TIDMAPAX
RNS Number : 8100R
Apax Global Alpha Limited
05 March 2019
Apax Global Alpha Limited
Annual Report and Accounts 2018
Introduction
REALISING POTENTIAL
Apax Global Alpha offers unique exposure to the global
investment expertise of Apax Partners.
Our objective is to provide shareholders with capital
appreciation from our investment portfolio and with regular
dividends.
For more information visit
WWW.APAXGLOBALALPHA.COM
OVERVIEW
Why invest in AGA?
Why invest in AGA?
ACCESS TO THE FULL EXPERTISE AND RESOURCES OF APAX PARTNERS
- A leading, global investment advisory firm with over 40-year
track record in Private Equity and ten years' experience in Derived
Investments
- AGA benefits from Apax Partners' large investment team,
including the senior executives who serve on its Investment
Committee
UNIQUE EXPOSURE TO A WELL-DIVERSIFIED PORTFOLIO OF ATTRACTIVE
INVESTMENTS
- The Apax Private Equity Funds* have consistently outperformed
relevant public benchmark indices across cycles
- Derived Investments leverage Private Equity expertise and
insights of Apax Partners, applying the same rigour and analysis to
the appraisal of debt and listed equity opportunities
ATTRACTIVE TARGET NET RETURNS, OFFERING BOTH CAPITAL
APPRECIATION AND REGULAR DIVIDS
- 12-15% Total NAV Return target per annum, including;
- 5% of NAV dividend yield per annum
* Defined as All Apax Buyout Funds
STRUCTURE
Expert knowledge
Our structure gives AGA access to a wide range of global
investment opportunities
THE INVESTMENT ADVISER
Apax Partners LLP
Apax Partners LLP is a leading global private equity advisory
firm and acts as Investment Adviser to AGML. It operates globally
and has more than 40 years of investing experience. Apax Partners
has raised and advised funds of c.EUR40bn in aggregate at 31
December 2018.
What Apax Partners do
- Identifies, analyses and undertakes due diligence on investment opportunities
- Recommends potential investments and divestments to AGML for consideration
THE INVESTMENT MANAGER
Apax Guernsey Managers Limited ("AGML")
AGA has appointed Apax Guernsey Managers Limited as its
discretionary Investment Manager. AGML is managed by a board of
experienced investment professionals and operational private equity
executives.
What AGML does
- Discretionary portfolio management
- Makes investment and divestment decisions
- Undertakes portfolio performance analysis, reporting and risk management
THE COMPANY
Apax Global Alpha Limited ("AGA")
AGA is a closed- ended investment company which invests in Apax
Funds to gain indirect exposure to a diversified portfolio of Apax
Private Equity Investments. It also invests directly in Derived
Investments which are debt and equity positions.
What AGA does
- Sets business objectives and investment strategy
- Governance and risk management
- Appoints and oversees the Investment Manager and other service providers
COMPANY OBJECTIVE
Our proposition
WHAT WE DO
Our strategy is to invest across the economic cycle in Private
Equity and Derived Investments' opportunities.
Through a diversified exposure in four core sectors of Tech
& Telco, Services, Healthcare and Consumer, our Investment
Adviser's expert knowledge allows us to spot emerging global trends
early and invest "ahead of the curve".
OUR PORTFOLIO
Private Equity
Apax Partners' Funds have a strong track record in private
equity through a diversified exposure in four core sectors of Tech
& Telco, Services, Healthcare and Consumer.
Derived Investments
Apax Partners' expertise enables the identification of value
creating opportunities in debt and equity which are not part of the
Apax Funds' investment mandate.
COMPANY OBJECTIVE
The Company's investment objective is to provide shareholders
with capital appreciation from its investment portfolio with
regular dividends.
The Company is targeting an annualised Total Net Asset Value
("NAV") Return across economic cycles of 12-15% net of fees and
expenses.
The Company aims to pay an annualised dividend yield of 5% of
NAV per annum.
FINANCIAL HIGHLIGHTS
What we have achieved this year
2018 TOTAL NAV RETURN(1) 7.1%
DIVIDS PAID IN 2018
5.0%
ADJUSTED NAV
EUR930.8m
RETURN HIGHLIGHTS
PRIVATE EQUITY
17.4%
DERIVED DEBT
4.5%
DERIVED EQUITY
-17.6%
1. Total NAV Return for the Company reflects the percentage
movement in the period between the closing euro Adjusted NAV
(dividend added back) relative to the opening Adjusted NAV
For details of calculations used please see the glossary on page
91.
STRATEGIC REPORT
CHAIRMAN'S STATEMENT
A fundamentally strong portfolio
TOTAL NAV RETURN
at 31 December 2018
7.1%
DIVID 5% OF NAV, IN RESPECT OF 2018
8.45
pence per share
TIM BREEDON CBE
Chairman
AGA's portfolio delivered positive returns in 2018 against a
very challenging market backdrop.
OVERVIEW
I am pleased to report that Apax Global Alpha delivered a
positive return in very challenging markets in 2018. In a year in
which almost all major markets witnessed negative returns, AGA's
Total NAV Return was +7.1%. Apax Partners' ability to identify
attractive off-the-beaten-track investments resulted in both
Private Equity and Derived Debt positively contributing to
performance. Derived Equity, however, produced a negative
return.
The Investment Manager's Report provides a comprehensive
analysis of the performance of the portfolio.
RESULTS
Total NAV Return for 2018 was +7.1%. Currency movements were
favourable: on a constant currency basis, the Company delivered a
Total NAV Return of +5.4% for the year. Adjusted NAV per share
increased from EUR1.86 to EUR1.90, and shareholders received two
dividend payments totalling 8.50 pence or 9.55 cents during the
year. Total Return for Private Equity was +17.4%, for Derived Debt
+4.5%, and for Derived Equity -17.6%.
The Private Equity portfolio's strong performance of +17.4% was
largely attributable to the profitable growth achieved by the
majority of portfolio companies. Over 80% of portfolio companies
grew their earnings during the year, with average revenue and
EBITDA growth of +14.5% and +22.2% respectively.
The Derived Debt portfolio's Total Return of +4.5% was achieved
in a market where global bonds experienced some of the worst
returns in a decade.
Derived Equity underperformed, as general market weakness
together with issues specific to a number of our holdings took
their toll. The Total Return of -17.6% is disappointing and
detracted significantly from the overall performance of the
Company.
INVESTMENT ACTIVITY
AGA was 98% invested as at 31 December 2018 and the portfolio
was split 65% Private Equity and 35% in Derived Investments.
As in the previous year, the portfolio was actively traded. In
total, EUR256.0m of capital was deployed over the 12 months to 31
December 2018: EUR43.5m in Private Equity and EUR212.5m in Derived
Investments.
Realisations totalled EUR311.4m, with EUR134.9m from Private
Equity and EUR176.5m from Derived Investments.
MARKET ENVIRONMENT
2018 witnessed a downturn across major markets and the vast
majority of asset classes produced negative returns. The year began
strongly with growth rates in the major economies above their
longer-term trends in both North America and Europe. Equity and
credit markets in January reflected this by reaching or approaching
all-time highs.
However, as the year progressed, increased friction in the
US-China trade relationship became more apparent and the imposition
of tariffs and counter-tariffs had a sobering effect on capital
markets as well as increasing uncertainty in the macro-economic
outlook. Central bank tightening in the US and a higher level of
political uncertainty in Europe (Brexit, Italy) added to the
general risk- off sentiment that culminated in market corrections
during the second half of the year.
NEW REVOLVING CREDIT FACILITY
The Board is pleased to have secured a new multi -currency
revolving credit facility with Credit Suisse AG, London Branch.
This agreement replaces the facility held with Lloyds Bank plc
which was due to expire on 4 February 2019. The funds available for
drawdown remain at EUR140.0m, with an initial term of three years
maturing on 5 November 2021. This facility increases the financial
resilience of the Company and will provide the Investment Manager
with flexibility in managing portfolio exposures and commitments in
the medium term.
THIRD LOCK-UP RELEASE AND FTSE 250 INCLUSION
The third anniversary of AGA's IPO took place on 15 June 2018
and this resulted in an additional 7.5% of AGA's ordinary shares
being released from lock-up. Previously a tender process was
offered through the Company's broker to facilitate the sale of
these shares. Due to negligible take- up in prior years, the Board
decided not to renew this arrangement in 2018. There has been a
steady increase in the free-float of the Company's shares, with the
proportion subject to lock-up decreasing from 63% at the time of
the IPO to 40% now.
On 24 December 2018 AGA became a constituent of the FTSE 250
index and the Board is hopeful that the wider investor interest
that this may generate will also contribute to an increase in the
liquidity of the shares.
DIVID
Following the first interim dividend of 4.33 pence paid in
September 2018, the Board has declared a final dividend of 4.12
pence per share for the financial period to 31 December 2018. This
dividend is equivalent to 2.5% of AGA's euro NAV at 31 December
2018 and continues the policy of distributing 5% of AGA's NAV per
annum. The dividend will be paid on 5 April 2019 to shareholders on
the register of members on 15 March 2019. The shares will trade
ex-dividend on 14 March 2019.
DISCONTINUATION VOTE
A discontinuation resolution was put forward to the Annual
General Meeting for the first time in May 2018 (and similar
resolutions will be put forward every three years in the future).
The Directors were pleased that 99% of votes cast supported the
continuation of the Company in its current form. All other
resolutions also received a high level of support.
BOARD CHANGES
Following Sarah Evans' retirement in early 2018, Mike Bane
joined the Board and the Audit Committee on 3 July 2018. A
qualified accountant with more than 35 years of audit and advisory
experience in the investment management industry, he brings to the
Board a wealth of knowledge in relation to asset management and
private equity.
EXTERNAL BOARD EVALUATION
An external evaluation of the Board was undertaken for the first
time during the year. Overall, the review concluded that the
Company has a well-functioning and effective Board, a strong
corporate governance culture, and Directors who are diligent and
independent in their outlook. There were a small number of
recommendations as to how the Board could improve further the
quality of its oversight of the business of the Company and these
will be considered for implementation next year.
OUTLOOK
Much of the outlook for 2019 will depend on how trade talks
between the US and China (and subsequently possibly between the US
and Europe) progress. Brexit is just one of a number of political
uncertainties worldwide which also have the potential to have an
impact on markets and currencies. As such, the economic outlook is
harder to predict than in previous periods. It is likely that
public-to-private deals will figure more prominently in sourcing
private equity deals. For the Derived Debt portfolio, risk-reward
profiles have improved, and the Investment Manager believes that
there will be an increasing number of attractive opportunities that
will allow AGA to grow its relative exposure to credit at the
expense of listed equity investments.
Tim Breedon CBE
Chairman
4 March 2019
OUR STRATEGIC OBJECTIVES
Delivering on long-term aims
Our objective is to provide shareholders with capital
appreciation from our investment portfolio and regular
dividends.
There are five strategic objectives by which AGA measures its
progress and performance to help achieve its purpose.
STRATEGIC WHAT WE FOCUS FOR 2019 RISKS(1)
OBJECTIVE ACHIEVED
IN 2018
Target annual DIVIDS
5% of NAV PAID * Target dividend strategy viable on current * Limited foreseeable risk
dividend 8.50p projections
Over-the-cycle TOTAL NAV
net target RETURN * Focus on micro-oriented investment themes, price * Investment portfolio does not achieve its target
Total 7.1% discipline, and early value generation as drivers of investment return
NAV Return of returns in an elevated valuation environment
12-15%
* Increasing geo-political uncertainty could create
macro-economic and market risks
Continue to 2018
invest CAPITAL * The Board will continue to evaluate potential * New Apax Funds not available
in Apax Funds CALLS commitments to future Apax Funds
PAID AND
SECONDARY
PURCHASES
EUR43.5m
Balanced PORTFOLIO
exposure BALANCE * The split is expected to remain overweight towards * Apax Funds' capital drawdown and distribution rate
to Private Private Equity in light of new investment activity in
Equity Private the Private Equity portfolio in 2018
and Derived Equity * Market conditions
Investments 65%
Debt 19% * Investors should expect the proportion of Private
Equity Equity to Derived Investments to fluctuate around the * Differing attractiveness or performance of asset
16% longer-term over-the-cycle objective of the Company classes
Remain fully INVESTED
invested PORTFOLIO * Remain fully or close to fully invested * Dependent on wider market conditions that may favour
98% of portfolio divestments over new investments
NAV
* Timing of cash flows in the portfolio
1. These risks are not exhaustive and should not be considered
to be a definitive list. For more information see p.38.
INTERVIEW WITH THE INVESTMENT ADVISER
A conversation with the Investment Adviser
ANDREW SILLITOE
Co-CEO, Chairman of the AGA Investment Committee
Q: How does AGA fit in to Apax Partners wider strategy?
A: AGA is strategically significant for our business and is a
large and important investor in the Apax Private Equity Funds. AGA
also helps to maximise the value we create from our global
investment expertise by taking advantage of a wider range of
insights and applying them to non-private equity opportunities.
Since IPO, AGA has invested more than EUR800m in attractive debt
and equity opportunities that fall outside the Apax Private Equity
Funds investment mandate. Also, through AGA, we have broadened the
investor base that can invest in Apax sponsored products, as we can
now offer access to Private Equity and Derived Investments with
daily liquidity and minimal size requirements.
Q: Why the decision to list AGA?
A: AGA's predecessor fund was fully invested and had a strong
investment track record. It had made commitments to the Apax
Private Equity Funds, and we expected it to continue to do so. We
also developed our capabilities to identify credit and listed
equity investments in the years leading up to the 2015 IPO. This
capability translated into a diversified Derived Investments
portfolio that was transferred to AGA at IPO. The IPO allowed AGA
to raise more capital to continue doing both - invest in Private
Equity and in Derived Investments opportunities. I also believe
that AGA's double digit target returns, combined with a high
dividend yield, is an attractive proposition for public
shareholders.
My Partners and our employees who were shareholders in AGA at
IPO accepted lock-ups, and the IPO was structured as a primary
offering only. This created a strong alignment with the new
shareholders investing at IPO and our team having "skin in the
game" remains a key ingredient of AGA to date.
NICO HANSEN
Partner, Member of the AGA Investment Committee
Q: What do you think of AGA's progress since its listing three
and a half years ago?
A: By and large it has been a success story. AGA's IPO provided,
for the first time, exposure and daily liquidity to the Apax
investment expertise for both institutional and retail investors.
AGA has delivered positive returns and paid out dividends of 5% of
NAV annually. I think that makes AGA a product worth considering
for a broad range of investors.
As an investor, you get exposure to a diversified portfolio of
about a hundred positions across various asset classes. While
initially AGA had a few investments that were a drag on
performance, these have been worked through. 2018 was a strong year
for AGA considering the falls in global equity and credit markets,
and the Private Equity portfolio is delivering real operational
momentum which bodes well for future value developments.
Q: Valuations remained high for the most part of 2018 - explain
how you dealt with this in Private Equity?
A: 2018 was defined by continued high private equity valuations
and intense competition for assets. The assets most in demand were
what I would call "plain vanilla" buy-outs where investors are
willing to pay up for perceived "safety". The Apax Private Equity
Funds pursue a different approach, and one that we think is
well-suited to navigating the high-valuation environment.
First, the investment pace of the Apax Private Equity Funds can
vary significantly over time and is based on the quality of
opportunities. As a result, the investment rate of the funds has
been considerably slower relative to 2017 and prior years as they
maintained discipline in a heated market.
"AGA offers a unique exposure to an extensive portfolio of
Private Equity Investments as well as exposure to Derived
Investments leveraging the global expertise of Apax Partners."
Andrew Sillitoe, Co-CEO, Apax Partners
Second, the Apax Private Equity Funds seek investment
opportunities which are differentiated or "complex". These are
situations that other private equity firms might find hard to
tackle, for example carve-outs or deals requiring massive
operational change. Therefore, competition for these assets can be
less. Apax's Operational Excellence Practice, a team of dedicated
functional experts, are often significantly involved in such
transactions, supporting deal teams to generate a positive
operational impact in the portfolio.
Third, the Apax Private Equity Funds seek to execute investments
within targeted sub-sectors where we as the Investment Adviser have
a proven history of success. Building deep, specialised expertise
in certain market niches allows the better calibration of
opportunities, thereby reducing risk, and the execution of proven
value creation strategies, increasing the probability of alpha. The
majority of Private Equity Investments in 2018 have levered this
sub-sector strategy.
On the flip side, the high valuation environment is a fabulous
backdrop for realisations. On a look-through basis, AGA monetised
Private Equity Investments of EUR134.9m of returned capital in
2018. As AGA's Private Equity portfolio is ripening, we would
expect strong realisations to continue for the foreseeable
future.
Q: Markets corrected significantly at the end of 2018. What is
your outlook for 2019 and how do you think this will impact AGA's
investment approach?
A: On the Private Equity side, I would expect public-to-privates
to play a larger role going forward than in the past two years. The
correction in many public markets allows entry at levels -
including take-out premiums - that are lower than in private
transactions. In fact, the last deal signed by Apax IX in 2018 was
the public-to -private of Trade Me, New Zealand's leading online
classifieds business.
For Derived Investments, the correction opens a larger
opportunity set, too. In credit, junior loans and high yield bonds
are now easily reaching double digit yields, as both credit spreads
and US base rates have increased significantly in the past six
months. Overall, this has improved risk- reward profiles and thus
we expect to see more attractive deal flow in Derived Debt
Investments.
For listed equities, clearly some valuation levels have
decreased recently, but the number of risk factors has risen. The
trade war between China and the US, Brexit, and political
uncertainties in Europe weigh on market sentiment and the macro
outlook. The potentially biggest area of risk is China - not just
in connection with the trade war but, more importantly, through the
economic slowdown and the ever-increasing pile of public and
private debt.
While we believe that the number of international risks is
substantial, we feel that they are more equity than credit risks -
at least in the Western world. So, we would expect that the Derived
Investments portfolio will be rebalanced towards a larger debt
portion, at the expense of the listed equity holdings.
RALF GRUSS
COO, Apax Partners,
Member of the AGA Investment Committee
Q: As a member of the Investment Committee, can you explain the
process of selecting a suitable Derived Investment?
A: There are four main steps in selecting a Derived Investment.
The first step is the identification of the opportunity. This is
largely done by our sector teams together with our AGA team.
If a potential investment looks interesting, due diligence will
be performed, which is the second step. We create a dedicated deal
team for each transaction that is evaluated. Therefore, there is no
single portfolio adviser for AGA, but each deal has a team
comprised of individuals who are best suited to evaluate the
opportunity. The deal teams are staffed from the relevant sector
teams globally, as well as the AGA team.
The findings are then debated in the AGA Investment Committee of
the Investment Adviser; this is the third step. The AGA Investment
Committee is comprised of senior representatives of Apax Partners,
including our Co-CEOs. The merits of the deal are discussed with
the deal team, and we form a view about which company we would
recommend AGA to invest in and at what price.
Our recommendation is then reviewed by the Investment Manager of
AGA, Apax Guernsey Managers Ltd, who ultimately decide on and
execute all transactions; this is the fourth and final step.
Q: What is the common denominator in Derived Investments?
A: Derived Investments focus on the Apax Partners' sectors and
geographies. Around 20 investments were made this year, and in each
of them we used insights and knowledge we had acquired internally
as part of our private equity business. For example, AGA invested
in second lien loans of Genex.
Genex was previously an Apax Private Equity Fund portfolio
company and as such we had a deep insight into the business and its
quality.
Other examples include the debt investments in Veritext, Rocket
Software and Alexander Mann Solutions. Each was recommended to AGA
because our sector teams had either followed other opportunities in
the same sub-sectors or had performed due diligence on these
companies as a potential Private Equity Investment.
Q: Can you talk more specifically about how you assessed credit
markets this year?
A: Taking a step back, as early as 2017 we had become
increasingly concerned about record pricing levels and low yields
in credit. Our focus has therefore been on high quality credits in
defensible companies. We felt that these instruments would perform
better in volatile markets. With risks to the macro-economy
increasing and investor sentiment deteriorating, a "high quality"
strategy also allowed AGA to hedge against a potential economic
slowdown during AGA's holding period. AGA has done well with this
approach during 2018, especially after markets took a turn and
spreads widened.
We also kept a focus on identifying floating rate loan
opportunities to benefit from the tightening cycle in the US and
rising base rates. For that reason, AGA doesn't have exposure to
fixed interest investments at the moment.
In terms of geographies, we also continued to prefer US credit
over European opportunities, mainly because of the differences in
base rates. At the beginning of the year, high yield spreads in
Europe were also lower compared with the US. This situation
reversed at the end of the year, so European credit could become
more attractive in 2019.
Q: Derived Debt portfolio performance has recently improved -
any changes you have made to your investment approach?
A: The historic underperformance of AGA in credit was largely
driven by investments made in Answers, FullBeauty, and Rue21
between 2013 and 2015. These three companies were Apax Fund
portfolio companies exposed to fashion retail in the US or had a
significant exposure to the likes of Amazon, Google and Facebook.
Given extensive efforts to stabilise these businesses, these
investments caused an ongoing valuation drag on Derived Debt
performance up until 2018.
However, as these investments have now either been restructured
or written off, the otherwise strong performance of the credit
portfolio is showing again. To provide some numbers to support
this: AGA has invested EUR319.0m in 26 transactions since the
beginning of 2016. The average Gross IRR on these transactions is
16.3% to date, and all have generated a positive Total Return on a
currency adjusted basis.
GAUTAM NARAYAN
Partner, Services (Mumbai office)
Q: What happened to the Indian stocks this year?
A: We experienced significant share price declines in Indian
financial services stocks between August and October 2018. What
triggered the sell -off was a default by IL&FS on its
short-term debt and commercial paper.
IL&FS is a well-known Indian infrastructure construction and
project lending conglomerate which was rated AAA before its crisis.
The unexpected default led to reduced funding liquidity in the
Indian financial sector. This was, in particular, true for Non-Bank
Financial Companies (NBFCs), which rely heavily on institutional
funding for their growth.
Despite sound operational performance in some of the NBFCs, many
investors reduced their exposure to the segment, furthering the
liquidity issues and negative sentiment. As a consequence, stock
prices across the NBFC universe declined significantly.
Q: What gave you confidence that it made sense for AGA to hold
on to these Indian financial stocks despite this crisis?
A: The Indian financial services companies in which AGA has
invested are well - capitalised and they didn't face any
significant short-term liquidity needs. They also continued to
perform operationally at or close to the business plans we
developed when AGA invested in them.
Company-specific considerations also gave us confidence: CanFin
Homes has a quasi-sovereign parent, DCB is a bank with access to
retail deposits, and Repco Home Finance operates a defensible
business model.
The other view we took is that the Indian government and the
Reserve Bank of India would intervene to keep the liquidity issues
under control - which indeed happened. In hindsight, I am pleased
to report that we were correct in our analysis; all three stocks
that AGA has invested in, climbed by 20- 30% by year end from their
low points in October although they still trade below AGA's entry
price.
Q: What is the outlook for Indian financial stocks in the coming
year?
A: Within the Indian financial services universe, we expect
private sector lenders such as banks and retail loan focused
non-banks to do well. There are three main reasons for this.
First, the outlook for credit growth in India continues to be
positive. According to the Reserve Bank of India, banking sector
corporate credit recently grew about 14% compared to a 5% annual
growth rate in the previous years. Also, retail credit continues to
grow at c.17%, something we haven't seen over the past four
years.
Second, I expect liquidity concerns for NBFCs to further calm
down in the next few months.
Third, private sector players such as NBFCs are expected to gain
further market share at the expense of the Indian state-owned
banking sector.
Q: More generally, how easy has it been to find suitable
opportunities in India for AGA to invest in?
A: I think India is a land of opportunity and if you have local
expertise on the ground, as Apax does, you know where to look.
Since IPO, AGA has invested more than EUR64m in Indian Derived
Investments, and the Apax Funds have deployed more than EUR800m in
Indian opportunities over the last three years. These investments
have been made across multiple Apax Funds. More than 78% of the
total investments made were in Services and Tech & Telco, with
about 22% deployed in Healthcare.
JASON WRIGHT
Partner, Services (New York office)
Q: Your team has put forward several opportunities for AGA to
invest in. Can you talk us through how you go about identifying
these opportunities?
A: The team naturally comes across Derived Investments
opportunities through their due diligence work on potential private
equity deals or from the insight we gain from the Apax Funds'
portfolio companies. Once an idea is generated, we work closely
with the AGA team to complete the due diligence on the potential
investment.
Q: Can you give a recent example?
A: Sure, some recent ones are Paycor, Syncsort and Rocket
Software.
Let me start with Paycor, which is a payroll, and HR software
provider for SMEs. We know it very well as it's an Apax Fund
portfolio company so we've performed extensive due diligence.
Paycor is currently focused on investing for growth and we were
comfortable to recommend the Payment-In -Kind Preferred Equity for
investment for two main reasons: Paycor is a provider of mission
critical software which provides high quality, high margin
recurring revenues with high retention rates and; the PIK Preferred
Equity was a better choice compared to the debt instruments on
offer of other software companies at the time that offered similar
returns.
Syncsort has been in AGA's portfolio since September 2017.
Syncsort was created through the combination of a software
solutions provider for the mainframe server market and a provider
of software for the power server market, formerly known as Vision.
In 2017, the deal team considered it as an investment for the Apax
Private Equity Funds at one time. Our team recommended to AGA to
invest in the new second lien being raised to partially fund the
transaction. The team believed that it represented an attractive
risk-return opportunity because it's a defensive business with
recurring revenue and high cash generation. There's also a sizeable
equity cushion to cover against a downside.
Rocket Software is a provider of software solutions to the
mainframe platform market, similar to Syncsort. Following the due
diligence in Syncsort, the team became aware of Rocket Software and
identified it as a potentially interesting future investment
opportunity. During 2018 a sale process for Rocket was launched,
and it was considered as an investment by the Apax Private Equity
Funds. However, when the company was eventually sold to another
private equity fund, the deal team thought the second lien being
raised to partially fund this acquisition was worth putting forward
to the AGA Investment Committee. This was because the market sector
was stable with a sticky product offering and customer base, strong
balance sheet and the note itself was of a high quality.
INVESTMENT MANAGER'S REPORT
PERFORMANCE REVIEW
Apax Partners' ability to identify off-the-beaten-track
investments has resulted in AGA delivering positive returns in
challenging markets.
QUICK READ:
Total NAV Return(1) 7.1%
Adjusted NAV(2) EUR930.8m
Adjusted NAV per share
EUR1.90/GBP1.70
AGA in the FTSE 250 with market cap of
GBP663.0m
Strong operational performance of the Private Equity portfolio
and a positive contribution from Derived Debt
Derived Equity challenged by market dislocations and operational
underperformance
PERFORMANCE HIGHLIGHTS
2018 was characterised by volatile capital markets stemming from
a slowing global economy and rising political risk. Global equities
lost some $15tn from their January 2018 peak, with the worst
December recorded for US equities since 1931(3) . Meanwhile, global
bond markets experienced the lowest returns in a decade at -1.4%;
in fact, 63 of the 80 major debt and equity markets worldwide
posted negative returns in 2018(3) .
Against this backdrop AGA delivered NAV(2) growth of EUR18.4m to
EUR930.8m as at 31 December 2018 (Fig.3), and made two dividend
pay-outs which returned EUR46.6m to shareholders over the course of
the year. This translates into a solid positive Total NAV Return(1)
of 7.1% (Fig.2).
Two of the three asset classes in which AGA invests, bucked
negative market developments. In constant currency terms, Private
Equity and Derived Debt both contributed positively to Total NAV
Return with 9.2% and 0.4% respectively. Derived Equity's
contribution was -2.9%. Whilst the negative contribution from
Derived Equity is disappointing, the overall portfolio Total NAV
Return(1) of 7.1% represents a solid performance in difficult
markets.
PRIVATE EQUITY HIGHLIGHTS
The Private Equity portfolio exhibited good operational momentum
as portfolio companies displayed strong organic and inorganic
growth in the year. On a look-through basis, AGA committed EUR73.3m
to Private Equity Investments closed in 2018, adding eight new
companies and one significant add-on to its holdings, and invested
EUR11.1m in Apax Europe VI and VII carried interest holdings. There
were significantly more distributions compared to 2017 with three
strong exits from Apax VIII, being GlobalLogic, Azelis and
Genex.
DERIVED INVESTMENTS HIGHLIGHTS
Derived Debt portfolio:
The Derived Debt portfolio is fundamentally a healthy book of
loans in companies where the Investment Adviser has relevant
knowledge from its private equity activities. Based on our
expectation in 2017 that US base rates would rise, as well as an
increasing uncertain macro environment, AGA's debt investment
activity focused on US floating rate credit in high quality
companies. This decision paid off in 2018 as can be seen from the
performance of AGA's Derived Debt in the last quarter, when the
portfolio produced a positive return in very volatile markets.
During 2018, AGA also exited 12 (4) debt investments, returning
EUR112.8m at an average Gross IRR(5) of 11.0%.
Derived Equity portfolio:
The Derived Equity portfolio had a challenging year. One reason
for the disappointing performance was the generally weak market
backdrop for listed equity. Furthermore, investments in Indian
financial stocks (DCB, Repco Home Finance and CanFin Homes)
suffered from a significant worsening of investor sentiment towards
the sector, despite good underlying operating performance. Company
specific issues in certain investments also caused a drag on
returns with AGA's investments in OVS, VIP.com, Strides and Sophos
all underperforming.
1. Total NAV Return means the movement in the Adjusted NAV per
share over the period plus any dividends paid. Total Return
reflects the sub-portfolio performance on a stand-alone basis. It
excludes items at overall AGA level such as cash, management fees
and costs. Constant currency returns calculated the same as Total
NAV Return adjusted to remove the impact of FX
2. Adjusted NAV represents NAV of EUR930.8m adjusted for the
performance fee reserve of nil at 31 December 2018
3. Deutsche Bank C-Space publication January 2019
4. Twelve debt realisations comprise of five debt positions that
were called; five positions that were fully exited and two
positions that amortised during the year
5. Gross IRR calculated based on aggregate euro cash flows since
inception of deals realised during the year
FIG.1: Portfolio overview at 31 December 2018
PRIVATE EQUITY
65%
DERIVED INVESTMENTS
35%
INVESTED PORTFOLIO
EUR912.1m
98% OF TOTAL NAV
FIG.2: Total NAV Return contributions (%)
%
------------------------------- -------
Private Equity 9.2%
---------------------------------- -------
Derived Debt 0.4%
---------------------------------- -------
Derived Equity (2.9%)
---------------------------------- -------
Costs and other movements (1.5%)
---------------------------------- -------
Performance fee adjustment(1) 0.2%
---------------------------------- -------
FX 1.7%
---------------------------------- -------
Total NAV Return 7.1%
---------------------------------- -------
FIG.3: Adjusted NAV development (EURm)
Private Derived Investments Total
Equity
----------------------------- -------- -------------------- -------
Adjusted NAV at 31 December
2017 912.4
------------------------------ -------- -------------------- -------
Dividends paid (46.6)
------------------------------ -------- -------------------- -------
Expenses & other(2) (11.0)
------------------------------ -------- -------------------- -------
Total value gains(3) 95.3 37.5 132.8
------------------------------ -------- -------------------- -------
Total value losses(3) (2.7) (54.1) (56.8)
------------------------------ -------- -------------------- -------
Adjusted NAV at 31 December
2018 930.8
------------------------------ -------- -------------------- -------
1. Performance fee adjustment accounting for the movement in the
performance fee reserve at 31 December 2018
2. Expenses and other consists of: expenses and accruals of
EUR13.2m offset by positive performance fee movement of EUR2.1m and
net FX gain on cash of EUR0.1m
3. Total value movements calculated by taking unrealised and
realised movements, FX and income earned during the period. Total
value gains show the positive contributors and total value losses
show the negative contributors
PRIVATE EQUITY
Strong performance from positive operational momentum in the
portfolio companies.
QUICK READ:
Private Equity Total Return(1) 17.4%
LTM EBITDA growth
22.2%
The Apax Funds returned to AGA
EUR134.9m
Gross IRR(2) on 2018 full exits
50.2%
On a look-through basis, AGA invested EUR73.3m in eight new
companies and one add-on investment and EUR11.1m in two carried
interest positions
Strong operational performance and exits contributed to healthy
returns
Maturing portfolio with
86%
of investments, 2014-2018 vintage
STRONG NAV PERFORMANCE THANKS TO ACCELERATING EBITDA GROWTH
The Private Equity portfolio delivered strong performance in the
year with a Total Return(1) of 17.4% (Fig.1). The main driver of
value creation was earnings growth in the investee companies. FX
also positively impacted performance as the US dollar strengthened
relative to the euro. On a constant currency(1) basis, the Total
Return(1) was 15.9%. Adjusted NAV increased from EUR586.1m to
EUR591.5m (Fig.2) largely due to unrealised gains which were driven
by earnings growth in the underlying portfolio.
A number of companies outperformed during the year with
ThoughtWorks, AssuredPartners and Exact Software producing
significant value increases (Fig.3). ThoughtWorks enjoyed a very
strong start under the Apax Funds' ownership. New client wins
alongside increasing demand from existing customers drove the top
line, and cost reduction initiatives created a positive margin
impact. The valuation of AssuredPartners increased due to accretive
M&A and organic growth. The company announced 42 acquisitions
in 2018 as it continues to successfully execute its M&A
strategy. Meanwhile, Exact Software continued to grow profitably by
attracting more customers with its cloud-based software packages
having enhanced functionality.
The largest valuation declines in the portfolio were from
Shriram City Union Finance ("SCUF"), One Call and Ideal Protein.
SCUF's valuation decline was driven by the Indian non-bank
financial sector falling out of favour, following the default of a
leading player (see Q&A section p.12). One Call continued to
perform below expectations as a result of pricing pressure, lower
growth in high margin products, and continued investment in its new
IT system, Polaris. Longer-term, Polaris is expected to increase
internal efficiency and enhance customer experience. Ideal Protein
is dealing with softening customer acquisition and retention rates.
