REG - Apax Global Alpha Ld - 2020 Annual Report and Accounts
02/03/2021 07:00
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RNS Number : 7833Q Apax Global Alpha Limited 02 March 2021
Apax Global Alpha
Annual Report & Accounts 2020
INTRODUCTION
WHO WE ARE
Apax Global Alpha Limited ("AGA", "Apax Global Alpha" or the "Company") is a
closed-ended investment company that invests in a portfolio of private equity
funds advised by Apax Partners LLP ("Apax"). It also holds debt and equity
investments ("Derived Investments") which are identified as a direct result of
the private equity investment process, insights, and expertise of Apax.
The Company has a Premium listing and is a constituent of the FTSE 250 Index
(LSE: APAX).
NAV AND ADJUSTED NAV
€1.2bn
71% PE / 29% DI
OUR OBJECTIVE
Our objective is to provide shareholders with superior long-term returns
through capital appreciation and regular dividends.
AGA aims to build and maintain a global portfolio of investments across four
core sectors, delivering sustained value across economic cycles. Our unique
business model allows shareholders to access high-quality companies in the
Tech, Services, Healthcare and Consumer sectors through the private equity
funds advised by Apax ("Apax Funds") as well as via direct investments.
TARGET ANNUALISED TOTAL NAV RETURN
12-15%
TARGET DIVIDEND YIELD P.A.
5%
OF NAV
OUR INVESTMENT APPROACH
Our investment approach seeks to provide investors with access to Apax's
private equity funds across all stages of maturity, and their carefully
selected portfolio of private companies. Leveraging Apax's insights derived
from private equity activities, AGA holds a focused portfolio of debt and
equity investments that provides additional liquidity and flexibility for the
Company with the aim of generating superior risk-adjusted returns.
SECTORS
4
INVESTMENT ADVISOR INVESTING EXPERIENCE
nearly 50
YEARS
Apax Global Alpha Limited provides shareholders with unique access to a
diversified private equity portfolio across four core sectors, as well as a
focused portfolio of debt and equity investments, derived from the insights
gained by the Apax team.
Overview \ Business model
Our objective is to provide shareholders with superior long-term returns
through capital appreciation from our investment portfolio and regular
dividends.
In order to achieve the Company's investment objective, AGA is:
1. a limited partner in funds raised and advised by Apax (the "Apax Funds" or
"the Funds"); and
2. a direct investor in debt and equity instruments which are identified by
leveraging the insights gained by Apax during the private equity investment
activities.
The Company refers to these two investment activities as its "Private Equity
investments" and "Derived Investments", respectively.
THE COMPANY: APAX GLOBAL ALPHA LIMITED
AGA is a publicly traded fund that provides shareholders with unique exposure
to a portfolio of private equity funds advised by Apax. Through AGA,
shareholders have access to a diversified private equity portfolio across all
stages of maturity (investment, maturity, harvesting). AGA also holds a
portfolio of debt and equity investments, derived from the Apax team's
insights, which provides additional capital flexibility and liquidity for the
Company.
As AGA is typically a sizeable investor in each Apax Fund, it benefits from
better terms which are available to other similar-sized third-party investors
in those funds.
Details about the Company's Board can be found in the Governance Section on
page 50.
AGA SHAREHOLDERS
AGA
APAX GLOBAL ALPHA LIMITED
WHAT AGA DOES
- Sets Company objectives and investment strategy
- Governance and risk management
- Appointment and oversight of service providers
INVESTMENT MANAGER: APAX GUERNSEY MANAGERS LIMITED
AGA has appointed Apax Guernsey Managers Limited ("AGML") as its discretionary
Investment Manager. AGML is managed by a board of experienced investment
professionals and operational private equity executives. Biographies for the
individual directors can be found on page 52.
AGML
APAX GUERNSEY MANAGERS LIMITED IS THE INVESTMENT MANAGER TO AGA
WHAT AGML DOES
- Identification and due diligence of investment opportunities
- Recommendation of potential investments to AGML and the Apax Funds for
consideration
- Provides investor relations services to AGA
INVESTMENT ADVISOR: APAX
Apax is a leading global private equity advisory firm. It looks for
opportunities to partner with exceptional management teams to build great
businesses and achieve transformative growth. The Apax Funds look for buyout
opportunities in four key sectors:
Tech, Services, Healthcare and Consumer.
Apax has pursued this sector strategy for over 30 years, leveraging the firm's
digital expertise and Operational Excellence
Practice to help accelerate value creation for its investors. More information
about Apax can be found on page 12.
Apax
PROVIDES INVESTMENT ADVICE TO AGML AND THE APAX FUNDS
WHAT APAX DOES
- Discretionary portfolio management
- Investment decisions
- Portfolio performance analysis and risk management
Overview \ Investment case
Why invest in AGA?
UNIQUE PRIVATE EQUITY ACCESS
AGA provides investors with access to the private equity funds advised by
Apax, which contain a carefully selected and actively managed portfolio of
investments. Value creation is achieved through sector focus, transformational
ownership, and operational value-add
SECTOR-DRIVEN STRATEGY
Focus on four attractively positioned and dynamic sectors, benefitting from
accelerating changes in global trends: Tech, Services, Healthcare, and
Consumer
ATTRACTIVE NET RETURNS
AGA targets Total NAV Return of 12-15%, including a dividend target of 5% of
NAV per year, aiming to generate both capital appreciation and an attractive
yield income for investors
DISTINCTIVE DERIVED INVESTMENT APPROACH
We employ a portfolio of debt and equity investments identified from the Apax
team's insights in order to manage capital not invested in Private Equity,
providing liquidity and flexibility for the portfolio while generating
enhanced risk adjusted returns
Exposure to attractive sectors
Apax has pursued a sector-based strategy for over 30 years, building
specialist expertise in Tech, Services, Healthcare, and Consumer. As a result,
the investment teams have developed deep knowledge and understanding of
portfolio companies' specific markets, their networks, and competitive
environments, which can be applied across funds and investments.
Within their core sectors, the investment teams focus on specific sub -sectors
which demonstrate strong fundamentals and significant opportunities. These
areas tend to:
- grow faster than GDP;
- lend themselves to producing market leaders that have sustainable
competitive advantages in their respective niches;
- have companies with multiple levers to improve performance and execute
a "good to great" strategy; and
- be in areas where the Apax team's expertise leads to better deal
sourcing, due diligence, value add, and ultimately a clear exit strategy.
This approach allows the Apax Funds to maximise support for the businesses in
which they invest, helping them realise their full growth potential, by
applying tried-and-tested business transformation models to deliver value
creation.
PORTFOLIO SPLIT BY SECTOR
TECH 47%
SERVICES 26%
HEALTHCARE 18%
CONSUMER 9%
Portfolio weighted towards Tech, Healthcare, and Services
TECH
This makes up the largest part of our portfolio and is an area which Apax has
focused on since the early 1980s, experiencing first-hand how the sector has
evolved over time, and gaining valuable insights into the essential elements
which drive successful disruption and strategic growth.
Strategic focus on fast growing sub-sectors that are transforming the global
economy, including software, tech-enabled services, and telecoms.
SERVICES
The services industry remains the largest market in the world, and it
continues to evolve. Apax is at the forefront of these changes which allows it
to identify emerging trends and capitalise on them.
Strategic focus on building market leaders in innovative sub-sectors,
including density-driven business models, outsourced sales & marketing,
and online marketplaces.
HEALTHCARE
Ageing populations and the increasing prevalence of chronic diseases, as well
as the emergence of new technologies, are transforming the healthcare
industry. This provides a strong pipeline of attractive opportunities to
invest in businesses with key capabilities.
Strategic focus on critical sub-sectors that anticipate evolving needs for
improved healthcare offerings, including medical technology, healthcare IT,
pharmaceuticals and healthcare services.
CONSUMER
Unprecedented change in the consumer sector driven by accelerating
technological disruption, evolving demographics, changing customer habits and
global events creates opportunities that closely fit with Apax's technology
expertise.
Strategic focus on evolving sub-sectors driving disruption, including
ecommerce, consumer services and consumer goods.
66
PRIVATE EQUITY PORTFOLIO COMPANIES
31
DERIVED INVESTMENTS
Access to a global portfolio
AGA offers investors access to a global portfolio of investments, taking
advantage of both local and global trends.
Investment opportunities for both the Private Equity and Derived Investment
portfolios are identified by Apax's sector teams across its international
offices and evaluated by Apax's Investment Committee on a global basis before
a recommendation to invest is made.
Investing into private companies requires skill and strong networks and AGA
benefits from the experience of the Apax team that has been built across
economic cycles:
- Identifying and evaluating exciting new investment opportunities.
- Working with private equity portfolio company management teams to
unlock growth through a focused and transformational ownership approach.
- Realising existing investments with a track record of value creation
and uplifts to carrying values.
Investment decisions are made with a long-term view and typical hold periods
are 4-7 years for private equity portfolio companies and 1-3 years for debt
and equity investments. This means that long-term value creation can be
prioritised over short-term profit targets.
Targeting superior returns
Through its Private Equity and Derived Investment portfolios, AGA aims to
generate attractive returns for its shareholders, from both capital
appreciation and regular dividends.
AGA's Private Equity portfolio gives shareholders a unique opportunity to
participate in an exciting and diversified portfolio of unlisted companies,
owned by the Apax Funds. The Funds look for transformative investments by
targeting value-added or complex opportunities across four sectors. They take
a differentiated view and leverage prior experience to support meaningful
change in portfolio companies. From investment, through ownership and exit,
there is a strong focus on alignment of interest, governance and investing
responsibly to manage ESG risks and generate long-term sustainable returns.
Where proceeds received by AGA from the sales of portfolio companies can't be
immediately reinvested in new Private Equity opportunities, funds are invested
in Derived Investments to minimise cash drag for investors, and await
redeployment in new Private Equity investments.
12-15%
TARGET TOTAL NET ASSET VALUE ("NAV") RETURN
5%
OF NAV P.A. TARGET DIVIDEND YIELD
Overview \ Key highlights
TOTAL RETURN(1)
25.4%
PRIVATE EQUITY
0.2%
DERIVED DEBT
(3.8)%
DERIVED EQUITY
FY 2020 TOTAL NAV RETURN(2)
14.8%
FY 2020 DIVIDENDS
10.15(P)
ADJUSTED NAV(2) AS AT 31 DECEMBER 2020
€1,201.2m
1. Total Return is an Alternative Performance Measure ("APM"). It
reflects the sub-portfolio performance on a stand-alone basis. It excludes
items at overall AGA level such as cash, management fees and costs. For
details of calculations used see the glossary on page 101.
2. Total NAV Return is an APM. It means the return on the movement in
the Adjusted NAV per share over the period plus any dividends. Further details
can be seen on page 72.
3. Adjusted NAV is an APM. It represents NAV of €1,201.2m adjusted
for the performance fee reserve at year end. As the reserve was nil in the
current period, NAV and Adjusted NAV were the same. Further details can be
seen on page 72.
Strategic report \ Chairman's statement
Strong performance and well-positioned portfolio
TOTAL NAV RETURN AT 31 DECEMBER 2020
14.8%
DIVIDEND 5% OF NAV, IN RESPECT OF 2020
10.15
pence per share
I am pleased to report that 2020 was another successful year for your Company.
OVERVIEW
At the beginning of 2020, public equity and corporate credit markets fell
sharply in response to the severe economic effects of the measures taken to
slow the spread of Covid-19. An easing of the initial wave of lockdowns,
coupled with far-reaching actions taken by governments and central banks to
support the global economy, led to a recovery in the summer with activity
picking up in the second half of the year. In response to this, and to
positive news with respect to the development of an effective vaccine, public
markets rebounded sharply, with some reaching new all-time highs in the second
half of the year. However, there were marked differences between the
performance of different sectors. In particular, AGA's portfolio weighting
towards Tech & Digital was beneficial as existing positive trends were
accelerated by the conditions created by the pandemic.
The unprecedented level of fiscal and monetary support given to the global
economy, with very low and (in places) negative interest rates, renewed
quantitative easing and significantly higher budget deficits, has created
stresses and imbalances in the financial system which, along with rising
economic inequalities, are likely to have profound long-term consequences. For
2021 however, the focus of markets will be on the effectiveness of any further
measures taken to maintain control over the pandemic, and the pace of the
economic recovery achieved.
RESULTS
Total NAV Return for the period was 14.8%. Adjusted NAV per share increased
from €2.22 (£1.88) to €2.45 (£ 2.19) and the Company's total Adjusted
NAV grew to €1,201.2m at year end.
A particularly strong second half contributed to a Total Return for the
Private Equity portfolio of 25.4%, driven by continued improving operating
performance across the portfolio companies, where average EBITDA grew 20.8% in
the year, and the re-rating of market comparators used in valuation. The
Derived Investment portfolio was adversely impacted by the weakness of the US
dollar. On a constant currency basis, the portfolio was up 6.5% but this
translated to a Total Return of (0.6)% in Euro terms.
In line with our strategy, exposure to Private Equity has been increased and
represented 71% of the Invested Portfolio at the year-end (2019: 69%) with 25%
in Derived Debt (2019: 23%) and 4% in Derived Equity (2019: 8%). The Company
ended the period 93% invested.
PORTFOLIO UPDATE
Our Private Equity portfolio has continued to generate cash despite the
challenging market conditions of 2020. In what was a record year for
distributions, seven full exits, three significant partial exits and two IPOs
were achieved, generating €207.3m for AGA at a material uplift to previous
carrying valuations.
The pandemic required swift action from portfolio company management teams in
the first half of the year in order to adjust business models and adapt to the
new operating environment. Only one investment required additional capital
from the Apax Funds in the period, and the vast majority of portfolio
companies experienced improving performance through the second half of 2020.
The largest valuation declines were seen in the Consumer sector where
businesses like Cole Haan and Takko continued to face challenges as a result
of the pandemic and stringent lockdowns. However, the majority of the 66
companies held at year end on a look-through basis in the PE portfolio saw an
increase in valuation over the year.
Despite the turbulent macro conditions and the high prevailing prices in the
marketplace, particularly in some of Apax's core sub-sectors in Tech &
Digital, the funds signed or closed ten new investments. AGA, through its
participation in the Apax Funds, deployed €69.4m into Private Equity, with
45% in the technology sector.
In Derived Investments, in line with the refocused investment strategy being
applied to the portfolio, new debt investments during the period were balanced
between second lien loans and lower-risk first lien loans where there is a
high degree of visibility on cash flow. Investments are concentrated in Apax's
core sectors with the Derived Debt portfolio now 47% invested in Tech
companies. No new investments were made in Derived Equity. Capital deployed
totalled €87.4m in the year, and AGA also realised a net amount of €90.1m
from sales, interest, and dividends from the Derived Investment portfolio.
BREXIT
With uncertainty persisting well into December, the Investment Manager and
Apax prepared for a 'No Deal' Brexit scenario at the end of the transition
period to ensure there was minimal impact on AGA's portfolio or disruption to
private equity portfolio companies' operations. AGA is Guernsey-domiciled and
as a result it has not been directly affected in the short-term by the UK's
departure from the EU. Looking at the portfolio level, AGA invests globally
and has limited exposure to the UK.
LIQUIDITY, COMMITMENTS, AND FUNDING
AGA continues to maintain a strong balance sheet and a comfortable liquidity
position.
In addition to €319.4m in Derived Investments, AGA's available cash position
after net liabilities as at 31 December 2020 was €93.5m and its Revolving
Credit Facility ("RCF") of €140.0m remained undrawn. This leaves AGA with a
total of €552.9m of funding sources that can be used if needed for future
Private Equity calls.
Post year end, AGA reached an agreement to amend the terms of its RCF. The
revised agreement converts the previous facility of €140.0m, which was due
to expire on 5 November 2021, to an evergreen structure whereby either party
is required to give two years' notice to terminate the agreement. The amended
facility will continue to be used for the Company's general corporate
purposes, including short-term financing of investments such as the drawdown
on commitments to the Apax Funds.
As at 31 December 2020, undrawn commitments, including recallable
distributions from the Apax Funds, amounted to €458.8m. The majority relate
to Apax X and are expected to be drawn down from AGA over the next three to
four years.
DIVIDEND
AGA's dividend policy is to pay dividends representing 5% of NAV each year to
its shareholders. Dividend payments are supported by income (net of expenses)
from Derived Investments and a steady flow of realisations from the private
equity portfolio. In line with the Company's policy, the Board has determined
a final dividend of 5.28 pence per share, bringing full year dividend to 10.15
pence per share. This represents an increase of 6.4% compared to 2019. The
final dividend is expected to be paid on 2 April 2021 to shareholders on the
register of members on 12 March 2021. The shares will trade ex-dividend on 11
March 2021.
DISCONTINUATION VOTE
In common with closed-end investment funds without a fixed duration, AGA's
articles require a resolution to be put to shareholders on a periodic basis
regarding the continuation of the Company. Accordingly, a "Discontinuation
Resolution" will be proposed at the 2021 Annual General Meeting ("AGM"). This
vote gives shareholders the opportunity to vote on whether to instruct the
Directors to bring forward proposals to wind up, liquidate, unitise or
restructure the Company.
To ensure the Company continues in its current form, the Board of Directors
recommends that shareholders vote "Against" the Discontinuation Resolution.
AGA has, to date, provided shareholders with capital appreciation and a
consistent dividend stream, and the quality of the Invested Portfolio means
the Company is well-positioned to continue to create value for shareholders
going forward.
CORPORATE GOVERNANCE
An important focus of the Board of Directors this year has been to ensure that
the operations of the Company have been able to continue as normal throughout
the pandemic. All of our major service providers, including the Investment
Manager, put in place arrangements which meant that service levels were
successfully maintained during the pandemic-related restrictions. In common
with other companies, some adjustments have been necessary, and we again
expect to limit in-person attendance at the forthcoming 2021 AGM.
OUTLOOK
While progress in developing and deploying a range of vaccines against
Covid-19 is encouraging, many governments were required to introduce
additional lockdown measures at the end of 2020 in order to reverse increased
transmission of the virus and consequent pressure on healthcare systems. These
measures will have the effect of slowing the economic recovery and increasing
the cost of support measures. In addition, there will inevitably be some
longer-term changes to the way we live, and the way we do business which will
have an impact on existing business models. Against this backdrop, sector
focus and a rigorous investment process should mean AGA's portfolio remains
resilient and well-positioned for both the current economic conditions and
emerging opportunities. The Board of Directors is confident that AGA will
continue to deliver long-term value and an attractive dividend yield for our
shareholders.
TIM BREEDON CBE
Chairman
1 March 2021
Strategic report \ Investment manager's report
ABOUT APAX
For nearly 50 years Apax has strived to go beyond a traditional private equity
approach to building businesses
YEARS OF EXPERIENCE
(nearly )50
AGGREGATE FUNDS RAISED
$60(+ bn)
( )
PROFESSIONALS
280(+)
APAX OFFICES WORLDWIDE
7
OVERVIEW
Apax provides investment advice to the Investment Manager, identifying and
recommending potential investments for consideration.
Apax has created a collaborative culture that listens, learns, and looks to
inspire long-term, sustainable value creation. Apax works side-by-side with
the management teams of the high-potential companies the Funds invest in,
providing access to the right blend of operating skills, specialist sector
knowledge, and insights from around the globe. Apax's overarching goal is to
inspire mutual success through mutual vision.
To achieve this, Apax focuses on four sectors: Tech, Services, Healthcare, and
Consumer. By taking both a sector and sub-sector approach, teams can improve
their understanding of the trends that matter. This helps with identifying new
opportunities and managing potential downside risks. It also supports value
creation and transformational improvements in portfolio companies.
Finding great companies to invest in is just the start of the journey.
Recognising that every company is different, facing its own unique set of
opportunities and challenges is critical. Strategies to accelerate growth and
improve efficiency are developed in conjunction with the management teams,
whilst providing access to Apax's expertise and extensive resources.
STRATEGIES
Apax has a proven investment approach which has delivered strong and
consistent returns across sectors, geographies, and strategies.
The investment teams work synergistically together, leveraging the Apax
platform to drive global sourcing and value creation in the Funds' portfolios.
For decades, Apax has retained its strong focus on sector expertise and
growth, drawing on the operational and financial backgrounds of its investment
professionals to create competitive advantage. Over the last ten years, the
firm has supplemented this core approach with an increased focus on digital
transformation.
Apax pursues four investment strategies: Apax Global Buyout, Apax Digital
Growth, Apax Mid-Market Israel and Apax Listed Private Equity (Apax Global
Alpha). All strategies share the same core principles: leveraging sub-sector
insights, deep operating capabilities, and a global platform to generate
value.
APAX DIGITAL GROWTH
The Apax Digital Fund ("ADF") partners with exceptional founders and
leadership teams of innovative software, internet, and tech-enabled services
companies worldwide to help them accelerate growth, drive transformational
change, and unlock their maximum potential.
ADF looks for minority growth and growth buyout opportunities.
CURRENT PORTFOLIO COMPANIES
10
AGA'S COMMITMENT TO ADF
$50m
APAX GLOBAL BUYOUT
Apax Global Buyout works to create valued partnerships, supporting growth and
meaningful change, and help build tomorrow's market leaders.
The Global Buyout Funds principally look for investment opportunities in the
mid-market globally.
CURRENT PORTFOLIO COMPANIES
48
SECTORS
4
AGA'S COMMITMENT TO APAX GLOBAL BUYOUT FUNDS
€1.1bn
(Of which: $618m + €611m)
APAX MID-MARKET ISRAEL
Launched in 2015, the AMI Opportunities Fund ("AMI") leverages Apax's deep
local expertise and network in the Israeli market, built over a 25-year
presence in the country, to identify attractive investment opportunities.
AMI looks for opportunities to invest in Israeli mid-market companies.
CURRENT PORTFOLIO COMPANIES
8
AGA'S COMMITMENT TO AMI
$30m
OPERATIONAL EXCELLENCE PRACTICE
Since 2008, Apax has offered deal teams and portfolio company executives
access to a unique group of business specialists with decades of operating
experience in mission critical areas. The aim is to inspire teams to identify
effective new solutions that help their businesses excel.
The Operational Excellence Practice's ("OEP") focus is on enhancing
performance, drawing on expert knowledge, a broad industry network, as well as
proprietary Apax technology platforms to support portfolio company management
teams.
The OEP platform consists of eight practice areas which drive transformation
and impact across the Apax Funds' portfolio. These include digital
acceleration, technology & operations, margin expansion, carve-out &
integration, sales & go-to-market, human capital, operational finance, and
Environmental, Social and Governance.
KnowledgeNow
The power of the Apax network is strong: the portfolio employs more than
100,000 people around the globe and conducts business in all major markets.
Apax harnesses this collective experience throughout the year, including
through a centrepiece annual KnowledgeNow event.
KnowledgeNow brings together CEOs, CFOs and senior executives within the
portfolio to share insights and best practices and to discuss the common
challenges businesses face. Through this multi-day immersion, relationships
are formed, ideas are reinforced or challenged, and cross-portfolio
partnerships are established.
RESPONSIBLE INVESTING
This section summarises Apax's approach to advising on responsible investing.
COMMITTED TO DELIVERING SUSTAINABLE RETURNS
Delivering sustainable returns has been a key focus for Apax and the Apax
Funds' portfolio companies for over a decade. Apax has a strong track record
in responsible investing and has made a substantial effort and investment over
time to measure the Apax Funds' impact on society and deliver sustainable
financial returns while encouraging sustainable business practices.
Apax's Operational Excellence Practice ("OEP") is an integral partner to the
deal teams, working together to identify key risks and value creation
opportunities while also delivering Environmental, Social and Governance
("ESG") related improvements or risk mitigation projects directly to portfolio
companies. The team also drives improvements at the overall portfolio level,
such as enhanced inclusion & diversity initiatives.
Apax has been implementing and fine-tuning this programme since 2009. Across
Apax and the portfolios, there is an enduring commitment to integrating ESG
considerations into business processes. This has been recognised by many
external stakeholders who endorse the Apax approach as industry-leading. For
example, the annual assessment by the Principles for Responsible
Investment ("UNPRI") rates the Apax ESG programme as A+.
From a practical perspective, the ability to assess and influence corporate
social responsibility ("CSR") matters in portfolio investments differs between
Private Equity Investments and Derived Investments. This is because Private
Equity Investments are characterised by longer hold periods and, often,
controlling stakes, whereas Derived Investments tend to be held for a shorter
time and usually involve non-controlling positions. Whilst this can limit any
influence on CSR initiatives within Derived Investments, Apax remains focused
on CSR issues and consider these as part of the overall investment thesis.
DRIVING INCLUSION AND DIVERSITY
Apax has an unwavering commitment to inclusion and diversity. Apax believes
that an inclusive and diverse work environment leads to better performance
both within Apax as well as within the Apax Funds' portfolio. The best
decision-making and highest quality governance require the broadest diversity
of perspectives, including gender, ethnicity, and sexual orientation.
Apax has been proactive in driving diversity and equal opportunity throughout
its Firm for a number of years. In 2018 Apax expanded its focus to include the
Apax Fund's portfolio companies, including KPIs measuring gender diversity
across the portfolio companies. The OEP is also providing portfolio companies
and deal teams with a toolkit to support them in creating diverse workplaces,
free of harassment.
RESPONSIBLE INVESTMENT HIGHLIGHTS 2020
In 2020, there was a strong focus on inclusion & diversity initiatives led
by Apax's Global Inclusion & Diversity Committee. These ranged from
internal speaker series and initiatives set up to identify opportunities for
improvements locally across the different regions, to supporting
not-for-profit organisations that share Apax's value of inclusion. Such
partnerships included, the Thirty Percent Coalition, a coalition for US Board
diversity, and in the period Apax became a founding signatory of the
Institutional Limited Partners Association's ("ILPA") Diversity in Action
Initiative which promotes the advancement of diversity, equity and inclusion
across the investment industry.
"Responsible investment is important to protect and create long-term
investment value."
MODERN SLAVERY1
Given the nature of Apax's advisory business, there is a very low risk of
slavery or human trafficking in connection with its activities. Apax's key
suppliers are professional services firms who provide operational, commercial
and financial advice for the review of investments made by the Apax Funds.
Apax expects all those in its supply chain and its contractors to comply with
its values.
Apax is committed to implementing and enforcing effective systems and controls
to safeguard against slavery and human trafficking taking place in its
business or supply chains. Specifically, it looks to ensure that its global
team receives training to understand the risks of modern slavery and it
includes anti-slavery and human trafficking measures in its Global Business
Standards.
1. https://www.apax.com/media/801811/Modern-Slavery-March-2019.pdf
INTEGRATION OF THE SUSTAINABILITY FRAMEWORK INTO THE INVESTMENT PROCESS
PRE-INVESTMENT POST-INVESTMENT ACTIVE OWNERSHIP
- Apax's teams undertake standard ESG due diligence for each new - Pre-investment due diligence is backed up post-investment by an annual - Apax has a well-defined responsible investment policy
investment made by the Apax Funds ESG KPI collection cycle
- Apax coordinates its sustainability efforts through a Sustainability
- Apax's Sustainability Committee reviews the findings of the ESG due - Apax is able to capture the ESG footprint of the Apax Funds' portfolio Committee which meets on a monthly basis
diligence process and incorporates these into the final Investment Committee companies and establish possible areas where the Apax investment teams
documentation prior to each new commitment together with the OEP can create value - Apax has integrated ESG considerations into its investment processes
and ownership practices relating to the Apax Funds' portfolio companies
- The objective is to create a high degree of awareness upfront with - The key goal of the data collection for Apax is to develop a better
regard to potential ESG issues which can contribute to value creation at a understanding of the materiality of certain ESG KPIs to the overall operations
very early stage of a portfolio company
THE APAX VALUES
Driving the right behaviours to deliver superior returns
Apax has a distinct culture with four core values that guide decision-making
and support its goal of delivering strong returns to investors. This approach
underpins Apax's responsible investment programme.
These values help Apax make the right choices by seeking to:
- act without compromising on principles, recognising that enduring
relationships are built on trust, honesty and transparency;
- make the most of its global platform by working collaboratively as one
global team to harness the best talent for situations, wherever they arise;
- empower its people to be entrepreneurial and creative; and
- create an environment in which continuous improvement and
introspection are highly valued and in which team members feel an "obligation
to dissent" when necessary.
WE CHOOSE RIGHT OVER EASY
A duty to all stakeholders to treat them with respect and to "do the right
thing"
WE HAVE IMPACT THROUGH INSIGHT AND TENACITY
An entrepreneurial spirit to seek out differentiated opportunities and
perspectives
WE SUCCEED AS ONE GLOBAL TEAM
Working collaboratively across teams and geographies to achieve optimal
results
WE LEARN, ADAPT AND GROW
Seeking out and learning from diverse perspectives to improve continuously
THE APAX VALUES
The Apax values inform investors, management teams, employees and other
stakeholders about what Apax stands for, and explain some of its longevity as
an institution.
MARKET REVIEW
REVIEW OF 2020
COVID AND MACROECONOMIC BACKDROP
2020 was clearly an unprecedented year in modern times. A global phenomenon,
Covid-19 saw c.100m confirmed cases and c. 2m reported fatalities as of 31
December 2020 according to the World Health Organisation, figures which almost
certainly understate the true scale of the pandemic.
The outlook remains uncertain with the pandemic currently undergoing second
and third waves in Europe and the US, with new cases and fatalities at or near
peaks and the emergence of new strains of the virus which appear to be more
contagious. Against the negative development of the virus is the unprecedented
rollout of what appear to be highly effective vaccines which should have
significant effects in suppressing the virus in the second half of 2021 in
many countries.
The impact on the global economy has been severe. Global GDP fell by 19% at an
annualised rate in the first half of 2020, with US real GDP falling by 19% at
an annualised rate and EU real GDP falling by 28% at an annualised rate during
the same period. Policymakers responded with unprecedented fiscal and monetary
stimuli which mitigated potential worst-case scenarios and as economies
re-opened in the US and Europe in mid-2020, we saw a strong rebound in
economic activity in Q3. However, given the second and third waves of the
pandemic in the US and Europe, there is expected to be a further contraction
or, at the very least, a slowdown in GDP growth particularly in the services
sector which was noticeable in Q4 2020 and is expected to extend into Q1 2021.
EQUITY MARKETS
Equity markets responded dramatically to Covid-19 in what has been a tale of
two halves. Q1 2020 saw one of the most dramatic declines in recent history
with S&P 500 peak-trough movement down 33.9% and the STOXX Europe 600
peak-trough down by 36.0%.
As both fiscal and monetary stimuli were unleashed markets staged one of their
most impressive recoveries in Q2 with the S&P increasing by 44.5% compared
to its Q1 trough and the STOXX Europe 600 gaining 34.2%. For the full year,
the S&P closed up 16.3% with the STOXX Europe 600 losing 4.0% with the
difference in performance attributed to both the tech weighting in the S&P
and the market's view on economic prospects. Investors appeared to be looking
through the crisis and valuing companies on a one or even two-year forward
basis, assuming earnings return to normal levels.
Additionally, while equity markets appear to be historically expensive on a
Price to Earnings basis, they are not at peaks on an equity risk premium basis
given very low long-term bond yields.
There has, however, been a very significant divergence in performance between
sectors and companies as investors differentiate between those which have been
less impacted by Covid-19 and are likely to be long-term winners, and those
that have suffered more and could be structurally challenged. This distinction
is evident within the AGA portfolio as the core sectors to which it has
exposure generally performed better than the market as a whole, with the
exception of the legacy "bricks-and-mortar" retail businesses. Further details
on the portfolio are provided throughout the rest of this report.
FIG.1: AGA 2020 PRIVATE EQUITY PERFORMANCE1
FTSE 250 (6.4%)
STOXX 600 (4.0%)
S&P 500 16.3%
AGA Private Equity Total Return 25.4%
1. Represents AGA's Private Equity Total Return for 2020 compared to
major equity indices. Indices source: Factset
PRIVATE EQUITY UPDATE
In private equity markets, the volume and value of transactions were
materially down in H1 2020 vs 2019, however they recovered strongly in the
second half of 2020 and overall, there was perhaps more deal activity than
might have been anticipated.
PRIVATE EQUITY TRANSACTION VOLUMES
At the start of the crisis, some private equity investors took the opportunity
to invest into public equities by providing capital for structurally sound but
Covid-19 impacted companies via so-called private investments in public
companies ("PIPEs").
As confidence returned somewhat towards the end of Q2 and financing for
transactions became available, more traditional leveraged buyout transactions
were completed which accelerated in H2 2020. Valuations for quality companies
continued to be elevated with the private equity market heavily discerning
between those companies viewed as structural winners (e.g. software) and those
considered more structurally challenged (e.g. bricks-and-mortar retail).
CREDIT MARKET UPDATE
Credit markets somewhat mirrored equity markets through 2020. Through central
bank action and an investor flight to safety, government bond yields
compressed to historic lows across the yield curve. With euro base rates
having been at or below zero for extended periods of time, the yield curve in
the US tightened significantly following the outbreak of the crisis.
Simultaneously, with public equity markets seeing significant losses in March,
credit spreads widened materially for investment grade, high yield and
leveraged loans. In particular high yield and loan markets dislocated
severely, with prices for loans in high-quality companies dropping materially
in line with the broader markets.
However, spreads narrowed again in Q2 2020 as investor confidence returned and
fiscal and monetary stimuli were announced. As in public equities, investors
distinguished between what were perceived to be higher and lower quality
sectors and companies in the current crisis.
As might be expected, new issuance volumes for credit supporting leverage
transactions were very low at the outset of the crisis, but these returned
during Q2 2020 which also saw signs of second lien loans re-emerging and
accelerating in H2 2020.
OUTLOOK
The economic outlook remains uncertain in the short term but more promising in
the second half of 2021. While many countries have begun to lock-down again,
the vaccine roll-out is accelerating. If the vaccines prove to be as effective
as forecast, this should lead to a re-opening of many economies towards the
end of 2021. In addition, fiscal stimulus continues to be strong particularly
in the US, and there should be significant pent-up demand.
Valuation levels for both public and private equity markets are at elevated
levels and generally assume earnings will normalise to 2019 levels in 2021 for
the S&P. High valuation levels are somewhat driven by very low bond yields
and a lack of attractive liquid investment alternatives indicating that
valuations may remain elevated for the foreseeable future. Valuations in both
public and private markets will also likely continue to be materially superior
for those companies viewed as better positioned for the long-term compared to
those which are more impacted or structurally challenged.
PERFORMANCE REVIEW
TOTAL NAV RETURN
14.8%
ADJUSTED NAV
€1,201.2m
ADJUSTED NAV PER SHARE
€2.45/£2.19
AGA IN THE FTSE 250 WITH MARKET CAP OF
£947.8m
Strong performance across the portfolio despite a challenging market backdrop
PERFORMANCE HIGHLIGHTS
Despite a challenging market backdrop, AGA achieved strong growth across the
portfolio in 2020. Total Adjusted NAV Return was 14.8%
(21.6% constant currency) for the 12 months. Performance was supported by
strong recovery across the portfolio in the second half of 2020, following a
largely flat first six months of the year, reflecting general market weakness.
