -
_____ _____
2016 2015
US$'000 US$'000
Ordinary shares
Authorised: unlimited number of shares of
no par value
Share capital and share premium issued and
fully paid
Opening balance of 109,131,199 (2015 - 109,131,199)
Sterling shares 229,199 229,199
Nil (2015 - nil) Sterling shares repurchased/issued - -
during the year
_____ _____
Closing balance of 109,131,199 Sterling shares 229,199 229,199
_____ _____
The authorised share capital of the Company on incorporation
was GBP10,000 divided into 10,000 shares of GBP1.00 each. On
31 May 2007 a special resolution was passed by the Company to
increase the share capital to an unlimited number of participating
shares of no par value ("shares"), which upon issue, the Directors
were able to designate as Sterling shares, US Dollar shares
or otherwise as determined by the Directors at the time of issue,
and 10,000 Management shares of GBP1.00 each.
The shares were issued on 4 July 2007 as a result of the Company
announcing the placing and offer for subscription of its shares
on 6 June 2007. Shareholders' rights attaching to the Sterling
shares are detailed within the "Glossary of Terms and Definitions"
in the Annual Report.
Following approval by shareholders of the Share Conversion Proposal
on 3 June 2010, all the US Dollar shares were converted into
new Sterling shares on 2 July 2010, on the basis of 0.5810 new
Sterling shares for every US Dollar share held.
The Company's Sterling shares give shareholders the entitlement
to all of the capital growth in the Company's assets and to
all the income from the Company that is resolved to be distributed.
The Sterling shares are in registered form and traded on the
London Stock Exchange's Main Market. Subject to the Articles
of Incorporation, on a show of hands every registered holder
of Shares (a shareholder) who is present in person (or, being
a corporation, by representative) shall have one vote. On a
poll every shareholder present in person (or, being a corporation,
by representative) or by proxy shall be entitled to one vote
in respect of each Share held by him. In the case of joint holders,
the vote of the senior who tenders a vote, whether in person
or by proxy, shall be accepted to the exclusion of the votes
of the other joint holders, and for this purpose seniority shall
be determined by the order in which the names stand in the register
of members in respect of the Shares. On a winding up of the
Company, following payment to the holders of Management Shares
of any sums up to the nominal amount paid up thereon, the assets
of the Shares available for distribution among the holders of
Shares shall be distributed amongst the holders pro rata to
the number of such Participating Shares held by each shareholder
and no holder of Shares shall have any claim against the Company
or any remaining assets of the Company in respect of any shortfall.
2016 2015
17. Revenue reserves US$'000 US$'000
Opening revenue reserves (23,414) (30,025)
Profit attributable to equity shareholders 7,112 10,155
Dividend paid (3,762) (3,544)
_____ _____
Closing revenue reserves (20,064) (23,414)
_____ _____
Revenue reserves attributable to shareholders (20,064) (23,414)
_____ _____
18. Net asset value
The NAV of each share is determined by dividing the net assets
of the Company attributable to the shares of GBP145,505,000
(US$209,135,000); (2015 - GBP139,044,000 (US$205,785,000)) by
109,131,199 (2015 - 109,131,199) shares, being the number of
shares in issue at the period end. Whilst the Company has chosen
to report NAV per share in a currency other than its functional
and presentation currency as supplementary information it has
complied with the requirements of IFRS including the translation
method.
