REG - Apax Global Alpha Ld - 2023 Annual Report and Accounts
05/03/2024 07:15
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RNS Number : 5499F Apax Global Alpha Limited 05 March 2024
Apax Global Alpha
Annual Report & Accounts 2023
Diversified. Tradeable. Accessible
Apax Global Alpha Limited ("AGA" or the "Company") aims to offer shareholders
superior long-term returns by providing access to a diversified portfolio of
high-quality companies owned by the Apax Private Equity Funds. Capital not
invested in Private Equity is deployed into a portfolio of predominantly debt
instruments to generate additional returns and income.
About AGA
Public market access to private equity
A share in AGA gives public market investors access to a portfolio of mostly
private companies, owned by the Apax Private Equity Funds, which public market
investors cannot buy elsewhere. This is combined with a smaller portfolio of
predominantly debt instruments which represents an additional source of alpha
and provides income to investors.
AGA has a premium listing on the London Stock Exchange and is a constituent of
the FTSE 250 index (LSE: APAX). The Company is actively managed and is
overseen by an independent Board of Directors.
AGA uses the Alternative Performance Measures ("APMs") of Adjusted NAV and
Total NAV Return to enhance transparency for shareholders. Adjusted NAV
represents total NAV (€1,294.2m) reduced by the performance fee accrued in
the period (€6.6m). Total NAV Return reflects the movement in Adjusted NAV
including dividends paid. The definition and reconciliation to IFRS of the
APMs is shown on p.73.
FY 2023 Highlights
FY 2023 Total NAV Return(1) FY 2023 dividends
4.1% 11.34p
Adjusted NAV(2) Share price
€1,288m £1.61
at 31 December 2023 at 29 December 2023
Adjusted NAV(2) per share Adjusted NAV(2) per share
€2.62 £2.27
at 31 December 2023 at 31 December 2023
1. Total NAV Return is an Alternative Performance Measure ("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 p.73 and p.119
2. Adjusted NAV reflects Total NAV of €1,294.2m, net of performance
fee reserve of €6.6m at 31 December 2023. Further details can be seen on
p.73 and p.118
Why AGA?
Access to a portfolio of 'hidden gems', mostly private companies which
shareholders can't buy elsewhere
· Exposure to high-quality companies, the majority of which were acquired
by the Apax Funds in control buyout transactions.
· Mostly companies that operate in the mid-market and in parts of the
economy where there are strong economic fundamentals.
See p.23 for an overview of AGA's top 30 private equity investments.
"All-weather" investment strategy well-suited to generate alpha
· Focus on business improvement with earnings growth rather than market
tailwinds driving value creation across Private Equity portfolio companies.
· Sector-led strategy providing access to a globally diversified portfolio
across Tech & Digital, Services, Healthcare, and Internet/Consumer.
See p.22 for an overview of Apax's investment strategy.
Robust balance sheet, strengthened by portfolio of debt investments
· Capital not invested in Private Equity is deployed into a smaller
portfolio of predominantly debt instruments to generate additional returns and
income. Debt positions are identified leveraging the insights gained by
Private Equity sector teams.
· AGA also has a Revolving Credit Facility ("RCF") which can be drawn to
provide additional liquidity.
See p.36 and p.37 for more information about AGA's debt investments.
Capital allocation - attractive dividend policy
· The Board aims to create significant exposure to private equity
investments by committing to Apax Funds.
· The Board recognises the importance of returning cash to shareholders
and in the last five years, AGA has paid out €304m in dividends.
· Strategy overseen by an independent Board.
See p.5 for more information about AGA's capital allocation.
12.8% €304m
Five-year annualised Dividends paid to investors
Cumulative Return(1)
in last five years
1. 5-year annualised Cumulative Return represents IRR return.
Further details on p.118 of the glossary.
Capital allocation
AGA invests as a Limited Partner in the Apax Private Equity Funds. Capital not
invested in Private Equity is deployed into a portfolio of predominantly debt
investments. When the Funds sell or refinance portfolio companies AGA receives
distributions from the Private Equity Funds (net of fees and carried
interest). AGA also receives income from its Debt portfolio and the Company
has a RCF which provides a further source of capital.
