REG - abrdn Pvt Equity - Annual Financial Report
31/01/2024 07:00
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RNS Number : 4214B abrdn Private Equity Opp Trst plc 31 January 2024
abrdn Private Equity Opportunities Trust plc
Legal Entity Identifier (LEI): 2138004MK7VPTZ99EV13
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2023
FINANCIAL HIGHLIGHTS
As at As at
30 September 30 September
2023 2022
Net Asset Value Total Return(*+) 5.4% 14.1%
Share Price Total Return(*+) 11.7% -15.1%
FTSE All - Share Index Total Return 13.8% -4.0%
Net Assets £1,195.6m £1,158.1m
Share Price 442.0p 410.0p
Expense Ratio(*+) 1.06% 1.06%
(*) Considered to be an Alternative Performance Measure.
(+) A Key Performance Indicator by which the performance of the Manager is
measured by the Board.
HIGHLIGHTS TO 30 SEPTEMBER 2023
· NAV Performance - NAV TR for the year to 30 September 2023 was 5.4%
(year to 30 September 2022: 14.1%). The valuation of the underlying portfolio
increased by 9.4% during the period excluding FX movements) (year to 30
September 2022: 10.5%).
· Investment Activity - APEO made seven new primary investments, one
diversified secondary investment, three new direct investments and two
follow-on investments in existing direct investments.
· Realisations - The portfolio generated £202.9 million realisations
(distributions and secondary sales) during the year, with distributions from
fund investments of £149.9 million (30 September 2022: £209.8 million).
· Outstanding Commitments - Outstanding commitments at the year-end
amounted to £652.0 million (30 September 2022: £678.9 million). The
over-commitment ratio of 35.2% at year-end (30 September 2022: 42.8%) was at
the lower end of the Company's target range (30-75%).
· Balance Sheet - During the year, the Company's revolving credit
facility was increased to £300 million in size (from £200 million) and
extended in duration by a year (to December 2025).
· Acquisition of the Manager by Patria Investments Ltd ("Patria") -
During 2023, abrdn plc announced the conditional sale of abrdn Private Equity,
including APEO's Manager, to Patria. The transaction is expected to close in
the first half of 2024. Patria is a leading alternative investment firm listed
on Nasdaq, with over 30 years of history and combined assets under management
of $28.2 billion, and a global presence with offices in ten cities across four
continents.
TEN YEAR FINANCIAL RECORD
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Per share data
NAV (diluted) (p) ^ 257.4 281.6 346.4 389.6 430.2 461.9 501.0 673.8 753.2 777.7
Share price (p) 230.0 214.0 267.3 341.5 345.5 352.0 320.0 498.0 410.0 442.0
Discount to diluted(^) NAV per Share (%)(*+) (10.6) (24.0) (22.8) (12.3) (19.7) (23.8) (36.1) (26.1) (45.6) (43.2)
Dividend per Share (p) 5.00 5.25 5.40 12.00 12.40 13.20
12.80 13.60 14.40 16.00
Expense Ratio(*+1) (%) 0.96 0.98 0.99 1.14(2) 1.10 1.09 1.10 1.10 1.06 1.06
Returns data
NAV Total Return(*+) (%) 7.7 11.9 24.8 14.9 13.3 11.7
10.5 37.9 14.1 5.4
Total Shareholder Return(*+) (%) 19.1 27.9 31.9 5.8 (4.6)
(4.0) 5.7 60.6 (15.1) 11.7
Portfolio data
Net Assets (£m) 409.1 438.7 532.6 599.0 661.4 710.1 770.3 1,036.0 1,158.1 1,195.6
Top 10 Managers as a % of net assets(3) 65.0 65.2 65.0 58.9 63.6 67.8
67.9 62.9 65.1 64.3
Top 10 investments as a % net assets 52.9 48.6 45.9 47.7 48.4 53.9 48.3
40.3 35.6 29.9
Source: The Manager & Refinitiv
1 For further information on the calculation of the expense ratio, as well as
the ongoing charges of the Company, please refer to the Alternative
Performance Measures.
2The incentive fee arrangement ended on 30 September 2016. Following the end
of the incentive fee period, a single management fee of 0.95% per annum of the
NAV of the Company replaced the previous management and incentive fees.
* Considered to be an Alternative Performance Measure.
+ A Key Performance Indication by which the performance of the Manager is
measured by the Board.
An introduction to abrdn Private Equity Opportunities Trust plc (the "Company"
or "APEO")
- A diversified portfolio of private equity funds and direct investments
into private companies, principally focused on the European mid-market.
- APEO partners with a carefully selected group of leading private
equity firms.
o Fund Investments - APEO commits to funds managed by these firms, either
from the fund's inception (a primary fund) or by buying a fund position from
another investor part way through the fund's life (a fund secondary). The
funds then invest into private companies.
o Direct Investments - APEO invests directly into private companies
alongside the lead private equity investor, either through a co-investment or
a single asset secondary investment.
- This approach creates an underlying portfolio of 720 private companies,
well balanced by sector, geography and maturity.
% Exposure as at
Sector 30 September 2023
Information technology 22
Healthcare 19
Industrials 19
Consumer discretionary 14
Consumer staples 10
Financials 9
Other 7
As at 30 September 2023. Based on the latest available information from
underlying managers. Figures represent percentage of total value of underlying
portfolio company exposure.
Our Philosophy - The key pillars that have guided our business for more than
two decades and differentiate us.
Access - APEO gives investors access to high-quality private equity managers and private companies, within a market that can be complex to navigate.
The private equity market can be difficult and complex to navigate, and there
are many opportunities for investors to choose from. Investment selection is
critical in order to generate the differentiated returns that private equity
can deliver, relative to other asset classes.
Our long-standing market presence and local networks provide us with insights
and relationships that, we believe, unlock some of the best opportunities for
investment in private equity funds and direct investments, alongside our core
private equity managers. We work hard to find and foster these relationships
so we become strong and reliable partners to these core managers. This enables
us to build and maintain a diversified and high-quality portfolio of
underlying private companies.
As an investment trust listed on the London Stock Exchange, APEO offers
shareholders an opportunity to invest in these private equity funds and direct
investments for as little as the price of one of the Company's shares. As
APEO's shares are listed on the London Stock Exchange, they provide daily
tradable access to an asset class which is normally relatively illiquid.
Expertise - abrdn Capital Partners LLP has managed APEO since its inception and its team has specialist knowledge in European markets.
The Investment Manager has a large and well established team of investment
professionals. It has managed APEO for more than two decades, since inception,
and has generated consistent performance over that time.
The European private equity market is a complex investment arena, with
multiple strategies and managers to choose from, not to mention the different
cultural and technical nuances across the various countries. The Investment
Manager's specialist expertise is a key asset in navigating these complexities
and honing in on the best private equity managers, funds and co-investments
for our shareholders.
APEO predominantly invests in European focused investments and underlying
private companies. Around 75% (2022: 76%) of the total value of underlying
portfolio company exposure is invested in European domiciled operating
companies, with a weighting towards North Western Europe. This has been APEO's
geographic focus since its inception in 2001 and where it has a strong,
long-term track record. However, APEO also selectively seeks exposure to North
American mid-market companies, as a means to access emerging growth or
investment trends that cannot be fully captured by investing in Europe alone.
Geography of the Underlying Portfolio as at 30 September 2023
Exposure %
North America 24
United Kingdom 15
Nordics 14
France 13
Germany 12
Benelux 7
Spain 4
Italy 3
Switzerland 1
Based on the latest available information from underlying managers. Figures
represent percentage of total value of underlying portfolio company exposure.
Geographic exposure is defined as the geographic region where underlying
portfolio companies are headquartered. In addition to the above, 5% of
underlying portfolio companies are based in European countries not separately
disclosed above, while 1% are based in countries outside of Europe, excluding
North America.
Focus - APEO has a carefully selected portfolio of some of the best
investments in mid-market private equity
We are predominantly focused on the private equity mid-market, which we define
as businesses between €100 million and €1 billion in enterprise value
("EV"). It's our belief that this part of the market is particularly
attractive, given it generally relates to growing, profitable, cash generative
businesses that are well established but still have clear opportunities to
further create further investment value.
Diversification is a well-recognised means of managing investment risk and we
achieve that through a portfolio of around 50 "active" private equity fund
investments, that in turn have exposure to over 700 underlying portfolio
companies. But we also believe it is important to have conviction and to
concentrate our firepower. We do this by selecting and focusing our capital
with a group of a dozen or so core buyout managers and partnering with them
through primary commitments to their funds, providing liquidity to their
investors through secondary transactions and making direct investments
alongside them in private companies.
Consistency - APEO has a history and track record of more than two decades,
based on the foundation of rigorous and disciplined investment analysis
We take a rigorous and disciplined approach to investment analysis that
delivers consistent long-term investment returns across market cycles.
Private equity is often perceived to be a risky business, but our historic
track record proves that steady NAV performance and consistent growth are
possible. What's more, stability does not have to translate into reduced
returns; our NAV has grown over ten times since launch.
STRATEGIC REPORT
INVESTMENT STRATEGY
Investment Objective
The Company's investment objective is to achieve long-term total returns
through holding a diversified portfolio of private equity funds and direct
investments into private companies alongside private equity managers
("co-investments"), a majority of which will have a European focus.
Investment Policy
The Company: (i) commits to private equity funds on a primary basis; (ii)
acquires private equity fund interests in the secondary market; and (iii)
makes direct investments into private companies via co-investments and
single-asset secondaries. Its policy is to maintain a broadly diversified
portfolio by country, industry sector, maturity and number of underlying
investments.
The objective is for the portfolio to comprise around 50 "active" private
equity fund investments; this excludes funds that have recently been raised,
but have not yet started investing, and funds that are close to or being wound
up. The Company may also invest up to 25% of its assets in direct investments
into private companies, via co-investments alongside private equity managers.
The Company may also hold direct private equity investments or quoted
securities as a result of distributions in specie from its portfolio of fund
investments. The Company's policy is normally to dispose of such assets where
they are held on an unrestricted basis.
To maximise the proportion of invested assets, the Company follows an
over-commitment strategy by making commitments which exceed its uninvested
capital. In making such commitments, the Manager, together with the Board,
will take into account the uninvested capital, the value and timing of
expected and projected cash flows to and from the portfolio and, from time to
time, may use borrowings to meet drawdowns. The Board has agreed that the
overcommitment ratio should sit within the range of 30% to 75% over the long
term.
The Company's maximum borrowing capacity, defined in its Articles of
Association, is an amount equal to the aggregate of the amount paid up on the
issued share capital of the Company and the amount standing to the credit of
the reserves of the Company. However, it is expected that borrowings would not
normally exceed 30% of the Company's net assets at the time of drawdown.
The Company's non-sterling currency exposure is principally to the euro and US
dollar. The Company does not seek to hedge this exposure into sterling,
although any borrowings in euros and other currencies in which the Company is
invested would have such a hedging effect.
Cash held pending investment is invested in short-dated government bonds,
money-market instruments, bank deposits or other similar investments. Cash
held pending investment may also be invested in other listed investment
companies or trusts. The Company will not invest more than 15% of its total
assets in such listed equities.
The investment limits described above are all measured at the time of
investment.
Portfolio Construction Approach
Investments made by APEO are typically with or alongside private equity firms
with whom the Manager has an established relationship of more than ten years.
As at 30 September 2023, APEO directly held 80 separate fund investments
(2022: 75) comprising of primary and secondary fund interests, as well as 26
direct investments (2022: 22).
Through its portfolio of directly held investments, the Company indirectly has
exposure to a diverse range of underlying portfolio companies, as well as
additional underlying fund of fund and co-investment interests. At 30
September 2023, APEO's underlying portfolio included exposure to 720 separate
underlying portfolio companies (2022: 655).
APEO predominantly invests in European mid-market companies. Around 75% (2022:
76%) of the total value of underlying portfolio company exposure is invested
in European domiciled operating companies and the Board expects this to remain
the case over the longer term, with a weighting towards North Western Europe.
This has been APEO's geographic focus since its inception in 2001 and where
it has a strong, long-term track record. However, APEO also selectively seeks
exposure to North American mid-market companies, as a means to access emerging
growth or investment trends that cannot be fully captured by investing in
Europe alone.
APEO has a well-balanced portfolio in terms of non-cyclical and cyclical
exposures. Currently the largest single sector exposure (Information
Technology) represents 22% of the total value of underlying portfolio company
exposure(1) (2022: 20%) and it is expected that no single sector will be more
than 30% of the portfolio over the longer term. Over time, the Manager
anticipates a continuation of the recent shift toward sectors that are
experiencing long-term growth (such as Technology and Healthcare) at the
expense of more cyclical sectors, such as Industrial and Consumer
Discretionary.
Environmental, social and governance ("ESG") is a strategic priority for the
Board and the Manager. APEO aims to be an active, long-term responsible
investor and ESG is a fundamental component of APEO's investment process.
Further detail on the Manager's approach to ESG can be found below.
(1) Excludes underlying fund and co-investments indirectly held through the
Company portfolio.
CHAIR'S STATEMENT
Introduction
The past 12 months have been eventful, for both APEO and the wider market.
Whilst the Investment Trust sector and APEO remain challenged by stubbornly
wide share price discounts to NAV, I am heartened that the APEO portfolio has
continued to deliver a resilient annual NAV TR during the period of 5.4%,
despite a currency FX headwind of -2.8%, and that the Company continues to
regularly return capital to shareholders through its enhanced quarterly
dividend, delivering a yield of 3.6% as at 30 September 2023.
For this year's Annual Report, I have changed the format of the Chair's
Statement to ensure that I am directly addressing the key questions of
shareholders. I hope that shareholders find this format more engaging and
useful but, as always, I encourage shareholders to provide the Board with
feedback on the Annual Report and indeed the Company more broadly. The Board
and I can be reached at APEO.Board@abrdn.com.
The Manager announced in October 2023 that it is due to be purchased by Patria
Investments Ltd, subject to regulatory approvals. What impact will that have
on APEO and its shareholders?
The Board noted the announcement made by abrdn plc on 16 October 2023 of the
conditional sale of abrdn Private Equity to Patria, a global alternative asset
manager established in Latin America. This includes the sale of abrdn Capital
Partners LLP, the Company's Investment Manager and AIFM.
The Board and I place the interests of APEO shareholders at the forefront our
minds when considering the Patria transaction. We have been fully engaged with
abrdn, the Company's Manager, and Patria for a number of weeks now, indeed
even before the conditional sale was formally signed and announced. In this
regard, the Board has received assurances from abrdn and Patria that the
Company's investment management team will remain unchanged should the sale
complete. abrdn has also confirmed that appropriate arrangements will be put
in place to maintain the existing administration and other services currently
provided by abrdn or third-party service providers.
That said, the Board is evaluating the impact of the sale on the Company and
its management team and is continuing to have constructive discussions with
Patria. No changes will be made to the Company's existing management and
administration arrangements prior to the completion of the sale, and we expect
the impact of the sale to be cost neutral for the Company and its
shareholders. The Board will provide an update to APEO's shareholders on the
progress of the sale, which is expected to complete in the first half of 2024,
in due course.
How has APEO performed during the year to 30 September 2023?
Over the 12 months to 30 September 2023, the share price total return
increased by 11.7%, which I would normally consider strong performance in
isolation.
However, I recognise that this performance is relative to a low base, in terms
of the share price declines we saw in most equities and asset classes in 2022.
The APEO share price total return underperformed the 13.8% total return from
the FTSE All-Share Index over the period and the share price discount to NAV
remained wide at 43.2% (30 September 2022: 45.6%). APEO's share price
performance is by no means an outlier in the investment trust landscape, and
particularly the private equity investment trust sector, which continues to
see lukewarm investor buying demand. I personally find the current share price
discount confusing given the quality of APEO's underlying portfolio companies,
the robustness of its valuation (see later comments) and the long-term nature
of its NAV growth. The NAV TR of 5.4% during the period (30 September 2022:
14.1%), even with the challenging market conditions and into a currency FX
headwind, helps to further demonstrate this resiliency and also means that
APEO's NAV has grown in every year since 2010.
If we look a little deeper into the NAV performance during the year, I would
highlight that the portfolio has grown in value by 9.4% in constant currency
terms.
I take particular satisfaction in watching the evolution of the Company's
direct portfolio of co-investments and single-asset secondaries, which we
introduced at the start of 2019. The direct portfolio grew by 21.1% during the
year and now equates to 19.4% of the overall portfolio. I would encourage
shareholders to read the Investment Manager's Report, where the Manager
outlines the portfolio in detail and the drivers of performance.
Private equity market activity has fallen during the year; how has that
impacted upon APEO's cash flows, balance sheet, new investment deployment and
outstanding commitments?
The decrease in private equity market activity during the year has had an
impact on APEO but I believe that the Company remains well positioned. A key
focus of the Board's interactions with the Manager over the last 12 months has
been around cash flows, with the Board challenging the Manager to provide
detailed scenario analysis to ensure that APEO remains in a strong liquidity
position in this more difficult environment and can remain so if the current
market conditions persist.
In the year to 30 September 2023, drawdowns totalled £193.2 million (30
September 2022: £253.6 million) and distributions totalled £202.9 million
(30 September 2022: £210.2 million). I feel that APEO has weathered the sharp
decline in private equity activity during the period well. I would highlight
that part of the distribution figure includes partial sales relating to APEO's
co-investment in Action, the European discount retailer. The Manager decided
to take advantage of a liquidity window to reduce APEO's position for
portfolio construction reasons. These trades generated £53.0 million of
proceeds and were priced at 100% of the most recent valuation of Action in
each case. Following these sales, Action remains the largest underlying
portfolio company in APEO.
From a balance sheet perspective, we upsized the Company's revolving credit
facility during the year, from £200 million to £300 million, and extended
the maturity by a year to December 2025.
At 30 September 2023, APEO had £9.4 million of cash and cash equivalents (30
September 2022: £30.3 million) and £197.7 million remaining undrawn on the
revolving credit facility (30 September 2022: £138.0 million). Therefore,
should markets result in a period of a relatively low private equity activity,
I believe that APEO has a sufficiently strong balance sheet to weather the
storm.
In APEO the Manager does not try to time the market, rather it aims to deploy
consistently through the cycle so that its underlying managers can capture the
best buying opportunities in the market. Therefore, the year to 30 September
2023 was another active year of new investment deployment, with £174.8
million committed to 13 new investments (30 September 2022: £340.3 million to
24 new investments). Whilst new investment deployment was materially behind
levels in 2021 and 2022, which were especially active years, I feel excited by
the new investments made in 2023, all of which are very much "on strategy" for
APEO.
The Manager runs an overcommitment strategy for APEO and has done so since the
Company's inception in 2001. This ensures that APEO's resources are
efficiently deployed, given it makes primary fund investments - this involves
committing an amount of equity capital which is then typically drawn over a
three- to five-year period. Outstanding commitments at 30 September 2023 were
£652.0 million (30 September 2022: £678.9 million) and this equates to an
overcommitment ratio of 35.2%, at the lower end of our target range of 30-75%.
The Investment Manager's Report provides further information on cash flows,
balance sheet, new investments and outstanding commitments.
What is the Board's view on the valuation of the portfolio?
The Board and Audit Committee continually monitor and challenge the Manager on
the valuation of the underlying portfolio, and the Board has gained insight
and reassurances on the strong governance around the valuation of APEO's
portfolio through this ongoing oversight process. It should be noted that the
vast majority of APEO's investments are, at an underlying level: (i) revalued
on a quarterly basis; (ii) audited independently at least annually;(iii)
valued in line with International Private Equity and Venture Capital Valuation
("IPEV") Guidelines; and (iv) audited either in line with International
Financial Reporting Standards ("IFRS") or US generally accepted accounting
principles ("GAAP") accounting standards. Once the valuations reach APEO, they
are scrutinised by the Manager on a quarterly basis under a diligent Valuation
Policy, including a fulsome Valuation Committee, as well as APEO's external
auditors on an annual basis.
Whilst I could discuss the valuation merits of APEO's portfolio in a lot of
detail, including the defensive and profitable nature of APEO's underlying
private companies and the strong earnings growth the portfolio has seen over
the period, ultimately I believe that the test of any private equity valuation
is evidenced by the sale price at exit of each investment. As mentioned
earlier, APEO has undertaken a number of partial secondary sales with respect
to its position in Action, a European discount retailer, and all of these
disposals have been achieved at 100% of the most recent quarterly valuation of
that asset. Furthermore, while the volume of private equity exits has been
lower over the course of 2023,distributions from fund investments during the
year to 30 September 2023 were at an average uplift of 18% when compared to
the unrealised valuation two quarters prior.
The Boards conviction on the current valuation of the portfolio was a key
factor in progressing with a buyback programme, as announced earlier this
month.
What is the Board's view on share buybacks, and could you explain the
rationale around the announced buyback programme?
The Board does not have a stated discount management policy. That said, the
Board and Manager closely monitor the discount on a regular basis to ensure
that APEO is not an outlier when compared to other investment companies with a
similar investment approach and shareholder structure. Suffice to say there is
a balance to consider in terms of buying-back shares, right now that centres
on the ability to provide NAV accretion for our shareholders versus preserving
cash liquidity during this period of lower private equity exit activity.
Also, the Board considers the quarterly enhanced dividend effectively a
regular return of capital to shareholders at NAV and has prioritised this over
share buybacks in recent years.
However, in light of the persistently wide share price discount to NAV,
coupled with both the Manager and the Board's strong conviction in the
valuation of the portfolio, the Board announced in January 2024 that it will
use a portion of the €34.6 million of proceeds realised from its most recent
partial sale of APEO's co-investment in Action to commence a buyback
programme. The ability to recycle a significant portion of the Action sale
proceeds, realised at 100% of NAV, into buying APEO shares at a discount to
NAV, is a compelling use of the Company's capital and provides NAV accretion
to shareholders. It also highlights in the clearest terms the disconnect
between APEO's current share price and the valuation of its underlying
portfolio.
Going forward, the Board will continue to monitor the evolution of the share
price and, in the event of further sizeable distributions from the portfolio,
may look to extend the programme.
Does the Board plan to make any changes regarding the Company's dividend
policy?
Since 2016, the Company has paid shareholders an enhanced dividend on a
quarterly basis, which is effectively an ongoing return of capital to
shareholders at NAV. The Board intends to continue this policy going forward,
with the aim of maintaining the value of the dividend in real terms.