Adjusted NAV grew to €1.2bn and dividends to shareholders totalled €52.9m,
paid in line with the stated policy to distribute 5% of NAV on an annual
basis.
The Private Equity portfolio materially contributed to these strong results
delivering a 25.4% Total Return (32.6% constant currency), benefitting from a
weighting towards Tech & Digital and other sectors proving more resilient
against the impact of the Covid-19 pandemic. There was strong operational
performance in the underlying portfolio companies, with premium valuations
achieved on exits at an average uplift of 40% from the last Unaffected
Valuations.
Valuations of the funds to which AGA has the largest exposure, Apax X, Apax IX
and Apax VIII continued to excel, whilst valuations in AEVI and AEVII were
down over the year reflecting a greater sensitivity of the smaller remaining
portfolios to swings in performance of individual portfolio companies.
TOTAL NAV RETURN CONTRIBUTIONS (%)
Private Equity 20.6%
Derived Debt 1.7%
Derived Equity 0.1%
Cost and other movements (0.8)%
Performance fee adjustments(1) 0.0%
FX (6.8)%
Total NAV Return 14.8%
1. Performance fee adjustment accounting for the movement in the
performance fee reserve at 31 December 2020
2. Total NAV Return means the movement in the Adjusted NAV per share
over the period plus any dividends paid
ADJUSTED NAV DEVELOPMENT (€M)
Adjusted NAV 31 December 2019 1,092.1
Private Equity 225.1
Derived Debt 18.7
Derived Equity 1.5
Cost and other movements (7.4)
Dividends paid (52.9)
Performance fee adjustments(1) -
FX (75.9)
Adjusted NAV 31 December 2020 1,201.2
1. Performance fee adjustment accounting for the movement in the
performance fee reserve at 31 December 2020
The Derived Investment portfolio, which primarily consists of debt
investments, experienced good performance in 2020 but was adversely impacted
by foreign exchange, mainly driven by the USD weakening against the EUR. After
a relatively muted first half of 2020, performance improved in the second half
of the year. Derived Investment Total Return was (0.6)% (6.5% constant
currency). The Derived Debt portfolio delivered a Total Return of 0.2% (7.4%
constant currency), continuing to invest across the risk spectrum of debt
instruments, with 40% in first lien and 51% in second lien loans. Derived
Equity achieved a Total Return of (3.8)% (2.5% constant currency) though with
a high level of volatility throughout the year.
INVESTMENT PORTFOLIO
AGA's portfolio approach has evolved over time to enable a higher exposure to
Private Equity, with a consequent reduction in Derived Equity. At the same
time, the Company has adopted a more diversified risk profile in Derived Debt
which now makes up the principal portion of the Derived Investment portfolio.
As at 31 December 2020, AGA was 93% invested, with an Invested Portfolio of
€1,107.7m. The majority of the portfolio was invested in Private Equity
(71%), with the Derived Investment portfolio representing 29%. Net current
assets (inclusive of cash) represented €93.5m, or 7% of Adjusted NAV.
AGA's overall portfolio was weighed towards Tech & Digital which at 47%
constituted the biggest exposure, followed by Services at 26%, Healthcare at
18% and Consumer at 9%. Just over half of AGA's overall geographic exposure
continued to be to North America at 63%, followed by Europe at 16%. This is
largely mirrored by the currency exposures of the Fund, with US dollars
representing 68% and the euro representing 15% of the portfolio.
PORTFOLIO OVERVIEW AT 31 DECEMBER 2020
Portfolio by sector¹
December 2020 December 2019
Tech 43% 39%
Services 26% 26%
Healthcare 18% 18%
Consumer 9% 15%
Digital 4% 2%
Portfolio by geography
December 2020 December 2019
North America 63% 51%
Europe 16% 24%
United Kingdom 7% 9%
Israel 3% 4%
India 4% 5%
China 2% 2%
Rest of World 5% 5%
Portfolio by currency December 2020 December 2019
USD 68% 55%
EUR 15% 24%
GBP 7% 8%
INR 2% 4%
HKD 1% 2%
Other 7% 7%
1. At 31 December 2020 the percentages of Services and Consumer have
been amended to reflect the reclassification of two online market place
businesses (Idealista and Baltics Classifieds Group) from Consumer to Services
With a target to pay out 5% of NAV, the Company has paid and declared
€271.7m of dividends since IPO
PRIVATE EQUITY VALUATIONS DURING COVID-19
There were no material changes to the valuation methodology used by the Apax
Funds as a result of Covid-19. A comparable-based methodology was retained
given the transparency that comes with this approach as opposed to
alternatives such as using Discounted Cash Flows or long-term trading
multiples.
This valuation process is underpinned by a track record of delivering
consistent uplifts to Unaffected Valuations on exits from the Private Equity
portfolio. Average uplifts achieved from exits, inclusive of significant
partial exits and IPO's out of the Apax Funds was 40% during the period.
DIVIDENDS
AGA's dividends form an important part of returns to shareholders. With a
target to pay out 5% of NAV, the Company has paid and declared €271.7m of
dividends since IPO and has been steadily increasing annual dividends in pence
per share.
The first dividend for 2020 was 4.87 pence per share. The second semi-annual
dividend is expected to be paid on 2 April 2021 at 5.28 pence per share. Total
dividends in relation to 2020 will therefore be 11.15 euro cents or 10.15
pence per share.
COMMITMENTS AND FUNDING
As at 31 December 2020, AGA was a limited partner in seven Apax Funds,
providing exposure to 66 underlying portfolio companies. Outstanding
commitments to the Apax Funds (together with recallable distributions)
amounted to €458.8m.
As per the chart on the right, AGA has a significant balance sheet of
€1,201.2m and has access to an additional €140.0m from an undrawn
revolving credit facility with Credit Suisse AG. The terms of this facility
were amended on 21 January 2021, converting the existing facility to an
evergreen structure whereby either party is required to give two years' notice
to terminate the agreement.
Apax X, Apax IX, Apax VIII, AMI and the Apax Digital Fund operate capital call
facilities to bridge capital calls from its investors. The operation of a
capital call facility provides AGA and other Apax Fund investors with
significant visibility for liquidity planning. None of the Apax Funds in which
AGA invests employ long-term or structural gearing.
In 2019, AGA made a commitment of $450m to the Apax X fund which closed
post-period on 29 January 2021 at $11bn, excluding affiliated entities. In
assessing the size of any new commitments, the Board, on the advice of the
Investment Manager, appraises potential scenarios in relation to the economic
environment, the returns achieved by the Apax Funds, their investment pace,
and the likely timing and value of realisations. As the Company is typically a
sizeable investor in each Apax Fund, it benefits from better terms which are
available to other similar-sized third-party investors in those funds. During
2020, the average management fee paid on the Company's commitments to the Apax
Funds was 1.3%. Where the Apax Funds are subject to management fee payments,
there is no additional fee charged to the Company.
OUTLOOK
In Private Equity, there is continued focus on transformational,
"good-to-great" investment opportunities where sub-sector insights, operating
capabilities, and access to a global platform can deliver operational value
creation. In Derived Investments, the quality of underlying exposures
continues to be key and the Investment Manager remains disciplined when
considering the pricing of debt instruments.
AGA's portfolio exposure to Tech & Digital, in particular, has proven
resilient with only a small part of the Apax Funds' portfolio, mainly in the
consumer sector, continuing to be affected by global lockdown measures. AGA
believes the portfolio is well-positioned, largely as a result of the global
and sector diversification and expects investment activity to continue to
focus predominantly on Tech, Healthcare, and Services. As countries continue
to grapple with the pandemic, the challenges resulting from Covid-19 are
likely to persist and may have a prolonged impact on valuations and economic
growth, linked to a changed macroeconomic situation.
PRIVATE EQUITY
Returns supported by portfolio weighting towards Tech & Digital
HIGHLIGHTS
PRIVATE EQUITY TOTAL RETURN
25.4%
LTM EBITDA GROWTH
20.8%
% OF NAV
71%
TOTAL NEW INVESTMENT
€69.4(M)
DISTRIBUTION FROM APAX FUNDS
€207.3(M)
AVERAGE UPLIFT ON EXITS
40(%)
PRIVATE EQUITY PERFORMANCE (%)
Movement in underlying portfolio companies' earnings 14.4%
Movement in net debt1 (2.7)%
Movement in comparable companies' valuation multiples(2) 27.1%
One-of and other(3) (3.2)%
Management fees and carried interest accrued by the Apax Funds (4.0)%
Movement in AEVII and AEVI carried interest value 0.0%
Movement in performance fee reserve4 1.0.%
FX (7.2)%
LTM Total Return 25.4%
1. Represents movement in all instruments senior to equity
2. Movement in the valuation multiples captures movement in the
comparable companies valuation multiples. In accordance with International
Private Equity and Venture Capital Valuation ("IPEV") guidelines, the Apax
Funds use a multiple-based approach where an appropriate valuation multiple
(based on both public and private market valuation comparators) is applied to
maintainable earnings, which is often but not necessarily represented by
EBITDA to calculate Enterprise Value
3. Mainly dilutions from the management incentive plan as a result of
growth in the portfolio's value
4. Performance fee adjustment accounting for the movement in the
performance fee reserve at 31 December 2020
PERFORMANCE UPDATE
Strong performance against a challenging market backdrop
Following a muted first half of 2020, the Private Equity portfolio delivered a
strong performance in the second half of the year, reflecting continued
earnings growth in the underlying portfolio as well as premium valuations
achieved on exits.
Swift actions from portfolio company management teams in the first half of the
year in response to the pandemic enabled them to pivot their business models
and quickly adapt to the new environment, with operational performance
improving through the second half of 2020. Performance across the portfolio
also benefitted from policies adopted by central banks and the unprecedented
liquidity support that underpinned the rebound of public markets.
The Private Equity portfolio, which represented 71% of AGA's invested
portfolio at 31 December 2020, delivered a Total Return of 25.4% (32.6%
constant currency), highlighting the resilience and strength of Apax's
investment strategy:
- Focus on four global sectors and sub-sectors, underpinned by digital
technology;
- Creating "transformative" opportunities through business improvements.
This approach also reduces the dependency on any single lever; and
- Executing a strategy with modest levels of financial leverage at entry
(on average 4.2x net debt/EBITDA in Apax IX and 4.4x in Apax X at 31 December
2020).
Despite the challenging environment, the Apax funds made seven full exits,
three significant partial exits and two IPO's and signed or closed ten new
investments during the year (seven in Apax X and three in the Apax Digital
Fund).
STRONG NAV PERFORMANCE
Adjusted NAV was largely flat during the year, growing from €759.4m to
€788.3m at 31 December 2020. This was due to fair value gains of €225.1m,
mainly from the strong performance of Apax IX and Apax VIII, with AGA
receiving € 207.3m of distributions from exits, balanced with €55.7m of
calls, mainly from Apax IX (€18.3m) and the Apax Digital Fund (€12.4m) for
investments. The balance was for fees from Apax X (€4.7m) and AMI (€1.7m).
The strongest performers during the year were in the Tech sector, with
operational improvements in Duck Creek, ThoughtWorks, and Genius Sports
delivering the largest fair value movements. The largest valuation declines in
the portfolio were from Cole Haan, Takko and Tivit, with the two former
companies facing significant challenges as a result of the pandemic and
stringent lockdowns.
APAX FUNDS UPDATE
Exposure to funds across all stages of maturity
Apax X held a final fund close with commitments of $11bn, excluding affiliated
entities, post period end in January 2021. The fund signed seven investments
in 2020, of which six closed in the period. Apax X is off to a strong start,
with valuations benefitting from an increase in comparable multiples as well
as improvements in the performance of the underlying portfolio. The Apax
Digital Fund which at 60% invested and committed is approaching maturity, also
closed three investments in the period.
Apax IX is c. 91% invested and committed, having closed 25 investments, with
the remaining capital mainly reserved for follow-on investments. Operational
improvements across the fund's underlying portfolio supported an increase in
the fund's valuation during the year, with significant exit activity in Q4
achieved at a premium to previous unaffected valuations. The AMI Opportunities
Fund ("AMI") is focused on maturing the portfolio.
To date, Apax VIII has achieved 14 full realisations and 8 partial
realisations, with 11 companies remaining in the portfolio. The fund's
performance was largely flat during the year, with swings in the smaller
remaining portfolio having a greater overall impact on the fund's valuation.
Apax Europe VII and Apax Europe VI continued to actively evaluate exit
opportunities and monetise their portfolios for the last remaining
investments. AGA received carried interest payments of €15.0m and €0.7m
from Apax Europe VII and Apax Europe VI, respectively, following the sales of
Sophos and Aptos.
PRIVATE EQUITY ADJUSTED NAV DEVELOPMENT (€M)
Adjusted NAV at 31 December 2019 759.4
Calls 55.7
Distributions (207.3)
Gains 225.1
Performance fee adjustment1 6.9
FX (51.5)
Adjusted NAV at 31 December 20202 788.3
1. Performance fee adjustment accounting for the movement in the
performance fee reserve at 31 December 2020
2. Includes AGA's exposure to carried interest holdings in AEVII and
AEVI which were respectively valued at €20.6m and €3.7m at 31 December
2020
PRIVATE EQUITY LIFECYCLE
HARVESTING PHASE AVIII, AEVI, AEVII
INVESTMENT PHASE AX, ADF
MATURITY PHASE AIX, AMI
PORTFOLIO UPDATE
Supported by continued portfolio weighting towards Tech & Digital
The Private Equity portfolio continued to be overweight in Tech & Digital
with the majority of both realisations and new investments in 2020 falling
into this sector.
Overall, the primary focus on this sector benefitted the valuation increase
and performance improvement across the portfolio, with particularly strong
valuations achieved in both tech-enabled services and software. The Services
sub-sectors of online marketplaces, outsourced sales and marketing, and
density-driven business models, whilst initially affected by lockdown
measures, also performed well with strong recovery in both earnings and
multiples in the second half of 2020. Healthcare continued to be resilient in
general, with some strong beneficiaries of Covid-19 tailwinds, like Unilabs, a
leading European laboratory and radiology service company, which experienced
increased demand for its testing programmes. The Consumer sector, particularly
traditional bricks-and-mortar retail, continued to perform below pre-Covid-19
levels, affected by lockdowns in key regions.
Tech & Digital
47% of portfolio (including the Apax Digital Fund)
Against the backdrop of the Covid-19 pandemic, Tech & Digital proved to be
the most resilient sector and it has seen the strongest rebound in public
market valuations.
- Tech-enabled service companies like the digital transformation
consultancy firm ThoughtWorks and the cybersecurity services firm Coalfire,
performed well, benefitting from existing market trends which will likely be
accelerated as a result of Covid-19.
- Software businesses proved to be generally resilient and experienced a
strong re-rating in the second half of 2020 as evidenced by the IPO of Duck
Creek and the partial sale of ECI.
- Inmarsat proved resilient for most of its business, but with the
pandemic impacting the aviation segment (c. 20% of revenue).
Services
27% of portfolio
The Services sector experienced good performance during the year. Whilst some
sub-sectors faced challenges due to lockdown measures, most of the companies
in the portfolio recovered strongly in the second half of 2020, both in terms
of earnings and multiples.
- Among the density-driven businesses, Tosca benefitted from increased
demand from consumers eating more in the home. In Q2 Tosca acquired Contraload
which helped extend its range of services further upstream in the European
grocery value-chain whilst at the same time diversifying its revenue base.
Meanwhile Authority Brands, which predominantly operates in critical home
services, initially faced some challenges due to lockdowns but recovered
strongly in H2 2020
- Whilst online marketplaces such as TradeMe and idealista initially
faced some headwinds due to lockdown measures, they recovered strongly in the
second half of the year after restrictions lifted over the summer. These
business models operate lean cost structures and have ample liquidity which
make them more resilient to a slowdown in economic activity. The demand for
online marketplace assets also proved robust as evidenced by both the public
market valuations of comparables and the successful sales of idealista and
Boats Group.
Healthcare
15% of portfolio
Whilst some companies suffered at the start of the pandemic, the portfolio has
been resilient overall, with some businesses performing strongly in the second
half of the year.
- In healthcare services, most companies were relatively unaffected by
the pandemic, with businesses such as Kepro, a quality oversight and care
management business, enjoying stability from multi-year contracts and strong
customer bases. Others, like Unilabs, performed strongly in the second half of
the year as routine testing volumes rebounded following an initial reduction
as healthcare systems focused their resources on Covid-19 testing.
- After an initial Covid-driven dip in performance in the first half of
the year, medical technology company Candela recovered, ending 2020 in a
strong position and with a promising outlook.
- The focus on critical and chronic disorders, and the ongoing and
essential nature of demand, meant the pharmaceuticals sub -sector portfolio
was largely unaffected by the impact of the pandemic as evidenced by the
successful sale of Neuraxpharm.
Consumer
11% of portfolio
Whilst most of the consumer sub-sectors are geared towards digital trends, the
decline and change in demand resulting from the lockdowns saw the traditional
retail and education parts of the portfolio face continued challenges
throughout the year with performance below pre-Covid-19 levels.
- Consumer goods company, Cole Haan, is AGA's largest consumer exposure.
The company started the year from a position of strength but faced challenges
due to the lockdown measures. Online sales have helped performance but trading
remained below pre-Covid levels as at 31 December 2020.
- Among the education businesses, Cadence and Huayue were affected by
the initial school closures. Huayue has recovered strongly in H2 2020 and
Cadence, whilst having recovered, still has some way to go to reach its
pre-Covid revenue level.
- In MatchesFashion saw trading impacted. The management team is now
focusing on returning the business to profitable growth.
PRIVATE EQUITY PORTFOLIO AT 31 DECEMBER 2020
INVESTED PORTFOLIO
€788.3m
A AIX (45%) C AEVII (3%) E AMI (2%) G AX (1%)
B AVIII (16%) D AEVI (1%) F ADF (3%) H DI (29%)
APAX X
AGA NAV: €13.0m
Distributions(1): €0.0m
% of AGA PE portfolio: 1%
Vintage: 2020
Commitment: €199.8m+$225.0m
Invested and committed: 22%
Fund size: $11.7bn
APAX IX
AGA NAV: €500.7m
Distributions(1): €26.2m
% of AGA PE portfolio: 64%
Vintage: 2016
Commitment: €154.5m+$175.0m
Invested and committed: 91%
Fund size: $9.5bn
APAX VIII
AGA NAV: €180.7m
Distributions(1): €501.3m
% of AGA PE portfolio: 23%
Vintage: 2012
Commitment: €159.5m+$218.3m
Invested and committed: 108%
Fund size: $7.5bn
APAX EUROPE VII
AGA NAV: €29.2m
Distributions(1): €85.1m
% of AGA PE portfolio: 4%
Vintage: 2007
Commitment: €86.1m
Invested and committed: 108%
Fund size: €11.2bn
APAX EUROPE VI
AGA NAV: €5.3m
Distributions(1): €8.1m
% of AGA PE portfolio: 1%
Vintage: 2005
Commitment: €10.6m
Invested and committed: 107%
Fund size: €4.3bn
APAX DIGITAL
AGA NAV: €34.3m
Distributions(1): €0.8m
% of AGA PE portfolio: 4%
Vintage: 2017
Commitment: $50.0m
Invested and committed: 60%
Fund size: €1.1bn
AMI
AGA NAV: €25.1m
Distributions(1): €9.7m
% of AGA PE portfolio: 3%
Vintage: 2015
Commitment: $30.0m
Invested and committed: 59%
Fund size: $0.5bn
1. Represents distributions received by AGA since15 June 2015
NEW INVESTMENTS UPDATE
The Apax Funds signed or closed ten new investments in 2020 across the four
sectors and within the core sub-sectors: online marketplaces, software,
healthcare services, education, and tech-enabled services. On a look-through
basis, AGA invested € 69.4m in Private Equity deals which closed in 2020.
Apax X signed or closed seven investments in 2020, with three new investments
signed or closed in the second half of the year, demonstrating that there are
attractive opportunities despite the challenging global markets. In the second
half of the year, Apax X made two new investments in Tech and one in
Healthcare: myCase, a provider of software and case management systems for law
firms, which was carved out of AppFolio, a US software business; InnovAge, a
provider of comprehensive medical services and social supports to frail
seniors in the US; and Azentio Software, a software products business focused
on banking and financial services in India, which was carved out of 3i
Infotech, a global information technology company. Azentio Software remains
subject to customary closing procedures and is expected to close in the first
half of 2021.
In addition, the Apax Digital Fund made three new investments in 2020, with
one new investment in Pricefx, a global leader in pricing optimisation,
closing in the second half of the year.
The new investments reflect the funds' sector-driven strategy with a continued
focus on resilient and growth sub-sectors. The fact that two of Apax X's new
investments in the second half of the year are carve -outs in the technology
sector and software sub-sector, which are currently demanding high valuations,
is also indicative of the funds' "transformative" approach of seeking out
opportunities where operational improvements can generate significant value
creation.
INVESTMENTS
Total new investment¹ €69.4m
Tech 45%
Healthcare 16%
Services 17%
Consumer 22%
NEW INVESTMENTS CLOSED €M
Tech 30.5
Accurate Background - ADF 2.3
Provider of automated workforce screening solutions to US and international
clients across all industries
Coalfire - AX 10.8
Provider of cyber security assurance and consulting services with a strong
focus on the cloud security market
MyCase - AX 7.1
Provider of legal practice management software with integrated payment for
small and medium sized law firms in the US
Pricefx - ADF 2.2
Provider of price optimisation and management software
Prove - ADF 2.6
Provider of digital authentication, fraud prevention, and identity
verification products
Verint Systems - AX 5.5
Global leader in "Actionable Intelligence" software and services across two
business segments: Customer Engagement and Cyber Intelligence.
Healthcare 11.2
InnovAge - AX 11.2
Provider of senior care services in the US
Services 11.6
KAR Global - AX 11.6
Global end-to-end B2B platform connecting buyers and sellers of wholesale
vehicles Consumer
Consumer 16.1
Cadence Education - AX 16.1
Multi-brand operator of private early childhood education centers in the US
1. Represents AGA's look-through cost to investments acquired by the
Apax Funds during 2020
EXITS UPDATE
In 2020, the Apax funds made seven full exits, three significant partial exits
and two IPOs at an average gross MOIC of 4.1x. This reflects an average uplift
of 40% to their previous Unaffected Valuations⁴. AGA received distributions
of €207.3m in the year from its Private Equity portfolio.
Following a muted first half of the year, exit activity resumed strongly with
both Apax VIII and Apax IX signing several exits. In the second half of 2020,
Apax VIII completed the exits of idealista and Neuraxpharm, and the IPO of
Duck Creek. AMI saw a partial realisation of its investment in Max Stock
through a successful IPO on the Tel Aviv stock exchange.
Apax IX also experienced significant exit activity in Q4, signing the exit of
Boats Group and the partial exits of ECI Software, ThoughtWorks and Paycor,
the latter two via new funding rounds. Apax IX also announced the expected
listing of Genius Sports Group following its combination with a SPAC, expected
to close in Q1 2021.
As with the investment activity, most exits were in the tech sector, with two
exits in services, in the online marketplaces sub-sector, two exits in
healthcare and a Consumer IPO.
DIVESTMENTS
Gross MOIC² 4.1x
Tech 43%
Healthcare 27%
Services 27%
Consumer 3%
Note that percentages in chart reflect proceeds from full exits, significant
partial exits and IPO's. It excludes FMV's remaining
FULL EXITS GROSS MOIC² GROSS IRR² UPLIFT³
Tech 4.6x 54% 40%
Aptos - AEVI & AEVII 6.2x 29% 11%
Provider of technology and professional solutions for retailers
Engineering - AVIII 2.6x 25% 3%
Italian IT services provider
Sophos - AEVI & AEVII 3.9x 24% 30%
Provider of security software solutions for mid-market enterprises
SIGNIFICANT PARTIAL EXITS
ECI - AIX 4.0x 52% 8%
Provider of vertical ERP software for SMB clients
Duck Creek- AVIII 7.6x 59% 103%
Provider of SaaS-delivered enterprise software
Paycor - AIX 2.8x 55% 27%
Provider of SaaS Payroll and Human Capital Management software
ThoughtWorks - AIX 7.0x 85% 21%
A digital transformation development and software company
Healthcare 1.7x 13% 68%
GHG - AEVI 0.1x (16%) 0%
Private hospitals
operator in the UK
Neuraxpharm - AVIII 3.5x 35% 68%
Specialty pharmaceutical company focused on the treatment of central
Services 4.7x 40% 1%
idealista - AVIII 5.3x 43% (7%)
Online real estate
classifieds
Boats Group - AIX 3.8x 37% 25%
(signed)
Online marketplace and provider of software solutions for the recreational
marine industry
Consumer 6.3x 76% 122%
SIGNIFICANT PARTIAL EXITS
MAX- AMI 6.3x 76% 122%
A general discount retail chain store in Israel
2. Gross IRR and Gross MOIC on full and partial exits calculated based
on the concurrent aggregate expected cash flows and remaining fair value in
euro across all funds signed, or anexit was sufficiently close to being signed
that the Apax Funds incorporated the expected exit multiple into the quarter
end valuation
3. Uplift represents proceeds received (translated at FX rates
received) or proceeds expected to be received for deals yet to sign (at year
end FX rates) compared to their last Unaffected Valuation at AGA level. For
deals that were partially realised or IPO'd it includes proceeds received and
the latest remaining fair value at 31 December 2020
4. Unaffected Valuation is determined as the fair value in the last
quarter before exit, when valuation is not affected by the exit process (i.e.
because an exit was signed, or an exit was sufficiently close to being signed
that the Apax Funds incorporated the expected exit multiple into the quarter
end valuation)
OPERATIONAL METRICS
LTM revenue and EBITDA growth were 6.6% and 20.8%, respectively. This follows
LTM revenue and EBITDA growth of 20.9% and 15.9% at December 2019. Excluding
significant M&A, growth was 3.2% and 16.5% LTM to December 2020 for
revenue and EBITDA, respectively.
Excluding Cole Haan, which faced significant challenges throughout the year
due to lockdown measures, and distorts the numbers, the weighted average
valuation multiple in AGA's private equity portfolio was 16.9x at 31 December
2020 (2019: 17.2x) and the weighted average leverage of portfolio companies
increased from 3.7x to 3.9x LTM EBITDA at 31 December 2020.
Including Cole Haan the weighted average valuation multiple was 22.4x and
portfolio net debt was 5.2x LTM EBITDA.
PORTFOLIO YEAR-OVER-YEAR LTM REVENUE GROWTH(1): December 2020: 6.6% vs
December 2019: 20.9%
PORTFOLIO YEAR-OVER-YEAR LTM EBITDA GROWTH(1): December 2020: 20.8% vs
December 2019: 15.9%
NET DEBIT/EBITDA MULTIPLE(2): December 2020: 3.9x vs December 2019: 3.7x
ENTERPRISE VALUE/EBITDA VALUATION MULTIPLE(2): December 2020: 16.9x vs
December 2019: 17.2x
1. Gross Asset Value weighted average of the respective metric across
the portfolio. LTM Revenue growth and LTM EBITDA growth rates exclude
companies where EBITDA is not meaningful such as financial services or
high-growth business with fluctuations in EBITDA. Huayue Education and
TietoEVRY are also excluded due tothe unavailability of reported data.
2. Net debt/EBITDA multiple and EV/EBITDA valuation multiple excluded
companies where EBITDA is not meaningful such asfinancial services or
high-growth business valued on a revenue basis. MATCHESFASHION. COM is
excluded due to low EBITDA from opex investments and short-term fluctuations
in EBITDA. Additionally Cole Haan has been excluded at December 2020 ,
including this company Net Debt/EBITDA andEV/EBITDA multiples would have been
5.2x and 22.4x, respectively, when included.
TOP 30 PRIVATE EQUITY INVESTMENTS - AGA'S INDIRECT EXPOSURE
PORTFOLIO COMPANY SECTOR GEOGRAPHY VALUATION €M % OF NAV
ThoughtWorks Tech North America 101.5 8%
Duck Creek Technologies Tech North America 77.1 6%
Paycor* Tech North America 49.8 4%
Unilabs Healthcare Europe 46.8 4%
Cole Haan Consumer North America 37.9 3%
Vyaire Medical* Healthcare North America 36.0 3%
Trade Me* Services Rest of world 34.7 3%
Assured Partners Services North America 31.9 3%
Genius Sports Group Tech United Kingdom 30.2 3%
Safetykleen Europe Services United Kingdom 23.4 2%
Tosca Services Services North America 23.0 2%
Wehkamp Consumer Europe 22.7 2%
Candela Healthcare North America 21.8 2%
Inmarsat Tech Europe 20.6 2%
TietoEVRY* Tech Europe 20.4 2%
Authority Brands Services North America 20.0 2%
InnovAge Healthcare North America 19.6 2%
Boats Group Services North America 18.8 1%
KAR Global Services North America 17.2 1%
Baltic Classifieds Group Services Europe 16.3 1%
Coalfire Tech North America 15.3 1%
MatchesFashion Consumer United Kingdom 14.2 1%
Quality Distribution* Services North America 13.9 1%
Cadence Education Consumer North America 13.5 1%
Fractal Analytics Tech India 13.3 1%
Solita Digital Europe 10.9 1%
ADCO Group Services Europe 10.7 1%
Lexitas Services North America 10.1 1%
ECi Software Solutions Tech North America 9.2 1%
MyCase Tech North America 8.7 1%
Total top 30 gross values 789.5 66%
Other investments 152.2 13%
Carried interest (113.1) (9%)
Capital call facilities and other (40.3) (4%)
Total Private Equity 788.3 66%
* Investments where AGA also holds Derived Investments
PRIVATE EQUITY CASE STUDY
Neuraxpharm
GROSS MOIC 3.5x
GROSS IRR 35%
DATE OF INVESTMENT 2016
FUND Apax VIII
SECTOR Healthcare
REGION Europe
STATUS Realised
WEBSITE www.neuraxpharm.com
Building a European champion in CNS speciality pharmaceuticals
Neuraxpharm is a leading pan-European specialty pharmaceutical business,
focused on the treatment of central nervous system ("CNS") disorders for
diseases such as depression, psychosis, Alzheimer's and Parkinson's.
Neuraxpharm seeks to improve the quality of life and mental wellbeing of
patients. The company operates in 17 countries, covers 85% of the European CNS
pharmaceutical market and has 850 employees.
The Apax Funds have a strong track record of investing in the Healthcare
sector, having completed more than 80 investments over 30 years across
multiple geographies. At the time of investment, the Funds had actively been
targeting the European pharmaceutical space, having identified an opportunity
to consolidate a relatively fragmented market by combining subscale single
country local champions. In 2016, the Funds acquired Invent Farma in Spain and
Neuraxpharm arzneimittel in Germany, creating the foundations of the
pan-European Neuraxpharm group.
Under the Apax Funds' ownership, Neuraxpharm executed its rapid international
expansion plan both through acquisitions and greenfield operations. In total,
Neuraxpharm closed over 70 company and product acquisitions and in-licensing
agreements. This expanded the company's footprint from the initial 2 to 17
European countries. To drive organic growth, Neuraxpharm invested heavily in a
robust product pipeline that broadened the Company's CNS portfolio with unique
value-added and high-tech medicines, launching these via its pan-European
commercial platform.
In December 2020, the Apax Funds sold Neuraxpharm to funds advised by Permira.
At that time, the Company had grown its annual revenues to c.€450m.
Duck Creek Technologies
GROSS MOIC 7.6x(1)
GROSS IRR 59%(1)
DATE OF INVESTMENT 2016
FUND Apax VIII
SECTOR Tech
REGION North America
STATUS Partially realised
WEBSITE www.duckcreek.com
Creating a go-to provider of enterprise software for the global insurance
industry
Duck Creek Technologies is a leading provider of software and services to the
property & casualty and general insurance industry. Following a proactive
approach to Accenture, with an unsolicited proposal to carve-out Duck Creek,
the Apax Funds completed the transaction in 2016.
Drawing on prior experience in the space, the Apax Funds identified Duck Creek
as an attractive business with good growth opportunities as a standalone
company. Additionally, at the time of the investment, the insurance software
market was undergoing substantial transformation, moving from home-grown
solutions to modern systems.
Under the Apax Funds' ownership, the Company completely transformed its
business model, transitioning to a Software-as-a-Service ("SaaS") model. It
also leveraged Apax's experience and contacts to expand its system integrator
network, signing approximately 20 new relationships including with major
blue-chip partners. Additionally, the Apax Funds were integral in supporting
the management team in making four strategic add-on acquisitions as well as
attracting new talent to the board and executive team.
Taken together, these initiatives helped transform Duck Creek from a small
subsidiary of a multinational professional services company to a
next-generation SaaS platform, disrupting a massive software market for
insurance carriers.
In August 2020, Duck Creek started trading on the Nasdaq Global Select Market
under the symbol "DCT". Having acquired Duck Creek at a substantial multiple
discount to its listed peer, under the Apax Funds' ownership, the business
underwent extensive transformation, resulting in a public listing at a large
premium to the same peer.
1. Gross MOIC and Gross IRR based on the cashflows realised
and the remaining fair value held calculated based on the closing share price
at 31 December 2020
Pricefx
CONTRIBUTION TO AGA NAV €3.5m
DATE OF INVESTMENT 2020
FUND Apax Digital Fund
SECTOR Tech
REGION Europe
STATUS Current
WEBSITE www.pricefx.com
Leveraging Digital to accelerate a leading SaaS pricing software provider
Pricefx is a global leader in cloud-based price optimisation and management
software. Established in Germany in 2011, the company offers a full suite of
Software as a Service (SaaS) pricing software that is easy to use, fast and
accessible.
Pricing is a critical competency for global enterprises and demand for SaaS
solutions has steadily increased over time. The global pandemic and lockdown
measures have accelerated this trend as companies have been forced to rapidly
and radically address digital transformation initiatives. Pricing software has
experienced a tremendous surge in interest owing to the strong return on
investment, even in downturns, and the Apax Digital Fund identified an
opportunity to invest in Pricefx and to support their further product
innovation and customer success.
The Apax Funds have a strong track record investing in software as a
subsector, deploying over €3.5bn of equity in 14 deals in the last 15 years.
Software is also one of the core sub-sectors of Apax's growth equity arm, the
Apax Digital Fund, which has executed a number of investments in the space
including Signavio and Wizeline.
Following the Series C financing round, the Pricefx management team will work
with the Apax Digital Fund to focus on four key areas of transformation: i)
expand and solidify its global market leadership position as one of the few
true SaaS platform in the pricing industry; ii) accelerate product innovation;
iii) extend its partner ecosystem; and iv) evaluate strategic acquisitions.