AGA uses liquidity that is not reinvested in Private Equity (after paying for
fees and expenses, including financing costs relating to the RCF) to
distribute dividends to shareholders in line with AGA's dividend policy of
paying 5% of NAV p.a. Since IPO, the Company has returned a total of €444m
in dividends, equivalent of c.50% of the original IPO NAV, to shareholders.
Any excess liquidity is invested in a portfolio of predominantly Debt
instruments. This portfolio generates additional returns and income for AGA.
It also enables the Company to be fully invested and to make substantial
commitments to new Apax Private Equity Funds whilst remaining within its
liquidity risk appetite.
During 2023, and in light of the increasing share price discount to NAV, the
Board undertook a detailed review of the Company's capital allocation policy
in the context of future Private Equity calls and the capacity of AGA's RCF
and Debt portfolio. It was concluded that returning capital to shareholders
via the existing dividend policy remains appropriate and that any additional
mechanism of returning capital to shareholders should be kept under review in
the context of the Company's available liquid resources.
Principal strategic objectives
Adding value for shareholders
Strategic objective What we have achieved Focus for 2024 and beyond Principal risks(1)
Deliver over-the-cycle target Total NAV Return of 12-15% AGA has delivered a five-year annualised Cumulative Return of 12.8% Continue to manage liquidity in anticipation of capital calls from the Apax A continued difficult market environment and the underperformance of
Funds. AGA will also continue to provide shareholders with exposure to future individual portfolio companies in the Apax Funds could impact overall
Apax Private Equity Funds as they come to market investment performance
Target annual dividend of 5% of NAV In the last five years AGA has returned €304m to shareholders, equivalent to Maintain AGA's dividend policy of paying 5% of NAV p.a. The principal test for AGA to pay a dividend is sufficient liquidity (rather
24% of the 31 December 2023 NAV and in line with the dividend policy of paying than income) and therefore risk of not meeting the dividend policy is
5% of NAV p.a. considered low
Invest in Apax Private Equity Funds for long-term growth Over the last five years, AGA made new commitments of $1.3bn to five Apax Following significant commitments made in 2022, AGA will continue to manage Low investment rate of the Apax Funds to which AGA has made commitments
Funds, including two global buyout funds, Apax Digital Fund II, AMI II, and liquidity in anticipation of capital calls from the Apax Funds. AGA will also resulting in new Fund launches being delayed
Apax Global Impact continue to provide shareholders with exposure to future Apax Private Equity
Funds as they come to market
Manage Debt portfolio to generate additional returns on capital not invested Debt portfolio has delivered a five-year annualised return of 9.2% Continue to evaluate debt investment opportunities to ensure liquidity of the Availability of attractive opportunities, credit spreads, base rates, and
in Private Equity
instruments are appropriate in the context of AGA's Private Equity commitments underperformance of investee companies
and expected future calls
2.7% outperformance per annum against the S&P/LSTA Leveraged Loan Index in
the last five years
Remain fully invested 93% invested at 31 December 2023 Remain fully or close to fully invested whilst maintaining liquidity within Significant slowdown in pace of deployment in Private Equity combined with
risk appetite reduced availability of attractive investment opportunities in debt in target
sectors
Continue to adjust liquidity risk profile of debt portfolio as appropriate
depending on liquidity needs to meet new calls from Private Equity
1. Strategic Report
Chairman's statement
Well-positioned to take advantage of opportunities
The global economy displayed remarkable resilience in 2023. As the year went
on, fears of a widespread recession were replaced by a growing confidence that
policymakers would achieve an economic soft landing. In the first part of
2023, central banks continued to raise interest rates to levels not seen for
many years. However, with inflation moderating, rates are now expected to have
peaked. Looking ahead, growth remains slow, geopolitical tensions high, and
rates are likely to stay elevated until signs are clearer that inflation is
under control.
Against this backdrop, public equity markets have rebounded, closing what was
widely perceived as a disconnect between private and public valuations in
2022. Whilst the drivers of market recovery remain narrow, the MSCI World
Index (EUR) rallied and closed the year almost 20% above its January 2023
level. Not surprisingly, deal activity in Private Equity was more muted during
the first half of 2023, but we saw increased activity across our portfolio in
the second half of the year as visibility on the economic outlook increased
and valuation expectations were adjusted.