For the year to 30 September 2023, APEO has so far paid three quarterly
dividends of 4.0 pence per share and the Board has announced a fourth
quarterly dividend of 4.0 pence per share. This was paid on 26 January 2024 to
shareholders on the register on 22 December 2023 and will make a total
dividend for the year of 16.0 pence per share. This represents an increase of
11.1% on the 14.4 pence per share paid for the year to 30 September 2022.
What is your view on recent discussions around the packaged retail investment
and insurance-based products ("PRIIPs") regime and cost disclosure more
generally in UK Investment Trusts?
The Board and I welcome the recent discussions on this topic and the
involvement of HM Treasury and the Financial Conduct Authority ("FCA"). We
have long held the belief that the current cost disclosure requirements for UK
Investment Trusts are misleading to investors, especially retail investors.
The current regime effectively creates a double counting of costs, given that
the NAVs of Investment Trusts are already calculated net of costs. Therefore,
costs are already factored into the relevant share prices. I would also add,
the synthetic or "look through" costs appear to have been calculated
inconsistently across the Investment Trust sector, and therefore have been of
limited use in terms of comparing different Investment Trusts. We will monitor
developments over the coming weeks and months ahead, and the Board and I will
make ourselves available should HM Treasury or the FCA seek direct feedback
from the industry.
How has the Board performed during the year and how does the Board engage with
shareholders?
The Board regularly considers its own performance and, whilst there have been
no changes to the Board composition during the year, we have been active in
considering Board succession planning. To help support potential future
changes, Diane Seymour-Williams assumed the role of Chair of the Nomination
Committee and Yvonne Stillhart was appointed as Chair of the Management
Engagement Committee on 13 December 2022. Having served on the Board since 28
May 2014, I stepped down as a Member of the Audit Committee on 28 May 2023.
The Board's Policy on Tenure states that, in normal circumstances, Directors
will not serve beyond the Annual General Meeting ("AGM") following the ninth
anniversary of their appointment. In accordance with that policy, I would be
expected to step down at the conclusion of the next AGM. However, the Board
takes the view that the independence of Directors is not necessarily
compromised by length of tenure on the Board and that continuity and
experience can add significantly to the Board's strength. To that end the
Nomination Committee recommended to the Board that I stay on the Board as
Chair of the Board to oversee the transition of the Patria transaction and
support the Manager as it embeds into Patria. The Board intends to recruit an
additional Director during 2024 and the Board will address my successor in due
course.
The Board enjoys interaction with shareholders and, in my capacity as Chair, I
have been fortunate to meet with a number of the larger shareholders during
the year and responded to a number of inbound emails from a range of other
shareholders.
This year's AGM will be held on 27 March 2024 at 12:30pm at wallacespace,
Spitalfields, 15-25 Artillery Lane, London, E1 7HA. The meeting will include a
presentation by the Investment Manager and will be followed by lunch. This is
a good opportunity for shareholders to meet the Board and the Manager and the
Board encourages you to attend. The Notice of the Meeting is contained in the
Annual Report.
At the AGM, one of the resolutions being proposed relates to a change to the
Company's Articles of Association ("the Articles"). The proposed amendments
being introduced in the Articles primarily relate to the new power conferred
on the Board which provides it with flexibility to change the Company's name
by way of Board resolution rather than shareholder resolution. We believe that
this is standard practice and will allow the Board to change the Company's
name at relatively short notice if required in the future.
Could you outline the Board's view and approach to ESG?
Firstly, I would flag that APEO is not designed as an "ESG investment company"
per se; its investment objective is to create attractive returns for its
shareholders through building a diversified portfolio of private equity funds
and direct investments into private companies. That said, the Board continues
to believe that integrating ESG best practice into APEO's strategy and
investment processes will help support the investment objective by generating
stronger, more sustainable returns for shareholders over the long term.
The Board monitors the Manager's commitment to ESG factors closely and
encourages it to stay close to the latest market developments in this area.
The majority of our portfolio is managed by third-party managers and the Board
takes comfort from the Manager's policy to invest only with private equity
firms who are ESG market leaders or have a strong cultural commitment to
improve their ESG credentials.
I am personally encouraged by the Manager's ESG credentials, including
obtaining the top rating for indirect private equity from the Principles for
Responsible Investment ("PRI") in its latest assessment.
ESG has been embedded into the Manager's investment process since 2015 and
every new investment made by APEO in recent years has been subject to specific
ESG due diligence.
The Board has encouraged the Manager to continue to raise ESG standards across
the industry and to publicise the work that it has done in this area. For
further detail, including a Responsible Investment case study, see the
Responsible Investment and Sustainability section below.
What is the outlook for the Company over the next 12 months and beyond?
The current private equity market is proving to be tough, with the sharp rise
in interest rates impacting pricing expectations, availability and cost of
financing, and ultimately causing a material decrease in private equity
activity during 2023.
Whilst I currently hear rumblings in the market about sentiment starting to
improve gradually, with more sale processes initiated in the second half of
2023 than in the first half of 2023, both the Board and the Manager are not
anticipating a sharp rebound and we suspect a return to "normal" private
equity activity levels might be some way off yet.
However, those that have read my previous Chair Statements will note that I
have consistently said that private equity is an asset class that should
viewed over the long term, where new investment decisions are often made with
a five-year time horizon in mind. The immediate road ahead remains uncertain,
but the governance model of private equity has proved many times in the past,
most notably during the global financial crisis of 2008-09, that it
facilitates nimble and active ownership and allows underlying businesses to
adapt more quickly to changing market circumstances.
Periods of uncertainty also tend to offer up new and different opportunities
for investment, which private equity firms have proved adept at generating and
completing. This is why I believe that private equity should be particularly
attractive to investors at times like these, in order to capture the upside
that usually follows.
As we look ahead, I want to underline that the Board will continue to
prioritise the interests of APEO shareholders. I remain convinced by the
strategy of APEO, which is centred on investment selection conviction and
focused principally on the European mid-market buyout segment of private
equity, where there is a plentiful supply of private companies that are highly
resilient niche market leaders or fast-growing disruptive businesses of the
future.
On behalf of our investors, the Manager will continue to grow direct
investment as a proportion of APEO's portfolio. This brings a number of
advantages, not least lowering the fees APEO pays to underlying third- party
managers and therefore enhancing the Company's NAV growth potential. The Board
remains committed to maintaining the value of the quarterly dividend in real
terms, returning capital regularly to shareholders at NAV. Furthermore, we
will stay alive to opportunities to create further NAV for shareholders
through opportunistic buybacks.
Lastly, in terms of the transaction relating to APEO's Manager, shareholders
can be assured that the Board will remain closely involved and act in their
best interests throughout our review. I hope that the Board will, in the very
near future, be able to give a formal update and provide more clarity to
shareholders on this matter.
Alan Devine
Chair,
30 January 2024
INVESTMENT MANAGER'S REVIEW
Summary of the Year
The portfolio has performed resiliently during the financial year, in spite of
uncertainties in both the global economy and financial markets, as well as the
private equity market experiencing lower deal activity compared to levels seen
in recent years. Whilst the NAV TR of 5.4% is lower than the 14.1% APEO
experienced in 2022, once the impacts of currency FX are removed the portfolio
grew 9.4% compared with 10.5% in 2022. The NAV TR lagged the 13.8% increase in
the FTSE All-Share, its comparator index, which recovered from the listed
market headwinds in 2022. However, APEO NAV growth continues to outperform the
FTSE All-Share over three, five and ten years, and since inception.
APEO's portfolio of private companies continues to perform well, with the top
50 companies by value, which equate to 40% of the overall portfolio,
experiencing average revenue and EBITDA growth of 16% and 23% respectively in
the 12 months to 30 September 2023. That has helped drive the resilient
valuation performance in the unrealised book. Most notably, APEO's direct
investment portfolio, which consists of direct co-investments into private
companies and single-asset secondaries, continues to grow strongly,
experiencing a valuation uplift in the year of 21.1%, once the effects of
currency FX are excluded. The direct investment portfolio now stands at 26
underlying companies and 19.4% of the portfolio, even after the partial
realisation of APEO's co-investment in Action, the European discount retailer.
The partial sale of Action was the largest single realisation during the year,
returning £53.0 million to APEO. This proactive sale was conducted for
portfolio construction reasons, taking advantage of a liquidity window that
was facilitated by Action's lead investor 3i Group. The partial sales were
made at 100% of the most recent valuation of Action in each case. Action
remains APEO's largest single company exposure at 2.1% of the portfolio and
the intention as we stand today is to continue to hold that position until an
eventual exit of the business, albeit the Manger will continue to monitor the
potential to make opportunistic sales in the future.
In terms of further cash coming back to APEO, distributions from fund
investments totalled £149.9 million in the year. This was a decrease on the
£209.8 million of distributions received by APEO during 2022, a figure that
was an all-time annual record for the Company. The decrease is directly
attributable to the lower level of private equity market activity we have seen
during 2023. It is worth noting that the average exit from the portfolio
during the year was at a multiple of 2.5x original cost of investment (2022:
2.2x cost) and at a 18% valuation uplift, when compared to the unrealised
valuation two quarters prior. This valuation uplift is similar to the
long-term average uplift upon exit (25%) and provides some assurance as to the
valuation of APEO's portfolio.
Drawdowns totalled £193.2 million during the year (2022: £253.6 million),
the vast majority of which was used to fund underlying investments in new
portfolio companies. Whilst total realisations of £202.9 million exceeded the
total drawdown figure, it is worth noting that when we only look at fund
investments (excluding the impact of sales of direct investments) drawdowns
outpaced distributions for the first time since 2010. This trend is linked to
the decrease in private equity market activity and the fact that fund
investments typically use a credit facility to bridge new investments into
portfolio companies before drawing the money from investors. Therefore,
drawdowns typically see a lag during periods when private equity market
activity changes sharply, like we saw in 2023, and therefore this was fully
expected and planned for by the Manager.
On the new investment side, the period ended 30 September 2023 saw APEO make
new commitments totalling £174.8 million (2022: £340.3 million), with seven
new primary fund investments, one secondary, three direct investments and two
follow-on investments in existing direct investments. Whilst new investment
deployment is materially behind the levels seen in 2022, the Manager would
note that is partially a function of a less active private equity market and
the Manager exercising caution during a relatively uncertain period. New fund
investments continue to be aligned with our long-term strategy of backing
private equity firms that have a mid-market orientation and have proven deep
expertise within one or more specified sectors. As aforementioned, we
continued to deploy capital into new direct investments during the year, with
a good balance in deployment across our key sectors.
During the year the revolving credit facility was increased to £300 million
(from £200 million) and the maturity extended by a year to December 2025. The
larger facility, provided by RBS International, Société Générale and State
Street Bank International, provides the Company with further flexibility and
firepower for new investments. The balance sheet remains in a strong position
with cash and cash equivalents of £9.4 million (2022: £30.3 million). APEO
also had £197.7 million remaining undrawn on its revolving credit facility at
30 September 2023 (2022: £137.0 million undrawn on a £200 million facility).
Performance
Pence per share
NAV as at 1 October 2022 753.2
Net realised gains and income from portfolio 78.6
Net unrealised losses at constant FX on portfolio(1) (5.6)
Net unrealised FX losses on portfolio (21.6)
Dividends paid (15.2)
Management fee, administrative and finance costs (12.1)
Net income from other assets 0.3
NAV as at 30 September 2023 777.7
(1) Includes the reversal of previously recognised unrealised gains that have
realised during the financial year and are therefore included in Net realised
gains and income from portfolio.
The NAV TR for the year ended 30 September 2023 was 5.4% versus 13.8% for the
FTSE All-Share Index. The valuation of the portfolio at 30 September 2023
increased 9.4% on the prior year on a constant currency basis, with a decrease
of -2.8% attributable to FX gains during the year, principally due to the
strength of pound sterling over the period, compared to US dollar and the
euro.
The increase in value of the portfolio on a per share basis was 24.5 pence.
This was principally made up of realised gains and income of 78.6 pence and
net income from other assets of 0.3 pence, partially offset by net unrealised
losses from the portfolio, FX in the unrealised portfolio, dividends and costs
associated with management fee and administrative and financing costs
totalling 54.5 pence.
The overall increase in the portfolio during the period is largely driven by
the strong performance of the underlying portfolio companies, which generally
continue to perform well operationally and have experienced continued earnings
growth. Looking at the top 50 underlying portfolio companies, which are the
main value drivers and equate to 40% of the portfolio, the average revenue and
EBITDA growth was 15.6% and 23.4% respectively in the 12 months to 30
September 2023. That has helped drive the resilient valuation performance in
the portfolio, rather than due to valuation multiples. Focusing on the same
cohort, the median valuation multiple was 14.0x EBITDA at 30 September 2023,
compared with 14.5x EBITDA a year prior. We are especially pleased about
progress in APEO's direct investment portfolio, which has seen a valuation
uplift of 18.5% during the 12 months to 30 September 2023, net of FX
movements.
Realised gains were derived from full or partial sales of underlying portfolio
companies during the 12-month period, which were at an average uplift of 18%
to the unrealised value two quarters prior (30 September 2022: 20%).
The headline realised return from the portfolio exits equated to 2.5 times
original cost (30 September 2022: 2.2 times original cost), which we consider
a strong performance in what was a challenging backdrop to conduct successful
exit processes.
Top companies % of portfolio Median valuation multiple Median leverage multiple Average LTM growth Average LTM EBITDA growth
10 14.0% 15.2x 4.6x 19.1% 17.5%
20 30.1% 15.4x 4.6x 16.3% 18.4%
50 40.0% 14.0x 4.3x 15.6% 23.4%
LTM = Last 12 months
Drawdowns
Amount
IK Partnership II £11.5m
Hg Saturn 3 £8.5m
Nordic Capital X £8.5m
Seidler Equity Partners VII £8.3m
Advent X £7.0m
Permina Growth Opportunities II £6.7m
HRworks CV (Co-investment) £6.5m
MSouth Equity Partners IV £6.2m
Altor V £5.6m
Cinven 7 £5.5m
Other £118.9m
During the year £193.2 million was invested into existing and new underlying
companies. £154.2 million of this figure related to primary fund drawdowns,
with the remainder related to secondary deployment and direct investment,
which are under the control of the Manager and as planned. Secondary and
direct investment activity are covered in detail later in the review.
Primary fund drawdowns during the year were mainly used to fund new underlying
investments into portfolio companies, with notably large drawdowns relating to
the following new portfolio companies:
• Safic Alcan (IK Partnership II) - Global speciality chemicals and
ingredients distributor;
· Access (Hg Saturn 3) - Leading Enterprise Resource Planning ("ERP")
software provider;
· GWI (Permira Growth Opportunities II) - Global consumer data and
analytics provider;
· GEDH (IK Partnership II) - Leading higher education group in
France; and
· Theramex (PAI VII) - Global specialty pharmaceuticals focused on
women's health.
We estimate that APEO had around £79.5 million held on underlying fund credit
facilities at 30 September 2023 (30 September 2021: £113.3 million), and we
expect that this will all be drawn over the next 12 months. The decline in the
amount held on underlying fund credit facilities during the year gives a
strong indication that fund drawdowns will likely fall in 2024.
Realisations
Amount
Action(1) £54.8m
Hg Capital 8 £18.8m
Investindustrial Growth £10.8m
Advent International Global Private Equity VIII £10.2m
CVC VI £9.9m
Other £98.4m
(1) Distributions from Action are made up predominantly of proceeds from
secondary sales during the year amounting to £53.0 million, with the
remaining amount of £1.8 million attributable to dividend income.
Total realisations of £202.9 million were received by APEO during the 12
months to 30 September 2023, from distributions from fund investments and the
partial realisation of APEO's co-investment in Action during the period.
The partial sale of Action was the largest single realisation event during the
year, returning £53.0 million to APEO. This proactive sale was conducted for
portfolio construction reasons, taking advantage of a liquidity window that
was facilitated by Action's lead investor 3i Group. Action remains APEO's
largest single company exposure at 2.1% of the portfolio.
£149.9 million of distributions were received from funds during the year,
which is less than the record annual total that APEO received in the prior
year (30 September 2022: £210.2 million). Exit activity was slower than prior
year due to the decline in private equity market activity during the period.
Trade buyers remained active during the period and were the main exit route
for APEO's portfolio companies. Demand from financial buyers softened somewhat
compared to prior year and there were no Initial Public Offerings in the
portfolio during the period. The headline realised return from the portfolio
equated to 2.5 times original cost (30 September 2022: 2.2 times original
cost).
Commitments
As at 30 September Outstanding Commitments Outstanding commitments in excess of undrawn loan facility and case resources
as a % of portfolio NAV (£million)
2019 47.4 450.3
2020 30.9 471.4
2021 32.5 557.1
2022 42.8 678.9
2023 35.2 652.0
APEO made commitments totalling £174.8 million during the year (2022: £340.3
million). These commitments were across seven new primary investments, one
secondary investment, three direct investments and two follow-on investments
in existing direct investments. The total outstanding commitments at 30
September 2023 were £652.0 million (30 September 2022: £678.9 million).
The value of outstanding commitments in excess of liquid resources as a
percentage of portfolio value decreased to 35.2% in the financial year (30
September 2022: 42.8%). The decrease is largely due to the upsizing of APEO's
revolving credit facility during the period and the current figure is at the
lower end of our long-term target range of 30-75%. We estimate that £94.3
million of the reported outstanding commitments are unlikely to be drawn down,
based on guidance from our underlying private equity managers, and the nature
of private equity investing, with private equity funds not always being fully
drawn.
Investment Activity
Primary Funds
£147.5 million was committed to seven new primary funds during the year ended
30 September 2023 (2022: £257.2 million into 12 new primary funds). As a
reminder, APEO's primary fund strategy is to partner with private equity
firms, principally in Europe, that have genuine sector expertise and
operational value creation capabilities and have a core mid-market buyout
orientation, i.e. focusing on businesses with an EV between €100 million and
€1 billion. The firms that APEO has partnered with during this period fulfil
most, if not all, of these criteria and they are all relationships with whom
the Manager has known for many years, often decades.
Investment £m Description
Hg Mercury 4 26.7 Lower mid-market buyout fund targeting investments in software and services
businesses primarily in Northern Europe.
Vitruvian Investment Partners V 26.4 Growth-focused fund principally targeting European businesses which operate
principally in the Technology, Healthcare, Financial Services and
Sustainability sectors.
Hg Genesis 10 26.1 Mid-market buyout fund targeting investments in software and services
businesses primarily in Northern Europe.
Altor Fund VI 25.9 Mid-market buyout fund with a strong sustainability focus, which targets
businesses across the Nordic and DACH regions.
Montefiore VI 17.6 Mid-market buyout fund primarily focused on investing in companies in the
French and Italian services sectors. Target sub-sectors include B2BServices,
Digital and IT Services, B2C Healthcare Services and Tourism & Leisure..
Seidler Equity Partners VIII 16.2 Fund focusing primarily on investing in lower mid-market businesses in North
America across branded consumer products, business services, and specialty
manufacturing sectors.
Montefiore Expansion I 8.8 Lower mid-market buyout fund primarily focused on investing in companies in
the French and Italian services sectors. Target sub-sectors include B2B
Services, Digital and IT Services, B2C Healthcare Services and Tourism &
Leisure.
Case study - primary - Montefiore Investment
Montefiore is a leading mid-market private equity firm in France, primarily
focused on investing in companies in the French and Italian services sectors.
Investment: Fund VI/ Expansion
Fund size: €1.4bn/€400m
APEO's commitment: €30.0m (across the two funds)
Commitment year: 2023
Geographic focus: France
Target company size: Full mid-market focus
Sectors: Business and Consumer Sectors
Investment strategy: Buyout
History and Background
Montefiore Investment ("Montefiore") was established in 2005 by Éric Bismuth
and Daniel Elalouf, and is headquartered in Paris, France. The firm was
founded with the specific objective to invest in the French Services sector,
particularly companies active in B2B Services, Digital and IT Services, B2C
Healthcare Services and Tourism & Leisure, segments of the Services
industry where Montefiore has deep knowledge and expertise.
Since inception, Montefiore has deployed the same successful strategy,
focusing on profitable growth and business transformation. Montefiore
typically acts as the lead investor and the first financial investor with a
control ownership position. The firm is fully independent and owned by the
Partners.
Strategy
The two Montefiore funds (Fund VI and Expansion I) provide APEO with the
opportunity to invest in a leading continental-European lower/mid-market
manager focused on the French and Italian Services sector.
Montefiore Fund VI is targeting businesses with EVs of €100-500 million and
equity cheques of €40-200 million. Montefiore Expansion I is targeting
businesses with EVs <€100 million and equity cheques <€40 million.
Montefiore operate a one team structure and are differentiated through their
deep sector expertise, broad sourcing networks and capabilities, and their
strong brand in the French and Italian markets.
APEO's Exposure
· abrdn Private Equity has partnered with Montefiore since 2016,
committing to Funds IV and V and co-investing alongside Montefiore in NGE, an
infrastructure services business.
· Montefiore VI and Expansion I are the first Montefiore funds that
APEO has committed to. However, APEO made a direct investment alongside
Montefiore into NGE in 2022.
· The Montefiore funds will provide APEO with exposure to growing
midmarket services businesses in France and Italy, alongside one of the
leading private equity managers in the region.
Previous / current investments
Ensio, Premium Group, NGE
Fund Secondaries
During the 12-month period, APEO invested and committed £4.6 million into
one secondary transaction (2022:
£17.2 million into two secondaries).
Investment £m Description
Capiton Quantum 4.6 Through APEO's existing commitment to Capiton V, APEO rolled its position of
€4.5 million in two underlying private companies into the Capiton Quantum
continuation fund, with an additional top-up commitment of €0.7 million also
provided for additional M&A opportunities.
Direct Investments
During the 12-month period, APEO invested and committed £22.6 million into
three new direct investments and two follow-on investments in existing direct
investments (2021: £66.1 million into nine new direct investments and one
follow-on investment).
As a reminder, direct investments were introduced to APEO's investment
objective in 2019 and bring a number of advantages, most notably greater
control over portfolio construction and lower associated costs (and therefore
higher return potential). Over the medium term the Manager expects direct
investments to equate to around 25% of the portfolio. At 30 September 2023
there were 26 direct investments in APEO's portfolio, equating to 19.4% of
NAV.