Idealista
GROSS MOIC 5.3x
GROSS IRR 43%
DATE OF INVESTMENT 2015
FUND Apax VIII
SECTOR Services
REGION Europe
STATUS Realised
WEBSITE https://www.idealista.com/en/
Building Spain's leading digital real-estate platform
Founded in 2000 and headquartered in Madrid, idealista is the leading online
real estate classified advertising marketplace in Southern Europe with over
100 million visits a month and supporting around 40,000 real estate agents.
The Company's online platform and diversified portfolio of digital services,
such as Customer Relationship Management ("CRM") tools, data analytics, and
online mortgage brokerage, help enable efficient real estate transactions,
making it a key destination for prospective homeowners and sellers.
The Apax Funds have a solid track record of investing in online classified
businesses, including Auto Trader, SouFun, and Trader Corporation. Having seen
the Spanish housing market rebound following the financial crisis, the Apax
Funds identified idealista as a high-quality business with strong brand
awareness in the Spanish market and significant opportunities for growth both
at home and abroad.
The Apax Funds acquired the company in 2015, kick-starting a transformation
programme, investing heavily into the business, its technology and operations.
Under the Apax Funds' ownership, the company executed on its international
growth ambitions, expanding further into Portugal and Italy while increasing
its website traffic by more than 4x, including a dramatic shift to mobile
devices. The Apax Funds helped evolve and enhance idealista's M&A function
to better support and evaluate strategic acquisitions while the OEP supported
the company in reviewing and negotiating key supplier contracts. Alongside
this, Apax's strong advisor network also allowed it to strengthen the
Company's board.
Working alongside idealista's co-founders, the Apax Funds helped transform the
company, turning it into the region's leading digital real-estate platform.
During the Apax Funds' ownership, idealista experienced a three-fold rise in
revenues. In 2020 the Apax Funds soldthe company to EQT IX.
DERIVED INVESTMENTS
Robust performance particularly in Derived Debt
HIGHLIGHTS
DERIVED INVESTMENTS TOTAL RETURN(1)
(0.6)%
DERIVED DEBT TOTAL RETURN(1)
0.2%
DERIVED EQUITY TOTAL RETURN(1)
(3.8)%
% OF NAV
27%
TOTAL NEW INVESTMENT
€87.4M
TOTAL DIVESTED
€90.1M
DERIVED INVESTMENTS PERFORMANCE (%)
Income 5.9%
Realised gains 2.6%
Unrealised losses (2.0%)
Performance fee adjustment(1) -
FX (7.1%)
Total return (0.6%)
1. Performance fee adjustment accounting for the movement in the
performance fee reserve at 31 December 2020
PERFORMANCE UPDATE
Robust performance adversely impacted by foreign exchange
The Derived Investment portfolio represented 29% of the invested portfolio at
31 December 2020, of which 86% was invested in debt with the remaining 14%
invested in equity. It generated a Total Return of 6.5% on a constant currency
basis ((0.6)% reported).
After a relatively muted first half of 2020 due to the market dislocation in
Q1, performance improved in the second half of 2020. Derived Debt generated a
Total Return of 7.4% on a constant currency basis (0.2% reported) and Derived
Equity achieved a Total Return of 2.5% on a constant currency basis ((3.8)%
reported) for the 12 months to 31 December 2020.
The Derived Debt portfolio experienced robust performance in the period,
supported by a focus on lower risk first lien loans and second lien loans
where there is a high degree of visibility on cash flow, and a narrow focus on
key sectors such as Tech and Healthcare. Removing the impact of foreign
exchange, Derived Debt achieved a constant currency performance of 7.4% in
2020, outperforming the relevant loan indices(2) in Europe and the US which
returned 2.4% and 3.1%, respectively.
The Derived Equity portfolio performed strongly in the second half of the
year, achieving constant currency performance of 31.1% in the second half of
2020. Whilst this helped offset some of the challenges faced during the first
half of 2020, constant currency performance for the year was 2.5%, lagging the
MSCI World Index which returned 6.3% in the same period.
2. Represents S&P European Leveraged Loan Total Return index for
Europe and represents S&P/LSTA Leveraged Loan Total Return index for the
US
PORTFOLIO UPDATE
Derived Investments follows a similar sector-based strategy to Private Equity,
thereby leveraging the Apax team's industry insight and knowledge.
The focus of the Derived Debt portfolio continued to be on high-quality credit
investments and as at 31 December 2020 most of the Derived Debt portfolio was
invested in Tech (47% of Derived Debt), with a particular focus on software
and tech-enabled services, Healthcare (31% of Derived Debt), and Services (22%
of Derived Debt).
The overall value of Derived Debt increased from €252.5m to €275.7m during
the year with most new investments in lower risk first lien loans which helped
reduce volatility within the portfolio in the period. At year end, AGA's
Derived Debt portfolio consisted of 40% first lien instruments, 51% of second
lien loans, and 9% of debt structured as preferred equity. The Derived Debt
portfolio continued to generate an attractive overall yield to maturity of
8.1%, with the reduction year-on-year reflecting a higher share of first lien
loans and lower base rates.
The Derived Debt portfolio also experienced strong operational performance
from underlying portfolio companies, as demonstrated by the LTM EBITDA growth
from 14.6% to 26.2% in the last 12 months.
The Derived Equity portfolio consists of eight positions, mainly Services and
Tech. The average price-to-earnings multiple for the portfolio decreased to
7.1x, reflecting the current portfolio mix following the sale of a number of
positions during the year.
DEBT YEAR-OVER-YEAR LTM EBITDA GROWTH(1): December 2020: 26.2% vs December
2019: 14.6%
DEBT YTM(1) : December 2020: 8.1% vs December 2019: 9.3%
EQUITY P/E RATIO(2): December 2020: 7.1x vs December 2019: 20.7x
Note: These operational metrics represent a snapshot of the portfolio as at
year end, hence they do not capture the performance of exited investments in
the reporting period
1. Gross Asset Value weighted average of the respective metric across
the Derived Debt portfolio (No exclusions)
2. Gross Asset Value weighted average of the respective metric across
the Derived Equity portfolio (Answers, FullBeauty, JustGroup and Cengage were
excluded from LTM earnings growth and Answers, FullBeauty and Cengage were
excluded from P/E ratio)
3. Gross Asset Value weighted average of the current full year income
(annual coupon/clean price as at the respective date) for each debt position
in the Derived Debt portfolio as at the respective date
INVESTMENT ACTIVITY
Investment activity focused on debt instruments
Reflecting the Company's strategy, investments in the derived portfolio ramped
up in the second half of the year as more capital became available following
several exits in the Private Equity portfolio. In the year, AGA deployed
€87.4m in ten new investments in Derived Debt and one add-on, also in
Derived Debt.
New investments were predominantly in the Tech and Healthcare sectors. No new
investments were made in Derived Equity in the year.
Reflecting the portfolio mix, the majority of realisations were in Derived
Debt and in the Tech , Services and Healthcare sectors. The Derived Debt
portfolio achieved a Gross IRR of 11.8% and MOIC of 1.2x on full exits.
The Derived Equity portfolio also exited three positions in the year,
generating a gross MOIC of 1.7x. The investment in Lonza was sold in the
second half of the year, generating a gross IRR of 35% and 1.7x Gross MOIC
overall.
INVESTMENTS
Total new investment €87.4m
Tech 35%
Healthcare 46%
Services 19%
NEW INVESTMENTS €M NEW INVESTMENTS €M
Tech 30.7 Healthcare 40.0
Astra - First lien term loan 4.5 PCI - First lien term loan 10.3
Mission-critical software for higher education institutions to manage the Provider of integrated pharmaceutical supply chain solutions.
student lifecycle and data.
Cotiviti - First lien term loan 2.3 Southern Veterinary Partners 6.8
Software and services provider for medical payers. - Second lien term loan
A veterinarian owned and operated network of animal hospitals in the US.
Planview - Second lien term loan 16.3
Planview is a global enterprise software company.
Neuraxpharm - First lien term loan 14.7
Specialty pharmaceutical company focused on the treatment of central nervous
system disorders.
Syndigo - Second lien term loan 2.4
Provider of product content management solutions.
Add-on
AccentCare - First lien term loan 8.2
Provider of post-acute healthcare services in the US.
Evercommerce - First lien term loan 5.2
Multi-vertical portfolio of marketing, business management and customer
experience software solutions.
Services 16.7
AmeriLife - Second lien term loan 15.4
Wholesale and retail insurance distributor focusing on health, annuity and
life insurance products in the US seniors market.
Veritext - First lien term loan 1.3
North American court reporting company.
DIVESTMENTS
Total DIVESTED €90.1m
Tech 45%
Healthcare 27%
Services 27%
Consumer 1%
FULL EXITS GROSS GROSS
MOIC(1) IRR(1)
Tech 1.7x 28.5%
ECi Software Solutions 1.2x 11.3%
- Second lien term loan
Provider of vertical ERP software for SMB clients.
Cotiviti - First lien term loan 1.1x 48.7%
Software and services provider for medical payers.
Sophos - Listed Equity 2.8x 51.1%
Provider of security software solutions for mid-market enterprises.
Healthcare 1.1x 6.4%
Strides Pharma Science 0.7x (7.6)%
- Listed Equity
Indian pharmaceutical company.
Lonza - Listed Equity 1.7x 35.0%
Swiss multinational, biotechnology and chemicals company.
Services 1.2x 14.4%
Safetykleen - Second lien term loan 1.3x 11.9%
Provider of surface treatment and chemical application services.
Boats Group - Second lien term loan 1.2x 16.9%
Online marketplace and provider of software solutions for the recreational
marine industry.
AmeriLife - First lien term loan 1.1x 14.3%
Wholesale and retail insurance distributor focusing on health, annuity and
life insurance products in the US seniors market.
AmeriLife - Second lien term loan 1.2x 23.2%
Consumer 0.7x (17.4)%
FullBeauty - Second Lien Term Loan 0.7x (17.4)%
Direct-to -consumer plus-size apparel provider in the US.
1. Gross IRR and Gross MOIC calculated based on the aggregate
concurrent euro cash flows since inception of deals fully realised during FY
20
HOLDINGS AS AT 31 DECEMBER 2020
INSTRUMENT SECTOR GEOGRAPHY VALUATION €M % OF NAV
Paycor* Preferred shares Tech North America 25.3 2%
AccentCare 1L term loan Healthcare North America 20.3 2%
Exact Software 2L term loan Tech Europe 20.0 2%
Syncsort 2L term loan Tech North America 20.0 2%
Planview 2L term loan Tech North America 16.1 1%
Rocket Software 2L term loan Tech North America 15.8 1%
Quality Distribution* 2L term loan Services North America 15.2 1%
Neuraxpharm 1L term loan Healthcare Europe 15.0 1%
EverCommerce 1L term loan Tech North America 14.7 1%
AmeriLife 2L (2020) 2L term loan Services North America 14.5 1%
Vyaire* 1L term loan Healthcare North America 13.4 1%
TradeMe* 2L term loan Services Rest of World 12.7 1%
Airtel Africa Listed equity Tech Rest of World 12.6 1%
WCG 1L term loan Healthcare North America 12.4 1%
PowerSchool 2L term loan Tech North America 12.2 1%
Alexander Mann Solutions 1L term loan Services United Kingdom 11.4 1%
PCI 1L term loan Healthcare North America 9.9 1%
Just Listed equity Services United Kingdom 8.2 1%
Navicure 1L term loan Healthcare North America 8.1 1%
Sinopharm Listed equity Healthcare China 7.1 1%
Southern Veterinary Partners 2L term loan Healthcare North America 6.8 1%
Development Credit Bank Listed equity Services India 5.0 1%
Astra 1L term loan Tech North America 4.1 1%
Veritext 2L term loan Services North America 4.0 0%
Repco Home Finance Listed equity Services India 3.5 0%
TietoEVRY* Listed equity Tech Europe 3.2 0%
Cengage Learning* OTC equity Other North America 2.5 0%
Syndigo 2L term loan Tech North America 2.4 0%
FullBeauty* Equity Consumer North America 1.3 0%
Veritext 1L term loan Services North America 1.3 0%
Other 0.4 0%
Total Derived Investments 319.4 27%
* Investments also held by Apax Funds 1L: first
lien 2L: second lien
DERIVED INVESTMENTS PORTFOLIO - APPROACH
AGA uses a portfolio of debt and equity investments to manage capital not
invested in Private Equity.
This Derived Investments portfolio provides liquidity and flexibility for the
portfolio while generating enhanced risk adjusted returns.
Investment opportunities are identified from the Apax team's insights gained
from the private equity investment process, and both debt and equity
investments share the sector focus of the Apax Funds.
The Derived Investment portfolio combines a top-down approach which considers
the overall risk and liquidity profile of the portfolio, together with a
bottom-up approach of investment idea generation, driven by the Apax sector
teams together with a dedicated team of credit experts.
In building this portfolio, the primary focus is on debt instruments of
companies where Apax has differentiated insights. Flexibility is maintained to
also invest in high conviction listed equity investments where the Apax team's
expertise in core sub-sectors allows AGA to target private equity-like returns
from public companies.
As the Private Equity portfolio has matured since IPO, the shape and risk
appetite of the Derived Investment portfolio has been adjusted. As a result,
shareholders should expect the mix within Derived Investments to remain
primarily focused on debt securities, with listed equities making up a smaller
part of the portfolio, concentrated in a limited number of investments.
DERIVED DEBT
AGA takes a flexible investment approach to invest in debt instruments,
balancing risk, return, and AGA's liquidity requirements. The portfolio has a
unique combination of instruments that have passed a high due diligence hurdle
and have the ability to outperform due to better credit selection, resulting
from the deep expertise Apax has in its core private equity sectors and the
close integration of the Apax credit team with the Apax sector teams.
The Derived Debt portfolio is typically invested in a mix of loan instruments
in financial sponsor backed companies. These loan markets allow the Apax team
to perform private equity style due diligence before an investment
recommendation is made. AGA invests across the capital structure, targeting
first and second lien secured loans, as well as other instruments such as debt
instruments structured as preferred equity.
Since 2019, more first lien secured instruments were added to AGA's Derived
Debt portfolio. This reflected the Investment Manager's view of the credit
cycle and the aim to construct a more risk diversified portfolio, while at the
same time increasing overall liquidity of the Derived Debt portfolio as the
share of (illiquid) Private Equity exposure in AGA's overall portfolio
increased and Derived Equity decreased.
Where AGA acquires debt instruments in a primary transaction, it principally
targets investments that are either acquired in private placement processes,
where an "early look" has been granted or as part of general syndication. AGA
however, also acquires loan instruments in the secondary markets, leveraging
the Investment Manager's relationships with banks, funds, and intermediaries.
EXAMPLES: PLANVIEW AND PCI
In 2020, AGA made an investment in the second lien debt issued by Planview - a
portfolio and work management software company well known to the team as the
Apax Funds were owners of the business from 2005 to 2012 - in the context of
its acquisition by
TPG Capital and TA Associates. The diversified and recurring revenue base
provided a stable backdrop to support this second lien investment with an
attractive return profile.
The first lien investment in PCI, a global provider of outsourced
pharmaceutical services, was made with the objective of adding a more liquid
loan instrument to the portfolio whilst capturing a running yield of close to
5.0% p.a.
DERIVED EQUITY
As more opportunities to invest in the Apax private equity funds have arisen,
and as AGA's private equity portfolio has matured, Derived Equity investments
have reduced.
The intention of this portfolio approach has been to focus more on private
equity investment opportunities, which in the past have demonstrated higher
and less volatile returns, rather than Derived Equity opportunities, which had
historically added additional volatility to AGA's returns.
In line with this approach, the investment focus in Derived Equity is on
identifying only those opportunities where the Apax sub-sector insight can
provide for clear visibility to generate private equity-like returns over a
one to three-year hold period. To achieve this level of comfort, an investment
will likely require that the Apax Funds have a significant track record
investing in similar sub-sectors in addition to making the investment at an
attractive valuation level.
No new investments in Derived Equity were made during 2020. This is both a
reflection of an ongoing portfolio re-balancing aiming at a reduced Derived
Equity exposure, as well as high valuations in public equity markets, making
it challenging to identify differentiated opportunities in high-quality
companies.
EXAMPLE: LONZA
AGA's equity investment in Lonza, a Swiss-based pharmaceuticals business, is a
good example of the Company's investment approach in Derived Equity. When
recommending the investment, Apax leveraged its insight from diligence on
other private equity opportunities and its network of experts within the Apax
Funds' healthcare portfolio. The investment thesis at the time of investment
was that public markets undervalued Lonza's biologics business and, whilst
there was no immediate catalyst, the expectation was that the intrinsic value
of the business would be the main driver of returns for the investment. The
investment in Lonza was made in late 2018 and exited in August 2020 at a 1.7x
MOIC and 35% Gross IRR.
RISK MANAGEMENT FRAMEWORK
Identify, evaluate and mitigate
The Board has established a set of risk management policies, procedures and
controls, and maintains oversight through regular reviews by the Board and the
Audit Committee
The Board and Audit Committee monitor the Company's principal risks on a
quarterly basis and a detailed review is undertaken proactively at least
annually.
The risk governance framework is designed to identify, evaluate and mitigate
the risks identified by the Board as being of significant relevance to the
Company's business model and to reflect its risk profile and risk appetite.
The underlying process aims to assist the Board to understand and where
possible mitigate, rather than eliminate, these risks and, therefore, can only
provide reasonable and not absolute assurance against loss.
The Board regularly reviews a register of principal risks and uncertainties
(the "Risk Register") maintained on behalf of the Board by the Company
Secretary. The Risk Register serves as a detailed assessment and tracking
undertaken by the Board of the Company's exposure to risks in three core
categories: strategic and business risks, operational risk and financial and
portfolio risks.
OWNERSHIP AND GOVERNANCE
While the Board remains ultimately responsible for the identification and
assessment of risk, as well as implementing and monitoring procedures to
control such risks, and for reviewing them on a regular basis, the Board
places reliance on its key service providers, to whom it has delegated aspects
of the day-to-day management of the Company. This delegation includes the
design and implementation of controls over specific risks.
The Board undertakes an annual review of its risk appetite, considering
recommendations from the Audit Committee and key service providers responsible
for implementing the controls related to risks identified by the Board, as
noted above. The Board considers existing and new risks at each quarterly
Board meeting and more frequently if necessary.
INVESTMENT PERFORMANCE
In accordance with the Investment Management Agreement between the Company and
the Investment Manager, responsibility for delivering investment performance
in line with the Company's strategic and business objectives, as well as
remaining within the parameters of its investment risk appetite, is delegated
to the Investment Manager.
Specific investment decisions are taken by the Investment Manager within
parameters of authority approved by the Board, while separate risk functions
within the Investment Manager support and review decision-making.
RISK ASSESSMENT
In assessing each category of risk, the Board considers systemic and
non-systemic risks as well as the control framework established to reduce the
likelihood and impact (the "residual risk rating") of individual inherent
risks. The Board does not consider political risk in isolation but
incorporates it within its consideration of other principal risks. During the
year, the Board added a new risk following the outbreak of the Covid-19
pandemic globally. Additionally, the Board considered the impact of Covid-19
on each of the Company's individual risks and as part of this process a number
of risks were marked higher in the first half of the year. Since the Interim
Report, taking into consideration the current environment and balance of AGA's
portfolio (weighted towards Technology and Digital), a number of risks that
had been marked higher have been re-assessed.
The Board is not, practically, in a position to consider every risk. However,
where possible, it does seek to identify, assess and mitigate remote and
emerging risks which might have a significant consequence or might not be
controllable.
In considering the framework around the policies and procedures adopted to
reduce the potential impact of individual risks, the Board takes account of
the nature, scale and complexity of the Company, its investment objectives and
strategy, and the role of the key service providers.
The wider control environment of the Company includes the policies and
procedures adopted by the key service providers. The Board considers these
policies and procedures in its assessment of individual risks and emerging
risks. The Board seeks regular reporting and assurance from its main service
providers on the robustness of their control environments and, based on such
assurances, will assess the suitability, adequacy and relevance of those
policies and procedures.
Individual risks are assessed based on the likelihood of occurrence and
consequential impact. For the avoidance of doubt, likelihood and consequence
are assessed after considering the mitigating effect of the control framework.
Risks are then ranked in order of residual risk rating likelihood and then
consequence. Judgement is applied in determining which risks rank above the
others where such risks have the same residual risk rating, likelihood and
consequence.
Emerging risks are identified and assessed as part of the quarterly review
process undertaken by the Board and Audit Committee. These are risks that may
have a material effect on the Company if they occur. Where possible,
mitigating measures are considered by the Board but due to the unknown nature
of future events the impact of these risks may not materialise. At year end
there were no emerging risks identified. Earlier in the year, the Covid-19
risk was identified and as the pandemic continued to unfold was added to
principal risks.
The Board recognises that it has limited control over many of the risks it
faces, such as political and macroeconomic events and changes in the
regulatory environment, and it periodically reviews the potential impact of
such ongoing risks on the business and actively considers them in its
decision-making.
PRINCIPAL RISKS
The Board is ultimately accountable for effective risk management affecting
the Company.
The Audit Committee has undertaken an exercise to identify, assess and manage
the risk within the Company. The principal risks identified have been assessed
based on residual likelihood and consequence and are summarised on the heat
map below:
STRATEGIC AND BUSINESS OPERATIONAL FINANCIAL AND PORTFOLIO
SB1: Company performance OP1: Continuity risk FR1: Liquidity risk
SB2: Discount to NAV OP2: Service provider risk FR2: Currency risk
SB3: Regulatory, tax and legislative risk FR3: Portfolio risk
SB4: Covid-19 risk
The Company's principal risks are split between three main risk categories:
SB STRATEGIC AND BUSINESS RISKS
OP OPERATIONAL RISKS
FR FINANCIAL AND PORTFOLIO RISKS
RISK STATUS
- Increase
« No change
¯ Decrease
ITEM RISK CURRENT YEAR ASSESSMENT MITIGATING MEASURES RISK
STATUS
SB1 COMPANY PERFORMANCE The Company's returns have been affected by broader market movements; however Performance, positioning and investment restrictions are analysed and «
the Company's portfolio is invested in sectors which to date, have been less monitored constantly by the Investment Manager
The target return and target dividend yield are based on estimates and affected by Covid-19 concerns than the general market. Total NAV Return for
assumptions. The actual rate of return and dividend yield may be lower than 2020 was 14.8% - please refer to the portfolio review section from page 18 for Investment performance is reviewed, challenged, and monitored by the Board
targets. further details.
SB2 DISCOUNT TO NAV The Company's shares continued to trade at a discount to NAV during the year, The Board receives regular reports from its corporate broker and the «
with the average level of the discount somewhat higher than in previous years. Investment Advisor's investor relations team on a quarterly basis
Persistent high discount to NAV may create dissatisfaction amongst The increase is part attributable to broader equity market volatility in
shareholders. response to the Covid-19 crisis. The discount continues to be closely These reports provide insight into shareholder sentiment, movements in the NAV
monitored by the Board. and share price discount and an assessment of discount management strategies
if required
SB3 REGULATORY, TAX AND LEGISLATIVE RISK There were no significant changes in regulation or legislation that materially Service providers have controls in place to monitor and review changes that «
impacted the Company during the year. The direct impact of Brexit is not may impact the Company
Regulatory, tax or legislative changes may result in limitation of marketing expected to be material as the Company is registered in Guernsey which remains
or force restructuring. Including political issues within the UK and the UK's outside the EU. Professional advisors are engaged through primary service providers, if
wider relationship with Europe. required
SB4 COVID-19 RISK The Company added this risk early in the year following the initial outbreak The Board considers the impact of the Covid-19 crisis on the general risk -
of the global Covid-19 pandemic. environment as well as its effect on the strategic, financial and operational
The outbreak of the global Covid-19 pandemic has led to extraordinary public
risks identified on an ongoing basis
health measures being taken which have had and continue to have substantial
and potentially long-lasting economic, market, political and social effects.
These will have an impact not only on the performance of the Company's The Board noted that the key areas that could be affected were liquidity, fair
investment portfolio but may intensify the general risk environment and market value of investments and the operations of its service providers. The
heighten strategic, financial and operational risks to which it is already Board has received regular updates from its key service providers, as well as
exposed. the Investment Manager and Investment Advisor to ensure that they have been
actively monitoring and responding to each of these key risks.
OP1 CONTINUITY RISK In response to the global Covid-19 pandemic, business continuity plans were All key service providers have in place business continuity procedures which «
enacted at the majority of the Company's service providers. During the year, are tested on a regular basis and subject to minimum regulatory standards in
Business continuity, including that provided by service providers, may be the Company noted that business continued with little disruption despite their jurisdictions
impacted by a natural disaster, cyber-attack, infrastructure damage or other service providers' staff working remotely. The pandemic has highlighted that
"outside" factors. service providers have responded well and business continuity plans have been
appropriate and effective.
OP2 SERVICE PROVIDER RISK Control failures at key service providers are reported and reviewed. There The Board conducts a formal review of all key service providers on an annual «
were no material issues identified as part of the formal review conducted by basis
Control failures at key service providers may result in decreased service the Board, despite service providers enacting work-from-home policies,
quality, loss of information, information security breach, theft or fraud. business has continued with little disruption. All key service providers have controls and procedures in place to mitigate
risks related to the loss of information, security breaches, theft and fraud
FR1 LIQUIDITY RISK The Board recognised that in the short term, due to the unprecedented nature Cash flow modelling is prepared and tested under various stress test scenarios «
of the Covid-19 pandemic, liquidity risk was heightened during the year and as
Decreases in the value of investments due to market weakness may affect the such uncertainty existed around the value and pace of Private Equity calls and Revolving credit facility was amended post year end with an evergreen
pace and value of realisations, leading to reduced liquidity and/or ability to distributions. structure in January 2021 and is available in the event of substantial
maintain credit facilities and meet covenant requirements.
liquidity issues
A higher proportion of the Derived Debt portfolio is now invested in first
However, the Board regularly assesses liquidity in highly stressed conditions lien instruments which have better liquidity
as part of its assessment to continue as a going concern. Additionally, please
refer to the viability statement on page 66 for further details. The investing Apax Funds operate capital call facilities which provide good
visibility of future expected calls
FR2 CURRENCY RISK Appreciation of the euro against the USD led to weaker returns being reported The Investment Manager has implemented an investment framework to manage and «
in the year than were achieved by the investment portfolio in local currency monitor the investment portfolio of the Company
The Company has established a global investment mandate and has appointed an terms. Please refer to note 12 on currency risk in the financial statements
Investment Manager whose policy it is not to hedge currency exposures. where the Company's sensitivity to movements in exchange rates Currency exposure analysis and monitoring forms part of the investment
Movements in exchange rates create NAV volatility when the value of
framework
investments is translated into the Company's reporting currency (the euro). has been assessed.
The Investment Manager maintains a monitoring tool that constantly tracks
portfolio exposures
Transparency allows investors to hedge their own exposure as desired
FR3 PORTFOLIO RISK The majority of the Company's assets are in Private Equity, which are valued The Investment Manager prepares the valuations on a quarterly basis «
based on NAV statements provided by the Apax Funds. The Apax Funds have a good
Risk of error, process failure or incorrect assumptions lead to incorrect track record of exiting investments at higher prices than most recent The review process includes a meeting with the Board and Investment Advisor
valuation of portfolio holdings. Unaffected Valuations. The Company's Debt portfolio is valued based on broker where the key assumptions are challenged and explained
quotes and/or models which use market inputs.
Semi-annually the AGA valuations are either reviewed or audited by the
Company's auditors
Governance report \ Introduction to governance
Board activities
2020 Board activities
01
GOVERNANCE
The Board has maintained under review the ever-changing regulatory and
corporate governance environment and, in particular, has conducted an annual
review of the Company's key policy documents. More information can be found on
page 56.
02
STRATEGY AND PERFORMANCE MONITORING
The strategy of the Company is reviewed annually by the Board. In March 2020
the Board approved a new fee structure and more information is provided on
pages 56 and 99. There was no change to strategy in 2020, and the
discretionary investment management arrangements operated through AGML
continued unchanged.
The Investment Manager operates under guidelines from the Board as set out in
the Investment Management Agreement. The Board keeps under regular review the
performance of the investment portfolio through quarterly reporting and
regular dialogue with the Investment Manager.
In addition, Board members receive regular briefings, generally monthly, from
the Investment Manager and Investment Advisor, on the Company's performance
with the opportunity to discuss valuation and movements in the portfolio.
03
RISK MANAGEMENT
The Board and Audit Committee monitor and review the Company's principal risks
on a regular basis throughout the year. As part of the 2020 reviews, they
considered whether there were any new or emerging risks, assessed the
consequence and likelihood of the current risks, and reviewed whether current
mitigating factors remained applicable. More details can be found on page 41.
04
PERFORMANCE OF KEY SERVICE PROVIDERS
The Board conducted an annual review of key service providers, being the
Investment Manager, Administrator/ Company Secretary, Registrar and the
Corporate Broker to the Company. The Board is pleased to report that this
review, which included an assessment of internal control systems, was positive
and the Board will continue its engagement with the existing key service
providers.
05
BOARD EVALUATION
In accordance with the Board management policy, the Board conducted an
internal Board evaluation exercise in 2020, having commissioned an external
review in 2019. The evaluation was managed by the Company Secretary and the
results indicated that the Board continues to operate effectively.
Governance report \.Chairman's introduction
Long-term success
The Board aims to promote the Company's long-term success and accountability
through the application and maintenance of the highest standards of corporate
governance.
The Directors recognise the importance of sound corporate governance and have
adopted the Association of Investment Companies ("AIC") Code of Corporate
Governance (the "AIC Code"). The AIC represents closed-ended investment
companies whose shares are traded on public markets. The purpose of the AIC
Code is to provide a framework of best practice in respect of the governance
of investment companies.
A copy of the AIC Code is available on the AIC website at www.theaic.co.uk
(http://www.theaic.co.uk) .
CORPORATE GOVERNANCE STATEMENT
Compliance with the AIC Code and UK Code
The AIC Code addresses all the principles set out in the UK Corporate
Governance Code ("UK Code"), as well as setting out additional principles and
recommendations on issues that are of specific relevance to listed investment
companies. The Board considers that reporting against the principles and
recommendations of the AIC Code, and by reference to the AIC Guide (which
incorporates the UK Code), will provide better information to shareholders.
Compliance with the principles and recommendations of the AIC Code enables the
Directors to satisfy the requirement to comply with the UK Code. UK Code
provisions relating to the role of the Chief Executive, Executive Directors'
remuneration, and the need for an internal audit function are not relevant to
AGA, being an externally managed investment company. In particular, all of the
Company's day-to- day management and administrative functions are outsourced
to third parties. As a result, the Company has no Executive Directors,
employees, or internal control functions. The Company has therefore not
reported further in respect to these provisions. This position is reassessed
on an annual basis.
When considering the nature, scale and complexity of the Company, certain
recommendations and principles of the AIC Code have not been deemed
appropriate or relevant to the governance framework of the Company. These
exceptions to the AIC Code are noted below:
- The Company has not established a separate Remuneration Committee as
it has no executive officers and the Board is satisfied that any relevant
issues that arise can be properly considered by the Board or by the
shareholders at AGMs. The Board as a whole considers matters relating to the
Directors' remuneration. An external assessment of Directors' remuneration has
not been undertaken. The Company's Remuneration policy is that the fees
payable to the Directors should reflect the time spent by the Directors on the
Company's affairs and the responsibilities borne by the Directors and be
sufficient to attract, retain, and motivate Directors of a quality required to
run the Company successfully. An internal evaluation of the Board was
undertaken in 2020 which concluded that the Board continued to display a
strong corporate governance culture and a high degree of Board effectiveness.
- The Board also fulfils the functions of a Management Engagement
Committee, regularly reviewing the performance of the Investment Manager and
relevant fee arrangements.
- The Board has not established a separate Nomination Committee as it
considers this to be unnecessarily burdensome given the scale and nature of
the Company's activities, as well as the current composition of the Board. All
duties expected of the Nomination Committee are carried out by the Board.
- The Board has implemented a board management policy (referred to
throughout this section) which includes consideration of relevant issues
relating to diversity. The Board has not established a formal policy on
diversity given the relative size of the Board and will keep this matter under
review. Diversity is considered on at least an annual basis through the Board
evaluation process.
COMPLIANCE WITH THE GUERNSEY FINANCIAL SERVICES COMMISSION ("GFSC") FINANCE
SECTOR CODE OF CORPORATE GOVERNANCE ("GFSC CODE")
The Company is subject to, and complies with, the GFSC Code, which applies to
all companies that hold a licence from the GFSC under the regulatory laws or
which are registered or authorised as collective investment schemes in
Guernsey. As the Company reports against the AIC Code, it is deemed to meet
the requirements of the GFSC Code.
SECTION 172 OF THE COMPANIES ACT 2006
The Board is committed to promoting the long-term success of the Company
whilst conducting business in a fair, ethical and transparent manner. Whilst
AGA is Guernsey registered, the Board recognises the intention of the AIC Code
that matters set out in Section 172 of the Companies Act, 2006 should be
reported on. This requires Directors to act in good faith and in a way that is
the most likely to promote the success of AGA. In doing so, Directors must
take into consideration the interests of AGA's stakeholders, the impact AGA
has on the community and the environment, take a long-term view on
consequences of the decisions they make, as well as aim to maintain a
reputation for high standards of business conduct and fair treatment of all
AGA's stakeholders.
As an investment company, the Company does not have any employees and conducts
its core activities through third-party service providers. Each provider has
an established track record and through regulatory oversight is required to
have in place suitable policies and procedures to ensure they maintain high
standards of business conduct, treat shareholders fairly, and employ corporate
governance best practice. The Company strongly believes that fostering healthy
and constructive relationships with its broad range of stakeholders should
result in increased shareholder value over the long term. The Board believes
that fulfilling the Director's duties under Section 172 of the Companies Act
2006 supports AGA in achieving its investment objectives and ensuring that all
decisions are made in a responsible and sustainable way. Further details on
how we meet the duties placed on Directors under Section 172 can be found on
pages 14 and 49.
STATEMENT OF INDEPENDENCE
The AIC Code recommends that at least half the Board of Directors of a
UK-listed company, excluding the Chairman, should comprise Non-Executive
Directors determined by the Board to be independent in character and judgement
and free from relationships or circumstances that may affect, or could appear
to affect, the Director's judgement.
In addition to this provision, a majority of the Board of Directors should be
independent of the Investment Manager.
Independence is determined by ensuring that, apart from receiving their fees
for acting as Directors or owning shares, Non-Executive Directors do not have
any other material relationships with, nor derive additional remuneration
from, or as a result of transactions with, the Company, its promoters, its
management or its partners, which in the opinion of the Board may affect, or
could appear to affect, the independence of their judgement.