19. Commitments
The table below summarises commitments to the underlying investments
of the Company at 31 March 2016
Total Outstanding
Currency Commitments Currency Commitments
'000 US$'000 '000 US$'000
Apax 8 (A8-A (feeder))
L.P. EUR 10,000 11,396 EUR 1,739 1,982
CCMP Capital Investors
III L.P. 15,000 7,589
Coller International
Partners V L.P. 15,000 3,270
CVC Capital Partners
V-A L.P. 10,000 8,839
Exponent Private Equity
Partners III, LP GBP10,000 14,373 GBP7,051 10,134
FFL Parallel Fund IV
LP 10,000 7,259
Goldman Sachs Capital
Partners VI L.P. 15,000 3,319
Gores Capital Partners
III L.P. 10,000 1,924
HIG Bayside Debt & LBO
Fund II L.P. 15,000 2,341
Latour Capital II L.P. EUR 10,000 11,396 EUR 9,700 11,054
Lion Capital Fund III
L.P. EUR 10,000 11,396 EUR 2,665 3,037
Longreach Capital Partners
Ireland 1, L.P 7,425 280
Longreach Capital Partners
2 - USD, L.P. 7,500 2,664
MatlinPatterson Global
Opportunities Partners
III L.P. 10,000 469
MML Capital Partners
Fund VI EUR 13,000 14,815 EUR 10,141 11,556
Montagu V L.P. EUR 8,000 9,117 EUR 7,882 8,982
Northzone Ventures VI
L.P. EUR 10,000 11,396 EUR 488 556
Oaktree OCM Opportunities
Fund VIIb L.P. 15,000 1,500
Pangaea Two Parallel
L.P. 5,000 2,350
Pine Brook Capital Partners
L.P. 10,000 1,083
Resolute Fund III L.P. 15,000 10,639
Rho Ventures VI L.P. 10,000 -
Silver Lake Partners
III L.P. 15,000 2,345
StepStone International
Investors III LP(formerly
Greenpark International
Investors III L.P.) EUR 14,600 16,638 EUR 506 577
Tenaya Capital V L.P. 12,500 1,188
Tenaya Capital VI L.P. 5,000 1,124
Thoma Bravo Fund IX 10,000 -
L.P.
Thomas H Lee Parallel
Fund VI L.P. 15,000 1,259
Wisequity IV EUR 10,000 11,396 EUR 9,938 11,325
Co-investments 13,646 4,171
_______ _______
As at 31 March 2016 352,994 122,816
_______ _______
20. Financial risk management
The Company maintains positions in a variety of investees as
determined by its investment management strategy.
The investees' own investing activities expose the Company to
various types of risks that are associated with the financial
investments and markets in which they invest. The significant
types of financial risks, to which the Company is exposed are
market risk, credit risk and liquidity risk.
Asset allocation is determined by the Company's Manager which
manages the allocation of assets to achieve the investment objectives
as detailed in the Strategic Report. Achievement of the investment
objectives involves taking risks. The Manager exercises judgement
based on analysis, research and risk management techniques when
making investment decisions. Adherence to target asset allocations
and the composition of the portfolio is monitored by the Board.
Risk management framework
The directors of Aberdeen Fund Managers Limited collectively
assume responsibility for obligations under the AIFMD including
reviewing investment performance and monitoring the Company's
risk profile during the year.
AFML is a fully integrated member of the Aberdeen Group, which
provides a variety of services and support to AFML in the conduct
of its business activities, including in the oversight of the
risk management framework for the Company. AFML has delegated
the day to day administration of the investment policy to Aberdeen
Asset Managers Limited, which is responsible for ensuring that
the Company is managed within the terms of its investment guidelines
and the limits set out in its pre-investment disclosures to investors
(details of which can be found on the Company's website). AFML
has delegated responsibility for monitoring and oversight of
the Investment Manager and other members of the Aberdeen Group
which carry out services and support to APWML to Aberdeen Fund
Managers Limited.
The Manager conducts its risk oversight function through the
operation of the Group's risk management processes and systems
which are embedded within the Group's operations. The Group's
Risk Division supports management in the identification and mitigation
of risks and provides independent monitoring of the business.
The Division includes Compliance, Business Risk, Market Risk,
Risk Management and Legal. The team is headed up by the Group's
Head of Risk, who reports to the Chief Executive Officer of the
Group. The Risk Division achieves its objective through embedding
the Risk Management Framework throughout the organisation using
the Group's operational risk management system ("SWORD").