Results
Apax Global Alpha achieved a Total NAV Return in 2023 of 4.1% (6.1% on a
constant currency basis).
Performance was driven by a mix of earnings growth in Private Equity and
strong returns from the Debt portfolio, partially offset by lower valuation
multiples and negative currency movements.
Over the past five years, AGA's investment strategy has delivered Cumulative
Returns of 71.0% or 12.8% on an annualised basis. During this same period, the
Company has paid out c.€304m, representing c.24% of its 31 December 2023
Adjusted NAV in dividends to shareholders.
Portfolio update
At 31 December 2023, AGA was 93% invested, with the invested portfolio split
74% in Private Equity and 25% in Debt, with the remaining 1% invested across
three listed equity positions.
The Private Equity portfolio performed well with average EBITDA growth across
portfolio companies in the twelve months to 31 December 2023 of 18%, broadly
in line with the prior year. Valuation multiples were up during Q4 2023 but
fell slightly from 17.2x to 16.6x year-on-year, with negative movements from
previously IPO'd portfolio companies in the Private Equity portfolio,
particularly Thoughtworks, Viasat, and Paycor.
Despite continued economic uncertainty in 2023, AGA, through the Apax Funds,
deployed c.€95m across 10 new Private Equity investments, mostly in the
second half as more compelling opportunities emerged. While the exit
environment remained more challenging than in previous years, AGA received
c.€90m in distributions from the Apax Funds.
Consistent with previous periods, AGA's Debt portfolio maintained a greater
exposure to first lien loans which are more readily tradeable, and we believe
the current proportion of first lien loans vs debt instruments that are less
liquid, is appropriate in the context of the Private Equity commitments made
by AGA. At 31 December 2023, the Debt portfolio had a yield to maturity of
12.0% and consisted almost exclusively of floating rate instruments.
Liquidity, commitments and funding
Outstanding commitments to the Apax Funds (together with recallable
distributions) reduced by c.€86m in the twelve months to 31 December 2023 to
c.€919m at the end of the period.
The Board takes a prudent approach to liquidity and capital management with
rigorous scenario modelling and stress testing being done prior to agreeing
any new commitments to the Apax Funds. At the period-end, AGA had cash
(including net current assets) of c.€94m in anticipation of capital calls
from Apax XI, ADF, and AGI and the dividend payable in Q1 2024.
In September 2023, AGA entered into a new multi-currency RCF of €250m with
SMBC Bank International plc and JPMorgan Chase Bank, N.A., London Branch,
replacing the facility held with Credit Suisse AG, London Branch. The RCF was
undrawn at year-end.
Capital allocation
During 2023, and in light of the increasing share price discount to NAV, the
Board undertook a detailed review of the Company's capital allocation in the
context of future Private Equity calls, the capacity of AGA's RCF, and the
size of its Debt portfolio. No change was made to the policy, but the need to
ensure that capital continues to be returned to shareholders via regular
dividends was reaffirmed as a key priority. The Board is pleased to have now
returned c.€444m, equivalent to c.50% of the original IPO NAV, to
shareholders in this way.
In line with AGA's dividend policy to distribute 5% of NAV per annum, the
Board has determined a final dividend of 5.64 pence per share.
The final dividend is expected to be paid on 4 April 2024 to shareholders on
the register of members on 14 March 2024.
Board succession
As announced in October 2023, I intend to retire from the Board in the second
half of 2024 having completed nine years as Chairman. Karl Sternberg, who
joined the Board on 1 March 2024, is expected to succeed me in this role. Karl
is an experienced Chairman, and has extensive investment management and
investment trust experience which will be of immense value to the Board in the
future. In parallel with Karl's appointment, Chris Ambler retired as a
Director on 1 March 2024 after nearly nine years in the role, and, on behalf
of myself and my fellow Directors, I would like to thank him for his
commitment and contribution to the Board.
Directors' fees
The fees payable to individual directors of the Company (other than the
Chairman) were increased by 11% effective from 1 July 2023.
Directors' fees have remained unchanged since our IPO in 2015 and, in order to
address a widening disparity relative to similar companies, and to ensure we
are able to attract new directors of a high quality in future, it was
determined that an increase in fees was required.
Discontinuation vote
AGA is a closed-end investment Company, with no fixed duration. However, its
Articles of Association 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 2024 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.