A new CEO has been hired to address these issues and several
initiatives are underway, including improvements to its
go-to-market strategy.
Overall, the Private Equity portfolio is performing strongly,
delivering LTM EBITDA growth of 22.2%. We expect this operational
momentum in the portfolio to continue into 2019.
INVESTING BEHIND PROVEN STRATEGIES
On a look-through basis, AGA invested EUR73.3m in Private Equity
Investments which closed during 2018, adding eight new companies to
its portfolio, and committed a further EUR22.5m to a new investment
in New Zealand's leading online classifieds business Trade Me which
is expected to close in the first half of 2019. The pace of
investment by the Apax Private Equity Funds was lower than last
year reflecting investment discipline in the face of high private
equity valuations in the market.
The Apax Partners' strategy to find value remains centred around
leveraging sector knowledge, geographic flexibility and operational
capabilities, as well as seeking out more differentiated
opportunities.
Apax Partners' strong sector knowledge has its roots in its
focus on four core sectors. Apax Partners also repeatedly
identifies investments within targeted sub-sectors. Through
building deep, specialised expertise in certain market niches, Apax
Partners can: identify and approach companies ahead of competitors
and often in less heavily-competed areas; better calibrate
opportunities, thereby reducing risk; and deploy proven operational
optimisation strategies, thereby increasing the probability of
alpha.
Most of the new Private Equity Investments in 2018 followed this
sub-sector led approach. For example, Healthium MedTech is a
leading Indian player in the focus sub -sector of medical devices,
while Paycor and Genius Sports Group are providers of software in
the HR and sports data areas. Wizeline and Solita are digital
transformation services businesses, and Trade Me is the leading
online classified marketplace in New Zealand. All of these
investments are in sub- sectors in which the Apax Private Equity
Funds have made multiple successful investments in previous
years.
1. Total Return reflects the sub-portfolio performance on a
stand-alone basis. Constant currency returns adjusted to remove the
impact of FX
2. Gross IRR and Gross MOIC on full exits calculated based on
the aggregate cash flows in euro across all funds for the deals
realised in the year; Genex which closed in March 2018, GlobalLogic
which closed in August 2018 and Azelis which closed in November
2018. Gross IRR represents concurrent Gross IRR
FIG.1: Private Equity performance (%)
%
--------------------------------- ----------------------------- --- --------
Movement in underlying portfolio companies' earnings 28.2%
------------------------------------------------------------ --------- --------
Movement in net debt(1) (6.4%)
------------------------------------------------------------ --------- --------
Movement in comparable companies' valuation multiple(2) 0.2%
------------------------------------------------------------ --------- --------
One-off and other(3) (2.0%)
------------------------------------------------------------ --------- --------
Management fees paid and carried interest accrued
by Apax Funds (5.7%)
------------------------------------------------------------ --------- --------
Movement in AEVII and AEVI carried interest fair
value 0.9%
------------------------------------------------------------ --------- --------
Movement in performance fee reserve(4) 0.7%
------------------------------------------------------------ --------- --------
FX 1.5%
------------------------------------------------------------ --------- --------
Total NAV Return 17.4%
------------------------------------------------------------ --------- --------
1. Represents movement in all instruments senior to equity
2. Movement in the valuation multiples captures movement in the
comparable companies valuation multiples. In accordance with
International Private Equity and Venture Capital Valuation ("IPEV")
guidelines, the Apax Funds use a multiples based approach where an
appropriate valuation multiple (based on both public and private
market valuation comparators) is applied to maintainable earnings,
which is often but not necessarily represented by EBITDA to
calculate Enterprise Value
3. Mainly dilutions from the management incentive plan as a
result of growth in the portfolio's value
4. Performance fee adjustment accounting for the movement in the
performance fee reserve at 31 December 2018
FIG.2: Private Equity Adjusted NAV development (EURm)
Total
---------------------------------- --------
Adjusted NAV at 31 December
2017 586.1
------------------------------------- --------
Calls and secondary purchases(1) 43.5
------------------------------------- --------
Distributions (134.9)
------------------------------------- --------
Unrealised gains 84.3
------------------------------------- --------
Performance fee adjustment(2) 4.1
------------------------------------- --------
FX 8.4
------------------------------------- --------
Adjusted NAV at 31 December
2018(3) 591.5
------------------------------------- --------
1. Included in the above were secondary purchases of EUR11.1m
that relate to the purchase of two carried interest holdings
(add-on of EUR7.7m in AEVII and EUR3.4m into a new carried interest
holding in AEVI)
2. Performance fee adjustment accounting for the movement in the
performance fee reserve at 31 December 2018
3. Includes AGA's exposure to carried interest holdings in AEVII
and AEVI which were respectively valued at EUR32.1m and EUR3.6m at
31 December 2018
SUCCESSFUL REALISATIONS
AGA realised a total of EUR134.9m from its Private Equity
portfolio, significantly more than in the prior year. There were
three strong full exits from the Apax VIII fund. GlobalLogic
delivered a 5.9x Gross MOIC(1) and a 56% Gross IRR(1) with a 17%
uplift(2) on exit to the last Unaffected Valuation(2) . The company
was repositioned to focus on digital services, with improved
go-to-market strategies and hired more employees in key functions.
As a result, growth accelerated with both revenue and EBITDA more
than doubling in five years. The sale of Azelis delivered a 3.6x
Gross MOIC(1) and a 50% Gross IRR(1) with a 24% uplift(2) on exit
to the last Unaffected Valuation(2) . During Apax VIII's ownership,
Azelis made one transformational acquisition and 12 tuck-in
acquisitions which broadened geographic reach and product offering
significantly, making Azelis a global market leader in specialty
chemicals distribution. The acquisitions also added a variety of
additional services, enabling Azelis to provide superior solutions
to its customers. The disposal of Genex generated a 2.8x Gross
MOIC(1) and 32% Gross IRR(1) with a 13% uplift(2) on exit to the
last Unaffected Valuation(2) .
In addition to the full exits above, several portfolio companies
were refinanced in order to optimise capital structures and/or fund
dividends (see p.20 for details).
APAX FUNDS UPDATE
AGA's Private Equity exposure is spread across six Apax Funds
with vintages from 2005 to 2017.
Apax IX, the global buyout fund currently being invested, was
raised in 2017. The fund is performing well and is diversified
across sectors and geographies with a mix of value investments
bought at attractive absolute multiples, and high-growth businesses
acquired at reasonable relative multiples. Including an investment
signed in January 2019 to invest in Fractal Analytics, a global
provider of artificial intelligence services to Fortune 500
companies, Apax IX has made 12 investments to date.
Apax VIII, which was raised in 2012, has started to deliver
strong realisations such as the previously highlighted exits of
GlobalLogic, Azelis and Genex. As the fund matures, we expect
further NAV expansion and exits in the coming years. The average
valuation uplift(3) of the eight full exits was 20%.
Post year end, Apax VIII's strong realisation momentum continued
and the fund announced agreements to sell AssuredPartners and Exact
Software in February 2019, representing uplifts (3) of 14% and 34%
respectively compared to their December 2018 valuations. Both
transactions are subject to customary closing conditions.
Apax Europe VII and Apax Europe VI continue to actively evaluate
exit opportunities and monetise their portfolios. In addition to
the limited partnership interests, AGA also acquired carried
interest entitlements in both funds. During 2018, EUR11.1m was
invested in carried interests in Apax Europe VI and Apax Europe
VII. The average valuation uplift (3) for Apax Europe VII with 18
exits was 28% and the average valuation uplift(3) for Apax Europe
VI with 16 exits, was 26%.
The Apax Mid-Market Israel Fund ("AMI") and the Apax Digital
Fund ("ADF") remain focused on new investments and growing their
existing portfolios. Both funds have healthy pipelines of
attractive opportunities under review which will further diversify
AGA's portfolio. AMI made two investments in the year. ADF also
completed two new investments.
VALUATION OF PRIVATE EQUITY
1. The Apax Funds' investments are valued on a quarterly basis
to reflect their latest fair value.
2. Fair value of Apax Funds' private investments are largely
determined using public comparatives trading and/or transaction
comps as appropriate.
3. In the Apax Funds, the majority of fair value movements are
reported as unrealised given that gains or losses on exits signed,
but not closed, are already reflected in the quarter-end
valuations.
OPERATIONAL METRICS
2018 has been another year of good operating performance in the
majority of portfolio companies, and both organic and inorganic
earnings increases were the main drivers of value creation.
Last Twelve Months ("LTM") revenue and EBITDA growth(4) were
14.5% and 22.2% respectively, compared to 12.8% and 17.9% at the
same time last year. Organic growth constitutes a material part of
this performance. Excluding significant M&A, LTM revenue and
EBITDA grew by 9.8% and 15.2%, respectively.
The weighted average valuation multiple(4) increased from 13.8x
LTM EBITDA to 14.5x LTM EBITDA, reflecting an uplift in valuation
multiples used to value the Private Equity portfolio. Portfolio
companies in higher growth Tech & Telco and Digital sectors
have higher relevance in the portfolio.
The weighted average leverage(4) of portfolio companies
decreased from 4.3x to 4.0x LTM EBITDA over the period. This is due
to EBITDA growth outpacing changes in absolute levels in net
debt.
MARKET OUTLOOK
Despite recent corrections in equity markets, private equity
valuations continue to remain frothy. Whilst valuations of the
Private Equity portfolio would not be insulated from a de-rating of
market valuations, we believe the Apax Private Equity Funds
approach is particularly well-suited to generate value in this
"late-cycle" environment for a number of reasons:
a. A high level of discipline is employed with regard to entry multiples paid;
b. There are no particular capital deployment targets but a high
bar for risk-reward-profiles is maintained (and many unreasonably
priced "plain vanilla" private equity deals are not invested in as
a consequence);
c. "Differentiated" investment situations where businesses can
be transformed or repositioned are the preferred opportunities;
d. The Apax Partners' sub-sector expertise actively target
opportunities where proven strategies can be deployed;
e. The high valuation backdrop also provides an opportunity for achieving compelling exits.
1. Performance as at 31 December 2018, including unrealised
value and total realised proceeds. Gross MOICs and Gross IRRs
represent return to the fund which invested the most across all the
Apax Funds into the deal. AVIII and AIX performances represent the
euro tranche returns
2. Valuation uplifts on exits are calculated based on the total
actual or estimated sales proceeds and income as appropriate since
the last Unaffected Valuation. Unaffected Valuation is determined
as the fair value in the last quarter before exit, when valuation
is not affected by the exit process (i.e. because an exit was
signed, or an exit was sufficiently close to being signed that the
Apax Funds incorporated the expected exit multiple in to the
current valuation)
3. Average Fund valuation uplifts are weighted by the fair value
of the Unaffected Valuations. It includes full exits and the
significant partial exit of Sophos since 2014
FIG.4: Private Equity portfolio at 31 December 2018
Apax IX ("AIX")
AGA NAV EUR160.2m
----------------------- -----------
% of AGA PE portfolio 31%
----------------------- -----------
Vintage 2016
----------------------- -----------
EUR154.5m +
Commitment $175m
----------------------- -----------
Invested and committed 55%
----------------------- -----------
Apax VIII ("AVIII")
----------------------- ------------------
AGA NAV EUR342.3m
----------------------- ------------------
% of AGA PE portfolio 56%
----------------------- ------------------
Vintage 2012
----------------------- ------------------
Commitment EUR159.5m +$218.3m
----------------------- ------------------
Invested and committed 103%
----------------------- ------------------
Apax Europe VII ("AEVII")
-------------------------- --------
AGA NAV EUR59.5m
-------------------------- --------
% of AGA PE portfolio 8%
-------------------------- --------
Vintage 2007
-------------------------- --------
Commitment EUR86.5m
-------------------------- --------
Invested and committed 108%
-------------------------- --------
Apax Europe VI ("AEVI")
------------------------ --------
AGA NAV EUR5.3m
------------------------ --------
% of AGA PE portfolio 1%
------------------------ --------
Vintage 2005
------------------------ --------
Commitment EUR10.6m
------------------------ --------
Invested and committed 107%
------------------------ --------
AMI Opportunities Fund ("AMI")
------------------------------- --------
AGA NAV EUR20.6m
------------------------------- --------
% of AGA PE portfolio 3%
------------------------------- --------
Vintage 2015
------------------------------- --------
Commitment EUR25.6m
------------------------------- --------
Invested and committed 55%
------------------------------- --------
Apax Digital Fund ("ADF")
-------------------------- -------
AGA NAV EUR3.6m
-------------------------- -------
% of AGA PE portfolio 1%
-------------------------- -------
Vintage 2017
-------------------------- -------
Commitment EUR50m
-------------------------- -------
Invested and committed 18%
-------------------------- -------
Portfolio year-over-year LTM revenue growth(4) :
December 2018: 14.5% vs December 2017: 12.8%
Portfolio year-over-year LTM EBITDA growth(4) :
December 2018: 22.2% vs December 2017: 17.9%
Enterprise Value/EBITDA valuation multiple(4) :
December 2018: 14.5x vs December 2017: 13.8x
Net debt/EBITDA multiple(4) :
December 2018: 4.0x vs December 2017: 4.3x
Investment activity(5) :
Investments
December 2018: 8 vs December 2017: 16
Exits
December 2018: 3 vs December 2017: 8
Number of position changes in the last 12 months
Note: These operational metrics represent a snapshot of the
portfolio as at period end, hence they do not capture the
performance of exited investments in the reporting period
4. At December 2017 and December 2018, nine and thirteen
investments were respectively excluded as these are financial
services companies often valued on book value or for which earnings
financials are not available e.g. complex carve-outs or growth
investments. The increase was due to new portfolio additions, and
the exclusion of Vyaire Medical due to short-term fluctuations in
EBITDA. December 2018 figures including Vyaire are 13.9% LTM
revenue growth, 17.7% LTM EBITDA growth, 15.8x EV/EBITDA multiple,
and 4.7x net debt/EBITDA multiple
5. New closed investments and closed exits in 2018 - see page 20
for full list of acquisitions and disposals
ACQUISITIONS Closed(1) COST(2)
------------------------------------------------------------------- ---------
Apax Europe VI
New carry position in AEVI EUR3.4m
Apax Europe VII
Add-on position to the carry held in AEVII EUR7.7m
Authority Brands
A leading franchisor of home services in US, Canada
and Latin America (AIX, North America, Services) EUR8.4m
Genius Sports Group
Leader in provision of information, odds and software
for sports betting operators and sports leagues (AIX,
UK, Tech & Telco) EUR9.7m
Global-e
Provider of solutions to online retailers who want
to sell outside their home market (AMI, Israel, Tech
& Telco) EUR1.0m
Healthium
Independent medical devices player in India (AIX, India,
Healthcare) EUR7.1m
Paycor
Provider of SaaS Payroll and Human Capital Management
software to small and medium-sized businesses (AIX,
North America, Tech & Telco) EUR18.7m
Ramet Trom
Producer and supplier of prefabricated elements for
the infrastructure and construction sectors in Israel
(AMI, Israel, Services) EUR1.7m
Solita
Finland's largest digital transformation services company,
with particular expertise in data and analytics (ADF,
Europe, Digital) EUR3.3m
Vyaire Medical
Respiratory devices and consumables manufacturer (AVIII,
North America, Healthcare) (follow--on investment) EUR17.8m
Wizeline
High-growth product innovation and digital transformation-focused
IT services provider (ADF, North America, Digital) EUR1.4m
DIVESTMENTS Full exits
-------------------------------------------------------- -------------
Genex GROSS MOIC(3)
Provider of cost containment services to the workers' 2.8x
comp, disability and auto industries (AEVII & AVIII,
North America, Healthcare)
GROSS IRR(3)
32%
GlobalLogic GROSS MOIC(3)
An outsourced product development services firm (AVIII, 5.9x
North America, Tech & Telco)
GROSS IRR(3)
56%
Azelis GROSS MOIC(3)
Global distributor of specialty chemicals and related 3.6x
services (AVIII, Europe, Services)
GROSS IRR(3)
50%
1. Wizeline closed in March 2018, Vyaire Medical closed in April
2018, Global-e closed in April 2018, Ramet Trom closed in May 2018,
Solita closed in June 2018, Healthium MedTech closed in June 2018,
Genius Sports Group closed in September 2018, Authority Brands
closed in September 2018 and Paycor closed in November 2018
2. Cost is AGA's indirect exposure to the underlying portfolio
companies held by the Apax Funds. Costs may change following final
close of the deal
3. Performance as at 31 December 2018, including unrealised
value and total realised proceeds. Gross MOICs and Aggregate Gross
IRRs represent return to the fund which invested the most across
all the Apax Funds into the deal. AVIII and AIX performances
represent the euro tranche returns
DIVESTMENTS Partial exits, IPOs and others
---------------------------------------------------------------------------
Huarong
Huarong, a Chinese asset management company (AEVII & CASH PROCEEDS
AVIII, China, Services) TO APAX FUNDS
Recapitalised EUR70.1m
----------------------------------------------------------- --------------
Zap Group
The leading consumer internet group in Israel (AMI, CASH PROCEEDS
Israel, Tech & Telco) TO APAX FUNDS
Dividend EUR6.3m
----------------------------------------------------------- --------------
Acelity
Global medical technology company (AEVII, North America, CASH PROCEEDS
Healthcare) TO APAX FUNDS
Dividend EUR37.7m
----------------------------------------------------------- --------------
Boats Group
Digital marketplace and solutions for recreational marine CASH PROCEEDS
industry (AIX, North America, Services) TO APAX FUNDS
Recapitalised EUR36.2m
----------------------------------------------------------- --------------
Max
The largest general discount retail chain store in Israel CASH PROCEEDS
(AMI, Israel, Consumer) TO APAX FUNDS
Dividend EUR5.9m
----------------------------------------------------------- --------------
DIVESTMENTS Partial exits, IPOs and others
------------------------------------------------------------------ --------------
Psagot
The largest investment house in Israel (AEVII, Israel, CASH PROCEEDS
Services) TO APAX FUNDS
Recapitalised EUR71.9m
------------------------------------------------------------------ --------------
EVRY
Nordic IT services provider (AVIII, Europe, Tech & CASH PROCEEDS
Telco) TO APAX FUNDS
Dividend EUR21.3m
------------------------------------------------------------------ --------------
Tivit
A leader in integrated IT outsourcing services in Latin CASH PROCEEDS
America (AEVII & AEVI, Rest of world, Tech & Telco) TO APAX FUNDS
Dividend EUR53.4m
------------------------------------------------------------------ --------------
Idealista
Leading real estate classified marketplace in Spain CASH PROCEEDS
(AVIII, Europe, Consumer) TO APAX FUNDS
Dividend EUR6.5m
------------------------------------------------------------------ --------------
Zensar
Technology services provider to global clients in manufacturing,
retail and hi-tech verticals (AVIII, India, Tech & CASH PROCEEDS
Telco) TO APAX FUNDS
Recapitalised EUR57.3m
------------------------------------------------------------------ --------------
Go Global Travel
Leading global B2B travel technology and service provider(AMI, CASH PROCEEDS
Israel, Tech & Telco) TO APAX FUNDS
Dividend EUR7.0m
------------------------------------------------------------------ --------------
Ten
Leading discount gas stations operator in Israel (AMI, CASH PROCEEDS
Israel, Services) TO APAX FUNDS
Dividend EUR6.5m
------------------------------------------------------------------ --------------
TOP 30 PRIVATE EQUITY INVESTMENTS - AGA'S INDIRECT EXPOSURE
INITIAL
PURCHASE VALUATION % OF
FUND YEAR GEOGRAPHY EURM NAV
------------------------ ------------- ------------ --------------- --------- ----
AssuredPartners AVIII 2015 North America 68.8 7%
------------------------ ------------- ------------ --------------- --------- ----
Exact Software AVIII 2015 Europe 51.9 6%
------------------------ ------------- ------------ --------------- --------- ----
ThoughtWorks AIX 2017 North America 39.8 4%
------------------------ ------------- ------------ --------------- --------- ----
Idealista AVIII 2015 Europe 34.9 4%
------------------------ ------------- ------------ --------------- --------- ----
Vyaire Medical* AVIII 2016 North America 34.1 4%
------------------------ ------------- ------------ --------------- --------- ----
Acelity AEVII 2011 North America 32.1 3%
------------------------ ------------- ------------ --------------- --------- ----
Engineering AVIII 2016 Europe 31.1 3%
------------------------ ------------- ------------ --------------- --------- ----
Cole Haan AVIII 2013 North America 30.6 3%
------------------------ ------------- ------------ --------------- --------- ----
Unilabs AEVI & AIX 2007 & 2017 Europe 29.7 3%
------------------------ ------------- ------------ --------------- --------- ----
Neuraxpharm Group AVIII 2016 Europe 26.8 3%
------------------------ ------------- ------------ --------------- --------- ----
Duck Creek Technologies AVIII 2016 North America 26.1 3%
------------------------ ------------- ------------ --------------- --------- ----
EVRY* AVIII 2015 Europe 25.5 3%
------------------------ ------------- ------------ --------------- --------- ----
Wehkamp AVIII 2015 Europe 19.3 2%
------------------------ ------------- ------------ --------------- --------- ----
Paycor* AIX 2018 North America 18.6 2%
------------------------ ------------- ------------ --------------- --------- ----
Safetykleen* AIX 2017 United Kingdom 18.5 2%
------------------------ ------------- ------------ --------------- --------- ----
Candela AIX 2017 North America 18.5 2%
------------------------ ------------- ------------ --------------- --------- ----
Quality Distribution* AVIII 2015 North America 17.0 2%
------------------------ ------------- ------------ --------------- --------- ----
MATCHESFASHION.COM AIX 2017 United Kingdom 15.3 2%
------------------------ ------------- ------------ --------------- --------- ----
ECi Software Solutions* AIX 2017 North America 12.1 1%
------------------------ ------------- ------------ --------------- --------- ----
Shriram City Union AVIII 2015 India 11.0 1%
------------------------ ------------- ------------ --------------- --------- ----
Tosca Services AIX 2017 North America 9.0 1%
------------------------ ------------- ------------ --------------- --------- ----
Genius Sports Group AIX 2018 United Kingdom 8.9 1%
------------------------ ------------- ------------ --------------- --------- ----
Authority Brands AIX 2018 North America 8.3 1%
------------------------ ------------- ------------ --------------- --------- ----
Guotai Junan Securities AIX 2017 China 8.0 1%
------------------------ ------------- ------------ --------------- --------- ----
Healthium AIX 2018 India 7.9 1%
------------------------ ------------- ------------ --------------- --------- ----
Boats Group* AIX 2016 North America 7.8 1%
------------------------ ------------- ------------ --------------- --------- ----
Tivit AEVI & AEVII 2010 Rest of world 7.5 1%
------------------------ ------------- ------------ --------------- --------- ----
Attenti AIX 2017 Israel 6.6 1%
------------------------ ------------- ------------ --------------- --------- ----
Go Global Travel AMI 2017 Israel 6.5 1%
------------------------ ------------- ------------ --------------- --------- ----
Psagot AEVII 2010 Israel 6.3 1%
------------------------ ------------- ------------ --------------- --------- ----
Other investments 54.1 6%
---------------------------------------------------------------------- --------- ----
Total gross investments 692.6 76%
---------------------------------------------------------------------- --------- ----
Carried interest (57.3) -6%
---------------------------------------------------------------------- --------- ----
Capital call facilities
and other (43.8) -5%
---------------------------------------------------------------------- --------- ----
Total Private Equity 591.5 65%
---------------------------------------------------------------------- --------- ----
* AGA also holds these companies in the Derived Investments portfolio
CASE STUDY: GlobalLogic
Transformational ownership in action
INVESTMENT DETAILS
Date of investment
December 2013
Fund
AVIII
Sector
Tech & Telco
Region
North America
Status
Realised
GROSS MOIC/ GROSS IRR
5.9x/56%
GlobalLogic is a leader in digital product engineering services.
The company helps blue chip clients (such as Microsoft, Coca-Cola,
Volvo and Verizon) design, build, and deliver their digital
products. Headquartered in San Jose, USA, GlobalLogic employs more
than 12,000 people across North America, South America, Europe and
Asia.
The Apax Funds acquired GlobalLogic in December 2013 having
recognised the significant long-term growth outlook for the
outsourced product development industry. GlobalLogic was well -
positioned to capitalise on this growth due to its best-in-class
global delivery capabilities, well- established client base and
experienced management team.
Together with management, the Apax Funds supported investment in
sales and marketing capabilities to both seek out and develop areas
of expertise. Through both organic growth and M&A, the company
expanded into new geographies across the world. A best-in-class
Board of Directors was put in place, and the second layer of
management was upgraded to support GlobalLogic's growth
aspirations. Lastly, Apax's Operational Excellence Practice
supported the business in several ways, including redefining their
internal IT strategy and leading a finance improvement
initiative.
The result of these initiatives saw an acceleration in growth as
both revenue and EBITDA more than doubled during the Apax Funds'
ownership.
The Apax Funds sold their stake in GlobalLogic across two
tranches: half was sold in January 2017; and the remaining stake
was sold in August 2018 in a transaction which valued GlobalLogic
at over $2bn.
"The growth strategy for GlobalLogic was scaling the business to
support its long-term growth aspirations, and offering complex
engineering expertise across diversified customer industries on a
truly global scale."
Rohan Haldea
Apax Partners
CASE STUDY: Tosca
Growing potential
INVESTMENT DETAILS
Date of investment
October 2017
Fund
AIX
Sector
Services
Region
North America
Status
Unrealised
CONTRIBUTION TO AGA NAV
EUR9.0m
Tosca is a leading provider of supply chain solutions and
reusable packaging to the perishable food markets in the United
States. The company is headquartered in Atlanta, USA. One of the
key services it provides to grocery retailers and suppliers is the
rental and sale of reusable plastic containers ("RPCs") to
transport produce. The Apax Funds acquired the business in October
2017 through a bilateral transaction.
Ashish Karandikar, a Partner at Apax Partners who led the deal,
said: "Tosca is a great example of a typical Apax deal: a growth
asset in an industry we know well.
Within this market, Tosca stood out due to its strong management
team and excellent track record of innovation and growth. The
investment thesis is to back a differentiated player to continue to
deliver innovation-led growth. There are significant opportunities
for the company to continue to innovate and are delighted the
investment has got off to a strong start."
Since acquisition, the Investment Adviser has been working with
management to invest in the business to support growth. This has
included increasing its pool of RPCs available to grocery
retailers, as well as the opening of a new service centre to
support higher demand. In addition, the company has improved margin
by focusing its sales mix on higher-margin products such as meat
and eggs.
"Apax has significant experience in route-based services
business, including within the RPC sector directly through a
previous investment the Apax Funds made in IFCO Systems. Through
this institutional knowledge we assessed the North American RPC
sector was attractive. It has strong growth momentum driven by
grocery retailers looking to RPCs to reduce costs, high barriers to
entry, and recession-resilient characteristics."
Ashish Karandikar
Apax Partners
DERIVED INVESTMENTS
The Derived Debt portfolio delivered positive results throughout
the year whilst the performance of Derived Equity was
disappointing.
QUICK READ:
Derived Investments Total Return(1) -6.0%
Fully exited 12(2) debt investments generating EUR112.8m. 12(2)
exits in equities with proceeds of EUR63.7m
Gross IRR(3) on Derived Debt exits 11.0% and Gross MOIC(3) 1.2x.
Gross IRR(3) on Derived Equity exits -15.8% and Gross MOIC(3)
0.9x
Eleven new investments in debt and eleven(4) equity investments
amounting to EUR212.5m
The quality of the Derived Debt portfolio allowed for
outperformance against credit markets. Listed equity investments
disappointed and could not withstand market volatility.
Portfolio split: Derived Debt 56%, Derived Equity 44%
DIVERGING PERFORMANCE IN DERIVED INVESTMENTS
Returns in the Derived Investments portfolio diverged during the
year. The Derived Debt portfolio produced a solid performance
against a very difficult market backdrop with both spreads widening
and increasing base rates in the US. Following strong returns in
prior years, Derived Equity had a more challenging year
accumulating realised and unrealised losses. Given the relatively
high share of Derived Equity as a proportion of Derived
Investments, the overall Total Return(1) in Derived Investments was
-6.0% (Fig.1). The sub-portfolio Total Return for Derived Debt was
4.5% and for Derived Equity -17.6%. FX added positively to
performance as the US dollar strengthened relative to the euro. On
a constant currency(1) basis, the Total Return(1) was -8.0% and for
the sub-portfolios it was 0.3% for Derived Debt and -17.4% for
Derived Equity. Adjusted NAV increased from EUR 307.2m to EUR320.6m
(Fig.2) largely due to net investments of EUR36.0m.
DEBT PORTFOLIO REVIEW: A HEALTHY BOOK OF MAINLY US SECOND LIEN
LOANS
Credit markets became significantly more volatile during 2018.
US fixed rate investors suffered losses from rising interest rates,
and high yield spreads widened throughout the year in Europe with
the US markets following in the second half. Volatility in credit
markets intensified, during the fourth quarter.
Against this backdrop AGA's Derived Debt portfolio was well
positioned, being invested primarily in US floating rate loans of
high quality issuers. AGA intentionally has not invested in fixed
rate instruments in the past 24 months which has kept duration risk
in the portfolio at a minimum. AGA made two new investments in the
UK (ERM and Alexander Mann). Both investments are US dollar
denominated, and the investment in Alexander Mann is a first lien
loan which we believe is the best position in the company's capital
structure in the light of continuing Brexit risks.
Performance of the Derived Debt portfolio continued to be
impacted by a second lien loan investment in the US fashion
catalogue retailer FullBeauty, which was made in 2015. The majority
of losses in AGA's credit portfolio result from this unsuccessful
investment. FullBeauty concluded a restructuring at the end of 2018
with a remaining fair market value at 31 December 2018 of
EUR2.5m.
In total, EUR109.8m was deployed in eleven new debt investments
during the year. AGA also fully exited 12 (2) debt investments
generating proceeds of EUR112.8m with a Gross IRR(3) of 11.0%. As
many of these debt investments were US dollar denominated, the
constant currency(1) Gross IRR(3) achieved was 10.0%.
FIG.1: Derived Investments performance (%)
Income 6.2%
---------------------------------- --------
Realised losses (3.6%)
---------------------------------- --------
Unrealised losses (10.0%)
---------------------------------- --------
Performance fee adjustment(5) (0.6%)
---------------------------------- --------
FX 2.0%
---------------------------------- --------
Total Return (6.0%)
---------------------------------- --------
FIG.2: Derived Investments Adjusted NAV development (EURm)
Total
------------------------------- --------
Adjusted NAV at 31 December
2017 307.2
---------------------------------- --------
Investments 212.5
---------------------------------- --------
Divestments (176.5)
---------------------------------- --------
Realised losses (11.4)
---------------------------------- --------
Unrealised losses (31.2)
---------------------------------- --------
Performance fee adjustment(5) 13.4
---------------------------------- --------
FX 6.6
---------------------------------- --------
Adjusted NAV at 31 December
2018 320.6
---------------------------------- --------
1. Total Return reflects the sub-portfolio performance on a
stand-alone basis. Constant currency returns adjusted to remove the
impact of FX
2. Twelve debt realisations comprise of five debt positions that
were called; five positions that were fully exited and two
positions that amortised during the year
3. Gross IRR and Gross MOIC calculated based on the aggregate
euro cash flows since inception for deals realised during the year
(inclusive of partial exits)
4. Eleven equity investments comprising nine new equity
positions, one add-on position, and one position received as part
of a demerger of another position
5. Performance fee adjustment accounting for the movement in the
performance fee reserve at 31 December 2018
AGA CREDIT INVESTMENT TRACK RECORD (FIG.4).
Since January 2012, AGA and its predecessor fund have deployed a
total of EUR743.1m in Derived Debt Investments in 51 investments(5)
.
All but three of these investments have produced positive
returns. In 2016, we adjusted our investment process following the
investments made in Rue21, Answers, and FullBeauty which were all
made in the 2013-2015 time period: the bar for AGA investments in
primary debt issuances of Apax Private Equity Fund portfolio
companies was raised significantly.
Since 1 January 2016, AGA has made debt investments of EUR319.0m
in 26 different investments(5) . These investments have generated a
Gross IRR of 16.3%(6) to date, (13.9%(6) excluding FX movements),
and the realised deals of the post-2016 portfolio have already
generated a Gross IRR of 19.0%(6) (16.7%(6) excluding FX movements)
with EUR182.2m of capital and interest returned to AGA.
EQUITIES PORTFOLIO REVIEW: EMERGING MARKET VOLATILITY CHALLENGED
RETURNS
2018 was a very challenging year for listed equity investments.
Most equity markets across the globe saw significant declines over
the year. In addition to the general market decline, some sub
-sectors in which AGA has made investments were particularly hit:
peak to trough declines were 29.0% for Indian small cap stocks and
28.2% for retail in Europe(7) .
Against this market backdrop, the Derived Equity portfolio was
actively managed during the year. Nine new investments were made,
almost half of them in the Services sector. The UK and Europe
represented six of these holdings, while North America and India
added another three positions. Twelve(8) equity exits generated
proceeds of EUR63.7m with a Gross IRR(9) of (15.8%). Overall
performance in Derived Equity was disappointing. However, there
were notable differences across the portfolio:
- Performing investments: Greencore, Dignity and Civitas
Solutions were the top equity performers (Fig.3) in 2018. For
Dignity, our investment thesis played out very quickly leading to a
short holding period and a Gross MOIC of 1.4x. Greencore and
Civitas Solutions remained in the portfolio at year end, with
Civitas Solutions announcing it has agreed a take-private
transaction and Greencore offering a share buy-back following the
disposal of its US business.