The Group's Internal Audit Department is independent of the Risk
Division and reports directly to the Group CEO and to the Audit
Committee of the Group's Board of Directors. The Internal Audit
Department is responsible for providing an independent assessment
of the Group's control environment.
The Group's corporate governance structure is supported by several
committees to assist the board of directors of Aberdeen, its
subsidiaries and the Company to fulfil their roles and responsibilities.
The Group's Risk Division is represented on all committees, with
the exception of those committees that deal with investment recommendations.
The specific goals and guidelines on the functioning of those
committees are described on the committees' terms of reference.
Risk management
The significant types of risk that the Company is exposed to
are detailed below:
a) Capital management risk
* the Company may not be able to continue as a going
concern, and
* the balance between equity capital and debt may
become inappropriate resulting in an adverse impact
on returns to shareholders.
The capital of the Company is represented by the net assets
attributable to the holders of the Company's shares.
It is the Board's policy to monitor and review the broad
structure of the Company's capital on an ongoing basis. This
review includes the nature and planned level of gearing,
which takes account of the Manager's views on the market
and the extent to which any return of capital may be made
to equity shareholders via dividends or share repurchases.
The Board normally seeks to limit gearing to 25% of the net
assets. Capital transactions undertaken during the year are
disclosed in the Chairman's Statement.
b) Market risk
The potential for adverse changes in the fair value of the
Company's investment portfolio is referred to as market risk.
Commonly used categories of market risk include currency
risk, interest rate risk and other price risk.
* Currency risk may result from exposure to changes in
spot prices, forward prices and volatilities of
currency exchange rates.
* Interest rate risk may result from exposures to
changes in the level, slope and curvature of the
various yield curves, the volatility of interest
rates, and credit spreads.
* Other price risk is the risk that the value of an
instrument will fluctuate as a result of changes in
market prices other than those arising from currency
risk or interest rate risk.
i) Market risk management
The Company's unlisted equity securities are susceptible
to market price risk arising from uncertainties about future
values of the investment securities. The Manager provides
the Company with investment recommendations that are consistent
with the Company's objectives.
The valuation method of these investments is described within
the accounting policies. The nature of some of the Company's
investments, which are unquoted investments in private equity
funds and co-investments, means that the investments are
valued by the Manager on behalf of the Company after due
consideration of the most recent available information from
the underlying investments as adjusted where relevant by
the Directors. While the underlying fund managers may utilise
various model-based approaches to value their investment
portfolios, on which the Company's valuations are based,
no such models are used directly in the preparation of fair
values of the investments.
Market risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of
changes in market prices. The investments of the Company
are subject to normal market fluctuations and the risks inherent
with investment in financial markets. The maximum risk resulting
from financial instruments held by the Company is determined
by the fair value of the financial instruments. The Manager
moderates this risk through careful selection of funds managed
by experienced fund managers, which meet the investment objectives
outlined in the Strategic Report; the Company's market risk
is managed through diversification of the investment portfolio.
Through a variety of analytical techniques, the Manager monitors,
on a daily basis, the Company's overall market positions,
as well as its exposure to market risk.
ii) Currency risk
The Company has assets and liabilities denominated in currencies
other than US Dollars, its functional currency. The Company
is therefore exposed to currency risk, as the value of the
assets and liabilities denominated in other currencies fluctuates
due to changes in exchange rates. During the year ended 31
March 2016, the value of Sterling decreased by 2.89% (2015
- decreased 11.01%) against the US Dollar, resulting in a
decrease of US$239,000 (2015 - US$158,000) in the US$ NAV.
At 31 March 2016, an opposite movement of a similar scale
in the value of Sterling against the US Dollar would, with
all other variables held constant, increase the NAV of the
Company by approximately US$239,000 (2015 - US$158,000).