Investment £m Description
HRworks 7.7 HRworks is a Human Capital Management ("HCM") software suite provider to small
to medium-sized enterprises in the DACH region. See Case Study for further
information.
Undisclosed business 5.3 Investment into a European-headquartered technology business in the healthcare
sector, the details of which remain undisclosed due to confidentiality
restrictions at this time.
Undisclosed business 4.0 Investment into a US-headquartered consumer business alongside one of APEO's
core private equity managers, the details of which remain undisclosed due to
confidentiality restrictions.
Funecap (follow-on investment) 3.0 Additional commitment provided to Funecap alongside Latour Capital as part of
a shareholder reorganisation following a period of strong growth at the
business. The additional capital will also be used to support future growth
initiatives
European Camping Group (follow-on investment) 2.6 Additional investment made into European Camping Group in order to fund the
strategic acquisition of Vacanceselect, a French headquartered peer in the
outdoor
accommodation market which, similar to European Camping Group, has campsites
across Europe including France, Italy, Spain and Croatia.
Case study - Direct investment - HRworks
HRworks is a leading HCM cloud-native software provider to SMEs in the DACH
region.
Lead Manager: Maguar
APEO's investment: €9.0m
Investment Year: 2023
Size at Entry: Mid-market (<€1bn EV)
Geographic Focus: Germany
Sectors: Technology
Company Overview
· Founded in 1998, HRworks is a leading HCM cloud-native software
provider to small- and medium-sized companies ("SMEs") in the DACH region. The
company's products cover a broad range of relevant HCM modules, e.g. expense
management, time management, employee administration, talent management and
recruiting software.
· The company is primarily focused on German SMEs with 50-249 full-time
employees. This market still offers material white space with just 30% of the
firms in this segment utilising an HR software suite.
· Maguar Capital first invested in HRworks in 2020 and have seen
impressive growth of +27% revenue compound annual growth rate. This is
materially ahead of initial expectations and so to support the company's next
phase of growth, Maguar launched a continuation investment vehicle, allowing
the opportunity for APEO and other new investors to participate in the
business.
The Opportunity
· abrdn Private Equity originally invested in HRworks alongside Maguar
Capital in 2020. Since then, our view on the key attractions of this market
and HRworks' positioning within it have been validated and even enhanced.
· The company has provided consistent month-on-month growth with strong
customer retention. The fundamentals of the business are best-in-class, with
strong quality of earnings, high cash generation and excellent margins. The
white space in Germany alone provides ample opportunity for HRworks to achieve
its plan over the next five years.
· Going forward the business will increase its marketing/sales focus
within existing geographies and modularise its software. There is an
opportunity to increase penetration of its existing client base with a broader
product offering.
· The company completed its first small acquisition in September 2022.
There is significant potential for organic growth to be supplemented by
inorganic activity. Add-ons could complement the current HCM suite (e.g.
recruitment, HR analytics and organisational management) and/or help to expand
in selected adjacencies (e.g. legal compliance, document management and
e-signature).
· When the time eventually arrives to exit the investment, its strategic
nature means that HRworks will be attractive to both trade buyers and large
financial buyers with a software focus.
Portfolio Construction
The underlying portfolio consists of over 700 separate portfolio companies,
largely within the European mid-market and spread across different countries,
sectors and vintages. At 30 September 2023, 12 companies equated to more than
1% of portfolio NAV, with the largest single underlying company exposure
equating to 2.1% (Action).
Geographic Exposure(1)
We believe that the portfolio is well diversified and positions APEO well as
we continue to navigate this challenging macroeconomic environment. At 30
September 2023, 75% of underlying portfolio companies were headquartered in
Europe (2022: 76%). APEO's underlying portfolio remains largely positioned to
North Western Europe, with only 7% of underlying portfolio company exposure in
Italy and Spain (2022: 6%). APEO is well diversified by region across North
Western Europe, with the UK having the largest exposure at 15% (2022: UK 17%).
North America equates to 24% of the total (2022: 23%).
1 Based on the latest available information from underlying managers. Figures
represent percentage of total value of underlying portfolio company exposure.
Geographic exposure is defined as the geographic region where underlying
portfolio companies are headquartered. In addition to the above, 5% of
underlying portfolio companies are based in European countries not separately
disclosed above, while 1% are based in countries outside of Europe, excluding
North America.
Sector Exposure(1)
At 30 September 2023 Information Technology and Healthcare represented a
combined 41% of the portfolio (2022: 41%). When combined with Consumer
Staples, these more stable, less cyclical sectors equate to over half of
APEO's portfolio (2022: 52%). The other half of the portfolio is exposed to
sectors that are typically more cyclical, notably Industrials, Consumer
Discretionary and Financials. That said, there are sub-sectors within these
areas that provide growth opportunities, such as Fintech and B2B Services,
where businesses often have a valuable product or an essential service
offering with a strong digital component. Some examples within our top 20
companies by underlying portfolio company exposure include ACT (Environmental
Services), Funecap (Funeral Services), CFC (Specialist Insurance) and Planet
(Payments).
% Exposure as at
Sector 30 September 2023
Information technology 22
Industrials 19
Healthcare 19
Consumer discretionary 14
Consumer staples 10
Financials 9
Materials 4
Utilities 1
Energy 1
Communication services 1
1 Based on the latest available information from underlying managers. Figures
represent percentage of total value of underlying portfolio company exposure.
Maturity Analysis(1,2)
A large proportion of the portfolio is reaching maturity, with 49% being in
vintages of four years and older (2022: 47%). This should underpin consistent
distribution activity moving forward, once private equity market activity
starts to increase.
Holding period 30 September 2023
1 year 10%
2 years 24%
3 years 17%
4 years 12%
5 years 10%
>5 years 27%
1 Based on the latest available information from underlying managers. Figures
represent % of total value of underlying portfolio company exposure.
2 The holding period is the length of time that an underlying portfolio
company has been held since its initial investment date by the Company.
Outlook
APEO is over two decades old and has remained consistently focused on
partnering with a small group of leading private equity managers, principally
in the European mid-market. We do not foresee a material change in the
Company's investment strategy as we move forward. However, we do expect
"direct investment", i.e. co-investments and single-asset secondaries, to
continue to increase as a proportion of the portfolio and bring a number of
benefits with it, not least lower costs and therefore the potential for higher
returns.
In terms of the broader private activity market, we are not planning for an
immediate uplift in deal activity as we move into 2024, despite some
encouraging noises in the industry about the potential for a pick-up in
levels. The uncertain financial market backdrop caused by the sharp increases
in both inflation and interest rates has impacted both buyers and sellers'
willingness to transact in the short term. Furthermore, availability and
pricing of debt to finance new transactions will continue to be a challenge.
2023 was a tough year for private equity deal activity and whilst we can
definitely see a scenario where deal volumes materially pick up in 2024, we
continue to plan with caution.
APEO distributions held up well in 2023 given these headwinds and we do not
currently expect the next 12 months to show a material increase in cash being
returned to APEO. Even if we see an increase in deal activity in 2024, it will
take time for portfolio exits to translate into distributions to APEO, due to
the lag between transaction signing and closing.
For the same reason, we also expect drawdowns to fall next year, with fewer
new transactions being struck in 2023 and the use of credit facilities by
underlying fund investments creating a lag between deals being completed and
cash being drawn from the Company. APEO has a strong balance sheet position
and, as Manager, we always feel it's important to "plan for the worst"
regarding the use of the Company's resources. Therefore, we will remain
disciplined in the year ahead in terms of deploying APEO's cash into new
opportunities.
That said, market uncertainty and volatility does provide a silver lining
around the attractiveness of new investment opportunities. These periods tend
to present differentiated opportunities such as corporate carve outs and
public to private transactions, and family owners of attractive businesses can
often be more willing to sell long-held assets for liquidity or portfolio
reasons. Furthermore, entry multiples tend to be lower during these periods,
compared to long-term averages. The aftermath of the dot com bubble and the
global financial crisis are good examples of private equity's ability to take
advantage of these periods of uncertainty and generate strong investment
performance.
APEO's underlying portfolio has illustrated its resilience in the current
backdrop, and we expect it to continue to demonstrate this going forward,
given the quality of the portfolio, with many market-leading underlying
companies offering mission critical, non-discretionary products and/or
services. However, we are cognisant that sharp rises in both inflation and
interest rates mean that portfolio companies will need to pass through pricing
increases and manage their operations efficiently in order to maintain current
margin levels and cash flows.
Whilst we are planning for market headwinds to continue in the short-term, our
longer-term outlook on private equity and APEO remains bullish. In terms of
deal activity levels, the record levels of capital raised by the industry (so
called "dry powder") will need to be deployed over the next few years, which
will help drive a convergence between buyer and seller pricing expectations
and an eventual upturn in M&A. An increase in activity will, in turn,
drive an uptick in portfolio company exits and distributions to APEO,
especially given 49% of the underlying portfolio has been held for four years
or more and should, in theory, be ripe for exit. As well as returning cash to
APEO, distributions usually help drive additional NAV growth, given private
equity firms tend to sell underlying companies at an uplift to their
unrealised valuations two quarters prior.
More broadly, companies continue to stay private for longer and the governance
model of private equity, through majority control and active ownership,
provides the opportunity for hands-on value creation and for decisions to be
taken more efficiently and effectively in response to changing market
circumstances. The private equity firms that APEO partners with today are more
sector specialised and have deeper value creation toolkits compared to, for
example, before the global financial crisis. These firms are not reliant on
low interest rates and financial engineering to create investment returns.
We believe that private equity is a long-term asset class, and we expect it to
continue to deliver outperformance on both absolute and relative bases. Whilst
current headwinds are unlikely to fully abate in the next 12 months, we take
comfort in the private equity governance model, the quality of APEO's current
portfolio and its set of core managers, and the opportunity to make attractive
new investments during this period of relative uncertainty.
Alan Gauld,
Lead Investment Manager and Senior Investment Director
for abrdn Capital Partners LLP
30 January 2024
Responsible Investment and Sustainability
ESG Integration - embedded throughout the Manager's investment process
Due Diligence - Focus on Materiality
· ESG is a standard due diligence item for all new investments and an
ESG section is included in all Investment Committee papers.
· We perform different materiality assessments depending on the type of
investment opportunity being presented:
o Primary - primarily focuses on underwriting the private equity manager's
ESG process and identify areas for engagement and improvement.
o Direct - primarily focuses on the ESG risks and opportunities impacting
the business.
o Secondary - primarily focuses on ESG risks and exclusions.
Investments - Leverage Our Influence
· When we identify risks or potential for improvement, we work with our
private equity managers to drive sustainability enhancements.
· We negotiate ESG reporting requirements and standards in legal
documentation prior to investment.
Monitoring - Annual Assessments
· We produce an annual ESG survey focusing on selected areas of interest
(e.g. employees' wellbeing or climate risk) while monitoring progress of our
portfolio of private equity managers in terms of ESG integration.
· We monitor identified key performance indicators for client vehicles
with a sustainability objective.
Reporting - Client Focused
· Task Force on Climate related Financial Disclosures ("TCFD") entity
level report produced for the first time in June 2023.
· Reporting available for Sustainable Finance Disclosure Regulation
("SFDR") Article 8 products.
A Year in Brief
Focus in ESG in 2023
Sustainable Products and Climate Focus
· We defined a "sustainable investment" taxonomy for co-investments
and are in the process of defining "impact investing" for primaries.
· We joined ICI initiatives to formalise our collaboration across
industry.
· TCFD entity level report produced for the first time in June 2023.
Enhanced Reporting
· We have signed up to the ESG Data Convergence Initiative.
Enhanced Due Diligence and Engagement
· We have updated the Due Diligence Questionnaire process for primary,
secondary and direct investments, piloting external advisor collaboration.
Achievements
· We have scored the highest mark in PRI's indirect private equity
category. We were included in the first products qualified as Article 8+ under
SFDR.
Case Study - H₂ green steel - Investment
A fully integrated, digitalised and circular plant in Boden, northern Sweden,
H2 Green Steel will produce green steel, reducing CO₂ emissions by up to 95%
compared to traditional steelmaking.
Lead Manager: Altor
APEO's investment: via Altor Fund V and Fund VI
Investment Year: 2021, 2022 and 2023
Company Size: (EV>€1bn)
Geographic Focus: Global
Sectors: Industrial
Company Overview
· H2 Green Steel ("H2GS") was founded in 2020 with the ambition to
accelerate the decarbonisation of hard-to-abate industries.
· The company is starting with steel, building a fully integrated,
digitalised and circular plant in Boden, northern Sweden.
· Currently under construction, its first steel plant is due to be
operational by 2025/26.
· APEO will have exposure to H2GS through its primary fund investments
in both Altor Fund V and Altor Fund VI.
Responsible Investment
· Conventional steelmaking is an essential industry in the global
economy but is pollutive, responsible for 8-9% of global CO₂ emissions.
· H2GS's final steel product will have a 95% reduction in CO₂
emissions compared to traditional steel making. It aims to produce more than
four million tonnes of "green steel" annually by 2030.
· H2GS has the ability to help materially decarbonise the industry and
has signed customer agreements with a number of large, "blue-chip"
corporations, across industries like automotive and consumer appliances.
· H2GS's activities address five of the UN Sustainable Development
Goals ("SDGs").
APEO's Investment
· abrdn Private Equity has a long-term relationship with Altor,
supporting the manager in every fundraise since its inception in 2003. APEO
first partnered with Altor in 2014, via Altor Fund IV.
· Altor's partnership approach, credibility and track record in the
Nordic and DACH mid-market are its traditional key points of difference.
However, during the last decade Altor has also built market-leading
capabilities in ESG and sustainability, in particular making a number of
investments related to the "green transition".
· abrdn Private Equity has been able to monitor Altor's approach to
ESG carefully, not least through periodic due diligence and the annual abrdn
Private Equity Responsible Investment survey, in which Altor has consistently
obtained the highest rating.
TEN LARGEST INVESTMENTS
at 30 September 2023
1 Advent International Invests in attractive niches within Business and Financial Services,
Healthcare, Industrial,
Retail and Technology sectors.
Fund Size: €13.0bn Advent International Global Private Equity VIII 30/09/23 30/09/22
Strategy: Mid to large buyouts
EV of investments: $200m-$3bn
Geography: Global with a focus on Europe and North America
Website: www.adventinternational.com
Value (£'000) 45,051 52,171
Cost (£'000) 27,671 31,652
3.8% of NAV Commitment (€'000) 45,000 45,000
(30 September 2022: 4.5%)
Amount Funded 100.0% 100.0%
Income (£'000)* - -
2 CVC Capital Partners Undertakes medium- and large-sized buyout transactions across a range of
industries and geographies.
Fund Size: €16.4bn CVC Capital Partners VII 30/09/23 30/09/22
Strategy: Mid to large buyouts
EV of investments: €500m-€5bn
Geography: Europe and North America
Website: www.cvc.com
Value (£'000) 44,945 44,399
Cost (£'000) 24,898 24,862
3.8% of NAV Commitment (€'000) 35,000 35,000
(30 September 2022: 3.8%)
Amount Funded 97.2% 84.1%
Income (£'000)* 9 50
3 Nordic Capital Invests in medium- to large-sized buyout deals in Northern Europe, through
five dedicated sector teams, with the ability to invest in healthcare on a
global basis.
Fund size: €4.3bn Nordic Capital Fund IX 30/09/23 30/09/22
Strategy: Mid to large buyouts
EV of investments: €200m-€800m
Geography: Northern Europe (Global in Healthcare)
Website: www.nordiccapital.com
Value (£'000) 37,762 35,841
Cost (£'000) 23,403 22,355
3.2% of NAV Commitment (€'000) 30,000 30,000
(30 September 2022: 3.1%)
Amount Funded 100.0% 89.0%
Income (£'000) - -
4 A diversified secondary transaction comprising large cap buyout funds in
Europe and the US.
Fund Size: $125m Structured Solutions IV Primary Holdings 30/09/23 30/09/22
Strategy: Various
EV of investments: $500m-$5bn
Geography: Europe and North America
Website: n/a
Value (£'000) 36,687 36,504
Cost (£'000) 31,066 27,594
3.1% of NAV Commitment (€'000) 62,500 62,500
(30 September 2022: 3.2%)
Amount Funded 72.0% 62.9%
Income (£'000)* - -
5 IK Partner Invests in growth strategies supporting business transformation. Unique
Northern Continental
European footprint.
Fund Size: €1.9bn IK Fund VIII 30/09/23 30/09/22
Strategy: Mid-market buyouts
EV of investments: €100m-€500m
Geography: Northern Europe
Website: www.ikinvest.com
Value (£'000) 35,090 38,225
Cost (£'000) 13,371 22,947
2.9% of NAV Commitment (€'000) 46,000 46,000
(30 September 2022: 3.3%)
Amount Funded 94.7% 94.7%
Income (£'000)* 558 4
6 Altor Funds Focuses on investing in and developing medium-sized companies with a Nordic
origin that offer potential for value creation through revenue growth, margin
expansion, improved capital management and strategic re-positioning.
Fund Size: €2.1bn Altor Fund IV 30/09/23 30/09/22
Strategy: Mid-market buyouts
EV of investments: €50m-€500m
Geography: Northern Europe
Website: www.altor.com
Value (£'000) 34,954 37,158
Cost (£'000) 29,206 27,886
2.9% of NAV Commitment (€'000) 55,000 55,000
(30 September 2022: 3.2%)
Amount Funded 76.0% 73.2%
Income (£'000)* - 847
7 Bridgepoint A leading mid-market focused private equity firm targeting buyout investments
in European companies with strong market positions and earnings growth
potential across six core sectors.
Fund Size: €5.8bn Bridgepoint Europe VI 30/09/23 30/9/22
Strategy: Mid-market buyouts
EV of investments: €200m - €1bn
Geography: Europe
Website: www.bridgepoint.eu
Value (£'000) 34,488 28,650
Cost (£'000) 23,707 20,118
2.9% of NAV Commitment ($'000) 30,000 30,000
(30 September 2022: 2.5%)
Amount Funded 94.4% 79.7%
Income (£'000) 55 -
8 Exponent Invests in medium- to large-sized buyout deals in Northern Europe, through
five dedicated sector teams, with the ability to invest in healthcare on a
global basis.
Fund Size: £1.0bn Exponent Private Equity Partners III, LP. 30/09/23 30/09/22
Strategy: Mid-market buyouts
EV of investments: £75m-£350m
Geography: UK
Website: www.exponentpe.com
Value (£'000) 30,273 34,963
Cost (£'000) 21,232 22,749
2.5% of NAV Commitment (£'000) 28,000 28,000
(30 September 2022: 3.0%)
Amount Funded 100.0% 87.5%
Income (£'000) 1,566 411
9 PAI Targets upper mid-market businesses in Western Europe, with a particular focus
on continental Europe. Typically invests in market leaders across Food and
Consumer Goods, Healthcare, Business Services, and Industrials sectors.
Fund Size: €5.1bn PAI Europe VII 30/09/23 30/9/22
Strategy: Upper Mid-market buyouts
EV of investments: €300m - €1.2bn
Geography: Western Europe
Website: www.paipartners.com
Value (£'000) 29,681 24,801
Cost (£'000) 22,789 19,402
2.5% of NAV Commitment ($'000) 30,000 30,000
(30 September 2022: 2.1%)
Amount Funded 86.5% 73.5%
Income (£'000) - -
10 Advent International Targets high growth, international expansion and strategic restructuring
opportunities in five core sectors: Business and Financial Services;
Healthcare; Industrial and Energy; Retail, Consumer and Leisure; and
Technology.
Fund Size: $17.5bn Advent International Global Private Equity IX 30/09/23 30/09/22
Strategy: Mid to large buyouts
EV of investments: $200m-$3bn
Geography: Primarily Europe and North America
Website: www.adventinternational.com
Value (£'000) 27,262 52,171
Cost (£'000) 19,794 31,652
2.3% of NAV Commitment (€'000) 25,000 45,000
(30 September 2022: 2.7%)
Amount Funded 94.1% 100.0%
Income (£'000)* - -
Notes:
Performance information has been prepared by APEO and has not been approved by
the General Partners of the funds or any of their Associates.
* Income figures are for the year ended 30 September 2023 and 30 September
2022 respectively.
Ten Largest Underlying Private Companies
Largest Ten Underlying Private Companies at 30 September 20231,2
The below represents the ten largest underlying private companies which are
indirectly held through the Company's
fund investments and/or co-investments.
1 2.2% of NAV Action Sector: Consumer Staples Since its establishment in 1993, Benelux-based Action has grown into the
leading non-food discount retailer in the region with more than 2,100 stores
Location: Netherlands and over 65,000 employees.
Year of Investment: 2020
Private Equity Manager: 3i Group plc
Investment: 3i 2020 Co-investment 1 SCSp
Company Website: www.action.nl
2 1.8% of NAV European Camping Group Sector: Consumer Discretionary European Camping Group ("ECG") is a leading outdoor accommodation operator in
Europe. At acquisition, ECG operated a fleet of 21,000 high-quality holiday
Location: France lets across over 300 European sites. It operates under a number of strong
brands, including Eurocamp and Homair.
Year of Investment: 2021
Private Equity Manager: PAI Partners
Investments: ECG Co-invest SLP/PAI Europe VII/
PAI Europe VIII/ECG 2 Co-invest SLP
Company Website:
www.europeancampinggroup.com
3 1.7% of NAV ACT Sector: Industrials ACT is the leading global provider of market-based sustainability solutions.
It is headquartered in the Netherlands but operates from a global platform,
Location: Netherlands and is the largest specialist intermediary in the global environmental
certificate sector. ACT acts as an intermediary between corporates seeking to
Year of Investment: 2021 purchase certificates and suppliers with whom it has entrenched relationships.
It also provides advisory services, helping clients to navigate this rapidly
Private Fund Manager: Bridgepoint Capital evolving market and meet their environmental goals.
Investments: Arbor Co-Investment LP/
Bridgepoint Europe VI
Website: www.actcommodities.com
4 1.6% of NAV access Sector: Information Technology Founded in 1991, the Access Group ("Access") is a leading UK midmarket ERP
business, providing financial management systems and human capital management
Location: UK software, as well as industry specific software solutions. Access' software
helps over 75,000 customers across commercial and not-for-profit organisations
Year of Investment: 2018 to work efficiently, with expertise across numerous industries.