- Market dislocation: AGA's investments in Indian financial
services contributed half of the unrealised equity losses for the
year. The Non-Bank Financial Companies sector in India was hit
particularly hard due to liquidity issues (see interview with the
Investment Adviser on page 12). AGA's Indian financial positions in
DCB, Repco Home Finance and CanFin Homes however all have strong
underlying fundamental characteristics and we believe that the
market's liquidity tightness will abate over time. The valuation of
Just Group was impacted by the market's concerns regarding
regulatory changes. These concerns began to reduce by year end and
the shares have started to appreciate since.
- Operational underperformance: Operational performance issues
in OVS, an Italian fashion retailer, and VIP.com, a Chinese online
retailer, emerged during 2018. Following a re-diligence of these
investments by the Investment Adviser, we decided to exit both
positions in the fourth quarter of 2018. Strides Pharma Science, an
Indian healthcare business, and Sophos, a UK-listed security
software business, both underperformed market expectations.
Following a management shake-up in Strides its share price started
to recover towards the end of the year.
5. Excluding follow-ons into investments initially made before respective period shown
6. Gross IRR calculated based on the aggregate euro cash flows
of debt investments for period noted, whilst constant currency
Gross IRR calculated based on cash flows converted to euro using FX
rates on the first cashflow date for each respective investment
7. Bloomberg
OPERATIONAL METRICS
Derived Debt
Operational performance in the Derived Debt portfolio, measured
by LTM EBITDA growth(10) , remained solid at 7.9%. The average debt
yield to maturity(10) decreased to 10.8%, mainly due to the
exclusion of FullBeauty as the position has moved into
restructuring, offset by increases in LIBOR during the period. 68%
of Derived Debt value was yielding 10% to maturity(11) or
higher.
Derived Equity
Average LTM earnings growth(12) in the Derived Equity portfolio
increased from 12.0% to 19.2%. The average price-to-earnings
multiple(12) for the Derived Equity portfolio decreased to 18.5x
mainly due to the global equities market correction in the fourth
quarter.
MARKET OUTLOOK
The market correction during 2018 started to generate more
interesting opportunities for Derived Investments, especially in
credit, as conditions became more investor-friendly. US high yield
spreads widened from 363bps to 539bps(11) and we have seen spreads
also widen for junior loans. In Europe, the widening of high yield
spreads has been even more pronounced at 287bps to 507bps(12) . As
a result, 2019 should offer more interesting investment
opportunities in debt than prior years. Market volatility has
increased and is likely to remain high, which should enable AGA to
exploit more dislocations. Similar considerations apply to listed
equities, although the number of political risks (trade wars,
Brexit, China etc.) suggest more caution is required for this asset
class.
Debt year-over-year LTM EBITDA growth(10) :
December 2018: 7.9% vs December 2017: 6.2%
Debt YTM(10) :
December 2018: 10.6% vs December 2017: 11.6%
Additional debt statistics:
Average across the portfolio
Equity year-over-year LTM earnings growth(12) :
December 2018: 19.2% vs December 2017: 12.0%
Equity P/E ratio(12) :
December 2018: 18.5x vs December 2017: 29.0x%
Investment activity:
Investments
December 2018: 21 vs December 2017: 27
Exits
December 2018: 19 vs December 2017: 25
Number of position changes in the last 12 months
8. Twelve equity positions comprise of nine full disposals;
three partial exits (of which one was a stock demerger)
9. Gross IRR and Gross MOIC calculated based on the aggregate
euro cash flows since inception for deals realised during the year
(inclusive of partial exits)
10. Gross Asset Value weighted average of the respective metric
across the Derived Investments Debt portfolio. (FullBeauty was
excluded from 2018 as the position went into restructuring)
11. Gross Asset Value weighted average of the current full year
income (annual coupon/clean price as at the respective date) for
each debt position in the Derived Debt portfolio as at the
respective date
12. Gross Asset Value weighted average of the respective metric
across the Derived Investments Equity portfolio. (Cengage, Answers,
Solara, Mitie and QAD were excluded from both LTM earnings growth
and P/E ratio; additionally Mitie was excluded from LTM earnings
growth. In prior period, Solara was included in Strides Pharma
Science following its demerger in 2Q18
13. MSCI India Small Cap and Europe Retailing Index
14. BAML High Yield USD and EUR indices
15. New closed investments in 2018 - see p.30 for full list of acquisitions
16. Represents full exits only during 2018 - see p.30 and p.31 for list of disposals
ACQUISITIONS(1) COST(2)
---------------------------------------------------------------- --------
CanFin Homes
House financing company (India, Services, listed equity) EUR8.2m
Civitas Solutions
Provider of health and human services to patients with
intellectual disabilities (North America, Healthcare,
listed equity) EUR12.1m
Dignity
UK funeral services provider (UK, Services, listed equity) EUR8.1m
Greencore
International producer of convenience foods (Europe, Consumer,
listed equity) EUR11.4m
Just Group
UK retirement specialist (UK, Services, listed equity) EUR14.1m
Lonza
Pharmaceutical contract development and manufacturing
organization (Europe, Healthcare, listed equity) EUR9.9m
Mitie
Facilities management company (UK, Services, listed equity) EUR10.0m
OVS
Italian family apparel retailer (Europe, Consumer, listed
equity) EUR12.5m
QAD
Provider of ERP software to manufacturing companies (North
America, Tech & Telco, listed equity) EUR7.3m
Repco Home Finance
House financing company (India, Services, listed equity)
(add-on position) EUR7.9m
Alexander Mann
Talent acquisition and management solutions (UK, Services,
first lien) EUR12.4m
---------------------------------------------------------------- --------
Boats Group
Online marketplace and provider of software solutions
for the recreational marine industry (North America, Services,
second lien) EUR6.7m
---------------------------------------------------------------- --------
ERM
Global provider of environmental, health, safety, risk,
social consulting services and sustainability related
services (UK, Services, second lien) EUR1.7m
---------------------------------------------------------------- --------
Genex
Provider of cost containment services to the workers'
compensation, disability and auto industries (North America,
Healthcare, second lien) EUR6.0m
---------------------------------------------------------------- --------
Goodpack
Container leasing and logistics company (North America,
Services, second lien) EUR3.4m
---------------------------------------------------------------- --------
LegalShield
Provider of subscription-based legal insurance plans and
identity theft protection plans to individuals (North
America, Services, second lien) EUR8.0m
---------------------------------------------------------------- --------
Paycor
Provider of SaaS Payroll and Human Capital Management
software to SMEs (North America, Tech & Telco, preferred
shares) EUR21.5m
---------------------------------------------------------------- --------
PowerSchool
Market leader in US K-12 education software (North America,
Tech & Telco, second lien) EUR12.8m
---------------------------------------------------------------- --------
Rocket Software
Software provider for legacy IT infrastructure (North
America, Tech & Telco, second lien) EUR17.4m
---------------------------------------------------------------- --------
Veritext
Provider of deposition and legal litigation support solutions
and services (North America, Services, second lien) EUR4.4m
---------------------------------------------------------------- --------
Vyaire Medical
Global leader in the respiratory diagnostics, ventilation,
and anaesthesia delivery and patient monitoring market
segments (North America, Healthcare, first lien) EUR15.5m
---------------------------------------------------------------- --------
DIVESTMENTS(3)
--------------------------------------------------------------- ----------
Altair Engineering GROSS MOIC
Product design and development, engineering software and 1.9x
cloud computing software company (North America, Tech
& Telco, listed equity) GROSS IRR
1883%
Banca Farmafactoring GROSS MOIC
Italian factoring business (Europe, Services, listed equity) 0.9x
GROSS IRR
(12%)
China Cinda Asset Management GROSS MOIC
Chinese merchant bank and asset management company (China, 0.8x
Services, listed equity)
GROSS IRR
(9)%
--------------------------------------------------------------- ----------
Dignity GROSS MOIC
UK funeral services provider (UK, Services, listed equity) 1.4x
GROSS IRR
522%
--------------------------------------------------------------- ----------
OVS GROSS MOIC
Italian family apparel retailer (Europe, Consumer, listed 0.3x
equity)
GROSS IRR
(89%)
--------------------------------------------------------------- ----------
Rue21 Equity(4) GROSS MOIC
A specialty retailer of value priced apparel for ages 0.4x
ranging from pre-teens to mid-thirties (North America,
Consumer, equity) GROSS IRR
(52%)
--------------------------------------------------------------- ----------
TAKE GROSS MOIC
Technology services provider (India, Tech & Telco, listed 1.1x
equity)
GROSS IRR
4%
--------------------------------------------------------------- ----------
Talend GROSS MOIC
Open source SaaS provider of data management solutions 1.2x
(North America, Tech & Telco, listed equity)
GROSS IRR
36%
--------------------------------------------------------------- ----------
VIP.com GROSS MOIC
Largest independent online discount retailer in China 0.5x
(China, Consumer, listed equity)
GROSS IRR
(42%)
--------------------------------------------------------------- ----------
Advantage Sales & Marketing GROSS MOIC
Provider of outsourced sales and marketing services for 1.3x
the consumer packaged goods industry (North America, Consumer,
second lien) GROSS IRR
9%
--------------------------------------------------------------- ----------
Aptos GROSS MOIC
Provider of technology and professional solutions for 1.1x
retailers (North America, Tech & Telco, first lien)
GROSS IRR
16%
--------------------------------------------------------------- ----------
Genex (2014) GROSS MOIC
Provider of cost containment services to the workers' 1.4x
compensation, disability and auto industries (North America,
Healthcare, second lien) GROSS IRR
13%
--------------------------------------------------------------- ----------
Genex (2018) GROSS MOIC
Provider of cost containment services to the workers' 1.2x
compensation, disability and auto industries (North America,
Healthcare, second lien) GROSS IRR
33%
--------------------------------------------------------------- ----------
LegalZoom GROSS MOIC
Personalised online legal solutions and legal documents 1.2x
for small businesses and families (North America, Services,
second lien) GROSS IRR
18%
--------------------------------------------------------------- ----------
Misys GROSS MOIC
Provider of financial services software (Europe, Tech 1.0x
& Telco, second lien)
GROSS IRR
(6%)
--------------------------------------------------------------- ----------
Rentpath GROSS MOIC
Provider of financial services software (Europe, Tech 1.3x
& Telco, second lien)
GROSS IRR
10%
--------------------------------------------------------------- ----------
Riemser GROSS MOIC
German based speciality pharmaceutical company (Europe, 1.1x
Healthcare, first lien)
GROSS IRR
25%
--------------------------------------------------------------- ----------
Rue21(4) GROSS MOIC
A specialty retailer of value priced apparel for ages 0.8x
ranging from pre-teens to mid-thirties (North America,
Consumer, first lien) GROSS IRR
(73%)
--------------------------------------------------------------- ----------
Vertafore GROSS MOIC
Provider of insurance software solutions (North America, 1.2x
Tech & Telco, second lien)
GROSS IRR
9%
--------------------------------------------------------------- ----------
1. In April 2018, AGA's investment in Strides Pharma Science
(formally Strides Shasun) demerged and the Company received shares
in a new investment Solara that subsequently listed on the National
Stock Exchange of India in June 2018. This resulted in a partial
realisation of Strides Pharma Science and a new investment in
Solara, which has been excluded from the above
2. Represents the cost acquired during 2018
3. Each position's Gross IRR and MOIC calculated based on euro
cashflows since the initial purchase date of the investment
4. Rue21 debt was initially purchased in 2013 with a follow-on
investment in 2015. Subsequently, the initial rue21 first lien debt
restructured in September 2017 and AGA received new debt and
equity. These were sold in December 2018 and the Gross IRR and
Gross MOIC for the restructured assets shown above. On an aggregate
basis, the Gross IRR and MOIC if the asset was treated as a
continuation was -44% and 0.2x respectively
TOP 30 DERIVED INVESTMENTS
VALUATION % OF
INSTRUMENT GEOGRAPHY SECTOR EURM NAV
-------------------------- -------------- --------------- ------------- --------- ----
Syncsort 2L term loan North America Tech & Telco 21.7 2%
-------------------------- -------------- --------------- ------------- --------- ----
Preferred
Paycor* shares North America Services 21.6 2%
-------------------------- -------------- --------------- ------------- --------- ----
KRKA Listed equity Europe Healthcare 20.3 2%
-------------------------- -------------- --------------- ------------- --------- ----
Quality Distribution* 2L term loan North America Services 17.3 2%
-------------------------- -------------- --------------- ------------- --------- ----
Rocket Software 2L term loan North America Tech & Telco 17.1 2%
-------------------------- -------------- --------------- ------------- --------- ----
Vyaire Medical* 1L term loan North America Healthcare 16.5 2%
-------------------------- -------------- --------------- ------------- --------- ----
Civitas Solutions Listed equity North America Healthcare 15.2 2%
-------------------------- -------------- --------------- ------------- --------- ----
Sinopharm Listed equity China Healthcare 13.0 1%
-------------------------- -------------- --------------- ------------- --------- ----
ECi Software Solutions* 2L term loan North America Tech & Telco 13.0 1%
-------------------------- -------------- --------------- ------------- --------- ----
PowerSchool 2L term loan North America Tech & Telco 13.0 1%
-------------------------- -------------- --------------- ------------- --------- ----
Alexander Mann 1L term loan United Kingdom Services 12.4 1%
-------------------------- -------------- --------------- ------------- --------- ----
Greencore Listed equity Europe Consumer 10.7 1%
-------------------------- -------------- --------------- ------------- --------- ----
Just Group Listed equity United Kingdom Services 10.6 1%
-------------------------- -------------- --------------- ------------- --------- ----
Sophos* Listed equity United Kingdom Tech & Telco 10.0 1%
-------------------------- -------------- --------------- ------------- --------- ----
Development Credit Bank Listed equity India Services 9.9 1%
-------------------------- -------------- --------------- ------------- --------- ----
Safetykleen* 2L term loan United Kingdom Services 9.5 1%
-------------------------- -------------- --------------- ------------- --------- ----
PDC Brands 2L term loan North America Consumer 8.7 1%
-------------------------- -------------- --------------- ------------- --------- ----
LegalShield 2L term loan North America Services 8.6 1%
-------------------------- -------------- --------------- ------------- --------- ----
Answers Equity North America Services 7.7 1%
-------------------------- -------------- --------------- ------------- --------- ----
Lonza Listed equity Europe Healthcare 7.6 1%
-------------------------- -------------- --------------- ------------- --------- ----
Strides Pharma Science Listed equity India Healthcare 7.6 1%
-------------------------- -------------- --------------- ------------- --------- ----
QAD Listed equity North America Tech & Telco 7.1 1%
-------------------------- -------------- --------------- ------------- --------- ----
Boats Group* 2L term loan North America Services 6.9 1%
-------------------------- -------------- --------------- ------------- --------- ----
Repco Home Finance Listed equity India Services 6.6 1%
-------------------------- -------------- --------------- ------------- --------- ----
CanFin Homes Listed equity India Services 5.5 1%
-------------------------- -------------- --------------- ------------- --------- ----
Veritext 2L term loan North America Services 4.3 1%
-------------------------- -------------- --------------- ------------- --------- ----
Mitie Listed equity United Kingdom Services 4.2 1%
-------------------------- -------------- --------------- ------------- --------- ----
EVRY* Listed equity Europe Tech & Telco 3.9 0%
-------------------------- -------------- --------------- ------------- --------- ----
Goodpack 2L term loan North America Services 3.4 0%
-------------------------- -------------- --------------- ------------- --------- ----
FullBeauty* 2L term loan North America Consumer 2.5 0%
-------------------------- -------------- --------------- ------------- --------- ----
Other investments 4.2 0%
-------------------------------------------------------------------------- --------- ----
Total Derived Investments 320.6 34%
-------------------------------------------------------------------------- --------- ----
* Investments also held by Apax Funds
1L - first lien
2L - second lien
CASE STUDY: Legalzoom
Realising opportunities
INVESTMENT DETAILS
Date of investment
November 2017
Instrument
Debt, second lien loan
Sector
Services
Region
North America
Status
Realised
GROSS MOIC/IRR
1.2x/18%
A leading provider of online legal products and services in the
US, LegalZoom caters mainly to SMEs. Its core products include
compliance services and attorney advice, intellectual property
registration, family estate planning as well as transaction related
products related to new entity formation.
The Apax Services team continuously seek out opportunities in
sub-sectors such as the digital arena for the Apax Funds to invest
in. As part of these activities, they learned of LegalZoom's
refinancing plans to fund a dividend to its shareholders through
the issuance of a second lien loan.
The Apax Funds had not previously considered the company as a
private equity investment but the derived insight came from the
Apax Partners' considerable experience investing in digital and
online business models, notably, AutoTrader, Bankrate, SouFun,
Dealer.com, Trader Corporation and more recently Idealista. Apax's
proven expertise in digital business models includes over EUR2bn of
equity invested in digital marketplace businesses by the Apax
Funds.
"The Investment Committee put forward the recommendation to AGA
to invest in the second lien note as LegalZoom has a strong product
which is vital to SMEs, the platform is easy to use and is
competitively priced. LegalZoom is a trusted brand and all these
elements have created high barriers to entry for newcomers. Coupled
with stable revenues, the team was confident of the risk/return
profile.
Roy Mackenzie
Apax Partners
CASE STUDY: PowerSchool
The value of software
INVESTMENT DETAILS
Date of investment
June 2018
Instrument
Debt, second lien loan
Sector
Tech & Telco
Region
North America
Status
Unrealised
CONTRIBUTION TO AGA NAV
EUR13m
PowerSchool is a market-leading technology platform provider of
education software ranging from pre-school to high school. Its
products include Student Information Systems, Enterprise Resource
Planning for administrative functions, Learning Management Systems
and Human Capital Management software.
The Apax Funds had considered PowerSchool as a potential Private
Equity Investment. The deal team continued to monitor the company,
with AGA ultimately investing in the second lien note which was
issued to help finance Onex and Vista's combination of PowerSchool
and PeopleAdmin.
The Apax Partners' derived insight was gained from the private
equity due diligence. Apax has a deep understanding of the market
in which the company operates. AGA had also invested in this space
before; for example, Ellucian, a higher education software
provider, which was a very successful realisation for the Derived
Investments portfolio.
Software is a key sub -sector for Apax and one where it has
significant experience. The Apax Funds invested over EUR3bn of
equity in the sub-sector to date. This includes in companies in the
Enterprise Resource Planning ("ERP") space (ECi Software Services,
Exact Software), a leading provider of security software solutions
(Sophos), a large US player in payroll and HR-related software
(Paycor), and software solutions for retailers (Aptos, Epicor) and
insurance carriers (Duck Creek Technologies).
"The opportunity was recommended to AGA as PowerSchool
represents a high quality, defensible business, with a stable
revenue and customer base, given the mission critical functionality
and high barriers to entry. It is also a clear leader in a
non-cyclical end-market. All of these factors make it an attractive
risk/return profile for a second lien."
Jason Wright
Apax Partners
RESPONSIBLE INVESTING
RESPONSIBLE INVESTING
Delivering sustainable returns
Apax is committed to delivering returns ethically and
responsibly. In this section, Apax summarises its approach to
advising on responsible investing.
A CLEAR COMMITMENT
Apax recognised the value a responsible investment strategy
could bring not only in maximising economic returns for investors,
but also in delivering a net benefit to society and the
environment. Apax Partners has been a signatory to the Principles
for Responsible Investing (UNPRI) since 2011. Together with the
management teams in the Apax Funds portfolio companies, Apax has
over the years identified and capitalised on a wide range of ESG
initiatives designed to create stronger, more robust businesses by
mitigating risks, enhancing value and improving sustainability.
Its comprehensive sustainability programme is fully embedded in
the investment process - from identifying ESG risks
pre-acquisition, through to working with portfolio companies
post-acquisition, and to monitoring their ESG indicators. The goal
throughout is to achieve a better understanding of the operations
of each portfolio company, to assess their ability to manage ESG
considerations, and to put in place appropriate risk mitigation and
value creation initiatives.
Our approach is to continually assess the possible impact of CSR
issues, in order to help release the full potential of investments,
while providing a net benefit to society.
From a practical perspective, our ability to assess and
influence CSR matters in portfolio investments differs between
Private Equity Investments and Derived Investments. This is because
Private Equity Investments are characterised by longer hold periods
and, often, controlling stakes, whereas Derived Investments tend to
have shorter hold periods and usually involve non-control
positions.
Whilst this can limit our ability to influence CSR initiatives
within the Derived Investments, we remain focused on CSR issues and
consider these as part of the overall investment thesis.
DEDICATED OPERATIONAL VALUE ADD
Apax's Operational Excellence Practice (OEP) is a team of
operational and functional experts who work on specific areas
within the Funds' portfolio to target step -change results. The OEP
helps the Funds identify value creation opportunities during due
diligence and generate operational impact during ownership by the
Funds.
The involvement of Apax's OEP, whether it is through due
diligence, procurement efficiencies or optimising processes, plays
an integral role in the success of the Firm's responsible
investment programme.
SUPPORTING ESG STEWARDSHIP INITIATIVES
This past year there were again many examples of ESG efforts
coming to fruition across the Apax Funds portfolio: from the
impressive reductions in electricity consumption at data centres,
the noteworthy savings in paper usage achieved through reuse
programmes by retail companies, to the important work being done
around strengthening human capital and talent. The goal of Apax's
ESG stewardship initiatives for the Fund portfolio companies is to
help protect the planet while improving efficiency, reducing costs,
increasing workforce stability, and preserving the companies'
ability to do business in the future.
MODERN SLAVERY(1)
Given the nature of our advisory business, we believe there is a
very low risk of slavery or human trafficking in connection with
our activities. Our key suppliers are professional services firms
who provide operational, commercial and financial advice for the
review of investments made by the Funds. We expect all those in our
supply chain and our contractors to comply with our values and we
are progressing and revising our contracting processes to reflect
this expectation. We are committed to implementing and enforcing
effective systems and controls to safeguard against slavery and
human trafficking taking place in our business or supply chains.
Specifically, we look to ensure that our global team receives
training to understand the risks of modern slavery and we intend to
include anti-slavery and human trafficking measures in our Global
Business Standards.
APAX'S CULTURE EMPHASISES ETHICAL RESPONSIBILITY
Apax has a distinct culture with four values that guide
decision-making and support its goal of delivering strong returns
to investors. One of the values, "We choose right over easy",
recognises the Firm's actions and recommendations have the
potential to affect many stakeholders. This value therefore
highlights Apax's duty to treat its stakeholders with respect and
to "do the right thing". The Firm aims to act without compromising
on principles, recognising that enduring relationships are based on
trust, honesty and transparency. This approach underpins Apax's
responsible investment programme.
1. www.apax.com/media/620781/ UK-Modern-Slavery-and-HumanTrafficking-Statement-approved-.pdf
A distinctive feature of our sustainability programme is the
annual collection of around 100 ESG related KPIs from the Apax
Funds' underlying portfolio companies.
INTEGRATION OF THE SUSTAINABILITY FRAMEWORK INTO THE INVESTMENT
PROCESS
ACTIVE OWNERSHIP
- Apax has a well-defined responsible investment policy
- Apax coordinates its sustainability efforts through a
Sustainability Committee which meets on a monthly basis
- Apax focuses on being active owners and incorporating ESG
issues into its ownership policies and practices relating to the
Apax Funds portfolio companies
PRE-INVESTMENT
- Apax's teams undertake standard ESG due diligence for each new
investment made by the Apax Funds
- Apax's Sustainability Committee reviews the findings of the
ESG due diligence process and incorporates these into the final
Investment Committee documentation prior to each new commitment
- The objective is to create a high degree of awareness upfront
with regard to potential ESG issues which can contribute to value
creation at a very early stage
POST-INVESTMENT
- Pre-investment due diligence is backed up post-investment by
an annual ESG KPI collection cycle
- Apax is able to capture the ESG footprint of the Apax Funds
portfolio companies and establish possible areas of materiality
where Apax's teams together with the OEP can create value
- The key goal for Apax Partners is to get a better
understanding of the materiality of certain ESG KPIs to the overall
operations of a portfolio company
For further details and the latest Sustainability report, please
refer to:
www.apax.com/media/630557/apax-partnerssustainability-report-5th-edition-final.pdf
RISK MANAGEMENT FRAMEWORK
Identify, evaluate and mitigate
"The Board and Audit Committee monitor the Company's principal
risks on a quarterly basis and a detailed review is undertaken at
least annually."
The Board has established a set of risk management policies,
procedures and controls, and maintains oversight through regular
reviews by the Board and the Audit Committee.
The risk governance framework is designed to identify, evaluate
and mitigate the risks identified by the Board as being of
significant relevance to the Company's business model and to
reflect its risk profile and risk appetite. The underlying process
aims to assist the Board to understand and where possible mitigate,
rather than to eliminate, these risks to the Company and,
therefore, can only provide reasonable and not absolute assurance
against loss.
The Board regularly reviews a register of principal risks and
uncertainties (the "Risk Register") maintained on behalf of the
Board by the Company Secretary. The Risk Register serves as a
detailed assessment undertaken by the Board of the Company's
exposure to risks in three core categories: financial risks,
strategic and business risks, and operating risks.
OWNERSHIP AND GOVERNANCE
While the Board remains ultimately responsible for the
identification and assessment of risk, as well as implementing and
monitoring procedures to control such risks, and for reviewing
these on a regular basis, the Board naturally places reliance on
its key service providers, to whom it has delegated aspects of the
day-to-day management of the Company. This includes the design and
implementation of controls over specific risks.
The Board undertakes an annual review of its risk appetite,
considering recommendations from the Audit Committee and key
service providers responsible for implementing the controls related
to risks identified by the Board, as noted above. The Board
considers strategic and business risk at each quarterly Board
meeting and more frequently if necessary.
INVESTMENT PERFORMANCE
In accordance with the Investment Management Agreement between
the Company and the Investment Manager, responsibility for
delivering investment performance in line with the Company's
strategic and business objectives, as well as remaining within the
parameters of its investment risk appetite, is delegated to the
Investment Manager.
Specific investment decisions are taken by the Investment
Manager within parameters of authority approved by the Board, while
separate risk functions within the Investment Manager support and
review decision-making.
RISK ASSESSMENT
In assessing each category of risk, the Board considers systemic
and non-systemic risks as well as the control framework established
to reduce the likelihood and impact (the "residual risk rating") of
individual inherent risks. The Board does not consider political
risk in isolation, but incorporates it within its consideration of
other principal risks. The Board is not, practically, in a position
to consider every risk. However, where possible, it does seek to
identify and assess remote and emerging risks which might have a
significant consequence and/or likelihood or might not be
manageable within the current control environment.
In considering the framework around the policies and procedures
adopted to reduce the potential impact of individual risks, the
Board takes account of the nature, scale and complexity of the
Company, its investment objectives and strategy, and the role of
the key service providers.
The wider control environment of the Company includes the
policies and procedures adopted by the key service providers. The
Board considers these policies and procedures in its assessment of
individual risks and emerging risks. The Board seeks periodic
assurance from its main service providers on the robustness of
their control environments and, based on such assurances, will
assess the suitability, adequacy and relevance of those policies
and procedures.
Individual risks are assessed based on the likelihood of
occurrence and consequential impact. For the avoidance of doubt,
likelihood and consequence are assessed after taking into account
the mitigating effect of the control framework. Risks are then
ranked in order of residual risk rating likelihood and then
consequence. Judgement is applied in determining which risks rank
above the others where such risks have the same residual risk
rating, likelihood and consequence.
Emerging risks are identified and assessed as part of the
quarterly review undertaken by the Board and Audit Committee. These
are risks that may have a material effect on the Company if they
occur. Where possible, mitigating measures are considered by the
Board but due to the unknown nature of future events the impact of
these risks may not materialise.
The Board recognises that it has limited control over many of
the risks it faces, such as macro -economic events and changes in
the regulatory environment, and it periodically reviews the
potential impact of such ongoing risks on the business and actively
considers them in its decision-making.
Principal risks
The Board is ultimately accountable for effective risk
management within the Company.
The Audit Committee has undertaken an exercise to identify,
assess and manage the risk within the Company. The principal risks
identified have been assessed based on residual likelihood and
consequence and are summarised on the heat map in the Annual Report
on page 39.
Assessment of the main principal risks has been summarised in
the adjacent table.
Increase No change Decrease
ITEM RISK CURRENT YEAR MITIGATING MEASURES RISK
ASSESSMENT STATUS
---- ---------------- ------- -------------- ------------------------------------------------------------ -------
FR1 LIQUIDITY RISK à The Board has n
Decreases in assessed * Diversification of the investment portfolio provides
the liquidity multiple avenues for liquidity
value of in stressed
investments conditions
due to market as part of * Cash flow modelling is prepared and tested under
weakness its various stress test scenarios
may affect the assessment to
pace and value continue as a
of going * Revolving credit facility renewed for a further three
realisations, concern. years and is available in the event of substantial
leading to The viability liquidity issues
reduced statement on
liquidity page
and/or 58 contains
ability to further
maintain details. In
credit addition,
facilities please refer
and meet to
covenant note 13 on
requirements. liquidity
risk in the
financial
statements.
---- ---------------- ------- -------------- ------------------------------------------------------------ -------
FR2 CURRENCY RISK à Foreign n
The Company has exchange * The Investment Manager has implemented an investment
established a markets framework to manage and monitor the investment
global remained portfolio of the Company
investment volatile in
mandate 2018
and has resulting in * Currency exposure analysis and monitoring forms part
appointed large of the investment framework
an Investment exchange rate
Manager movements,
whose policy it particularly * The Investment Manager maintains a monitoring tool
is not to hedge the US dollar that constantly tracks portfolio exposures
currency against the
exposures. euro.
Movements in Please refer
exchange to
rates create note 13 on
NAV currency
volatility when risk in the
the value of financial
investments statements
is translated where
into the Company's
the Company's sensitivity
reporting to
currency (the movements in
euro). exchange
rates has
been
assessed.
---- ---------------- ------- -------------- ------------------------------------------------------------ -------
FR3 PORTFOLIO RISK à The current n
Composition of portfolio * Regular detailed reporting from the Investment
the investment remains well Manager, including at quarterly Board meetings, keeps
portfolio may diversified the Board appraised of the composition of the
fall between investment portfolio
outside of the Private
investment Equity and
policy, Derived
strategy and Investments,
objectives, in
without the line with the
prior investment
knowledge, strategy.
consent A summary of
or awareness of the
the Board or top 30 assets
shareholders. for the
Private
Equity
portfolio
and Derived
Investments
portfolio is
given
on pages 21
and
31
respectively.
---- ---------------- ------- -------------- ------------------------------------------------------------ -------
SB1 COMPANY à The Company n
PERFORMANCE paid * Investment performance is monitored by the Board
The target an interim
return dividend
and target in September * Performance, positioning and investment restrictions
dividend 2018 are monitored constantly by the Investment Manager
yield are based of 2.5% of 30
on estimates June 2018 NAV
and and the Board
assumptions. has approved
The a
actual rate of further final
return may be dividend of
lower 2.5%
than targets. of 31
December
2018 NAV in
line
with its
stated
dividend
policy.
Total NAV
Return
for 2018 was
7.1%
- please
refer
to the
portfolio
review
section
from page 14
for
further
details.
---- ---------------- ------- -------------- ------------------------------------------------------------ -------
SB2 REGULATORY, TAX à General Data n
AND LEGISLATIVE Protection * Service providers have controls in place to monitor
RISK Regulation and review changes that may impact the Company
Regulatory, tax ("GDPR")
or legislative was
changes may implemented * Professional advisers are engaged through primary
impact by the EU service providers, if required
the Company. during
the year.
Advice
was sought by
the Board
from
legal counsel
and all
necessary
changes were
implemented
by the
Company's
service
providers
to ensure
compliance
with the
regulation.
---- ---------------- ------- -------------- ------------------------------------------------------------ -------
SB3 DISCOUNT TO NAV à The Company's h
Persistent high shares traded * The Board receives regular reports from its corporate
discount to NAV at an average broker and the Investment Adviser's investor
may create discount of relations team on a quarterly basis
dissatisfaction 16.9%
amongst during the
shareholders. year. * These reports provide insight into shareholder
In line with sentiment, movements in the NAV/share price discount
the and an assessment of discount management strategies
prospectus, if required
this
was closely
monitored
by the Board
and
it was deemed
that a share
repurchase
scheme was
not
required in
the
current year.
The Board
will
continue to
actively
monitor the
discount
in future
periods.
---- ---------------- ------- -------------- ------------------------------------------------------------ -------
OP1 CONTINUITY RISK à There were no n
Business threats to * All key service providers have in place adequate
continuity, business business continuity procedures which are tested on a
including continuity regular basis and subject to minimum regulatory
service registered standards in their jurisdictions
providers, may by any of the
be impacted by service
natural providers.
disaster,
cyber-attack,
infrastructure
damage or other
"outside"
factors.
---- ---------------- ------- -------------- ------------------------------------------------------------ -------
OP2 SERVICE à Control n
PROVIDER failures * The Board conducts a formal review of all key service
RISK at key providers on an annual basis
Control services
failures are reported
at key service and * All key service providers have controls and
providers may reviewed. procedures in place to mitigate risks related to the
result There loss of information, security breaches, theft and
in decreased were no fraud
service material
quality, loss issues
of identified
information, as part of
information the
security formal review
breach, conducted by
theft or fraud. the
Board.