The Company complies with the recommendations regarding Board composition, as
the Board of Directors is comprised entirely of independent Non-Executive
Directors.
The AIC Code also recommends that the Chairman should meet certain
independence criteria as set out in the AIC Code on appointment.
I am pleased to confirm that I was independent on appointment, and remain so
to date. This was confirmed in the Board evaluation process conducted in 2020.
OUR BOARD OF DIRECTORS
The Company has a strong, independent Board of experienced Non- Executive
Directors. The Directors, all of whom are non-executive and considered to be
independent for the purposes of Chapter 15 of the Listing Rules, are
responsible for the determination of the investment policy of the Company and
have overall responsibility for overseeing the Company's activities.
Biographies of the Board of Directors, including details of their relevant
experience, are available on pages 50 and 51 and the Company's website at:
www.apaxglobalalpha.com/who-we- are/leadership-team/ board-of-directors
At 31 December 2020, the Board was composed of 60% male and 40% female
Directors.
SHAREHOLDER ENGAGEMENT
The Board is committed to a culture of openness and regular dialogue with
shareholders.
The Board ensures that Directors are available for effective engagement,
whether at the AGM or other investor relations events. The Chairman holds
one-to-one meetings with major shareholders, and the Senior Independent
Director is available on request. Against the backdrop of the pandemic, in
person meetings were not possible for most of 2020 but the Directors made
themselves available via phone or video conferences as required. Contact
details for shareholder queries can be found on page 94 and the Company's
website at: www.apaxglobalalpha.com/contact-us
(http://www.apaxglobalalpha.com/contact-us)
Apax, on behalf of AGA, manages a full investor relations programme throughout
the year. The Board receives regular reports and updates from the investor
relations team. Shareholder views and feedback are communicated to the Board
to help develop a balanced understanding of the issues and concerns of the
shareholders. In addition, the Company's Broker,
Jefferies International, regularly presents to the Board at meetings. Research
reports published by financial institutions on the Company are circulated to
the Board.
To give all shareholders access to the Company's announcements, all material
information reported via the London Stock Exchange's regulatory news service
is published on the Company's website at:
www.apaxglobalalpha.com/investors/news/rns
The Company reports formally to shareholders twice a year, with updates
provided on an ongoing basis. Shareholders may obtain up-to-date information
on the Company through the Company's website at: www.apaxglobalalpha.com
The Notice of the AGM is sent out at least 21 working days in advance of the
meeting. All shareholders have the opportunity to submit questions to the
Board or Investment Manager ahead of the AGM or they can do so in writing at
any time during the year via the Company Secretary. The Company Secretary may
be contacted by email at: AGA-admin@aztecgroup.co.uk.
THE INVESTMENT MANAGER
The Company has entered into an Investment Management Agreement with AGML to
manage the investments of the Company on a discretionary basis.
AGML is responsible for the implementation of the investment policy of the
Company and has overall responsibility for the management of the assets and
investments of the Company.
AGML reports to the Board at each quarterly Board meeting regarding the
performance of the Company's investment portfolio, which provides the Board
with an opportunity to review and discuss the implementation of the investment
policy of the Company. In addition, the Board attends regular meetings with
AGML in order to review the performance of the underlying investments and
portfolio outlook.
The Board reviewed and evaluated the performance of AGML during the year to 31
December 2020 and has determined that it is in the interests of the
shareholders to continue with its appointment as Investment Manager. A new fee
structure was put in place in the period and more information is available on
page 99.
Biographies of the Directors of AGML are available on page 52 and the
Company's website at:
www.apaxglobalalpha.com/who-we-are/leadership-team/investment-
manager-board-of-directors
THE INVESTMENT ADVISOR AND AGA INVESTMENT COMMITTEE
AGML draws on the resources and expertise of Apax for investment advice
through an Investment Advisory Agreement and the AGA Investment Committee. The
AGA Investment Committee is composed of several senior team members from Apax
Partners.
Biographies of the members of the AGA Investment Committee are available on
page 53 and the Company's website at: www.apaxglobalalpha.com/who-we-are/
leadership -team/the-investment-advisor
MODERN SLAVERY ACT STATEMENT
As an externally managed investment company, the Company relies on the
adequacy of controls and tolerances of the Investment Manager (and, in turn,
the Investment Advisor) with regard to the prevention of slavery and human
trafficking, in accordance with the UK
Modern Slavery Act 2015.More information is available on page 14.
EU Alternative Investment Fund Managers Directive ("AIFMD")
Please refer to page 96 for further information in respect of the AIFMD.
THE UNREGULATED COLLECTIVE INVESTMENT SCHEMES AND CLOSE SUBSTITUTES INSTRUMENT
2013 ("NMPI RULES")
Information regarding the Company's status under the NMPI Rules is available
on its website at: www.apaxglobalalpha.com/governance/
documents-administration
DISCLOSURE OF DIVIDEND INFORMATION
The Company targets the payment of a dividend equal to 5% of NAV per annum.
This dividend policy should not be taken as an indication of the Company's
expected future performance or results over any period and does not constitute
a profit forecast. It is intended to be a target only and there is no
guarantee that it can or will be achieved. Accordingly, prospective or current
investors should not place any reliance on the target dividend payment stated
above in making an investment decision in relation to the Company.
As a non-UK issuer, the Company does not require approval from shareholders
for the payment of dividends in accordance with The Companies (Guernsey) Law,
2008 and the Articles of Incorporation of the Company.
In response to feedback from shareholders, an ordinary resolution is proposed
at each AGM concerning approval of the dividend policy of the Company.
AGM
Finally, our sixth AGM will be held on 4 May 2021 at 10:00am (UK time) at East
Wing, Trafalgar Court, Les Banques, St Peter Port, Guernsey, Channel Islands
GY1 3PP.
The Company's articles require a resolution to be put to shareholders on a
periodic basis regarding the continuation of the Company. Accordingly, a
"Discontinuation Resolution" will be put forward at the 2021 AGM. The
Directors recommend that shareholders vote against the Discontinuation
Resolution.
Information about the Discontinuation Resolution, the notice, agenda and form
of proxy will be circulated to shareholders at least 21 working days prior to
the AGM and will be made available on the UK National Storage Mechanism and
the Company's website at: www.apaxglobalalpha.com/investors/
results-reports-presentations
Due to Guernsey government guidance in respect of Covid-19, we expect to limit
in-person attendance to the AGM. Shareholders will be able to dial-in remotely
to listen to the AGM and can submit questions in advance to the Company
Secretary by email at AGA-admin@ aztecgroup.co.uk
TIM BREEDON CBE
Chairman
1 March 2021
Governance report \ Shareholder engagement
The Board seeks to understand the needs and priorities of AGA's shareholders
and these are taken into account during all discussions and decision-making.
As part of the ongoing engagement, Apax provides a comprehensive investor
relations service on behalf of AGA to ensure an open dialogue is maintained
with investors. Investor engagement activities during the year included the
following:
01
THE ANNUAL REPORT
This is a significant engagement tool that is intended to show investors that
the Board has set the Company's purpose and strategy; and how the Board
activities focused on meeting its objectives and achieving outcomes through
the decisions it has taken. Most importantly, this enables investors to
evaluate the Board's approach to governance arrangements with all information
at hand.
02
THE ANNUAL GENERAL MEETING (AGM)
The AGM presents investors with an opportunity to ask Board members questions,
and to cast their votes. Like other companies around the world, the Covid-19
pandemic meant we adapted the format of our AGM to ensure shareholders had the
opportunity to submit questions in advance and dial in to listen to the 2020
AGM remotely. We were pleased with the level of engagement and we are looking
to follow a similar setup for the AGM on 4 May 2021.
03
THE AGA WEBSITE
The AGA website provides investors with timely information on the Group's
strategy and performance as well as any other key Board activities. It also
provides investors with details regarding the composition of the Board, up
-to-date financial information, regulatory news released on RNS, together with
detail regarding how the Group meets its Code obligations. Apax has recently
rebranded and refreshed its website, and as a result AGA's website has also
been updated with a view to make it more accessible, with additional
information that can be useful to investors.
04
INVESTOR/ ANALYST MEETINGS
Apax maintains a comprehensive programme of meetings between the senior
management of Apax on behalf of AGA and institutional investors, fund
managers, and equity analysts. Issues discussed at these meetings cover the
investment strategy and financial performance of AGA. The Directors receive
updates on any shareholder feedback at Board meetings, helping the Board gauge
how AGA is meeting its objectives. This information is also added to the
Board's considerations in decision-making.
05
RESULTS PRESENTATIONS AND CAPITAL MARKETS EVENTS
AGA holds conference calls, webcasts, and presentations following each of its
results announcements. It also holds an annual Capital Markets event. These
events are a key engagement tool for Apax to give more insights into
performance, the portfolio, the private equity markets, the sector focus, and
the "good-to -great" transformational strategy, as well as the risks and
opportunities facing the Company.
As a result of Covid-19, we hosted an event in Q2 where Apax provided colour
on the immediate impact of the pandemic on portfolio companies, and also gave
some guidance on the potential longer-term implications.
These events, which are published on the Company's website, are made available
to the market, subject to relevant marketing restrictions in certain
jurisdictions, with the facility for all listeners to ask questions, as well
as having a permanent replay facility.
06
CONFERENCES
Apax regularly attends and presents on AGA at various conferences hosted by
brokers and third parties to ensure visibility and accessibility by a wide
variety of investors, including those from different geographies. Attendance
at conferences during 2020 was limited and, with continued restrictions due to
Covid-19, we expect conference activity to remain limited in 2021,
particularly in the first half of the year.
Governance report \ AGA Board of directors
BOARD DIVERSITY
40%
60%
Female
Male
TIM BREEDON CBE
Chairman
Tenure
5 years, 8 months
Skills and experience
Tim Breedon joined the AGA Board on 28 April 2015. He worked for the Legal
& General Group plc for 25 years, most recently as Group Chief Executive
between 2006 and 2012. He was a Director of the Association of British
Insurers ("ABI"), and also served as its Chairman between 2010 and 2012. He
served as Chairman of the UK government's non-bank lending task force, an
industry-led task force that looked at the structural and behavioural barriers
to the development of alternative debt markets in the UK. He is a
Non-Executive Director of Barclays plc and Quilter plc, and was Chairman of
Northview Group from 2017 to 2019. He was previously lead Non-Executive
Director of the Ministry of Justice between 2012 and 2015. Tim was formerly a
Director of the Financial Reporting Council and was on the Board of the
Investment Management Association.
He has over 25 years of experience in financial services and has extensive
knowledge and experience of regulatory and government relationships. He brings
to the Board experience in asset management and knowledge of leading a major
financial services company.
Current appointments
Non-Executive Director of:
Barclays plc; and
Quilter plc.
Qualifications
Graduate of Oxford University and an MSc in Business Administration from the
London Business School.
SUSIE FARNON
Non-Executive Director
Tenure
5 years, 5 months
Skills and experience
Susie Farnon joined the AGA Board on 22 July 2015 and was appointed as
Chairman of its Audit Committee on 1 July 2016 and elected as Senior
Independent Director on 18 November 2016. She served as President of the
Guernsey Society of Chartered and Certified Accountants, as a member of The
States of Guernsey Audit Commission and as a Commissioner of the Guernsey
Financial Services Commission. Susie was a Banking and Finance Partner with
KPMG Channel Islands from 1990 until 2001 and was Head of Audit at KPMG in the
Channel Islands from 1999 until 2001.
Current appointments
Non-Executive Director of:
HICL Infrastructure plc;
Real Estate Credit Investments Ltd;
BH Global Limited; and,
Bailiwick Investments Limited.
Board member of The Association of Investment Companies.
Qualifications
Fellow of the Institute of Chartered Accountants in England and Wales.
CHRIS AMBLER
Non-Executive Director
Tenure
5 years, 8 months
Skills and experience
Chris Ambler joined the AGA Board on 28 April 2015. He has experience in a
number of senior positions in the global industrial, energy and materials
sectors working for major corporations including ICI/Zeneca, The BOC Group and
Centrica/ British Gas, as well as in strategic consulting roles.
Current appointments
Chief Executive of Jersey Electricity plc; and Non-Executive Director of:
Foresight Solar Fund Limited.
Qualifications
Graduate of Queens' College, Cambridge and an MBA from INSEAD. Chartered
Director, Chartered Engineer and a Member of the Institution of Mechanical
Engineers.
MIKE BANE
Non-Executive Director
Tenure
2 years, 6 months
Skills and experience
Mike Bane joined the AGA Board on 3 July 2018. He has more than 35 years of
audit and advisory experience with a particular focus on the asset management
industry. Mike retired from EY in June 2018 where he was a member of EY's
EMEIA Wealth and Asset Management Board. Following an earlier career in London
with PwC, he has been a Guernsey resident for over 20 years and has served as
President of the Guernsey Society of Chartered and Certified Accountants.
Current appointments
Non-Executive Director of:
HICL Infrastructure plc
NextEnergy Renewables Limited
Qualifications
Graduate of Magdalen College Oxford University and a Chartered Accountant.
STEPHANIE COXON
Non-Executive Director
Tenure
9 months
Skills and experience
Stephanie joined the AGA Board on 31 March 2020. She has 15 years' of
experience of audit and advisory with PwC in the asset management sector,
specialising in listed investment funds in a multitude of asset classes. Over
the past 9 years, Stephanie led the PwC capital markets team responsible for
advising on the listing process for UK, Guernsey and Jersey investment funds.
Stephanie has a wealth of knowledge in this area having advised numerous
investment managers throughout the UK, US and Europe on initial public
offerings and secondary offerings.
Current appointments
Non-Executive Director of:
JLEN Environmental Assets Group
Limited;
PPHE Hotel Group Limited; and,
PraxisIFM Group Limited.
Qualifications
Fellow of the Institute of Chartered
Accountants in England and Wales.
Governance report \ Investment manager board
PAUL MEADER
Director
Tenure
5 years, 8 months
Skills and experience
Paul Meader has acted as Non- Executive Director of several insurers, London
and Euronext listed investment companies, funds and fund managers in real
estate, private equity, hedge funds, debt, structured product and multi-asset
funds. He is a senior investment professional with over 30 years of
multi-jurisdictional experience, 14 years of which were at chief executive
level.
Paul was Head of Portfolio Management at Collins Stewart (now Canaccord
Genuity) between 2010 and 2013 and was the Chief Executive of Corazon Capital
Group from 2002 to 2010. Paul was Managing Director at Rothschild Bank
Switzerland C.I. Limited from 1996 to 2002 and previously worked for Matheson
Investment Management, Ulster Bank, Aetna Investment Management and Midland
Montagu (now HSBC).
Current appointments
Non-Executive Director of a number of other companies in fund management and
insurance, inclusive of the General Partners of the Apax Private Equity Funds.
Qualifications
MA (Hons) in Geography from Oxford University and a Chartered Fellow of the
Chartered Institute of Securities and Investment.
MARTIN HALUSA
Director
Tenure
5 years, 8 months
Skills and experience
Martin Halusa was Chairman of Apax Partners from January 2014 to March 2016,
after ten years as Chief Executive Officer of the firm (2003-2013).
In 1990, he co-founded Apax Partners in Germany as Managing Director. His
investment experience has been primarily in the telecommunications and service
industries.
Martin began his career at The Boston Consulting Group ("BCG") in Germany, and
left as a Partner and Vice President of BCG Worldwide in 1986. He joined
Daniel Swarovski Corporation, Austria's largest private industrial company,
first as President of Swarovski Inc (US) and later as Director of the
International Holding in Zurich.
Current appointments
Director of the General Partners of the Apax Private Equity Funds.
Qualifications
A graduate of Georgetown University, an MBA from the Harvard Business School
and a PhD in Economics from the Leopold-Franzens University in Innsbruck.
ANDREW GUILLE
Director
Tenure
5 years, 8 months
Skills and experience
Andrew Guille has held directorships of regulated financial services
businesses since 1989 and has worked for more than 13 years in the private
equity industry. Andrew has been employed in the finance industry for over 30
years, with his early career spent in retail and institutional funds, trust
and company administration, treasury and securities processing.
Current appointments
Director of Apax Partners Guernsey Limited and a Director of the General
Partners of the Apax Private Equity Funds.
Qualifications
Institute of Directors' Diploma in Company Direction, a Chartered Fellow of
the Chartered Institute for Securities and Investment and a qualified banker
(ACIB).
MARK DESPRES
Director
Tenure
5 years, 4 months
Skills and experience
Mark has been employed in the wealth management industry in both Guernsey and
London for over 16 years, principally as an investment manager to a number of
listed funds (both open and closed-ended), institutional and private client
portfolios.
Current appointments
Director of Apax Partners Guernsey Limited.
Qualifications
First class honours degree in Mathematics from Royal Holloway University of
London and a Member of the Chartered Institute for Securities and Investment.
Governance report \ Investment advisor's AGA investment committee
ANDREW SILLITOE
Co-CEO | Apax Partners
Chairman of the Investment Committee
Tenure
5 years, 8 months
Skills and experience
Andrew Sillitoe joined Apax Partners in 1998 and has focused on the Tech
sector in that time. Andrew has been involved in a number of deals, including
Orange, TIVIT, TDC, Intelsat, Inmarsat and King Digital Entertainment PLC.
Current appointments
Co-CEO of Apax and a Partner in its Tech team. Member of the Apax Executive,
Investment Committees.
Qualifications
MA in Politics, Philosophy and Economics from Oxford University and an MBA
from INSEAD.
MITCH TRUWIT
Co-CEO | Apax Partners
Tenure
5 years, 8 months
Skills and experience
Mitch Truwit joined Apax Partners in 2006 and has been involved in a number of
transactions including HUB International, Advantage Sales and Marketing,
Bankrate, Dealer.com, Trader Canada, Garda and Answers.
Current appointments
Co-CEO of Apax and a Partner in its Services team. Member of the Apax
Executive, Allocation and Investment Committees and a Trustee of the Apax
Foundation.
Qualifications
BA in Political Science from Vassar College and an MBA from Harvard Business
School.
RALF GRUSS
Partner | Apax Partners
Tenure
5 years, 8 months
Skills and experience
Ralf Gruss joined Apax Partners in 2000 and is a former member of the Apax
Partners Services team. Ralf has been involved in a number of deals, including
Kabel Deutschland, LR Health and Beauty Systems and IFCO Systems.
Current appointments
Chief Operating Officer and a Partner at Apax.
Qualifications
Diploma in Industrial Engineering and Business Administration from the
Technical University in Karlsruhe. He also studied at the University of
Massachusetts and the London School of Economics.
ROY MACKENZIE
Partner | Apax Partners
Tenure
2 years, 7 months
Skills and experience
Roy Mackenzie joined Apax Partners in 2003. He led the investments in Sophos
and Exact and was responsible for Apax's investment in King Digital
Entertainment. In addition, Roy worked on the investments in Epicor, NXP and
Duck Creek.
Current appointments
Partner at in its Tech team. Member of the Apax Investment Committees.
Qualifications
M.Eng in Electrical Engineering from Imperial College, London and an MBA from
Stanford Graduate School of Business.
SALIM NATHOO
Partner | Apax Partners
Tenure
1 year, 9 months
Skills and experience
Salim Nathoo joined Apax Partners in 1999 specialising in the Tech &
Telecom space. He has both led and participated in a number of key deals
including ThoughtWorks, Candela, EVRY, GlobalLogic, Sophos and Inmarsat.
Current appointments
Partner at Apax in its Tech team. Member of the Apax Investment Committees.
Qualifications
MA in Mathematics from the University of Cambridge and an MBA from INSEAD.
Governance report \ Directors' duties
In 2020, the Board of the Company was composed of five independent
Non-Executive Directors. The Board considers that the range and experience of
its members is sufficient to fulfil its role effectively and provide the
required level of leadership, governance and assurance.
The terms and conditions of appointment for Non-Executive Directors are
outlined in their letters of appointment, and are available for inspection at
the Company's registered office during normal business hours and at the AGM
for
15 minutes prior to and during the AGM.
-
-
ROLE ROLE OVERVIEW RESPONSIBILITIES
CHAIRMAN OF THE BOARD OF DIRECTORS The Chairman is responsible for the leadership of the Board, the creation of - chairing the Board and general meetings of the Company,
conditions necessary for overall Board and individual Director effectiveness including setting the agenda of such meetings;
and ensuring a sound framework of corporate governance, which includes a
channel for shareholder communication. - promoting the highest standards of integrity, probity and
corporate governance throughout the Company, and in particular at Board level;
- ensuring that the Board receives accurate, timely and
clear information;
- ensuring effective communication with shareholders of the
Company;
- facilitating the effectiveness of the contributions and
constructive relationships between the Directors of the Company;
- ensuring that any incoming Directors of the Company
participate in a full, formal and tailored induction programme; and
- ensuring that the performance of the Board, its Committees
and individual Directors are evaluated at least once a year.
Tim Breedon fulfils the role of independent Non-Executive Chairman of the
Board of Directors.
CHAIRMAN OF THE AUDIT COMMITTEE The Chairman of the Audit Committee is appointed by the Board of Directors. - overseeing the selection process for the external auditor,
The role and responsibility of the Chairman of the Audit Committee is to set considering and making recommendations to the Board on the appointment,
the agenda for meetings of the Audit Committee and, in doing so, take reappointment and removal of the external auditor and the remuneration of the
responsibility for ensuring that the Audit Committee fulfils its duties under external auditor;
its terms of reference which include, but are not limited to, those listed
under "responsibilities". - reviewing and making recommendations to the Board on the
terms of engagement of the external auditor and the annual audit plan;
- reviewing the findings of the audit with the external
auditor, including a discussion of the major issues arising from the audit,
those that have been resolved, left unresolved, evidence received in relation
to areas of significant judgement, key accounting and audit judgements, levels
of errors and explanation for unadjusted errors and the effectiveness of the
audit;
- reviewing the scope and result of the external audit and
the external audit fee, keeping under consideration professional and
regulatory requirements;
- assessing the independence and objectivity of the external
auditor on at least an annual basis, taking into consideration the level of
non-audit services;
- reviewing and considering, as appropriate, the rotation of
the external audit partner and tender of the external audit firm;
- reviewing and recommending to the Board for approval, the
audit, audit-related and non-audit fees payable to the external auditor and
approving their terms of engagement;
- reviewing the external auditor's audit plan for the annual
audit which will include all proposed materiality levels;
- reviewing and establishing the Company's internal control
and financial and operational risk;
- management systems; whistleblowing; and fraud.
Susie Farnon fulfils the role of Chairman of the Audit Committee. The Audit
Committee is appointed under terms of reference from the Board of Directors,
available on the Company's website at: www.apaxglobalalpha. com/investors/
results- reports-presentations
The Audit Committee does not fulfil the role of a risk committee with regard to investment risk management systems. Overall responsibility for the Company's risk management and control systems lies with the Board.
NON-EXECUTIVE DIRECTORS
The Non-Executive Directors have a responsibility to ensure that they allocate - Shareholders are provided with the opportunity to re-elect
sufficient time to the Company to perform their responsibilities effectively. the Non-Executive Directors on an annual basis at the AGM of the Company and
Accordingly, Non-Executive Directors are required to make sufficient effort to to review their remuneration in doing so. The role of the Non-Executive
attend Board or Committee meetings, to disclose other significant commitments Directors includes, but is not limited to:
to the Board before accepting such commitments and to inform the Board of any
subsequent changes. - constructively challenging and developing proposals on
strategy;
- appointing service providers based on agreed goals and
objectives;
- monitoring the performance of service providers; and
- satisfying themselves of the integrity of the financial
information and that financial controls and systems of risk management are
robust and defensible.
In determining the extent to which another commitment proposed by a
Non-Executive Director would have an impact on their ability to sufficiently
discharge their duties to the Company, the Board will give consideration to
the extent to which the proposed commitment may create a conflict with:
their time commitment to the Company;
direct competitor of the Company, the Investment Manager or the Investment
Advisor;
a significant supplier or potential significant supplier to the Company; and
the investment manager or other related entity operating in substantially the
same investment markets as the Company.
SENIOR INDEPENDENT DIRECTOR The position of the SID provides shareholders with someone to whom they can - The role of the SID includes, but is not limited to:
turn if they have concerns which they cannot address through the normal
channels, for example with the Chairman. The SID is available as an - providing a sounding board for the Chairman and serving as
intermediary between fellow Directors and the Chairman. an intermediary for the other Directors when necessary;
- being available to shareholders if they have concerns
about contact through the normal channels of Chairman, or have failed to
resolve, through the normal channels, or for which such contact is
inappropriate;
- meeting with the other Non- Executive Directors at least
annually to appraise the Chairman's performance and on such other occasions as
may be deemed appropriate;
- taking responsibility for the orderly succession process
for the Chairman, as appropriate; and
- maintaining Board and Company stability during times of
crisis and conflict.
Susie Farnon fulfils the role of Senior Independent Director ("SID").
The role serves as an important check and balance in the governance process.
Governance report \ Governance framework
GOVERNANCE SYSTEMS
The Board has considered the current recommendations of the AIC Code and has
adopted various policies, procedures and control systems; a summary of each of
these is available on the Company's website at:
www.apaxglobalalpha.com/investors/ results-reports-presentations
In summary, these principally include:
- a schedule of matters reserved for the Board which includes, but is
not limited to:
- strategy and management;
- structure and capital;
- financial reporting and controls;
- internal and risk management controls;
- contracts and expenditure;
- Board membership and other appointments;
- corporate governance matters; and policies and codes.
- a Board management policy which includes, but is not limited to:
- succession planning, including Board composition and diversity
guidelines;
- Director induction and training; and
- Board evaluation.
- a conflicts of interests policy;
- a disclosure panel policy;
- an anti-bribery and corruption policy;
- a share dealing code;
- an insider dealing and market abuse policy; and
- a policy on the provision of non-audit services.
ADMINISTRATOR AND SECRETARY
The Company has appointed Aztec Financial Services (Guernsey) Limited ("Aztec
Group") as Administrator and Company Secretary of the Company.
The Administrator is responsible for the Company's general administrative
requirements such as the calculation of the Net Asset Value and Net Asset
Value per share and maintenance of the Company's accounting and statutory
records. The Administrator may delegate certain accounting and bookkeeping
services to Apax Partners Fund Services Limited or other such parties and/or
Group entities, as directed by the Company.
The Administrator is licensed by the GFSC under the Protection of Investors
(Bailiwick of Guernsey) Law to act as ''designated administrator'' under that
law and provide administrative services to closed-ended investment funds.
In fulfilling the role of Company Secretary, Aztec Group has due regard to the
provisions of the GFSC Code and the AIC Code and statutory requirements in
this respect.
REGISTRAR
Link Asset Services ("Link") has been appointed as Registrar of the Company.
The Registrar is licensed by the GFSC under the POI Law to provide registrar
services to closed-ended investment funds.
INFORMATION AND SUPPORT
The Board ensures that it receives, in a timely manner, information of an
appropriate quality to enable it to adequately discharge its responsibilities.
Papers are provided to the Directors in advance of the relevant Board or
Committee meeting to enable them to make further enquiries about any matters
prior to the meeting, should they so wish. This also allows Directors who are
unable to attend to submit views in advance of the meeting.
The Company Secretary takes responsibility for the distribution of board
papers and aims to circulate such papers at least five working days prior to
board or committee meetings. The Board has adopted electronic board pack
software which aids in the efficiency and adequacy of delivery of board
papers.
ONGOING CHARGES
Ongoing charges to 31 December 2020 were 1.5% (31 December 2019: 1.6%). The
Company's ongoing charges are calculated in line with guidance issued by the
AIC. They comprise of recurring costs such as administration costs, management
fees paid to AGML and management fees paid to the underlying Private Equity
funds' general partners. They specifically exclude deal costs, taxation,
financing costs, performance fees and other non-recurring costs. Ongoing
charges is an APM and a reconciliation to the costs per the financial
statement can be found on page 101.
MANAGEMENT AND PERFORMANCE FEES
The Board approved a new fee structure on 2 March 2020 with an effective date
from 1 January 2020. The revised fee structure is expected to result, in most
circumstances, in lower management and performance fees being paid to the
Investment Manager. Management fees to 31 December 2020 represented 1.2% of
NAV (31 December 2019: 1.4%) and performance fees were 0% of NAV (31 December
2019: 0.6%). Management fees represent fees paid to both the Investment
Manager and the Apax Funds. No fees are paid to the Investment Manager on Apax
Funds where the Company already pays a fee.
REVOLVING CREDIT FACILITY
In January 2021, AGA reached an agreement with Credit Suisse AG, London
Branch, to amend the terms of its Revolving Credit Facility ("RCF"). The
revised agreement converts the previous facility, which was due to expire on 5
November 2021, to an evergreen structure whereby either party is required to
give two years' notice to terminate the agreement. The amended RCF remains at
€140m and will continue to be used for the Company's general corporate
purposes, including short-term financing of investments such as the drawdown
on commitments to the Apax Funds.
KEY INFORMATION DOCUMENT
In accordance with the EU Packaged Retail and Insurance-based Investment
Products Directive which came into effect as of 1 January 2018, our latest Key
Information Document is available on the Company's website at:
www.apaxglobalalpha.com/ investors/key-information-document-kid
A summary of the Directors' attendance at meetings to which they were eligible
to attend is provided below. Eligibility to attend the relevant meetings is
shown in brackets.
ROLE TOTAL TOTAL AUDIT
BOARD COMMITTEE
Tim Breedon 4 (5) N/A
Susie Farnon 5 (5) 7 (7)
Chris Ambler 4 (5) 6 (7)
Mike Bane 5 (5) 7 (7)
Stephanie Coxon 3 (3) 5 (5)
1. The Board will appoint committees of the Board on occasion to deal
with specific operational matters; these committees are not established under
separate terms of reference as their appointment is conditional upon terms
resolved by the Board in formal Board meetings and authority conferred to such
committees will expire upon the due completion of the duty for which it has
been appointed. Such committees are referred to as other committee meetings
2. The Chairman of the Company, Tim Breedon, whilst not required to
attend meetings of the Audit Committee, does so on occasion, particularly
where financial reports are being reviewed.
FREQUENCY AND ATTENDANCE AT BOARD AND COMMITTEE MEETINGS
The Board aims to meet formally at least four times a year and met five times
in the year from 1 January 2020 to 31 December 2020.
The Audit Committee aims to meet formally at least four times a year as
appropriate in terms of the financial cycle of the Company and met seven times
in the year from 1 January 2020 to 31 December 2020.
ELECTION AND RE-ELECTION OF DIRECTORS AT THE 2021 AGM
In accordance with the Company's Articles of Incorporation and the principles
of the AIC Code, all Directors of the Company will offer themselves for
re-election or election at the 2021 AGM.
Following the successful evaluation of the Board as noted above, it is
proposed to shareholders that each of Tim Breedon, Susie Farnon, Chris Ambler,
Mike Bane, and Stephanie Coxon, be re-elected at the 2021 AGM.
IPO LOCK-UP ARRANGEMENTS
In line with the Company's prospectus, certain existing and former Apax
employees acquired shares in the Company under a share-for-share exchange
agreement at IPO. As a result of this, those shareholders were subject to
certain lock-up arrangements in respect of the shares issued to them for a
period of either five or ten years.
The five-year lock-up period expired on 15 June 2020, and those shares are
therefore no longer subject to the lock-up arrangements.
DISCONTINUATION VOTE
The Company's articles require a resolution to be put to shareholders on a
periodic basis regarding the continuation of the Company. Accordingly, a
"Discontinuation Resolution" will be put forward at the 2021 AGM.
Information about the Discontinuation Resolution, the notice, agenda and form
of proxy will be circulated to shareholders at least 21 working days prior to
the AGM and will be made available on the UK National Storage Mechanism and
the Company's website at: www.apaxglobalalpha.com/investors/
results-reports-presentations
Governance report \ Board induction and ongoing training
In addition to providing ongoing Director training and development, the
Company Secretary, under guidance from the Chairman, ensures that all newly
appointed Directors receive a comprehensive induction programme that is
tailored to their skills and experiences.
The induction programme is aimed at providing an in-depth understanding of the
business, its purpose, culture and values, and the markets in which the
business operates, as well as an overview of Director responsibilities and
liabilities. The induction also provides new Directors with the opportunity to
meet key personnel of the Investment Manager and Investment Advisor.
Induction programmes are developed by AGA's Company Secretary, Aztec, and are
approved by the Chairman. An example of a programme would include the
following:
- One-to-one meetings. These include members of the Board and the
Company's advisors. For example, the meetings with Apax include individuals
from different sector deal teams, the Operational Excellence Practice as well
as the investor relations and operations teams to get fully "under the skin"
of the business and better understand the firm's strengths and differentiating
factors. Any additional meetings are tailored to the specific role a Director
is being appointed to fulfil.
- Induction materials. Each new Director is provided with full access to
an electronic "reading room", which includes induction material, such as
relevant policies, terms of reference, Group organisational charts, the latest
trading statements, the Annual Report and Accounts, recent shareholder
information and broker notes as well as recent and relevant regulatory
correspondence.
If considered appropriate, new Directors are also provided with external
training that addresses their role and duties as a Director of a quoted public
company.
All new Directors are provided with access to our electronic Board paper
system which provides easy and immediate access to the following key
documents:
- the Group's risk register and Schedule of Principal Risks;
- our latest budget and long-term strategy;
- recent broker reports and feedback from our stakeholder engagement
programmes;
- recent reports from the external Auditor, KPMG; and
- matters reserved for the Board and the Committee terms of reference.
The Board also believes that continuous Director training and development
supports Board effectiveness. Under the direction of the Chairman, the Company
Secretary facilitates and arranges Board training, and assists the Board with
professional development.
The ever-evolving market and regulatory landscape means that there is a need
to continuously scan the horizon and identify any key developments that need
the Board's prioritisation. As such, the Company Secretary delivers regular
updates to the Board on any developing regulations and laws and corporate
governance. Regular updates are also provided by the Investment Manager in
relation to emerging themes and anticipated market or regulatory changes.
Governance report \ Introducing our new director, Stephanie Coxon
Specialising in capital market transactions, along with auditing and advising
global buyout funds, I always had an interest in private equity funds and I
have followed AGA's performance since IPO.
STEPHANIE COXON
Q Can you describe the process you went through to be appointed?
A I was approached to see if I would be interested in AGA and I was
asked to meet the Chairman, Senior Independent Director, and Group Company
Secretary as part of the initial process. These meetings covered my background
and experience as a Non-Executive Director as well as my understanding of the
industry. There was also a wider discussion about AGA, its history, structure
and, in particular the relationships with the Investment Manager and Apax.