During the year ended 31 March 2016, the value of the Euro
increased by 5.33% (2015 - decreased 20.13%) against the
US Dollar, resulting in an increase of US$2,150,000 (2015
- decrease of US$8,255,000) in US$ NAV. At 31 March 2016,
an opposite movement of a similar scale in the value of the
Euro against the US Dollar would, with all other variables
held constant, decrease the NAV of the Company by approximately
US$2,141,000 (2015 - increase of US$8,255,000).
The table below summarises the Company's exposure in US Dollars
to currency risks at the year end:
As at 31 March 2016 US'000 GBP'000 EUR'000 Total
Assets/(liabilities)
Financial assets at fair
value through profit or loss 121,829 8,257 43,018 173,104
Cash and cash equivalents 29,995 3,644 2,935 36,574
Other assets and liabilities (543) - - (543)
_______ _______ _______ _______
Total at 31 March 2016 151,281 11,901 45,953 209,135
_______ _______ _______ _______
As at 31 March 2015 US'000 GBP'000 EUR'000 Total
Assets/(liabilities)
Financial assets at fair
value through profit or loss 133,865 1,595 39,665 175,125
Cash and cash equivalents 29,856 534 2,259 32,649
Other assets and liabilities (1,989) - - (1,989)
_______ _______ _______ _______
Total at 31 March 2015 161,732 2,129 41,924 205,785
_______ _______ _______ _______
iii) Interest rate risk
The Company is exposed to interest rate risk. The Company
invests primarily in private equity funds and private equity
like funds that are non interest bearing investments, mainly
subject to market risk. Interest receivable on bank deposits
or payable on loan positions will be affected by fluctuations
in interest rates. Changes to prevailing interest rates or
changes in expectations of future rates may result in an
increase or decrease in the value of the securities held.
In general, if interest rates rise, the value of fixed income
securities will decline. A decline in interest rates will,
in general, have the opposite effect.
Although the majority of the Company's financial assets and
liabilities are non interest bearing, cash and cash equivalents
represent 18% of the Company's NAV (31 March 2015 - 15%).
As a result, the Company is subject to some risk due to fluctuations
in the prevailing levels of market interest rates. Any excess
cash and cash equivalents are invested at short-term market
interest rates.
As at 31 March 2016 the Company's interest bearing assets
and liabilities, all of which receive or pay interest at
a variable rate, were as follows:
2016 2015
US$'000 US$'000
Cash and cash equivalents 36,574 32,649
_____ _____
Based on the cash and cash equivalents held at 31 March 2016,
a movement of 1% in market interest rates would impact the
Company's annual income by approximately US$366,000 per annum
(2015 - US$326,000 per annum).
iv) Other price risk
Other price risk is the risk that the value of the investees'
financial investments will fluctuate as a result of changes
in market prices, other than those changes arising from currency
risk or interest rate risk whether caused by factors specific
to an individual investment, its issuer or any factor affecting
financial investments traded in the market.
As the Company's investments are carried at fair value with
fair value changes recognised in the Statement of Comprehensive
Income, all changes in market conditions will directly affect
the overall NAV.
The investments are valued based on the latest available
unaudited price of such shares or interests as determined
by the administrator or General Partner of each investee.
Furthermore, valuations received from the administrators
or General Partners of the investees may be estimates and
such values are generally used to calculate the NAV of the
Company. Such estimates provided by the administrators or
General Partner of the investees may be subject to subsequent
revisions which may not be restated for the purpose of the
Company's final month-end NAV.
Currency, interest rate and other price risk are managed
by the Company's Manager as part of the integrated market
risk management processes.
c) Credit risk
The Company takes on exposure to credit risk, which is the
risk that a counterparty will be unable to pay amounts in
full when due. The Manager has adopted procedures to reduce
credit risk related to the Company's dealings with counterparties.
Before transacting with any counterparty, the Manager or
its affiliates evaluate both creditworthiness and reputation
by conducting a credit analysis of the party, its business
and its reputation. The credit risk of approved counterparties
is then monitored on an ongoing basis, including periodic
reviews of financial statements and interim financial reports
as needed. Impairment provisions are provided for losses,
if any, that have been incurred by the Balance Sheet date.