---- ---------------- ------- -------------- ------------------------------------------------------------ -------
GOVERNANCE REPORT
AGA BOARD OF DIRECTORS
TIM BREEDON CBE
Chairman
Tenure
3 years, 8 months
Skills and experience
Tim Breedon joined the AGA Board on 28 April 2015. He worked for
the Legal & General Group plc for 25 years, most recently as
Group Chief Executive between 2006 and 2012. He was a Director of
the Association of British Insurers ("ABI"), and also served as its
Chairman between 2010 and 2012. He served as Chairman of the UK
government's non-bank lending task force, an industry-led task
force that looked at the structural and behavioural barriers to the
development of alternative debt markets in the UK. He was
previously lead Non-Executive Director of the Ministry of Justice
between 2012 and 2015. Tim was formerly a Director of the Financial
Reporting Council and was on the Board of the Investment Management
Association. He has over 25 years of experience in financial
services and has extensive knowledge and experience of regulatory
and government relationships. He brings to the Board experience in
asset management and knowledge of leading a major financial
services company.
Current appointments
Non-Executive Director of Barclays plc, Chairman of Northview
Group.
Qualifications
A graduate of Oxford University and an MSc in Business
Administration from the London Business School.
SUSIE FARNON
Non-Executive Director
Tenure
3 years, 5 months
Skills and experience
Susie Farnon joined the AGA Board on 22 July 2015 and was
appointed as Chairman of its Audit Committee on 1 July 2016 and
elected as Senior Independent Director on 18 November 2016. She
served as President of the Guernsey Society of Chartered and
Certified Accountants, as a member of The States of Guernsey Audit
Commission and as a Commissioner of the Guernsey Financial Services
Commission. Susie was a Banking and Finance Partner with KPMG
Channel Islands from 1990 until 2001 and was Head of Audit at KPMG
in the Channel Islands from 1999 until 2001.
Current appointments
Non-Executive Director of HICL Infrastructure Fund Limited,
Standard Life Investments Property & Income Trust Limited,
Breedon Group plc, Real Estate Credit Investments Ltd, BH Global
Limited and Bailiwick Investments Limited. Board member of The
Association of Investment Companies.
Qualifications
Fellow of the Institute of Chartered Accountants of England and
Wales.
CHRIS AMBLER
Non-Executive Director
Tenure
3 years, 8 months
Skills and experience
Chris Ambler joined the AGA Board on 28 April 2015. He has
experience in a number of senior positions in the global
industrial, energy and materials sectors working for major
corporations including ICI/Zeneca, The BOC Group and Centrica/
British Gas, as well as in strategic consulting roles.
Current appointments
Chief Executive of Jersey Electricity Plc, Non-Executive
Director of Foresight Solar Fund Limited.
Qualifications
First class honours degree from Queens' College, Cambridge and
an MBA from INSEAD. Chartered Director, Chartered Engineer and a
Member of the Institution of Mechanical Engineers.
MIKE BANE
Non-Executive Director
Tenure
5 months
Skills and experience
Mike Bane joined the AGA Board on 3 July 2018. Mike has more
than 35 years of audit and advisory experience in the asset
management industry. He has been resident in Guernsey for over 20
years and, before retiring from the partnership in June 2018, was a
member of Ernst & Young's EMEIA Wealth and Asset Management
Board. Prior to Ernst & Young, Mike worked for PwC, in London
and Guernsey.
Current appointments
Non-Executive Director of HICL Infrastructure Group Limited.
Qualifications
A graduate of Oxford University and a Chartered Accountant.
AGA INVESTMENT COMMITTEE
ANDREW SILLITOE
Co-CEOApax Partners
Chairman of the AGA
Investment Committee
Tenure
3 years, 8 months
Skills and experience
Andrew Sillitoe joined Apax Partners in 1998 and has focused on
the Tech & Telco sector in that time. Andrew has been involved
in a number of deals, including Orange, TIVIT, TDC, Intelsat,
Inmarsat and King Digital Entertainment PLC.
Prior to joining Apax Partners, Andrew was a consultant at LEK
where he advised clients on acquisitions in a number of
sectors.
Current appointments
Co-CEO of Apax Partners and a partner in its Tech & Telco
team. Member of the Apax Partners' Executive, Investment and
Approval Committees.
Qualifications
MA in Politics, Philosophy and Economics from Oxford University
and an MBA from INSEAD.
MITCH TRUWIT
Co-CEOApax Partners
Tenure
3 years, 8 months
Skills and experience
Mitch Truwit joined Apax Partners in 2006 and has been involved
in a number of transactions including HUB International, Advantage
Sales and Marketing, Bankrate, Dealer.com, Trader Canada, Garda and
Answers.
Prior to joining Apax Partners, Mitch was the President and CEO
of Orbitz Worldwide, a subsidiary of Travelport, between 2005 and
2006, and was the Executive Vice President and Chief Operating
Officer of priceline.com between 2001 and 2005.
Current appointments
Co-CEO of Apax Partners and a partner in its Services team.
Member of the Apax Partners Executive and Investment Committees and
a Trustee of the Apax Foundation.
Qualifications
BA in Political Science from Vassar College and an MBA from
Harvard Business School.
NICO HANSEN
PartnerApax Partners
Tenure
3 years, 8 months
Skills and experience
Nico Hansen joined Apax Partners in 2000, specialising in the
Tech & Telco sector. He has both led and participated in a
number of key deals, including Kabel Deutschland, Sulo, Versatel,
Bezeq, Capio, Tnuva, HUB International and Trizetto.
Prior to joining Apax Partners, Nico was a consultant with
McKinsey & Company where he specialised in advising clients in
the telecoms sector.
Current appointments
Partner at Apax Partners, a member of its Investment Committee
and chairs its Approval Committee.
Qualifications
MA in Economics from the University of Göttingen and a PhD in
Economics from the University of Bonn.
RALF GRUSS
COOApax Partners
Tenure
3 years, 8 months
Skills and experience
Ralf Gruss joined Apax Partners in 2000 and is a former member
of the Apax Partners Services team. Ralf has been involved in a
number of deals, including Kabel Deutschland, LR Health and Beauty
Systems and IFCO Systems.
Prior to joining Apax Partners, Ralf was a consultant with
Arthur D. Little International Inc., where he specialized in
advising clients in the financial services sector.
Current appointments
Chief Operating Officer of Apax Partners and a partner at
Apax.
Qualifications
Diploma in Industrial Engineering and Business Administration
from the Technical University in Karlsruhe. He also studied at the
University of Massachusetts and the London School of Economics.
ROY MACKENZIE
PartnerApax Partners
Tenure
7 months
Skills and experience
Roy Mackenzie joined Apax Partners in 2003. He led the
investments in Sophos and Exact and was responsible for Apax's
investment in King Digital Entertainment. In addition, Roy worked
on the investments in Epicor, NXP and Duck Creek.
Prior to joining Apax Partners, Roy spent most of his career at
McKinsey & Co., where he specialised in the technology sector.
He has also held operating roles at Psion Plc. and nSine Technology
Inc.
Current appointments
Partner at Apax Partners and a partner in its Tech & Telco
team.
Qualifications
M.Eng in Electrical Engineering from Imperial College, London
and an MBA from Stanford Graduate School of Business.
INVESTMENT MANAGER BOARD
PAUL MEADER
Director
Tenure
3 years, 8 months
Skills and experience
Paul Meader has acted as Non-Executive Director of several
insurers, London and Euronext listed investment companies, funds
and fund managers in real estate, private equity, hedge funds,
debt, structured product and multi-asset funds. He is a senior
investment professional with over 30 years of multi-jurisdictional
experience, 14 years of which were at chief executive level.
Paul was Head of Portfolio Management at Collins Stewart (now
Canaccord Genuity) between 2010 and 2013 and was the Chief
Executive of Corazon Capital Group from 2002 to 2010. Paul was
Managing Director at Rothschild Bank Switzerland C.I. Limited from
1996 to 2002 and previously worked for Matheson Investment
Management, Ulster Bank, Aetna Investment Management and Midland
Montagu (now HSBC).
Current appointments
Paul Meader is also a non-executive director of a number of
other companies in fund management and insurance.
Qualifications
MA (Hons) in Geography from Oxford University and a Chartered
Fellow of the Chartered Institute of Securities and Investment.
MARTIN HALUSA
Director
Tenure
3 years, 8 months
Skills and experience
Martin Halusa was Chairman of Apax Partners from January 2014 to
March 2016, after ten years as Chief Executive Officer of the firm
(2003-2013).
In 1990, he co-founded Apax Partners in Germany as Managing
Director. His investment experience has been primarily in the
telecommunications and service industries.
Martin began his career at The Boston Consulting Group ("BCG")
in Germany, and left as a Partner and Vice President of BCG
Worldwide in 1986. He joined Daniel Swarovski Corporation,
Austria's largest private industrial company, first as President
Swarovski Inc (US) and later as Director of the International
Holding in Zurich.
Current appointments
No other appointments.
Qualifications
A graduate of Georgetown University, an MBA from the Harvard
Business School and a PhD in Economics from the Leopold-Franzens
University in Innsbruck.
ANDREW GUILLE
Director
Tenure
3 years, 8 months
Skills and experience
Andrew Guille has held directorships regulated financial
services businesses since 1989 and has worked for more than 13
years in the private equity industry. Andrew has been employed in
the finance industry for over 30 years, with his early career spent
in retail and institutional funds, trust and company
administration, treasury and securities processing.
Current appointments
Director of Apax Partners Guernsey Limited.
Qualifications
Institute of Directors' Diploma in Company Direction, a
Chartered Fellow of the Chartered Institute for Securities and
Investment and a qualified banker (ACIB).
MARK DESPRES
Director
Tenure
2 years, 9 months
Skills and experience
Mark has been employed in the wealth management industry in both
Guernsey and London for over 16 years, principally as an investment
manager to a number of listed funds (both open and closed-ended),
institutional and private client portfolios.
Current appointments
No other appointments.
Qualifications
First class honours degree in Mathematics from Royal Holloway
University of London and a Member of the Chartered Institute for
Securities and Investment.
CHAIRMAN'S INTRODUCTION
Long-term success
The Board aims to promote the Company's long-term success and
accountability to shareholders through the highest standards of
corporate governance.
TIM BREEDON CBE
Chairman
4 March 2019
The Directors recognise the importance of sound corporate
governance and have adopted the Association of Investment Companies
("AIC") Code of Corporate Governance (the "AIC Code"). The AIC
represents closed- ended investment companies whose shares are
traded on public markets. The purpose of the AIC Code is to provide
a framework of best practice in respect of the governance of
investment companies.
A copy of the AIC Code is available on the AIC website at
www.theaic.co.uk.
CORPORATE GOVERNANCE STATEMENT
Compliance with the AIC Code and UK Code
Following recent changes to the UK Corporate Governance Code,
the Board noted that a revision to the AIC Code was published in
the first quarter of 2019. In common with the latest UK Corporate
Governance Code, changes to the AIC Code will be effective for
accounting periods commencing on or after 1 January 2019. The Board
has undertaken a review of the applicability of these changes to
the Company and will update its governance framework
accordingly.
The Board considers that by reporting under the principles and
recommendations of the AIC Code, and by reference to the AIC Guide,
it provides better and more relevant information to its
shareholders. Compliance with the principles and recommendations of
the AIC Code enables the Directors to satisfy in full the
requirement to comply with the UK Corporate Governance Code ("UK
Code").
COMPLIANCE WITH THE GUERNSEY FINANCIAL SERVICES COMMISSION
("GFSC") FINANCE SECTOR CODE OF CORPORATE GOVERNANCE ("GFSC
CODE")
The Company is subject to, and complies with, the GFSC Code,
which applies to all companies that hold a licence from the GFSC
under the regulatory laws or which are registered or authorised as
collective investment schemes in Guernsey. As the Company reports
against the AIC Code, it is deemed to meet the requirements of the
GFSC Code.
MODERN SLAVERY ACT STATEMENT
As an externally managed investment company, the Company relies
on the adequacy of controls and tolerances of the Investment
Manager (and, in turn, the Investment Adviser) with regard to the
prevention of slavery and human trafficking, in accordance with the
UK Modern Slavery Act 2015.
More information is available in the report of the Investment
Adviser on page 37.
EU Alternative Investment Fund Managers Directive ("AIFMD")
Please refer to page 88 for further information in respect of
the AIFMD.
THE UNREGULATED COLLECTIVE INVESTMENT SCHEMES AND CLOSE
SUBSTITUTES INSTRUMENT 2013 (NMPI RULES)
Information regarding the Company's status under the NMPI Rules
is available on its website at: www.apaxglobalalpha.com/governance/
documents-administration
DISCLOSURE OF DIVID INFORMATION
The Company targets the payment of a dividend equal to 5% of the
NAV per annum. This dividend policy should not be taken as an
indication of the Company's expected future performance or results
over any period and does not constitute a profit forecast. It is
intended to be a target only and there is no guarantee that it can
or will be achieved. Accordingly, prospective or current investors
should not place any reliance on the target dividend payment stated
above in making an investment decision in relation to the
Company.
As a non-UK issuer, the Company does not require approval from
shareholders for the payment of dividends in accordance with The
Companies (Guernsey) Law, 2008 and the Articles of Incorporation of
the Company.
In response to feedback from shareholders, an ordinary
resolution is proposed at each AGM concerning approval of the
dividend policy of the Company.
STATEMENT OF INDEPENCE
The AIC Code recommends that at least half the Board of
Directors of a UK- listed company, excluding the Chairman, should
comprise Non- Executive Directors determined by the Board to be
independent in character and judgement and free from relationships
or circumstances that may affect, or could appear to affect, the
Directors' judgement.
In addition to this provision, a majority of the Board of
Directors should be independent of the Investment Manager.
Independence is determined by ensuring that, apart from
receiving their fees for acting as Directors or owning shares,
Non-Executive Directors do not have any other material
relationships with, nor derive additional remuneration from, or as
a result of transactions with, the Company, its promoters, its
management or its partners, which in the opinion of the Board may
affect, or could appear to affect, the independence of their
judgement.
The Company complies with the recommendations regarding Board
composition, as the Board of Directors is comprised entirely of
independent Non-Executive Directors.
The AIC Code also recommends that the Chairman should meet
certain independence criteria as set out in the AIC Code on
appointment.
I am pleased to confirm that I was independent on appointment,
and remain so to date and this was confirmed by the external
evaluation of the Board and its committees conducted in 2018.
EXPLANATION AS TO EXCEPTIONS
In the context of the nature, scale and complexity of the
Company, certain recommendations of the AIC Code have not been
deemed appropriate to the governance framework of the Company, an
explanation of which is set out as follows:
- Provisions relating to the role of the Chief Executive,
Executive Directors' remuneration, and the need for an internal
audit function are not relevant to the position of AGA, 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 control functions. The Company has therefore not
reported further in respect of these provisions. This position is
reassessed on an annual basis.
- The Company has not established a separate Remuneration
Committee as it has no executive officers and the Board is
satisfied that any relevant issues that arise can be properly
considered by the Board or by the shareholders at AGMs. The Board
as a whole considers matters relating to the Directors'
remuneration. An external assessment of Directors' remuneration has
not been undertaken. The Company's policy is that the fees payable
to the Directors should reflect the time spent by the Directors on
the Company's affairs and the responsibilities borne by the
Directors and be sufficient to attract, retain and motivate
Directors of a quality required to run the Company successfully. An
external evaluation of the Board has been undertaken during the
year; the results highlighted that the Board displayed a strong
corporate governance culture and demonstrated a high degree of
Board effectiveness.
- The Board also fulfils the functions of a Management
Engagement Committee, regularly reviewing the performance of the
Investment Manager and relevant fee arrangements.
- The Board has not established a separate Nomination Committee
as it considers this to be unnecessarily burdensome given the scale
and nature of the Company's activities, as well as the current
composition of the Board.
- The Board has not adopted a formal policy on diversity, as set
out in DTR 7.2.8A. The Board has implemented a Board management
policy (referred to throughout this section) which includes
consideration of relevant issues relating to diversity. As a
result, and in view of the nature, scale and complexity of the
Company, the Board does not consider a specific policy with respect
to diversity to be necessary at this time. Diversity of the Board
is further considered on at least an annual basis through the Board
evaluation process.
OUR BOARD OF DIRECTORS
The Company has a strong, independent Board of experienced
Non-Executive Directors. The Directors, all of whom are
non-executive and considered to be independent for the purposes of
Chapter 15 of the Listing Rules, are responsible for the
determination of the investment policy of the Company and have
overall responsibility for overseeing the Company's activities. On
3 January 2018, Sarah Evans decided, for health reasons, to step
down as a Non-Executive Director. The Board was saddened to hear of
Sarah's death in November and wishes to pass on its deepest
condolences to her family. Mr Bane joined the Board on 3 July 2018
and brings with him a wealth of experience relevant to the business
of the Company. Biographies of the Board of Directors, including
details of their relevant experience, are available on page 42 and
the Company's website at:
www.apaxglobalalpha.com/who-we-are/leadership-team/board-of-directors
The Board has not established a formal policy on diversity given
the relative size of the Board and will keep this matter under
review as is deemed appropriate by the Board, collectively. The
Board reports that the composition of the Board as to male and
female Directors is proportioned 75% male and 25% female at 31
December 2018.
THE INVESTMENT MANAGER
The Company entered into an Investment Management Agreement with
AGML to manage, on a discretionary basis, the investments of the
Company.
AGML is responsible for the implementation of the investment
policy of the Company and has overall responsibility for the
management of the assets and investments of the Company.
AGML reports to the Board at each quarterly Board meeting
regarding the performance of the Company's investment portfolio,
which provides the Board with an opportunity to review and discuss
the implementation of the investment policy of the Company. In
addition, the Board attends regular meetings with AGML in order to
receive a detailed overview of the performance of the underlying
investments and portfolio outlook.
The AGA Board reviewed and evaluated the performance of AGML
during the year to 31 December 2018 and has determined that it is
in the interests of the shareholders to continue with its
appointment as Investment Manager.
Biographies of the Directors of AGML are available on page 44
and the Company's website at:
www.apaxglobalalpha.com/who-we-are/leadership-team/investment-manager-board-of-directors
THE INVESTMENT ADVISER AND AGA INVESTMENT COMMITTEE
AGML, in turn, draws on the resources and expertise of Apax
Partners for investment advice through an Investment Advisory
Agreement and the AGA Investment Committee. The AGA Investment
Committee is composed of several senior team members from Apax
Partners.
Biographies of the members of the AGA Investment Committee are
available on page 43 and the Company's website at:
www.apaxglobalalpha.com/who-we-are/
leadership-team/the-investment-adviser
CULTURE AND APPROACH
The Board is committed to a culture of openness and dialogue
with shareholders and will not only report regularly, but also
ensure that Directors are available for effective engagement,
whether at the AGM or other investor relations events. Apax
Partners, on behalf of AGA, manages a programme of meetings with
investors during each of the financial reporting cycles throughout
the year. Contact details for shareholder queries can be found on
page 86 and the Company's website at:
www.apaxglobalalpha.com/contact-us
AGM
Finally, my Board colleagues and I look forward to meeting
shareholders at our fourth AGM to be held on 7 May 2019 at 10:00am
(UK time) at the offices of Aztec Group, East Wing, Trafalgar
Court, Les Banques, St Peter Port, Guernsey, Channel Islands GY1
3PP.
The notice, agenda and form of proxy will be circulated to
shareholders at least 21 working days prior to the AGM and will be
made available on the UK National Storage Mechanism and the
Company's website at: www.apaxglobalalpha.com/investors/
results-reports-presentations
Shareholders who wish to attend the AGM in person should inform
the Company Secretary by email at AGA-admin@aztecgroup.co.uk
Tim Breedon CBE
Chairman
4 March 2019
Investor Day
JUNE 2018
AGA hosted more than 30 investors and analysts at our annual
Investor Day in June at our London offices.
Presentations were given by senior members of the Apax Partners
team and provided us with an opportunity to tell our story to
current and prospective investors and give them a greater insight
into Apax's investment approach.
The presentation and accompanying transcript are available to
view in the Investor section of our website at:
www.apaxglobalalpha.
com/investors/results-reports-presentations
BOARD COMPOSITION
In 2018, the Board of the Company was composed of four
independent Non-Executive Directors. The Board considers that the
range and experience of its members is sufficient to fulfil its
role effectively and provide the required level of leadership,
governance and assurance.
The terms and conditions of appointment for Non-Executive
Directors are outlined in their letters of appointment, and are
available for inspection at the Company's registered office during
normal business hours and at the AGM for 15 minutes prior to and
during the AGM.
CHAIRMAN OF THE BOARD OF DIRECTORS
Tim Breedon fulfils the role of independent Non-Executive
Chairman of the Board of Directors.
There have been no significant changes to the external
commitments of the Chairman during the year.
The Chairman is responsible for the leadership of the Board, the
creation of conditions necessary for overall Board and individual
Director effectiveness and ensuring a sound framework of corporate
governance, which includes a channel for shareholder communication.
The responsibilities of the Chairman include, but are not limited
to:
- chairing the Board and general meetings of the Company,
including setting the agenda of such meetings;
- promoting the highest standards of integrity, probity and
corporate governance throughout the Company, and in particular at
Board level;
- ensuring that the Board receives accurate, timely and clear information;
- ensuring effective communication with shareholders of the Company;
- facilitating the effectiveness of the contributions and
constructive relationships between the Directors of the
Company;
- ensuring that any incoming Directors of the Company
participate in a full, formal and tailored induction programme;
and
- ensuring that the performance of the Board, its Committees and
individual Directors is evaluated at least once a year.
CHAIRMAN OF THE AUDIT COMMITTEE
Susie Farnon fulfils the role of Chairman of the Audit
Committee. The Audit Committee is appointed under terms of
reference from the Board of Directors, available on the Company's
website at: www.apaxglobalalpha.com/investors/
results-reports-presentations
The Chairman of the Audit Committee is appointed by the Board of
Directors. The role and responsibility of the Chairman of the Audit
Committee is to set the agenda for meetings of the Audit Committee
and, in doing so, take responsibility for ensuring that the Audit
Committee fulfils its duties under its terms of reference. These
include, but are not limited to:
- overseeing the selection process for the external auditor,
considering and making recommendations to the Board on the
appointment, reappointment and removal of the external auditor and
the remuneration of the external auditor;
- reviewing and making recommendations to the Board on the terms
of engagement of the external auditor and the annual audit
plan;
- reviewing the findings of the audit with the external auditor,
including a discussion of the major issues arising from the audit,
those that have been resolved, left unresolved, evidence received
in relation to areas of significant judgement, key accounting and
audit judgements, levels of errors and explanation for unadjusted
errors and the effectiveness of the audit;
- reviewing the scope and result of the external audit and the
external audit fee, keeping under consideration professional and
regulatory requirements;
- assessing the independence and objectivity of the external
auditor on at least an annual basis, taking into consideration the
level of non-audit services;
- reviewing and considering, as appropriate, the rotation of the
external audit engagement partner and tender of the external audit
firm;
- external audit, audit planning and review;
- reviewing and recommending to the Board for approval, the
audit, audit-related and non-audit fees payable to the external
auditor and approving their terms of engagement;
- reviewing the external auditor's audit plan for the annual
audit which will include all proposed materiality levels;
- internal control and financial and operational risk management systems;
- whistleblowing; and
- fraud.
The Audit Committee does not fulfil the role of a risk committee
with regard to investment risk management systems. Overall
responsibility for the Company's risk management and control
systems lies with the Board.
NON-EXECUTIVE DIRECTORS
On 3 January 2018, Sarah Evans stepped down as a Non-Executive
Director to the Board of AGA for health reasons. On 3 July 2018,
Mike Bane was appointed to the Board of Directors.
The Non-Executive Directors have a responsibility to ensure that
they allocate sufficient time to the Company to perform their
responsibilities effectively. Accordingly, Non-Executive Directors
are required to make sufficient effort to attend Board or Committee
meetings, to disclose other significant commitments to the Board
before accepting such commitments and to inform the Board of any
subsequent changes.
In determining the extent to which another commitment proposed
by a Non-Executive Director would have an impact on their ability
to sufficiently discharge their duties to the Company, the Board
will give consideration to the extent to which the proposed
commitment may create a conflict with:
- their time commitment to the Company;
- a direct competitor of the Company, the Investment Manager or the Investment Adviser;
- a significant supplier or potential significant supplier to the Company; and
- an investment manager or other related entity operating in
substantially the same investment markets as the Company.
Shareholders are provided with the opportunity to re-elect the
Non -Executive Directors on an annual basis at the AGM of the
Company and to review their remuneration in doing so. The role of
the Non -Executive Directors includes, but is not limited to:
- constructively challenging and developing proposals on strategy;
- appointing service providers based on agreed goals and objectives;
- monitoring the performance of service providers; and
- satisfying themselves of the integrity of the financial
information and that financial controls and systems of risk
management are robust and defensible.
GOVERNANCE FRAMEWORK
SENIOR INDEPENT DIRECTOR
Susie Farnon fulfils the role of Senior Independent Director
("SID").
The position of SID provides shareholders with someone to whom
they can turn if they have concerns which they cannot address
through the normal channels, for example with the Chairman, and is
available as an intermediary between fellow Directors and the
Chairman.
The role serves as an important check and balance in the
governance process. The role of the SID includes, but is not
limited to:
- providing a sounding board for the Chairman and serving as an
intermediary for the other Directors when necessary;
- being available to shareholders if they have concerns which
contact through the normal channels of Chairman, has failed to
resolve or for which such contact is inappropriate;
- meeting with the other Non-Executive Directors at least
annually to appraise the Chairman's performance (taking into
account the views of the Executive Directors, if any are appointed)
and on such other occasions as may be deemed appropriate;
- taking responsibility for the orderly succession process for
the Chairman, as appropriate; and
- maintaining Board and Company stability during times of crisis and conflict.
GOVERNANCE SYSTEMS
The Board has considered the current recommendations of the AIC
Code and has adopted various policies, procedures and control
systems; a summary of each of these is available on the Company's
website at: www.apaxglobalalpha.com/investors/
results-reports-presentations
In summary, these principally include:
- a schedule of matters reserved for the Board which includes, but is not limited to:
- strategy and management;
- structure and capital;
- financial reporting and controls;
- internal and risk management controls;
- contracts and expenditure;
- Board membership and other appointments;
- corporate governance matters; and policies and codes
- a Board management policy which includes, but is not limited to:
- succession planning, including Board composition and diversity guidelines;
- Director induction and training; and
- Board evaluation.
- a conflicts of interests policy;
- a disclosure panel policy;
- an anti-bribery and corruption policy;
- a share dealing code;
- an insider dealing and market abuse policy; and
- a policy on the provision of non-audit services.
ADMINISTRATOR AND SECRETARY
The Company has appointed Aztec Financial Services (Guernsey)
Limited ("Aztec Group") as Administrator and Company Secretary of
the Company.
The Administrator is responsible for the Company's general
administrative requirements such as the calculation of the Net
Asset Value and Net Asset Value per share and maintenance of the
Company's accounting and statutory records. The Administrator may
delegate certain accounting and bookkeeping services to Apax
Partners Fund Services Limited or other such parties and/or Group
entities, as directed by the Company.
The Administrator is licensed by the GFSC under the Protection
of Investors (Bailiwick of Guernsey) Law to act as "designated
administrator" under that law and provide administrative services
to closed-ended investment funds.
In fulfilling the role of Company Secretary, Aztec Group has due
regard to the provisions of the GFSC Code and the AIC Code and
statutory requirements in this respect.
REGISTRAR
Link Asset Services ("Link") has been appointed as Registrar of
the Company. The Registrar is licensed by the GFSC under the POI
Law to provide registrar services to closed-ended investment
funds.
INFORMATION AND SUPPORT
The Board ensures that it receives, in a timely manner,
information of an appropriate quality to enable it to adequately
discharge its responsibilities. Papers are provided to the
Directors in advance of the relevant Board or Committee meeting to
enable them to make further enquiries about any matters prior to
the meeting, should they so wish. This also allows Directors who
are unable to attend to submit views in advance of the meeting.
The Company Secretary takes responsibility for the distribution
of Board papers and aims to circulate such papers at least five
working days prior to Board or Committee meetings. The Board has
adopted electronic board pack software which aids in the efficiency
and adequacy of delivery of Board papers.
ONGOING CHARGES
Ongoing charges to 31 December 2018 were 1.6% (31 December 2017:
1.6%). The Company's ongoing charges are calculated in line with
guidance issued by the AIC. They comprise of recurring costs such
as administration costs, management fees paid to AGML and
management fees paid to the underlying Private Equity funds'
general partners. They specifically exclude deal costs, taxation,
financing costs, performance fees and other non-recurring
costs.
MANAGEMENT AND PERFORMANCE FEES
Management fees to 31 December 2018 represented 1.4% of NAV (31
December 2017: 1.4%) and performance fees were 0.0% of NAV (31
December 2017: 1.3%). Management fees represent fees paid to both
the Investment Manager and the Apax Funds.
BOARD FOCUS - WHAT THE BOARD HAS DONE
Maintaining sound governance
The Board has maintained under review the ever-changing
regulatory and corporate governance environment and, in particular,
has conducted an annual review of the Company's key policy
documents, which has involved a reflection on a review of
governance practices in the industry, in particular with regard to
disclosure of diversity arrangements, viability statements and
dividend policy, practice and disclosure procedures.
A summary of the Directors' attendance at meetings to which they
were eligible to attend is provided below. Eligibility to attend
the relevant meetings is shown in brackets.
TOTAL TOTAL AUDIT TOTAL OTHER
DIRECTOR BOARD COMMITTEE COMMITTEES(1)
------------- ----- ----------- -------------
Tim Breedon 4 (5) 0 (0) 0 (0)
Susie Farnon 5 (5) 7 (7) 2 (2)
Chris Ambler 5 (5) 7 (7) 0 (0)
Mike Bane 2 (2) 3 (3) 1 (1)
------------- ----- ----------- -------------
1. The Board will appoint committees of the Board on occasion to
deal with specific operational matters; these committees are not
established under separate terms of reference as their appointment
is conditional upon terms resolved by the Board in formal Board
meetings and authority conferred to such committees will expire
upon the due completion of the duty for which it has been
appointed. Such committees are referred to as other committee
meetings
The Board has kept under review and responded to the
implementation of the EU Packaged Retail and Insurance-based
Investment Products Directive on 1 January 2018 and has made
available a Key Information Document on the Company's website at:
www.apaxglobalalpha.com/ investors/key-information-document-kid The
Board has also conducted an annual review of key service providers,
being the Investment Manager, Administrator/Company Secretary,
Registrar and Jefferies International Limited, as corporate broker
to the Company. The Board is pleased to report that such
evaluation, which has included an assessment of internal control
systems, was positive and the Board will continue its engagement
with the existing key service providers.
FREQUENCY AND ATTANCE AT BOARD AND COMMITTEE MEETINGS
The Board aims to meet formally at least four times a year and
met five times in the year from 1 January 2018 to 31 December
2018.
The Audit Committee aims to meet formally at least four times a
year as appropriate in terms of the financial cycle of the Company
and met seven times in the year from 1 January 2018 to 31 December
2018.
STRATEGY AND PERFORMANCE MONITORING
The Board has been pursuing the investment strategy of the
Company during the year through the discretionary management
arrangements with AGML as reflected in the Investment Manager's
Report on page 14.
The Investment Manager operates under guidelines from the Board
and, as set out in the Investment Management Agreement, as to the
monitoring of the performance of the investment portfolio,
associated risks and reporting to the Board in each of these areas.
The Board keeps under regular review the performance of the
investment portfolio through quarterly reporting and regular
dialogue with the Investment Manager.
Additionally, the Board has regular calls, generally monthly,
with the Investment Adviser where it receives an update on the
Company's performance and has the opportunity to discuss movements
in the portfolio.
The Board held its second annual strategy day in November 2018,
reflecting on the performance of the Company, its investment
portfolio and the future strategy of the Company.
NEW REVOLVING CREDIT FACILITY
As announced to the market in November 2018, the Board is
pleased to have secured a new multi -currency revolving credit
facility with Credit Suisse AG, London Branch. This agreement
replaced the facility held with Lloyds Bank plc which was due to
expire on 3 February 2019. The funds available for drawdown remain
at EUR140m, with an initial term of three years maturing on 5
November 2021. The margin has remained the same as the prior
facility at 210bps (over EURIBOR or LIBOR depending on the currency
drawn). Further details of the terms of the revolving credit
facility are available on page 75.
THIRD ANNIVERSARY OF THE LOCK-UP RELEASE
In line with the Company's prospectus, certain existing and
former Apax employees acquired shares in the Company under a
share-for-share exchange agreement at IPO. As a result of this,
those shareholders were subject to certain lock-up arrangements in
respect of the shares issued to them for a period of either five or
ten years.
The Board, following advice from the corporate broker, did not
facilitate a placing of the Company's shares for those locked-up
shareholders who wished to sell their shares following the third
release from lock-up on 15 June 2018, due to insufficient uptake
from those shareholders. In the case of shares subject to a
five-year lock-up period, on 15 June 2018, 60% of those shares were
no longer subject to the lock-up arrangements.
BOARD CALAR AND FOCUS FOR 2019 - WHAT THE BOARD PLANS TO DO
In order to position AGA to enable it to deliver on its
objectives, the Board has set out a plan of key activities that
need to be achieved through 2019. These will be monitored during
the year and appropriate action taken to drive these initiatives
forward.
BOARD EVALUATION OF DIRECTORS
In accordance with the Board management policy, the Board is
pleased to report completion of its third evaluation exercise, this
time conducted externally through a process managed between the
Chairman and the Company Secretary.
An external evaluation of the Board as a whole, the Directors as
individuals and the Audit Committee was undertaken through Platinum
Compliance (Guernsey) Limited. The Company has no connections with
the evaluation provider.
No material matters were observed during the external evaluation
process and each of the Non-Executive Directors were deemed to
remain independent of AGA and of the Investment Manager. The
results also highlighted that the Board displayed a strong
corporate governance culture and demonstrated a high degree of
Board effectiveness.
ELECTION AND RE-ELECTION OF DIRECTORS AT THE 2019 AGM
In accordance with the Company's Articles of Incorporation and
the principles of the AIC Code, all Directors of the Company will
offer themselves for re-election or election at the 2019 AGM.