Following that, I was invited to meet several individuals from the Investment
Manager and Apax. Despite the logistical challenges that 2020 has brought,
I've been made to feel very welcome and I'm honoured to be on the Board.
Q What attracted you to AGA?
A Having audited and advised global buyout funds during my time at PwC,
I always had an interest in private equity funds and followed AGA's
performance from the beginning.
Five years after its IPO, I felt that AGA was embarking on an
exciting phase. The portfolio of private equity funds covers all lifecycle
stages from investment, through transformation, and with the earliest vintages
now in the realisation phase. As a result, I believe AGA provides an
attractive opportunity for investors who would not otherwise be in a position
to access the Apax Private Equity Funds.
Q How do you think your experience will help AGA?
A During 15 years of audit and advisory work with PwC in the asset
management sector, I specialised in advising global asset managers on
investment fund IPOs. As a result, I have worked with funds on their strategy
ahead of IPOs and also through many different market cycles. This experience
is fundamental to supporting AGA in its drive to deliver value for investors.
I also bring wider stakeholder engagement experience, corporate governance,
and global commercial knowledge.
Q What were your impressions from the NED induction programme?
A I was very impressed by how comprehensive the programme was and the
first induction stages began in 2019, in advance of my official appointment to
the Board from 31 March 2020.
Having spent a lot of time with various members of the Investment
Manager and Apax, I was impressed by the breadth and depth of their expertise.
Probably the biggest takeout from these meetings was how quickly Apax has
adapted to advising a public company, managing regular investor reporting and
the requirements of public markets.
Q What's your focus for 2021?
A Despite the ongoing challenges brought by Covid-19, I am hugely
looking forward to working with Apax and our other service providers to
continue to deliver on our investment strategy, monitoring the impact Covid-19
will have on the investment portfolio, and ensuring stakeholder transparency
along the way.
Governance report \ Audit committee report
Integrity and objectivity
I am pleased to present the Audit Committee report for 2020 detailing the
activities undertaken this year to fulfil its responsibilities.
SUSIE FARNON
Audit Committee Chairman
The main areas of activity for the Audit Committee have been:
- reviewing in detail the content of the interim report and this annual
report, the work of the service providers in producing it and the results of
the external audit;
- considering those areas of judgement or estimation arising from the
application of International Financial Reporting Standards to the Company's
activities and documenting the rationale for the decisions made and estimation
techniques selected. This includes the valuation of investments;
- keeping under review the policy on the supply of non-audit services by
the external auditor, which has taken into account ethical guidance and
related legislation;
- conducting an annual review of the performance of the external
auditor, which has included a general review of the coordination of the
external audit function with the activities of the Company, any appropriate
internal controls, the suitability and independence of the external auditor;
- keeping under review the risk review and control framework with the
assistance of the Investment Manager and the Company Secretary;
- meeting with the external auditor, KPMG Channel Islands Limited
("KPMG"), to review and discuss their independence, objectivity and proposed
scope of work for their review of the interim report and their audit of this
annual report and accounts; and
- meeting with the Company's principal service providers to review the
controls and procedures operated by them to ensure that the Company's
operational risks are properly managed and that its financial reporting is
complete, accurate and reliable.
The scope of the Committee with respect to internal control does not include
all controls around risk arising from the Company's investment portfolio. Such
risks are overseen directly by the Board, which sets policies in this area to
govern the day-to-day management of these risks by the Investment Manager.
MEMBERSHIP AND ATTENDANCE
The Audit Committee membership currently consists of Susie Farnon, Chris
Ambler, Mike Bane, and Stephanie Coxon. A summary of meetings held during the
year and attendance at those meetings is available on page 57.
The Chairman of the Company, Tim Breedon, whilst not required to attend
meetings of the Audit Committee, does so on occasion, particularly in meetings
where financial reports are reviewed.
ROLE OF THE AUDIT COMMITTEE
The Audit Committee is appointed under terms of reference from the Board of
Directors, available on the Company's website at:
www.apaxglobalalpha.com/investors/ results-reports-presentations
REVIEW OF AREAS FOR JUDGEMENT OR ESTIMATION
The Audit Committee has determined that the key area for judgement and
estimation is the fair value of the Company's investment portfolio for
reporting purposes. For investments not traded in an active market, the fair
value is determined by using valuation techniques and methodologies, as deemed
appropriate by the Investment Manager. These assumptions may give rise to
valuations that differ from amounts realised in the future. The Audit
Committee has also considered the calculation of the performance fee to be an
area of judgement given the complexity of the calculation. Further details and
considerations of the Committee as set out below.
VALUATION OF INVESTMENTS
The valuation of investments is a significant area of judgement in the
preparation of the financial statements and performance reporting and
represents a particular focus for the Audit Committee. The Audit Committee is
satisfied that it is reasonable overall and has been prepared in accordance
with the Company's stated accounting policies.
The majority of Derived Equity Investments held by the Company, and certain
investments underlying the Company's Private Equity positions, are quoted and
have a ready market, leaving the focus on the other Private Equity and Derived
Debt Investments which are valued less easily.
At each quarterly valuation point, and particularly at the year end, members
of the Audit Committee have reviewed the detailed valuation schedules prepared
by the Investment Manager.
Discussions were also held with the Investment Manager, Investment Advisor and
the external auditor (in respect of the interim and year end valuations only).
The aim of these reviews and discussions was to ensure, as far as possible,
that the valuations were prepared in line with the valuation process and
methodology set out in the Company's accounting policies. No material
discrepancies were identified.
The valuation of the Derived Investments and Private Equity has been reviewed
by the external auditor who has reported to the Committee and the Board on
whether, in their opinion, the valuations used are reasonable and in
accordance with the stated accounting policies.
PERFORMANCE FEE
The revised basis for calculation of the performance fee due to the Investment
Manager is detailed on page 99 of the Annual Report and is summarised in the
notes to the financial statements. Although this fee may not always be
material to the financial performance or position of the Company, it is
payable to the Investment Manager, and therefore the Audit Committee consider
it important by nature.
The Audit Committee generally commissions a specific report on the calculation
of the fee prior to payment. However, no report was commissioned in the
current year as there was no performance fee payable.
OBJECTIVES FOR 2021
Keep under review the risk governance framework
Conduct a thorough review of the external auditor's services
EXTERNAL AUDIT
KPMG has been the Company's external auditor since 2015. During the year, and
up to the date of this report, the Audit Committee has met formally with KPMG
on four occasions and, in addition, the Chairman of the Audit Committee has
met them informally on four further occasions. These informal meetings have
been held to ensure the Chairman is kept up-to-date with the progress of their
work and that their formal reporting meets the Audit Committee's needs.
The formal meetings included detailed reviews of the proposed scope of the
work to be performed by the auditor in their review of the Company's report
for the period to 30 June 2020 and in their audit for the year ended 31
December 2020. They also included detailed reviews of the results of this
work, their findings and observations. I am pleased to report that there are
no matters arising that should be brought to the attention of shareholders.
The Audit Committee has also reviewed KPMG's report on their own independence
and objectivity, including their team structure for the audit of the Company
and of the underlying Apax Funds, and the level of non-audit services provided
by them. In addition, the Audit Committee assessed the effectiveness of KPMG.
The Audit Committee has concluded that KPMG are independent and objective,
carry out their work to a high standard and provide concise and useful
reporting. Accordingly, the Audit Committee has recommended to the Board that
KPMG be put forward to shareholders for re-appointment at the next AGM.
The Company has a policy in place to ensure the independence and integrity of
the external auditor, where non-audit services are to be provided by them. In
the first instance, all non-audit services require pre-approval of the
Chairman of the Audit Committee and/or the Chairman of the Board. Full
consideration of the financial and other implications on the independence of
the auditor arising from any such engagement are considered before proceeding.
Note 6 of the financial statements includes a summary of fees paid to KPMG.
RISK MANAGEMENT, INTERNAL CONTROLS AND CORPORATE RISKS
An outline of the risk management framework and principal risks is provided on
pages 40 to 43.
The Audit Committee has kept, and continues to keep, under review financial
risks, operational risks and emerging risks, which includes reviewing and
obtaining assurances from key service providers in respect of the controls for
which they are responsible. The Audit
Committee has not identified any areas of concern as a result.
SERVICE PROVIDERS
The Audit Committee has met regularly with the key service providers (besides
KPMG) involved in the preparation of the Company's reporting to its
shareholders and in the operation of controls on its behalf, the Administrator
and sub-Administrator, both of whom have attended each formal Audit Committee
meeting as well as other informal meetings. Through these meetings, supported
by review and challenge of supporting documentation, the Audit Committee has
satisfied itself, as far as is possible in the circumstances of a Company with
outsourced functions, that financial and operational risks facing the Company
are appropriately managed and controlled.
ADJUSTED AND UNADJUSTED DIFFERENCES IN THE FINANCIAL STATEMENTS
The external auditor, KPMG, has reported to the Audit Committee that they
found no reportable differences during the course of their audit work.
WHISTLEBLOWING
The Company does not have any employees. Each of the service providers has
whistleblowing policies in place.
ANTI-BRIBERY AND CORRUPTION
The Company has a zero tolerance approach to bribery and corruption, in line
with the UK Bribery Act 2010.
An anti-bribery and corruption policy has been adopted and is kept under
review.
ANNUAL REPORT
The Audit Committee members have each reviewed this annual report and earlier
drafts of it in detail, comparing its content with their own knowledge of the
Company, reporting requirements and shareholder expectations. Formal meetings
of the Audit Committee have also reviewed the report and its content and have
received reports and explanations from the Company's service providers about
the content and the financial results. The Audit Committee has concluded that
the annual report, taken as a whole, is fair, balanced and understandable, and
that the Board can reasonably and with justification make the statement of
Directors' responsibilities on page 67.
SUSIE FARNON
Audit Committee Chairman
1 March 2021
GOVERNANCE REPORT \ DIRECTORS' REMUNERATION REPORT
Provisions relating to Executive Directors' remuneration are not deemed
relevant to AGA, being an externally managed investment company with a Board
comprised wholly of Non-Executive Directors.
In particular, the Company's day-to-day management and administrative
functions are outsourced to third parties. As a result, the Company has no
Executive Directors, employees or internal operations. The Company has
therefore not reported further in respect of these provisions.
REMUNERATION REPORT
The Directors who served in the period from 1 January 2020 to 31 December 2020
received the fees detailed in the table below.
No taxable benefits were paid to Directors in respect of this period and no
remuneration above that was paid to the Directors for their services.
Remuneration paid reflects the duties and responsibilities of the Directors
and the value of their time. No element of the Directors' remuneration is
performance related.
DIRECTORS' FEES AND EXPENSES
Fees are pro-rated where an appointment takes place during a financial year.
None of the fees disclosed below were payable to third parties by the Company.
Chris Ambler is obliged to pay 20% of the fee he receives from the Company for
his services as a Non- Executive Director to a third party, being the company
to which he is appointed as an Executive Director. The Directors are entitled
to be reasonably reimbursed for expenses incurred in the exercise of their
duties as Directors. Expenses paid to the Directors are also listed in the
table below.
DIRECTORS' FEES AND EXPENSES FOR THE YEAR TO 31 DECEMBER 2020
DIRECTOR FEES EXPENSES FEES EXPENSES
(GBP) (GBP) (EUR) (EUR)
Tim Breedon 125,000 - 138,623 -
Susie Farnon 55,000 579 60,994 635
Chris Ambler 45,000 653 49,904 762
Mike Bane 45,000 - 49,904 -
Stephanie Coxon(1) 33,875 - 37,239 -
Total 303,875 1,232 336,664 1,397
1. Appointed 31 March 2020
DIRECTORS' HOLDINGS AT 31 DECEMBER 2020
VOTING RIGHTS % OF VOTING RIGHTS
DIRECTOR CLASS OF SHARE SHARES HELD DIRECT INDIRECT DIRECT INDIRECT
Tim Breedon Ordinary shares of NPV(2) 70,000 70,000 - 0.014% 0.000%
Susie Farnon Ordinary shares of NPV(2) 43,600 43,600 - 0.006% 0.000%
Chris Ambler Ordinary shares of NPV(2) 27,191 27,191 - 0.007% 0.000%
Mike Bane Ordinary shares of NPV(2) 18,749 18,749 - 0.002% 0.000%
Stephanie Coxon Ordinary shares of NPV(2) 10,000 10,000 - 0.001% 0.000%
2. No par value
Governance report \ Directors' report
The Directors submit their annual report together with the audited financial
statements of the Company for the year ended 31 December 2020. The Company's
registered office and principal place of business is East Wing, Trafalgar
Court, Les Banques, St Peter Port, Guernsey GY1 3PP.
LISTING ON THE LONDON STOCK EXCHANGE
On 15 June 2015, the entire issued ordinary share capital of the Company was
admitted to the Premium Listing segment of the Official List of the Financial
Conduct Authority and to unconditional trading on the London Stock Exchange's
Main Market for listed securities.
DIVIDEND
The Directors have approved a dividend of 5.28 pence per share as a final
dividend in respect of the financial period ended 31 December 2020 (2019: 4.68
pence). An interim dividend of 4.87 pence was paid on 25 September 2020 (2019:
4.69 pence).
BOARD OF DIRECTORS
Biographies of the Board of Directors, including details of their relevant
experience, are available on the Company's website at:
www.apaxglobalalpha.com/who-we- are/ leadership -team/board-of-directors
The Non-Executive Directors do not have service agreements.
POWERS OF DIRECTORS
The business of the Company is managed by the Directors who may exercise all
the powers of the Company, subject to any relevant legislation, any directions
given by the Company by passing a special resolution and to the Company's
Articles of Incorporation (the "Articles"). The Articles, for example, contain
specific provisions concerning the Company's power to borrow money and issue
shares.
APPOINTMENT AND REMOVAL OF DIRECTORS
Rules relating to the appointment and removal of the Directors are contained
within the Company's Articles of Incorporation, which can be found in full on
the Company's website at: www.apaxglobalalpha.com/ investors/
results-reports-presentations
AMENDMENT OF ARTICLES OF INCORPORATION
The Company may only make amendments to the Articles of Incorporation of the
Company by way of special resolution of the shareholders, in accordance with
The Companies (Guernsey) Law, 2008, as amended.
EMPLOYEES
The Company does not have any direct employees.
POLITICAL DONATIONS AND EXPENDITURE
The Company has made no political donations in the period since incorporation
or since admission.
SHARE CAPITAL
As at the date of this report, the Company had an issued share capital of
€873.8m. The rights attaching to the shares are set out in the Articles of
Incorporation. There are no restrictions on the transfer of ordinary shares in
the capital of the Company other than those which may be imposed by law from
time to time. There are no special control rights in relation to the Company's
shares and the Company is not aware of any agreements between holders of
securities that may result in restrictions on the transfer of securities or on
voting rights, except for the lock-ups agreed at the time of admission as set
out in the prospectus. In accordance with the Disclosure and Transparency
Rules, Board members and certain employees of the Company's service providers
are required to seek approval to deal in the Company's shares.
ALLOTMENT OF SHARES AND PRE-EMPTION RIGHTS
Details of the Company's ability to allot shares and pre-emption rights are
included in the Articles of Incorporation.
VOTING RIGHTS
In a general meeting of the Company, on a show of hands, every member who is
present in person or by proxy and entitled to vote shall have one vote. On a
poll, every member who is present in person or by proxy shall have one vote
for every share of which they are the holder.
RESTRICTIONS ON VOTING
Unless the Directors otherwise determine, a shareholder shall not be entitled
to vote either personally or by proxy:
if any call or other sum currently payable to the Company in respect of that
share remains unpaid; or
having been duly served with a notice requiring the disclosure of a member's
interests given under article 10 of the Articles of Incorporation of the
Company, and has failed to do so within 14 days, in a case where the shares in
question represent at least 0.25% of the number of shares in issue of the
class of shares concerned, or within 28 days, in any other case, from the date
of such notice.
DIRECTORS' INTERESTS IN SHARES
The Directors' share interests in the Company are detailed on the prior page.
MATERIAL INTERESTS IN SHARES
The Company has been notified in accordance with DTR 5 of the Disclosure and
Transparency Rules of the interests in its issued ordinary shares as at 31
December 2020 detailed in the table on page 65.
SIGNIFICANT AGREEMENTS
The following agreements are considered significant to
the Company:
- AGML as Investment Manager under the terms of the Investment
Management Agreement;
- Aztec Group as Administrator, Company Secretary and Depositary under
the Administration Agreement and Depositary Agreement;
- Link as Registrar under the Registration Agreement;
- Jefferies International as corporate broker; and
- KPMG as appointed external auditor.
COMPENSATION FOR LOSS OF OFFICE
There are no agreements between the Company and its Directors providing for
compensation for loss of office that occurs because of a change of control.
DISCLOSURES REQUIRED UNDER LISTING RULE 9.8.4R
There are no disclosures required under Listing Rule section 9.8.4R.
EVENTS AFTER THE REPORTING PERIOD
The Audit Committee noted that there were two post-balance sheet events:
- on 19 January 2021, AGA reached an agreement with Credit Suisse AG,
London Branch, to amend the terms of its Revolving Credit Facility ("RCF").
More details are provided on page 85.
- on 2 March 2021, the Board of Directors announced a dividend of 5.28
pence per share in respect of the financial period ended 31 December 2020.
GOING CONCERN
After making enquiries and given the nature of the Company and its
investments, the Directors, after due consideration, conclude that the Company
should be able to continue for the foreseeable future.
In reaching this conclusion, the Board is mindful of the nature of the
Company's assets, and considers that adverse investment performance should not
have a material impact on the Company's ability to meet its liabilities as
they fall due. Further details of the Board's considerations in relation to
going concern and the effect of the discontinuation resolution to be put to
shareholders are set out in note 2 to the financial statements.
Accordingly, they are satisfied that it is appropriate to adopt the going
concern basis in preparing these financial statements.
DISCLOSURE OF INFORMATION TO THE AUDITOR
Having made enquiries of fellow Directors and key service providers, each of
the Directors confirms that:
- to the best of their knowledge and belief, there is no relevant audit
information of which the Company's auditor is unaware; and
- they have taken all the steps a Director might reasonably be expected
to have taken to be aware of relevant audit information and to establish that
the Company's auditor is aware of that information.
REAPPOINTMENT OF AUDITOR
Resolutions for the reappointment of KPMG Channel Islands Limited as the
auditor of the Company and to authorise the Directors to determine its
remuneration are to be proposed at the next AGM.
AGM
The next AGM will be held on 4 May 2021 at 10:00am (UK time) at East Wing,
Trafalgar Court, Les Banques, St Peter Port, Guernsey, Channel Islands GY1
3PP.
The Company's articles require a resolution to be put to shareholders on a
periodic basis regarding the continuation of the Company. Accordingly, a
"Discontinuation Resolution" will be put forward at the 2021 AGM.
The notice, agenda and form of proxy will be circulated to shareholders at
least 21 working days prior to the AGM and will be made available on the UK
National Storage Mechanism and the Company's website at: www.
apaxglobalalpha.com/investors/results-reports-presentations
Due to Guernsey government guidance in respect of Covid-19, we expect to limit
in-person attendance to the AGM. Shareholders will be able to dial-in remotely
to listen to the AGM and can submit questions in advance to the Company
Secretary by email at AGA-admin@aztecgroup.co.uk
The Directors' report has been approved by the Board and is signed on its
behalf by:
TIM BREEDON CBE
Chairman
1 March 2021
TABLE OF SHAREHOLDERS OVER 5% AT 31 DECEMBER 2020(1)
VOTING RIGHTS % OF VOTING RIGHTS
DIRECTOR CLASS OF SHARE SHARES HELD DIRECT INDIRECT DIRECT INDIRECT THRESHOLD
NorTrust Ordinary 32,701,581 32,701,581 - 6.7% 0.0% 5%
Nominees Limited shares of NPV
Witan Ordinary 31,350,780 31,350,780 - 6.4% 0.0% 5%
Investment Trust shares of NPV
Berlinetta Limited Ordinary 28,778,552 28,778,552 - 5.9% 0.0% 5%
shares of NPV
1. The figures shown above reflect the position of the shareholders as
most recently disclosed to and by the Company pursuant to DTR 5.1
(Notification of the acquisition or disposal of major shareholdings) and may
not reflect the actual or current position of the shareholders as at the date
of this report
Governance report \ Viability statement
VIABILITY STATEMENT
As stated on page 2 the investment objective of the Company is to provide
shareholders with capital appreciation from its investment portfolio and
regular dividends. The Company's investment performance depends upon the
performance of its portfolio of Private Equity and Derived Investments. The
Directors, in assessing the viability of the Company, have paid particular
attention to the risks faced by the Company in seeking to achieve its stated
objectives. The principal risks are set out on pages 42 to 43. The Board has
established a risk management framework within which the Investment Manager
operates and which is intended to identify, measure, monitor, report and,
where appropriate, mitigate the risks to the Company's investment objective.
The Directors confirm that their assessment of the principal risks facing the
Company was robust and in doing so they have considered models projecting
future cash flows during the three years to 31 December 2023. These models
have also been stress tested to reflect the impact on the portfolio of some
severe but plausible scenarios similar to those experienced by investment
markets recently and historically. The projections consider cash balances,
covenants, limits, the split of the investment portfolio, commitments to new
Apax Funds (inclusive of the Apax X commitment of $450m) in addition to the
investment policy. The stress testing examines the potential impact of the key
principal risks occurring individually and together.
These projections are based on the Investment Manager's expectations of future
investment performance, income and costs. The viability assessment covers a
period of three years, which reflects the average holding period of Derived
Investments and the expected period between the launch of new funds by Apax
Partners.
The Company also has access to a significant credit facility to enable it to
manage cash demands without resorting to urgent sales of its less liquid
portfolio assets; the Company utilised this facility once during the year,
with a drawdown period of one month. Diversification of the portfolio, split
between Private Equity and Derived Investments, also helps the Company
withstand risks it is most likely to meet.
The continuation of the Company in its present form is dependent on the
Investment Management Agreement ("IMA") with the Investment Manager remaining
in place. The Directors note that the IMA with the Investment Manager is
terminable with a minimum of one year's notice by either party. The Directors
have no current reason to assume that either the Company or the Investment
Manager would serve notice of termination of the IMA during the three-year
period covered by this viability statement. The initial term of the IMA is six
years and shall automatically continue unless the Investment Manager or the
Company (by special resolution) serves notice electing to terminate at the
expiry of the initial term. The earliest termination would be 15 June 2021.
The Articles require that the Directors put a discontinuation resolution to
the AGM every three years, with the next resolution being put forward at the
upcoming 2021 AGM. Following the result of the 2018 resolution, where 99% of
votes cast supported a continuation, the Directors have reasonable grounds to
believe that it is unlikely that the extraordinary resolution would be passed
and for the purposes of the viability assessment they have assumed that it
will not do so.
The Directors, having duly considered the risks facing the Company, their
mitigation and the cash flow modelling, have a reasonable expectation that the
Company will be able to continue in operation and meet its liabilities as they
fall due over the three year period of their assessment. For more information
on how AGA is satisfied with its ability to operate as a going concern, see
page 76.
Governance report \ Statement of directors' responsibilities
ANNUAL REPORT AND FINANCIAL STATEMENTS
The Directors are responsible for preparing the annual report and financial
statements in accordance with applicable law and regulations.
Company Law requires the Directors to prepare financial statements for each
financial year. Under that law they are required to prepare financial
statements that show a true and fair view. The Directors have chosen to
prepare the financial statements in accordance with International Financial
Reporting Standards ("IFRS") as adopted by the EU to meet the requirements of
applicable law and regulations.
Under Company Law, the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for that
period. In preparing these financial statements, the
Directors are required to:
- select suitable accounting policies and apply them consistently;
- make judgements and estimates that are reasonable, relevant and
reliable;
- state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the financial
statements;
- assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
- use the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations, or have no realistic alternative
but to do so.
The Directors are responsible for keeping proper accounting records, that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and to
enable them to ensure that the financial statements comply with the Companies
(Guernsey) Law, 2008 (as amended). They are responsible for such internal
control as they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or
error. They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and to prevent
and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in Guernsey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE ANNUAL FINANCIAL
REPORT
The annual report and financial statements are the responsibility of, and have
been approved by the Directors who confirm, to the best of their knowledge and
belief, that they have complied with the above requirements in preparing the
financial statements. During the course of this assessment, the Directors have
received input from the Audit Committee, the Investment Manager, the
Investment Advisor, the Company Secretary and Administrator, and the Directors
confirm that:
- the annual report includes a fair review of the development and
performance of the business and the position of the Company, together with a
description of the principal risks and uncertainties that the Company faces;
- the financial statements, prepared in accordance with IFRS adopted by
the EU, give a true and fair view of the assets, liabilities, financial
position and results of the Company, taken as a whole, as required by DTR
4.1.6, and are in compliance with the requirements set out in the Companies
(Guernsey) Law 2008 (as amended); and
- the annual report and financial statements, taken as a whole, provide
the information necessary to assess the Company's position and performance,
business model and strategy, and is fair, balanced and understandable.
Signed on behalf of the Board of Directors
TIM BREEDON CBE
Chairman
1 March 2021
SUSIE FARNON
Audit Committee Chairman
1 March 2021
Financial statements \ Independent auditor's report
to the members of Apax Global Alpha Limited
OUR OPINION IS UNMODIFIED
We have audited the financial statements of Apax Global Alpha Limited (the
"Company"), which comprise the statement of financial position as at 31
December 2020, the statements of profit or loss and other comprehensive
income, changes in equity and cash flows for the year then ended, and notes,
comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying financial statements:
- give a true and fair view of the financial position of the
Company as at 31 December 2020, and of the Company's financial performance and
cash flows for the year then ended;
- are prepared in accordance with International Financial Reporting
Standards as adopted by the EU; and
- comply with the Companies (Guernsey) Law, 2008.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing
(UK) ("ISAs (UK)") and applicable law. Our responsibilities are described
below. We have fulfilled our ethical responsibilities under, and are
independent of the Company in accordance with, UK ethical
requirements including FRC Ethical Standards, as applied to listed entities.
We believe that the audit evidence we have obtained is a sufficient and
appropriate basis for our opinion.
KEY AUDIT MATTERS: OUR ASSESSMENT OF THE RISKS OF MATERIAL MISSTATEMENT
Key audit matters are those matters that, in our professional judgment, were
of most significance in the audit of the financial statements and include the
most significant assessed risks of material misstatement (whether or not due
to fraud) identified by us, including those which had the greatest effect on:
the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in
the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these
matters. In arriving at our audit opinion above, the key audit matter was as
follows (unchanged from 2019):
The risk Our response
Valuation of Investments held at fair value through profit or loss Basis: Our audit procedures included:
("Investments")
As at 31 December 2020, the Company had invested the equivalent of 93% of its
net assets in private equity funds advised by the Company's Investment Advisor
("Private Equity Investments") and in equities and debt in public and private Internal Controls:
€1,107,723,000; companies ("Derived Investments").
We assessed the design and implementation of the Investment Manager's review
(2019: €1,108,477,000) control in relation to the valuation of Investments.
The Company's holdings in Private Equity Investments (representing 71% of
Investments) are valued based on the net asset values provided by the
Refer to page 61 of the Audit Committee Report, note 3 (Subsequent measurement underlying funds' general partners, adjusted if considered necessary by the Challenging managements' assumptions and inputs including use of KPMG
of financial instruments), note 4 (Critical accounting estimates and Board of Directors, including any adjustment necessary for carried interest. valuation specialists:
judgements), note 8 (Investments) and note 13 (Fair value estimation).
For Private Entity Investments, we agreed the fair values to capital account
or other similar statements ("Statements") received from the underlying funds'
The Company's holdings in quoted equities (representing 4% of Investments) are general partners. For the majority of Private Equity Investments, we obtained
valued based on the bid or last traded price depending upon the convention of the coterminous audited financial statements and agreed the audited net asset
the exchange on which the investment is quoted. value to the Statements. In order to assess whether the fair value required
adjustment, we considered: the basis of preparation together with accounting
policies applied; and whether the audit opinion was modified.
The Company's holdings in unquoted debt (representing 25% of Investments) are
valued based on models that take into account the factors relevant to each
investment and use relevant third party market data where available. For Derived Investments, we used our own valuation specialist to independently
price 100% of quoted equities and 100% of unquoted debt based on third party
data sources.
Risk:
The valuation of the Company's Investments is considered a significant area of Assessing disclosures:
our audit, given that it represents the majority of the net assets of the
Company and in view of the significance of estimates and judgements that may We also considered the Company's disclosures (see note 4) in relation to the
be involved in the determination of fair value. use of estimates and judgements regarding the fair value of investments and
the Company's investment valuation policies adopted and fair value disclosures
in note 3, note 8 and note 13
for compliance with International Financial Reporting Standards as adopted by
the EU.
OUR APPLICATION OF MATERIALITY AND AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Materiality for the financial statements as a whole was set at € 21,200,000,
determined with reference to a benchmark of net assets of €1,201,184,000 of
which it represents approximately 2% (2019: 2%).
In line with our audit methodology, our procedures on individual account
balances and disclosures were performed to a lower threshold, performance
materiality, so as to reduce to an acceptable level the risk that individually
immaterial misstatements in individual account balances add up to a material
amount across the financial statements as a whole. Performance materiality for
the Company was set at 75% (2019: 75%) of materiality for the financial
statements as a whole, which equates to €15,900,000 (2019: €15,400,000).
We applied this percentage in our determination of performance materiality
because we did not identify any factors indicating an elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected identified
misstatements exceeding €1,000,000, in addition to other identified
misstatements that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified
above, which has informed our identification of significant risks of material
misstatement and the associated audit procedures performed in those areas as
detailed above.
GOING CONCERN
The directors have prepared the financial statements on the going concern
basis as they do not intend to liquidate the Company or to cease its
operations, and as they have concluded that the Company's financial position
means that this is realistic. They have also concluded that there are no
material uncertainties that could have cast significant doubt over its ability
to continue as a going concern for at least a year from the date of approval
of the financial statements (the "going concern period").
In our evaluation of the directors' conclusions, we considered the inherent
risks to the Company's business model and analysed how those risks might
affect the Company's financial resources or ability to continue operations
over the going concern period. The risks that we considered most likely to
affect the Company's financial resources or ability to continue operations
over this period were:
- availability of capital to meet operating costs and other financial
commitments;
- the recoverability of financial assets subject to credit risk;
- the outcome of the upcoming discontinuation vote;
We considered whether these risks could plausibly affect the liquidity in the
going concern period by comparing severe, but plausible downside scenarios
that could arise from these risks individually and collectively against the
level of available financial resources indicated by the Company's financial
forecasts.
We also considered the risk that the outcome of the discontinuation vote could
affect the going concern period, by considering the outcome
of the previous discontinuation vote held by the Company, general voting
records of shareholders, assessing the indications of intent from key
shareholders, and considering key financial metrics including discount of the
Company's share price against its reported net asset value per share, over the
past 12 months.
We considered whether the going concern disclosure in note 2 to the financial
statements gives a full and accurate description of the directors'
assessment of going concern.
Our conclusions based on this work:
- we consider that the directors' use of the going concern basis of
accounting in the preparation of the financial statements is appropriate;
- we have not identified, and concur with the directors' assessment that
there is not, a material uncertainty related to events or conditions that,
individually or collectively, may cast significant doubt on the Company's
ability to continue as a going concern for the going concern period; and
- we have nothing material to add or draw attention to in relation to
the directors' statement in the notes to the financial statements on the use
of the going concern basis of accounting with no material uncertainties that
may cast significant doubt over the Company's use of that basis for the going
concern period, and that statement is materially consistent with the financial
statements and our audit knowledge.
However, as we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the above conclusions are not
a guarantee that the Company will continue in operation.
FRAUD AND BREACHES OF LAWS AND REGULATIONS - ABILITY TO DETECT
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud ("fraud risks") we
assessed events or conditions that could indicate an incentive or pressure to
commit fraud or provide an opportunity to commit fraud. Our risk assessment
procedures included:
- enquiring of management as to the Company's policies and procedures to
prevent and detect fraud as well as enquiring whether management have
knowledge of any actual, suspected or alleged fraud;
- reading minutes of meetings of those charged with governance; and
- using analytical procedures to identify any unusual or unexpected
relationships.
As required by auditing standards, we perform procedures to address the risk
of management override of controls, in particular the risk that management may
be in a position to make inappropriate accounting entries. On this audit we do
not believe there is a fraud risk related to revenue recognition because the
Company's revenue streams are simple in nature with respect to accounting
policy choice, and are easily verifiable to external data sources or
agreements with little or no requirement for estimation from management. We
did not identify any additional fraud risks.
We performed procedures including:
- Identifying journal entries and other adjustments to test based on
risk criteria and comparing the identified entries to supporting
documentation; and
- incorporating an element of unpredictability in our audit procedures.
Identifying and responding to risks of material misstatement due to
non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected
to have a material effect on the financial statements from our general
commercial and sector experience and through discussion with management (as
required by auditing standards), and from inspection of the Company's
regulatory and legal correspondence, and discussed with management the
policies and procedures regarding compliance with laws and regulations. As the
Company is regulated, our assessment of risks involved gaining an
understanding of the control environment including the entity's procedures for
complying with regulatory requirements.
The Company is subject to laws and regulations that directly affect the
financial statements including financial reporting legislation and taxation
legislation and we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial statement
items.
The Company is subject to other laws and regulations where the consequences of
non-compliance could have a material effect on amounts or disclosures in the
financial statements, for instance through the imposition of fines or
litigation or impacts on the Company's ability to operate. We identified
financial services regulation as being the area most likely to have such an
effect, recognising the regulated nature of the Company's activities and its
legal form. Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of management and
inspection of regulatory and legal correspondence, if any. Therefore if a
breach of operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or
regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk
that we may not have detected some material misstatements in the financial
statements, even though we have properly planned and performed our audit in
accordance with auditing standards. For example, the further removed
non-compliance with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection
of fraud, as this may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. Our audit procedures
are designed to detect material misstatement. We are not responsible for
preventing non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
OTHER INFORMATION
The directors are responsible for the other information. The other information
comprises the information included in the annual report but does not include
the financial statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and we do not
express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility
is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our
knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report in this regard.
DISCLOSURES OF EMERGING AND PRINCIPAL RISKS AND LONGER TERM VIABILITY
We are required to perform procedures to identify whether there is a material
inconsistency between the directors' disclosures in respect of emerging and
principal risks and the viability statement, and the financial statements and
our audit knowledge. we have nothing material to add or draw attention to in
relation to:
- the directors' confirmation within the Viability Statement (page 66)
that they have carried out a robust assessment of the emerging and principal
risks facing the Company, including those that would threaten its business
model, future performance, solvency or liquidity;
- the emerging and principal disclosures describing these risks and
explaining how they are being managed or mitigated;
- the directors' explanation in the Viability Statement (page 66) as to
how they have assessed the prospects of the Company, over what period they
have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the Company
will be able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
We are also required to review the Viability Statement, set out on page 66
under the Listing Rules. Based on the above procedures, we have concluded that
the above disclosures are materially consistent with the financial statements
and our audit knowledge.