Outlook
We have seen an uptick in deal activity during the second half of 2024, and
believe that the Apax Funds will continue to identify attractive investment
opportunities with a clear path to value creation through operational
improvements.
Coupled with a prudent approach to balance sheet management, the Company is
well-positioned to navigate the current environment in 2024 and beyond.
Tim Breedon CBE
Chairman
4 March 2024
Active management
Increased focus on Private Equity investments and a more diversified portfolio
Since IPO, the Company has grown the portfolio exposure to Private Equity
whilst simultaneously reducing the allocation to public equity investments.
As a result, shareholders are now able to access a larger portfolio of mostly
private companies and the superior returns that can be achieved from private
equity investments.
The Board has continued to make commitments to all new Apax Private Equity
Funds since IPO and today, AGA's portfolio is well diversified across
investment phases and receiving a steady stream of distributions from the fund
vintages that are in harvesting mode.
To ensure the Company can meet increasing capital calls from Private Equity
Funds, it has maintained a higher share of more liquid first loans in its Debt
portfolio. This provides further robustness to the Company's balance sheet.
At 31 December 2023, AGA had cash of c.€94m (including net current assets)
in anticipation of capital calls from Apax XI, ADF II, and AGI, and the
dividend payable in Q1 2024.
Portfolio at IPO
Portfolio split
Private Equity 30%
Debt 27%
Equity 8%
Cash(1) 35%
Private Equity portfolio by investment phase
Investment 80%
Harvesting 20%
Portfolio at 31 December 2016
Portfolio split
Private Equity 52%
Debt 30%
Equity 14%
Cash(1) 4%
Private Equity portfolio by investment phase
Investment 43%
Maturity 45%
Harvesting 12%
Portfolio at 31 December 2023
Portfolio split
Private Equity 69%
Debt 23%
Equity 1%
Cash(1) 7%
Private Equity portfolio by investment phase
Investment 40%
Maturity 38%
Harvesting 22%
1. Cash & Net Current Assets
Responsible investment
The Board believes that responsible investment is important in protecting and
creating long-term value. The Board relies upon its Responsible Investment
policy and the expertise and practices of Apax to ensure it delivers returns
ethically and responsibly across the Private Equity portfolio.
This section focuses on Apax's sustainability efforts relating to the Private
Equity portfolio. AGA's approach to sustainability in the Debt portfolio
focuses on due diligence carried out before investment as AGA is typically a
minority investor and therefore there is less scope to influence
sustainability post-investment.
Apax's approach to sustainability in Private Equity
Sustainability is embedded throughout the Apax Funds' investment process, from
due diligence through to the Funds' ownership and exit.
Supported by Apax's Operational Excellence Practice ("OEP"), investment teams
are responsible for identifying and monitoring portfolio companies'
sustainability footprint, and driving value and mitigating risk based on
company or sector-specific material issues.
Apax actively participates in industry-leading platforms and the firm's
approach has been recognised by the Principles for Responsible Investment
("PRI"). Apax is a member of the BVCA Responsible Investment Advisory Group,
the Thirty Percent Coalition and the Sustainable Markets Initiative Private
Equity Taskforce, as well as a signatory to ILPA Diversity in Action Group,
and the initiative Climat International.
To learn more about Apax's sustainability efforts see page 29.
Driven by materiality
Apax's sustainability focus is driven by the material issues of the sectors
invested in, leveraging industry frameworks and standards.
Apax has collected a large suite of sustainability indicators since 2012, and
regularly reviews and adapts KPI monitoring across the portfolio in relation
to company, sector and other emerging issues such as cybersecurity, climate
change, and workforce diversity.
For more information about AGA's ESG policy and responsible investment
considerations for the Debt portfolio, please see:
www.apaxglobalalpha.com/wp-content/uploads/2023/11/2023-11-01-Apax-Global-Alpha_ESG-policy.pdf
(http://www.apaxglobalalpha.com/wp-content/uploads/2023/11/2023-11-01-Apax-Global-Alpha_ESG-policy.pdf)
For more information about Apax's approach to sustainability, please see:
www.apax.com/reports/apax-sustainability-report-edition-11/index.html#page=1
(http://www.apax.com/reports/apax-sustainability-report-edition-11/index.html#page=1)
Our Section 172(1) Statement
Overview
The Board is committed to promoting the long-term success of the Company
whilst conducting business in a fair, ethical and transparent manner.