Mike Bane was appointed to the Board of Directors on 3 July
2018. Neither an external search consultancy nor open advertising
was used. Mike was appointed from a shortlist of suitably qualified
candidates through an interview process involving both the Chairman
and each of the Directors of the Board. Mike was appointed to add
to the breadth of experience and skills of the Board, in addition
to filling a vacancy following the resignation of Sarah Evans.
Following the successful evaluation of the Board as noted above,
it is proposed to shareholders that each of Tim Breedon, Susie
Farnon and Chris Ambler be re-elected, and Mike Bane be elected, as
Non-Executive Directors at the 2019 AGM.
AUDIT COMMITTEE REPORT
Integrity and objectivity
I am pleased to present the Audit Committee report for 2018
detailing the activities undertaken this year to fulfil its
responsibilities.
SUSIE FARNON
Audit Committee Chairman
4 March 2019
The main areas of activity for the Audit Committee have
been:
- reviewing in detail the content of the interim report and this
annual report, the work of the service providers in producing it
and the results of the external audit;
- considering those areas of judgement or estimation arising
from the application of International Financial Reporting Standards
to the Company's activities and documenting the rationale for the
decisions made and estimation techniques selected. This includes
the valuation of investments;
- keeping under review the policy on the supply of non-audit
services by the external auditor, which has taken into account
ethical guidance and related legislation;
- conducting an annual review of the performance of the external
auditor, which has included a general review of the coordination of
the external audit function with the activities of the Company, any
appropriate internal controls, the suitability and independence of
the external auditor;
- keeping under review the risk review and control framework
with the assistance of the Investment Manager and the Company
Secretary;
- meeting with the external auditor, KPMG Channel Islands
Limited ("KPMG"), to review and discuss their independence,
objectivity and proposed scope of work for their review of the
interim report and their audit of this annual report and
accounts;
- reviewing Financial Reporting Council ("FRC") Audit Quality
Review findings report of KPMG's audit of financial statements for
the year ended 31 December 2017; and
- meeting with the Company's principal service providers to
review the controls and procedures operated by them to ensure that
the Company's operational risks are properly managed and that its
financial reporting is complete, accurate and reliable.
The scope of the Committee with respect to internal control does
not include all controls around risk arising from the Company's
investment portfolio. Such risks are overseen directly by the
Board, which sets policies in this area to govern the day-to-day
management of these risks by the Investment Manager.
MEMBERSHIP AND ATTANCE
The Audit Committee membership currently consists of Susie
Farnon, Chris Ambler and Mike Bane. A summary of meetings held
during the year and attendance at those meetings is available on
page 50.
The Chairman of the Company, Tim Breedon, whilst not required to
attend meetings of the Audit Committee, does so on occasion,
particularly in meetings where financial reports are reviewed.
ROLE OF THE AUDIT COMMITTEE
The Audit Committee is appointed under terms of reference from
the Board of Directors, available on the Company's website at:
www.apaxglobalalpha.com/investors/
results-reports-presentations
REVIEW OF AREAS FOR JUDGEMENT OR ESTIMATION
The Audit Committee has determined that the key area for
judgement and estimation is the fair value of the Company's
investment portfolio for reporting purposes. For investments not
traded in an active market, the fair value is determined by using
valuation techniques and methodologies, as deemed appropriate by
the Investment Manager. These assumptions may give rise to
valuations that differ from amounts realised in the future. The
Audit Committee has also considered the calculation of the
performance fee to be an area of judgement given the complexity of
the calculation. Further details and considerations of the
Committee below.
VALUATION OF INVESTMENTS
The valuation of investments is a significant area of judgement
in the preparation of the financial statements and performance
reporting and represents a particular focus for the Audit
Committee. The Audit Committee is satisfied that it is reasonable
overall and has been prepared in accordance with the Company's
stated accounting policies.
The majority of Derived Equity Investments held by the Company,
and certain investments underlying the Company's Private Equity
positions, are quoted and have a ready market, leaving the focus on
the other Private Equity and Derived Debt Investments which are
valued less easily.
At each quarterly valuation point, and particularly at the year
end, members of the Audit Committee have reviewed the detailed
valuation schedules prepared by the Investment Manager.
Discussions were also held with the Investment Manager,
Investment Adviser and the external auditor (in respect of the
interim and year end valuations only). The aim of these reviews and
discussions was to ensure, as far as possible, that the valuations
were prepared in line with the valuation process and methodology
set out in the Company's accounting policies. No material
discrepancies were identified.
The valuation of the Derived Debt Investments has been reviewed
by the external auditor who has reported to the Committee and the
Board on whether, in their opinion, the valuations used are
reasonable and in accordance with the stated accounting
policies.
PERFORMANCE FEE
The detailed basis for calculation and settlement of the
performance fee due to the Investment Manager is set out in the
Company's prospectus, and is summarised in the notes to the
financial statements. Although this fee may not always be material
to the financial performance or position of the Company, its
calculation is complex and payable to the Investment Manager, and
therefore the Audit Committee consider it important by nature.
The Audit Committee generally commissions a specific report on
the calculation of the fee prior to payment. However, no report was
commissioned in the current year as there was no performance fee
payable.
EXTERNAL AUDIT
KPMG has been the Company's external auditor since 2015. During
the year, and up to the date of this report, the Audit Committee
has met formally with KPMG on four occasions and, in addition, the
Chairman of the Audit Committee has met them informally on four
further occasions. These informal meetings have been held to ensure
the Chairman is kept up-to-date with the progress of their work and
that their formal reporting meets the Audit Committee's needs.
The formal meetings included detailed reviews of the proposed
scope of the work to be performed by the auditor in their review of
the Company's report for the period to 30 June 2018 and in their
audit for the year ended 31 December 2018. They also included
detailed reviews of the results of this work, their findings and
observations. I am pleased to report that there are no matters
arising that should be brought to the attention of
shareholders.
The Audit Committee has also reviewed KPMG's report on their own
independence and objectivity, including their team structure for
the audit of the Company and of the underlying Apax Funds, and the
level of non-audit services provided by them. In addition, the
Audit Committee assessed the effectiveness of KPMG.
The Audit Committee noted that the KPMG audit of the Company's
financial statements for the year ended 31 December 2017 was
selected by the FRC for review. Their Audit Quality Review team
reviewed the audit work undertaken by KPMG. Overall, there were no
findings that caused the Audit Committee to be concerned about the
quality of the audit.
The Audit Committee has concluded that KPMG are independent and
objective, carry out their work to a high standard and provide
concise and useful reporting. Accordingly, the Audit Committee has
recommended to the Board that KPMG be put forward to shareholders
for re-appointment at the next AGM.
The Company has a policy in place to ensure the independence and
integrity of the external auditor, where non- audit services are to
be provided by them. In the first instance, all non-audit services
require pre-approval of the Chairman of the Audit Committee and/or
the Chairman of the Board. Full consideration of the financial and
other implications on the independence of the auditor arising from
any such engagement are considered before proceeding. Note 6 of the
financial statements includes a summary of fees paid to KPMG.
IN 2018, WE:
- Kept under review the risk governance framework
- Conducted a thorough review of the external auditor's services
RISK MANAGEMENT, INTERNAL CONTROLS AND CORPORATE RISKS
An outline of the risk management framework and principal risks
is provided on pages 38 to 41.
The Audit Committee has kept, and continues to keep, under
review financial and operational risk, which includes reviewing and
obtaining assurances from key service providers in respect of the
controls for which they are responsible. The Audit Committee has
not identified any areas of concern as a result.
SERVICE PROVIDERS
The Audit Committee has met regularly with the key service
providers (besides KPMG) involved in the preparation of the
Company's reporting to its shareholders and in the operation of
controls on its behalf, the Administrator and sub-Administrator,
both of whom have attended each formal Audit Committee meeting as
well as other informal meetings. Through these meetings, supported
by review and challenge of supporting documentation, the Audit
Committee has satisfied itself, as far as is possible in the
circumstances of a Company with outsourced functions, that
financial and operational risks facing the Company are
appropriately managed and controlled.
ADJUSTED AND UNADJUSTED DIFFERENCES IN THE FINANCIAL
STATEMENTS
The external auditor, KPMG, has reported to the Audit Committee
that they found no reportable differences during the course of
their audit work.
WHISTLEBLOWING
The Company does not have any employees. Each of the service
providers has whistleblowing policies in place.
ANTI-BRIBERY AND CORRUPTION
The Company has a zero tolerance approach to bribery and
corruption, in line with the UK Bribery Act 2010.
An anti-bribery and corruption policy has been adopted and is
kept under review.
ANNUAL REPORT
The Audit Committee members have each reviewed this annual
report and earlier drafts of it in detail, comparing its content
with their own knowledge of the Company, reporting requirements and
shareholder expectations. Formal meetings of the Audit Committee
have also reviewed the report and its content and have received
reports and explanations from the Company's service providers about
the content and the financial results. The Audit Committee has
concluded that the annual report, taken as a whole, is fair,
balanced and understandable, and that the Board can reasonably and
with justification make the statement of Directors'
responsibilities on page 57.
Susie Farnon
Audit Committee Chairman
4 March 2019
SHAREHOLDER RELATIONS
SHAREHOLDER COMMUNICATION
The Directors place a great deal of importance on communication
with shareholders. The interim report and accounts, annual report
and financial statements are available to shareholders and to other
parties who have an interest in the Company's performance on the
Company's website at: www.apaxglobalalpha.com/investors/
results-reports-presentations
Shareholders may obtain up-to-date information on the Company
through the Company's website at: www.apaxglobalalpha.com
The Notice of the AGM is sent out at least 21 working days in
advance of the meeting. All shareholders have the opportunity to
put questions to the Board or Investment Manager, either formally
at the Company's AGM, 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 and may be contacted by
email at: AGA-admin@aztecgroup.co.uk.
The Board recognises and supports the investor relations
activities, which include close engagement with shareholders. On a
quarterly basis, the Company provides a performance update
presentation and holds a conference call and/or webcast for
analysts and investors. The Board receives regular reports and
updates from the investor relations team and the corporate broker.
Shareholder views and feedback are communicated to the Board to
help develop a balanced understanding of the issues and concerns of
the shareholders. Publications can be found on the Company's
website at: www.apaxglobalalpha.com/investors/
results-reports-presentations
The Company has continued to build a dialogue with its
shareholders. As part of this, Apax Partners provide an investor
relations service to support communications with investors. Apax
Partners maintain a programme of meetings between senior management
of Apax Partners on behalf of AGA, and institutional investors,
fund managers and equity analysts. Issues discussed at investor
presentations and meetings cover investment strategy and financial
performance of AGA.
To give all shareholders access to the Company's announcements,
all material information reported via the London Stock Exchange's
regulatory news service is published on the Company's website at:
www.apaxglobalalpha.com/investors/ news/rns
AGA has hosted conference calls to support the release of its
interim and quarterly results. An investor presentation will also
be held for the full-year results. Details were published on the
London Stock Exchange. These events, which are published on the
Company's website, are made available to the market, subject to
relevant marketing restrictions in certain jurisdictions, with the
facility for all listeners to ask questions, as well as having a
permanent replay facility, and a full transcript.
REMUNERATION REPORT
Provisions relating to Executive Directors' remuneration are not
deemed relevant to AGA, being an externally managed investment
company with a Board comprised wholly of Non-Executive
Directors.
In particular, 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.
REMUNERATION REPORT
The Directors who served in the period from 1 January 2018 to 31
December 2018 received the fees detailed in the table below.
No taxable benefits were paid to Directors in respect of this
period and no remuneration above that was paid to the Directors for
their services. Remuneration paid reflects the duties and
responsibilities of the Directors and the value of their time. No
element of the Directors' remuneration is performance related.
DIRECTORS' FEES AND EXPENSES
Fees are pro-rated where an appointment takes place during a
financial year. None of the fees disclosed below were payable to
third parties by the Company. Chris Ambler is obliged to pay 20% of
the fee he receives from the Company for his services as a
Non-Executive Director to a third party, being a company to which
he is appointed as an Executive Director. The Directors are
entitled to be reasonably reimbursed for expenses incurred in the
exercise of their duties as Directors. Expenses paid to the
Directors are also listed in the table below.
DIRECTORS' FEES AND EXPENSES FOR THE YEAR TO 31 DECEMBER
2018
FEES EXPENSES
DIRECTOR (EUR) (EUR)
--------------- ------- --------
Tim Breedon 140,965 1,539
Susie Farnon 62,025 50
Chris Ambler 50,747 1,448
Mike Bane(1) 25,150 38
Sarah Evans(2) 422 12
--------------- ------- --------
Total (EUR) 279,309 3,088
--------------- ------- --------
Total (GBP) 247,870 2,731
--------------- ------- --------
1. Appointed 3 July 2018
2. Retired 3 January 2018
DIRECTORS' HOLDINGS AT 31 DECEMBER 2018
VOTING RIGHTS % OF VOTING RIGHTS
---------------- --------------------
DIRECTOR CLASS OF SHARE SHARES HELD DIRECT INDIRECT DIRECT INDIRECT
------------- -------------------- ----------- ------ -------- -------- ----------
Ordinary shares of
Tim Breedon NPV 70,000 70,000 - 0.014% 0.000%
Ordinary shares of
Susie Farnon NPV 20,000 20,000 - 0.004% 0.000%
Ordinary shares of
Chris Ambler NPV 18,008 18,008 - 0.004% 0.000%
Ordinary shares of
Mike Bane NPV Nil Nil - 0.000% 0.000%
------------- -------------------- ----------- ------ -------- -------- ----------
DIRECTORS' REPORT
The Directors submit their annual report together with the
audited financial statements of the Company for the year ended 31
December 2018. The Company's registered office and principal place
of business is East Wing, Trafalgar Court, Les Banques, St Peter
Port, Guernsey GY1 3PP.
LISTING ON THE LONDON STOCK EXCHANGE
On 15 June 2015, the entire issued ordinary share capital of the
Company was admitted to the Premium Listing segment of the Official
List of the Financial Conduct Authority and to unconditional
trading on the London Stock Exchange's Main Market for listed
securities.
DIVID
The Directors have approved a dividend of 4.12 pence per share
as a final dividend in respect of the financial period ended 31
December 2018 (2017: 4.17 pence). An interim dividend of 4.33 pence
was paid on 15 September 2018 (2017: 4.24 pence).
BOARD OF DIRECTORS
Biographies of the Board of Directors, including details of
their relevant experience, are available on the Company's website
at:
www.apaxglobalalpha.com/who-we-are/leadership-team/board-of-directors
The Non-Executive Directors do not have service agreements.
POWERS OF DIRECTORS
The business of the Company is managed by the Directors who may
exercise all the powers of the Company, subject to any relevant
legislation, any directions given by the Company by passing a
special resolution and to the Company's Articles of Incorporation
(the "Articles"). The Articles, for example, contain specific
provisions concerning the Company's power to borrow money and issue
shares.
APPOINTMENT AND REMOVAL OF DIRECTORS
Rules relating to the appointment and removal of the Directors
are contained within the Company's Articles of Incorporation, which
can be found in full on the Company's website at:
www.apaxglobalalpha.com/investors/
results-reports-presentations
AMMENT OF ARTICLES OF INCORPORATION
The Company may only make amendments to the Articles of
Incorporation of the Company by way of special resolution of the
shareholders, in accordance with The Companies (Guernsey) Law,
2008, as amended.
EMPLOYEES
The Company does not have any direct employees.
POLITICAL DONATIONS AND EXPITURE
The Company has made no political donations in the period since
incorporation or since admission.
SHARE CAPITAL
As at the date of this report, the Company had an issued share
capital of EUR873.8m. The rights attaching to the shares are set
out in the Articles of Incorporation. There are no restrictions on
the transfer of ordinary shares in the capital of the Company other
than those which may be imposed by law from time to time. There are
no special control rights in relation to the Company's shares and
the Company is not aware of any agreements between holders of
securities that may result in restrictions on the transfer of
securities or on voting rights, except for the lock-ups agreed at
the time of admission as set out in the prospectus. In accordance
with the Disclosure and Transparency Rules, Board members and
certain employees of the Company's service providers are required
to seek approval to deal in the Company's shares.
ALLOTMENT OF SHARES AND PRE-EMPTION RIGHTS
Details of the Company's ability to allot shares and pre-emption
rights are included in the Articles of Incorporation.
VOTING RIGHTS
In a general meeting of the Company, on a show of hands, every
member who is present in person or by proxy and entitled to vote
shall have one vote. On a poll, every member who is present in
person or by proxy shall have one vote for every share of which
they are the holder.
RESTRICTIONS ON VOTING
Unless the Directors otherwise determine, a shareholder shall
not be entitled to vote either personally or by proxy:
-- if any call or other sum currently payable to the Company in
respect of that share remains unpaid; or
-- having been duly served with a notice requiring the
disclosure of a member's interests given under article 10 of the
Articles of Incorporation of the Company, and has failed to do so
within 14 days, in a case where the shares in question represent at
least 0.25% of the number of shares in issue of the class of shares
concerned, or within 28 days, in any other case, from the date of
such notice.
DIRECTORS' INTERESTS IN SHARES
The Directors' share interests in the Company are detailed on
the prior page.
MATERIAL INTERESTS IN SHARES
The Company has been notified in accordance with DTR 5 of the
Disclosure and Transparency Rules of the interests in its issued
ordinary shares as at 31 December 2018 detailed in the table on
page 54.
SIGNIFICANT AGREEMENTS
The following agreements are considered significant to the
Company:
-- AGML as Investment Manager under the terms of the Investment Management Agreement;
-- Aztec Group as Administrator, Company Secretary and
Depositary under the Administration Agreement and Depositary
Agreement;
-- Link as Registrar under the Registration Agreement;
-- Jefferies International as corporate broker; and
-- KPMG as appointed external auditor.
COMPENSATION FOR LOSS OF OFFICE
There are no agreements between the Company and its Directors
providing for compensation for loss of office that occurs because
of a change of control.
DISCLOSURES REQUIRED UNDER LISTING RULE 9.8.4R
There are no disclosures required under Listing Rule section
9.8.4R.
EVENTS AFTER THE REPORTING PERIOD
The Audit Committee noted that there were two post-balance sheet
events:
-- on 26 February 2019, Apax VIII, in which the Company is a
limited partner, announced an agreement in principle to sell Exact
Software. On 21 February 2019, Apax VIII also announced that it has
agreed to sell its entire stake in AssuredPartners. Together, these
two transactions represent an estimated uplift of c.EUR34m or
c.3.6% to the Company's Adjusted NAV at 31 December 2018. Both
transactions are subject to customary closing conditions
-- on 4 March 2019, the Board of Directors approved a dividend
of 4.12 pence per share in respect of the financial period ended 31
December 2018.
GOING CONCERN
After making enquiries and given the nature of the Company and
its investments, the Directors, after due consideration, conclude
that the Company should be able to continue for the foreseeable
future.
In reaching this conclusion, the Board is mindful of the nature
of the Company's assets, and considers that adverse investment
performance should not have a material impact on the Company's
ability to meet its liabilities as they fall due.
Accordingly, they are satisfied that it is appropriate to adopt
the going concern basis in preparing these financial
statements.
DISCLOSURE OF INFORMATION TO THE AUDITOR
Having made enquiries of fellow Directors and key service
providers, each of the Directors confirms that:
- to the best of their knowledge and belief, there is no
relevant audit information of which the Company's auditor is
unaware; and
- they have taken all the steps a Director might reasonably be
expected to have taken to be aware of relevant audit information
and to establish that the Company's auditor is aware of that
information.
REAPPOINTMENT OF AUDITOR
Resolutions for the reappointment of KPMG Channel Islands
Limited as the auditor of the Company and to authorise the
Directors to determine its remuneration are to be proposed at the
next AGM.
AGM
The next AGM will be held on 7 May 2019 at 10:00am (UK time) at
the offices of Aztec Group, East Wing, Trafalgar Court, Les
Banques, St Peter Port, Guernsey, Channel Islands GY1 3PP.
The notice, agenda and form of proxy will be circulated to
shareholders at least 21 working days prior to the AGM and will be
made available on the UK National Storage Mechanism and the
Company's website at: www.apaxglobalalpha.com/investors/
results-reports-presentations
Shareholders who wish to attend the AGM in person should inform
the Company Secretary by email at AGA-admin@aztecgroup.co.uk
The Directors' report has been approved by the Board and is
signed on its behalf by:
Tim Breedon CBE
Chairman
4 March 2019
TABLE OF SHAREHOLDERS OVER 5% AT 31 DECEMBER 2018(2)
VOTING RIGHTS % OF VOTING RIGHTS
---------------------- ---------------------------
SHAREHOLDER CLASS OF SHARE SHARES HELD DIRECT INDIRECT DIRECT INDIRECT THRESHOLD
----------------------- --------------- ----------- ---------- ---------- ------ -------- ---------
Ordinary
NorTrust Nominees shares of
Limited NPV(1) 32,701,581 32,701,581 - 6.5% 0.0% 5%
Ordinary
Investec Wealth & shares of
Investment Limited NPV 24,006,557 24,006,557 - 4.8% 0.0% 5%
Ordinary
shares of
Martin Halusa NPV 28,778,552 2,869,735 25,908,817 0.6% 5.3% 5%
Ordinary
shares of
Witan Investment Trust NPV 30,317,414 30,317,414 - 6.2% 0.0% 5%
----------------------- --------------- ----------- ---------- ---------- ------ -------- ---------
1. No par value
2. The figures shown above reflect the position of the
shareholders as most recently disclosed to and by the Company
pursuant to DTR 5.1 (Notification of the acquisition or disposal of
major shareholdings) and may not reflect the actual or current
position of the shareholders as at the date of this report
STATEMENT OF DIRECTORS' RESPONSIBILITIES
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Directors are responsible for preparing the annual report
and financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they are
required to prepare financial statements that show a true and fair
view. The Directors have chosen to prepare the financial statements
in accordance with International Financial Reporting Standards
("IFRS") as adopted by the EU to meet the requirements of
applicable law and regulations.
Under Company Law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss of the Company for that period. In preparing these 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; and
- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern;
- use the going concern basis of accounting unless they either
intend to liquidate the Company or to cease operations, or have no
realistic alternative but to do so.
The Directors are responsible for keeping proper accounting
records, which disclose with reasonable accuracy at any time the
financial position of the Company and to enable them to ensure that
the financial statements comply with the Companies (Guernsey) Law,
2008 (as amended). They are responsible for such internal control
as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error. They have general responsibility for
taking such steps as are reasonably open to them to safeguard the
assets of the Company and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in Guernsey governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE
ANNUAL FINANCIAL REPORT
The annual report and financial statements are the
responsibility of, and have been approved by the Directors who
confirm, to the best of their knowledge and belief, that they have
complied with the above requirements in preparing the financial
statements. During the course of this assessment, the Directors
have received input from the Audit Committee, the Investment
Manager, the Investment Adviser, the Company Secretary and
Administrator, and the Directors confirm that:
- the annual report includes a fair review of the development
and performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that the Company faces;
- the financial statements, prepared in accordance with IFRS
adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and results of the Company, taken
as a whole, as required by DTR 4.1.6, and are in compliance with
the requirements set out in the Companies (Guernsey) Law 2008 as
amended;
- the annual report and financial statements, taken as a whole,
provide the information necessary to assess the Company's position
and performance, business model and strategy, and is fair, balanced
and understandable.
Signed on behalf of the Board of Directors
Tim Breedon CBE
Chairman
4 March 2019
Signed on behalf of the Audit Committee
Susie Farnon
Audit Committee Chairman
4 March 2019
VIABILITY STATEMENT
As stated on page 4, the investment objective of the Company is
to provide shareholders with capital appreciation from its
investment portfolio and regular dividends. The Company's
investment performance depends upon the performance of its
portfolio of Private Equity and Derived Investments. The Directors,
in assessing the viability of the Company, have paid particular
attention to the risks faced by the Company in seeking to achieve
its stated objectives, which are set out on pages 8 and 9. The
Board has established a risk management framework within which the
Investment Manager operates and which is intended to identify,
measure, monitor, report and, where appropriate, mitigate the risks
to the Company's investment objective. The Board does not consider
the other risks faced by the Company to be principal risks, as
defined in the UK Code.
The Directors confirm that their assessment of the principal
risks facing the Company was robust and in doing so they have
considered models projecting future cash flows during the three
years to 31 December 2021. These models have also been stress
tested to reflect the impact on the portfolio of some plausible but
severe scenarios similar to those experienced by investment markets
in the past. The projections consider cash balances, covenants,
limits, the split of the investment portfolio in addition to
investment policy. The stress testing examines the potential impact
of the principal risks occurring individually and together.
These projections are based on the Investment Manager's
expectations of future investment performance, income and costs.
The viability assessment covers a period of three years, which
reflects the average holding period of Derived Investments and the
expected period between the launch of new funds by Apax
Partners.
The Company also has access to a significant credit facility to
enable it to manage cash demands without resorting to urgent sales
of its less liquid portfolio assets; the Company utilised this
facility 16 times during the year, with an average drawdown period
of less than one month. Diversification of the portfolio, split
between Private Equity and Derived Investments, also helps the
Company withstand risks it is most likely to meet.
The continuation of the Company in its present form is dependent
on the Investment Management Agreement ("IMA") with the Investment
Manager remaining in place. The Directors note that the IMA with
the Investment Manager is terminable with a minimum of one year's
notice by either party. The Directors have no current reason to
assume that either the Company or the Investment Manager would
serve notice of termination of the IMA during the three-year period
covered by this viability statement. The initial term of the IMA is
six years and shall automatically continue unless the Investment
Manager or the Company (by special resolution) serves notice
electing to terminate at the expiry of the initial term. The
earliest termination would be 15 June 2020. The Articles require
that the Directors put a discontinuation resolution to the AGM
every three years, with the next resolution being put forward at
the 2021 AGM. Following the result of the 2018 resolution, where
99% of votes cast supported a continuation, the Directors have
reasonable grounds to believe that it is unlikely that the
extraordinary resolution would be passed and for the purposes of
the viability assessment they have assumed that it will not do
so.
The Directors, having duly considered the risks facing the
Company, their mitigation and the cash flow modelling, have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the
three-year period of their assessment.
For more information on how AGA is satisfied with its ability to
operate as a going concern, see page 66.
Financial Statements
FINANCIAL STATEMENTS INDEPENT AUDITOR'S REPORT
to the members of Apax Global Alpha Limited
OUR OPINION IS UNMODIFIED
We have audited the financial statements of Apax Global Alpha
Limited (the "Company"), which comprise the statement of financial
position as at 31 December 2018, the statements of profit or loss
and other comprehensive income, changes in equity and cash flows
for the year then ended, and notes, comprising significant
accounting policies and other explanatory information.
In our opinion, the accompanying financial statements:
-- give a true and fair view of the financial position of the
Company as at 31 December 2018, and of its financial performance
and its cash flows for the year then ended;
-- are prepared in accordance with International Financial
Reporting Standards as adopted by the EU; and
-- comply with the Companies (Guernsey) Law, 2008.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities are described below. We have fulfilled our ethical
responsibilities under, and are independent of the Company in
accordance with, UK ethical requirements including FRC Ethical
Standards as applied to listed entities. We believe that the audit
evidence we have obtained is a sufficient and appropriate basis for
our opinion.
KEY AUDIT MATTERS: OUR ASSESSMENT OF THE RISKS OF MATERIAL
MISSTATEMENT
Key audit matters are those matters that, in our professional
judgement, were of most significance in the audit of the financial
statements and include the most significant assessed risks of
material misstatement (whether or not due to fraud) identified by
us, including those which had the greatest effect on: the overall
audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements
as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters. In arriving at our
audit opinion above, the key audit matter was as follows (unchanged
from 2017):
VALUATION OF INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR
LOSS ("INVESTMENTS")
EUR912,048,000; (2017 EUR910,669,000)
Refer to page 51 of the Audit Committee Report, note 3
(subsequent measurement of financial instruments), note 4 (Critical
accounting estimates and judgements), note 8 (Investments) and note
14 (Fair value estimation).
The risk Our response
---------------------------------------- ----------------------------------------------
Basis: Our audit procedures included:
As at 31 December 2018, the Company Controls evaluation:
had invested 98% of its net assets We assessed the design and implementation
in private equity funds advised of the Investment Manager's review
by the Company's Investment Adviser control in relation to the valuation
("Private Equity Investments") of Investments.
and in equities and debt in public Challenging managements' assumptions
and private companies ("Derived and inputs including use of KPMG valuation
Investments"). specialists:
The Company's holdings in Private For Private Equity Investments, we
Equity Investments (representing agreed the fair values to capital account
65% of Investments) are valued or other similar statements ("Statements")
based on the net asset values received from the underlying funds'
provided by the underlying funds' general partners. For the majority
general partners, adjusted if of Private Equity Investments, we obtained
considered necessary by the Board the coterminous audited financial statements
of Directors, including any adjustment and agreed the audited net asset value
necessary for carried interest. to the Statements. In order to assess
The Company's holdings in quoted whether the fair value required adjustment,
equities and debt (representing we considered: the basis of preparation
15% of Investments) are valued together with accounting polices applied;
based on the bid or last traded and whether the audit opinion was unmodified.
price depending upon the convention For Derived Investments, we used our
of the exchange on which the own valuation specialist to
investment is quoted. independently price 100% of quoted
The Company's holdings in unquoted equities and 88% of unquoted debt based
debt (representing 19% of Investments) on third party data sources.
are valued based on models that Assessing disclosures:
take into account the factors We also considered the Company's disclosures
relevant to each investment and (see note 4) in relation to the use
use relevant third party market of estimates and judgements regarding
data where available. The Company's the fair value of investments and the
holdings in unquoted equities Company's investment valuation policies
(representing 1% of Investments) adopted and fair value disclosures
are valued based on comparable in note 3, note 8 and note 14 for compliance
company multiples and precedent with International Financial Reporting
transaction analysis. Standards as adopted by the EU.
Risk:
The valuation of the Company's
Investments is considered a significant
area of our audit, given that
it represents the majority of
the net assets of the Company
and in view of the significance
of estimates and judgements that
may be involved in the determination
of fair value.
---------------------------------------- ----------------------------------------------
OUR APPLICATION OF MATERIALITY AND AN OVERVIEW OF THE SCOPE OF
OUR AUDIT
Materiality for the financial statements as a whole was set at
EUR37,900,000, determined with reference to a benchmark of net
assets of EUR930,771,000, of which it represents 4% (2017: 4%).
We reported to the Audit Committee any corrected or uncorrected
identified misstatements exceeding EUR1,800,000, in addition to
other identified misstatements that warranted reporting on
qualitative grounds.
Our audit of the Company was undertaken to the materiality level
specified above, which has informed our identification of
significant risks of material misstatement and the associated audit
procedures performed in those areas as detailed above.
WE HAVE NOTHING TO REPORT ON GOING CONCERN
We are required to report to you if we have anything material to
add or draw attention to in relation to the directors' statement in
note 2 to the financial statements on the use of the going concern
basis of accounting with no material uncertainties that may cast
significant doubt over the Company's use of that basis for a period
of at least twelve months from the date of approval of the
financial statements. We have nothing to report in this
respect.
WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION IN THE ANNUAL
REPORT
The directors are responsible for the other information
presented in the Annual Report together with the financial
statements. Our opinion on the financial statements does not cover
the other information and we do not express an audit opinion or any
form of assurance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial statements audit
work, the information therein is materially misstated or
inconsistent with the financial statements or our audit knowledge.
Based solely on that work we have not identified material
misstatements in the other information.
DISCLOSURES OF PRINCIPAL RISKS AND LONGER-TERM VIABILITY
Based on the knowledge we acquired during our financial
statements audit, we have nothing material to add or draw attention
to in relation to:
- the directors' confirmation within the Viability Statement on
page 58 that they have carried out a robust assessment of the
principal risks facing the Company, including those that would
threaten its business model, future performance, solvency or
liquidity;
- the Principal Risks disclosures describing these risks and
explaining how they are being managed or mitigated;
- the directors' explanation in the Viability Statement on page
58 as to how they have assessed the prospects of the Company, over
what period they have done so and why they consider that period to
be appropriate, and their statement as to whether they have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
CORPORATE GOVERNANCE DISCLOSURES
We are required to report to you if:
- we have identified material inconsistencies between the
knowledge we acquired during our financial statements audit and the
directors' statement that they consider that the Annual Report and
financial statements taken as a whole is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company's position and performance,
business model and strategy; or
- the section of the Annual Report describing the work of the
Audit Committee does not appropriately address matters communicated
by us to the Audit Committee.
We are required to report to you if the Corporate Governance
Statement does not properly disclose a departure from the eleven
provisions of the 2016 UK Corporate Governance Code specified by
the Listing Rules for our review.
We have nothing to report to you in these respects.
WE HAVE NOTHING TO REPORT ON OTHER MATTERS ON WHICH WE ARE
REQUIRED TO REPORT BY EXCEPTION
We have nothing to report in respect of the following matters
where the Companies (Guernsey) Law, 2008 requires us to report to
you if, in our opinion:
- the Company has not kept proper accounting records; or
- the financial statements are not in agreement with the accounting records; or
- we have not received all the information and explanations,
which to the best of our knowledge and belief are necessary for the
purpose of our audit.
RESPECTIVE RESPONSIBILITIES
Directors' responsibilities
As explained more fully in their statement set out on page 57,
the Directors are responsible for: the preparation of the financial
statements including being satisfied that they give a true and fair
view; such internal control as they determine is necessary to
enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error; assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going
concern basis of accounting unless they either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether
the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our
opinion in an auditor's report. Reasonable assurance is a high
level of assurance, but does not guarantee that an audit conducted
in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is provided on the
FRC's website at www.frc.org.uk/auditorsresponsibilities.