At 31 March 2016 and 31 March 2015, the following financial
assets were exposed to counterparty credit risk: cash and
cash equivalents and other receivables. The carrying amounts
of financial assets best represent the maximum credit risk
exposure at the year end date.
The Company places cash deposits with counterparties whose
credit ratings are all investment graded. Ratings for fixed
deposits, as rated primarily by Moody's that subject the
Company to credit risk at 31 March 2016 and 31 March 2015
are noted below:
2016 2015
Credit ratings for short-term Rating % of NAV Rating % of
notes NAV
Standard Chartered A1 2.5 A1 3.4
Barclays Bank A2 1.7 A2 0.3
The Company has also placed funds within Aberdeen Liquidity
Funds which are rated by S&P at 31 March 2016 and 31 March
2015 as noted below:
2016 2015
Credit ratings for short-term Rating % of NAV Rating % of NAV
funds
Sterling Fund Income A-1 1.7 A-1 0.2
Euro Fund Income A-1 - A-1 1.0
US Dollar Fund Income A-1 11.5 A-1 10.9
d) Liquidity risk
The Company's financial instruments include investments in
unlisted securities, which are not traded in an organised
public market and may generally be illiquid. Although this
illiquidity is considered as part of the investment valuations,
should the Company be required to dispose of such investments
in a short time-frame, an action that is not consistent with
the Company's investment objective, the Company may have
difficulty liquidating quickly its investments in these instruments
at an amount close to fair value in order to respond to its
liquidity requirements or to specific events.
The financial liabilities of the Company comprise trade and
other payables. The Company will generally retain sufficient
cash and cash equivalent balances to satisfy trade and other
payables as they fall due.
The Company's outstanding commitments are detailed in note
19. When an over-commitment approach is followed, the aggregate
amount of capital committed by the Company to investments
at any given time may exceed the aggregate amount of cash
that the Company has available for immediate investment,
so there is a risk that the Company might not be able to
meet capital calls when they fall due. To manage this risk,
the Company holds an appropriate amount of its assets in
cash and cash equivalents together with a selection of readily
realisable investments.
In planning the Company's commitments, the Manager takes
into account expected cash flows to and from the portfolio
of fund interests and, from time to time, may use borrowings
to meet draw downs; these expected cash flows are monitored
against actual draw downs and distributions on a monthly
basis to assess the level of additional commitments that
can be made and how much cash needs to be kept on hand. The
Directors have resolved that the Company may borrow up to
25% of its NAV for short-term or long-term purposes. As at
31 March 2016, the Company had a revolving credit facility
in place of GBP40 million (2015 - GBP15 million).
The table below sets out the liquidity risk of the Company
as at 31 March 2016 and 31 March 2015. All liabilities represent
amounts falling due within twelve months. Amounts due within
twelve months equal their carrying balances.
Less than Less than
one year one year
2016 2015
Financial liabilities US$'000 US$'000
Trade and other payables 1,050 2,053
_____ _____
Based on on-going communications with General Partners and
the Manager's best estimates as at 31 March 2016, the outstanding
commitments could be drawn down with the following maturity
profile:
2016 2015
Maturity US$ million US$ million
Less than 3 months 11 12
3-6 months 8 9
6-12 months 14 13
1-2 years 19 23
Greater than 2 years 70 35
_____ _____
122 92
_____ _____
There is no guarantee of this call rate. Any new investments
or secondary sales made will alter these figures and assumptions.
As at 31 March 2016, an analysis of the financial instruments
by category shows assets at fair value through profit or
loss of US$172,341,000 (2015 - US$175,125,000), deposits
and receivables of US$36,586,000 (2015 - US$32,653,000) and
other financial liabilities totalling US$891,000 (2015 -
US$2,053,000).