Private Equity Manager: HgCapital
Investments: HgCapital 8
Company Website: www.theaccessgroup.com
5 1.4% of NAV UVESCO Sector: Consumer Staples Uvesco is a leading food retailer in the North of Spain with a growing
presence in Madrid. The company follows a differentiated model based on
Location: Spain proximity stores and a high-quality offering, including a significant fresh
product component that is locally sourced and sold through its network of over
Year of Investment: 2022 270 stores across six regions.
Private Equity Manager: PAI Partners
Investments: Uvesco Co-Invest SCSp/PAI Mid-
Market I
Company Website: www.uvesco.es
6 1.4% of NAV NAMSA Sector: Healthcare NAMSA is the global industry leading contract research organisation for
preclinical and clinical medical device companies, and a global market leader
Location: United States in preclinical and biocompatability testing.
Year of Investment: 2020
Private Fund Manager: ArchiMed SaS
Investment: MPI-COI-NAMSA SLP
Company Website: www.namsa.com
7 1.3% of NAV FRONERI Sector: Consumer Discretionary Froneri is a global ice cream manufacturer, and largest pure-play ice-cream
manufacturer globally, benefitting from market-leading positioning in both
Location: United Kingdom branded and private label ice cream. It was formed as a joint venture between
R&R Ice cream plc and Nestle in 2016.
Year of Investment: 2019
Private Equity Manager: PAI Partners
Investments: PAI Strategic Partnerships SCSp/PAI
Europe VII
Company Website: www.froneri.com
8 1.2% of NAV cfc Sector: Financials CFC is a technology-led vertically integrated insurance platform, focusing on
the highest growth most attractive risk categories in their
Location: United Kingdom
markets. CFC is a global market leader in Cyber insurance, particularly to
Year of Investment: 2022 SMEs, given its early mover advantage in the Cyber space through product
innovation.
Private Equity Manager: Vitruvian Partners
Investments: CFC Continuation Fund/Vitruvian IV
Company Website: www.cfc.com
9 1.1% of NAV Trioworld Sector: Industrials Trioworld (formerly Trioplast) offers innovative and sustainable,
high-performance polyethylene and polypropylene film solutions for consumer
Location: Sweden and industrial packaging, transport packaging, agriculture, hygiene and
medical technology. The company was founded in 1965 in Smalandsstenar, Sweden.
Year of Investment: 2018
Private Equity Manager: Altor Equity Partners
Investment: Altor Fund IV
Company Website www.trioworld.com
10 1.1% of NAV FUNECAP GROUP Sector: Industrials Founded in 2010 by Thierry Gisserot and Xavier Thoumieux, Funecap is the
number two vertically-integrated funeral services and crematoria provider in
Location: France France.
Year of Investment: 2021
Private Equity Manager: Latour Capital
Investments: Latour Co-invest Funecap/Latour
Co-invest Funecap II/Latour IV
Company Website: www.funecap.group
INVESTMENT PORTFOLIO
at 30 September 2023
Vintage Investment Number of investments Outstanding commitments Cost Valuation Net multiple(2) % of NAV
£'000
£'000
£'000(1)
2016 Advent International Global Private Equity VIII 27 - 27,671 45,051 2.1x 3.8
2017 CVC Capital Partners VII 31 2,582 24,898 44,945 1.9x 3.8
2018 Nordic Capital Fund IX 13 7,800 23,403 37,762 1.7x 3.2
2021 Structured Solutions IV Primary Holdings* 53 14,328 31,066 36,687 1.3x 3.1
2016 IK Fund VIII 11 2,125 19,371 35,090 1.9x 2.9
2014 Altor Fund IV 16 11,465 29,206 34,954 1.7x 2.9
2018 Bridgepoint Europe VI 17 1,455 23,707 34,488 1.5x 2.9
2015 Exponent Private Equity Partners III, LP. 10 3,034 21,232 30,273 1.9x 2.5
2018 PAI Europe VII 18 5,321 22,789 29,681 1.5x 2.5
2019 Advent International Global Private Equity IX 37 1,292 19,794 27,262 1.4x 2.3
2016 Sixth Cinven Fund 14 2,559 16,079 27,230 2.0x 2.3
2019 Altor Fund V 18 14,101 23,069 26,706 1.3x 2.2
2018 Triton Fund V 18 10,497 15,632 26,375 1.5x 2.2
2020 3i 2020 Co-investment 1 SCSp3,4 1 - 6,380 26,160 3.5x 2.2
2017 HgCapital 8 7 2,269 7,528 25,369 2.8x 2.1
2014 CVC VI 22 2,293 14,043 22,470 2.2x 1.9
2020 Nordic Capital X 16 4,740 16,856 22,334 1.3x 1.9
2019 Investindustrial VII 12 6,823 15,316 21,760 1.4x 1.8
2019 Cinven 7 17 3,724 17,827 21,523 1.2x 1.8
2018 MSouth Equity Partners IV 13 1,604 15,456 20,669 1.4x 1.7
2020 Vitruvian IV 28 4,135 17,192 20,492 1.2x 1.7
2013 TowerBrook Investors IV 10 10,915 13,329 20,440 2.3x 1.7
2014 Permira V 12 730 9,832 19,766 3.5x 1.7
2019 IK IX 14 3,832 17,658 19,689 1.1x 1.6
2019 American Industrial Partners VII 13 4,766 12,999 19,626 1.6x 1.6
2021 Arbor Co-Investment LP3 1 - 8,374 17,296 2.1x 1.4
2015 Bridgepoint Europe V 9 2,521 13,159 17,123 2.0x 1.4
2020 MPI-COI-NAMSA SLP3 1 1,896 5,562 16,723 2.6x 1.4
2014 PAI Europe VI 12 1,774 9,371 16,652 1.9x 1.4
2020 Capiton VI 10 7,236 9,979 16,280 1.6x 1.4
2021 IK Partnership II 5 6,935 14,829 16,083 1.1x 1.3
2015 Equistone Partners Europe Fund V 10 2,035 16,476 13,839 1.6x 1.2
2022 Uvesco Co-invest3 1 2,212 6,268 13,797 2.0x 1.2
2021 Excellere Partners Fund IV 4 15,982 12,470 13,762 1.1x 1.2
2018 Investindustrial Growth 3 5,922 11,669 13,685 2.3x 1.1
2021 ECG Co-invest SLP3 1 247 6,663 13,263 2.0x 1.1
2020 Seidler Equity Partners VII L.P. 7 1,749 12,425 13,114 1.1x 1.1
2020 Hg Genesis 9 12 3,033 9,872 12,898 1.3x 1.1
2019 PAI Strategic Partnerships SCSp 2 121 6,659 12,540 1.9x 1.0
2020 Hg Saturn 2 7 3,507 8,584 11,862 1.3x 1.0
2013 Nordic Capital VIII 11 3,495 17,311 11,806 1.5x 1.0
2021 Advent Technology II-A 11 16,388 9,394 11,627 1.2x 1.0
2021 MI NGE S.L.P.3 1 837 8,153 11,447 1.4x 1.0
2021 MPI-COI-PROLLENIUM SLP3 1 1,417 7,147 11,256 1.6x 0.9
2020 PAI Mid-Market I 7 12,622 8,988 11,075 1.2x 0.9
2017 Onex Partners IV LP 7 1,046 10,259 10,810 1.4x 0.9
2019 Great Hill Partners VII 18 813 8,012 10,506 1.5x 0.9
2021 Hg Isaac Co-Invest LP3 1 41 7,571 10,453 1.4x 0.9
2020 Triton Smaller Mid-Cap Fund II 8 11,555 9,963 10,176 1.0x 0.9
2019 Vitruvian I CF LP 5 8,077 7,828 10,125 1.3x 0.8
2020 Vitruvian III 30 1,089 5,312 9,652 2.1x 0.8
2021 Eurazeo Payment Luxembourg Fund SCSp3 1 1,090 7,798 9,646 1.2x 0.8
2021 Capiton VI Wundex Co-Investment3 1 3,199 5,378 9,226 1.7x 0.8
2021 Hg Riley Co-Invest LP3 1 - 6,836 8,958 1.3x 0.7
2021 IK Co-invest Questel3 1 - 8,658 8,957 1.0x 0.7
2022 Hg Saturn 3 2 19,818 8,681 8,923 1.0x 0.7
2016 Astorg VI 5 1,595 205 8,646 1.7x 0.7
2020 Hg Mercury 3 11 4,715 5,959 8,240 1.3x 0.7
2021 CDL Coinvestment SPV3 1 - 5,294 7,938 1.5x 0.7
2021 WindRose Health Investors Fund VI 5 9,631 6,962 7,671 1.1x 0.6
2020 Hg Vardos Co-invest L.P.3 1 - 4,244 7,589 1.8x 0.6
2021 Bengal Co-Invest SCSp3 1 2,521 6,198 7,550 1.2x 0.6
2022 Advent International Global Private Equity X 12 18,130 7,970 7,401 0.9x 0.6
2021 MPI-COI-SUAN SLP3 1 37 6,402 7,073 1.1x 0.6
2021 Latour Co-invest Funecap*,3 1 - 4,287 6,908 1.5x 0.6
2021 VIP SIV I LP3 1 4,781 4,219 6,705 1.6x 0.6
2019 Alphaone International S.a.r.l.3 1 1,720 3,522 6,481 1.8x 0.5
2023 Maguar Continuation Fund I GmbH & Co. KG3 1 1,210 6,505 6,459 1.0x 0.5
2021 Permira Growth Opportunities II 11 19,973 9,037 5,904 0.7x 0.5
2015 Nordic Capital VII 7 1,580 10,998 5,870 1.4x 0.5
2023 One Peak Co-invest III LP3 1 - 5,277 5,193 1.0x 0.4
2021 bd-capital Partners Chase3 1 - 4,279 5,077 1.2x 0.4
2022 Hg Genesis 10 2 21,406 4,610 4,954 1.1x 0.4
2021 Nordic Capital Evolution Fund 8 21,378 4,661 4,925 1.1x 0.4
2023 Capiton Quantum GmbH & Co 2 732 3,857 4,850 1.3x 0.4
2022 Leviathan Holdings, L.P.3 1 - 4,103 4,637 1.1x 0.4
2012 Equistone Partners Europe Fund IV 6 493 8,762 4,427 2.1x 0.4
2019 ASI Omega Holdco Limited3 1 18 4,259 4,096 1.0x 0.3
2021 Nordic Capital WH1 Beta, L.P.3 1 511 3,192 3,896 1.1x 0.3
2022 ArchiMed - Med Platform 2 2 22,133 3,747 3,725 1.0x 0.3
2015 Capiton V 9 228 7,262 3,283 0.8x 0.3
2022 AV Invest B3*,3 1 312 4,789 3,040 0.6x 0.3
2023 Latour Co-invest Funecap II*,3 1 - 2,952 2,908 1.0x 0.2
2012 Advent International Global Private Equity VII 18 824 5,149 2,856 2.1x 0.2
2021 Great Hill Equity Partners VIII 5 12,973 3,349 2,560 0.8x 0.2
2012 IK Fund VII 2 1,734 5,871 2,427 2.1x 0.2
2021 ArchiMed III 5 10,448 2,573 2,195 0.9x 0.2
2001 CVC III* 1 426 4,283 2,101 2.7x 0.2
2022 Nordic Capital Fund XI 4 23,389 2,615 1,989 0.8x 0.2
2023 ECG 2 Co-Invest S.L.P.3 1 900 1,753 1,973 1.1x 0.2
20136 Bridgepoint Europe IV 5 785 2,920 1,764 1.6x 0.1
2011 American Industrial Partners V 7 33 1,313 1,573 1.4x 0.1
2011 Montagu IV 4 667 4,771 1,510 1.8x 0.1
2022 One Peak Growth III 6 10,997 2,032 1,447 0.7x 0.1
2022 Investindustrial Growth III 1 24,938 1,112 894 0.8x 0.1
2008 CVC V* 2 433 4,310 802 2.4x 0.1
2023 Vitruvian V 1 24,973 1,039 716 0.7x 0.1
2019 Gilde Buy-Out Fund IV 1 - 2,262 518 1.2x 0.0
2006 3i Eurofund V 0 - 9,282 381 2.7x 0.0
2022 PAI Europe VIII 4 25,509 508 224 0.4x 0.0
2022 Latour Capital IV 1 25,320 715 129 0.2x 0.0
2007 Industri Kapital 2007 Fund 0 1,506 5,545 72 1.4x 0.0
2023 Hg Mercury 4 1 25,851 172 25 0.1x 0.0
2009 Capiton IV GmbH & Co. Beteiligungs KG 5 147 241 16 1.1x 0.0
2022 Altor Fund VI 4 25,656 371 15 0.0x 0.0
2023 Montefiore Expansion I 0 8,648 26 - 0.0x 0.0
2023 Montefiore Investment VI 0 17,297 51 - 0.0x 0.0
2023 Seidler Equity Partners VIII, L.P. 0 16,386 - - 0.0x 0.0
Total investments(6) 812 651,991 957,797 1,261,995 105.2
Non-portfolio assets less liabilities (66,352) (5.2)
Total shareholders' funds 1,195,643 100.0
1. All funds are valued by the manager of the relevant fund or co-investment
as at 30 September 2023, with the exception of those funds suffixed with an *
which were
valued as at 30 June 2023 or initial funding amount paid.
2. The net multiple has been calculated by the Manager in sterling on the
basis of the total realised and unrealised return for the interest held in
each fund and co-investments.
These figures have not been reviewed or approved by the relevant fund or its
manager.
3. Co-investment position.
4. Formerly known as 3i Venice SCSp.
5. The 812 underlying investments represent holdings in 720 separate
underlying portfolio companies, as well as 44 underlying fund investments and
9 underlying co-investments which are indirectly held by the Company through
its Investment Portfolio.
TOP 30 UNDERLYING PRIVATE COMPANY INVESTMENTS
at 30 September 2023
Entity Description Fund/Co-investment Year of Investment(1) % of NAV(2)
Action Non-food discount retailer 3i 2020 Co-Investment 1 SCSp 2011 2.22%
ECG European leader in outdoor accommodation market ECG Co-invest SLP/PAI Europe VII/PAI Europe VIII/ECG 2 Co-invest SLP 2021 1.8%
ACT Leading global provider of market-based sustainability solutions Arbor Co-Investment LP/Bridgepoint Europe VI 2021 1.7%
Access Group Enterprise Resource Planning ('ERP') software business HgCapital 8/Hg Saturn 3 2018 1.6%
Uvesco Leading Spanish regional grocer Uvesco Co-invest SCSp/PAI Mid- Market I 2022 1.4%
NAMSA Provider of medical devices MPI-COI-NAMSA SLP 2020 1.4%
Froneri Ice cream manufacturer for take home and private label segments PAI Strategic Partnerships SCSp / PAI Europe VII 2019 1.3%
CFC Underwriting Global leader in the cyber insurance market CFC Continuation Fund/Vitruvian IV 2022 1.2%
Trioworld Manufacturer of sustainable polyethylene film Altor Fund IV 2022 1.1%
Funecap Operator of funeral infrastructures and services Latour Co-invest Funecap/Latour Co-investFunecap II/Latour IV 2021 1.1%
Mademoiselle Dessert and confectionery producer Alphaone International S.a.r.l./IK Fund VIII 2018 1.1%
Desserts
CDL Provides support to the medical profession through advanced diagnostics CDL Coinvestment SPV/Excellere 2018 1.1%
Partners Fund IV
Questel IP management company IK Co-invest Questel/IK IX 2020 1.0%
Planet Leading provider of integrated payment solutions for hospitality and retail Eurazeo Payment Luxembourg Fund SCSp 2021 1.0%
Insight software Financial reporting and enterprise performance management software provider Hg Isaac Co-Invest LP / Hg Saturn 2 2021 1.0%
Undisclosed(3) Medical aesthetics company MPI-COI-PROLLENIUM SLP 2021 0.9%
Visma Provider of business-critical software to Small to Medium-sized Enterprises Visma/Hg Saturn 2/Montagu IV 2014 0.9%
('SMEs')
Groupe NGE Independent public works concessions group MI NGE S.L.P. 2021 0.9%
Undisclosed(3) Software provider to automotive collision repairers, parts suppliers and Advent International Global Private Equity VIII 2017 0.9%
insurers
Wundex Home care provider Capiton VI Wundex Co-Investment/Capiton VI 2021 0.9%
Riskalyze Risk tolerance software for the wealth Hg Riley Co-Invest LP/ Hg Mercury 3 2021 0.9%
management industry
Undisclosed(3) Space conglomerate Advent International Global Private Equity X 2023 0.8%
R1 RCM Healthcare revenue services TowerBrook Investors IV 2016 0.8%
Norican Metallic parts formation and preparation Altor Fund IV 2015 0.8%
industry
Tropicana Non-alcoholic beverages Bengal Co-Invest SCSp/PAI Europe VII 2022 0.8%
Infradata Cybersecurity and secure networking solutions IK Fund VIII 2019 0.7%
Undisclosed 3 Global top-three pure player in engineering materials Advent International Global Private Equity X 2023 0.7%
Aspia Leader within accounting, payroll, tax and related services in Sweden IK Fund VIII 2018 0.7%
Undisclosed (3) Generics pharmaceutical company Advent International Global Private Equity VIII 2018 0.7%
Litera Provider of legal technology solutions HgCapital 8/Hg Genesis 9 2019 0.7%
1 Year of investment is disclosed as the first year of investment by a
portfolio investment.
2 All percentage of NAV figures are based on gross valuations, before any
carry provision.
3 Due to disclosure restrictions associated with our holding in the associated
fund or co-investment, we are unable to name the underlying private company.
Stakeholder Engagement and Responsible Management
Section 172 Statement
The Board is required to describe how the Directors have discharged their
duties and responsibilities over the course of the financial year following
the guidelines set out in the UK under section 172 (1) of the Companies Act
2006 (the "s172 Statement"). This Statement provides an explanation of how the
Directors have promoted the success of APEO for the benefit of its
shareholders as a whole, taking into account the likely long-term consequences
of decisions, the need to foster relationships with all stakeholders and the
impact of APEO's operations on the environment.
Stakeholders
APEO is an investment trust and is externally managed, has no employees, and
is overseen by an independent non-executive Board of Directors. The Board
makes decisions to promote the success of APEO for the benefit of the
shareholders as a whole, with the ultimate aim of delivering its investment
objective to achieve long-term total returns. The Directors set APEO's
investment mandate, monitor the performance of all service providers
(including the Manager), and are responsible for reviewing strategy on a
regular basis. All this is done with the aim of preserving and enhancing
shareholder value over the longer term. The following section discusses how
the actions taken by the Board work towards ensuring that the interests of all
stakeholders are appropriately considered. In line with the Financial
Reporting Council ("FRC") Guidance, this statement focuses on stakeholders
that are considered key to APEO's business and does not therefore cover every
one of APEO's stakeholders.
Shareholders
The Board is committed to maintaining open channels of communication and
engaging with shareholders. The Board seeks shareholder feedback in order to
ensure that decisions are taken with the views of shareholders in mind. These
shareholder communications include:
Annual General Meeting
The AGM provides an opportunity for the Directors to engage with shareholders,
answer their questions and meet them informally. At the AGM there is typically
a presentation on APEO's performance and the future outlook as well as an
opportunity to ask questions of the Manager and Board. The Board has agreed to
alternate the location of the AGM between Edinburgh and London and the next
AGM will take place on 27 March 2024 in London. The Board encourages
shareholders to attend the AGM, and for those unable to attend, to lodge their
votes by proxy on all of the resolutions put forward. For more information on
how to lodge proxy votes in advance of the AGM, please see the How to Attend
and Vote at Company Meetings section in the Annual Report.
Shareholder Meetings
Unlike trading companies, shareholders in investment companies often meet
representatives of the Manager rather than members of the Board. Feedback from
the Manager's meetings with shareholders is provided to the Board at every
meeting. The Chair, Senior Independent Director and other members of the Board
are also available to meet with shareholders to understand their views at any
time during the year.
Publications
APEO publishes a full annual report each year that contains a strategic
report, governance section, financial statements and additional information.
The report is available online and in paper format. APEO also produces a
half-yearly report each year. The purpose of these reports is to provide
shareholders with a clear understanding of APEO's activities, portfolio,
financial position and performance. The Manager also publishes a Monthly
Factsheet, and a Monthly Net Asset Value Statement. The purpose of these
publications is to keep shareholders abreast of APEO's developments.
Investor Relations and Website
APEO subscribes to the Manager's Investor Relations programme. APEO's website
contains a range of information and includes a full monthly portfolio listing
of APEO's investments as well as podcasts and presentations by the Manager.
Details of financial results, the investment process and Manager together with
APEO announcements and contact details can be found at: abrdnpeot.co.uk.
Keeping in Touch
The Board encourages shareholder feedback and invites shareholders to write to
the Board at its registered office. The Board has also set up an email account
to encourage shareholders to write directly to the Board. Shareholders are
invited to email any feedback or questions to the Board at
APEOT.Board@abrdn.com. Any questions received will be replied to by either the
Manager or Board via the Company Secretary.
The Manager
The Manager's performance is critical for APEO to achieve its investment
objective and the Board maintains a close and constructive working
relationship with the Manager. The Board meets the Manager at formal Board
meetings at least four times per year and more regularly as necessary. The
Board Members also keep in touch with the Manager informally throughout the
year and receive reports and updates as appropriate. During the year, the
Management Engagement Committee, on behalf of the Board, reviewed the
continued appointment of Manager, and the terms of the Management Agreement,
and believes that the continued appointment of the Manager is in the best
interests of shareholders.
Suppliers
As an investment trust, APEO has outsourced its entire operations to
third-party suppliers. The Board is responsible for selecting the most
appropriate outsourced service providers and, alongside the Investment
Manager, monitors their services to ensure a constructive working
relationship. The Board, through the Investment Manager, maintains regular
contact with its key suppliers, namely the Company Secretary, the
Administrator, the Registrar, the Depositary and the Broker, and receives
regular reporting from them. The Board, via the Management Engagement
Committee, ensures that the arrangements with service providers are reviewed
at least annually. The aim is to ensure that contractual arrangements remain
in line with best practice, services being offered meet the requirements and
needs of APEO, and performance is in line with the expectations of the Board,
Manager and other relevant stakeholders. The Audit Committee considers the
internal controls at these service providers to ensure they are fit for
purpose.