CORPORATE GOVERNANCE DISCLOSURES
We are required to perform procedures to identify whether there is a material
inconsistency between the directors' corporate governance disclosures and the
financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is
materially consistent with the financial statements and our audit knowledge:
- the directors' statement that they consider that the annual report and
financial statements taken as a whole is fair, balanced and understandable,
and provides the information necessary for shareholders to assess the
Company's position and performance, business model and strategy;
- the section of the annual report describing the work of the Audit
Committee, including the significant issues that the audit committee
considered in relation to the financial statements, and how these issues were
addressed; and
- the section of the annual report that describes the review of the
effectiveness of the Company's risk management and internal control systems.
We are required to review the part of Corporate Governance Statement relating
to the Company's compliance with the provisions of the UK Corporate Governance
Code specified by the Listing Rules for our review. We have nothing to report
in this respect.
WE HAVE NOTHING TO REPORT ON OTHER MATTERS ON WHICH WE ARE REQUIRED TO REPORT
BY EXCEPTION
We have nothing to report in respect of the following matters where the
Companies (Guernsey) Law, 2008 requires us to report to you if, in our
opinion:
- the Company has not kept proper accounting records; or
- the financial statements are not in agreement with the accounting
records; or
- we have not received all the information and explanations, which to
the best of our knowledge and belief are necessary for the purpose of our
audit.
RESPECTIVE RESPONSIBILITIES
Directors' responsibilities
As explained more fully in their statement set out on page 67, the directors
are responsible for: the preparation of the financial statements including
being satisfied that they give a true and fair view; such internal control as
they determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error;
assessing the Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern; and using the going concern
basis of accounting unless they either intend to liquidate the Company or to
cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to
fraud or error, and to issue our opinion in an auditor's report. Reasonable
assurance is a high level of assurance, but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC's website
at www.frc.org.uk/auditorsresponsibilities.
THE PURPOSE OF THIS REPORT AND RESTRICTIONS ON ITS USE BY PERSONS OTHER THAN
THE COMPANY'S MEMBERS AS A BODY
This report is made solely to the Company's members, as a body, in accordance
with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has
been undertaken so that we might state to the Company's members those matters
we are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members, as
a body, for our audit work, for this report, or for the opinions we have
formed.
Deborah Smith
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
1 March 2021
Financial statements \ Statement of financial position
At 31 December 2020
NOTES 31 DECEMBER 31 DECEMBER
2020 2019
€'000 €'000
Assets
Non-current assets
Financial assets held at fair value through profit or loss ("FVTPL")1 8(a) 1,107,723 1,111,218
Total non-current assets 1,107,723 1,111,218
Current assets 124,569 3,277
Cash and cash equivalents
Investment receivables 1,338 129
Other receivables - 2,143
Total current assets 125,907 5,549
Total assets 1,233,630 1,116,767
Liabilities
Financial liabilities held at FVTPL1 8(a) - 2,741
Investment payables 30,965 13,352
Accrued expenses 1,481 1,705
Total current liabilities 32,446 17,798
Total liabilities 32,446 17,798
Capital and retained earnings
Shareholders' capital 14 873,804 873,804
Retained earnings 327,380 218,272
Total capital and retained earnings 1,201,184 1,092,076
Share-based payment performance fee reserve 10 - 6,893
Total equity 1,201,184 1,098,969
Total shareholders' equity and liabilities 1,233,630 1,116,767
1. The Company's investment in Apax X has been reclassified from
financial assets held at FVTPL to financial liabilities held at FVTPL at 31
December 2019
On behalf of the Board of Directors
TIM BREEDON SUSIE FARNON
Chairman Chair of the Audit Committee
1 March 2021 1 March 2021
31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER
2020 2020 2019 2019
€ £ EQUIVALENT(1) € £ EQUIVALENT1
Net Asset Value ("NAV") ('000) 1,201,184 1,073,546 1,098,969 929,651
Performance fee reserve 10 - - (6,893) (5,831)
Adjusted NAV ('000)2 1,201,184 1,073,546 1,092,076 923,820
NAV per share 2.45 2.19 2.24 1.89
Adjusted NAV per share2 2.45 2.19 2.22 1.88
31 DECEMBER 31 DECEMBER
2020 2019
% %
Total NAV Return3 14.8% 22.7%
1. The sterling equivalent has been calculated based on the GBP/EUR
exchange rate at 31 December 2020 and 31 December 2019, respectively
2. Adjusted NAV is the NAV net of the share-based payment performance
fee reserve. Adjusted NAV per share is calculated by dividing the Adjusted NAV
by the total number of shares
3. Total NAV Return for the year means the return on the movement in
the Adjusted NAV per share at the end of the year together with all the
dividends paid during the year, to the Adjusted NAV per share at the beginning
of the year. Adjusted NAV per share used in the calculation is rounded to 5
decimal places
The accompanying notes form an integral part of these financial statements.
Financial statements \ Statement of profit or loss and other comprehensive
income
For the year ended 31 December 2020
NOTES YEAR ENDED YEAR ENDED
31 DECEMBER 31 DECEMBER
2020 2019
€'000 €'000
Income
Investment income 18,106 20,852
Net gains on financial assets at FVTPL1 8(b) 153,518 208,767
Net losses on financial liabilities at FVTPL1 8(c) - (2,741)
Realised foreign currency gains/(losses) 1,224 (479)
Unrealised foreign currency (losses)/gains (3,743) 762
Total income 169,105 227,161
Operating and other expenses
Performance fee 10 (46) (6,893)
Management fee 9 (2,853) (5,013)
Administration and other operating expenses 6 (2,363) (2,051)
Total operating expenses (5,262) (13,957)
Total income less operating expenses 163,843 213,204
Finance costs 11 (1,751) (1,860)
Profit before tax 162,092 211,344
Tax charge 7 (109) (412)
Profit after tax 161,983 210,932
Other comprehensive income - -
Total comprehensive income attributable to shareholders 161,983 210,932
Earnings per share (cents) 15
Basic and diluted 32.98 42.95
Adjusted2 32.98 42.66
The accompanying notes form an integral part of these financial statements.
1. The Company's investment in Apax X has been reclassified from
financial assets held at FVTPL to financial liabilities held at FVTPL at 31
December 2019
2. The Adjusted earnings per share has been calculated based on the
profit attributable to ordinary shareholders adjusted for the total accrued
performance fee at 31 December 2020 and 31 December 2019, respectively, as per
note 15 and the weighted average number of ordinary shares
Financial statements \ Statement of changes in equity
For the year ended 31 December 2020
FOR THE YEAR ENDED 31 DECEMBER 2020 NOTES SHAREHOLDERS' RETAINED TOTAL CAPITAL SHARE-BASED TOTAL
CAPITAL EARNINGS AND RETAINED PAYMENT €'000
€'000 €'000 EARNINGS PERFORMANCE
€'000 FEE RESERVE
€'000
Balance at 1 January 2020 873,804 218,272 1,092,076 6,893 1,098,969
Total comprehensive income attributable to shareholders - 161,983 161,983 - 161,983
Share-based payment performance fee reserve movement 10 - - - (6,893) (6,893)
Dividends paid 16 - (52,875) (52,875) - (52,875)
Balance at 31 December 2020 873,804 327,380 1,201,184 - 1,201,184
FOR THE YEAR ENDED 31 DECEMBER 2019 NOTES SHAREHOLDERS' RETAINED TOTAL CAPITAL SHARE-BASED TOTAL
CAPITAL EARNINGS AND RETAINED PAYMENT €'000
€'000 €'000 EARNINGS PERFORMANCE
€'000 FEE RESERVE
€'000
Balance at 1 January 2019 873,804 56,967 930,771 - 930,771
Total comprehensive income attributable to shareholders - 210,932 210,932 - 210,932
Share-based payment performance fee reserve movement 10 - - - 6,893 6,893
Dividends paid 16 - (49,627) (49,627) - (49,627)
Balance at 31 December 2019 873,804 218,272 1,092,076 6,893 1,098,969
The accompanying notes form an integral part of these financial statements.
Financial statements \ Statement of cash flows
For the year ended 31 December 2020
NOTES YEAR ENDED YEAR ENDED
31 DECEMBER 31 DECEMBER
2020 2019
€'000 €'000
Cash flows from operating activities
Interest received 18,024 16,963
Interest paid (259) (200)
Dividends received 1,060 2,807
Operating expenses paid (5,460) (7,285)
Tax received / (paid) 17 (52)
Capital calls paid to Private Equity Investments (55,651) (165,904)
Capital distributions received from Private Equity Investments 207,270 182,324
Purchase of Derived Investments (69,126) (114,792)
Sale of Derived Investments 89,641 123,370
Net cash from operating activities 185,516 37,231
Cash flows used in financing activities
Financing costs paid (1,706) (1,710)
Dividends paid (51,805) (50,312)
Purchase of own shares 10 (6,970) -
Revolving credit facility drawn 6,106 88,824
Revolving credit facility repaid (6,106) (88,824)
Net cash used in financing activities (60,481) (52,022)
Cash and cash equivalents at the beginning of the year 3,277 17,306
Net increase/(decrease) in cash and cash equivalents 125,035 (14,791)
Effect of foreign currency fluctuations on cash and cash equivalents (3,743) 762
Cash and cash equivalents at the end of the year 12(b) 124,569 3,277
The accompanying notes form an integral part of these financial statements.
Financial statements \ Notes to the financial statements
1 Reporting entity
Apax Global Alpha Limited (the "Company" or "AGA") is a limited liability
Guernsey company that was incorporated on 2 March 2015. The address of the
Company's registered office is PO Box 656, East Wing, Trafalgar Court, Les
Banques, St Peter Port, Guernsey GY1 3PP. The Company invests in Private
Equity funds, listed and unlisted securities including debt instruments.
The Company's main corporate objective is to provide shareholders with capital
appreciation from its investment portfolio and regular dividends. The
Company's operating activities are managed by its Board of Directors and its
investment activities are managed by Apax Guernsey Managers Limited (the
"Investment Manager") under a discretionary investment management agreement.
The Investment Manager obtains investment advice from Apax Partners LLP (the
"Investment Advisor").
2 Basis of preparation
Statement of compliance
The financial statements, which give a true and fair view, have been prepared
in compliance with the Companies (Guernsey) Law, 2008 and in accordance with
International Financial Reporting Standards as adopted by the European Union
("IFRS"). They are for the year from 1 January 2020 to 31 December 2020 and
were authorised for issue by the Board of Directors of the Company on 1 March
2021.
Basis of measurement
The financial statements have been prepared on the historic cost basis except
for financial assets and financial liabilities, which are measured at FVTPL.
Functional and presentation currency
The financial statements are presented in euro (€), which is the Company's
functional and presentation currency. All amounts are stated to the nearest
one thousand euro unless otherwise stated.
Going concern
The Directors consider that it is appropriate to adopt the going concern basis
of accounting in preparing the financial statements. In reaching this
assessment, the Directors have considered a wide range of information relating
to present and future conditions, (for at least 12 months from
1 March 2021, the authorisation date of these financial statements), including
the statement of financial position, future projections (which include highly
stressed scenarios), cash flows, revolving credit facility, net current
assets, the longer-term strategy of the Company and the discontinuation vote
that will be presented at the next AGM. The impact of Covid-19 was also
considered by the Directors; and whilst the long-term effect remains to be
seen, it was noted that the impact on the Company has been limited to date, as
the underlying portfolio is invested in sectors, such as Tech, which have been
relatively less affected. The Directors are satisfied, based on their
assessment of reasonably possible outcomes, that the Company has sufficient
liquidity, including the undrawn revolving credit facility, to meet current
and expected obligations up to the going concern horizon. They are also
satisfied, based on their assessment of reasonably possible outcomes and the
results of the previous discontinuation vote, that no material uncertainty
with respect to going concern arises from the Discontinuation Vote (see
below).
Discontinuation vote
The Company's Articles require that a shareholder resolution on whether the
Company should wind up, liquidate, reconstruct or unitise (the
"Discontinuation Vote") be presented for the second time at the AGM in May
2021 and, if not passed, every three years thereafter. The Directors, based on
discussions with a number of key shareholders, consider that it is unlikely
that Discontinuation Vote will be passed, and no provisions have been made in
respect to costs related to the winding-up of the Company.
3 Accounting policies
The accounting policies adopted by the Company and applied consistently in
these financial statements are set out below and overleaf:
Initial recognition of financial instruments
The Company designates all financial assets and financial liabilities, except
loans payable, other payables, investment receivables, other receivables and
cash, at FVTPL. These are initially recognised at cost which equates to the
best indicator of fair value on the trade date, the date on which the Company
becomes a party to the contractual provisions of the instrument. All
transaction costs are immediately recognised in profit or loss. Financial
assets or financial liabilities not at FVTPL are initially recognised at cost
plus transaction costs that are directly attributable to their acquisition or
issue.
Subsequent measurement of financial instruments
Fair value is a market-based measurement, that estimates the price at which an
asset could be sold or a liability transferred, in an orderly transaction
between market participants, on the measurement date. When available, the
Company measures the fair value of an instrument using quoted prices in an
active market for that instrument. A market is regarded as "active" if quoted
prices are readily and regularly available and represent actual and regularly
occurring market transactions on an arm's length basis. If a market for a
financial instrument is not active, then the Company establishes fair value
using an alternative valuation technique.
The Company uses alternative valuation techniques, taking into account the
International Private Equity and Venture Capital Valuation ("IPEV")
guidelines, in the absence of an active market. Valuation techniques include,
but are not limited to, market multiples, using recent and relevant arm's
length transactions between knowledgeable, willing parties (if they are
available), reference to the current fair value of other instruments that are
substantially the same, statistical methods, discounted cash flow analyses and
option pricing models. The chosen valuation technique seeks to maximise the
use of market inputs and incorporates factors that market participants might
consider in setting a price.
Inputs to valuation techniques aim to reasonably represent market expectations
and measures of the risk-return factors inherent in the financial instrument.
The Company calibrates valuation techniques where possible using prices from
observable current market transactions in the same instrument or based on
other available observable market data.
The Company has two main investment portfolios that are split between "Private
Equity Investments" and "Derived Investments". Private Equity Investments
comprise primary and secondary commitments to, and investments in, existing
Private Equity funds advised by the Investment Advisor.
Derived Investments comprise investments in debt and equities. At each
reporting date these are measured at fair value, and changes therein are
recognised in the statement of profit or loss and other comprehensive income.
Fair values of the Private Equity portfolio are generally considered to be the
Company's attributable portion of the NAV of the Private Equity funds, as
determined by the general partners of such funds, adjusted if considered
necessary by the Board of Directors, including any adjustment necessary for
carried interest. The general partners consider the IPEV guidelines when
valuing the Private Equity funds.
The fair value of unlisted debt investments is calculated based on models that
take into account the factors relevant to each investment and use relevant
third-party market data where available. The fair value of unlisted equities
and equities not traded in an active market, is calculated based on comparable
company multiples and precedent transaction analysis. The Company reviews and
considers the appropriateness of the fair value analysis prepared by the
Investment Manager and Investment Advisor when determining the fair value for
such assets.
The fair value of investments traded in an active market is determined by
taking into account the latest market bid price available, or the last traded
price depending upon the convention of the exchange on which the investment is
quoted.
Derecognition of financial instruments
The Company derecognises a financial asset when the contractual rights to the
cash flows from the financial asset expire or it transfers the financial asset
and the transfer qualifies for derecognition in accordance with IFRS 9
"Financial Instruments: Recognition and Measurement". The Company uses the
first-in first-out method to determine realised gains and losses on
derecognition. A financial liability is derecognised when the obligation
specified in the contract is discharged, cancelled or expired.
Share-based payments
The Company applies the requirements of IFRS 2 "Share-based Payment" in
respect to its performance fee. The Company maintains a separate performance
fee reserve in equity, showing the expected performance fee calculated on a
liquidation basis on eligible assets. This is revised at each reporting period
and the movement is credited or expensed through the statement of profit or
loss and other comprehensive income. Further details are given in note 10.
Operating segments
The criteria for identifying an operating segment in accordance with IFRS 8
"Operating Segments" are that the chief operating decision maker of the
Company regularly reviews the performance of these operating segments and
determines the allocation of resources based on these results. It is
determined that the Company's Chief Operating Decision Maker is the Board of
Directors. As previously noted, the Company invests into two separate
portfolios, Private Equity Investments and Derived Investments. These have
been identified as segments on the basis that the Board of Directors uses
information based on these segments to make decisions about assessing
performance and allocating resources. The Company has a third administration
segment for central functions which represents general administration costs
that cannot be specifically allocated to the two portfolios. The analysis of
results by operating segment is based on information from the Company's
management accounts. The segmental analysis of the Company's results and
financial position is set out in note 5.
Investment receivables
Investment receivables are recognised in the Company's statement of financial
position when it becomes party to a contractual provision for the amount
receivable. Investment receivables are held at their nominal amount. They are
reviewed at each reporting date to determine whether there is any indication
of impairment. If any such indication exists, the receivables recoverable
amount is estimated based on expected discounted future cash flows. Changes in
the level of impairment are recognised in the statement of profit or loss and
other comprehensive income. Investment receivables are also revalued at the
reporting date if held in a currency other than euro.
Liabilities
Liabilities, other than those specifically accounted for under a separate
policy, are stated at the amounts which are considered to be payable in
respect of goods or services received up to the reporting date on an accruals
basis.
Investment payables
Investment payables are recognised in the Company's statement of financial
position when it becomes party to a contractual provision for the amount
payable. Investment payables are held at their nominal amount. Investment
payables are also revalued at the reporting date if held in a currency other
than euro.
Loans payable
Loans payable are held at amortised cost. Amortised cost for loans payable is
defined as the amount at which the loan is measured at initial recognition,
less principal repayments, plus or minus the cumulative amortisation using the
effective interest method.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, call deposits and cash held
in money market funds with original maturities of three months or less.
Interest income
Interest income comprises interest income on cash and cash equivalents and
interest earned on financial assets on the effective interest rate basis.
Dividend income
Dividend income is recognised in the statement of profit or loss and other
comprehensive income on the date that the Company's right to receive payment
is established, which in the case of listed securities is the ex-dividend
date. For unlisted equities, this is usually the date on which the payee's
Board approve the payment of a dividend. Dividend income of €1.1m(31
December 2019: €2.8m) from equity securities designated at FVTPL is
recognised in the statement of profit or loss and other comprehensive income
in the current year.
Net changes on investments at FVTPL
Unrealised gains and losses
Net change in Derived Investments at FVTPL includes all unrealised changes in
the fair value of investments (financial assets and financial liabilities),
including foreign currency movements, since the beginning of the reporting
period or since designated upon initial recognition as held at FVTPL and
excludes dividend and interest income.
Net change in the fair value of Private Equity Investments is calculated based
on the movement of fair value since the beginning of the reporting period
adjusted for all calls paid and distributions received. Distributions received
from Private Equity Investments are treated as unrealised movements until the
commitment for primary investments, or cost and undrawn commitment for
secondary investments, have been fully repaid.
Realised gains and losses
Realised gains and losses from financial assets and financial liabilities at
FVTPL represents the gain or loss realised in the period. The unit of account
for Derived Investments is the individual share or debt nominal which can be
sold on an individual basis. The unit of account for Private Equity
Investments is commitment. The resulting accounting treatment for the realised
gains and losses is based on these units of account.
The realised gain or loss for Derived Investments is calculated based on the
carrying amount of a financial instrument at the beginning of the reporting
period, or the transaction price if it was purchased in the current reporting
period, and its sale or settlement price. Realised gains and losses on
disposals of these investments are calculated using the first-in first-out
method. Realised gains on the Private Equity portfolio are recognised when the
commitment on primary investments or the cost and undrawn commitment for
secondary investments has been fully repaid.
Distributions received in excess of the commitment for a primary investment or
the cost and undrawn amount for a secondary investment are recognised as
realised gains in the statement of profit or loss and other comprehensive
income.
Brokerage fees and other transaction costs
Brokerage fees and other transaction costs are costs incurred to acquire
investments at FVTPL. They include fees and commissions paid to agents,
brokers and dealers. Brokerage fees and other transaction costs, when
incurred, are immediately recognised in the statement of profit or loss and
other comprehensive income as an expense.
Other expenses
Fees and other operating expenses are recognised in the statement of profit or
loss and other comprehensive income on an accruals basis.
Provisions and contingent liabilities
Provisions are recognised when the Company has a present legal or constructive
obligation as a result of past events, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate of the amount of the obligation can be
made. Contingent liabilities are possible obligations whose existence will be
confirmed only by uncertain future events or present obligations where the
transfer of economic benefit is uncertain or cannot be reliably measured.
Contingent liabilities are not recognised but are disclosed unless the
probability of their occurrence is remote.
Foreign currency transactions
Transactions in foreign currencies are translated to the functional currency
of the Company at the exchange rates at the date of the transactions. Monetary
assets and liabilities denominated in foreign currencies at the reporting date
are translated to the functional currency at the exchange rate at that date.
For loans payable, the foreign currency gain or loss is the difference between
the amortised cost in the functional currency at the beginning of the period,
adjusted for interest payments during the period, and the amortised cost in
foreign currency translated at the exchange rate at the end of the reporting
period. Foreign currency differences arising on the repayments or
retranslation are recognised in the statement of profit or loss and other
comprehensive income.
Non-monetary assets and liabilities denominated in foreign currencies that are
measured at fair value are retranslated to the functional currency at the
exchange rate at the date that the fair value was determined. Non-monetary
items that are measured in terms of historical cost in foreign currency are
translated using the exchange rate at the date of the transaction. Foreign
currency differences arising on retranslation of non-investment assets are
recognised in the statement of profit or loss and other comprehensive income.
For financial assets and financial liabilities held at FVTPL, foreign currency
differences are reported as part of their net changes at FVTPL.
Taxation
The Company may incur withholding taxes imposed by certain countries on
investment income or capital gains taxes upon realisation of its investments.
Such income or gains are recorded gross of withholding taxes and capital gains
taxes in the statement of profit or loss and other comprehensive income.
Withholding taxes and capital gains taxes are shown as separate items. Where
applicable, tax accruals are raised by the Company based on an investments
expected hold period.
Shareholders' capital and reserves
Shareholders' capital
Shareholders' capital issued by the Company is recognised as the proceeds or
fair value received. Incremental costs directly attributable to the issue
there of, net of tax effects, are recognised as a deduction from equity.
Ordinary shares have been classified as equity as they do not meet the
definition of liabilities per IAS 32.
Dividends
Dividends on ordinary shares are recognised in equity in the period in which
they become payable, which is when they are approved by the Company's Board of
Directors.
Earnings per share
Earnings per share is calculated based on the profit attributable to ordinary
shareholders and the weighted average number of ordinary shares in issue
during the year.
Diluted earnings per share is calculated based on the profit attributable to
ordinary shareholders and the weighted average number of ordinary shares in
issue during the year adjusted for items that would cause a dilutive effect on
the ordinary shares.
Adjusted earnings per share is calculated based on the profit attributable to
ordinary shareholders and the weighted average number of ordinary shares in
issue during the year adjusted for the performance fee.
Accounting standards and interpretations not yet adopted
The Company has applied all new and amended standards with an effective date
from 1 January 2020. Additionally, it has reviewed and assessed changes to
current accounting standards issued by the IASB with an effective date from 1
January 2021; none of these have had or are expected to have a material impact
on the Company's financial statements.
4 Critical accounting estimates and judgements
In preparing the financial statements, the Company makes judgements and
estimates that affect the reported amounts of assets, liabilities, income and
expenses. Actual results could differ from those estimates. Estimates and
judgements are continually evaluated and are based on the Board of Directors
and Investment Managers' experience and their expectations of future events.
Revisions to estimates are recognised prospectively.
(i) Judgements
The judgement that has the most significant effect on the amounts recognised
in the Company's financial statements relates to investment assets and
liabilities. These have been determined to be financial assets and liabilities
held at FVTPL and have been accounted for accordingly.
The other significant judgement relates to going concern and whether the
discontinuation vote gives rise to a material uncertainty. For the reasons
explained in the "Going concern" and "Discontinuation vote" sections of note
2, it has been concluded that there is no material uncertainty.
(ii) Estimates
The estimate that has the most significant effect on the amounts recognised in
the Company's financial statements relates to financial assets and financial
liabilities held at FVTPL other than those traded in an active market.
The Investment Manager is responsible for the preparation of the Company's
valuations and meets quarterly to discuss and approve the key valuation
assumptions. The meetings are open to the Board of Directors and the
Investment Advisor to enable them to challenge the valuation assumptions and
the proposed valuation estimates and to the external auditor to observe. On a
quarterly basis, the Board of Directors review and approve the final NAV
calculation before it is announced to the market.
The Investment Manager also makes estimates and assumptions concerning the
future and the resulting accounting estimates will, by definition, seldom
equal the related actual results. The assumptions that have a significant risk
of causing a material adjustment to the carrying amounts of assets and
liabilities are outlined in note 13.
5 Segmental analysis
The segmental analysis of the Company's results and financial position, which
is prepared using the accounting policies in note 3, is set out below. There
have been no changes to segments in the current or prior year.
The investment segments follow different investment strategies as approved by
the Chief Operating Decision Maker, the Board of Directors, which monitors the
portfolio allocation to ensure that it is in line with the investment
strategy.
Reportable segments
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME PRIVATE EQUITY DERIVED CENTRAL TOTAL
FOR THE YEAR ENDED 31 DECEMBER 2020 INVESTMENTS INVESTMENTS FUNCTIONS(1) €'000
€'000 €'000 €'000
Investment income - 18,360 (254) 18,106
Net gains (losses) on financial assets at FVTPL 173,658 (20,140) - 153,518
Realised foreign exchange gains - 210 1,014 1,224
Unrealised foreign currency (losses) - - (3,743) (3,743)
Total income/(loss) 173,658 (1,570) (2,983) 169,105
Performance fees(2) (46) - - (46)
Management fees (161) (2,692) - (2,853)
Administration and other operating expenses - (301) (2,062) (2,363)
Total operating expenses (207) (2,993) (2,062) (5,262)
Total income less operating expenses 173,451 (4,563) (5,045) 163,843
Finance costs - - (1,751) (1,751)
Profit/(loss) before taxation 173,451 (4,563) (6,796) 162,092
Tax charge - (109) - (109)
Total comprehensive income attributable to shareholders 173,451 (4,672) (6,796) 161,983
STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2020 PRIVATE EQUITY DERIVED CASH AND TOTAL
INVESTMENTS INVESTMENTS OTHER NCAS(3) €'000
€'000 €'000 €'000
Total assets 788,307 320,754 124,569 1,233,630
Total liabilities - (32,446) - (32,446)
NAV 788,307 288,308 124,569 1,201,184
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME PRIVATE EQUITY DERIVED CENTRAL TOTAL
FOR THE YEAR ENDED 31 DECEMBER 2019 INVESTMENTS INVESTMENTS FUNCTIONS(1) €'000
€'000 €'000 €'000
Investment income - 21,051 (199) 20,852
Net gains on financial assets at FVTPL(4) 194,010 14,757 - 208,767
Net losses on financial liabilities at FVTPL(4) (2,741) (2,741)
Realised foreign exchange gains/(losses) - 14 (493) (479)
Unrealised foreign currency gains - - 762 762
Total income 191,269 35,822 70 227,161
Performance fees(2) (6,893) - - (6,893)
Management fees (809) (4,204) - (5,013)
Administration and other operating expenses - (438) (1,613) (2,051)
Total operating expenses (7,702) (4,642) (1,613) (13,957)
Total income less operating expenses 183,567 31,180 (1,543) 213,204
Finance costs - - (1,860) (1,860)
Profit/(loss) before tax 183,567 31,180 (3,403) 211,344
Tax charge - (412) - (412)
Total comprehensive income attributable to shareholders 183,567 30,768 (3,403) 210,932
STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2019 PRIVATE EQUITY DERIVED CASH AND TOTAL
INVESTMENTS INVESTMENTS OTHER NCAS(3) €'000
€'000 €'000 €'000
Total assets(5) 769,019 344,443 3,305 1,116,767
Total liabilities(5) (2,741) (13,352) (1,705) (17,798)
NAV 766,278 331,091 1,600 1,098,969
1. Central functions represents interest income earned on cash
balances and general administration and finance costs that cannot be allocated
to investment segments
2. Represents the movement in each respective portfolio's overall
performance fee reserve. At 31 December 2020, there was no performance fee
payable.
3. NCAs refers to net current assets of the Company
4. The Company's investment in Apax X has been reclassified from
financial assets held at FVTPL to financial liabilities held at FVTPL at 31
December 2019
5. The Company's investment in Apax X has been reclassified from total
assets to total liabilities at 31 December 2019
Geographic information
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME NORTH EUROPE BRIC(1) REST OF TOTAL
FOR THE YEAR ENDED 31 DECEMBER 2020 AMERICA €'000 €'000 WORLD €'000
€'000 €'000
Investment income 14,028 2,709 258 1,111 18,106
Net gains/(losses) on financial assets at FVTPL 82,727 74,941 (7,767) 3,617 153,518
Realised foreign exchange gains/(losses) 907 359 (25) (17) 1,224
Unrealised foreign currency losses - (3,743) - - (3,743)
Total income 97,662 74,266 (7,534) 4,711 169,105
Performance fee - (46) - - (46)
Management fee (2,034) (582) (69) (167) (2,853)
Administration and other operating expenses - (2,363) - - (2,363)
Total operating expenses (2,034) (2,991) (69) (167) (5,262)
Total income less operating expenses 95,628 71,275 (7,603) 4,544 163,843
Finance costs - (1,751) - - (1,751)
Profit/(loss) before tax 95,628 69,524 (7,603) 4,544 162,092
Tax charge 17 (126) - - (109)
Total comprehensive income attributable to shareholders 95,645 69,398 (7,603) 4,544 161,983
STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2020 NORTH EUROPE BRIC(1) REST OF TOTAL
AMERICA €'000 €'000 WORLD €'000
€'000 €'000
Total assets 657,572 509,771 15,603 50,684 1,233,630
Total liabilities (30,965) (1,481) - - (32,446)
NAV 626,607 508,290 15,603 50,684 1,201,184
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME NORTH EUROPE BRIC(1) REST OF TOTAL
FOR THE YEAR ENDED 31 DECEMBER 2019 AMERICA €'000 €'000 WORLD €'000
€'000 €'000
Investment income 14,539 4,136 636 1,541 20,852
Net gains/(losses) on financial assets at FVTPL(2) 87,672 116,160 (1,871) 6,806 208,767
Net losses on financial liabilities at FVTPL(2) (2,741) (2,741)
Realised foreign exchange losses (41) (387) (50) (1) (479)
Unrealised foreign currency gains - 762 - - 762
Total income 102,170 117,930 (1,285) 8,346 227,161
Performance fee - (6,893) - - (6,893)
Management fee (2,367) (1,904) (520) (221) (5,013)
Administration and other operating expenses - (2,051) - - (2,051)
Total operating expenses (2,367) (10,848) (520) (221) (13,957)
Total income less operating expenses 99,803 107,082 (1,805) 8,125 213,204
Finance costs - (1,860) - - (1,860)
Profit/(loss) before tax 99,803 105,222 (1,805) 8,125 211,344
Tax charge - (373) (39) - (412)
Total comprehensive income attributable to shareholders 99,803 104,849 (1,844) 8,125 210,932
STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2019 NORTH EUROPE BRIC* REST OF TOTAL
AMERICA €'000 €'000 €'000 WORLD €'000
€'000
Total assets (3) 570,477 461,027 32,737 52,526 1,116,767
Total liabilities (3) (13,352) (4,446) - - (17,798)
NAV 557,125 456,581 32,737 52,526 1,098,969
1. BRIC = Brazil, Russia, India and China. AGA holds Derived
Investments directly in India and China only
2. The Company's investment in Apax X has been reclassified from
financial assets held at FVTPL to financial liabilities held at FVTPL at 31
December 2019
3. The Company's investment in Apax X has been reclassified from total
assets to total liabilities at 31 December 2019
6 Administration and other operating expenses
YEAR ENDED YEAR ENDED
31 DECEMBER 31 DECEMBER
2020 2019
€'000 €'000
Directors' fees 337 309
Administration and other fees 611 606
Corporate and investor relations services fee 9 401 -
Deal transaction, custody and research costs 301 438
General expenses 521 511
Auditors' remuneration
Statutory audit 146 121
Other assurance services - interim review 46 48
Other assurance services - agreed upon procedures - 18
Total administration and other operating expenses 2,363 2,051
The Company has no employees and there were no pension or staff cost
liabilities incurred during the period.
7 Taxation
The Company is exempt from taxation in Guernsey under the provisions of the
Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 and is charged an annual
exemption fee of £1,200 (31 December 2019: £1,200).
The Company may be required, at times, to pay tax in other jurisdictions as a
result of specific trades in its investment portfolio. During the year ended
31 December 2020, the Company had a net tax expense of €0.1m (31 December
2019: €0.4m), mainly related to the sale of listed equities in India and tax
incurred on debt interest in the United Kingdom. No deferred income taxes were
recorded as there are no timing differences.