21. Related party transactions and transactions with Service Providers
Fees payable during the year to the Directors and their interests
in shares of the Company are disclosed within the Directors'
Remuneration Report in the Annual Report.
During the year, the Company had an agreement with ASVG until
30 October 2015 and thereafter AFML for the provision of management
services following the acquisition of remaining shares in ASVG
by AAM. AFML also acts as the alternative investment fund manager
(AIFM) of the Company and delegates the portfolio management
of and the provision of promotional activities for the Company
to AAML. ASVG, AFML and AAML are all wholly owned subsidiaries
of AAM PLC. The change reflected an internal re-organisation
within AAM and the same team continues to be involved in the
management of the Company. ASVG was released and discharged
from the Management Agreement made between ASVG and the Company
dated 18 July 2014 with AFML having become party thereto in
place of ASVG. Performance fee arrangements under the management
agreement were amended by way of a deed. The Company has an
agreement with Ipes (Guernsey) Limited for the provision of
administration and secretarial services, an agreement with Ipes
(UK) Limited for the provision of depositary services and an
agreement with BNP Paribas Securities Services Guernsey for
the provision of custody services. Details of certain transactions
during the year and balances outstanding at the year end are
disclosed in notes 5 and 6.
As at 31 March 2016, the Company had holdings amounting to US$27,557,000
(2015 - US$24,988,000) in Aberdeen Liquidity Funds which are
managed and administered by AAML. The Company pays a management
fee of 0.75% per annum on the value of these holdings but no
fee is chargeable at the underlying fund level. Details of these
holdings can be found within the Investment Portfolio.
22. Controlling party
In the opinion of the Directors on the basis of shareholdings
advised to them, the Company has no immediate or ultimate controlling
party.
23. Exchange rates
As at 31 March 2016 and 31 March 2015, the exchange rates used
(against US$) in preparation of these financial statements are
as follows:
2016 2015
US$ US$
Sterling 1.4373 1.4800
Euro 1.1396 1.0819
24. Geographical analysis
Geographic breakdown is determined by the geographical area
in which each Fund has indicated that it will invest:
2016 2015
US$m US$m
North America 67.6 65.7
Global 59.3 64.8
Europe 31.7 30.0
Asia & Other 14.5 14.6
The Company engages in a single segment of business as detailed
in note 3 to the financial statements and geographical analysis
is provided as supplemental information.
25. Subsequent events
On 4 May 2016 the Company committed EUR12,000,000 to Northzone
VIII L.P. and on 23 May 2016 US$15,000,000 was committed to
MTS Health Partners IV L.P.
Other than this there were no material subsequent events.
Please note that past performance is not necessarily a guide to
the future and that the value of investments and the income from
them may fall as well as rise and may be affected by exchange rate
movements. Investors may not get back the amount they originally
invested.
The above financial information does not constitute statutory
financial statements as defined in Section 262 of The Companies
(Guernsey) Law, 2008. The comparative information is based on the
statutory financial statements for the year ended 31 March 2015.
Those financial statements, upon which the auditors issued an
unqualified opinion, have been delivered to the Registrar of
Companies. Statutory financial statements for the year ended 31
March 2016 will be filed in due course.
The Annual General Meeting of the Company will be held at 10.30
a.m. on 13 September 2016 at 1 Royal Plaza, Royal Avenue, St Peter
Port, Guernsey GY1 2HL.
The audited Annual Report and Financial Statements incorporating
the Notice of Annual General Meeting will be posted to shareholders
during July. Copies may be obtained during normal business hours
from the Company's Registered Office, 1 Royal Plaza, Royal Avenue,
St Peter Port, Guernsey GY1 2HL Channel Islands or from the
Manager, Bow Bells House, 1 Bread Street, London EC4M 9HH. Further
copies will be available for download from the Company's website
www.aberdeenprivateequity.co.uk.