The Board notes that the AIC Code recommends that matters set out in Section
172 of the Companies Act, 2006 should be considered and reported on. This
requires Directors to act in good faith and in a way that is the most likely
to promote the success of the Company. In doing so, Directors must take into
consideration the interests of AGA's stakeholders, the impact AGA has on the
community and the environment, and take a long-term view on consequences of
the decisions they make. They must also aim to maintain a reputation for high
standards of business conduct and fair treatment.
The importance of stakeholder considerations, in particular in the context of
decision-making, is taken into account at every Board meeting. All discussions
involve careful consideration of the longer-term consequences of any decisions
and their implications for stakeholders. The key strategic decisions taken
during 2023 were informed and supported by stakeholder engagement activities
and are set out on p.47 in the Governance section.
AGA Stakeholders
The Board regularly reviews and assesses which parties should be considered as
stakeholders of the Company and for the period under review, has concluded
that, as an externally managed investment company without employees or
customers, AGA's key stakeholders comprise its shareholders, the Investment
Manager, Investment Advisor, regulators, communities, and service providers.
Our Investment Manager
We work closely with AGML, the Company's investment manager, around portfolio
strategy, capital allocation, and private equity investment decisions. The
Board receives regular updates on portfolio performance and risk management.
Our Investment Advisor
Apax, the investment advisor, is a leading global private equity advisory
firm. We rely on Apax for the identification and due diligence of investment
opportunities. We also rely on them for investor relations services.
Our Service Provider
We maintain an open relationship with our service providers and regularly
engage with them across a number of matters relevant to the Company. A formal
review of our service providers is carried out annually.
Regulators
We maintain a constructive and open relationship with our regulators, engaging
on key matters relevant to the Company.
Communities
We recognise the importance of contributing to our communities for long-term
value creation. We consider these to be the communities where our service
providers operate.
Our Shareholders
Our strategic objective is to provide shareholders with superior long-term
returns through capital appreciation and regular dividends. The Board engages
with shareholders, including at the Capital Markets Day, and receives regular
briefings from our investor relations team and corporate broker on investors'
views.
Stakeholder engagement
The section below discusses why our stakeholders are considered important to
the Company, and the actions taken to ensure that their interests are taken
into account.
Shareholders
Why they are important
Shareholder support and engagement are critical to the continued success of
the business and the achievement of our objectives. We believe shareholders
value the strong financial performance of the Company, prudent balance sheet
management, and commitment to the highest standards of corporate governance.
A resolution to continue the life of AGA is put to shareholders every three
years. Having been approved by shareholders at its Annual General Meeting
("AGM") in 2021, a similar resolution will be put to shareholders at the AGM
in 2024.
More information about this resolution is available on p.52.
Contact details for shareholder queries can be found on p.108 and on the
Company's website at: www.apaxglobalalpha.com/contact
(http://www.apaxglobalalpha.com/contact)
How the Board engages
The Board is committed to a culture of openness and regular dialogue with
shareholders, and it seeks to take into account the needs and priorities of
shareholders during all discussions and decision-making.
Throughout the year, the Board ensures that Directors are available for
effective engagement, whether at the AGM, Capital Markets Day, or other
investor relations events. The Chairman also holds one-to-one meetings with
shareholders on an ad-hoc basis and as part of an annual corporate governance
roadshow. The Senior Independent Director, Susie Farnon, is available for
investor meetings on request.
As part of the ongoing engagement, AGA has retained Apax to provide
comprehensive investor relations services. In addition, the Company's
corporate broker, Jefferies International Limited, and corporate access
provider, RMS Partners, further support shareholder engagement. The Board
receives regular reports and updates from the Apax investor relations team and
the corporate broker.
Shareholder views and feedback are regularly sought and communicated to the
Board to help develop a balanced understanding of their issues and concerns.
Key activities during the year
AGM - The AGM presents investors with the opportunity to ask Board members
questions, and to cast their votes. The 2023 AGM was conducted both in person
and via a dial-in format to encourage attendance. The same format will be
adopted in 2024.