Debt Providers
On behalf of the Board, the Manager maintains a positive working relationship
with RBS International, Societe Generale and State Street Bank International,
the providers of APEO's multi-currency revolving credit facility, and provides
regular updates on business activity and compliance with its loan covenants.
Investment Managers, Funds and Companies
Responsibility for actively monitoring the activities of investment managers,
funds and companies, which make up APEO's portfolio, has been delegated by the
Board to the Manager. On behalf of the Board and its stakeholders, the Manager
invests in a carefully selected range of private equity managers, built from
years of established relationships and proprietary research. The Manager
assesses all investment opportunities and participates on the advisory boards
of some investments. The Board is responsible for overseeing the work of the
Manager and this is not limited solely to the investment performance of the
investments. The Board also has regard for environmental (including climate
change), social and governance matters that subsist within the portfolio
companies. Please see the Manager's approach to ESG above.
Principal Decisions
Pursuant to the Board's aim of promoting APEO's long-term success, the
Directors were particularly mindful of stakeholder considerations when
considering the following items during the year ended 30 September 2023:
• The Investment Manager's Review details the key investment decisions
taken during the year. In the opinion of the Board, the performance of the
investment portfolio is the key factor in determining the long-term success of
APEO. Accordingly, at each Board meeting the Directors discuss performance in
detail with the Investment Manager. During the year the Management Engagement
Committee decided that the continuing appointment of the Manager was in the
best interests of shareholders.
• As set out in the Chair's Statement, the Board was notified of abrdn
plc's intention to sell the abrdn Private Equity business, including the
Company's Manager, to Patria. On behalf of the Company's shareholders, the
Board is undertaking diligence on Patria, its systems and processes, and
seeking assurance that the Manager will continue to have sufficient skills and
resources to continue to manage the Company in accordance with its investment
policy and mandate. Diligence started during the financial year, and has
continued since then, and the Board will update the market following its
conclusions in due course.
• The level of dividend to be paid to shareholders was carefully
assessed during the financial year. The Board is pleased to have paid four
quarterly dividends of 4.0 pence per share making a total dividend for the
year to 30 September 2023 of 16.0 pence per share. This represents a dividend
yield of 3.6%, based on the APEO share price at 30 September 2023, and is an
increase of 11.1% on the 14.4 pence per share paid for the year to 30
September 2022.
• Subsequent to the year end, the Board announced a buyback programme
using proceeds from a recent sale. The buyback is intended to provide an
accretion to NAV for shareholders as well as underlines the Board's belief in
the Company's underlying portfolio valuations.
• The Board is wholly aligned with the concept of good customer
outcomes as defined by the new Consumer Duty Regulations but believes that the
current cost disclosure regime misleads investors and overall provides poor
results for retail investors. The Board has written to the FCA to outline its
dissatisfaction with the current cost disclosure regime.
• The Board regularly considers succession planning and, as set out in
the Chair's Statement, the Board has asked Alan Devine to remain as the
Company's Chair during the transition of the Company's Manager to Patria. The
Board believes that Alan Devine's continued appointment is in the best
interests of the shareholders as a whole. The Board is actively considering
Chair succession, and intends to appointment an additional non-executive
director to the Board during 2024.
Board Diversity
The Board's statement on diversity is set out in the Statement of Corporate
Governance. At 30 September 2023, there were three male and two female
Directors on the Board.
Modern Slavery Act
Being a company that does not offer goods and services to customers and has no
turnover, the Board considers that APEO is not within the scope of the Modern
Slavery Act 2015. APEO is therefore not required to make a slavery and human
trafficking statement. In any event, the Board considers APEO's supply chains,
dealing predominantly with professional advisers and service providers in the
financial services industry, to be low risk in relation to this matter.
Streamlined Energy and Carbon Reporting ("SECR") Statement: Greenhouse Gas
Emissions and Energy Consumption Disclosure
APEO has no employees, premises or operations either as a producer or provider
of goods and services. Therefore, it is not required to disclose energy and
carbon information as there are zero emissions associated or attributed to the
Company and no underlying global energy consumption.
Viability Statement
The Board has decided that five years is an appropriate period over which to
consider its viability. The Board considers this to be an appropriate period
for an investment trust company with a portfolio of private equity investments
and the financial position of the Company. In determining this time period the
Directors considered the nature of APEO's commitments and its associated cash
flows. Generally, the private equity funds and co-investments in which APEO
invests call monies over a five year period, whilst they are making
investments, and these drawdowns should be offset by the more mature funds and
co-investments, which are realising their investments and distributing cash
back to APEO. The Manager presents the Board with a comprehensive review of
APEO's detailed cash flow model on a regular basis, including projections for
up to five years ahead depending on the expected life of the commitments. This
analysis takes account of the most up to date information provided by the
underlying managers, together with the Manager's current expectations in terms
of market activity and performance.
The Directors have also carried out an assessment of the principal risks and
discussed in note 18 to the financial statements that are facing APEO over the
period of the review. These include those that would threaten its business
model, future performance, solvency or liquidity such as over-commitment,
liquidity and market risks. When considering the risks, the Board reviewed the
impact of stress testing on the portfolio, including multiple downside
scenarios which modelled a reduction in forecast distributions from 50% to
100% in an extreme downside case and the impact this would have on liquidity
and deployment. Under an extreme downside scenario which involved: i) a 100%
reduction in forecast distributions over a 12-month period; ii) all underlying
General Partner debt facilities being drawn simultaneously; and iii) a 25%
reduction in portfolio valuations spread over a period of 12 months, a
significant adjustment to planned deployment would be required to maintain
sufficient liquid resources over the financial year to 30 September 2024 and
over the period through to December 2024. From December 2024 onwards, the
implied resumption of forecast distribution activity then provides sufficient
liquidity in this extreme downside scenario.
By having a portfolio of predominantly fund investments, diversified by
manager, vintage year, sector and geography; by assessing market and economic
risks as decisions are made on new commitments; and by monitoring APEO's cash
flows together with the Manager, the Directors believe APEO is able to
withstand economic cycles. The Directors are also aware of APEO's indirect
exposure to ongoing risks through underlying funds. These are continually
assessed by the Manager monitoring the underlying managers themselves and by
participation on a number of fund advisory boards. Based on the results of
this analysis, and the ongoing ability to adjust the portfolio, the Directors
have a reasonable expectation that APEO will be able to continue in operation
and meet its liabilities as they fall due over the five-year period following
the date of this report.
Future Strategy
The Board intends to maintain the strategic policies set out in the Strategic
Report for the year ending 30 September 2024 as it is believes that these are
in the best interests of shareholders.
Long-Term Investment
The Manager's investment process seeks to outperform its comparator index over
the longer term. The Board has in place the necessary procedures and processes
to continue to promote APEO's long-term success. The Board will continue to
monitor, evaluate and seek to improve these processes as APEO continues to
grow over time, to ensure that the investment proposition is delivered to
shareholders and other stakeholders in line with their expectations.
On behalf of the Board
Alan Devine
Chair
30 January 2024
Principal Risks and Uncertainties
The Board and Audit Committee carry out a regular and robust review of the
risk environment in which APEO operates. The Board also identifies emerging
risks such as a material change in the geopolitical or macroeconomic
environment, or developments in climate change from an investor attitude or
regulatory expectation, which might affect APEO's underlying investments.
During the financial year, global economic conditions continued to be
challenging, in particular with higher inflation and sharp interest rate
rises. This impacted APEO both at a Company level but also in its underlying
portfolio. The Board is aware that there are a number of risks which, if
realised, could have a material adverse effect on APEO and its financial
condition, performance and prospects. The Board monitors APEO's principal and
emerging risks regularly, alongside the Manager, and the operating and control
environment in which APEO operates.
The Board considers its risk appetite in relation to each principal risk and
monitors this on an ongoing basis. Where a risk is approaching or is outside
the tolerance level, the Board will take action to manage the risk. Currently,
the Board considers the risks to be managed within acceptable levels. The
principal risks faced by APEO relate to the Company's investment activities
and these are set out in the following table.
Risk Definition Tolerance Mitigation / Update Direction of Travel
Market a) Pricing risk Medium a) Public markets remain volatile but have generally increased over levels Unchanged risk
seen in 2022, which has impacted the valuation of the APEO portfolio.
APEO is at risk of the economic cycle impacting listed financial markets and Investments in APEO's portfolio are all subject to private equity guidelines
hence potentially affecting the pricing of underlying investments and timing such as IPEV Guidelines with respect of valuations. Furthermore, they are
of exits. predominantly in line with either IFRS or US GAAP accounting standards.
b) Currency risk
APEO has a material proportion of its investments and cash balances in Inflation and interest rate rises have impacted both the valuations of the
currencies other than Sterling and is therefore sensitive to movements in existing underlying portfolio and the pricing of new investments. Pricing risk
foreign exchange rates. is mitigated by APEO having a diversified portfolio of fund investments and
co-investments.
Private equity market deal activity has remained low in 2023, continuing the
trend seen in the second half of 2022. This has extended the timing of some
investment exits and distributions. The Manager forecasts an uptick in market
activity in 2024 but continues to plan in case the exit environment remains
similar to 2023. As such, APEO increased the size of its revolving credit
facility to £300 million and took extra caution in new investment deployment
in 2023 to help mitigate this risk.
b) The Manager monitors APEO's exposure to foreign currencies and reports to
the Board on a regular basis. It is not APEO's policy to hedge foreign
currency risk. APEO's non-sterling currency exposure is primarily to the euro
and the US dollar.
During the year ended 30 September 2023, sterling appreciated by 1.2% relative
to the euro (2022: depreciated 2.1%) and appreciated by 9.3% relative to the
US dollar (2022: depreciated 17.2%).
This movement in the euro and the US dollar had a net negative impact on the
net assets of APEO.
Over-commitment The risk that APEO is unable to settle outstanding commitments to fund Medium APEO makes commitments to private equity funds, which are typically drawn over Unchanged risk
investments. three to five years. Hence, APEO will tolerate a degree of over commitment
risk in order to deliver long-term investment performance.
In order to mitigate this risk, the Manager ensures that APEO has appropriate
levels of resources, whether through resources available for investment or the
revolving credit facility, relative to the levels of over- commitment.
The Manager will also forecast and assess the maturity of the underlying
portfolio to determine likely levels of distributions in the near term.
The Manager will also track the over-commitment ratio and ensure that it sits
within the range, agreed with the Board, of 30% to 75% over the long term.
At 30 September 2023 APEO had £651.9 million (2022: £678.9 million) of
outstanding commitments, with £94.3 million (2022: £69.9 million) expected
not to be drawn. The over-commitment ratio was 35.2% (2022: 42.8%).
Investment selection The risk that the Manager makes decisions to invest in funds and/or Medium The Manager undertakes detailed due diligence prior to investing in, or Unchanged risk
co-investments that are not accretive to APEO's NAV over the long term. divesting, any fund or co-investment. It has an experienced team which
monitors market activity closely. APEO's management team has long-established
relationships with the third-party fund managers in the Company's portfolio
which have been built up over many years. ESG factors are integrated into the
investment selection process and the Board and the Manager believes that will
improve investment decision making and help to generate stronger, more
sustainable returns.
Climate The risk that climate change impacts the APEO portfolio, either from a Medium APEO is committed to being an active, long-term responsible investor. As such Increased risk
physical or transition point of view. sustainability and ESG is a fundamental component of its Manager's investment
process.
The Manager commits APEO's capital with or alongside private equity managers
who demonstrate strong adherence to ESG principles and processes or have a
cultural commitment to improve their ESG credentials. Focus on climate change
is part of that assessment. The private equity industry is still relatively
early in its response to climate change and the Manager is focused on engaging
with its portfolio of private equity managers to help promote further positive
change.
Liquidity The risk that APEO is unable to meet short-term financial demands. Low APEO manages its liquid investments to ensure that sufficient cash is Unchanged risk
available to meet contractual commitments and also seeks to have cash
available to meet other short-term needs. Additional short-term flexibility
is achieved through the use of the £300 million revolving multi-currency
loan facility.
APEO had cash and cash equivalents of £9.4 million (2022: £30.3 million)
and £197.7m (2022: £138.0 million) available on its revolving credit
facility as at 30 September 2023.
Credit The exposure to loss from failure of a counterparty to deliver securities or Low APEO places funds with authorised deposit takers from time to time and, Unchanged risk
cash for acquisitions or disposals of investments or to repay deposits. therefore, is potentially at risk from the failure of such an institution.
APEO's cash is held by BNP Paribas Securities Services S.A., which is rated
'A+' by S&P Global Ratings.
The credit quality of the counterparties is kept under regular review. Should
the credit quality or the financial position of these financial institutions
deteriorate significantly, the Manager would move cash balances to other
institutions.
Operational The risk of loss or a missed opportunity resulting from a regulatory failure Low The Manager's business continuity plans, and approach to cyber security risk, Unchanged risk
or a failure relating to people, processes or systems. are reviewed on an ongoing basis alongside those of APEO's key service
providers.
The Board has received reports from its key service providers setting out
their existing business continuity framework. Having considered these
arrangements, the Board is confident that a good level of service will be
maintained in the event of an interruption to business operations or other
major event, including another global pandemic.
APEO's financial risk management objectives and policies are contained in note
18 to the financial statements.
Review of Performance
An outline of the performance, market background, investment activity and
portfolio during the year under review and the performance over the longer
term, as well as the investment outlook, are provided in the Highlights,
Chair's Statement, and Investment Manager's Review. Details of APEO's
investments can be found above. The ten largest investments are shown above
and the top ten underlying private company investments are shown above.
CORPORATE GOVERNANCE
DIRECTORS' REPORT
The Directors present their report and the audited financial statements of the
Company for the year ended 30 September 2023.
The Directors consider that the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Company's position and performance, business
model and strategy.
Results and Dividends
The financial statements for the year ended 30 September 2023 are contained
below. Interim dividends of 4.0 pence per Ordinary share were paid in April,
July and October 2023. The Board declared, on 13 December 2023, a fourth
interim dividend for the year to 30 September 2023 of 4.0 pence per share to
be paid on 26 January 2024 to shareholders on the register on 22 December
2023. The total dividend for the financial year to 30 September 2023 was 16.0
pence per Ordinary share, an increase of 11.1% on the 14.4 pence per Ordinary
share paid for the financial year to 30 September 2022.
Principal Activity and Status
The Company is registered as a public limited company in Scotland under
company number SC216638, is an investment company within the meaning of
Section 833 of the Companies Act 2006 and carries on business as an investment
trust.
The Company has applied for and has been accepted as an investment trust under
Sections 1158 and 1159 of the Corporation Tax Act 2010 and Part 2 Chapter 1 of
Statutory Instrument 2011/2999. This approval relates to accounting periods
commencing on or after 1 October 2012. The Directors are of the opinion that
the Company has conducted its affairs so as to be able to retain such
approval.
The Company intends to manage its affairs so that its Ordinary shares continue
to be a qualifying investment for inclusion in the stocks and shares component
of an Individual Savings Account.
Capital Structure and Voting Rights
The Company's issued share capital at 30 September 2023 consisted of
153,746,294 (2021: 153,746,294) Ordinary shares of 0.2 pence each in issue.
Each Ordinary shareholder is entitled to one vote on a show of hands and, on a
poll, to one vote for every Ordinary share held.
Management Agreement
The Company has appointed abrdn Capital Partners LLP, a wholly owned
subsidiary of abrdn, as its AIFM and Manager. abrdn Capital Partners LLP has
been appointed to provide investment management, risk management,
administration and company secretarial services, and promotional activities to
the Company. abrdn Capital Partners LLP has sub-delegated administrative and
secretarial services to abrdn Holdings Limited (previously known as Aberdeen
Asset Management PLC) and promotional activities to abrdn.
The management fee, payable quarterly, is calculated as 0.95% per annum of the
Company's NAV at the end of the relative quarter. No fee is payable on any
investments in any investment trust, collective investment scheme or any other
company or fund managed, operated or advised by the Manager or any other
subsidiary of abrdn where there is an entitlement to a fee on that investment.
Further details of the fees payable to the Manager are shown in notes 3 and 4
to the financial statements.
The management agreement is terminable on not less than 12 months' written
notice.
External Agencies
The Board has contractually delegated depositary services (which include the
custody and safeguarding of the Company's assets) to IQ-EQ Depositary Company
(UK) Limited and the share registration services to Equiniti Limited. These
contracts were entered into after full and proper consideration by the Board
of the quality and cost of services offered in so far as they relate to the
affairs of the Company, and are subject to regular review by the Management
Engagement Committee.
Substantial Interests
Information provided to the Company by major shareholders pursuant to the
FCA's Disclosure, Guidance and Transparency Rules is published by the Company
via a Regulatory Information Service.
The table below sets out the interests in 3% or more of the issued share
capital of the Company, of which the Board was aware as at 30 September 2023.
Shareholder Number of % held
Ordinary shares
Phoenix Group Holdings1 84,945,125 55.25
Interactive investor 6,897,577 4.49
Hargreaves Lansdown, stockbrokers 6,046,840 3.93
Oxfordshire CC PF 5,038,909 3.28
1 The Phoenix Group Holdings shareholding reflects a holding of 82,467,496
(53.60%) with the voting rights of those shares exercisable by abrdn
Investments Limited, and 2,477,628 (1.61%) of shares held by abrdn Holdings
Limited.
The Company has not been notified of any changes to these holdings as at the
date of this Annual Report.
Relationship Agreement with the Phoenix Group
The Company's largest shareholder, Phoenix Group Holdings plc, previously held
its shares through Standard Life Assurance Limited and Phoenix Life Assurance
Limited ("SLAL" and "PLAL" which were 100% owned by Phoenix Group Holdings).
Subsequent to the financial year end, Phoenix Group Holdings notified the
Company that the shares held in the Company by SLAL and PLAL had been
transferred intra-group to Phoenix Life Limited ("PLL", which is owned 100% by
Phoenix Group Holdings). PLL has irrevocably undertaken to the Company that,
at any time when PLL and its Associates (meaning any company which is a member
of the PLL group) are entitled to exercise or control 30% or more of the
rights to vote at general meetings of the Company, it will not (and will
procure that none of its Associates will) seek to nominate directors to the
Board of the Company who are not independent of PLL and its Associates, enter
into any transaction or arrangement with the Company which is not conducted at
arm's length and on normal commercial terms, take any action that would have
the effect of preventing the Company from carrying on an independent business
as its main activity or from complying with its obligations under the Listing
Rules or propose or procure the proposal of any shareholder resolution which
is intended or appears to be intended to circumvent the proper application of
the Listing Rules.
Directors
Each of the Directors of the Company as at 30 September 2023, whose
biographies are shown in the Annual Report and on the Company's website, are
considered by the Board to be independent of the Company and the Manager and
free of any relationship which could materially interfere with the exercise of
their independent judgement on issues of strategy, performance, resources and
standards of conduct.
All of the Directors held office throughout the year under review and up to
the date of signing the financial statements.
The Directors attended scheduled Board and Committee meetings during the year
ended 30 September 2023 as follows (with their eligibility to attend the
relevant meetings in brackets):
Board Audit Management Nomination
meetings Committee Engagement Committee
meetings and Nomination meetings
Committee
meetings
Dugald Agble1 5 (6) 2 (3) 1 (1) 1 (1)
Alan Devine2 6 (6) 2 (2) 1 (1) 1 (1)
Diane Seymour-Williams 6 (6) 3 (3) 1 (1) 1 (1)
Yvonne Stillhart 6 (6) 3 (3) 1 (1) 1 (1)
Calum Thomson 6 (6) 3 (3) 1 (1) 1 (1)
1 Unable to attend one Board and one Audit Committee meeting due to a family
bereavement.
2 Stepped down as a member of the Audit Committee, Management Engagement
Committee and Nomination Committee on 28 May 2023.
The Board and Committees meet more frequently when business needs require and
met a further seven times during the financial year. There are a number of
matters reserved for the Board's approval which include overall strategy,
investment policy, borrowings, dividend policy and Board composition.
All of the Directors will retire and, being eligible, will offer themselves
for re-election at the AGM.
The Board believes that each Director has the requisite high level and range
of business, investment and financial experience which enables the Board to
provide clear and effective leadership and proper governance of the Company.
Each Director remains independent and free from any relationship which could
materially interfere with the exercise of their judgement on issues of
strategy, performance, resources and standards of conduct.
Following the Company's formal annual performance evaluation, the Board
concluded that each Director's performance continues to be effective and each
Director demonstrates commitment to the role, and their individual
performances contribute to the long-term sustainable success of the Company.
The Board therefore recommends the re-election, of each of the Directors at
the AGM. The biographies set out the Directors' range of skills and experience
as well as length of service and their contribution to the Board during the
year.
The Chair, with support from the Company Secretary, led the annual performance
evaluation during the financial year. The process was based around a
questionnaire which was issued to and completed by all Directors. The collated
results of the questionnaires were discussed by the Directors at the Board
meeting in October 2023. Overall the performance of the Board, collectively
and individually, was considered to be satisfactory. The Board last engaged an
external independent consultancy, Lintstock Limited, to undertake a formal
evaluation of the Board and Committees during the financial year to 30
September 2019. In accordance with corporate governance best practice, the
Company intends to appoint an external provider to undertake the evaluation
during 2024.
Board's Policy on Tenure
In normal circumstances, it is the Board's expectation that Directors will not
serve beyond the AGM following the ninth anniversary of their appointment.
However, the Board takes the view that independence of individual Directors is
not necessarily compromised by length of tenure on the Board and that
continuity and experience can add significantly to the Board's strength. The
Board believes that recommendation for re-election should be on an individual
basis following a rigorous review which assesses the contribution made by the
Director concerned, but also taking into account the need for regular
refreshment and diversity.
It is the Board's policy that the Chair of the Board will not normally serve
as a Director beyond the AGM following the ninth anniversary of his or her
appointment to the Board. However, this may be extended in certain
circumstances or to facilitate effective succession planning and the
development of a diverse Board. In such a situation the reasons for the
extension will be fully explained to shareholders and a timetable for the
departure of the Chair clearly set out. Alan Devine was appointed to the Board
on 28 May 2014, and as Chairman on 22 March 2022, and the AGM in March 2024
follows the ninth anniversary of his appointment. The Board has asked Alan
Devine to remain on the Board for an additional year to oversee the transition
of the Manager from abrdn to Patria. The plans for Alan Devine's successor as
Chair will be announced in due course.