8 Investments
(a) Financial instruments held at FVTPL
YEAR ENDED YEAR ENDED
31 DECEMBER 31 DECEMBER
2020 2019
€'000 €'000
Private Equity Investments 788,307 766,278
Private Equity financial assets 788,307 769,019
Private Equity financial liabilities - (2,741)
Derived Investments 319,416 342,199
Debt 275,739 252,543
Equities 43,677 89,656
Closing fair value 1,107,723 1,108,477
Financial assets held at FVTPL(1) 1,107,723 1,111,218
Financial liabilities held at FVTPL(1) - (2,741)
YEAR ENDED YEAR ENDED
31 DECEMBER 31 DECEMBER
2020 2019
€'000 €'000
Opening fair value 1,108,477 912,048
Calls 55,651 165,904
Distributions (207,280) (182,353)
Purchases 87,400 133,658
Sales (90,043) (126,806)
Net changes on fair value on financial assets 153,518 208,767
Net changes on fair value on financial liabilities - (2,741)
Closing fair value 1,107,723 1,108,477
Financial assets held at FVTPL(1) 1,107,723 1,111,218
Financial liabilities held at FVTPL(1) - (2,741)
1. The Company's investment in Apax X has been reclassified from
financial assets held at FVTPL to financial liabilities held at FVTPL at 31
December 2019
(b) Net changes on financial assets at FVTPL
YEAR ENDED YEAR ENDED
31 DECEMBER 31 DECEMBER
2020 2019
€'000 €'000
Private Equity financial assets
Gross unrealised gains 178,865 234,196
Gross unrealised losses (105,349) (40,187)
Total net unrealised gains on Private Equity financial assets 73,516 194,009
Private Equity financial assets
Gross realised gains 100,142 -
Total net realised gains on Private Equity financial assets 100,142 -
Net gains on Private Equity financial assets 173,658 194,009
Derived investments
Gross unrealised gains 13,231 51,258
Gross unrealised losses (42,495) (21,241)
Total net unrealised (losses)/gains on Derived investments (29,264) 30,017
Derived investments
Gross realised gains 18,624 14,034
Gross realised losses (9,500) (29,293)
Total net realised gains/(losses) on Derived investments 9,124 (15,259)
Total net (losses)/gains on Derived investments (20,141) 14,758
Total net gains on investments at fair value through profit or loss 153,518 208,767
(c) Net losses on financial liabilities at FVTPL
YEAR ENDED YEAR ENDED
31 DECEMBER 31 DECEMBER
2020 2019
€'000 €'000
Private Equity financial liabilities
Gross unrealised losses - (2,741)
Total net unrealised gains on Private Equity investments - (2,741)
1. The Company's investment in Apax X has been reclassified from
financial assets held at FVTPL to financial liabilities held at FVTPL at 31
December 2019
(d) Involvement with unconsolidated structured entities
The Company's investments in Private Equity funds are considered to be
unconsolidated structured entities. Their nature and purpose is to invest
capital on behalf of their limited partners. The funds pursue sector-focused
strategies, investing in four key sectors: Tech, Services, Healthcare and
Consumer. The Company commits to a fixed amount of capital, which may be drawn
(and returned) over the life of the fund. The Company pays capital calls when
due and receives distributions from the funds, once an asset has been sold.
Note 12 summarises current outstanding commitments and recallable
distributions to the seven underlying Private Equity Investments held. The
fair value of these was €788.3m at 31 December 2020 (31 December 2019:
€766.3m), whereas total value of the Private Equity funds was €18.8bn (31
December 2019: €17.4bn). During the year, the Company did not provide
financial support and has no intention of providing financial or other support
to these unconsolidated structured entities.
9 Related party transactions
The Investment Manager was appointed by the Board of Directors under a
discretionary Investment Management Agreement ("IMA") dated 22 May 2015 and
amendments dated 22 August 2016 and 2 March 2020, which sets out the basis for
the calculation and payment of the management fee.
Following the amendment approved by the Board on 2 March 2020, the Company's
management fees earned by the Investment Manager decreased in the year to
€2.9m (31 December 2019: €5.0m), of which €0.8m was included in accruals
at 31 December 2020. The revised management fee is calculated in arrears at a
rate of 0.5% per annum on the fair value of non-fee paying private equity
investments and equity investments and 1.0% per annum on the fair value of
debt investments. The Investment Manager is also entitled to a performance
fee. The revised performance fee is calculated based on the overall gains or
losses net of management fees and Direct Deal costs (being costs directly
attributable to due diligence and execution of investments) in each financial
year. When the Portfolio Total Return hurdle is met a performance fee is
payable. Further details are included in note 10 and a summary of all fee
amendments are detailed on page 99.
The IMA has an initial term of six years and automatically continues for a
further three additional years unless prior to the fifth anniversary the
Investment Manager or the Company (by a special resolution) serves written
notice to terminate the IMA. The Company is required to pay the Investment
Manager all fees and expenses accrued and payable for the notice period
through to the termination date.
The Investment Advisor has been engaged by the Investment Manager to provide
advice on the investment strategy of the Company. An Investment Advisory
Agreement ("IAA"), dated 22 May 2015 and an amendment dated 22 August 2016,
exists between the two parties. Though not legally related to the Company, the
Investment Advisor has been determined to be a related party. The Company paid
no fees and had no transactions with the Investment Advisor during the year
(31 December 2019: €Nil).
The Company has an Administration Agreement with Aztec Financial Services
(Guernsey) Limited ("Aztec") dated 22 May 2015. Under the terms of the
agreement, Aztec has delegated some of the Company's accounting and
bookkeeping to Apax Partners Fund Services Limited ("APFS"), a related party
of the Investment Advisor, under a sub-administration agreement dated 22 May
2015. A fee of € 0.5m (31 December 2019: €0.5m) was paid by the Company in
respect of administration fees and expenses, of which €0.3m (31 December
2019: €0.3m) was paid to APFS. Additionally, following the approval of the
amended fee structure on 2 March 2020, with an effective date from 1 January
2020, the Company entered into a new service agreement with Apax Partners LLP
and its affiliate, APFS, with a fee calculated as 0.04% of the Invested
Portfolio per annum for corporate and investor services. During the year a fee
of €0.4m (31 December 2019: €Nil) was paid by the Company to APFS.
On 31 March 2020, Stephanie Coxon joined the Board and Audit Committee.
Stephanie has 15 years of experience of audit and advisory with PwC in the
asset management sector, specialising in listed investment funds in a
multitude of asset classes and is a fellow of the Institute of Chartered
Accountants of England and Wales.
The table below summarises shares held by Directors:
31 DECEMBER % OF TOTAL 31 DECEMBER % OF TOTAL
2020 SHARES IN ISSUE 2019 SHARES IN ISSUE
Tim Breedon 70,000 0.014% 70,000 0.014%
Susie Farnon 43,600 0.007% 20,000 0.004%
Chris Ambler 27,191 0.006% 18,008 0.004%
Mike Bane 18,749 0.002% - -
Stephanie Coxon 10,000 0.001% - -
A summary of the Directors fees and expenses are detailed on page 63 of the
report.
10 Performance fee
31 DECEMBER 31 DECEMBER
2020 2019
€'000 €'000
Opening performance fee reserve 6,893 -
Performance fee charged to statement of profit or loss and other comprehensive 46 6,893
income
Performance fee settled (6,939) -
Closing performance fee reserve - 6,893
On 2 March 2020, the Board approved an amendment to the Company's fee
structure. The revised performance fee for periods from 1 January 2020 is
calculated based on overall gains or losses net of management fees and Direct
Deal costs (being costs directly attributable to due diligence and execution
of investments) for each financial year. The fee revision retains the concept
of a fee payable above a hurdle threshold.
The performance fee remains payable on an annual basis once the hurdle
threshold is met by eligible portfolios. Performance fees are only payable to
the extent they do not dilute the returns below the required benchmark for
each respective portfolio as detailed in the table below. Additionally, net
losses are carried forward and netted against future gains.
FROM 1 JANUARY 2020 UNTIL 31 DECEMBER 2019
NET PORTFOLIO PERFORMANCE FEE GROSS IRR PERFORMANCE FEE
TOTAL RETURN RATE HURDLE¹ RATE
HURDLE¹
Derived Debt 6% 15% 8% 20%
Derived Equity 8% 20% 8% 20%
Eligible Private Equity 8% 20% 8% 20%
1. Net Portfolio Total Return means the sub-portfolio performance in a
given period, is calculated by taking total gains or losses and dividing them
by the sum of gross asset value at the beginning of the period and the
time-weighted net invested capital. The time-weighted net invested capital is
the sum of investments made during the period less realised proceeds received
during the period, both weighted by the number of days the capital was at work
in the portfolio. Net Portfolio Total Return is gross of performance fees but
net of management fees and relevant Direct Deal costs
The performance fee is payable to the Investment Manager by way of ordinary
shares of the Company. The mechanics of the payment of the performance fee are
explained in the prospectus. In accordance with IFRS 2 "Share-based Payment",
performance fee expenses are charged through the statement of profit or loss
and other comprehensive income and allocated to a share-based payment
performance fee reserve in equity.
In the year ended 31 December 2020, ordinary shares equivalent to €6.9m were
purchased by the Company in the market and then subsequently transferred to
the Investment Manager to settle the performance fee accrued at 31 December
2019 (31 December 2019: €Nil).
At 31 December 2020, management's best estimate of the expected performance
fee was calculated on the eligible portfolio on a liquidation basis.
11 Revolving credit facility and finance costs
The Company entered into a multi-currency revolving credit facility on 6
November 2018 (the "Loan Agreement") with Credit Suisse AG, London Branch
("Credit Suisse") for general corporate purposes. The Company may borrow under
the Loan Agreement; including letters of credit subject to a maximum borrowing
limit set at €140.0m. The facility has an initial term of three years and
was due to expire on 5 November 2021.
The interest rate charged is LIBOR or EURIBOR plus a margin of 210bps and
there is a non-utilisation fee on the undrawn facility. Summary of finance
costs are detailed below:
YEAR ENDED YEAR ENDED
31 DECEMBER 31 DECEMBER
2020 2019
€'000 €'000
Interest paid 6 258
Non-utilisation fee 1,745 1,602
Total finance costs 1,751 1,860
Under the Loan Agreement, the Company is required to provide Private Equity
Investments as collateral for each utilisation. The loan-to-value must not
exceed 35% of the eligible Private Equity NAV, which the Company met
throughout the period. The facility was drawn once and fully repaid during the
year. As at 31 December 2020 the facility was unutilised (31 December 2019:
€Nil).
Post year end, on 19 January 2021, the Company amended the terms of its
revolving credit facility with Credit Suisse. The revised agreement amends the
facility term, converting it to a two-year evergreen structure whereby either
party is required to give 2 years' notice to terminate the facility.
Additionally, the interest rate charged will be LIBOR or EURIBOR plus a margin
of 230bps and the non-utilisation fee, on an initial blended basis, will be
around 100bps per annum.
12 Financial risk management
The Company holds a variety of financial instruments in accordance with its
Investment Management strategy. The investment portfolio comprises Private
Equity Investments and Derived Investments as shown in the table below:
31 DECEMBER 31 DECEMBER
2020 2019
Private Equity Investments 71% 69%
Private Equity financial assets 71% 69%
Private Equity financial liabilities 0% 0%
Derived Investments 29% 31%
Debt 25% 23%
Equities 4% 8%
Total 100% 100%
Private Equity Investments have a limited life-cycle as the average legal term
of a fund is ten years, unless extended by investor consent. The Company
actively manages Derived Investments and realises these as opportunities
arise.
The Company's overall risk management programme seeks to maximise the returns
derived for the level of risk to which the Company is exposed and seeks to
minimise potential adverse effects on the Company's financial performance.
Investments made by the Company potentially carry a significant level of risk.
There can be no assurance that the Company's objectives will be achieved or
that there will be a return of capital invested.
The management of financial risks is carried out by the Investment Manager
under the policies approved by the Board of Directors. The Investment Manager
regularly updates the Board of Directors, a minimum of four times a year, on
its activities and any material risk identified.
The Investment Manager manages financial risk against an investment reporting
and monitoring framework tailored to the Company. The framework monitors
investment strategy, investment limits and restrictions as detailed in the
prospectus along with additional financial metrics deemed to be fundamental in
the running and monitoring of the Invested Portfolio. The Invested Portfolio
is monitored in real time which enables the Investment Manager to keep a close
review on performance and positioning.
The Company's activities expose it to a variety of financial risks: credit
risk, liquidity risk and market risk including price risk, foreign currency
risk and interest rate risk. The Company is also exposed to operational risks
such as custody risk. Custody risk is the risk of loss of securities held in
custody occasioned by the insolvency or negligence of the custodian. Although
an appropriate legal framework is in place that mitigates the risk of loss of
title of the securities held by the custodian, in the event of failure, the
ability of the Company to transfer the securities might be impaired. At 31
December 2020 and 31 December 2019, the Company's custodians were ING and
HSBC, both with A- credit ratings.
The Company considers that it is not exposed to any significant concentration
of risks. The Company has a diversified underlying portfolio of investments in
Private Equity Investments and Derived Investments. The underlying investments
are further diversified as they are split across a number of sectors and
sub-sectors and operate in a number of different geographic regions.
Credit risk
Credit risk is the risk of financial loss to the Company if a counterparty to
a financial instrument fails to meet its contractual obligations. This risk
arises principally from the Company's investment in debt, cash and cash
equivalents, investment receivables and other receivables.
31 DECEMBER % OF NAV 31 DECEMBER % OF NAV
2020 2019
€'000 €'000
Debt investments 275,739 23% 252,543 23%
Cash and cash equivalents 124,569 10% 3,277 0%
Investment receivables 1,338 0% 129 0%
Other receivables - 0% 2,143 0%
Total 401,646 33% 258,092 23%
(a) Debt investments
The Investment Manager manages the risk related to debt investments by
assessing the credit quality of the issuers and monitoring this through the
term of investment. The credit quality of the Company's debt investments is
summarised in the table below:
RATING (S&P) 31 DECEMBER % OF DEBT % OF NAV 31 DECEMBER % OF DEBT % OF NAV
2020 INVESTMENTS 2019 INVESTMENTS
€'000 €'000
B 28,223 10% 2% 28,439 11% 4%
B- 57,431 21% 5% 39,619 16% 3%
CCC+ 61,558 22% 5% 34,558 14% 3%
CCC 44,345 17% 4% 60,603 25% 5%
N/R(1) 84,182 30% 7% 89,324 34% 8%
Total 275,739 100% 23% 252,543 100% 23%
1. Not currently rated by S&P
The Investment Manager also reviews the debt investments' industry sector
concentration. The Company was exposed to concentration risk in the following
industry sectors:
31 DECEMBER % OF DEBT % OF NAV 31 DECEMBER % OF DEBT % OF NAV
2020 INVESTMENTS 2019 INVESTMENTS
€'000 €'000
Tech 130,677 47% 11% 104,417 41% 10%
Services 59,117 22% 5% 94,607 37% 9%
Healthcare 85,945 31% 7% 52,486 21% 4%
Consumer - 0% 0% 1,033 1% 0%
Total 275,739 100% 23% 252,543 100% 23%
(b) Cash and cash equivalents
The Company limits its credit risk exposure in cash and cash equivalents by
depositing cash with adequately rated institutions. No allowance for
impairment is made for cash and cash equivalents.
The exposure to credit risk to cash and cash equivalents is set out below:
CREDIT RATING 31 DECEMBER 31 DECEMBER
2020 2019
€'000 €'000
Cash held in banks A 70 21
Cash held in banks A- 254 14
Cash held in banks BBB+ 43,437 3,242
Cash held in money market funds AAA 80,808 -
Total 124,569 3,277
The Company's cash is held with RBS International, HSBC, ING and JP Morgan,
Goldman Sachs and Deutsche Bank money market funds.
(c) Investment receivables and other receivables
The Company monitors the credit risk of investment receivables and other
receivables on an ongoing basis. These assets are not considered impaired nor
overdue for repayment.
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its
financial obligations as they fall due. Such obligations are met through a
combination of liquidity from the sale of investments, revolving credit
facility as well as cash resources. In accordance with the Company's policy,
the Investment Manager monitors the Company's liquidity position on a regular
basis; the Board of Directors also reviews it, at a minimum, on a quarterly
basis.
The Company invests in two portfolios, Private Equity Investments and Derived
Investments. Each portfolio has a different liquidity profile.
Derived Investments in the form of listed securities are considered to be
liquid investments that the Company may realise on short notice. These are
determined to be readily realisable, as the majority are listed on major
global stock exchanges. Derived Investments in the form of debt and unlisted
equity have a mixed liquidity profile as some positions may not be readily
realisable due to an inactive market or due to other factors such as
restricted trading windows during the year. Debt investments held in actively
traded bonds are considered to be readily realisable.
The Company's Private Equity Investments are not readily realisable although,
in some circumstances, they could be sold in the secondary market, potentially
at a discounted price. The timing and quantum of Private Equity distributions
is difficult to predict, however, the Company has some visibility on capital
calls as the majority of the underlying funds operate capital call facilities.
These are typically drawn by the underlying funds for periods of c.12 months
to fund investments and fund operating expenses, and provide the Company with
reasonable visibility of calls for this period.
The table below summarises the maturity profile of the Company's financial
liabilities at 31 December 2020 based on contractual undiscounted repayment
obligations. The contractual maturities of most financial liabilities are less
than three months, with the exception of the revolving credit facility and
commitments to Private Equity Investments, where their expected cash flow
dates are summarised in the tables below.
The Company does not manage liquidity risk on the basis of contractual
maturity, instead the Company manages liquidity risk based on expected cash
flows.
31 December 2020
UP TO 3-12 MONTHS 1-5 YEARS TOTAL
3MONTHS €'000 €'000 €'000
€'000
Investment payables 30,965 - - 30,965
Accrued expenses 1,481 - - 1,481
Private Equity Investments outstanding commitments and recallable 53,543 60,590 344,698 458,831
distributions
Total 85,989 60,590 344,698 491,277
31 December 2019
UP TO 3-12 MONTHS 1-5 YEARS TOTAL
3MONTHS €'000 €'000 €'000
€'000
Investment payables 13,352 - - 13,352
Accrued expenses 1,705 - - 1,705
Private Equity Investments outstanding commitments and recallable 7,374 28,580 460,917 496,871
distributions
Total 22,431 28,580 460,917 511,928
The Company has outstanding commitments and recallable distributions to
Private Equity Investments as summarised below:
31 DECEMBER 31 DECEMBER
2020 2019
€'000 €'000
Apax Europe VI 225 225
Apax Europe VII 1,030 1,030
Apax VIII 20,440 16,781
Apax IX 25,870 32,757
Apax X 379,355 400,438
AMI Opportunities 11,457 11,808
Apax Digital Fund 20,454 33,832
Total 458,831 496,871
At 31 December 2020, the Company had undrawn commitments and recallable
distributions of €458.8m (31 December 2019: €496.9m), of which €114.1m
(31 December 2019: €36.5m) is expected to be drawn within 12 months. The
increase in expected calls due within 12 months is mainly due to Apax X,
having closed six investments during the year.
The Company has access to a short-term revolving credit facility upon which it
can draw up to €140.0m. The Company may utilise this facility in the short
term to bridge Private Equity calls and ensure that it can realise the Derived
Investments at the best price available. At 31 December 2020, the facility
remained undrawn (31 December 2019: €Nil).
At year end, the Company's investments are recorded at fair value. The
remaining assets and liabilities are of a short-term nature and their fair
values approximate their carrying values.
Market risk
Market risk is the risk that changes in market prices such as foreign currency
exchange rates, interest rates and equity prices will affect the Company's
income or the value of its investments. The Company aims to manage this risk
within acceptable parameters while optimising the return.
(a) Price risk
The Company is exposed to price risk on its Private Equity Investments and
Derived Investments. All positions within the portfolio involve a degree of
risk and there are a wide variety of risks that affect how the price of each
individual investments will perform. The key price risks in the Company's
portfolio include, but are not limited to: investment liquidity - where a
significant imbalance between buyers and sellers can cause significant
increases or decreases in prices; the risk that a company which has issued a
bond or a loan has its credit rating changed, which can lead to significant
pricing risk; and general investment market direction, where various factors
such as the state of the global economy or global political developments can
impact prices.
For the year ended 31 December 2020, the main price risks for the Company's
portfolio were market uncertainty due to the global Covid-19 pandemic and
economic uncertainty in Europe and the US together with uncertainty regarding
fiscal policy. The Investment Manager actively manages and monitors price
risk. The table below reflects the sensitivity of price risk of the Invested
Portfolio and the impact on NAV:
31 DECEMBER 2020 BASE CASE BULL CASE BEAR CASE
€'000 (+20%) (-20%)
€'000 €'000
Financial assets 1,107,723 1,329,268 886,178
Change in NAV and profit 221,545 (221,545)
Change in NAV (%) 18% -18%
Change in total income 131% -131%
Change in profit for the year 137% -137%
31 DECEMBER 2019 BASE CASE BULL CASE BEAR CASE
€'000 (+20%) (-20%)
€'000 €'000
Financial assets 1,111,218 1,333,462 888,974
Financial liabilities (2,741) (3,290) (2,192)
Change in NAV and profit 221,695 (221,695)
Change in NAV (%) 20% -20%
Change in total income 98% -98%
Change in profit for the year 105% -105%
(b) Currency risk
The Company is exposed to currency risk on those investments, cash, interest
receivable and other non-current assets which are denominated in a currency
other than the Company's functional currency, which is the euro. The Company
does not hedge the currency exposure related to its investments. The Company
regards its exposure to exchange rate changes on the underlying investments as
part of its overall investment return and does not seek to mitigate that risk
through the use of financial derivatives. The Company is also exposed to
currency risk on fees which are denominated in a currency other than the
Company's functional currency.
The Company's exposure to currency risk on net assets is as follows:
AT 31 DECEMBER 2020 EUR USD GBP INR HKD NZD CHF TOTAL
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Financial assets at FVTPL 412,497 646,226 20,741 8,462 7,070 12,727 - 1,107,723
Cash and cash equivalents 50,359 46,805 27,335 70 - - - 124,569
Investment receivables 151 151
Interest receivable - 1,127 - - - 17 - 1,144
Other receivables 43 - - - - - - 43
Investment payables - (30,965) - - - - - (30,965)
Accrued expenses (1,212) (122) (147) - - - - (1,481)
Total net foreign currency exposure 461,687 663,222 47,929 8,532 7,070 12,744 - 1,201,184
AT 31 DECEMBER 2019 EUR USD GBP INR HKD NOK CHF TOTAL
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Financial assets at FVTPL 406,898 607,995 40,029 21,149 11,566 12,682 10,899 1,111,218
Financial liabilities at FVTPL (1,373) (1,368) - - - - - (2,741)
Cash and cash equivalents 2,885 279 92 21 - - - 3,277
Investment receivables - 129 - - - - - 129
Interest receivable - 1,819 - - - 314 - 2,133
Other receivables 10 - - - - - - 10
Investment payables - (13,352) - - - - - (13,352)
Accrued expenses (1,449) (111) (145) - - - - (1,705)
Total net foreign currency exposure 406,971 595,391 39,976 21,170 11,566 12,996 10,899 1,098,969
The Company's sensitivity to changes in foreign exchange movements on net
assets is summarised below:
31 DECEMBER 2020 BASE CASE BULL CASE BEAR CASE
€'000 (+15%) (-15%)
€'000 €'000
USD 663,222 762,705 563,739
GBP 47,929 55,118 40,740
INR 8,532 9,812 7,252
HKD 7,070 8,131 6,010
NZD 12,744 14,656 10,832
CHF - - -
Change in NAV and profit 110,925 (110,925)
Change in NAV (%) 9% -9%
Change in total income 66% -66%
Change in profit for the year 68% -68%
31 DECEMBER 2019 BASE CASE BULL CASE BEAR CASE
€'000 (+15%) (-15%)
€'000 €'000
USD 595,391 684,700 506,082
GBP 39,976 45,972 33,980
INR 21,170 24,346 17,995
HKD 11,566 13,301 9,831
NZD 12,996 14,945 11,047
CHF 10,899 12,534 9,264
Change in NAV and profit 103,800 (103,800)
Change in NAV (%) 9% -9%
Change in total income 46% -46%
Change in profit for the year 49% -49%
(c) Interest rate risk
Interest rate risk arises from the effects of fluctuations in the prevailing
levels of market interest rates on financial assets and liabilities and future
cash flows. The Company holds debt investments, loans payable and cash and
cash equivalents that expose the Company to cash flow interest rate risk. The
Company's policy makes provision for the Investment Manager to manage this
risk and to report to the Board of Directors as appropriate.
The Company's exposure to interest rate risk was €400.3m (31 December 2019:
€255.8m). The analysis below assumes that the price remains constant for
both bull and bear case. The impact of interest rate floors on the debt
portfolio have been included in the bear case and fixed rate debt positions
have been excluded from the below:
31 DECEMBER 2020 BASE CASE BULL CASE BEAR CASE
€'000 (+500BPS) (-500BPS)
€'000 €'000
Cash and cash equivalents 124,569 130,797 118,341
Debt 275,739 289,526 275,739
Change in NAV and profit 20,015 (6,228)
Change in NAV (%) 2% -1%
Change in total income 12% -4%
Change in profit for the year 12% -4%
31 DECEMBER 2019 BASE CASE BULL CASE BEAR CASE
€'000 (+500BPS) (-500BPS)
€'000 €'000
Cash and cash equivalents 3,277 3,441 3,113
Debt 252,543 265,171 252,543
Change in NAV and profit 12,792 (164)
Change in NAV (%) 1% 0%
Change in total income 6% 0%
Change in profit for the year 6% 0%
(d) Concentration risk
The Investment Manager also reviews the concentration risk of the Invested
Portfolio. The spread of the portfolio across the four key sectors is set out
below:
% OF % OF DEBT % OF EQUITY % OF % OF DEBT % OF EQUITY
PRIVATE EQUITY INVESTMENTS INVESTMENTS PRIVATE EQUITY INVESTMENTS INVESTMENTS
31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER 31 DECEMBER
2020 2020 2020 2019 2019 2019
Tech 41% 47% 36% 39% 41% 37%
Services 27% 22% 39% 22% 38% 29%
Healthcare 15% 31% 16% 16% 21% 32%
Consumer 11% 0% 3% 20% 0% 0%
Digital 5% 0% 0% 3% 0% 0%
Other 1% 0% 6% 0% 0% 2%
Total 100% 100% 100% 100% 100% 100%
Capital management
The Company's capital management objectives are to maintain a strong capital
base to ensure it will continue as a going concern, maximise capital
appreciation and provide regular dividends to its shareholders. The Company's
capital comprises of non-redeemable ordinary shares and retained earnings.
The ordinary shares are listed on the London Stock Exchange. The Board
receives regular reporting from its corporate broker which provides insight
into shareholder sentiment and movements in the NAV per share discount. The
Board monitors and assesses the requirement for discount management
strategies.
13 Fair value estimation
(a) Investments measured at fair value
IFRS 13 "Fair Value Measurement" ("IFRS13") requires the Company to classify
fair value measurements using a fair value hierarchy that reflects the
significance of the inputs used to make those measurements. The fair value
hierarchy has the following levels:
- Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1).
- Valuation techniques based on observable inputs (other than quoted
prices included within level 1), that are observable for the asset or
liability, either directly (that is, as prices) or indirectly (that is,
derived from prices). This category includes instruments valued using: quoted
market prices in active markets for similar but not identical instruments;
quoted prices for identical instruments in markets that are not considered to
be active; and, other valuation techniques where all the significant inputs
are directly or indirectly observable from market data (level 2).
- Valuation techniques for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level 3).
The level in the fair value hierarchy within which the fair value measurement
is categorised in its entirety is determined on the basis of the lowest level
input that is significant to the fair value measurement in its entirety. If a
fair value measurement uses observable inputs that require significant
adjustment based on unobservable inputs, that measurement is a level 3
measurement. Assessing the significance of a particular input to the fair
value measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
The determination of what constitutes "observable" requires significant
judgement by the Company. The Company considers observable data to be market
data that is readily available, regularly distributed or updated, reliable and
verifiable, not proprietary, and provided by independent sources that are
actively involved in the relevant market. The Company also determines if there
is a transfer between each respective level at the end of each reporting
period based on the valuation information available.
The following table analyses within the fair value hierarchy the Company's
financial assets and financial liabilities (by class) measured at fair value
at 31 December 2020:
ASSETS LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
€'000 €'000 €'000 €'000
Private Equity financial assets - - 788,307 788,307
Derived Investments 39,480 275,739 4,197 319,416
Debt - 275,739 - 275,739
Equities 39,480 - 4,197 43,677
Total 39,480 275,739 792,504 1,107,723
The following table analyses within the fair value hierarchy the Company's
financial assets and liabilities (by class) measured at fair value at 31
December 20191:
ASSETS LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
€'000 €'000 €'000 €'000
Private Equity financial assets - - 769,019 769,019
Derived Investments 87,102 252,543 2,554 342,199
Debt - 252,543 - 252,543
Equities 87,102 - 2,554 89,656
Total 87,102 252,543 771,573 1,111,218
LIABILITIES LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
€'000 €'000 €'000 €'000
Private Equity financial liabilities - - (2,741) (2,741)
Total - - (2,741) (2,741)
1. The Company's investment in Apax X has been reclassified from
financial assets held at FVTPL to financial liabilities held at FVTPL
IFRS13 requires the Company to describe movements in and transfers between
levels of the fair value hierarchy. The Company determines if there is a
transfer between each respective level at the end of each reporting period
based on the valuation information available.
There were no transfers to or from level 1, level 2 or level 3 during the
period.
(b) Significant unobservable inputs used in measuring fair value
The Company values debt instruments in the Derived Portfolio using third-party
market data and broker quotes where available. Where such information is not
available the Company uses models that take account of factors that are
relevant to each investment and that prioritise the use of observable inputs.
The Company values unquoted equities in the Derived Portfolio using recent
transaction data where applicable or models that utilise comparable company
multiples applied to budgeted and historical earnings.
The Company values its holdings in Private Equity based on the NAV statements
it receives from the respective underlying fund. The main inputs into the
valuation models used to value the underlying level 3 investments within the
Private Equity Funds are earnings multiples (based on the earnings multiples
of comparable listed companies). These are applied to the budgeted or
historical earnings of each investment. In addition, original transaction
price, recent transactions in the same or similar instruments and completed
third-party transactions in comparable instruments are also considered.
Movements in level 3 investments are summarised in the table below:
YEAR ENDED YEAR ENDED
31 DECEMBER 2020 31 DECEMBER 2019
PRIVATE EQUITY INVESTMENTS €'000 DERIVED INVESTMENTS TOTAL INVESTMENTS €'000 PRIVATE EQUITY INVESTMENTS DERIVED
€'000
€'000
€'000
TOTAL
€'000
Opening fair value 766,278 2,554 768,832 591,458 18,681 610,139
Additions 55,651 - 55,651 165,904 492 166,396
Disposals and repayments (207,280) - (207,280) (182,353) - (182,353)
Realised gains on financial assets 100,142 _ 100,142 - - -
Unrealised gains on financial assets 73,516 1,643 75,159 194,009 (7,154) 186,855
Unrealised losses on financial liabilities - - - (2,741) - (2,741)
Transfers into level 3 - - - - (9,465) (9,465)
Closing fair value 788,307 4,197 792,504 766,278 2,554 768,832
Financial assets held at FVTPL - - - 769,019 (7,154) 771,573
Financial liabilities held at FVTPL¹ - - - (2,741) - (2,741)
1. The Company's investment in Apax X has been reclassified from
financial assets at FVTPL to financial liabilities at FVTPL
The unrealised gains attributable to only assets held at 31 December 2020 were
€75.2m (31 December 2019: €184.1m).
The table below sets out information about significant unobservable inputs
used in measuring financial instruments categorised as level 3 in the fair
value hierarchy:
DESCRIPTION VALUATION TECHNIQUE SIGNIFICANT UNOBSERVABLE INPUTS SENSITIVITY TO CHANGES IN SIGNIFICANT UNOBSERVABLE INPUTS 31 DECEMBER 2020 VALUATION €'000 31 DECEMBER 2019 VALUATION €'000
Private Equity financial assets NAV adjusted for carried interest NAV The Company does not apply further discount or liquidity premiums to the 788,307 769,019
valuations as these are already captured in the underlying valuation. This NAV
is subject to changes in the valuations of the underlying portfolio companies.
These can be exposed to a number of risks, including liquidity risk, price
risk, credit risk, currency risk and interest rate risk.
Private Equity financial liabilities(1)
A movement of 10% in the value of Private Equity Investments would move the - (2,741)
NAV at the year end by 6.6% (31 December 2019: 7.0%).
Equities Comparable company earnings multiples and/or precedent transaction analysis Comparable company multiples The Company held 3 equity positions (31 December 2019: 4) of which 3 positions 4,197 2,554
(31 December 2019: 3) were valued using comparable company multiples. The
average multiple was 9.0x (31December 2019: 9.0x).
A movement of 10% in the multiple applied would move the NAV at year end by
0.1% (31 December 2019: 0.1%).
1. The Company's investment in Apax X has been reclassified from financial
assets at FVTPL to financial liabilities at FVTPL
14 SHAREHOLDERS' CAPITAL
At 31 December 2020, the Company had 491,100,768 ordinary shares fully paid
with no par value in issue (31 December 2019: 491,100,768 shares). All
ordinary shares rank pari passu with each other, including voting rights and
there has been no change since 31 December 2019.
The Company has one share class; however, a number of investors are subject to
lock-up periods between five and ten years, which restricts them from
disposing of ordinary shares issued at admission. For investors with five-year
lock-up periods, 20% of ordinary shares are released from lock-up each year
from the first anniversary of admission, 15 June 2016. As at 31 December 2020,
all of these shares have been released following the fifth anniversary on the
15 June 2020. For investors with ten-year lock-up periods, 20% of ordinary
shares are released from lock-up each year from the sixth anniversary of
admission, 15 June 2021.
15 EARNINGS AND NAV PER SHARE
EARNINGS YEAR ENDED 31 DECEMBER 2020 YEAR ENDED 31 DECEMBER 2019
Profit or loss for the year attributable to equity shareholders: €'000 161,983 210,932
Weighted average number of shares in issue
Ordinary shares at end of year 491,100,768 491,100,768
Shares issued in respect of performance fee - -
Total weighted ordinary shares 491,100,768 491,100,768
Dilutive adjustments - -
Total diluted weighted ordinary shares 491,100,768 491,100,768
Effect of performance fee adjustment on ordinary shares
Performance shares to be awarded based on a liquidation basis(1) - 3,380,271
Adjusted shares(2) 491,100,768 494,481,039
Earnings per share (cents)
Basic 32.98 42.95
Diluted 32.98 42.95
Adjusted 32.98 42.66
F 31 DECEMBER 31 DECEMBER
2020 2019
NAV €'000
NAV at end of year 1,201,184 1,098,969
NAV per share (€)
NAV per share 2.45 2.24
Adjusted NAV per share 2.45 2.22
1. The number of performance shares is calculated inclusive of deemed
realised performance shares that would be issued utilising the theoretical
performance fee payable calculated on a liquidation basis
2. The calculation of Adjusted Shares above assumes that new shares
were issued by the Company to the Investment Manager in lieu of the
performance fee. As per the prospectus, the Company may also purchase shares
from the market if the Company is trading at a discount to its NAV per share.
In such a case, the Adjusted NAV per share would be calculated by taking the
NAV at the year adjusted for the performance fee reserve and then divided by
the current number of ordinary shares in issue. At 31 December 2020, there was
no performance fee accrued and therefore Adjusted NAV per share remained the
same as NAV per share at €2.45. In the prior year, the Adjusted NAV per
share for both methodologies resulted in an Adjusted NAV per share of €2.22
At 31 December 2020, there were no items that would cause a dilutive effect on
earnings per share. The adjusted earnings per share has been calculated based
on the profit attributable to shareholders adjusted for the total accrued
performance fee at year end over the weighted average number of ordinary
shares. This has been calculated on a full liquidation basis.