Publications - The Company reports formally to shareholders four times a year,
with updates on transactions and significant events presented on an ongoing
basis. Shareholders may obtain up-to-date information on the Company through
its website at www.apaxglobalalpha.com (http://www.apaxglobalalpha.com)
Website - To enhance transparency, the Company launched a new website towards
the end of 2023, improving navigation and the information available to
shareholders.
Events - Apax maintains a comprehensive investor engagement programme with
investors and equity analysts. This includes presentations, roadshows,
attendance at conferences, and other events. The Board always welcomes
feedback at these meetings.
Community
Why they are important
The Board believes that investing responsibly is important in protecting and
creating long-term value. The Board recognises that the incorporation of
material sustainability considerations can help inform the assessment of
overall risk and opportunities.
AGA does not itself invest directly in Private Equity portfolio companies.
However, the Board recognises the importance of portfolio companies themselves
having proper policies and procedures in place regarding their employees,
suppliers, customers and other stakeholders. Similarly, for the debt
portfolio, the Board is committed to including sustainability considerations
during the diligence process of debt investment, whilst recognising that the
size and nature of the Company's investments typically limits its ability to
influence decisions once invested.
How the Board engages
The Board relies upon its Responsible Investment policy and the practices of
the Investment Manager and Apax. The Board receives updates on Apax's
sustainability activities. Apax integrates sustainability considerations
throughout the investment process and works closely with portfolio companies
on these matters. There has been a substantial focus on measuring the impact
on society and delivering sustainable financial returns while encouraging
sustainable business practices. The OEP helps deal teams identify key
sustainability risks and value creation opportunities whilst also delivering
value creation or risk mitigation directly to portfolio companies.
Key activities during the year
The Investment Manager regularly updates the Board on key sustainability
initiatives and milestones throughout the year, including in relation to
regulatory changes.
Following a decision made by the Board in 2021 to become carbon neutral, the
CO2 emissions relating to AGA's own activities have been offset via Carbon
Footprint Ltd.
Service providers
Why they are important
In addition to supporting the Company to deliver on its objectives, effective
relationships with service providers help the Company achieve its investment
objectives and to operate in an efficient and compliant manner.
How the Board engages
The Board maintains an ongoing dialogue with its service providers and
receives regular updates from them, both formally at Board and Audit Committee
meetings and informally outside the Board and Audit Committee meeting
schedule.
All service providers are subject to an annual evaluation process by the
Board.
Key activities during the year
Details of the responsibilities of the Investment Manager (AGML), Investment
Advisor (Apax), Registrar (Link Asset Services), and Company Secretary and
Administrator (Aztec Financial Services (Guernsey) Ltd) can be found on p.45
and p.51.
Other service providers include our corporate broker, lenders, auditors,
counsel, and other advisors.
2. Investment Manager's Report
Investment Environment and Outlook
Q&A with Salim Nathoo, Partner, Apax
Q Where in the economic cycle do you think we are at the moment?
A While characterised by weak economic activity, the global economy
displayed resilience in 2023. As the year drew to a close, some of the initial
uncertainty faded as rates peaked and deal activity picked up slightly in the
second half of the year.
Q What does the current more challenging market environment mean for
private equity firms?
A Absent a major geopolitical event, projections are increasingly
consistent with a "soft landing" scenario where inflation decelerates albeit
unclear to what level. Yet, with growth likely to remain sluggish and rates
elevated, the recovery to pre-pandemic levels is seemingly distant. The
economic outlook is also likely to differ across markets with 2024 US GDP
estimated growth at 1.6% vs the Euro area forecasts of 0.7%.
For the private equity industry this has the potential knock-on effect of
holding periods lengthening as exits, particularly for larger assets, remain
challenging. The cost of debt is also expected to remain high.
Q In choppier markets, how will private equity firms continue to
generate value for investors?
A For those of us who remember the Global Financial Crisis this
reversal of the markets seen in 2020/2021 underscores the importance of having
multiple operational levers to drive business improvements as outcomes become
harder to predict. Particularly, and as the market tailwinds of the past few
years ease, private equity firms will be reminded of the value of having
portfolio companies with business models and capital structures able to
perform well in a variety of conditions and withstand macrobumps through the
holding period. It will also be increasingly important to have the skill to
drive alpha through operational improvement.