Board Diversity
The Board recognises the importance of having a range of skilled, experienced
individuals with appropriate knowledge represented on the Board in order to
allow it to fulfil its obligations. The Board also recognises the benefits and
is supportive of the principle of diversity in its recruitment of new Board
members. The Board will not display any bias for age, gender, race, sexual
orientation, religion, ethnic or national origins, or disability in
considering the appointment of its Directors. In view of its size, the Board
will continue to ensure that all appointments are made on the basis of merit
against the specification prepared for each appointment. The Board does not
therefore consider it appropriate to set measurable objectives in relation to
its diversity.
However, the Board will take account of the diversity targets set out in the
FCA's Listing Rules, which are set out below. The Board voluntarily discloses
the following information in relation to its diversity.
As an externally managed investment company, the Board employs no executive
staff, and therefore does not have a chief executive officer ("CEO") or a
chief financial officer ("CFO") both of which are deemed senior board
positions by the FCA. Other senior board positions recognised by the FCA are
chair of the board and senior independent director ("SID"). In addition, the
Board has resolved that the Company's year end date be the most appropriate
date for disclosure purposes.
The following information has been provided by each Director. There have been
no changes since 30 September 2023.
Number Percentage Number
of Board of the Board of senior
members positions on
the Board
Men 3 60 2
Women 2 401 0
1 Meets target of at least 40% as set out in LR 9.8.6R (9)(a)(i).
Number Percentage Number
of Board of the Board of senior
members positions on
the Board
White British or other White (including minority-white groups) 4 80 2
Black/African/Caribbean/Black British 1 201 0
1 Meets target of at least one individual from a minority background as set
out in LR 9.8.6R (9)(a)(i).
The Role of the Chair and Senior Independent Director
Alan Devine is the Chair and Calum Thomson is the Senior Independent Director.
The Chair is responsible for providing effective leadership to the Board, by
setting the tone of the Company, demonstrating objective judgement and
promoting a culture of openness and debate. The Chair facilitates the
effective contribution of and encourages active engagement by each Director.
In conjunction with the Company Secretary, the Chair ensures that Directors
receive accurate, timely and clear information to assist them with effective
decision making. The Chair leads and acts upon the results of the formal and
rigorous annual Board and Committee evaluation process by recognising
strengths and addressing any weaknesses of the Board. He also ensures that the
Board engages with major shareholders and that all Directors understand
shareholder views.
The Senior Independent Director acts as a sounding board for the Chair and
acts as an intermediary for other Directors, when necessary. Working closely
with the Nomination Committee, the Senior Independent Director takes
responsibility for an orderly succession process for the Chair, and leads the
annual appraisal of the Chair's performance. The Senior Independent Director
is also available to shareholders to discuss any concerns they may have.
Directors' and Officers' Liability Insurance
The Company maintains insurance in respect of directors' and officers'
liabilities in relation to their acts on behalf of the Company. The Company's
Articles of Association provide that any Director or other officer of the
Company is to be indemnified out of the assets of the Company against any
liability incurred by him as a Director or other officer of the Company to the
extent permitted by law.
Management of Conflicts of Interest
The Board has a procedure in place to deal with a situation where a Director
has a conflict of interest. As part of this process, each Director discloses
other positions held and all other conflict situations that may need to be
authorised either in relation to the Director concerned or his or her
connected persons. The Board considers each Director's situation and decides
whether to approve any conflict or other external positions, taking into
consideration what is in the best interests of the Company and whether the
Director's ability to act in accordance with his or her wider duties is
affected. Each Director is required to notify the Company Secretary of any
potential, or actual, conflict situations that will need authorising by the
Board. Authorisations given by the Board are reviewed at each Board meeting.
No Director has a service contract with the Company although all Directors are
issued with letters of appointment. There were no contracts during, or at the
end of the year, in which any Director was interested.
The Company has a policy of conducting its business in an honest and ethical
manner. The Company takes a zero-tolerance approach to bribery and corruption
and has procedures in place that are proportionate to the Company's
circumstances to prevent them. The Manager also adopts a Group-wide
zero-tolerance approach and has its own detailed policy and procedures in
place to prevent bribery and corruption. Copies of the Manager's anti-bribery
and corruption policies are available on its website.
In relation to the corporate offence of failing to prevent tax evasion, it is
the Company's policy to conduct all business in an honest and ethical manner.
The Company takes a zero- tolerance approach to facilitation of tax evasion
whether under UK law or under the law of any foreign country and is committed
to acting professionally, fairly and with integrity in all its business
dealings and relationships.
Financial Risk Management
The principal risks and uncertainties facing the Company are set out above.
The principal financial risks and the Company's policies for managing these
risks are set out in note 18 to the financial statements.
Corporate Governance
The Company is committed to high standards of corporate governance. The Board
is accountable to the Company's shareholders for good governance and this
statement describes how the Company has applied the principles identified in
the UK Corporate Governance Code as published in July 2018 (the "UK Code"),
which is available
on the FRC's website: frc.org.uk.
The Board has also considered the principles and provisions of the AIC Code of
Corporate Governance as published in February 2019 (the "AIC Code"). The AIC
Code addresses the principles and provisions set out in the UK Code, as well
as setting out additional provisions on issues that are of specific relevance
to the Company. The AIC Code is available on the AIC's website: theaic.co.uk.
The Board considers that reporting against the principles and provisions of
the AIC Code, which has been endorsed by the FRC, provides more relevant
information to shareholders.
The Board confirms that, during the year, the Company complied with the
principles and provisions of the AIC Code and the relevant provisions of the
UK Code, except as set out below.
The UK Code includes provisions relating to:
• interaction with the workforce (provisions 2, 5 and 6);
• the role and responsibility of the chief executive (provisions
9 and 14);
• previous experience of the chair of a remuneration committee
(provision 32); and
• executive directors' remuneration (provisions 33 and 36 to 40).
The Board considers that these provisions are not relevant to the position of
the Company, being an externally managed investment company. In particular,
all of the Company's day-to-day management and administrative functions are
outsourced to third parties. As a result, the Company has no executive
directors, employees or internal operations. The Company has therefore not
reported further in respect of these provisions. The full text of the
Company's Corporate Governance Statement can be found on its website.
Board Committees
The Board has appointed a number of Committees, as set out below. Copies of
their terms of reference, which clearly define the responsibilities and duties
of each Committee, are available on the Company's website, or upon request
from the Company.
The performance of the Committees and their terms of reference are reviewed by
the Board on an ongoing basis and formally at least annually.
Audit Committee
The Audit Committee is chaired by Calum Thomson who is a Chartered Accountant
and has recent and relevant financial experience. The Committee comprises all
Non- Executive Directors, except Alan Devine who stepped down as a member on
28 May 2023, the ninth anniversary of his appointment as a Board Director. The
Board is satisfied that the Committee as a whole has competence relevant to
the investment trust sector.
The Audit Committee's Report is contained in the Annual Report
Management Engagement Committee
The Management Engagement Committee was chaired by Alan Devine until 13
December 2022, at which point Yvonne Stillhart assumed the role of Chair. Alan
Devine stepped down as a member on 28 May 2023, the ninth anniversary of his
appointment as a Board Director.
The main responsibilities of the Committee include:
• monitoring and evaluating the performance of the Manager;
• reviewing at least annually the continued retention of the Manager;
• reviewing, at least annually, the terms of appointment of the
Manager including, but not limited to, the level and method of remuneration
and the notice period of the Manager; and
• reviewing the performance and remuneration of the other key service
providers to the Company.
The Committee met in respect of the year ended 30 September 2023 to review of
performance and the terms of appointment of the Manager. Following which, the
Committee recommended to the Board that the continuing appointment of the
Manager was in the best interests of the shareholders and the Company as a
whole.
In reaching this decision, the Committee considered the Company's long-term
performance record and concluded that it remained satisfied with the
capability of the Manager to deliver satisfactory investment performance, that
its processes are thorough and robust and that it employs a well-resourced
team of skilled and experienced fund managers. In addition, the Committee is
satisfied that the Manager has the secretarial, administrative and promotional
skills required for the effective operation and administration of the Company.
As set out in the Chair's Statement, the Board and Committee is actively
considering the impact of the sale of abrdn Private Equity to Patria and is
undertaking due diligence to ensure that the Manager continues to have the
appropriate resources to continue to manage the Company effectively and that
the functions providing the secretarial, administrative and promotional sills
are effectively resourced.
Nomination Committee
The Nomination Committee was chaired by Alan Devine until 13 December 2022, at
which point Diane Seymour- Williams assumed the role of Chair. Alan Devine
stepped down as a member on 28 May 2023, the ninth anniversary
of his appointment as a Board Director.
The Committee met once during the year to carry out its responsibilities. The
main responsibilities of the Committee include:
• regularly reviewing the structure, size and composition (including the
skills, knowledge, experience, diversity and gender) of the Board;
• undertaking succession planning, taking into account the challenges
and opportunities facing the Company and identifying candidates to fill
vacancies;
• recruiting new Directors, undertaking open advertising or engaging
external advisers to facilitate the search, as appropriate, with a view to
considering candidates from a wide range of backgrounds, on merit, and with
due regard for the benefits of diversity on the Board, taking care to ensure
that appointees have enough time available to devote to the position;
• ensuring that new appointees receive a formal letter of appointment
and suitable induction and ongoing training;
• arranging for the annual Board and Committee performance evaluations
and ensuring that Directors are able to commit the time required to properly
discharge their duties;
• making recommendations to the Board as to the position of Chair,
Senior Independent Director and Chair of the Nomination, Audit and Management
Engagement Committees;
• assessing, on an annual basis, the independence of each Director;
and
• approving the re-election of any Director, subject to the UK Code, the
AIC Code, or the Articles of Association, at the AGM, having due regard to
their performance, ability to continue to contribute to the Board in the light
of the knowledge, skills and experience required and the need for progressive
refreshing of the Board.
The Nomination Committee did not engage any firm during the financial year to
assist with recruitment or Board succession planning. The Nomination Committee
last used the services of an external recruitment agency in 2021 during the
search which resulted in the appointment of Yvonne Stillhart and Dugald Agble
as Directors of the Company. During the search in 2021, the Company engaged
the services of the services of Europe Limited. Nurole Limited is independent
of the Company and Board of Directors.
Going Concern
The Company's business activities, together with the factors likely to affect
its future development, performance, and financial position, are set out in
the Strategic Report and Investment Manager's Review.
The financial statements have been prepared on the going concern basis and on
the basis that approval as an investment trust company will continue to be
met. The Directors have made an assessment of the Company's ability to
continue as a going concern and are satisfied that the Company has adequate
resources to continue in operational existence for a period of at least 12
months from the date when these financial statements were approved.
In making the assessment, the Directors of the Company have considered the
likely impacts of geopolitical and economic uncertainties on the Company, the
investment portfolio and the Company's operations. These include, but are not
limited to, the impact of the war in Ukraine, the ongoing Israel/Palestine
conflict, political and economic instability in the UK, supply shortages and
inflationary pressures.
The Directors noted that, following a review of the Company's latest
management accounts and other financial information of the Company, the
Company is able to meet the obligations of the Company as they fall due. At
each Board meeting, the Directors review the Company's latest management
accounts and other financial information. The Company's commitments to
investments are reviewed at each Board meeting, together with its financial
resources, including cash held and its borrowing capability. Cash flow
scenarios are also presented and discussed at each meeting as well as stress
testing and downside liquidity modelling scenarios with varying degrees of
decline in investment valuations, decreased investment distributions, and
increased call rates.
In the event of a downside scenario, APEO can take steps to limit or mitigate
the impact on the Balance Sheet, by drawing on the £300 million credit
facility and pausing on new commitments. It could also look to raise
additional credit or capital, sell assets to increase liquidity and reduce its
over-commitment ratio.
After due consideration of the Balance Sheet, activities of the Company, its
assets, liabilities, commitments and financial resources, the Directors have
concluded that the Company has adequate resources to continue in operation for
at least 12 months from the approval of the financial statements for the year
ended 30 September 2024. For this reason, they consider it appropriate to
continue to adopt the going concern basis in preparing the financial
statements.
Accountability and Audit
The respective responsibilities of the Directors and the Independent Auditor
in connection with the financial statements appear in the Annual Report.
The Directors confirm that, so far as they are each aware, there is no
relevant audit information of which the Company's Independent Auditor was
unaware, and that each Director has taken all the steps that they might
reasonably be expected to have taken as a Director to make themselves aware of
any relevant audit information and to establish that the Company's Independent
Auditor was aware of that information.
Independent Auditor
Shareholders approved the re-appointment of BDO LLP as the Company's
Independent Auditor at the AGM on 22 March 2023 and resolutions to approve its
re- appointment for the year to 30 September 2024 and to authorise the
Directors to determine its remuneration will be proposed at the AGM on 27
March 2024.
Additional Information
Where not provided elsewhere in the Directors' Report, the following provides
the additional information required to be disclosed by Part 15 of the
Companies Act 2006.
There are no restrictions on the transfer of Ordinary shares in the Company
issued by the Company other than certain restrictions which may from time to
time be imposed by law. The Company is not aware of any agreements between
shareholders that may result in a transfer of securities and/or voting rights.
The rules governing the appointment of Directors are set out in the Directors'
Remuneration Report in the Annual Report. The Company's Articles of
Association may only be amended by a special resolution passed at a general
meeting of shareholders.
Annual General Meeting
The Notice of the Annual General Meeting, which will be held on 27 March 2024
at 12:30p.m. at wallacespace
Spitalfields, 15-25 Artillery Lane, London E1 7HA, and the related notes, may
be found in the Annual Report.
Shareholders are encouraged vote on the resolutions proposed in advance of the
AGM and submit questions to the Board and to the Manager by emailing
APEOT.Board@abrdn.com. (mailto:APEOT.Board@abrdn.com)
At the AGM on 27 March 2024, resolutions including the following business will
be proposed:
Dividend Policy
As a result of the timing of the payment of the Company's interim dividends,
the Company's shareholders are unable to approve a final dividend each year.
In line with good corporate governance, the Board therefore proposes to put
the Company's dividend policy to shareholders for approval at the AGM and on
an annual basis thereafter.
The Company's dividend policy is that interim dividends on the Ordinary shares
are payable quarterly. Resolution 3 will seek shareholder approval for the
dividend policy.
Issue of Ordinary Shares
Resolution 11, which is an ordinary resolution, will, if passed, renew the
Directors' authority to allot new Ordinary shares up to 10% of the issued
share capital of the Company (excluding treasury shares) as at the date of the
passing of the resolution.
Resolution 12, which is a special resolution, will, if passed, renew the
Directors' existing authority to allot new Ordinary shares or sell treasury
shares for cash without the new Ordinary shares first being offered to
existing shareholders in proportion to their existing holdings. This will give
the Directors authority to allot Ordinary shares or sell shares from treasury
on a non pre-emptive basis for cash up to an aggregate nominal amount of
£30,749.25] (representing 10% of the issued Ordinary share capital of the
Company (excluding treasury shares) as at 30 January 2024).
New Ordinary shares, issued under this authority, will only be issued at
prices representing a premium to the last published NAV per share.
The authorities being sought under Resolutions 11 and 12 shall expire at the
conclusion of the Company's next AGM in 2025 or, if earlier, on the expiry of
15 months from the date of the passing of the resolutions, unless such
authorities are renewed, varied or extended prior to such time. The Directors
have no current intention to exercise these authorities and will only do so if
they believe it is advantageous and in the best interests of shareholders as a
whole.
Purchase of the Company's Ordinary Shares
Resolution 13, which is a special resolution, seeks to renew the Board's
authority to make market purchases of the Company's Ordinary shares in
accordance with the provisions contained in the Companies Act 2006 and the
FCA's Listing Rules. Accordingly, the Company will seek authority to purchase
up to a maximum of 14.99% of the issued share capital (excluding treasury
shares) at the date of passing of the resolution at a minimum price of 0.2
pence per share (being the nominal value). Under the Listing Rules, the
maximum price that may be paid on the exercise of this authority must not
exceed the higher of:
(i) 105% of the average of the middle market quotations (as
derived from the Daily Official List of the London Stock Exchange) for the
shares over the five business days immediately preceding the date of purchase;
and
(ii) (ii) the higher of the last independent trade and the highest
current independent bid on the trading venue on which the purchase is carried
out.
The Board does not intend to use this authority to purchase the Company's
Ordinary shares, unless to do so would result in an increase in the NAV per
Ordinary share and would be in the best interests of shareholders. Any
Ordinary shares purchased shall either be cancelled or held in treasury. The
authority being sought shall expire at the conclusion of the AGM in 2025 or,
if earlier, on the expiry of 15 months from the date of the passing of the
resolution unless such authority is renewed prior to such time.
Notice of General Meetings
The Companies Act 2006 provides that the minimum notice period for general
meetings of listed companies is 21 days, but with an ability for companies to
reduce this period to 14 days (other than for annual general meetings)
provided that two conditions are met. The first condition is that the company
offers a facility, accessible to all shareholders, to appoint a proxy by means
of a website. The second condition is that there is an annual resolution of
shareholders approving the reduction of the minimum notice period from 21 days
to 14 days.
The Board is therefore proposing Resolution 14 as a special resolution to
approve 14 days as the minimum period of notice for all general meetings of
the Company other than annual general meetings, renewing the authority passed
at last year's AGM. The approval would be effective until the end of the
Company's next AGM, when it is intended that the approval be renewed.
The Board would consider on a case by case basis whether the use of the
flexibility offered by the shorter notice period is merited, taking into
account the circumstances, including whether the business of the meeting is
time sensitive and it would therefore be to the advantage of the shareholders
to call the meeting on shorter notice.
Adoption of new Articles of Association
Resolution 15, which will be proposed as a special resolution, seeks
shareholder approval to adopt new Articles of Association (the "New Articles")
in order to update the Company's current Articles of Association (the
"Existing Articles"). The proposed amendments being introduced in the New
Articles primarily relate to the new power conferred on the Board which
provides it with flexibility to change the Company's name by way of Board
resolution and the increase to the cap on the aggregate of all fees paid to
Directors per annum.
A copy of the New Articles, together with a copy showing all of the proposed
changes to the Existing Articles, will be available for inspection on the
Company's website, abrdnpeot.co.uk, and at the offices of wallacespace
Spitalfields, 15-25 Artillery Lane, London, E1 7HA, which is also the venue of
the AGM, from 15 minutes before and during the AGM.
Recommendation
The Board considers that the resolutions to be proposed at the AGM are in the
best interests of the Company and most likely to promote the success of the
Company for the benefit of its members as a whole. Accordingly, the Board
recommends that shareholders vote in favour of the resolutions as they intend
to do in respect of their own beneficial shareholdings, amounting to 64,993
Ordinary shares, representing 0.04% of the issued share capital.
By order of the Board
abrdn Holdings Limited
Company Secretary
1 George Street
Edinburgh EH2 2LL
30 January 2024
Directors' Responsibility Statement
Directors' Responsibilities
The Directors are responsible for preparing the Annual Report and the
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 the Directors have elected to prepare the
financial statements in accordance with UK Accounting Standards.
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 for the Company for that
period.
In preparing these financial statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and accounting estimates that are reasonable and prudent;
* state whether they have been prepared in accordance with applicable UK
Accounting Standards, subject to any material departures disclosed and
explained in the financial statements;
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business; and
* prepare a Directors' Report, a Strategic Report and Directors' Remuneration
Report which comply with the requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006.
They are also responsible for safeguarding the assets of the Company and hence
for taking reasonable steps for the prevention and detection of fraud and
other irregularities. The Directors are responsible for ensuring that the
Annual Report and accounts, taken as a whole, are fair, balanced, and
understandable and provides the information necessary for shareholders to
assess the Company's position and performance, business model and strategy.
Website Publication
The Directors are responsible for ensuring the Annual Report and the financial
statements are made available on a website. Financial statements are published
on the Company's website in accordance with legislation in the United Kingdom
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity of
the Company's website is the responsibility of the Directors. The Directors'
responsibility also extends to the ongoing integrity of the financial
statements contained therein.
Directors' Responsibilities Pursuant to DTR4
The Directors confirm to the best of their knowledge:
• the financial statements have been prepared in accordance with
applicable accounting standards and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Company; and
• the Annual Report includes a fair review of the development and
performance of the business and the financial position of the Company,
together with a description of the principal risks and uncertainties that the
Company faces.
On behalf of the Board
Alan Devine
Chair
30 January 2024
Financial Statements
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 September 2023
For the year ended 30 September 2023 For the year ended 30 September 2022
Notes Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Total capital gains on investments 9 - 70,562 70,562 - 147,940 147,940
Currency (losses)/gains 14 - (60) (60) - 942 942
Income 2 9,645 - 9,645 9,368 - 9,368
Investment management fee 3 (561) (10,652) (11,213) (1,060) (9,540) (10,600)
Administrative expenses 4 (1.234) - (1,234) (1,054) - (1,054)
Profit before finance costs and taxation 7,850 59,850 67,700 7,254 139,342 146,596
Finance costs 5 (332) (5,821) (6,153) (318) (1,907) (2,225)
Profit before taxation 7,518 54,029 61,547 6,936 137,435 144,371
Taxation 6 (1,462) 878 (584) (1,174) 414 (760)
Profit after taxation 6,056 54,907 60,963 5,762 137,849 143,611
Earnings per share - basic and diluted 8 3.94p 35.71p 39.65p 3.75p 89.66p 93.41p
The Total columns of this statement represents the profit and loss account of
the Company.
There are no items of other comprehensive income, therefore this statement is
the single statement of comprehensive income of the Company.
All revenue and capital items in the above statement are derived from
continuing operations.
No operations were acquired or discontinued in the year.
The total dividend which has been recommended based on this Statement of
Comprehensive Income is 16.00p (2022:14.40p) per Ordinary share.
The accompanying notes form an integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION
As at 30 September 2023
As at As at
30 September 2023 30 September 2022
Notes £'000 £'000 £'000 £'000
Non-current assets
Investments 9 1,261,995 1,192,380
Current assets 1,261,995
Receivables 10 30,117 1,056
Cash and cash equivalents 9,436 30,341
Total Current assets 39,553 31,397
Creditors: amounts falling due within one year
Payables 11 (5,022) (3,713)
Revolving credit facility 12 (100,883) (62,012)
Net current (liabilities) / assets (66,352) (34,328)
Total assets less current liabilities 1,195,643 1,158,052
Capital and reserves
Called-up share capital 13 307 307
Share premium account 14 86,485 86,485
Special reserve 14 51,503 51,503
Capital redemption reserve 14 94 94
Capital reserves 14 1,057,254 1,019,663
Revenue reserve 14 - -
Total shareholders' funds 1,195,643 1,158,052
Net asset value per equity share 15 777.7p 753.2p
The accompanying notes form an integral part of these financial statements.