16 DIVIDENDS
YEAR ENDED YEAR ENDED
31 DECEMBER 2020 31 DECEMBER 2019
DIVIDENDS PAID TO SHAREHOLDERS €'000 £'000 €'000 £'000
Final dividend paid - 5.28 pence per share (31 December 2019: 4.12 pence per 30,006 25,930 23,747 20,233
share)
Interim dividend paid - 4.87 pence per share (31 December 2019: 4.86 pence per 26,519 23,916 25,880 23,867
share)
Total 56,525 49,846 49,627 44,100
YEAR ENDED YEAR ENDED
31 DECEMBER 2020 31 DECEMBER 2019
DIVIDENDS PROPOSED € £ € £
Final dividend per share 6.11c 5.28p 5.59c 4.68p
On 1 March 2021, the Board approved the final dividend for 2020, 5.28 pence
per share (6.11 cents euro equivalent). This represents 2.5% of the Company's
euro NAV at 31 December 2020 and will be paid on 2 April 2021.
On 24 August 2020, the Board approved an interim dividend for the six months
ended 30 June 2020, 4.87 pence per share (5.40 cents euro equivalent). This
represents 2.5% of the Company's euro NAV at 30 June 2020 and was paid on 25
September 2020.
The Board considered the Company's future liquidity position and ability to
pay dividends and deemed it appropriate to maintain payment of the interim and
final dividend in respect of 2020.
17 SUBSEQUENT EVENTS
On 19 January 2021, the Company amended the terms of its revolving credit
facility with Credit Suisse. The revised agreement amends to facility term,
converting it to a two-year evergreen structure whereby either party is
required to give two years' notice to terminate. Additionally, the interest
rate charged will be LIBOR or EURIBOR plus a margin of 230bps and the non
utilisation fee, on an initial blended basis, will be around 100bps per annum.
On 2 March 2021, the Board announced the final dividend for 2020, 5.28 pence
per share (6.11 cents euro equivalent). This represents 2.5% of the Company's
euro NAV at 31 December 2020 and has an expected payment date of 2 April 2021.
Financial statements \ Administration
DIRECTORS (ALL NON-EXECUTIVE) INDEPENDENT AUDITOR
Tim Breedon CBE (Chairman) KPMG Channel Islands Limited
Susie Farnon (Chair of the Audit Committee) Glategny Court
Chris Ambler St Peter Port
Mike Bane Guernsey GY1 1WR
Stephanie Coxon (Appointed on 31 March 2020) Channel Islands
REGISTERED OFFICE OF THE COMPANY ASSOCIATION OF INVESTMENT COMPANIES - AIC
PO Box 656 The AIC is the trade body for closed-ended investment companies. It helps its
member companies deliver better returns for their investors through lobbying,
East Wing media engagement, technical advice, training, and events.
Trafalgar Court
Les Banques www.theaic.co.uk
St Peter Port
Guernsey GY1 3PP DIVIDEND TIMETABLE
Channel Islands Announcement: 2 March 2021
Ex-dividend date: 11 March 2021
INVESTMENT MANAGER Record date: 12 March 2021
Apax Guernsey Managers Limited Payment date: 2 April 2021
Third Floor, Royal Bank Place
1 Glategny Esplanade EARNINGS RELEASES
St Peter Port Earnings releases are expected to be issued on or around 5 May and 4 November
2021. The interim results for the six months to 30 June 2021 are expected to
Guernsey GY1 2HJ be issued around 19 August 2021.
Channel Islands
STOCK SYMBOL
INVESTMENT ADVISOR London Stock Exchange: APAX
Apax Partners LLP
33 Jermyn Street ENQUIRIES
London Any enquiries relating to shareholdings on the share register (for example,
transfers of shares, changes of name or address, lost share certificates or
SW1Y 6DN dividend cheques) should be sent to the Registrars at the address given above.
The Registrars offer an online facility at www.signalshares.com which enables
United Kingdom shareholders to manage their shareholding electronically.
www.apax.com
INVESTOR RELATIONS
ADMINISTRATOR, COMPANY SECRETARY AND DEPOSITARY Enquiries relating to AGA's strategy and results or if you would like to
arrange a meeting, please contact:
Aztec Financial Services (Guernsey) Limited
Katarina Sallerfors
PO Box 656
Investor Relations - AGA
East Wing
Apax Partners LLP
Trafalgar Court
33 Jermyn Street
Les Banques
London
St Peter Port
SW1Y 6DN
Guernsey GY1 3PP
United Kingdom
Channel Islands
Tel: +44 (0) 207 872 6300
Tel: +44 (0)1481 749 700
investor.relations@apaxglobalalpha.com
AGA-admin@aztecgroup.co.uk
www.aztecgroup.co.uk
CORPORATE BROKER
Jefferies International Limited
100 Bishopsgate
London EC2N 4JL
United Kingdom
REGISTRAR
Link Asset Services
Mont Crevelt House
Bulwer Avenue
St Sampson
Guernsey GY2 4LH
Channel Islands
Tel: +44 (0) 871 664 0300
enquiries@linkgroup.co.uk
www.linkassetservices.com
Financial statements \ Investment policy
The Company's investment policy is to make (i) Private Equity Investments,
which are primary and secondary commitments to, and investments in, existing
and future Apax Funds and (ii) Derived Investments, which Apax will typically
identify as a result of the process that Apax Partners undertakes in its
private equity activities and which will comprise direct or indirect
investments other than Private Equity Investments, including primarily
investments in public and private debt, as well as limited investments in
equity, primarily in listed companies. For the foreseeable future, the Board
believes that market conditions and the relative attractiveness of investment
opportunities in private equity will cause the Company to hold the majority of
its investments in private equity assets. The investment mix will fluctuate
over time due to market conditions and other factors, including calls for and
distributions from Private Equity Investments, the timing of making and
exiting Derived Investments and the Company's ability to invest in future Apax
Funds. The actual allocation may therefore fluctuate according to market
conditions, investment opportunities and their relative attractiveness, the
cash flow requirements of the Company, its dividend policy and other factors.
PRIVATE EQUITY INVESTMENTS
The Company expects that it will seek to invest in any new Apax Funds that are
raised in the future. Private Equity Investments may be made into Apax Funds
with any target sectors and geographic focus and may be made directly or
indirectly. The Company will not invest in third-party managed funds.
DERIVED INVESTMENTS
The Company will typically follow the Apax Group's core sector and
geographical focus in making Derived Investments, which may be made globally.
Derived Investments may include among others, (i)direct and indirect
investments in equity and debt instruments, including equity in private and
public companies, as well as in private and public debt which may include
sub-investment grade and unrated debt instruments; (ii) co-investments with
Apax Funds or third-parties; (iii) investments in the same or different types
of equity or debt instruments in portfolio companies as the Apax Funds and may
potentially include (iv) acquisitions of Derived Investments from Apax Funds
or third-parties; and (v) investments in restructurings; and (vi) controlling
stakes in companies.
INVESTMENT RESTRICTIONS
The following specific investment restrictions apply to the Company's
investment policy:
no investment or commitment to invest shall be made in any Apax Fund which
would cause the total amounts invested by the Company in, together with all
amounts committed by the Company to, such Apax Fund to exceed, at the time of
investment or commitment, 25% of the Gross Asset Value; this restriction does
not apply to any investments in or commitments to invest made to any Apax Fund
that has investment restrictions restricting it from investing or committing
to invest more than 25% of its total commitments in any one underlying
portfolio company;
not more than 15% of the Gross Asset Value may be invested in any one
portfolio company of an Apax Fund on a look-through basis;
not more than 15% of the Gross Asset Value may be invested in any one Derived
Investment; and
in aggregate, not more than 20% of the Gross Asset Value is intended to be
invested in Derived Investments in equity securities of publicly listed
companies. However, such aggregate exposure will always be subject to an
absolute maximum of 25% of the Gross Asset Value.
The aforementioned restrictions apply as at the date of the relevant
transaction or commitment to invest. Hence, the Company would not be required
to effect changes in its investments owing to appreciations or depreciations
in value, distributions or calls from existing commitments to Apax Funds,
redemptions or the receipt of, or subscription for, any rights, bonuses or
benefits in the nature of capital or of any acquisition or merger or scheme of
arrangement for amalgamation, reconstruction, conversion or exchange or any
redemption, but regard shall be had to these restrictions when considering
changes or additions to the Company's investments (other than where these
investments are due to commitments made by the Company earlier).
The Company may borrow in aggregate up to 25% of Gross Asset Value at the time
of borrowing to be used for financing or refinancing (directly or indirectly)
its general corporate purposes (including without limitation, any general
liquidity requirements as permitted under its Articles of Incorporation),
which may include financing short-term investments and/or buybacks of ordinary
shares. The Company does not intend to introduce long-term structural gearing.
Financial statements \ AIFMD
Alternative Investment Fund Managers Directive ("AIFMD")
STATUS AND LEGAL FORM
The Company is a non-EU Alternative Investment Fund ("AIF"), being a
closed-ended investment company incorporated in Guernsey and listed on the
London Stock Exchange. The Company's registered office is PO Box 656, East
Wing, Trafalgar Court, Les Banques, St Peter Port, Guernsey GY1 3PP.
REMUNERATION DISCLOSURE
This disclosure contains general information about the basic characteristics
of AGML's (the "AIFM") remuneration policies and practices as well as some
detailed information regarding the remuneration policies and practices for
board directors whose professional activities have a material impact on the
risk profile of Apax Global Alpha Limited (the "AIF"). This disclosure is
intended to provide the information contemplated by Section XIII of the ESMA
Guidelines on sound remuneration policies under the AIFMD and paragraph 8 of
the Commission Recommendation (2009/384/EC of 30 April 2009 on remuneration
policies in the financial services sector) taking into account the nature,
scale and complexity of the AIFM and the AIFs it manages. The AIFM is a non-EU
manager and the AIF is a non-EU closed-ended investment company incorporated
in Guernsey and listed on the London Stock Exchange.
The AIF is externally managed(1) by the AIFM. The AIFM does not have any
employees, however it does have a board of directors comprising four people,
two of whom are employees of Apax Partners Guernsey Limited ("APG") and two of
whom are non-executive directors. No other persons are remunerated directly
from the AIFM for work in relation to the AIFM or the AIF. The directors of
the AIFM fall within the Directive definitions as senior management and
risk-takers as detailed below:
- "senior management" means the relevant persons responsible for the
supervision of the AIFM and for the assessment and periodical review of the
adequacy and effectiveness of the risk management process and policies of the
AIFM;
- "risk-takers" means all staff whose actions have a material impact on
the AIFM's risk profile or the risk profile of the AIF and, given the size of
the AIFM's operations, includes all staff of the AIFM who are involved
directly or indirectly in the management of the AIF.
GENERAL DESCRIPTION OF POLICY
The board of the AIFM has adopted a remuneration policy which applies to the
directors. The overarching aim of the policy is twofold: (i) to ensure that
there is no encouragement for risk-taking at the level of the AIF which is
inconsistent with the risk profile and investment strategy of the AIF and (ii)
to encourage proper governance, risk management and the use of sound control
processes. All directors are responsible for ensuring the AIF acts in
accordance with its investment policy and managing the AIFM's risks
effectively. The policy recognises that two of the directors are non-executive
directors and two directors are Apax employees (the"Apax directors").
Remuneration (which excludes carried interest) paid to the directors is not
based on, or linked to, the overall performance of the AIF. There is no
variable component in the remuneration paid to any of the directors for their
services on the board and thus the policy does not seek to identify
quantitative and qualitative criteria by which the directors' performance can
be assessed for the purposes of adjusting a variable component of
remuneration. Remuneration paid to the directors is therefore not based on, or
linked to, the overall performance of the AIF.
GENERAL DESCRIPTION OF REMUNERATION GOVERNANCE
The remuneration process is overseen by the AIFM directors. The board of the
AIFM reviews the remuneration policy annually. The board of the AIFM ensures
that the policy is transparent and easy to understand.
Remuneration framework - objectives The remuneration of directors is described
in the table below:
TYPE OF REMUNERATION PURPOSE
Non-executive directors of the AIFM x2 persons - a contractual arrangement is in place with each person for their services
- receive a set amount of remuneration each quarter
- the remuneration of these directors is detailed in the disclosed
remuneration value
APG employees as directors of the AIFM x2 persons receive no direct remuneration resulting from the performance of the AIFM or
the AIF
the services provided by these directors is included within the total fee
payable for services provided by the administrator to the AIFM and the
performance of these services forms part of the employees duties
Variable remuneration (annual bonus) no such remuneration is paid
QUANTITATIVE DISCLOSURES
The table below shows the breakdown of remuneration for the fiscal year ended
31 December 2020, for the directors:
Total The total amount of fixed remuneration for the reporting period paid by the £155,000
AIFM to its directors
Carried interest Not applicable to the AIF(2)
1. From the Directive - "Depending on their legal form, it should be
possible for AIFs to be either externally or internally managed. An AIF should
be deemed externally managed when an external legal person has been appointed
as manager by or on behalf of the AIF, which through such appointment is
responsible for managing the AIF"
2. The AIF will not pay carried interest, which can be confirmed in
its prospectus
MATERIAL CHANGES
There have been no material changes to the information disclosed under Article
23 of the AIFMD in the prospectus of the Company.
Financial statements \ Quarterly returns since 1Q17
TOTAL RETURN1 (EURO) RETURN ATTRIBUTION
PRIVATE EQUITY DERIVED DEBT DERIVED EQUITY PRIVATE EQUITY DERIVED DEBT DERIVED EQUITY PERFORMANCE FEE OTHER2 TOTAL NAV RETURN
1Q17 1.6% 0.5% 4.7% 0.7% 0.2% 0.6% (0.3%) 0.2% 1.4%
2Q17 (2.7%) (7.7%) 11.4% (1.9%) (2.4%) 2.9% (0.6%) (0.2%) (2.1%)
3Q17 1.0% (1.4%) 0.2% 0.8% (0.3%) 0.2% (0.2%) (0.9%) (0.3%)
4Q17 3.4% 5.2% 3.4% 1.8% 1.0% 1.0% (0.4%) 0.2% 3.5%
1Q18 0.0% (1.7%) (0.2%) (0.3%) 0.0% (0.1%) 0.2% (0.4%) (0.7%)
2Q18 11.0% 2.5% (1.8%) 6.9% 0.7% (0.2%) (0.3%) (0.1%) 6.9%
3Q18 5.4% 1.5% (10.4%) 3.5% 0.2% (1.8%) 0.1% (0.2%) 1.8%
4Q18 (0.0%) 2.3% (3.9%) (0.0%) 0.2% (0.7%) (0.2%) 0.1% (0.7%)
1Q19 12.3% 4.8% 1.2% 7.9% 0.9% 0.1% 0.0% (0.2%) 8.7%
2Q19 7.1% 0.9% (0.4%) 4.8% 0.2% 0.0% (0.3%) (0.2%) 4.4%
3Q19 6.9% 6.0% (3.5%) 4.3% 1.4% (0.4%) (0.2%) (0.2%) 4.9%
4Q19 3.0% 1.8% 14.9% 2.5% 0.1% 1.3% (0.5%) 0.0% 3.4%
1Q20 (11.6%) (7.7%) (25.1%) (8.0%) (1.8%) (1.8%) 0.0% (0.3%) (11.9%)
2Q20 16.0% 7.0% 14.8% 11.1% 1.6% 0.7% 0.0% (0.2%) 13.3%
3Q20 12.4% 2.1% (2.4%) 8.4% 0.4% (0.1%) 0.0% (0.3%) 8.5%
4Q20 8.7% (0.1%) 36.1% 6.0% 0.0% 1.0% 0.0% (0.1%) 6.9%
2017 3.3% (2.0%) 24.2% 1.6% (0.7%) 4.3% (1.4%) (1.7%) 2.2%
2018 17.4% 4.5% (17.6%) 10.1% 1.2% (3.0%) 0.2% (1.4%) 7.1%
2019 33.9% 11.8% 9.1% 20.2% 2.7% 1.1% (1.0%) (0.3%) 22.7%
2020 25.4% 0.2% (3.8%) 15.9% 0.0% (0.2%) 0.0% (0.9%) 14.8%
TOTAL RETURN(1) (CONSTANT CURRENCY) RETURN ATTRIBUTION
PRIVATE EQUITY DERIVED DEBT DERIVED EQUITY PRIVATE EQUITY DERIVED DEBT DERIVED EQUITY PERFORMANCE FEE OTHER(2) FX(3) TOTAL NAV RETURN
1Q17 2.0% 1.7% 4.5% 1.1% 0.7% 0.7% (0.3%) (0.2%) (0.6%) 1.4%
2Q17 1.5% (1.5%) 17.9% 0.7% (0.3%) 3.3% (0.5%) (0.6%) (4.8%) (2.1%)
3Q17 2.5% 1.7% 1.1% 1.3% 0.5% 0.5% (0.1%) (0.2%) (2.3%) (0.3%)
4Q17 4.5% 6.6% 3.9% 2.7% 1.4% 1.2% (0.4%) (0.2%) (1.1%) 3.5%
1Q18 1.3% 0.6% 2.4% 0.4% 0.4% 0.2% 0.3% (0.3%) (1.7%) (0.7%)
2Q18 8.9% (2.6%) (3.9%) 5.8% (0.2%) (0.6%) (0.3%) (0.5%) 2.7% 6.9%
3Q18 5.5% 1.0% (9.5%) 3.5% 0.1% (1.7%) 0.2% (0.2%) (0.1%) 1.8%
4Q18 (0.3%) 1.3% (4.9%) (0.2%) 0.1% (0.8%) (0.3%) 0.0% 0.5% (0.7%)
1Q19 10.0% 2.5% (1.5%) 6.4% 0.5% (0.2%) 0.0% (0.2%) 2.2% 8.7%
2Q19 8.0% 2.3% 0.8% 5.3% 0.5% 0.1% (0.3%) (0.2%) (1.0%) 4.4%
3Q19 4.8% 2.5% (5.1%) 3.1% 0.6% (0.6%) (0.2%) (0.3%) 2.3% 4.9%
4Q19 4.1% 3.7% 15.2% 3.2% 0.6% 1.3% (0.5%) 0.0% (1.2%) 3.4%
1Q20 (11.6%) (8.6%) (23.5%) (7.9%) (2.0%) (1.7%) 0.0% (0.2%) (0.1%) (11.9%)
2Q20 16.3% 8.4% 16.2% 11.4% 2.0% 0.8% 0.0% (0.2%) (0.6%) 13.3%
3Q20 15.9% 5.7% (1.0%) 10.7% 1.2% 0.0% 0.0% (0.2%) (3.2%) 8.5%
4Q20 11.0% 3.0% 37.2% 7.6% 0.7% 1.1% 0.0% (0.1%) (2.4%) 6.9%
2017 10.0% 9.8% 35.7% 4.9% 2.1% 5.5% (1.3%) (1.0%) (8.0%) 2.2%
2018 15.9% 0.3% (17.4%) 9.2% 0.4% (2.9%) 0.2% (1.5%) 1.7% 7.1%
2019 31.7% 9.6% 5.5% 19.3% 2.2% 0.7% (0.7%) (1.0%) (2.2%) 22.7%
2020 32.6% 7.4% 2.5% 20.6% 1.7% 0.1% 0.0% (0.8%) (6.8%) 14.8%
NOTE: All quarterly information included in the tables above is unaudited
1. Total Return for each respective sub-portfolio has been calculated
by taking total gains or losses and dividing them by the sum of Adjusted NAV
at the beginning of the period and the time-weighted net invested capital. The
time-weighted net invested capital is the sum of investments made during the
period less realised proceeds received during the period, both weighted by the
number of days the capital was at work in the portfolio
2. Includes management fees and other general costs. It also includes
FX on the euro returns table only
3. Includes the impact of FX movements on investments and FX on cash
held during each respective period
Financial statements \ Portfolio allocation since 1Q17
PORTFOLIO ALLOCATION(1) PORTFOLIO NAV (EURO) NAV (EURO)
PRIVATE EQUITY DERIVED DEBT DERIVED EQUITY NET CASH AND NCAS PRIVATE EQUITY DERIVED DEBT DERIVED EQUITY NET CASH AND NCAS TOTAL NAV TOTAL ADJUSTED NAV
1Q17 52% 30% 16% 2% 489.5 282.4 147.5 16.6 935.9 928.0
2Q17 50% 21% 13% 16% 457.6 195.3 119.5 148.0 920.4 908.1
3Q17 58% 21% 19% 1% 522.8 189.1 170.8 12.7 895.5 881.9
4Q17 63% 20% 14% 2% 590.2 188.4 132.1 19.2 929.9 912.4
1Q18 65% 15% 17% 3% 572.5 136.2 152.6 22.1 883.3 883.3
2Q18 67% 19% 17% (4%) 638.8 184.3 160.6 (35.8) 947.8 943.9
3Q18 68% 17% 17% (2%) 638.9 158.1 159.0 (16.3) 939.7 937.3
4Q18 64% 19% 15% 2% 591.5 178.3 142.3 18.7 930.8 930.8
1Q19 68% 18% 11% 3% 669.5 178.9 112 28.1 988.5 988.2
2Q19 56% 22% 12% 9% 582.9 232.1 123.3 96.2 1,034.5 1,031.9
3Q19 61% 24% 11% 4% 648.1 257.4 116.0 38.9 1,060.4 1,055.8
4Q19 70% 23% 8% (1%) 766.3 252.5 89.7 (9.5) 1,099.0 1,092.1
1Q20 69% 24% 4% 3% 643.1 221.4 44.3 27.4 936.2 936.2
2Q20 70% 22% 5% 3% 742.5 230.8 50.7 36.7 1,060.7 1,060.7
3Q20 70% 22% 3% 5% 784.1 243.4 32.3 64.3 1,124.1 1,124.1
4Q20 66% 23% 3% 8% 788.3 275.7 43.7 93.5 1,201.2 1,201.2
2017 56% 23% 16% 5% 515.0 213.8 142.5 49.1 920.4 907.6
2018 66% 18% 16% 0% 610.4 164.2 153.6 (2.8) 925.4 923.8
2019 64% 22% 11% 4% 666.7 230.3 110.2 38.4 1,045.6 1,042.0
2020 69% 23% 4% 5% 739.5 242.8 42.75 55.5 1,080.6 1,080.6
1. For annual periods the average weighting over four quarters used
Financial statements \ Summary of fee amendments
The Board approved a revised fee structure on 5 March 2020, with an effective
date from 1 January 2020. A summary of the changes are detailed below:
MANAGEMENT FEES
The Board has negotiated lower management fee rates, as shown in the table
below:
UNTIL FROM
31 DECEMBER 1 JANUARY
2019 2020
Derived Debt 1.25% 1.0%
Derived Equity 1.25% 0.5%
Eligible Private Equity 1.25% 0.5%
The fee will continue to be calculated and paid quarterly in arrears to AGML.
PERFORMANCE FEES
The Board has approved a change in the rates and the methodology of how the
performance fee is calculated. The current performance fee is calculated based
on investments realised for cash in each financial year. When the Gross IRR
hurdle of 8% is met, a fee of 20% of realised gains is paid to the Investment
Manager. The IRR calculation does not take management fees and Direct Deal
costs into account.
The revised performance fee is calculated based on the overall gains or
losses1 net of management fees and Direct Deal costs in each financial year.
When the Portfolio Total Return hurdle is met a performance fee is payable as
per the below:
UNTIL 31 DECEMBER 2019 FROM 1 JANUARY 2020
GROSS IRR HURDLE PERFORMANCE FEE RATE NET PORTFOLIO TOTAL RETURN HURDLE PERFORMANCE FEE RATE
Derived Debt 8% 20% 6% 15%
Derived Equity 8% 20% 8% 20%
Eligible Private
Equity 8% 20% 8% 20%
The performance fee will continue to be calculated and paid annually.
Performance fee payments are expected to be made in shares and remain subject
to the terms as disclosed in the Prospectus.
ADMINISTRATION FEES
The Company pays Aztec administration fees of £400,000 per annum, of which
£250,000 is payable to APFS, the sub-administrator.
In addition to the above, the Board approved a new service agreement with Apax
Partners and its affiliate, APFS, with a fee of 0.04% of Invested Portfolio
per annum for providing certain corporate and investor relations services.
CAP ON FEES
The Board negotiated a cap on overall direct fees payable to the Investment
Manager and the Investment Advisor. From 1 January 2020, overall fees payable
are capped at 3% of the Net Asset Value of the Company2. Prior to 31 December
2019, fees payable to the Investment Manager and Investment Advisor were
uncapped.
1. Overall gains or losses for each portfolio includes realised and
unrealised fair value movements, income and foreign exchange movements
2. Cap relates only to fees paid directly by Apax Global Alpha
Limited, i.e. it excludes fees at the Apax Fund level such as management fees
and carried interest paid
KEY TERMS
Eligible Portfolio means the Derived Debt, Derived Equity and Eligible Private
Equity portfolios.
Eligible Private Equity means the Private Equity portfolio eligible for
management fees and performance fee. It represents interests in Private Equity
Investments held that do not pay fees at the Apax Fund level.
Portfolio Total Return means the sub-portfolio performance in a given period,
is calculated by taking total gains or losses and dividing them by the sum of
GAV at the beginning of the period and the time weighted net invested capital.
The time weighted net invested capital is the sum of investments made during
the period less realised proceeds received during the period, both weighted by
the number of days the capital was at work in the portfolio. Portfolio Total
Return is gross of performance fees but net of management fees and relevant
Direct Deal costs.
Direct Deal costs means costs directly attributable to the due diligence and
execution of deals completed by the Company (such as broker fees and deal
research costs). For avoidance of doubt it excludes taxes payables and general
fund and administration costs.
EXPECTED CHANGES FROM REVISED FEE AGREEMENTS
The Board expects that fee payments to the Investment Manager and the
Investment Advisor will, in a substantial majority of circumstances, reduce
significantly following these amendments.
The Board also believes that the change in calculation methodology for the
performance fee will better align incentives of the Investment Manager with
those of the Company and shareholders.
To transition to the new fee applicable from 1 January 2020, the Company's
Investment portfolio was assumed to be realised and re-acquired for cash as at
31 December 2019. The performance fee accrual of €6.9m (all attributable to
Eligible Private Equity) at 31 December 2019 was then paid to the Investment
Manager as a consequence.
Financial statements \ Glossary
ADF means the limited partnerships that constitute the Apax Digital Private
Equity fund.
Adjusted NAV calculated by adjusting the NAV at reporting periods, by the
estimated performance fee reserves.
Adjusted NAV per share calculated by dividing the Adjusted NAV by the number
of shares in issue.
AEVI means the limited partnerships that constitute the Apax Europe VI Private
Equity fund.
AEVII means the limited partnerships that constitute the Apax Europe VII
Private Equity fund.
AGML or Investment Manager means Apax Guernsey Managers Limited.
AIX means the limited partnerships that constitute the Apax IX Private Equity
fund.
AMI means the limited partnerships that constitute the AMI Opportunities Fund
focused on investing in Israel.
Apax Global Alpha or Company or AGA means Apax Global Alpha Limited.
Apax Group means Apax Partners LLP and its affiliated entities, including its
sub-advisors, and their predecessors, as the context may require.
Apax Partners or Apax or Investment Advisor means Apax Partners LLP.
Apax Private Equity Funds or Apax Funds means Private Equity funds managed,
advised and/or operated by Apax Partners.
APFS means Apax Partners Fund Services Limited.
APG means Apax Partners Guernsey Limited.
AVIII means the limited partnerships that constitute the Apax VIII Private
Equity fund.
AX means the limited partnerships that constitute the Apax X Private Equity
fund.
Aztec means Aztec Financial Services (Guernsey) Limited
B2B means business to business.
Brexit refers to the exit of the UK from the EU following the invocation of
Article 50 of the Treaty on the European Union on 29 March 2017.
Capital Markets Practice or CMP consists of a dedicated team of specialists
within the Apax Partners Group having in-depth experience of the leverage
finance debt markets, including market conditions, participants and
opportunities. The CMP was initially set up to support the investment advisory
teams within the Apax Group in structuring the debt component of a private
equity transaction. The CMP has over the years expanded its mandate to working
alongside the investment advisory teams to advise on Derived Debt Investments.
CEE Central and eastern Europe.
CSR Corporate social responsibility.
Custody risk is the risk of loss of securities held in custody occasioned by
the insolvency or negligence of the custodian.
Derived Debt Investments comprise debt investments held within the Derived
Investments portfolio.
Derived Equity Investments comprise equity investments held within the Derived
Investments portfolio.
Derived Investments comprise investments other than Private Equity
Investments, including primary investments in public and private debt, with
limited investments in equity, primarily in listed companies. In each case,
these are typically identified by Apax Partners as part of its private equity
activities.
Direct Deal costs means costs directly attributable to the due diligence and
execution of deals completed by the Company (such as broker fees and deal
research costs). For avoidance of doubt it excludes taxes payables and general
fund and administration costs.
EBITDA Earnings before interest, tax, depreciation and amortisation.
Eligible Portfolio means the Derived Debt, Derived Equity and Eligible Private
Equity portfolios.
Eligible Private Equity means the Private Equity portfolio eligible for
management fees and performance fee. It represents interests in Private Equity
Investments held that do not pay fees at the Apax Fund level.
ERP Enterprise resource planning.
ESG Environmental, social and governance.
EV Enterprise value.
FVTPL means fair value through profit or loss.
FX means foreign exchange.
Gross Asset Value or GAV means the Net Asset Value of the Company plus all
liabilities of the Company (current and non-current).
Gross IRR or Internal Rate of Return means an aggregate, annual, compound,
internal rate of return calculated on the basis of cash receipts and payments
together with the valuation of unrealised investments at the measurement date.
Foreign currency cash flows have been converted at the exchange rates
applicable at the date of receipt or payment. For Private Equity Investments,
IRR is net of all amounts paid to the underlying Investment Manager and/or
general partner of the relevant fund, including costs, fees and carried
interests. For Derived Investments, IRR does not reflect expenses to be borne
by the relevant investment vehicle or its investors including, without
limitation, performance fees, management fees, taxes and organisational,
partnership or transaction expenses.
Invested Portfolio means the part of AGA's portfolio which is invested in
Private Equity and Derived Investments, however excluding any other
investments such as legacy hedge funds and cash.
Investor relations team means such investor relations services as are
currently provided to AGA by the Investment Advisor.
IPO Initial public offering.
GTJA means Guotai Junan Securities.
KPI Key performance indicator.
LSE London Stock Exchange.
LTM Last twelve months.
Market capitalisation is calculated by taking the share price at the reporting
period date multiplied by the number of shares in issue. The euro equivalent
is translated using the exchange rate at the reporting period date.
MOIC Multiple of invested capital.
NBFC Non-bank financial company.
Net Asset Value or NAV means the value of the assets of the Company less its
liabilities as calculated in accordance with the Company's valuation policy.
NAV has no adjustments related to the IPO proceeds or performance fee
reserves.
NTM Next twelve months.
Ongoing charges are the Company's ongoing charges which are calculated in line
with guidance issued by the AIC. They comprise of recurring costs such as
administration costs, management fees paid to AGML and management fees paid to
the underlying Private Equity funds' general partners. They specifically
exclude deal costs, taxation, financing costs, performance fees and other
non-recurring costs. A reconciliation between costs per the financial
statements and those used in the ongoing charges are set out below:
ALL IN €'000 TOTAL PER STATEMENT OF PROFIT OR LOSS STATEMENTS AND OCI EXCLUDED FROM AIC ONGOING CHARGES INCLUDED IN AIC ONGOING CHARGES
OPERATING COSTS
Performance fee 46 46 -
Management fee 2,853 - 2,853
Admin and other expenses 2,363 301 2,062
Other admin and operating expenses 2,062 - 2,062
Deal transaction, custody and research costs 301 301 -
Total 5,262 347 4,915
Finance costs 1,751 1,751 -
Total costs 7,013 2,098 4,915
Look-through managementfees(1) 11,454
Total Ongoing charges 16,369
Average NAV(2) 1,084,225
% of Average NAV 1.5%
1. Represents management fees to the Apax Funds
2. Represents the average of 5 quarter end reported NAV's from 31
December 2019 to 31 December 2020
Operational Excellence Practice or OEP Professionals who support the Apax
Funds' investment strategy by providing assistance to portfolio companies in
specific areas such as devising strategies, testing sales effectiveness and
cutting costs.
OCI Other comprehensive income.
OTC Over-the-counter.
PCV means PCV Lux S.C.A.
PCV Group means PCV Lux S.C.A. and its subsidiaries. PCV Group was established
in August 2008. Irrespective of whether the text refers to AGA or PCV Group,
references to trading or performance prior to the IPO on 15 June 2015 refer to
trading as PCV Group.
P/E Price-to-earnings.
Performance fee reserve is the estimated performance fee reserve which
commenced accruing on 1 January 2015 in line with the Investment Management
Agreements of the PCV Group and AGA.
Portfolio Total Return means the sub-portfolio performance in a given period,
is calculated by taking total gains or losses and dividing them by the sum of
GAV at the beginning of the period and the time weighted net invested capital.
The time weighted net invested capital is the sum of investments made during
the period less realised proceeds received during the period, both weighted by
the number of days the capital was at work in the portfolio. Portfolio Total
Return is gross of performance fees but net of management fees and relevant
Direct Deal costs.
Private Equity Investments or Private Equity means primary commitments to,
secondary purchases of commitments in, and investments in, existing and future
Apax Funds.
Reporting period means the period from 1 January 2020 to 31 December 2020.
SMEs Small and mid-sized enterprises.
Total NAV Return for a year/period means the return on the movement in the
Adjusted NAV per share at the end of the period together with all the
dividends paid during the period, to the Adjusted NAV per share at the
beginning of the period/year. Adjusted NAV per share used in the calculation
is rounded to five decimal points.
Total Return under the Total Return calculation, sub-portfolio performance in
a given period can be evaluated by taking total net gains in the period and
dividing them by the sum of the Adjusted NAV at the beginning of the period as
well as the investments made during the period. However, in situations where
realised proceeds are reinvested within the same period, performance under
this calculation is, via the denominator, impacted by the reinvestment.
Therefore, starting from 2017 the Investment Manager will evaluate
sub-portfolio performance using an amended methodology. The revised
methodology takes total gains or losses and divides them by the sum of
Adjusted NAV at the beginning of the period and the time weighted net invested
capital. The time weighted net invested capital is the sum of investments made
during the period less realised proceeds received during the period, both
weighted by the number of days the capital was at work in the portfolio. This
should provide a more reflective view of actual performance.
Total Shareholder Return or TSR for the period means the net share price
change together with all dividends paid during the period.
Unaffected Valuation is determined as the fair value in the last quarter
before exit, when valuation is not affected by the exit process (i.e. because
an exit was signed, or an exit was sufficiently close to being signed that the
Apax Funds incorporated the expected exit multiple into the quarter end
valuation).
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