Neither the content of the Company's website nor the content of
any website accessible from hyperlinks on the Company's website (or
any other website) is (or is deemed to be) incorporated into, or
forms (or is deemed to form) part of this announcement.
By order of the Board
Ipes (Guernsey) Limited
Company Secretary
11 July 2016
[1] November 2009
[2] Co-investment with Hg Capital. Note, no Hg funds are held in
the Aberdeen Private Equity Fund portfolio
([3]) Co-investment with Alchemy Partners. Note, no Alchemy
funds are held in the Aberdeen Private Equity Fund portfolio
[4] Excluding investments held in Resonant, Stepstone and Coller
V.
[5] The amount of unspent or uncalled equity at General
Partners' disposal
[6] Preqin Q1 2016 Quarterly Private Equity Update Q1 2016
[7] Preqin Q1 2016 Quarterly Private Equity Update Q1 2016
[8] "Covenant-Lite" loans refer to financing with limited
restrictions on the debt service capabilities of the borrower
[9]
Excludes underlying companies in the portfolio's two Secondary
funds (Coller V, StepStone III). It also excludes non-material
sub-portfolios in the HIG Bayside and Oaktree funds.
[10] This figure includes performance from existing investments
and from any new investments made during the year. It is inclusive
of fees charged by underlying managers during the
year, including accruals for GPs' performance fees ("carried
interest") but does not include management and/or any performance
fees charged to Aberdeen Private Equity Fund Ltd.
[11] For the purposes of this analysis, income from investments
has been capitalised into the distributions figure.
[12] A corporate action where a company takes on new debt to
facilitate a dividend or return of equity to shareholders
[13] Source Aberdeen Asset Management, in local currency and
inclusive of income distribution
[14] Northzone.com, Avito press release 23 October 2015
[15] Source Aberdeen Asset Management, in local currency and
inclusive of income distribution
[16] Small and Medium-sized Enterprises
[17] In addition the Company also paid calls for this period of
$3.1m in relation to GPs fees and expenses
[18] Aberdeen Private Equity Fund Half Yearly Report for the six
months ended 30 September 2015
[19] Aberdeen Private Equity Fund Half Yearly Report for the six
months ended 30 September 2015 (quoting "IMF World Economic Outlook
Update, 'Adjusting to Lower Commodity Prices', 9 October 2015")
[20] IMF World Economic Outlook Update, 'Global Economy
Faltering from Too Slow Growth for Too Long', 12 April 2016
[21] Earnings Before Interest, Taxation, Depreciation and
Amortisation
[22] S&P Capital IQ European Leveraged Buyout Review Q1
2016
[23] Preqin, 'Q1 2016 Private Equity-Backed Buyout Deals and
Exits', 4 April 2016
[24] As per above
[25] General Partners
[26] Preqin, 'Q1 2016 Private Equity-Backed Buyout Deals and
Exits', 4 April 2016
[27] Preqin Q1 2016 Private Capital Fundraising Update', April
2016
[28] The amount of unspent or uncalled equity at PE General
Partners' disposal
[29] Preqin Q1 2016 Private Capital Fundraising Update', April
2016
[30] Ernst & Young 2015 and 2016 Global Private Equity
surveys
[31] Printed Circuit Boards
[32] Portfolio holding comprises both the Company's
co-investment position and a look through allocation from our
investment in Longreach 2 LP
[33] A 'challenger bank' is a small bank that has been set up to
compete with larger well established national banks. The focus can
be retail or commercial, or a blend of both.
[34] Who may not be able to take up their full co-investments
rights and/or where the GP is willing to offer co-investment beyond
its immediate LP base
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR SFDFMFFMSEDW
(END) Dow Jones Newswires
July 12, 2016 02:00 ET (06:00 GMT)
Aberdeen Prv (LSE:APEF)
Gráfico Histórico do Ativo
De Mar 2024 até Abr 2024
Aberdeen Prv (LSE:APEF)
Gráfico Histórico do Ativo
De Abr 2023 até Abr 2024