The Financial Statements of abrdn Private Equity Opportunities Trust plc,
registered number SC216638, were approved and authorised for issue by the
Board of Directors on 30 January 2024 and were signed on its behalf by Alan
Devine, Chair.
Alan Devine
Chair
30 January 2024
STATEMENT OF CHANGES IN EQUITY
For the year ended 30 September 202
Notes Called-up Share Capital Share premium account Special reserve Capital redemption reserve Capital reserves Revenue reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 October 2021 307 86,485 51,503 94 1,019,663 - 1,158,052
Profit after taxation - - - - 54,907 6,056 60,963
Dividends paid 7 - - - - (17,316) (6,056) (23,372)
Balance at 30 September 2022 13,14 307 86,485 51,503 94 1,057,254 - 1,195,643
For the year ended 30 September 2022
Notes Called-up Share Capital Share premium account Special reserve Capital redemption reserve Capital reserves Revenue reserve Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 October 2021 307 86,485 51,503 94 897,578 - 1,035,967
Profit after taxation - - - - 137,849 5,762 143,611
Dividends paid 7 - - - - (15,764) (5,762) (21,526)
Balance at 30 September 2022 13,14 307 86,485 51,503 94 1,019,663 - 1,158,052
The accompanying notes form an integral part of these financial statements.
STATEMENT OF CASH FLOWS
For the year ended For the year ended
30 September 2023 30 September 2022
Notes £'000 £'000 £'000 £'000
Cashflows from operating activities
Profit before taxation 61,547 144,371
Adjusted for:
Finance costs 5 6,153 2,225
Gains on disposal of investments 9 (112,726) (107,007)
Revaluation of investments 9 41,864 (41,433)
Currency gains / (losses) 14 60 (942)
Increase / (decrease) in debtors 241 (6)
Increase in creditors 880 854
Tax deducted from non-UK income 6 (584) (760)
Net cash (outflow) / inflow from operating activities (2,565) (2,698)
Investing activities
Purchase of investments 9 (189,446) (245,270)
Purchase of secondary investments 9 (3,857) (8,347)
Distributions of capital proceeds received by investments 9 141,555 201,557
Receipt of proceeds from disposal of unquoted investments 9 22,955 15,714
Net cash inflow / (outflow) from investing activities (28,793) (36,346)
Financing activities
Revolving credit facility - amounts drawn 12 60,239 79,031
Revolving credit facility - amounts repaid 12 (19,893) (17,019)
Interest paid and arrangement fees (6,461) (1,757)
Ordinary dividends paid 7 (23,372) (21,526)
Net cash inflow / (outflow) from financing activities 10,513 38,729
Net decrease in cash and cash equivalents (20,845) (315)
Cash and cash equivalents at the beginning of the year 30,341 29,714
Currency gains / (losses) on cash and cash equivalents (60) 942
Cash and cash equivalents at the end of the year 9,436 30,341
Cash and cash equivalents consist of:
Money-market funds -
Cash 9,436 30,341
Cash and cash equivalents 9,436 30,341
The accompanying notes form an integral part of these financial statements.
Included in profit before taxation is dividends received from investments of
3,532,000 (2022: 4,759,000), interest received from investments of
5,519,000 (2022: 4,538,000) and interest received from cash balances of
593,000 (2022: 71,000).
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting Policies
(a) Basis of Accounting
The financial statements have been prepared in accordance with the Companies
Act 2006, Financial Reporting Standard 102 and with the Statement of
Recommended Practice "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" (the "SORP"), updated in July 2022. They have also
been prepared on the assumption that approval as an investment trust will
continue to be granted. The financial statements have been prepared on a going
concern basis. The Directors believe that this is appropriate for the reasons
outlined in the Directors' Report. The principal accounting policies adopted
are set out below. These policies have been applied consistently throughout
the current and prior year.
Rounding is applied to the disclosures in these financial statements, where
considered relevant.
(b) Revenue, Expenses and Finance Costs
Dividends and income from unquoted investments are included when the right to
receipt is established, which is the notice value date. Dividends are
accounted for as revenue in the Statement of Comprehensive Income. Interest
receivable is dealt with on an accruals basis.
All expenses are accounted for on an accruals basis. Expenses are charged
through the revenue account of the Statement of Comprehensive Income except as
follows:
• transaction costs incurred on the purchase and disposal of
investments are recognised as a capital item in the Statement of Comprehensive
Income;
• the Company charges 95% of investment management fees and finance
costs to capital, in accordance with the Board's expected long-term split of
returns between capital gains and income from the Company's investment
portfolio. Prior to 1 October 2022, the investment management fees and finance
costs were allocated 90% to the realised capital reserve - gains/(losses) on
disposal and 10% to the revenue account. Bank interest expense has been
charged wholly to revenue.
(c) Investments
Investments are measured at fair value through profit or loss as detailed
below. On the date of making a legal commitment to invest in a fund or
co-investment, such commitment is recorded and disclosed. When funds are drawn
in respect of these commitments, the resulting investment is recognised in the
financial statements. The investment is removed when it is realised or when
the investment is wound up. Gains and losses arising from changes in fair
value are included as a capital item in the Statement of Comprehensive Income
and are ultimately recognised in the capital reserves.
Unquoted investments are stated at the Directors' estimate of fair value and
follow the recommendations of the European Private Equity & Venture
Capital Association ("EVCA") and the British Private Equity & Venture
Capital Association ("BVCA"). The estimate of fair value is normally the
latest valuation placed on an investment by its manager as at the Statement of
Financial Position date. The valuation policies used by the manager in
undertaking that valuation will generally be in line with the joint
publication from the EVCA and the BVCA, "International Private Equity and
Venture Capital Valuation ("IPEV") Guidelines". Where formal valuations are
not completed as at the Statement of Financial Position date, the last
available valuation from the manager is adjusted for any subsequent cash flows
occurring between the valuation date and the Statement of Financial Position
date. The Company's Manager may further adjust such valuations to reflect any
changes in circumstances from the last manager's formal valuation date to
arrive at the estimate of fair value.
For listed investments, which were actively traded on recognised stock
exchanges, fair value is determined by reference to their quoted bid prices on
the relevant exchange as at the close of business on the last trading day of
the Company's financial year.
(d) Dividends payable
Dividends are recognised in the period in which they are paid.
(e) Capital and Reserves
Share premium - The share premium account represents the premium above nominal
value received by the Company on issuing shares net of issue costs.
Special reserve - Court approval was given on 27 September 2001 for 50% of the
initial premium arising on the issue of the Ordinary share capital to be
cancelled and transferred to a special reserve. The reserve is a distributable
reserve and may be applied in any manner as a distribution, other than by way
of a dividend.
Capital redemption reserve - this reserve is used to record the amount
equivalent to the nominal value of any of the Company's own shares purchased
and cancelled in order to maintain the Company's capital.
Capital reserve - gains/(losses) on disposal - Represents gains or losses on
investments realised in the period that have been recognised in the Statement
of Comprehensive Income, in addition to the transfer of any previously
recognised unrealised gains or losses on investments within "Capital reserve -
revaluation" upon disposal. This reserve also represents other accumulated
capital related expenditure such as management fees and finance costs, as well
as other currency gains/losses from non-investment activity.
Capital reserve - revaluation - Represents increases and decreases in the fair
value of investments that have been recognised in the Statement of
Comprehensive Income during the period. This reserve also represents
unrealised currency gains/losses from non-investment activity.
Revenue reserve - The revenue reserve represents accumulated revenue profits
retained by the Company that have not currently been distributed to
shareholders as a dividend.
The revenue and capital reserves - gains/(losses) on disposal represent the
amount of the Company's reserves distributable by way of dividend. All other
aforementioned reserves are not distributable by way of dividend.
(f) Taxation
i) Current taxation - Provision for corporation tax is made at the current
rate on the excess of taxable income net of any allowable deductions. In line
with the recommendations of the SORP, the allocation method used to calculate
tax relief on expenses presented against capital in the Statement of
Comprehensive Income is the "marginal basis". Under this basis, if taxable
income is capable of being offset entirely by expenses presented in the
revenue column of the Statement of Comprehensive Income, then no tax relief is
transferred to the capital column. Withholding tax suffered on income from
overseas investments is taken to the revenue column of the Statement of
Comprehensive Income.
ii) Deferred taxation is recognised in respect of all timing differences that
have originated but not reversed at the Statement of Financial Position date,
where transactions or events that result in an obligation to pay more or a
right to pay less tax in future have occurred at the Statement of Financial
Position date, measured on an undiscounted basis and based on enacted tax
rates. This is subject to deferred tax assets only being recognised if it is
considered more likely than not that there will be suitable profits from which
the future reversal of the underlying timing differences can be deducted.
Timing differences are differences arising between the Company's taxable
profits and its results as stated in the financial statements which are
capable of reversal in one or more subsequent periods.
Due to the Company's status as an investment trust company, and the intention
to continue meeting the conditions required to obtain approval in the
foreseeable future, the Company has not provided deferred tax on any capital
gains and losses arising on the revaluation or disposal of investments.
(g) Foreign Currency Translation, Functional and Presentation Currency
Foreign currency translation - Transactions in foreign currencies are
converted to sterling at the exchange rate ruling at the date of the
transaction. Overseas assets and liabilities are translated at the exchange
rate prevailing at the Company's Statement of Financial Position date. Gains
or losses on translation of investments held at the year end are accounted for
in the Statement of Comprehensive Income through inclusion in total capital
gains/losses on investments and is transferred to capital reserves. Gains or
losses on the translation of overseas currency balances held at the year end
are also accounted for through the Statement of Comprehensive Income and are
transferred to capital reserves.
Functional and presentation currency - For the purposes of the financial
statements, the results and financial position of the Company is expressed in
sterling, which is the functional currency and the presentation currency of
the Company.
Rates of exchange to sterling at 30 September were:
2023 2022
Euro 1.1528 1.1395
US Dollar 1.2206 1.1163
Canadian Dollar 1.6502 1.5339
Transactions in overseas currency are translated at the exchange rate
prevailing on the date of transaction.
The Company's investments are made in a number of currencies. However, the
Board considers the Company's functional currency to be sterling. In arriving
at this conclusion, the Board considers that the shares of the Company are
listed on the London Stock Exchange. The Company is regulated in the United
Kingdom, principally having its shareholder base in the United Kingdom, and
pays dividends as well as expenses in sterling.
(h) Cash and Cash Equivalents
Cash comprises bank balances and cash held by the Company. Cash equivalents
comprise money-market funds which are used by the Company to provide
additional short-term liquidity. Cash equivalents are short-term, highly
liquid investments that are readily convertible to known amounts of cash and
which are subject to an insignificant risk of changes in value.
(i) Debtors
Debtors are recognised initially at fair value. They are subsequently measured
at amortised cost using the effective interest method, less the appropriate
allowances for estimated irrecoverable amounts.
(j) Creditors
Creditors are recognised initially at fair value. They are subsequently stated
at amortised cost using the effective interest method.
(k) Revolving Credit Facility
Revolving credit facility drawdowns are recognised initially at cost, being
the fair value of the consideration received. They are subsequently stated at
amortised cost using the effective interest method.
(l) Segmental Reporting
The Directors are of the opinion that the Company is engaged in a single
segment of business activity, being investment business. Consequently, no
business segmental analysis is provided.
(m) Judgements and Key Sources of Estimation Uncertainty
The preparation of financial statements requires the Company to make estimates
and assumptions and exercise judgements in applying the accounting policies
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses arising
during the year. Estimates and judgements are continually evaluated and based
on historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances. The area
where estimates and assumptions have the most significant effect on the
amounts recognised in the financial statements is the determination of fair
value of unquoted investments, as disclosed in note 1(c).
The Manager of the Company is abrdn Capital Partners LLP. In order to comply
with the Alternative Investment Fund Managers Directive ("AIFMD"), the Company
appointed abrdn Capital Partners LLP as its AIFM from 1 July 2014.
The investment management fee payable to the Manager is 0.95% per annum of the
NAV of the Company. The investment management fee is allocated 95% to the
realised capital reserve - gains/(losses) on disposal and 5% to the revenue
account. Prior to 1 October 2022, the investment management fee was allocated
90% to the realised capital reserve - gains/(losses) on disposal and 10% to
the revenue account. The management agreement between the Company and the
Manager is terminable by either party on 12 months' written notice.
Investment management fees due to the Manager as at 30 September 2023 amounted
to £3,943,000 (30 September 2022: £2,888,000).
2. Income
Year to Year to
30 September 2023 30 September 2022
£'000 £'000
Income from investments 5,519 4,538
Dividends from investments 3,532 4,759
Interest from cash balances and money-market funds 594 71
Total income 9,645 9,368
3. Investment Management Fees
Year to 30 September 2023 Year to 30 September 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 561 10,652 11,213 1,060 9,540 10,600
The Manager of the Company is abrdn Capital Partners LLP. In order to comply
with the Alternative Investment Fund Managers Directive ("AIFMD"), the Company
appointed abrdn Capital Partners LLP as its AIFM from 1 July 2014.
The investment management fee payable to the Manager is 0.95% per annum of the
NAV of the Company. The investment management fee is allocated 95% to the
realised capital reserve - gains/(losses) on disposal and 5% to the revenue
account. Prior to 1 October 2022, the investment management fee was allocated
90% to the realised capital reserve - gains/(losses) on disposal and 10% to
the revenue account. The management agreement between the Company and the
Manager is terminable by either party on 12 months' written notice.
Investment management fees due to the Manager as at 30 September 2023 amounted
to £3,943,000 (30 September 2022: £2,888,000).
4. Administrative Expenses
Year to Year to
30 September 2023 30 September 2022
£'000 £'000
Directors' fees 269 269
Employers' national insurance 31 32
Marketing fees 323 243
Secretarial and administration fees 266 247
Fees and subscriptions 99 78
Auditor's remuneration 84 63
Depositary fees 62 59
Professional and consultancy fees 55 49
Legal fees 7 12
Other expenses 38 2
Total 1,234 1,054
No non-audit services were provided by the Company Auditor, BDO LLP during the
year to 30 September 2023.
Irrecoverable VAT has been shown under the relevant expense line.
The administration fee payable to IQ EQ Administration Services (UK) Ltd is
adjusted annually in line with the retail prices index. The administration
agreement is terminable by the Company on three months' notice.
The secretarial fee payable to abrdn Holdings plc is adjusted annually in line
with the retail price index. The secretarial agreement is terminable by the
Company on six months' notice.
The emoluments paid to the Directors during the year can be found in the
Directors' Remuneration Report in the Annual Report.
5. Finance Costs
Year to 30 September 2023 Year to 30 September 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Revolving credit facility interest expense 215 3,604 3,819 107 965 1,072
Revolving credit facility commitment fee 84 1,590 1,674 70 634 704
Revolving credit facility arrangement fee 33 627 660 34 308 342
Bank interest expense - - - 107 - 107
Total 332 5,821 6,153 318 1,907 2,225
6. Taxation
(a) Analysis of the Tax Charge Throughout the Year
Year to Year to
30 September 2023 30 September 2022
£'000 £'000
Overseas withholding tax 584 760
Year to 30 September 2023 Year to 30 September 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(b) Factors affecting the total tax charge for the year
Profit before taxation 7,518 54,029 61,547 6,936 137,435 144,371
The tax assessed for the year is different from the standard rate of
corporation tax in the UK. The differences are explained below.
Profit multiplied by the effective rate of corporation tax in the UK - 22.0% 1,655 11,887 13,542 1,318 26,113 27,431
(2022: 19.0%)
Non-taxable capital gains on investments (1) - (15,524) (15,524) - (28,109) (28,109)
Non-taxable currency (gains)/losses - 13 13 - (179) (179)
Non-taxable income (777) - (777) (904) - (904)
Overseas withholding tax 584 - 584 760 - 760
Surplus management expenses and loan relationship deficits not relieved - 2,746 2,746 - 1,761 1,761
Total tax charge/(credit) for the year 1,462 (878) 584 1,174 (414) 760
1 The Company carries on business as an investment trust company with respect
to sections 1158-1159 of the Corporation Tax Act 2010. As such any capital
gains are exempt from UK taxation.
(c) Factors that may affect future tax charges
At the year end there is a potential deferred tax asset of £11,202,939 (2022:
£8,081,044) in relation to excess management expenses carried forward. The
deferred tax asset is unrecognised at the year end in line with the Company's
stated accounting policy.
The corporation tax main rate for the years 1 April 2021 and 2022 was 19%. A
revision to Corporation Tax was introduced in Finance Bill 2021, which
retained the main rate at 19% from 1 April 2022, followed by an increase to
25% from 1 April 2023. The effective tax rate applied for the year ended 30
September 2023 is therefore a blended rate of 22%. Deferred taxes at the
Statement of Financial Position date have been measured at these enacted rates
and reflected in these
7. Dividend on Ordinary Shares
Year to Year to
30 September 2023 30 September 2022
£'000 £'000
Amount recognised as a distribution to equity holders in the year:
2022 third quarterly dividend of 3.60p (2021: 3.40p) per Ordinary share paid 5,536 5,227
on 28 October 2022 (2021: paid on 29 October 2021)
2022 fourth quarterly dividend of 3.60p per Ordinary share (2021: 3.40p) paid 5,536 5,227
on 27 January 2023 (2021: paid on 28 January 2022)
2023 first quarterly dividend of 4.00p (2022: 3.60p) per Ordinary share paid 6,150 5,536
on 21 April 2023 (2022: paid on 22 April 2022)
2023 second quarterly dividend of 4.00p (2022: 3.60p) per Ordinary share paid 6,150 5,536
on 28 July 2023 (2022: paid on 29 July 2022)
Total 23,372 21,526
Set out below are the total dividends paid and proposed in respect of the
financial year, which is the basis on which the requirements of sections
1158-1159 of the Corporation Tax Act 2010 are considered. Of the total profit
after taxation for the year of £60,963,000 (2022: £143,611,000), the total
revenue and capital profits which are available for distribution by way of a
dividend for the year is £102,208,000 (2022: £102,755,000).
Year to Year to
30 September 2023 30 September 2022
£'000 £'000
2023 first quarterly dividend of 4.00p (2022: 3.60p) per Ordinary share paid 6,150 5,536
on 21 April 2023 (2022: paid on 22 April 2022)
2023 second quarterly dividend of 4.00p (2022: 3.60p) per Ordinary share paid 6,150 5,536
on 28 July 2023 (2022: paid on 29 July 2022)
2023 third quarterly dividend of 4.00p (2022: 3.60p) per Ordinary share paid 6,150 5,536
on 27 October 2023 (2022: paid on 28 October 2022)
Proposed 2023 fourth quarterly dividend of 4.00p per Ordinary share (2022: 6,150 5,536
3.60p per ordinary share) due to be paid on 26 January 2024 (2022: 27 January
2023).
Total 24,600 22,144
8. Earnings Per Share - Basic and Diluted
Year to Year to
30 September 2023 30 September 2022
p £'000 p £'000
The net return per ordinary share is based on the following figures:
Revenue net return 3.94 6,056 3.75 5,762
Capital net return 35.71 54,907 89.66 137,849
Total net return 39.65 60,963 93.41 143,611
Weighted average number of ordinary shares in issue: 153,746,294 153,746,294
There are no diluting elements to the earnings per share calculation in 2023
(2022: none).
9. Investments
Year to 30 September 2023 Year to 30 September 2022
Total Total
£'000 £'000
Fair value through profit or loss:
Opening market value 1,192,380 1,007,843
Opening investment holding gains (346,062) (304,629)
Opening book cost 846,318 703,214
Movements in the year:
Additions at cost 189,446 245,270
Secondary purchases 3,857 8,347
Distribution of capital proceeds (141,555) (201,806)
Secondary sales (52,995) (15,714)
845,071 739,311
Gains on disposal of underlying investments 112,726 107,007
Closing book cost 957,797 846,318
Closing investment holding gains 304,198 346,062
Closing market value 1,261,995 1,192,380
Year to 30 September 2023 Year to 30 September 2022
Total Total
£'000 £'000
Gains on investments held at fair value through profit or loss based on 112,726 107,007
historical costs.
Gains recognised as unrealised in previous years in respect of distributed (46,367) (44,999)
capital proceeds or disposal of investments.
Gains on distribution of capital proceeds or disposal of investments based on 66,359 62,008
the carrying value at the previous year end date
Net movement in unrealised investment gains 4,503 86,432
Total capital gains on investments held at fair value through profit or loss 70,862 148,440
Transaction costs
During the year expenses were incurred in acquiring or disposing of
investments. These have been expensed through capital and are included within
capital gains on investments of 70,562,000 (2022: 147,940,000) in the
Statement of Comprehensive Income. The total costs were as follows:
30 September 2023 30 September 2022
£'000 £'000
Transaction costs 300 500
10. Receivables
30 September 2023 30 September 2022
£'000 £'000
Amounts falling due within one year:
Investments receivable 30,040 249
Prepayments 39 34
Investments receivable 38 25
Unamortised arrangement fees - 748
Total 30,117 1,056
Investments receivable as at 30 September 2023 relate to the future receipt of
proceeds from a partial sale of Action during the financial year. These
proceeds were received shortly after the financial year end of the Company.
11. Payables
30 September 2023 30 September 2022
£'000 £'000
Amounts falling due within one year:
Management fee 3,943 2,888
Accruals 888 719
Secretarial and administration fee 191 105
Bank interest - 1
Total 5,022 3,713
12. Revolving Credit Facility
30 September 2023 30 September 2022
£'000 £'000
Revolving credit facility 100,883 62,012
On 10 October 2022, the Company announced an expansion of the credit facility
which increased from £200 million to £300 million with The Royal Bank of
Scotland International Limited joining as a lender and Natwest Markets Plc
replacing Citibank Europe plc as Agent in the syndicate of banks providing the
revolving credit facility, alongside current providers Société Générale
and State Street Bank International GmbH.