THE PURPOSE OF THIS REPORT AND RESTRICTIONS ON ITS USE BY
PERSONS OTHER THAN THE COMPANY'S MEMBERS AS A BODY
This report is made solely to the Company's members, as a body,
in accordance with section 262 of the Companies (Guernsey) Law,
2008. Our audit work has been undertaken so that we might state to
the Company's members those matters we are required to state to
them in an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's
members, as a body, for our audit work, for this report, or for the
opinions we have formed.
Lee Clark
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Glategny Court
St Peter Port
Guernsey GY1 1WR
Channel Islands
4 March 2019
STATEMENT OF FINANCIAL POSITION
At 31 December 2018
31 DECEMBER 31 DECEMBER
2018 2017
NOTES EUR'000 EUR'000
------------------------------------------------- ----- ----------- -----------
Assets
Non-current assets
Investments held at fair value through profit or
loss ("FVTPL") 8 912,048 910,669
------------------------------------------------- ----- ----------- -----------
Total non-current assets 912,048 910,669
------------------------------------------------- ----- ----------- -----------
Current assets
Cash and cash equivalents 9 17,306 18,989
Investment receivables 2,125 -
Other receivables 1,454 1,987
------------------------------------------------- ----- ----------- -----------
Total current assets 20,885 20,976
------------------------------------------------- ----- ----------- -----------
Total assets 932,933 931,645
------------------------------------------------- ----- ----------- -----------
Liabilities
Current liabilities
Accrued expenses 2,162 1,729
------------------------------------------------- ----- ----------- -----------
Total current liabilities 2,162 1,729
------------------------------------------------- ----- ----------- -----------
Total liabilities 2,162 1,729
------------------------------------------------- ----- ----------- -----------
Capital and reserves
Shareholders' capital 15 873,804 873,804
Share-based payment performance fee reserve 11 - 17,495
Retained earnings 56,967 38,617
------------------------------------------------- ----- ----------- -----------
Total equity 930,771 929,916
------------------------------------------------- ----- ----------- -----------
Total shareholders' equity and liabilities 932,933 931,645
------------------------------------------------- ----- ----------- -----------
On behalf of the Board of Directors
Tim Breedon
Chairman
4 March 2019
Susie Farnon
Chairman of the Audit Committee
4 March 2019
31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER
2018 2018 2017 2017
EUR GBP EQUIVALENT(1) EUR GBP EQUIVALENT(1)
------------------------------- ----------- ----------------- ----------- -----------------
Net Asset Value ("NAV") ('000) 930,771 836,717 929,916 825,849
Adjusted NAV ('000)(2) 930,771 836,717 912,421 810,312
NAV per share 1.90 1.70 1.89 1.68
Adjusted NAV per share(2) 1.90 1.70 1.86 1.65
------------------------------- ----------- ----------------- ----------- -----------------
1. The sterling equivalent has been calculated based on the
GBP/EUR exchange rate at 31 December 2018 and 31 December 2017
respectively
2. Adjusted NAV is the NAV net of the share-based payment
performance fee reserve. Adjusted NAV per share is calculated by
dividing the Adjusted NAV by the total number of shares
The accompanying notes form an integral part of these financial
statements.
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2018
YEARED YEARED
31 DECEMBER 31 DECEMBER
2018 2017
NOTES EUR'000 EUR'000
----------------------------------------------- ----- ----------- -----------
Income
Investment income 19,442 27,560
Net changes in investments at FVTPL 8 56,739 20,870
Realised foreign currency (losses)/gains (2,766) 1,799
Net unrealised foreign currency gains/(losses) 116 (6,871)
----------------------------------------------- ----- ----------- -----------
Total income 73,531 43,358
----------------------------------------------- ----- ----------- -----------
Operating and other expenses
Performance fee 11 2,123 (12,770)
Management fee 10 (4,610) (5,216)
Administration and other operating expenses 6 (3,107) (2,810)
----------------------------------------------- ----- ----------- -----------
Total operating expenses (5,594) (20,796)
Finance costs 12 (2,729) (1,324)
Profit before tax 65,208 21,238
Taxation charge 7 (261) (733)
Profit after taxation for the year 64,947 20,505
----------------------------------------------- ----- ----------- -----------
Other comprehensive income - -
----------------------------------------------- ----- ----------- -----------
Total comprehensive income attributable to
shareholders 64,947 20,505
----------------------------------------------- ----- ----------- -----------
Earnings per share (cents) 16
Basic and diluted 13.22 4.18
Adjusted(1) 13.22 4.09
----------------------------------------------- ----- ----------- -----------
The accompanying notes form an integral part of these financial
statements.
1. The Adjusted earnings per share has been calculated based on
the profit attributable to ordinary shareholders adjusted for the
total accrued performance fee at 31 December 2018 and 31 December
2017 respectively as per note 16 and the weighted average number of
ordinary shares
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2018
SHARE-BASED
PAYMENT
SHAREHOLDERS' RETAINED PERFORMANCE
CAPITAL EARNINGS FEE RESERVE TOTAL
FOR THE YEARED 31 DECEMBER
2018 NOTES EUR'000 EUR'000 EUR'000 EUR'000
-------------------------------- ----- ------------- -------- ----------- --------
Balance at 1 January 2018 873,804 38,617 17,495 929,916
Total comprehensive income
attributable to owners - 64,947 - 64,947
Share-based payment performance
fee reserve movement 11 - - (17,495) (17,495)
Dividend paid 17 - (46,597) - (46,597)
-------------------------------- ----- ------------- -------- ----------- --------
Balance at 31 December 2018 873,804 56,967 - 930,771
-------------------------------- ----- ------------- -------- ----------- --------
SHARE-BASED
PAYMENT
SHAREHOLDERS' RETAINED PERFORMANCE
CAPITAL EARNINGS FEE RESERVE TOTAL
FOR THE YEARED 31 DECEMBER
2017 NOTES EUR'000 EUR'000 EUR'000 EUR'000
-------------------------------- ----- ------------- -------- ----------- --------
Balance at 1 January 2017 873,804 64,914 11,291 950,009
Total comprehensive income
attributable to owners - 20,505 - 20,505
Share-based payment performance
fee reserve movement 11 - - 6,204 6,204
Dividend paid 17 - (46,802) - (46,802)
-------------------------------- ----- ------------- -------- ----------- --------
Balance at 31 December 2017 873,804 38,617 17,495 929,916
-------------------------------- ----- ------------- -------- ----------- --------
The accompanying notes form an integral part of these financial
statements
STATEMENT OF CASH FLOWS
For the year ended 31 December 2018
YEARED YEARED
31 DECEMBER 31 DECEMBER
2018 2017
NOTES EUR'000 EUR'000
---------------------------------------------- ----- ----------- -----------
Cash flows from operating activities
Interest received 17,896 25,126
Interest paid (43) (70)
Dividend received 1,718 1,372
Performance fee paid (15,372) (6,566)
Operating expenses paid (6,490) (8,034)
Tax paid (132) (636)
Purchase of Private Equity Investments(1) (11,126) -
Capital calls from Private Equity Investments (30,812) (149,581)
Capital distributions from Private Equity
Investments 133,362 74,478
Purchase of Derived Investments(2) (212,988) (238,033)
Sale of Derived Investments(2) 172,811 341,966
---------------------------------------------- ----- ----------- -----------
Net cash from operating activities 48,824 40,022
---------------------------------------------- ----- ----------- -----------
Cash flows used in financing activities
Financing costs paid(3) (3,309) (1,668)
Dividend paid(4) (47,314) (46,356)
Revolving credit facility drawn 94,248 44,312
Revolving credit facility repaid (94,248) (44,312)
---------------------------------------------- ----- ----------- -----------
Net cash used in financing activities (50,623) (48,024)
---------------------------------------------- ----- ----------- -----------
Cash and cash equivalents at the beginning
of the year 18,989 33,862
Net decrease in cash and cash equivalents (1,799) (8,002)
Effect of foreign currency fluctuations on
cash and cash equivalents 116 (6,871)
---------------------------------------------- ----- ----------- -----------
Cash and cash equivalents at the end of the
year 9 17,306 18,989
---------------------------------------------- ----- ----------- -----------
1. These cash flows relate to the purchase of two carried
interest positions in Apax Europe VI (EUR3.4m) and Apax Europe VII
(EUR7.7m) in the secondary market
2. On 9 April 2018, the Company's equity investment in Strides
Pharma Sciences Limited ("Strides") (formerly "Strides Shasun
Limited") demerged and the Company received shares in a new company
Solara, that subsequently listed on the National Stock Exchange of
India ("NSE") on 27 June 2018. This resulted in a partial
realisation of Strides (EUR1.2m) and a new investment of EUR1.2m in
Solara. As no cash was exchanged, this has been excluded from the
cash flows from investing activities. In the prior period, the
Company's first and second lien debt positions in Answers were
restructured and the Company received equity of EUR6.9m, warrants
of EUR0.2m and new second lien debt of EUR1.9m. As no cash was
exchanged, these have been excluded from the comparative
3. Financing costs include a one-off commitment fee of EUR1.0m
related to the refinancing of the new revolving credit facility
during the year
4. Dividend paid represents the cash amount paid to shareholders
adjusted for foreign exchange movements. The difference between the
amount included in the statement of changes in equity and the cash
flow statement represents the foreign exchange difference between
the liability being booked and the final amount paid
The accompanying notes form an integral part of these financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
1 REPORTING ENTITY
Apax Global Alpha Limited (the "Company" or "AGA") is a limited
liability Guernsey company that was incorporated on 2 March 2015.
The address of the Company's registered office is PO Box 656, East
Wing, Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1
3PP. The Company invests in Private Equity funds, listed and
unlisted securities including debt instruments.
The Company's main corporate objective is to provide
shareholders with capital appreciation from its investment
portfolio and regular dividends. The Company's operating activities
are managed by its Board of Directors and its investment activities
are managed by Apax Guernsey Managers Limited (the "Investment
Manager") under a discretionary investment management agreement.
The Investment Manager obtains investment advice from Apax Partners
LLP (the "Investment Adviser").
2 BASIS OF PREPARATION
Statement of compliance
These financial statements have been prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union ("IFRS"). These financial statements are from 1
January 2018 to 31 December 2018 and these financial statements
were authorised for issue by the Board of Directors of the Company
on 4 March 2019.
Basis of measurement
The financial statements have been prepared on the historic cost
basis except for investments, which are measured at FVTPL.
Functional and presentation currency
These financial statements are presented in euro (EUR), which is
the Company's functional and presentation currency. All amounts are
stated to the nearest one thousand euro unless otherwise
stated.
Going concern
The Directors consider that it is appropriate to adopt the going
concern basis of accounting in preparing the financial statements.
In reaching this assessment, the Directors have considered a wide
range of information relating to present and future conditions (at
least 12 months from 4 March 2019, the authorisation date of these
financial statements), including the statement of financial
position, future projections, cash flows and the longer-term
strategy of the business.
The Directors have reviewed models assessing the Company's
estimated future cash flows for three years to 31 December 2021,
which have been stress tested to provide guidance of the possible
impact of financial scenarios that may affect the Company. The
Company also successfully renewed its revolving credit facility
which ensures access to short-term liquidity until 5 November 2021.
See note 12 for further details.
3 ACCOUNTING POLICIES
The accounting policies adopted by the Company and applied
consistently in these financial statements are set out below and
overleaf:
Initial recognition of financial instruments
The Company designates all financial assets and financial
liabilities, except loans payable, other payables, other
receivables and cash, at FVTPL. These are initially recognised at
cost which equates to the best indicator of fair value on the trade
date, the date on which the Company becomes a party to the
contractual provisions of the instrument. All transaction costs are
immediately recognised in profit or loss. Financial assets or
financial liabilities not at FVTPL are initially recognised at cost
plus transaction costs that are directly attributable to their
acquisition or issue.
Subsequent measurement of financial instruments
Fair value is a market-based measurement, that estimates the
price at which an asset could be sold or a liability transferred,
in an orderly transaction between market participants, on the
measurement date. When available, the Company measures the fair
value of an instrument using quoted prices in an active market for
that instrument. A market is regarded as "active" if quoted prices
are readily and regularly available and represent actual and
regularly occurring market transactions on an arm's length basis.
If a market for a financial instrument is not active, then the
Company establishes fair value using an alternative valuation
technique.
In the absence of an active market, the Company determines fair
value taking into account the International Private Equity and
Venture Capital Valuation ("IPEV") guidelines. Valuation techniques
include, but are not limited to, market multiples, using recent and
relevant arm's length transactions between knowledgeable, willing
parties (if they are available), reference to the current fair
value of other instruments that are substantially the same,
statistical methods and where deemed appropriate, augmented by,
discounted cash flow analyses and option pricing models. The chosen
valuation technique seeks to maximise the use of market inputs and
incorporates factors that market participants might consider in
setting a price.
Inputs to valuation techniques aim to reasonably represent
market expectations and measures of the risk-return factors
inherent in the financial instrument. The Company calibrates
valuation techniques where possible using prices from observable
current market transactions in the same instrument or based on
other available observable market data.
The Company has two main asset portfolios that are split between
"Private Equity Investments" and "Derived Investments". Private
Equity Investments comprise primary and secondary commitments to,
and investments in, existing Private Equity funds advised by the
Investment Adviser. Derived Investments comprise of investments in
debt and equities. At each reporting date these are measured at
fair value, and changes therein are recognised in the statement of
profit or loss and other comprehensive income.
Fair values of the Private Equity portfolio are generally
considered to be the Company's attributable portion of the NAV of
the Private Equity funds, as determined by the general partners of
such funds, adjusted if considered necessary by the Board of
Directors, including any adjustment necessary for carried interest.
The general partners consider the IPEV guidelines when valuing the
Private Equity funds.
For unlisted debt investments, fair value is calculated based
upon models that take into account the factors relevant to each
investment and use relevant third-party market data where
available. For unlisted equities and equities not traded in an
active market, fair value is calculated based on comparable company
multiples and precedent transaction analysis. The Company utilises
the resources of the Investment Manager and the Investment Adviser,
to augment its own fair value analysis of these investments to
determine the most appropriate fair value for such assets.
For investments traded in an active market, fair value is
determined by taking into account the latest market bid price
available, or such last traded price depending upon the convention
of the exchange on which the investment is quoted.
Derecognition of financial instruments
The Company derecognises a financial asset when the contractual
rights to the cash flows from the financial asset expire or it
transfers the financial asset and the transfer qualifies for
derecognition in accordance with IAS 39 "Financial Instruments:
Recognition and Measurement". The Company uses the first-in
first-out method to determine realised gains and losses on
derecognition. A financial liability is derecognised when the
obligation specified in the contract is discharged, cancelled or
expired.
Share-based payments
The Company applies the requirements of IFRS 2 "Share-based
Payment" in respect to its performance fee. The Company maintains a
separate performance fee reserve in equity, showing the expected
performance fee calculated on a liquidation basis on eligible
assets. This is revised at each reporting period and the movement
is credited or expensed through the statement of profit or loss and
other comprehensive income. Please refer to note 11 for further
details.
Operating segments
Per IFRS 8 "Operating Segments", the criteria for identifying an
operating segment is that the chief operating decision maker of the
Company regularly reviews the performance of these operating
segments and determines the allocation of resources based on these
results. It is determined that the Company's Chief Operating
Decision Maker is the Board of Directors. As previously noted, the
Company invests into two separate portfolios, Private Equity
Investments and Derived Investments. These have been identified as
segments on the basis that the Board of Directors uses information
based on these segments to make decisions about assessing
performance and allocating resources. The Company has a third
administration segment for central functions which represents
general administration costs that cannot be specifically allocated
to the two portfolios. The analysis of results by operating segment
is based on management account information. The segment analysis of
the Company's results and financial position is set out in note
5.
Investment receivables
Investment receivables are recognised in the Company's statement
of financial position when it becomes party to a contractual
provision for the amount receivable. Investment receivables are
held at their nominal amount. They are reviewed at each reporting
date to determine whether there is any indication of impairment. If
any such indication exists, the receivables recoverable amount is
estimated based on expected discounted future cash flows. Changes
in the level of impairment are recognised in the statement of
profit or loss and other comprehensive income. Investment
receivables are also revalued at the reporting date if held in a
currency other than euro.
Liabilities
Liabilities, other than those specifically accounted for under a
separate policy, are stated at the amounts which are considered to
be payable in respect of goods or services received up to the
reporting date on an accruals basis.
Investment payables
Investment payables are recognised in the Company's statement of
financial position when it becomes party to a contractual provision
for the amount payable. Investment payables are held at their
nominal amount. Investment payables are also revalued at the
reporting date if held in a currency other than euro.
Loans payable
Loans payable are held at amortised cost. Amortised cost for
loans payable is defined as the amount at which the loan is
measured at initial recognition, less principal repayments, plus or
minus the cumulative amortisation using the effective interest
method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits
and cash held in money market funds with original maturities of
three months or less.
Finance income
Finance income comprises interest income on cash and cash
equivalents and interest earned on financial assets on the
effective interest rate basis. Finance income is recognised in
investment income in the statement of profit and loss and other
comprehensive income.
Dividend income
Dividend income is recognised in the statement of profit or loss
and other comprehensive income on the date that the Company's right
to receive payment is established, which in the case of listed
securities is the ex-dividend date. For unlisted equities, this is
usually the date on which the payee's Board approve the payment of
a dividend. Dividend income of EUR1.6m (31 December 2017: EUR1.4m)
from equity securities designated at FVTPL is recognised in the
statement of profit or loss and other comprehensive income in the
current year.
Net changes in investments at FVTPL
Unrealised gains and losses
Net change in Derived Investments at FVTPL includes all
unrealised changes in the fair value of investments, including
foreign currency movements, since the beginning of the reporting
period or since designated upon initial recognition as held at
FVTPL and excludes dividend and interest income.
Net change in the fair value of Private Equity Investments is
calculated based on the movement of fair value since the beginning
of the reporting period adjusted for all calls paid and
distributions received. Total Private Equity distributions received
from this portfolio are treated as unrealised movements until the
commitment for primary investments or cost and undrawn commitment
for secondary investments have been fully repaid.
Realised gains and losses
Realised gains and losses from financial instruments at FVTPL
represents the gain or loss realised in the period. The unit of
account for Derived Investments is the individual share or debt
nominal which can be sold on an individual basis. The unit of
account for Private Equity Investments is commitment. The resulting
accounting treatment for the realised gains and losses is based on
these units of account.
The realised gain or loss for Derived Investments is calculated
based on the carrying amount of a financial instrument at the
beginning of the reporting period, or the transaction price if it
was purchased in the current reporting period, and its sale or
settlement price. Realised gains and losses on disposals of these
investments are calculated using the first- in first-out method.
Realised gains on the Private Equity portfolio are recognised when
the commitment on primary investments or the cost and undrawn
commitment for secondary investments has been fully repaid.
Distributions received in excess of the commitment for a primary
investment or the cost and undrawn amount for a secondary
investment are recognised as realised gains in the statement of
profit or loss and other comprehensive income.
Brokerage fees and other transaction costs
Brokerage fees and other transaction costs are costs incurred to
acquire investments at FVTPL. They include fees and commissions
paid to agents, brokers and dealers. Brokerage fees and other
transaction costs, when incurred, are immediately recognised in the
statement of profit or loss and other comprehensive income as an
expense.
Other expenses
Fees and other operating expenses are recognised in the
statement of profit or loss and other comprehensive income on an
accruals basis.
Provisions and contingent liabilities
Provisions are recognised when the Company has a present legal
or constructive obligation as a result of past events, it is
probable that an outflow of resources embodying economic benefits
will be required to settle the obligation, and a reliable estimate
of the amount of the obligation can be made. Contingent liabilities
are possible obligations whose existence will be confirmed only by
uncertain future events or present obligations where the transfer
of economic benefit is uncertain or cannot be reliably measured.
Contingent liabilities are not recognised but are disclosed unless
the probability of their occurrence is remote.
Foreign currency transactions
Transactions in foreign currencies are translated to the
functional currency of the Company at the exchange rates at the
date of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are
translated to the functional currency at the exchange rate at that
date.
For loans payable, the foreign currency gain or loss is the
difference between the amortised cost in the functional currency at
the beginning of the period, adjusted for interest payments during
the period, and the amortised cost in foreign currency translated
at the exchange rate at the end of the reporting period.
Non-monetary assets and liabilities denominated in foreign
currencies that are measured at fair value are retranslated to the
functional currency at the exchange rate at the date that the fair
value was determined. Non-monetary items that are measured in terms
of historical cost in foreign currency are translated using the
exchange rate at the date of the transaction. Foreign currency
differences arising on retranslation of non-investment assets are
recognised in the statement of profit or loss and other
comprehensive income. For investment assets held at FVTPL, foreign
currency differences are reported as part of the net changes in
investments at FVTPL.
Taxation
The Company may incur withholding taxes imposed by certain
countries on investment income or capital gains taxes upon
realisation of its investments. Such income or gains are recorded
gross of withholding taxes and capital gains taxes in the statement
of profit or loss and other comprehensive income. Withholding taxes
and capital gains taxes are shown as separate items. Where
applicable, tax accruals are raised by the Company based on an
investments expected hold period.
Shareholders' capital and reserves
Shareholders' capital
Shareholders' capital issued by the Company is recognised as the
proceeds or fair value received less incremental costs directly
attributable to the issue of shareholders' capital, net of tax
effects recognised as a deduction from equity.
Dividends
Dividends on ordinary shares are recognised in equity in the
period in which they become payable, which is when they are
approved by the Company's Board of Directors.
Earnings per share
The earnings per share is calculated based on the profit
attributable to ordinary shareholders and the weighted average
number of ordinary shares in issue during the year.
The diluted earnings per share is calculated based on the profit
attributable to ordinary shareholders and the weighted average
number of ordinary shares in issue during the year adjusted for
items that would cause a dilutive effect on the ordinary
shares.
The Adjusted earnings per share is calculated based on the
profit attributable to ordinary shareholders and the weighted
average number of ordinary shares in issue during the year adjusted
for the performance fee.
New standards and interpretations not yet adopted
The Company has applied all new and amended standards with an
effective date from 1 January 2018. Additionally, it has reviewed
and assessed changes to current accounting standards issued by the
IASB with an effective date from 1 January 2019; none of these have
had or are expected to have a material impact on the Company's
financial statements.
4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
In preparing the financial statements, the Company makes
judgements and estimates that affect the reported amounts of
assets, liabilities, income and expenses. Actual results could
differ from those estimates. Estimates and judgements are
continually evaluated and are based on the Board of Directors and
Investment Managers' experience and their expectations of future
events. Revisions to estimates are recognised prospectively.
(i) Judgements
The judgement that has the most significant effect on the
amounts recognised in the Company's financial statements relates to
investment assets. These have been determined to be investments
held at FVTPL and have been accounted for accordingly. See note 3
for further details.
(ii) Estimates
The estimate that has the most significant effect on the amounts
recognised in the Company's financial statements relates to
investments held at FVTPL. The fair value of investments traded in
an active market at FVTPL is determined by reference to their bid
-market pricing at the reporting date, otherwise the fair value is
determined by using appropriate valuation techniques and
methodologies.
The Investment Manager is responsible for the preparation of the
Company's valuations and meets quarterly to approve and discuss the
key valuation assumptions. The meetings are open to the Board of
Directors, the Investment Adviser and to the external auditor to
enable them to challenge the valuation assumptions and the proposed
valuation estimates. On a quarterly basis, the Board of Directors
review and approve the final NAV calculation before it is announced
to the market.
The Investment Manager also makes estimates and assumptions
concerning the future and the resulting accounting estimates will,
by definition, seldom equal the related actual results. The
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities are
outlined in note 14.
5 SEGMENTAL ANALYSIS
The segmental analysis of the Company's results and financial
position is set out below. Each pursue a different investment
strategy thesis as approved by the Chief Operating Decision Maker,
the Board of Directors. There have been no changes to segments
since the prior year ended 31 December 2017.
The Company prepares the analysis on the same basis as those
referenced in the accounting policies in note 3. On an ongoing
basis, the Board of Directors monitors the portfolio allocation to
ensure that it is in line with the investment strategy.
Reportable segments
PRIVATE
EQUITY DERIVED CENTRAL
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME INVESTMENTS INVESTMENTS FUNCTIONS(1) TOTAL
FOR THE YEARED 31 DECEMBER 2018 EUR'000 EUR'000 EUR'000 EUR'000
---------------------------------------- ----------- ----------- ------------ -------
Investment income - 19,416 26 19,442
Net changes in investments at FVTPL 92,667 (35,928) - 56,739
Realised foreign exchange losses - (1,550) (1,216) (2,766)
Net unrealised foreign currency gains - - 116 116
---------------------------------------- ----------- ----------- ------------ -------
Total income 92,667 (18,062) (1,074) 73,531
---------------------------------------- ----------- ----------- ------------ -------
Performance fees(2) 4,104 (1,981) - 2,123
Management fees (705) (3,905) - (4,610)
Administration and other operating
expenses - (1,131) (1,976) (3,107)
---------------------------------------- ----------- ----------- ------------ -------
Total operating expenses 3,399 (7,017) (1,976) (5,594)
---------------------------------------- ----------- ----------- ------------ -------
Finance costs - - (2,729) (2,729)
---------------------------------------- ----------- ----------- ------------ -------
Profit/(loss) before tax 96,066 (25,079) (5,779) 65,208
Tax charge - (261) - (261)
---------------------------------------- ----------- ----------- ------------ -------
Total comprehensive income attributable
to shareholders 96,066 (25,340) (5,779) 64,947
---------------------------------------- ----------- ----------- ------------ -------
PRIVATE
EQUITY DERIVED CASH AND
INVESTMENTS INVESTMENTS OTHER NCAs(3) TOTAL
STATEMENT OF FINANCIAL POSITION AT
31 DECEMBER 2018 EUR'000 EUR'000 EUR'000 EUR'000
----------------------------------- ----------- ----------- ------------- -------
Total assets 591,458 324,125 17,350 932,933
Total liabilities (239) (1,024) (899) (2,162)
----------------------------------- ----------- ----------- ------------- -------
NAV 591,219 323,101 16,451 930,771
----------------------------------- ----------- ----------- ------------- -------
PRIVATE
EQUITY DERIVED CENTRAL
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME INVESTMENTS INVESTMENTS FUNCTIONS(1) TOTAL
FOR THE YEARED 31 DECEMBER 2017 EUR'000 EUR'000 EUR'000 EUR'000
----------------------------------------- ----------- ----------- ------------ --------
Investment income - 27,304 256 27,560
Net changes in investments at FVTPL 15,510 5,360 - 20,870
Realised foreign exchange gains/(losses) 1,112 874 (187) 1,799
Net unrealised foreign currency losses - - (6,871) (6,871)
----------------------------------------- ----------- ----------- ------------ --------
Total income 16,622 33,538 (6,802) 43,358
----------------------------------------- ----------- ----------- ------------ --------
Performance fees(2) 630 (13,400) - (12,770)
Management fees (627) (4,589) - (5,216)
Administration and other operating
expenses(4) - (961) (1,849) (2,810)
----------------------------------------- ----------- ----------- ------------ --------
Total operating expenses 3 (18,950) (1,849) (20,796)
----------------------------------------- ----------- ----------- ------------ --------
Finance costs - - (1,324) (1,324)
----------------------------------------- ----------- ----------- ------------ --------
Profit/(loss) before tax 16,625 14,588 (9,975) 21,238
Tax charge - (733) - (733)
----------------------------------------- ----------- ----------- ------------ --------
Total comprehensive income attributable
to shareholders 16,625 13,855 (9,975) 20,505
----------------------------------------- ----------- ----------- ------------ --------
PRIVATE
EQUITY DERIVED CASH AND
INVESTMENTS INVESTMENTS OTHER NCAs(3) TOTAL
STATEMENT OF FINANCIAL POSITION AT
31 DECEMBER 2017 EUR'000 EUR'000 EUR'000 EUR'000
----------------------------------- ----------- ----------- ------------- -------
Total assets 590,185 320,484 20,976 931,645
Total liabilities - - (1,729) (1,729)
----------------------------------- ----------- ----------- ------------- -------
NAV 590,185 320,484 19,247 929,916
----------------------------------- ----------- ----------- ------------- -------
1. Central functions represents interest income earned on cash
balances held and administration and other operating expenses and
finance costs
2. Represents the movement in each respective portfolio's
overall performance fee reserve (realised and unrealised)
3. NCAs refers to net current assets of the Company
4. Expenses related to Derived Investments have been
reclassified from central functions to Derived Investments in the
prior year comparative
Geographic information
REST
NORTH OF
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME AMERICA EUROPE BRIC* WORLD TOTAL
FOR THE YEARED 31 DECEMBER 2018 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
-------------------------------------------- ------- ------- -------- ------- -------
Investment income 16,325 2,717 400 - 19,442
Net changes in investments at FVTPL 43,022 28,973 (18,300) 3,044 56,739
Realised foreign exchange losses (1,448) (1,225) (93) - (2,766)
Net unrealised foreign currency gains - 116 - - 116
-------------------------------------------- ------- ------- -------- ------- -------
Total income 57,899 30,581 (17,993) 3,044 73,531
-------------------------------------------- ------- ------- -------- ------- -------
Performance fee 4,104 (1,981) - - 2,123
Management fee (2,123) (1,823) (664) - (4,610)
Administration and other operating expenses - (3,107) - - (3,107)
-------------------------------------------- ------- ------- -------- ------- -------
Total operating expenses 1,981 (6,911) (664) - (5,594)
-------------------------------------------- ------- ------- -------- ------- -------
Finance costs - (2,729) - - (2,729)
-------------------------------------------- ------- ------- -------- ------- -------
Profit/(loss) before tax 59,880 20,941 (18,657) 3,044 65,208
-------------------------------------------- ------- ------- -------- ------- -------
Tax charge - (162) (99) - (261)
-------------------------------------------- ------- ------- -------- ------- -------
Total comprehensive income attributable
to shareholders 59,880 20,779 (18,756) 3,044 64,947
-------------------------------------------- ------- ------- -------- ------- -------
REST
NORTH OF
AMERICA EUROPE BRIC* WORLD TOTAL
STATEMENT OF FINANCIAL POSITION AT 31
DECEMBER 2018 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
-------------------------------------------- -------- -------- ------- ------- --------
Total assets 460,371 408,154 43,850 20,558 932,933
Total liabilities (12) (2,149) (1) - (2,162)
-------------------------------------------- -------- -------- ------- ------- --------
NAV 460,359 406,005 43,849 20,558 930,771
-------------------------------------------- -------- -------- ------- ------- --------
REST
NORTH OF
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME AMERICA EUROPE BRIC* WORLD TOTAL
FOR THE YEARED 31 DECEMBER 2017 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
-------------------------------------------- -------- -------- ------- ------- --------
Investment income 19,950 6,669 941 - 27,560
Net changes in investments at FVTPL (20,561) 37,096 3,167 1,168 20,870
Realised foreign exchange gains 432 1,154 213 - 1,799
Net unrealised foreign currency losses - (6,871) - - (6,871)
-------------------------------------------- -------- -------- ------- ------- --------
Total income (179) 38,048 4,321 1,168 43,358
-------------------------------------------- -------- -------- ------- ------- --------
Performance fee (1,326) (9,515) (1,929) - (12,770)
Management fee (2,685) (1,600) (931) - (5,216)
Administration and other operating expenses - (2,810) - - (2,810)
-------------------------------------------- -------- -------- ------- ------- --------
Total operating expenses (4,011) (13,925) (2,860) - (20,796)
-------------------------------------------- -------- -------- ------- ------- --------
Finance costs - (1,324) - - (1,324)
-------------------------------------------- -------- -------- ------- ------- --------
Profit before tax (4,190) 22,799 1,461 1,168 21,238
Tax charge - (89) (644) - (733)
-------------------------------------------- -------- -------- ------- ------- --------
Total comprehensive income (4,190) 22,710 817 1,168 20,505
-------------------------------------------- -------- -------- ------- ------- --------
REST
NORTH OF
AMERICA EUROPE BRIC* WORLD TOTAL
STATEMENT OF FINANCIAL POSITION AT 31
DECEMBER 2017 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
-------------------------------------- ------- ------- ------- ------- -------
Total assets 454,386 375,416 87,185 14,658 931,645
Total liabilities - (1,729) - - (1,729)
-------------------------------------- ------- ------- ------- ------- -------
NAV 454,386 373,687 87,185 14,658 929,916
-------------------------------------- ------- ------- ------- ------- -------
* BRIC = Brazil, Russia, India and China. AGA holds Derived
Investments directly in India and China only
6 ADMINISTRATION AND OTHER OPERATING EXPENSES
YEARED YEARED
31 DECEMBER 31 DECEMBER
2018 2017
EUR'000 EUR'000
-------------------------------------------------- ----------- -----------
Directors' fees 279 308
Administration and other fees 586 535
Deal transaction, custody and research costs 1,131 961
General expenses 927 816
Auditors' remuneration
Statutory audit 111 114
Other assurance services - interim review 46 44
Tax services 27 23
Other non-audit services - 9
-------------------------------------------------- ----------- -----------
Total administration and other operating expenses 3,107 2,810
-------------------------------------------------- ----------- -----------
Included in general expenses of EUR0.9m (31 December 2017:
EUR0.8m) was EUR0.4m of legal fees related to the renewal of the
revolving credit facility during the year. The Company has no
employees and there were no pension or staff cost liabilities
incurred during the year.
7 TAXATION
The Company is exempt from taxation in Guernsey under the
provisions of the Income Tax (Exempt Bodies) (Guernsey) Ordinance,
1989 and is charged an annual exemption fee of GBP1,200 (31
December 2017: GBP1,200).
The Company, at times, may be required to pay tax in other
jurisdictions as a result of specific trades in its investment
portfolio. During the year ended 31 December 2018, the Company had
a net tax expense of EUR0.3m (31 December 2017: EUR0.7m), mainly
related to the sale of listed equities in India and tax incurred on
debt interest in the United Kingdom. No deferred income taxes were
recorded as there are no timing differences.
8 INVESTMENTS
(a) Investments held at FVTPL
YEARED YEARED
31 DECEMBER 31 DECEMBER
2018 2017
EUR'000 EUR'000
----------------------------------------- ------------ --------------
Opening fair value 910,669 911,554
Calls 32,540 154,422
Distributions (135,060) (78,497)
Purchases1 223,636 278,543
Sales (176,476) (376,223)
Net change in fair value 56,739 20,870
----------------------------------------- ------------ ------------
Closing fair value 912,048 910,669
----------------------------------------- ------------ ------------
Private Equity Investments 591,458 590,185
Derived Investments 320,590 320,484
----------------------------------------- ------------ ------------
Debt 178,272 188,429
Equities 142,318 132,055
----------------------------------------- ------------ ------------
Closing fair value 912,048 910,669
----------------------------------------- ------------ ------------
1. Included in purchases is EUR11.1m related to Private Equity
as two carried interest holdings were purchased on the secondary
market during the year
(b) Net changes in investments at FVTPL
YEARED YEARED
31 DECEMBER 31 DECEMBER
2018 2017
EUR'000 EUR'000
--------------------------------------------------- ------------ --------------
Private Equity Investments
Gross unrealised gains 125,199 57,537
Gross unrealised losses (32,532) (42,027)
--------------------------------------------------- ------------ ------------
Total net unrealised gains on Private Equity
Investments 92,667 15,510
--------------------------------------------------- ------------ ------------
Derived Investments
Gross unrealised gains 22,528 40,145
Gross unrealised losses (38,132) (52,951)
--------------------------------------------------- ------------ ------------
Net unrealised losses on Derived Investments (15,604) (12,806)
--------------------------------------------------- ------------ ------------
Gross realised gains 12,781 49,486
Gross realised losses (33,105) (31,320)
--------------------------------------------------- ------------ ------------
Net realised (losses)/gains on Derived Investments (20,324) 18,166
--------------------------------------------------- ------------ ------------
Total net (losses)/gains on Derived Investments (35,928) 5,360
--------------------------------------------------- ------------ ------------
Net changes in investments at FVTPL 56,739 20,870
--------------------------------------------------- ------------ ------------
(c) Involvement with unconsolidated structured entities
The Company's investments in Private Equity funds are considered
to be unconsolidated structured entities. The nature and purpose of
these investment funds is to invest capital on behalf of its
limited partners. The funds pursue a sector focused strategy,
investing in four key sectors: Tech & Telco, Services,
Healthcare and Consumer. The Company commits to a fixed amount of
capital, which may be drawn (and returned) over the life of the
fund. The Company pays capital calls when due and receives
distributions from the funds, once an asset has been sold. See note
13 for a summary of outstanding commitments and recallable
distributions to the six underlying Private Equity Investments
held. The fair value of these was EUR591.5m at 31 December 2018 (31
December 2017: EUR590.2m), whereas total value of the Private
Equity funds was EUR13.4bn (31 December 2017: EUR13.9bn). During
the year, the Company did not provide financial support and has no
intention of providing financial or other support to these
unconsolidated structured entities.
9 CASH AND CASH EQUIVALENTS
31 DECEMBER 31 DECEMBER
2018 2017
EUR'000 EUR'000
------------------- ----------- -----------
Cash held at banks 17,306 18,989
------------------- ----------- -----------
Total 17,306 18,989
------------------- ----------- -----------
10 RELATED PARTY TRANSACTIONS
The Investment Manager was appointed by the Board of Directors
under a discretionary Investment Management Agreement ("IMA") dated
22 May 2015 and the amended IMA dated 22 August 2016. Such
agreement sets out the allocation and payment of the management
fee.
The management fee is calculated in arrears at a rate of 1.25%
per annum on the fair value of Derived Investments and non-fee
paying Private Equity Investments held by the Company which do not
already pay a management fee and/or an advisory fee to the
Investment Manager or Investment Adviser. During the year ended 31
December 2018, management fees of EUR4.6m (31 December 2017:
EUR5.2m), of which EUR1.2m (31 December 2017: EUR1.2m) was accrued
at year end, were earned by the Investment Manager. The Investment
Manager is also entitled to a performance fee on realised gains
when they reach or exceed a benchmark performance, as explained in
note 11.
The IMA has an initial term of six years and automatically
continues for a further three additional years unless prior to the
fifth anniversary the Investment Manager or the Company (by a
special resolution) serves written notice to terminate the IMA. The
Company is required to pay the Investment Manager all fees and
expenses accrued and payable for the notice period through to the
termination date.
The Investment Adviser has been engaged by the Investment
Manager to provide advice on the investment strategy of the
Company. An Investment Advisory Agreement ("IAA"), dated 22 May
2015 and an amendment dated 22 August 2016, exists between the two
parties. Though not legally related to the Company, the Investment
Adviser has been determined to be a related party. The Company paid
no fees and had no transactions with the Investment Adviser during
the year (31 December 2017: EURNil).
The Company has an Administration Agreement with Aztec Financial
Services (Guernsey) Limited ("Aztec") dated 22 May 2015. Under the
terms of the agreement, Aztec has delegated certain accounting and
bookkeeping services related to the Company to Apax Partners Fund
Services Limited ("APFS"), a related party of the Investment
Adviser, under a sub-administration agreement dated 22 May 2015. A
fee of EUR0.4m (31 December 2017: EUR 0.4m) was paid by the Company
in respect of administration fees and expenses, of which EUR0.3m
(31 December 2017: EUR0.3m) was paid to APFS.
The table below summarises shares held by Directors:
% OF TOTAL % OF TOTAL
31 DECEMBER SHARES IN 31 DECEMBER SHARES IN
2018 ISSUE 2017 ISSUE
------------- ----------- ---------- ----------- ----------
Tim Breedon 70,000 0.014% 70,000 0.014%
Susie Farnon 20,000 0.004% 20,000 0.004%
Chris Ambler 18,008 0.004% 6,553 0.001%
Mike Bane - - - -
------------- ----------- ---------- ----------- ----------
On 3 January 2018, Sarah Evans retired from the Board of
Directors and the Audit Committee. On 3 July 2018, Mike Bane was
appointed as a new Director.
11 PERFORMANCE FEE
31 DECEMBER 31 DECEMBER
2018 2017
EUR'000 EUR'000
------------------------------------------------ ----------- -----------
Opening performance fee reserve 17,495 11,291
Performance fee (released)/charged to statement
of profit or loss and OCI (2,123) 12,770
Performance fee paid (15,372) (6,566)
------------------------------------------------ ----------- -----------
Closing performance fee reserve - 17,495
------------------------------------------------ ----------- -----------
A performance fee is payable on an annual basis once realised
gains on the Derived Investments and non-fee paying Private Equity
Investments exceed the benchmark of an 8% internal rate of return.
Performance fees are only payable to the extent they do not dilute
the returns below the 8% benchmark and are calculated at 20% on
total realised gains. Where there are net realised losses these are
carried forward and netted against future performance fees that may
become payable.
The performance fee is payable to the Investment Manager by way
of ordinary shares of the Company. The mechanics of the payment of
the performance fee are explained in the prospectus. In accordance
with IFRS 2 "Share-based Payment", performance fee expenses are
charged through the statement of profit or loss and other
comprehensive income and allocated to a share-based payment
performance fee reserve in equity.
In the year ended 31 December 2018, a performance fee of
EUR15.4m was paid in cash to the Investment Manager in relation to
performance on investments realised during the year ended 31
December 2017. Certain regulatory constraints prevented this
payment in shares. The Company and the Investment Manager have been
working to clear and resolve these limitations and expect to pay
future fees in shares. As permitted by the IMA, the Company may pay
the performance fee in cash if there are restrictions that prevent
the Company purchasing shares to be awarded.
At 31 December 2018, management's best estimate of the expected
performance fee was calculated on the eligible portfolio on a
liquidation basis. There was no performance fee reserve at 31
December 2018 as the required benchmark return of 8% was not met on
assets realised for cash during the year. Additionally, there was
no performance fee reserve accrued on the remaining unrealised
portfolio as the required benchmark return was not met either.
12 REVOLVING CREDIT FACILITY AND FINANCE COSTS
The Company entered into a new multi-currency revolving credit
facility on 6 November 2018 (the "Loan Agreement") with Credit
Suisse AG, London Branch ("Credit Suisse") for general corporate
purposes. It subsequently ended its revolving credit facility with
Lloyds Bank plc on 9 November 2018. The Company may borrow under
the Loan Agreement; including letters of credit subject to a
maximum borrowing limit set at EUR140m. The new facility has an
initial term of three years and is due to expire on 5 November
2021.
The interest rate charged remains the same as the prior facility
as LIBOR or EURIBOR plus a margin of 210 bps. During the year
EUR0.4m (31 December 2017: EUR0.1m) interest was paid on 16
drawdowns on the facilities. In addition, a charge of EUR1.3m (31
December 2017: EUR1.3m) was included in the statement of profit or
loss related to a non-utilisation fee on the undrawn facility and a
one-off commitment fee of EUR1.0m (31 December 2017: EURNil)
related to the refinancing of the new revolving credit facility.
Under the new Loan Agreement, the Company is required to provide
collateral for each utilisation. Collateral provided will be in the
form of material Private Equity investments only. The loan-to-value
must not exceed 35% of the eligible Private Equity NAV. As at 31
December 2018 and 31 December 2017, the facility was
unutilised.
13 FINANCIAL RISK MANAGEMENT
The Company maintains positions in a variety of financial
instruments in accordance with its Investment Management strategy.
The Company's underlying investment portfolio comprises Private
Equity Investments and Derived Investments. The Company's exposure
to the portfolio is summarised in the table below:
31 DECEMBER 31 DECEMBER
2018 2017
--------------------------- ----------- -----------
Private Equity Investments 65% 65%
Derived Investments 35% 35%
--------------------------- ----------- -----------
Debt 19% 20%
Equities 16% 15%
--------------------------- ----------- -----------
Total 100% 100%
--------------------------- ----------- -----------
Private Equity Investments have a limited life-cycle given the
average legal term of a fund is ten years, unless extended by
investor consent. The Company actively manages Derived Investments
held and realises these as opportunities arise.
The Company's overall risk management programme seeks to
maximise the returns derived for the level of risk to which the
Company is exposed and seeks to minimise potential adverse effects
on the Company's financial performance. Accordingly, investments
made by the Company potentially carry a significant level of risk.
There can be no assurance that the Company's objectives will be
achieved or that there will be a return of capital invested.
The management of financial risks is carried out by the
Investment Manager under the policies approved by the Board of
Directors. The Investment Manager regularly updates the Board of
Directors, at a minimum four times a year, on its activities and
any material risk identified.
The Investment Manager manages financial risk against an
investment reporting and monitoring framework tailored to the
Company. The framework monitors investment strategy, investment
limits and restrictions as detailed in the prospectus along with
additional financial metrics deemed to be fundamental in the
running and monitoring of the Invested Portfolio. The Invested
Portfolio is monitored in real time which enables the Investment
Manager to keep a close review on performance and positioning.
The Company's activities expose it to a variety of financial
risks: credit risk, liquidity risk and market risk including price
risk, foreign currency risk and interest rate risk. The Company is
also exposed to operational risks such as custody risk. Custody
risk is the risk of loss of securities held in custody occasioned
by the insolvency or negligence of the custodian. Although an
appropriate legal framework is in place that mitigates the risk of
loss of title of the securities held by the custodian, in the event
of failure, the ability of the Company to transfer the securities
might be temporarily impaired. At 31 December 2018 and 31 December
2017, the Company's custodians were ING and HSBC, their respective
credit ratings were A- and A.
The Company considers that it is not exposed to any significant
concentration of risks. The Company has a diversified underlying
portfolio of investments in Private Equity Investments and Derived
Investments. The underlying investments are further diversified as
they are split across a number of sectors and operate in a number
of different geographic regions.
Credit risk
Credit risk is the risk of financial loss to the Company if a
counterparty to a financial instrument fails to meet its
contractual obligations. This risk arises principally from the
Company's investment in debt, cash and cash equivalents, investment
receivables and other receivables.
31 DECEMBER 31 DECEMBER
2018 2017
EUR'000 % OF NAV EUR'000 % OF NAV
-------------------------- ----------- -------- ----------- --------
Debt investments 178,272 19% 188,429 20%
Cash and cash equivalents 17,306 2% 18,989 2%
Investment receivables 2,125 0% - 0%
Other receivables 1,454 0% 1,987 0%
-------------------------- ----------- -------- ----------- --------
Total 199,157 21% 209,405 22%
-------------------------- ----------- -------- ----------- --------
(a) Debt investments
The Investment Manager manages the risk related to debt
investments by assessing the credit quality of the issuers and
monitoring this through the term of investment. The credit quality
of the Company's debt investments are summarised in the table
below:
31 DECEMBER 31 DECEMBER
2018 % OF DEBT 2017 % OF DEBT
RATING (S&P) EUR'000 INVESTMENTS % OF NAV EUR'000 INVESTMENTS % OF NAV
------------- ----------- ----------- -------- ----------- ----------- --------
B- 25,709 14% 3% 16,314 9% 2%
CCC+ 34,616 19% 4% 62,760 33% 7%
CCC 64,923 37% 7% 66,154 35% 7%
CCC- - 0% 0% 10,693 6% 1%
D 2,529 1% 0% - 0% 0%
N/R(1) 50,495 29% 5% 32,508 17% 3%
------------- ----------- ----------- -------- ----------- ----------- --------
Total 178,272 100% 19% 188,429 100% 20%
------------- ----------- ----------- -------- ----------- ----------- --------
1. Not currently rated by S&P
The Investment Manager also reviews the debt investments'
industry sector concentration. The Company was exposed to
concentration risk in the following industry sectors:
31 DECEMBER 31 DECEMBER
2018 % OF DEBT 2017 % OF DEBT
EUR'000 INVESTMENTS % OF NAV EUR'000 INVESTMENTS % OF NAV
------------- ----------- ----------- -------- ----------- ----------- --------
Tech & Telco 64,696 37% 7% 77,706 41% 8%
Services 85,879 48% 9% 35,702 19% 4%
Healthcare 16,469 9% 2% 36,904 20% 4%
Consumer 11,228 6% 1% 38,117 20% 4%
------------- ----------- ----------- -------- ----------- ----------- --------
Total 178,272 100% 19% 188,429 100% 20%
------------- ----------- ----------- -------- ----------- ----------- --------
(b) Cash and cash equivalents
The Company limits its credit risk exposure in cash and cash
equivalents by depositing cash with adequately rated institutions.
No allowance for impairment is made for cash and cash
equivalents.
The exposure to credit risk to cash and cash equivalents is set
out below:
31 DECEMBER 31 DECEMBER
2018 2017
CREDIT RATING EUR'000 EUR'000
----------------------------------------------- ----------- -----------
Cash held in banks A 368 16,033
Cash held in banks A- 9,303 2,869
Cash held in banks BBB+ 448 87
Cash held in money market funds AAA 7,187 -
-------------------------------- -------------- ----------- -----------
Total 17,306 18,989
------------------------------------------------ ----------- -----------
The Company's cash is held with JP Morgan Chase, RBS
International in Guernsey, HSBC and ING.
(c) Investment receivables and other receivables
The Company monitors the credit risk of investment receivables
and other receivables on an ongoing basis. These assets are not
considered impaired nor overdue for repayment.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they fall due. The Company's
obligation requirements are met through a combination of liquidity
from the sale of investments and the use of cash resources. In
accordance with the Company's policy, the Investment Manager
monitors the Company's liquidity position on a regular basis; the
Board of Directors also reviews it, at a minimum, on a quarterly
basis.
The Company invests in two portfolios, Private Equity
Investments and Derived Investments. Each portfolio has a different
liquidity profile.
Derived Investments in the form of listed securities are
considered to be liquid investments that the Company may realise on
short notice. These are determined to be readily realisable, as the
majority are listed on major global stock exchanges. Derived
Investments in the form of debt and unlisted equity have a mixed
liquidity profile as some positions may not be readily realisable
due to an inactive market or due to other factors such as
restricted trading windows during the year. Debt investments held
in actively traded bonds are considered to be readily
realisable.
The Company's Private Equity Investments are not readily
realisable unless in a secondary market, potentially at a
discounted price. In addition, the timing and quantum of Private
Equity distributions and capital calls on the remaining undrawn
commitments are difficult to predict.
The table below summarises the maturity profile of the Company's
financial liabilities at 31 December 2018 based on contractual
undiscounted repayment obligations. The contractual maturities of
most financial liabilities are less than three months, with the
exception of the revolving credit facility and commitments to
Private Equity Investments, where their expected cash flow dates
are summarised in the tables below.
At 31 December 2018, the Company had undrawn commitments and
recallable distributions of EUR251.8m (31 December 2017:
EUR266.2m), of which EUR78.8m (31 December 2017: EUR78.7m) is
expected to be drawn within 12 months. In line with the investment
strategy of the Company, the Derived Investments portfolio is
expected to be invested in equities, predominantly listed equity,
and debt. These asset classes provide additional liquidity
management options as many of them are readily realisable.
The Company also has access to a short-term revolving credit
facility upon which it can draw up to EUR140.0m. The Company may
utilise this facility in the short term to bridge Private Equity
calls and ensure that it can realise the Derived Investments at the
best price available. At 31 December 2018, the facility remained
undrawn (31 December 2017: EURNil).
The Company does not manage liquidity risk on the basis of
contractual maturity, instead the Company manages liquidity risk
based on expected cash flows.
31 December 2018
UP TO
3 MONTHS 3-12 MONTHS 1-5 YEARS TOTAL
EUR'000 EUR'000 EUR'000 EUR'000
------------------------------------------ -------- ----------- --------- -------
Accrued expenses 2,162 - - 2,162
Private Equity Investments outstanding
commitments and recallable distributions - 78,820 172,930 251,750
------------------------------------------ -------- ----------- --------- -------
Total 2,162 78,820 172,930 253,912
------------------------------------------ -------- ----------- --------- -------
31 December 2017
UP TO
3 MONTHS 3-12 MONTHS 1-5 YEARS TOTAL
EUR'000 EUR'000 EUR'000 EUR'000
------------------------------------------ -------- ----------- --------- -------
Accrued expenses 1,729 - - 1,729
Private Equity Investments outstanding
commitments and recallable distributions - 78,714 187,517 266,231
------------------------------------------ -------- ----------- --------- -------
Total 1,729 78,714 187,517 267,960
------------------------------------------ -------- ----------- --------- -------
The Company has outstanding commitments and recallable
distributions to Private Equity Investments as summarised
below:
31 DECEMBER 31 DECEMBER
2018 2017
EUR'000 EUR'000
------------------ ----------- -----------
Apax Europe VI 225 225
Apax Europe VII 1,030 1,030
Apax VIII 26,584 48,892
AMI Opportunities 10,701 12,887
Apax IX 173,872 161,548
Apax Digital Fund 39,338 41,649
------------------ ----------- -----------
Total 251,750 266,231
------------------ ----------- -----------
At year end, the Company's investments are recorded at fair
value. The remaining assets and liabilities are of a short-term
nature and their fair values approximate their carrying values.
Market risk
Market risk is the risk that changes in market prices such as
foreign currency exchange rates, interest rates and equity prices
will affect the Company's income or the value of its investments.
The Company aims to manage this risk within acceptable parameters
while optimising the return.
(a) Price risk
The Company is exposed to price risk on its Private Equity
Investments and Derived Investments. All positions within the
portfolio involve a degree of risk and there are a wide variety of
risks that affect how the price of each individual investments will
perform. The key price risks in the Company's portfolio include,
but are not limited to: investment liquidity - where a significant
imbalance between buyers and sellers can cause significant
increases or decreases in prices; the risk that a company which has
issued a bond or a loan has its credit rating changed, which can
lead to significant pricing risk; and general investment market
direction, where various factors such as the state of the global
economy or global political developments can impact prices.
For the year ended 31 December 2018, the main price risks for
the Company's portfolio were economic and political uncertainty in
Europe and the US together with uncertainty regarding fiscal
policy. The Investment Manager actively manages and monitors price
risk. The table below reflects the sensitivity of price risk of the
Invested Portfolio and the impact on NAV:
BULL CASE BEAR CASE
BASE CASE (+20%) (-20%)
31 DECEMBER 2018 EUR'000 EUR'000 EUR'000
------------------------------ --------- --------- ---------
Investments 912,048 1,094,458 729,638
Change in NAV and profit 182,410 (182,410)
Change in NAV (%) 20% -20%
Change in total income 248% -248%
Change in profit for the year 281% -281%
------------------------------ --------- --------- ---------
BULL CASE BEAR CASE
BASE CASE (+20%) (-20%)
31 DECEMBER 2017 EUR'000 EUR'000 EUR'000
------------------------------ --------- --------- ---------
Investments 910,669 1,092,803 728,535
Change in NAV and profit 182,134 (182,134)
Change in NAV (%) 20% -20%
Change in total income 420% -420%
Change in profit for the year 888% -888%
------------------------------ --------- --------- ---------
(b) Currency risk
The Company is exposed to currency risk on those investments,
cash, interest receivable and other non-current assets which are
denominated in a currency other than the Company's functional
currency, which is the euro. The Company does not hedge the
currency exposure related to its investments. The Company regards
its exposure to exchange rate changes on the underlying investments
as part of its overall investment return and does not seek to
mitigate that risk through the use of financial derivatives. The
Company is also exposed to currency risk on fees which are
denominated in a currency other than the Company's functional
currency.
The Company's exposure to currency risk on net assets is as
follows:
EUR USD GBP INR HKD NOK CHF TOTAL
AT 31 DECEMBER 2018 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
--------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Investments at FVTPL 320,277 491,727 45,116 30,476 13,006 3,865 7,581 912,048
Cash and cash equivalents 14,263 2,478 197 368 - - - 17,306
Investment receivables - 2,125 - - - - - 2,125
Interest receivable - 1,242 168 - - - - 1,410
Other receivables - - 44 - - - - 44
Accrued expenses (1,540) (40) (582) - - - - (2,162)
--------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Total net foreign currency
exposure 333,000 497,532 44,943 30,844 13,006 3,865 7,581 930,771
--------------------------- ------- ------- ------- ------- ------- ------- ------- -------
EUR USD GBP INR HKD NOK CHF TOTAL
AT 31 DECEMBER 2017 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
--------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Investments at FVTPL 340,323 481,420 26,270 36,416 22,222 4,018 - 910,669
Cash and cash equivalents 2,009 625 319 16,032 4 - - 18,989
Interest receivable 118 1,828 41 - - - - 1,987
Accrued expenses (1,431) (60) (238) - - - - (1,729)
--------------------------- ------- ------- ------- ------- ------- ------- ------- -------
Total net foreign currency
exposure 341,019 483,813 26,392 52,448 22,226 4,018 - 929,916
--------------------------- ------- ------- ------- ------- ------- ------- ------- -------
The Company's sensitivity to changes in foreign exchange
movements on net assets is summarised below:
BULL CASE BEAR CASE
BASE CASE (+15%) (-15%)
31 DECEMBER 2018 EUR'000 EUR'000 EUR'000
------------------------------ --------- --------- ---------
USD 497,532 572,162 422,902
GBP 44,943 51,684 38,202
INR 30,844 35,471 26,217
HKD 13,006 14,957 11,055
NOK 3,865 4,445 3,285
CHF 7,581 8,718 6,444
Change in NAV and profit 89,666 (89,666)
Change in NAV (%) 10% -10%
Change in total income 122% -122%
Change in profit for the year 138% -138%
------------------------------ --------- --------- ---------
BULL CASE BEAR CASE
BASE CASE (+15%) (-15%)
31 DECEMBER 2017 EUR'000 EUR'000 EUR'000
------------------------------ --------- --------- ---------
USD 483,813 556,385 411,241
GBP 26,392 30,352 22,434
INR 52,448 60,315 44,581
HKD 22,226 25,560 18,892
NOK 4,018 4,621 3,415
Change in NAV and profit 88,335 (88,335)
Change in NAV (%) 9% -9%
Change in total income 204% -204%
Change in profit for the year 431% -431%
------------------------------ --------- --------- ---------
(c) Interest rate risk
Interest rate risk arises from the effects of fluctuations in
the prevailing levels of market interest rates on financial assets
and liabilities and future cash flows. The Company holds debt
investments, loans payable and cash and cash equivalents that
expose the Company to cash flow interest rate risk. The Company's
policy makes provision for the Investment Manager to manage this
risk and to report to the Board of Directors as appropriate.
The Company's exposure to interest rate risk was EUR195.6m (31
December 2017: EUR205.5m). The analysis below assumes that the
price remains constant for both bull and bear case. The impact of
interest rate floors on the debt portfolio have been included in
the bear case and fixed rate debt positions have been excluded from
the below:
BULL CASE BEAR CASE
BASE CASE (+500BPS) (-500BPS)
31 DECEMBER 2018 EUR'000 EUR'000 EUR'000
------------------------------ --------- --------- ---------
Cash and cash equivalents 17,306 18,171 16,441
Debt 178,272 187,186 178,272
Change in NAV and profit 9,779 (865)
Change in NAV (%) 1% 0%
Change in total income 13% -1%
Change in profit for the year 15% -1%
------------------------------ --------- --------- ---------
BULL CASE BEAR CASE
BASE CASE (+500BPS) (-500BPS)
31 DECEMBER 2017 EUR'000 EUR'000 EUR'000
------------------------------ --------- --------- ---------
Cash and cash equivalents 18,989 19,938 18,040
Debt 186,481 195,805 186,481
Change in NAV and profit 10,274 (949)
Change in NAV (%) 1% 0%
Change in total income 24% -2%
Change in profit for the year 50% -5%
------------------------------ --------- --------- ---------
(d) Concentration risk
The Investment Manager also reviews the concentration risk of
the Invested Portfolio. The spread of the portfolio across the four
key sectors is set out below:
% OF % OF
PRIVATE % OF DEBT % OF EQUITY PRIVATE % OF DEBT % OF EQUITY
EQUITY INVESTMENTS INVESTMENTS EQUITY INVESTMENTS INVESTMENTS
31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER
2018 2018 2018 2017 2017 2017
------------- ----------- ----------- ----------- ----------- ----------- -----------
Tech & Telco 36% 36% 15% 32% 41% 28%
Services 24% 48% 31% 32% 19% 24%
Healthcare 23% 9% 45% 20% 20% 36%
Consumer 16% 7% 8% 15% 20% 12%
Other 1% 0% 1% 1% 0% 0%
------------- ----------- ----------- ----------- ----------- ----------- -----------
Total 100% 100% 100% 100% 100% 100%
------------- ----------- ----------- ----------- ----------- ----------- -----------
Capital management
The Company's capital management objectives are to maintain a
strong capital base to ensure it will continue as a going concern,
maximise capital appreciation and provide regular dividends to its
shareholders. The Company's capital comprises of non-redeemable
ordinary shares and retained earnings.
The ordinary shares are listed on the London Stock Exchange. The
Board receives regular reporting from its corporate broker which
provides insight into shareholder sentiment and movements in the
NAV per share discount. The Board monitors and assesses the
requirement for discount management strategies.
14 FAIR VALUE ESTIMATION
(a) Investments measured at fair value
The Company classifies for disclosure purposes 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:
- Quoted prices (unadjusted) in active markets for identical
assets or liabilities (level 1)
- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2)
- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level 3)
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 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 asset or liability.
The determination of what constitutes "observable" requires
significant judgement by the Company. The Company considers
observable data to be market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market. The Company also determines if
there is a transfer between each respective level at the end of
each reporting period based on the valuation information
available.
The following table analyses within the fair value hierarchy the
Company's financial assets (by class) measured at fair value at 31
December 2018:
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
ASSETS EUR'000 EUR'000 EUR'000 EUR'000
--------------------------- ------- ------- ------- -------
Private Equity Investments - - 591,458 591,458
Derived Investments 133,104 - 187,486 320,590
--------------------------- ------- ------- ------- -------
Debt - - 178,272 178,272
Equities 133,104 - 9,214 142,318
--------------------------- ------- ------- ------- -------
Total 133,104 - 778,944 912,048
--------------------------- ------- ------- ------- -------
The following table analyses within the fair value hierarchy the
Company's financial assets (by class) measured at fair value at 31
December 2017:
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
ASSETS EUR'000 EUR'000 EUR'000 EUR'000
------------------------------------- ------- ------- ------- ---------
Private Equity Investments - - 590,185 590,185
Derived Investments 121,339 - 199,145 320,484
------------------------------------- ------- ------- ------- -------
Debt - - 188,428 188,428
Equities 121,339 - 10,717 132,056
------------------------------------- ------- ------- ------- -------
Total 121,339 - 789,330 910,669
------------------------------------- ------- ------- ------- -------
Investments whose values are based on quoted market prices in
active markets are classified as level 1 investments. At 31
December 2018, the Company holds EUR133.1m (31 December 2017:
EUR121.3m) as level 1. There were no transfers to or from level 1
during the year.
Financial instruments that trade in markets that are not
considered to be active but are valued based on quoted market
prices, dealer quotations or alternative pricing sources supported
by observable inputs, are classified within level 2. As level 2
investments include positions that are not traded in active markets
and/or are subject to transfer restrictions, valuations may be
adjusted to reflect illiquidity and/or non-transferability, which
are generally based on available market information. At 31 December
2018, the Company holds EURNil (31 December 2017: EURNil)
classified as level 2 investments.
Level 3 instruments include Private Equity Investments and
Derived Investments in both debt and equity. Observable prices are
not available for these investments either because they trade
infrequently, if at all, or because trading activity does not meet
the requirements of being observable. Accordingly, the Company has
used valuation techniques to derive the fair value.
The Company values its holding in Private Equity Investments
based on the NAV statements it receives from the respective
underlying fund. The main input into the valuation models used to
determine NAV of the underlying level 3 investments within the
Private Equity funds comprises earnings multiples (based on the
budgeted earnings or historical earnings of the investee and
earnings multiples of comparable listed companies). The Company
also considers original transaction price, recent transactions in
the same or similar instruments and completed third-party
transactions in comparable instruments and adjusts the model as
deemed necessary.
The Company values debt based upon models that take into account
factors relevant to each investment and uses third-party market
data and broker quotes where available. The Company values unquoted
equities based on models that utilise comparable company earnings
multiples, budgeted and historical earnings and recent
transactions.
Movements in level 3 investments are summarised in the table
below:
YEARED YEARED
31 DECEMBER 2018 31 DECEMBER 2017
----------------------------------- -----------------------------------
PRIVATE PRIVATE
EQUITY DERIVED EQUITY DERIVED
INVESTMENTS INVESTMENTS TOTAL INVESTMENTS INVESTMENTS TOTAL
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
------------------------- ----------- ----------- --------- ----------- ----------- ---------
Opening fair value 590,185 199,145 789,330 498,750 222,922 721,672
Additions 43,666 109,786 153,452 154,422 157,692 312,114
Disposals and repayments (135,060) (121,660) (256,720) (78,497) (182,436) (260,933)
Realised losses - (7,806) (7,806) - (29,214) (29,214)
Unrealised gains 92,667 8,021 100,688 15,510 26,904 42,414
Transfers into level
3 - - - - 3,277 3,277
------------------------- ----------- ----------- --------- ----------- ----------- ---------
Closing fair value 591,458 187,486 778,944 590,185 199,145 789,330
------------------------- ----------- ----------- --------- ----------- ----------- ---------
The unrealised gains attributable to only assets held at 31
December 2018 were EUR100.7m (31 December 2017: EUR6.8m)
(b) Significant unobservable inputs used in measuring fair
value
The table below sets out information about significant
unobservable inputs used in measuring financial instruments
categorised as level 3 in the fair value hierarchy:
SENSITIVITY TO
CHANGES
SIGNIFICANT IN SIGNIFICANT 31 DECEMBER 31 DECEMBER
UNOBSERVABLE UNOBSERVABLE 2018 VALUATION 2017 VALUATION
DESCRIPTION VALUATION TECHNIQUE INPUTS INPUTS EUR'000 EUR'000
-------------------- -------------------- ------------------- ------------------- --------------- ---------------
The Company does
not
apply further
discount
or liquidity
premiums
to the valuations
as these are
already
captured in the
underlying
valuation. This
NAV
is subject to
changes
in the valuations
of the underlying
portfolio
companies.