The interest rate on the expanded facility is unchanged and is calculated as
the defined reference rate of the currency drawn plus 1.625% rising to 2.0%
depending on the level of utilisation, whilst the commitment fee rate payable
on non-utilisation is now between 0.7% and 0.8% per annum based on the level
of facility utilisation. The maturity date of the facility was extended by one
year to December 2025.
Inclusive of the revolving credit facility balance is £1,475,000 of
unamortised revolving credit facility fees which partially offsets the total
amount of the facility balance drawn as at 30 September 2023. With respect of
the comparative period to 30 September 2022, the unamortised revolving credit
facility fees of £748,000 were included as part of Receivables. This amount
is not considered material to require restatement of the prior year financial
statements, and does not impact the NAV of the Company at either date.
13. Called-up Share Capital
30 September 2023 30 September 2022
£'000 £'000
Issued and fully paid:
Ordinary shares of 0.2p
Opening balance of 153,746,294 (2022: 153,746,294) ordinary shares 307 307
Closing balance of 153,746,294 (2022: 153,746,294) ordinary shares 307 307
The Company may buy back its own shares where it is judged to be beneficial to
shareholders, taking into account the
discount between the Company's Net Asset Value and the share price, and the
supply and demand for the Company's
shares in the open market.
No shares were bought back during the year (2022: Nil).
14. Reserves
Capital reserves
Share Special Capital Gains/ Revaluation Revenue
premium reserve redemption (losses) on reserve
account reserve disposal
£'000 £'000 £'000 £'000 £'000 £'000
Opening balances at 1 October 2022 86,485 51,503 94 674,173 345,490 -
Gains on disposal of investments - - - 112,726 - -
Management fee charged to capital - - - (10,652) - -
Finance costs charged to capital - - - (5,821) - -
Transaction costs - - - (300) - -
Tax relief on management fee and finance costs above - - - 878 - -
Currency gains / (losses) - - - (679) 619 -
Revaluation of investments - - - - (41,864) -
Return after taxation - - - - - 6,056
Dividends during the year - - - (17,316) - (6,056)
Closing balances at 30 September 2023 86,485 51,503 94 753,009 304,245 -
The revenue and capital reserve - gains/(losses) on disposal represent the
amounts of the Company's reserve distributable by way of dividend.
15. Net Asset Value Per Equity Share
30 September 2023 30 September 2022
Basic and diluted:
Ordinary shareholders' funds £1,195,643,000 £1,158,052,447
Number of ordinary shares in issue 153,746,294 153,746,294
Net asset value per ordinary share 777.7pp 753.2p
The NAV per Ordinary share and the Ordinary shareholders' funds are calculated
in accordance with the Company's Articles of Association.
There are no diluting elements to the NAV per equity share calculation in 2023
(2022: none).
16. Commitments and Contingent Liabilities
30 September 2023 30 September 2022
£'000 £'000
Outstanding calls on investments 651,991 678,880
This represents commitments made to fund and co-investment interests remaining
undrawn.
17. Parent Undertaking, Related Party Transactions and Transactions with the
Manager
The ultimate parent undertaking of the Company is Phoenix Group Holdings plc.
The results for the year to 30 September 2023 are incorporated into the group
financial statements of Phoenix Group Holdings plc, which will be available to
download from the website thephoenixgroup.com.
Phoenix Group Holdings plc previously held its shares through Standard Life
Assurance Limited and Phoenix Life Assurance Limited ("SLAL" and "PLAL" which
were 100% owned by Phoenix Group Holdings). Subsequent to the financial year
end, Phoenix Group Holdings notified the Company that the shares held in the
Company by SLAL and PLAL had been transferred intra-group to Phoenix Life
Limited ("PLL", which is owned 100% by Phoenix Group Holdings). PLL has
irrevocably undertaken to the Company that, at any time when PLL and its
Associates (meaning any company which is a member of the PLL group) are
entitled to exercise or control 30% or more of the rights to vote at general
meetings of the Company, it will not (and will procure that none of its
Associates will) seek to nominate directors to the Board of the Company who
are not independent of PLL and its Associates, enter into any transaction or
arrangement with the Company which is not conducted at arm's length and on
normal commercial terms, take any action that would have the effect of
preventing the Company from carrying on an independent business as its main
activity or from complying with its obligations under the Listing Rules or
propose or procure the proposal of any shareholder resolution which is
intended or appears to be intended to circumvent the proper application of the
Listing Rules. During the year ended 30 September 2023, SLAL and PLAL received
dividends from the Company totalling £12,521,000 (2022: £11,533,000).
During the year ended 30 September 2023 the Manager charged management fees
totalling £11,213,000 (2022:£10,600,000) to the Company in the normal course
of business. The balance of management fees outstanding at 30 September 2023
was £3,943,000 (30 September 2022: £2,888,000).
abrdn Investment Management Limited, which shares the same ultimate parent as
the Manager, received fees for the provision of promotional activities of
£108,000 (2022: £145,200) during the year. The balance of promotional fees
outstanding at 30 September 2023 was a payable of £89,000 (30 September 2022:
payable of £325,000).
The Company Secretarial services for the Company are provided by abrdn
Holdings plc, which shares the same ultimate parent as the Manager. During the
year ended 30 September 2023, the Company incurred secretarial fees of
£81,000 (2022: £70,000). The balance of secretarial fees outstanding at 30
September 2023 was £154,000 (2022: £104,000).
No other related party transactions were undertaken during the year ended 30
September 2023.
18. Risk Management, Financial Assets and Liabilities
Financial Assets and Liabilities
The Company's financial instruments comprise fund and other investments,
money-market funds, cash balances, debtors and creditors that arise from its
operations. The assets and liabilities are managed with the overall objective
of achieving long-term total returns for shareholders.
Summary of Financial Assets and Financial Liabilities by Category
The carrying amounts of the Company's financial assets and financial
liabilities, as recognised at the Statement of
Financial Position date of the reporting periods under review, are categorised
as follows:
30 September 2023 30 September 2022
£'000 £'000
Financial assets
Financial assets measured at fair value through profit or loss:
Fixed asset investments 1,261,995 1,192,380
Financial assets measured at amortised cost:
Investments receivable 30,040 249
Money-market funds, cash and short-term deposits 9,436 30,341
1,301,471 1,222,970
Non-financial assets
Other receivables 77 807
77 807
Financial Liabilities
Measured at amortised cost:
Creditors: amounts falling due within one year:
Accruals 5,022 3,713
Revolving credit facility 100,883 62,012
105,905 65,725
Assets/Liabilities Measured at Amortised Cost
The carrying value of the current assets and liabilities is deemed to be fair
value due to the short-term nature of the instruments and/or the instruments
bearing interest at the market rates.
Risk Management
The Directors manage investment risk principally through setting an investment
policy and by contracting management of the Company's investments to an
investment manager under terms which incorporate appropriate duties and
restrictions and by monitoring performance in relation to these. The Company's
investments are in private equity funds, typically unquoted limited
partnerships and co-investments. These are valued by their managers generally
in line with the EVCA and the BVCA guidelines, which provide for a fair value
basis of valuation. The funds may hold investments that have become quoted or
the co-investment may become quoted and these will be valued at the
appropriate listed price, subject to any discount for marketability
restrictions.
As explained in the Company's investment policy, risk is spread by investing
across a range of countries and industrial sectors, thereby reducing excessive
exposure to particular areas. The Manager's investment review and monitoring
process is used to identify and, where possible, reduce risk of loss of value
in the Company's investments.
The Company's investing activities expose it to various types of risk that are
associated with the financial instruments and markets in which it invests. The
most important types of financial risk to which the Company is exposed are
market risk, over-commitment risk, liquidity risk, credit risk and interest
rate risk.
The nature and extent of the financial instruments outstanding at the
Statement of Financial Position date and the risk management policies employed
by the Company are discussed below.
Market Risk
a) Price Risk
The Company is at risk of the economic cycle impacting the listed financial
markets and hence potentially affecting the pricing of new underlying
investments, the valuation of existing underlying investments and the price
and timing of exits. By having a diversified and rolling portfolio of
investments the Company is well placed to take advantage of economic cycles.
100% of the Company's investments are held at fair value. The valuation
methodology employed by the managers of the unquoted investments may include
the application of EBITDA ratios derived from listed companies with similar
characteristics. Therefore, the value of the Company's portfolio is indirectly
affected by price movements on listed financial exchanges. A 10% increase in
the valuation of investments at 30 September 2023 would have increased the net
assets attributable to the Company's shareholders and the total return for the
year by £126,995,000 (2022: £119,238,000); a 10% change in the opposite
direction would have decreased the net assets attributable to the Company's
shareholders and the total return for the year by an equivalent amount. Due to
the private nature of the underlying companies in which the Company's
investments are invested, it is not possible for the Company to pinpoint the
effect to the Company's net assets of changes to the EBITDA ratios of listed
markets any more accurately.
b) Currency Risk
The Company makes fund and co-investment commitments in currencies other than
sterling and, accordingly, a significant proportion of its investments and
cash balances are in currencies other than sterling. In addition, the
Company's syndicated revolving credit facility is a multi-currency facility.
Therefore, the Company's NAV is sensitive to movements in foreign exchange
rates.
The Manager monitors the Company's exposure to foreign currencies and reports
to the Board on a regular basis. It is not the Company's policy to hedge
foreign currency risk. It is expected that the majority of the Company's
commitments and investments will be denominated in euros. Accordingly, the
majority of the Company's indebtedness will usually be held in that currency.
No currency swaps or forwards were used during the year.
The table below sets out the Company's currency exposure.
30 September 2023 30 September 2022
Local Sterling Local Sterling
Currency Equivalent Currency Equivalent
'000 £'000 '000 £'000
Fixed asset investments:
Euro 1,105,059 958,569 1,045,818 917,787
Sterling 67,425 67,425 86,894 86,894
US Dollar 288,052 236,002 209,527 187,698
Money-market funds, cash and short-term deposits:
Euro 9,056 7,856 17,596 15,442
Sterling 569 569 5,624 5,624
US Dollar 1,232 1,009 10,351 9,273
Canadian Dollar 3 2 3 2
Investment receivable
Euro 34,631 30,040 - -
US Dollar - - 278 249
Revolving credit facility:
Euro (116,300) (100,883) (53,000) (46,512)
Sterling - - (15,500) (15,500)
Other debtors and creditors:
Euro (624) (543) (86) (75)
Sterling (4,381) (4,381) 2,817 2,817
US Dollar (27) (22) (16) (14)
Total 1,195,643 1,158,052
Outstanding commitments:
Euro 563,736 489,006 525,075 460,794
Sterling 10,084 10,084 13,100 13,100
US Dollar 186,623 152,901 228,826 204,986
Total 651,991 678,880
c) Currency Sensitivity
During the year ended 30 September 2023 sterling appreciated by 1.2% relative
to the euro (2022: depreciated 2.1%) and appreciated by 9.3% relative to the
US dollar (2022: depreciated 17.2%).
To highlight the sensitivity to currency movements, if the value of sterling
had weakened against both of the above currencies by 10% compared to the
exchange rates at 30 September 2023, the capital gain for the year would have
increased by £125,617,000 (2022: £120,428,000); a 10% change in the opposite
direction would have decreased the capital gain for the year by £102,777,000
(2022: £98,532,000).
The calculations above are based on the portfolio valuation and cash and
revolving credit facility balances as at the respective Statement of Financial
Position dates and are not necessarily representative of the year as a whole.
Based on similar assumptions, the amount of outstanding commitments would have
increased by £71,323,000 at the year end (2022: £73,976,0000), a 10% change
in the opposite direction would have decreased the amount of outstanding
commitments by £58,355,000 (2022: £60,525,000).
Liquidity Risk
The Company has significant investments in unquoted investments which are
relatively illiquid. As a result, the Company may not be able to quickly
liquidate its investments at an amount close to their fair value in order to
meet its liquidity requirements, including the need to meet outstanding
undrawn commitments. The Company manages its liquid investments to ensure
sufficient cash is available to meet contractual commitments and also seeks to
have cash available to meet other short-term financial needs. Short-term
flexibility is achieved, where necessary, through the use of the syndicated
revolving credit facility. Liquidity risk is monitored by the Manager on an
ongoing basis and by the Board on a regular basis. Payables, as disclosed in
note 11, all fall due within one year and the revolving credit facility, as
described in note 12, has drawn £102,358,000 as at 30 September 2023 (2022:
62,012,000), with an amount of £197,642,000 (2022: £137,988,000) still
available to be drawn.
Credit Risk
Credit risk is the exposure to loss from failure of a counterparty to deliver
securities or cash for acquisitions or disposals of investments or to repay
deposits. The Company places funds with authorised deposit takers from time to
time and, therefore, is potentially at risk from the failure of any such
institution. At the year end, the Company's financial assets exposed to credit
risk amounted to the following:
30 September 2023 30 September 2022
£'000 £'000
Cash and cash equivalents 9,436 30,341
Investment receivable 30,040 249
39,476 30,590
The Company's cash is held by BNP Paribas Securities Services S.A., which is
rated "A+" by Standard and Poors. Should the credit quality or the financial
position of the bank deteriorate significantly, the Manager would move the
cash balances to another institution.
The investment receivable relates to secondary sale proceeds payable to the
Company as at 30 September 2023 which were received subsequent to the
financial year end and is therefore no longer at risk of default.
Interest Rate Risk
The Company will be affected by interest rate changes as it holds some
interest bearing financial assets and liabilities which are shown in the table
below, however, the majority of its financial assets are investments in
private equity investments which are non-interest bearing. Interest rate
movements may affect the level of income receivable on money-market funds and
cash deposits and interest payable on the Company's variable rate borrowings.
The possible effects on the cash flows that could arise as a result of changes
in interest rates are taken into account when making investment and borrowing
decisions. Derivative contracts are not used to hedge against any exposure to
interest rate risk.
Interest Risk Profile
The interest rate risk profile of the portfolio of financial assets and
liabilities at the Statement of Financial Position date was as follows:
30 September 2023 30 September 2022
Weighted average Weighted average
interest rate interest rate
% £'000 % £'000
Floating rate
Financial assets: Money-market funds, cash and short-term deposits 2.72 9,436 1.06 30,341
Financial liabilities: Revolving credit facility 4.49 100,883 2.03 62,012
The weighted average interest rate on the bank balances is based on the
interest rate payable, weighted by the total value of the balances. The
weighted average period for which interest rates are fixed on the bank
balances is 31.0 days (2022: 31.0 days).
The weighted average interest rate on the revolving credit facility is based
on the interest rate paid on the individual loan balances, weighted by the
duration and value of each individual loan balance outstanding during the
financial year.
Interest Rate Sensitivity
An increase of 1% in interest rates would have decreased the net assets
attributable to the Company's shareholders and decreased the total gain for
the year ended 30 September 2023 by £853,000 (2022: £530,000). A decrease of
1% would have increased the net assets attributable to the Company's
shareholders and increased the total gain for the year ended 30 September 2023
by £853,000 (2022: £158,000). The calculations are based on the interest
paid and received during the year.
19. Fair Value Hierarchy
FRS 102 requires an entity to classify 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 classifications:
• Level 1: The unadjusted quoted price in an active market for identical
assets or liabilities that the entity can access at the measurement date.
• Level 2: Inputs other than quoted prices included within Level 1 that
are observable (i.e., developed using market data) for the asset or liability,
either directly or indirectly.
• Level 3: Inputs are unobservable (i.e., for which market data is
unavailable) for the asset or liability.
The Company's financial assets and liabilities, measured at fair value in the
Statement of Financial Position, are grouped into the following fair value
hierarchy at 30 September 2023:
Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss £'000 £'000 £'000 £'000
Unquoted investments - - 1,261,995 1,261,995
Net fair value - - 1,261,995 1,261,995
As at 30 September 2022
Level 1 Level 2 Level 3 Total
Financial assets at fair value through profit or loss £'000 £'000 £'000 £'000
Unquoted investments - - 1,192,380 1,192,380
Net fair value - - 1,192,380 1,192,380
Unquoted Investments
Unquoted investments are stated at the Directors' estimate of fair value and
follow the recommendations of the EVCA and the BVCA. The estimate of fair
value is normally the latest valuation placed on an investment by its manager
as at the Statement of Financial Position date. The valuation policies used by
the manager in undertaking that valuation will generally be in line with the
joint publication from the EVCA and the BVCA, "International Private Equity
and Venture Capital Valuation ("IPEV") Guidelines". Fair value can be
calculated by the manager of the investment in a number of ways. In general,
the managers with whom the Company invests adopt a valuation approach which
applies an appropriate comparable listed company multiple to a private
company's earnings or by reference to recent transactions. Where formal
valuations are not completed as at the Statement of Financial Position date,
the last available valuation from the manager is adjusted for any subsequent
cash flows occurring between the valuation date and the Statement of Financial
Position date. The Company's Manager may further adjust such valuations to
reflect any changes in circumstances from the last manager's formal valuation
date to arrive at the estimate of fair value.
Alternative Performance Measures
Alternative performance measures ("APMs") are numerical measures of the
Company's current, historical or future performance, financial position or
cash flows, other than financial measures defined or specified in the
applicable financial framework. The Company's applicable financial framework
includes FRS 102 and the Association of Investment Companies ("AIC") SORP.
In selecting these APMs, the Directors considered the key objectives and
expectations of typical investors in an investment trust such as APEO.
Annualised NAV Total Return
Annualised NAV Total Return is calculated as the return of the Net Asset Value
("NAV") per share compounded on a quarterly basis, based on reported NAV per
share from inception to 30 September 2023. NAV Total Return is inclusive of
all dividends received since inception and assumes all dividends are
reinvested at the time they are received and generate the same return as NAV
per share during each reporting period. Assuming dividends are not reinvested
results in a annualised NAV total return of 10.4% since inception.
Annualised Total Return Discount
The amount by which the market price per share is lower than the net asset
value ("NAV") per share of an investment trust. The discount is normally
expressed as a percentage of the NAV per share.
As at As at
30 September 30 September
2023
2022
Share price (p) a 442.0 410.0
Net Asset Value per share (p) b 777.7 753.2
Discount (%) c = (b-a) / b 43.2 45.6
Dividend yield
The total dividend per Ordinary share in respect of the financial year divided
by the share price, expressed as a percentage, calculated at the year end date
of the Company.
2023 2022
Dividend per share (p) a 16.0 14.4
Share price (p) b 442.0 410.0
Dividend yield (%) c = a / b 3.6 3.5
NAV total return ("NAV TR")
NAV TR shows how the NA has performed over a period of time in percentage
terms, taking into account both capital returns and dividends paid to
shareholders. This involves reinvesting the net dividend into the NAV at the
end of the quarter in which the shares go ex-dividend. Returns are calculated
to each quarter end in the year and then the total return for the year is
derived from the product of these individual returns.
NAV per share (p) as at 30 September 2022 a 753.2
NAV per share (p) as at 30 September 2023 b 777.7
Price Movement c = (b/a) - 1 3.2%
Dividend Reinvestment(1) d 2.2%
NAV Total return e = c + d 5.4%
1 NAV TR assumes investing the dividend in the NAV of the Company on the date
on which that dividend goes ex-dividend.
Ongoing charges ratio/expense ratio
The ongoing charges ratio is calculated as management fees and all other
recurring operating expenses that are payable by the Company, excluding the
costs of purchasing and selling investments, performance fees, finance costs,
taxation, non-recurring costs, and the costs of any share buyback
transactions, expressed as a percentage of the average NAV during the period.
The ratio also includes an allocation of the look-through expenses of the
Company's underlying investments, excluding performance-related fees.
The ongoing charges ratio has been calculated in accordance with the
applicable guidance issued by the AIC.
Year ended Year ended
30 September 2023 30 September 2022
£'000 £'000
Investment management fee a 11,213 10,600
Administrative expenses b 1,234 1,054
Ongoing charges c = a + b 12,447 11,654
Average net assets d 1,175,937 1,099,764
Expense ratio e = c / d 1.06% 1.06%
Look-through expenses f 1.78% 1.67%
Ongoing charges ratio g = e + f 2.84% 2.73%
The look-through expenses represent an allocation of the management fees and
other expenses charged b the underlying investments held in the portfolio of
the Company. Performance-related fees, such as carried interest, are excluded
from this figure. This is calculated over a five-year historic average, and is
recalculated on an annual basis based on the previous calendar year.
Over-commitment ratio
Outstanding commitments less cash and cash equivalents and the value of
undrawn loan facilities divided by portfolio NAV.
As at As at
30 September 2023
30 September 2022
£000
£000
Undrawn Commitments a 651,991 678,880
Less undrawn loan facility b (197,720) (137,988)
Less resources available for investment c (9,436) (30,341)
Net outstanding commitments d = a + b + c 444,805 510,550
Portfolio NAV e 1,261,995 1,192,380
Over-commitment ratio f = d / e 35.2% 42.8%
Share price total return/total shareholder return ("TSR")
The theoretical return derived from reinvesting each dividend in additional
shares in the Company on the day that the share price goes ex-dividend.
Date Share
price (p)
Share price (p) as at 30 September 2022 a 410.0
Share price (p) as at 30 September 2023 b 442.0
Price Movement (%) c = (b / a) - 1 7.8%
Dividend Reinvestment (%)1 d 3.9%
Share price total return e = c + d 11.7%
1 Share price total return assumes reinvesting the dividend in the share price
of the Company on the date on which that dividend goes ex-dividend.
The financial information set out above does not constitute the Company's
statutory accounts for the years ended 30 September 2023 or 2022 but is
derived from those accounts. Statutory accounts for 2022 have been delivered
to the registrar of companies, and those for 2023 will be delivered in due
course. The auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006
The statutory accounts for the financial year ended 30 September 2023 have
been approved by the Board and audited but will not be filed with the
Registrar of Companies until after the Company's Annual General Meeting which
will be held on 27 March 2024 at 12:30pm at wallacespace, Spitalfields, 15-25
Artillery Lane, London, E1 7HA.
The Annual Report will be posted to shareholders shortly and copies will be
available from the Manager or from the Company's website
(www.abrdnpeot.co.uk).
For abrdn Private Equity Opportunities Trust plc
abrdn Holdings Limited, Company Secretary
For further information, please contact:
abrdn Private Equity Opportunities Trust plc
Alan Gauld, Fund Manager alan.gauld@abrdn.com
SEC Newgate (For Media)
Bob Huxford / Tom Carnegie / Harry Handyside apeot@secnewgate.co.uk
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