These can be
exposed
to a number of
risks,
including
liquidity
risk, price risk,
credit risk,
currency
risk and interest
rate risk. A
movement
of 10% in the
value
of Private Equity
Investments would
move the NAV at
the
year end by 6.0%
NAV adjusted (31
Private for carried December 2017:
Equity Investments interest NAV 6.1%). 559,408 570,758
-------------------- -------------------- ------------------- ------------------- --------------- ---------------
The Company's
investment
in AEVII carried
interest
is valued based on
a discounted cash
flow model. A
movement
of 10% in the
discount
rate applied would
move the NAV at
year
end by 0.1% (31
Private Discounted cash Discount rate December
Equity Investments flow model applied 2017: 0.1%). 32,050 19,427
-------------------- -------------------- ------------------- ------------------- --------------- ---------------
The Company held 16
debt positions (31
December 2017:
15),
of which 6
Debt is valued positions
by market prices (31 December 2017:
if available 13) had a credit
and relevant quality
in size and adjustment
date. Illiquid applied.
debt positions The average credit
are valued via quality adjustment
debt valuation applied was 0.4%
models. These (31
models consider, December 2017:
where appropriate, 0.1%).
broker quotes, A movement of 10%
credit in the risk
computations, premium
market yield would result in a
movements, risk movement of 0.0%
premiums, the on
credit quality NAV at year end
of the borrower (31
and expected Credit quality December 2017:
Debt repayment dates. adjustment 0.0%). 178,272 188,428
-------------------- -------------------- ------------------- ------------------- --------------- ---------------
The Company held 3
equity positions
(31
December 2017: 4)
of which 2
positions
(31 December 2017:
2) were valued
using
comparable company
multiples. The
average
multiple was 4.4x
Where market (31 December 2017:
prices are 9.6x). A movement
unavailable, of 10% in the
the Company multiple
uses comparable applied would move
company earnings the NAV at year
multiples and end
precedent by 0.2% (31
transaction Comparable December
Equities analysis. company multiples 2017: 0.1%). 9,214 10,717
-------------------- -------------------- ------------------- ------------------- --------------- ---------------
15 SHAREHOLDERS' CAPITAL
At 31 December 2018, the Company had 491,100,768 ordinary shares
fully paid with no par value in issue (31 December 2017:
491,100,768 shares). All ordinary shares rank pari passu with each
other, including voting rights and there has been no change since
31 December 2017.
The Company has one share class; however, a number of investors
are subject to lock-up periods between five and ten years, which
restricts them from disposing of ordinary shares issued at
admission. For investors with five-year lock-up periods, 20% of
ordinary shares are released from lock-up each year from the first
anniversary of admission, 15 June 2016. As at 31 December 2018, 60%
of these shares have been released following the third anniversary
on the 15 June 2018. For investors with ten-year lock-up periods,
20% of ordinary shares are released from lock-up each year from the
sixth anniversary of admission, 15 June 2021.
16 EARNINGS AND NAV PER SHARE
31 DECEMBER 31 DECEMBER
EARNINGS 2018 2017
------------------------------------------- ----------- -----------
Profit or loss for the year attributable
to equity shareholders: EUR'000 64,947 20,505
Weighted average number of shares in issue
Ordinary shares at end of year 491,100,768 491,100,768
Shares issued in respect of performance
fee - -
------------------------------------------- ----------- -----------
Total weighted ordinary shares 491,100,768 491,100,768
------------------------------------------- ----------- -----------
Dilutive adjustments - -
Total diluted weighted ordinary shares 491,100,768 491,100,768
Effect of performance fee adjustment on
ordinary shares
Performance shares to be awarded based on
a liquidation basis(1) - 10,445,035
------------------------------------------- ----------- -----------
Adjusted shares(2) 491,100,768 501,545,803
------------------------------------------- ----------- -----------
Earnings per share (cents)
Basic 13.22 4.18
Diluted 13.22 4.18
Adjusted 13.22 4.09
------------------------------------------- ----------- -----------
1. The number of performance shares is calculated inclusive of
deemed realised performance shares that would be issued utilising
the theoretical performance fee payable calculated on a liquidation
basis
2. The calculation of Adjusted Shares above assumes that new
shares were issued by the Company to the Investment Manager in lieu
of the performance fee. As per the prospectus, the Company may also
purchase shares from the market if the Company is trading at a
discount to its NAV per share. In such a case, the Adjusted NAV per
share would be calculated by taking the NAV at the year adjusted
for the performance fee reserve and then divided by the current
number of ordinary shares in issue. At 31 December 2018, the
Adjusted NAV per share for both methodologies resulted in an
Adjusted NAV per share of EUR1.90 ( 31 December 2017: EUR1.85 and
EUR1.86) respectively. Please note that as there was no performance
fee reserve at 31 December 2018, the NAV per share and Adjusted NAV
per share remained the same
At 31 December 2018, there were no items that would cause a
dilutive effect on earnings per share. The Adjusted earnings per
share has been calculated based on the profit attributable to
shareholders adjusted for the total accrued performance fee at year
end over the weighted average number of ordinary shares. This has
been calculated on a full liquidation basis inclusive of
performance fee attributable to realised investments. Performance
shares to be issued are calculated based on the trading price of
shares and foreign exchange rate at close of business on 31
December 2018.
The Company had a NAV per share of EUR1.90 at 31 December 2018
(31 December 2017: EUR1.89). This was calculated based on the NAV
of the portfolio divided by the weighted average number of ordinary
shares. The Adjusted NAV per share remained the same as NAV per
share at EUR1.90 (31 December 2017: EUR1.86) as there was no
performance fee reserve in the current year.
31 DECEMBER 31 DECEMBER
2018 2017
----------------------- ----------- -----------
NAV EUR'000
NAV at end of year 930,771 929,916
NAV per share (EUR)
NAV per share 1.90 1.89
Adjusted NAV per share 1.90 1.86
----------------------- ----------- -----------
17 DIVIDS
YEARED YEARED
31 DECEMBER 31 DECEMBER
2018 2017
---------------- ----------------
DIVIDS PAID TO SHAREHOLDERS EUR'000 GBP'000 EUR'000 GBP'000
--------------------------------------------- ------- ------- ------- -------
Final dividend paid - 4.17 pence per share
(31 December 2017: 4.13 pence per share) 22,928 20,478 23,769 20,283
Interim dividend paid - 4.33 pence per share
(31 December 2017: 4.24 pence per share) 23,669 21,265 23,033 20,823
--------------------------------------------- ------- ------- ------- -------
Total 46,597 41,743 46,802 41,106
--------------------------------------------- ------- ------- ------- -------
YEARED YEARED
31 DECEMBER 31 DECEMBER
2018 2017
-------------- --------------
DIVIDS PROPOSED EUR GBP EUR GBP
------------------------- ------ ------ ------ ------
Final dividend per share 4.74c 4.12p 4.73c 4.17p
------------------------- ------ ------ ------ ------
On 5 March 2018, the Board approved the final dividend for 2017,
4.17 pence per share (4.73 cents euro equivalent). This represents
2.5% of the Company's euro NAV at 31 December 2017 and was paid on
4 April 2018.
On 14 August 2018, the Board approved an interim dividend for
the six months ended 30 June 2018 of 4.33 pence per ordinary share
(4.82 cents euro equivalent). This represents 2.5% of the Company's
euro NAV at 30 June 2017 and was paid on 14 September 2018.
18 SUBSEQUENT EVENTS
On 26 February 2019, Apax VIII, in which the Company is a
limited partner, announced an agreement in principle to sell Exact
Software. On 21 February 2019, Apax VIII also announced that it has
agreed to sell its entire stake in AssuredPartners. Together, these
two transactions represent an estimated uplift of c.EUR34m or
c.3.6% to the Company's Adjusted NAV at 31 December 2018. Both
transactions are subject to customary closing conditions.
On 4 March 2019, the Board approved the final dividend for 2018,
4.12 pence per share (4.74 cents euro equivalent). This represents
2.5% of the Company's euro NAV at 31 December 2018 and has an
expected payment date of 5 April 2019.
SHAREHOLDER INFORMATION
ADMINISTRATION
DIRECTORS (ALL NON-EXECUTIVE)
Tim Breedon CBE (Chairman)
Susie Farnon (Chairman of the Audit Committee)
Chris Ambler
Mike Bane (appointed 3 July 2018)
Sarah Evans (resigned 3 January 2018)
REGISTERED OFFICE OF THE COMPANY
PO Box 656
East Wing
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3PP
Channel Islands
INVESTMENT MANAGER
Apax Guernsey Managers Limited
Third Floor, Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey GY1 2HJ
Channel Islands
INVESTMENT ADVISER
Apax Partners LLP
33 Jermyn Street
London
SW1Y 6DN
United Kingdom
www.apax.com
ADMINISTRATOR, COMPANY SECRETARY AND DEPOSITARY
Aztec Financial Services (Guernsey) Limited
PO Box 656
East Wing
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3PP
Channel Islands
Tel: +44 (0)1481 749 700
AGA-admin@aztecgroup.co.uk
www.aztecgroup.co.uk
CORPORATE BROKER
Jefferies International Limited
Vintners Place
68 Upper Thames Street
London EC4V 3BJ
United Kingdom
REGISTRAR
Link Asset Services
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey GY2 4LH
Channel Islands
Tel: +44 (0) 871 664 0300
enquiries@linkgroup.co.uk
www.linkassetservices.com
INDEPENT AUDITOR
KPMG Channel Islands Limited
Glategny Court
St Peter Port
Guernsey GY1 1WR
Channel Islands
ASSOCIATION OF INVESTMENT COMPANIES - AIC
The AIC is the trade body for closed-ended investment companies.
It helps its member companies deliver better returns for their
investors through lobbying, media engagement, technical advice,
training, and events.
www.theaic.co.uk
DIVID TIMETABLE
Announcement: 5 March 2019
Ex-dividend date: 14 March 2019
Record date: 15 March 2019
Payment date: 5 April 2019
STOCK SYMBOL
London Stock Exchange: APAX
ENQUIRIES
Any enquiries relating to shareholdings on the share register
(for example, transfers of shares, changes of name or address, lost
share certificates or dividend cheques) should be sent to the
Registrars at the address given above. The Registrars offer an
online facility at www.signalshares.com which enables shareholders
to manage their shareholding electronically.
INVESTOR RELATIONS
Enquiries relating to AGA's strategy and results or if you would
like to arrange a meeting, please contact:
Sarah Wojcik
IR Manager - AGA
Apax Partners LLP
33 Jermyn Street
London
SW1Y 6DN
United Kingdom
Tel: +44 (0) 207 872 6300
INVESTMENT POLICY
The Company's investment policy is to make (i) Private Equity
Investments, which are primary and secondary commitments to, and
investments in, existing and future Apax Funds and (ii) Derived
Investments, which Apax will typically identify as a result of the
process that Apax Partners undertakes in its private equity
activities and which will comprise direct or indirect investments
other than Private Equity Investments, including primarily
investments in public and private debt, as well as limited
investments in equity, primarily in listed companies. Once fully
invested, the Company expects to be invested in approximately equal
proportion between Private Equity Investments and Derived
Investments, though the investment mix will fluctuate over time due
to market conditions and other factors, including calls for and
distributions from Private Equity Investments, the timing of making
and exiting Derived Investments and the Company's ability to invest
in future Apax Funds. The actual allocation may therefore fluctuate
according to market conditions, investment opportunities and their
relative attractiveness, the cash flow requirements of the Company,
its dividend policy and other factors.
PRIVATE EQUITY INVESTMENTS
The Company expects that it will seek to invest in any new Apax
Funds that are raised in the future. Private Equity Investments may
be made into Apax Funds with any target sectors and geographic
focus and may be made directly or indirectly. The Company will not
invest in third-party managed funds.
DERIVED INVESTMENTS
The Company will typically follow the Apax Group's core sector
and geographical focus in making Derived Investments, which may be
made globally. Derived Investments may include among others, (i)
direct and indirect investments in equity and debt instruments,
including equity in private and public companies, as well as in
private and public debt which may include sub-investment grade and
unrated debt instruments, (ii) co-investments with Apax Funds or
third-parties, (iii) investments in the same or different types of
equity or debt instruments in portfolio companies as the Apax Funds
and may potentially include (iv) acquisitions of Derived
Investments from Apax Funds or third-parties, (v) investments in
restructurings; and (vi) controlling stakes in companies.
INVESTMENT RESTRICTIONS
The following specific investment restrictions apply to the
Company's investment policy:
- no investment or commitment to invest shall be made in any
Apax Fund which would cause the total amounts invested by the
Company in, together with all amounts committed by the Company to,
such Apax Fund to exceed, at the time of investment or commitment,
25% of the Gross Asset Value; this restriction does not apply to
any investments in or commitments to invest made to any Apax Fund
that has investment restrictions restricting it from investing or
committing to invest more than 25% of its total commitments in any
one underlying portfolio company;
- not more than 15% of the Gross Asset Value may be invested in
any one portfolio company of an Apax Fund on a look-through
basis;
- not more than 15% of the Gross Asset Value may be invested in
any one Derived Investment; and
- in aggregate, not more than 20% of the Gross Asset Value is
intended to be invested in Derived Investments in equity securities
of publicly listed companies. However, such aggregate exposure will
always be subject to an absolute maximum of 25% of the Gross Asset
Value.
The aforementioned restrictions apply as at the date of the
relevant transaction or commitment to invest. Hence, the Company
would not be required to effect changes in its investments owing to
appreciations or depreciations in value, distributions or calls
from existing commitments to Apax Funds, redemptions or the receipt
of, or subscription for, any rights, bonuses or benefits in the
nature of capital or of any acquisition or merger or scheme of
arrangement for amalgamation, reconstruction, conversion or
exchange or any redemption, but regard shall be had to these
restrictions when considering changes or additions to the Company's
investments (other than where these investments are due to
commitments made by the Company earlier).
The Company may borrow in aggregate up to 25% of Gross Asset
Value at the time of borrowing to be used for financing or
refinancing (directly or indirectly) its general corporate purposes
(including without limitation, any general liquidity requirements
as permitted under its Articles of Incorporation), which may
include financing short-term investments and/or buybacks of
ordinary shares. The Company does not intend to introduce long-term
structural gearing.
AIFMD
Alternative Investment Fund Managers Directive ('AIFMD')
STATUS AND LEGAL FORM
The Company is a non-EU Alternative Investment Fund ("AIF"),
being a closed -ended investment company incorporated in Guernsey
and listed on the London Stock Exchange. The Company's registered
office is PO Box 656, East Wing, Trafalgar Court, Les Banques, St
Peter Port, Guernsey GY1 3PP.
REMUNERATION DISCLOSURE
This disclosure contains general information about the basic
characteristics of AGML's ("the AIFM") remuneration policies and
practices as well as some detailed information regarding the
remuneration policies and practices for board directors whose
professional activities have a material impact on the risk profile
of Apax Global Alpha Limited ("the AIF").
This disclosure is intended to provide the information
contemplated by Section XIII of the ESMA Guidelines on sound
remuneration policies under the AIFMD and paragraph 8 of the
Commission Recommendation (2009/384/EC of 30 April 2009 on
remuneration policies in the financial services sector) taking into
account the nature, scale and complexity of the AIFM and the AIFs
it manages. The AIFM is a non -EU manager and the AIF is a non-EU
closed-ended investment company incorporated in Guernsey and listed
on the London Stock Exchange.
The AIF is externally managed(1) by the AIFM. The AIFM does not
have any employees, however it does have a board of directors
comprising four people, two of whom are employees of Apax Partners
Guernsey Limited ("APG") and two of whom are non -executive
directors. No other persons are remunerated directly from the AIFM
for work in relation to the AIFM or the AIF. The directors of the
AIFM fall within the Directive definitions as senior management and
risk-takers as detailed below:
- "senior management" means the relevant persons responsible for
the supervision of the AIFM and for the assessment and periodical
review of the adequacy and effectiveness of the risk management
process and policies of the AIFM;
- "risk-takers" means all staff whose actions have material
impact on the AIFM's risk profile or the risk profile of the AIF
and, given size of the AIFM's operations, includes all staff of the
AIFM who are involved directly or indirectly in the management of
the AIF.
GENERAL DESCRIPTION OF POLICY
The board of the AIFM has adopted a remuneration policy which
applies to the directors. The overarching aim of the policy is
twofold: (i) to ensure that there is no encouragement for
risk-taking at the level of the AIF which is inconsistent with the
risk profile and investment strategy of the AIF and (ii) to
encourage proper governance, risk management and the use of sound
control processes. All directors are responsible for ensuring the
AIF acts in accordance with its investment policy and managing the
AIFM's risks effectively. The policy recognises that two of the
directors are non-executive directors and two directors are Apax
employees (the 'Apax directors').
Remuneration (which excludes carried interest) paid to the
directors is not based on, or linked to, the overall performance of
the AIF. There is no variable component in the remuneration paid to
any of the directors for their services on the board and thus the
policy does not seek to identify quantitative and qualitative
criteria by which the directors' performance can be assessed for
the purposes of adjusting a variable component of remuneration.
Remuneration paid to the directors is therefore not based on, or
linked to, the overall performance of the AIF.
GENERAL DESCRIPTION OF REMUNERATION GOVERNANCE
The remuneration process is overseen by the AIFM directors. The
board of the AIFM review the remuneration policy annually. The
board of the AIFM ensures that the policy is transparent and easy
to understand.
Remuneration framework - objectives
The remuneration of directors is described in the table
below:
TYPE OF REMUNERATION PURPOSE
-------------------------- ------------------------------------------------------------
Non-executive directors
of the AIFM x2 persons * a contractual arrangement is in place with each
person for their services
* receive a set amount of remuneration each quarter
* the remuneration of these directors is detailed in
the disclosed remuneration value
-------------------------- ------------------------------------------------------------
APG employees as directors
of the AIFM x2 persons * receive no direct remuneration resulting from the
performance of the AIFM or the AIF
* the services provided by these directors is included
within the total fee payable for services provided by
the administrator to the AIFM and the performance of
these services forms part of the employees duties
-------------------------- ------------------------------------------------------------
Variable remuneration * no such remuneration is paid
(annual bonus)
-------------------------- ------------------------------------------------------------
QUANTITATIVE DISCLOSURES
The table below shows the breakdown of remuneration for the
fiscal year ended 31 December 2018, for the directors:
Total The total amount of fixed remuneration for GBP155,000
the reporting period paid by the AIFM to its directors
Carried interest Not applicable to the AIF2
1. From the Directive - "Depending on their legal form, it
should be possible for AIFs to be either externally or internally
managed. An AIF should be deemed externally managed when an
external legal person has been appointed as manager by or on behalf
of the AIF, which through such appointment is responsible for
managing the AIF"
2. The AIF will not pay carried interest, which can be confirmed in its prospectus
MATERIAL CHANGES
There have been no material changes to the information disclosed
under Article 23 of the AIFMD in the prospectus of the Company.
QUARTERLY RETURNS SINCE 1Q15
TOTAL RETURN(2) (EURO) RETURN ATTRIBUTION
-------------------------- -----------------------------------------------------------
TOTAL
PRIVATE DERIVED DERIVED PRIVATE DERIVED DERIVED PERFORMANCE NAV
EQUITY DEBT EQUITY EQUITY DEBT EQUITY FEE OTHER(3) RETURN
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
1Q15(1) 17.4% 9.5% 15.3% 5.9% 4.0% 2.8% (1.6%) 0.9% 11.8%
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
2Q15(1) 2.7% (0.5%) (3.6%) 9.2% (3.9%) (4.8%) 2.8% (3.7%) (0.5%)
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
3Q15 4.6% (2.1%) (7.7%) 1.4% (0.5%) (0.8%) 0.0% (0.4%) (0.4%)
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
4Q15 8.1% 3.9% 10.4% 3.3% 1.5% 1.1% (0.5%) 0.3% 5.6%
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
1Q16 (0.5%) (1.5%) (5.4%) (0.3%) (0.7%) (0.5%) 0.5% (0.8%) (1.8%)
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
2Q16 1.6% (0.4%) 5.8% 0.9% (0.1%) 0.4% (0.3%) 0.3% 1.2%
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
3Q16 (0.3%) 5.0% 11.1% (0.2%) 1.7% 1.1% (0.1%) (0.5%) 2.0%
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
4Q16 7.5% 5.9% (0.3%) 3.4% 2.0% (0.0%) (0.4%) 0.5% 5.5%
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
1Q17 1.6% 0.5% 4.7% 0.7% 0.2% 0.6% (0.3%) 0.2% 1.4%
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
2Q17 (2.7%) (7.7%) 11.4% (1.9%) (2.4%) 2.9% (0.6%) (0.2%) (2.1%)
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
3Q17 1.0% (1.4%) 0.2% 0.8% (0.3%) 0.2% (0.2%) (0.9%) (0.3%)
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
4Q17 3.4% 5.2% 3.4% 1.8% 1.0% 1.0% (0.4%) 0.2% 3.5%
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
1Q18 0.0% (1.7%) (0.2%) (0.3%) 0.0% (0.1%) 0.2% (0.4%) (0.7%)
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
2Q18 11.0% 2.5% (1.8%) 6.9% 0.7% (0.2%) (0.3%) (0.1%) 6.9%
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
3Q18 5.4% 1.5% (10.4%) 3.5% 0.2% (1.8%) 0.1% (0.2%) 1.8%
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
4Q18 (0.0%) 2.3% (3.9%) (0.0%) 0.2% (0.7%) (0.2%) 0.1% (0.7%)
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
2015 34.6% 10.5% 15.9% 10.9% 3.8% 2.0% (1.6%) (1.4%) 13.6%
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
2016 8.0% 8.0% 11.3% 3.8% 2.7% 0.9% (0.0%) (0.9%) 6.6%
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
2017 3.3% (2.0%) 24.2% 1.6% (0.7%) 4.3% (1.4%) (1.7%) 2.2%
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
2018 17.4% 4.5% (17.6%) 10.1% 1.2% (3.0%) 0.2% (1.4%) 7.1%
------- -------- ------- ------- ------- ------- ------- ----------- ---------- ---------
TOTAL RETURN(2) (CONSTANT
CURRENCY) RETURN ATTRIBUTION
----------------------------- -----------------------------------------------------------------
TOTAL
PRIVATE DERIVED DERIVED PRIVATE DERIVED DERIVED PERFORMANCE NAV
EQUITY DEBT EQUITY EQUITY DEBT EQUITY FEE OTHER(3) FX(4) RETURN
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
1Q15(1) 8.7% 0.6% 3.7% 3.6% 1.2% 1.3% (1.9%) (0.9%) 8.7% 11.8%
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
2Q15(1) 4.7% 2.6% (0.2%) (3.2%) (0.9%) 0.2% (0.6%) 0.2% 3.7% (0.5%)
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
3Q15 7.2% (1.8%) (5.0%) 2.3% (0.5%) (0.6%) 0.0% (0.4%) (1.2%) (0.4%)
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
4Q15 7.3% 0.8% 8.1% 3.3% 0.5% 1.0% (0.6%) (0.3%) 1.7% 5.6%
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
1Q16 1.8% 2.5% (0.8%) 0.7% 0.4% (0.2%) 0.8% (0.4%) (3.1%) (1.8%)
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
2Q16 (0.1%) (2.5%) 5.4% 0.3% (0.9%) 0.5% (0.4%) 0.0% 1.6% 1.2%
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
3Q16 0.1% 6.0% 11.5% (0.1%) 2.1% 1.2% (0.1%) (0.6%) (0.5%) 2.0%
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
4Q16 4.1% (0.0%) (4.5%) 2.0% 0.3% (0.5%) (0.4%) 0.1% 4.0% 5.5%
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
1Q17 2.0% 1.7% 4.5% 1.1% 0.7% 0.7% (0.3%) (0.2%) (0.6%) 1.4%
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
2Q17 1.5% (1.5%) 17.9% 0.7% (0.3%) 3.3% (0.5%) (0.6%) (4.8%) (2.1%)
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
3Q17 2.5% 1.7% 1.1% 1.3% 0.5% 0.5% (0.1%) (0.2%) (2.3%) (0.3%)
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
4Q17 4.5% 6.6% 3.9% 2.7% 1.4% 1.2% (0.4%) (0.2%) (1.1%) 3.5%
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
1Q18 1.3% 0.6% 2.4% 0.4% 0.4% 0.2% 0.3% (0.3%) (1.7%) (0.7%)
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
2Q18 8.9% (2.6%) (3.9%) 5.8% (0.2%) (0.6%) (0.3%) (0.5%) 2.7% 6.9%
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
3Q18 5.5% 1.0% (9.5%) 3.5% 0.1% (1.7%) 0.2% (0.2%) (0.1%) 1.8%
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
4Q18 (0.3%) 1.3% (4.9%) (0.2%) 0.1% (0.8%) (0.3%) 0.0% 0.5% (0.7%)
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
2015 31.3% 1.8% 7.2% 9.9% 1.2% 1.1% (1.6%) (1.4%) 4.4% 13.6%
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
2016 5.9% 5.6% 12.0% 2.8% 2.0% 0.9% (0.0%) (0.9%) 1.8% 6.6%
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
2017 10.0% 9.8% 35.7% 4.9% 2.1% 5.5% (1.3%) (1.0%) (8.0%) 2.2%
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
2018 15.9% 0.3% (17.4%) 9.2% 0.4% (2.9%) 0.2% (1.5%) 1.7% 7.1%
------- --------- -------- -------- ------- ------- ------- ----------- -------- ------ -------
NOTE: All quarterly information included in the tables above is
unaudited
1. Includes returns of the PCV Group for the period between 31
December 2014 and 15 June 2015
2. Total Return for each respective sub-portfolio has been
calculated by taking total gains or losses and dividing them by the
sum of Adjusted NAV at the beginning of the period and the
time-weighted net invested capital. The time-weighted net invested
capital is the sum of investments made during the period less
realised proceeds received during the period, both weighted by the
number of days the capital was at work in the portfolio
3. Includes management fees and other general costs. It also
includes FX on the euro returns table only
4. Includes the impact of FX movements on investments and FX on
cash held during each respective period
PORTFOLIO ALLOCATION SINCE 1Q15
PORTFOLIO ALLOCATION(2) PORTFOLIO NAV (EURO) NAV (EURO)
------------------------- -------------------------------------------------------- ----------------
TOTAL
PRIVATE DERIVED DERIVED NET CASH PRIVATE DERIVED DERIVED NET CASH TOTAL ADJUSTED
EQUITY DEBT EQUITY AND NCAs EQUITY DEBT EQUITY AND NCAs NAV NAV
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
1Q15(1) 40% 36% 18% 7% 245.4 218.1 107.1 40.5 611.1 600.8
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
2Q15(1) 30% 27% 8% 35% 263.8 237.5 71.5 313.1 885.9 877.9
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
3Q15 39% 29% 10% 22% 344.0 256.9 89.1 192.5 882.4 874.7
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
4Q15 51% 37% 10% 2% 473.6 346.7 94.4 21.8 936.5 923.6
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
1Q16 50% 36% 9% 5% 444.5 320.1 82.1 40.3 887.1 883.6
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
2Q16 49% 35% 10% 6% 440.3 314.5 93.3 53.0 901.1 894.4
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
3Q16 47% 36% 10% 7% 421.0 319.2 90.4 66.6 897.2 889.6
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
4Q16 52% 30% 13% 4% 498.8 284.9 127.9 38.5 950.0 938.7
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
1Q17 52% 30% 16% 2% 489.5 282.4 147.5 16.6 935.9 928.0
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
2Q17 50% 21% 13% 16% 457.6 195.3 119.5 148.0 920.4 908.1
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
3Q17 58% 21% 19% 1% 522.8 189.1 170.8 12.7 895.5 881.9
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
4Q17 63% 20% 14% 2% 590.2 188.4 132.1 19.2 929.9 912.4
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
1Q18 65% 15% 17% 3% 572.5 136.2 152.6 22.1 883.3 883.3
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
2Q18 67% 19% 17% (4%) 638.8 184.3 160.6 (35.8) 947.8 943.9
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
3Q18 68% 17% 17% (2%) 638.9 158.1 159.0 (16.3) 939.7 937.3
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
4Q18 64% 19% 15% 2% 591.5 178.3 142.3 18.7 930.8 930.8
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
2015 40% 32% 11% 17% 331.7 264.8 90.5 142.0 829.0 819.2
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
2016 50% 34% 11% 5% 451.1 309.7 98.4 49.6 908.9 901.6
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
2017 56% 23% 16% 5% 515.0 213.8 142.5 49.1 920.4 907.6
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
2018 66% 18% 16% (0%) 610.4 164.2 153.6 (2.8) 925.4 923.8
------- ------------ ----------- ------- --------- ------- ------- ------- --------- ----- ---------
1. Includes returns of the PCV Group for the period between 31
December 2014 and 15 June 2015
2. For annual periods the average weighting over four quarters used
GLOSSARY
ADF means the limited partnerships that constitute the Apax
Digital Private Equity fund.
Adjusted NAV calculated by adjusting the NAV at reporting
periods, by the estimated performance fee reserves.
Adjusted NAV per share calculated by dividing the Adjusted NAV
by the number of shares in issue.
AEVI means the limited partnerships that constitute the Apax
Europe VI Private Equity fund.
AEVII means the limited partnerships that constitute the Apax
Europe VII Private Equity fund.
AGML or Investment Manager means Apax Guernsey Managers
Limited.
AIX means the limited partnerships that constitute the Apax IX
Private Equity fund.
AMI means the limited partnerships that constitute the AMI
Opportunities Fund focused on investing in Israel.
Apax Global Alpha or Company or AGA means Apax Global Alpha
Limited.
Apax Group means Apax Partners LLP and its affiliated entities,
including its sub-advisers, and their predecessors, as the context
may require.
Apax Partners or Apax or Investment Adviser means Apax Partners
LLP.
Apax Private Equity Funds or Apax Funds means Private Equity
funds managed, advised and/or operated by Apax Partners.
APG means Apax Partners Guernsey Limited.
AVIII means the limited partnerships that constitute the Apax
VIII Private Equity fund.
B2B means business to business.
Brexit refers to the upcoming exit of the UK from the EU
following the invocation of Article 50 of the Treaty on the
European Union on 29 March 2017.
Capital Markets Practice or CMP Consists of a dedicated team of
specialists within the Apax Partners Group having in-depth
experience of the leverage finance debt markets, including market
conditions, participants and opportunities. The CMP was initially
set up to support the investment advisory teams within the Apax
Group in structuring the debt component of a private equity
transaction. The CMP has over the years expanded its mandate to
working alongside the investment advisory teams to advise on
Derived Debt Investments.
CEE central and eastern Europe.
Custody risk is the risk of loss of securities held in custody
occasioned by the insolvency or negligence of the custodian.
Derived Debt Investments comprise debt investments held within
the Derived Investments portfolio.
Derived Equity Investments comprise equity investments held
within the Derived Investments portfolio.
Derived Investments comprise investments other than Private
Equity Investments, including primary investments in public and
private debt, with limited investments in equity, primarily in
listed companies. In each case, these are typically identified by
Apax Partners as part of its private equity activities.
EBITDA earnings before interest, tax, depreciation and
amortisation.
ERP enterprise resource planning.
EV enterprise value.
FVTPL means fair value through profit or loss.
Gross Asset Value or GAV means the Net Asset Value of the
Company plus all liabilities of the Company (current and
non-current).
Gross IRR or Internal Rate of Return means an aggregate, annual,
compound, internal rate of return calculated on the basis of cash
receipts and payments together with the valuation of unrealised
investments at the measurement date. Foreign currency cash flows
have been converted at the exchange rates applicable at the date of
receipt or payment. For Private Equity Investments, IRR is net of
all amounts paid to the underlying Investment Manager and/ or
general partner of the relevant fund, including costs, fees and
carried interests. For Derived Investments, IRR does not reflect
expenses to be borne by the relevant investment vehicle or its
investors including, without limitation, performance fees,
management fees, taxes and organisational, partnership or
transaction expenses.
Invested Portfolio means the part of AGA's portfolio which is
invested in Private Equity and Derived Investments, however
excluding any other investments such as legacy hedge funds and
cash.
Investor relations team means such investor relations services
as are currently provided to AGA by the Investment Adviser.
IPO Initial public offering.
KPI Key performance indicator.
LSE London Stock Exchange.
LTM Last twelve months.
Market capitalisation is calculated by taking the share price at
the reporting period date multiplied by the number of shares in
issue. The euro equivalent is translated using the exchange rate at
the reporting period date.
MOIC Multiple of invested capital.
NBFC Non-bank financial company.
Net Asset Value or NAV means the value of the assets of the
Company less its liabilities as calculated in accordance with the
Company's valuation policy. NAV has no adjustments related to the
IPO proceeds or performance fee reserves.
NTM Next twelve months.
Operational Excellence Practice or OEP Professionals who support
the Apax Funds' investment strategy by providing assistance to
portfolio companies in specific areas such as devising strategies,
testing sales effectiveness and cutting costs.
OCI Other comprehensive income.
OTC Over-the-counter.
PCV means PCV Lux S.C.A.
PCV Group means PCV Lux S.C.A. and its subsidiaries. PCV Group
was established in August 2008. Irrespective of whether the text
refers to AGA or PCV Group, references to trading or performance
prior to the IPO on 15 June 2015 refer to trading as PCV Group.
P/E Price-to-earnings.
Performance fee reserve is the estimated performance fee reserve
which commenced accruing on 1 January 2015 in line with the
Investment Management Agreements of the PCV Group and AGA.
Private Equity Investments or Private Equity means primary
commitments to, secondary purchases of commitments in, and
investments in, existing and future Apax Funds.
Reporting period means the period from 1 January 2018 to 31
December 2018.
SMEs Small and mid-sized enterprises.
Total NAV Return for a year/period means the return on the
movement in the Adjusted NAV per share at the end of the period
together with all the dividends paid during the period, to the
Adjusted NAV per share at the beginning of the period/year.
Adjusted NAV per share used in the calculation is rounded to five
decimal points.
Total Return under the Total Return calculation, sub-portfolio
performance in a given period can be evaluated by taking total net
gains in the period and dividing them by the sum of the Adjusted
NAV at the beginning of the period as well as the investments made
during the period. However, in situations where realised proceeds
are reinvested within the same period, performance under this
calculation is, via the denominator, impacted by the reinvestment.
Therefore, starting from 2017 the Investment Manager will evaluate
sub-portfolio performance using an amended methodology. The revised
methodology takes total gains or losses and divides them by the sum
of Adjusted NAV at the beginning of the period and the time
weighted net invested capital. The time weighted net invested
capital is the sum of investments made during the period less
realised proceeds received during the period, both weighted by the
number of days the capital was at work in the portfolio. This
should provide a more reflective view of actual performance.
Total Shareholder Return or TSR for the period means the net
share price change together with all dividends paid during the
period.
Unaffected Valuation is determined as the fair value in the last
quarter before exit, when valuation is not affected by the exit
process (i.e. because an exit was signed, or an exit was
sufficiently close to being signed that the Apax Funds incorporated
the expected exit multiple into the quarter end valuation).
Apax Global Alpha Limited
Annual Report and Accounts 2018
www.apaxglobalalpha.com
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR CKQDQKBKBQNK
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