We believe that Apax's 'Hidden Gems' investment strategy is well suited for
this environment. It is a strategy that is not predicated on continued market
tailwinds but rather grounded in enduring and proven disciplines:
diversification, backing businesses with strong underlying economic motors,
and driving 'alpha' through business improvement.
Q What does the current deal environment look like? Where are you
finding interesting opportunities?
A The deal environment is looking better than a year ago as some deals
are getting repriced to more reasonable levels, and this is a trend we would
expect to continue into 2024.
In H2 2023 we saw an uptick in deal activity and the quality of the investment
pipeline, with Apax XI, the latest global buyout fund, having now signed five
new investments. These investments fit squarely with the 'Hidden Gems'
strategy, focusing on subsectors we know well and opportunities where we see a
clear path to value creation through operational improvements.
Of the five Apax XI investments, three are carveouts with one also being a
day-1 combination and all of them show potential for accretive M&A.
Q What about leverage
A It is a fact that leverage has become less abundant and more
expensive. However, it is not stopping us from getting deals done. The Apax
Funds have generally used lower levels of leverage than the market, with the
average across AGA's Private Equity portfolio of 4.6x net debt/EBITDA.
Indeed, one of the lessons from the Global Financial Crisis is the importance
of focusing on entry multiples rather than IRR. If the Apax Funds can buy good
businesses at reasonable prices which we believe can be improved during the
Funds' ownership periods, then we are more likely to have found a good
investment, regardless of leverage levels.
On the other side, and looking to AGA's Debt portfolio where 92% of
investments are floating rate, AGA is also benefitting from higher interest
rates.
Q Are there any particular sectors that you find attractive right now?
Why so?
A We don't cycle in and out of sectors and we're big believers in
investing in areas for the long time. That said, we overlay the
macroenvironment on top of investment recommendations which means we are more
or less selective or cautious of certain areas at different times. For
example, at the start of 2023 we were deprioritising sub-sectors such as
healthcare services where inflation pass-through can take longer. Today, with
AI disruption risks front of mind, we are selective when it comes to certain
white-collar services businesses.
Q On the topic of AI, how is that weaved into the investment process?
As mentioned, the team is continuing to assess the disruptive capabilities of
AI in new investment opportunities for risks, productivity gains, and margin
accretion.
Apax is also focusing on the opportunity of AI in terms of knowledge
management for deal team due diligence, automation of workflows, and
experimentation around software development copilot tools within portfolio
companies.
Q What about exits? Some suggest there is pressure from investors for
private equity firms to exit investments?
A It is true that private equity deal activity remained relatively
subdued in 2023 and with the IPO window remaining closed, larger deals were
particularly challenging to exit. However, the Apax Funds focus on investments
in the upper mid-market where there is good exit optionality, and the funds
actually returned more capital than they called in 2023. The Funds also sought
to exit investments during the 'good times' and have therefore felt less
pressure to sell.
The portfolio is generally in good shape and when companies reach maturity, we
think there will be exit options in our part of the market.
Private equity transaction volumes
Total US private equity transaction value ($bn)
H119 111
H219 139
H120 100
H220 86
H121 177
H221 186
H122 147
H222 39
H123 76
H223 58
Source: LCD
AGA calls and distributions (last 5 years) (€m)
Calls Distributions
H119 20 149
H219 146 34
H120 21 62
H220 35 35
H121 79 131
H221 121 144
H122 36 117
H222 158 111
H123 7 35
H223 83 55
Q Equity markets recovered strongly in 2023, yet the listed holdings
in your private equity portfolio have been a drag on performance. Why is that?
A It is true that markets have rallied. However, drivers of US market
performance have been narrow, with the seven largest stocks leading the market
higher rather than the whole market, with AI being a significant catalyst. In
Europe and the UK, markets trade well below the median.
Looking at the underperformance in Apax Funds listed private equity holdings,
this is particularly driven by Thoughtworks, Paycor, and Viasat, which faced
challenges in the year. Thoughtworks saw a slowdown in demand whilst Viasat
experienced a satellite failure impacting share price performance.
Taking a step back, most of the listed holdings in AGA's look-through Private
Equity portfolio are positions in previously IPO'd portfolio companies where
significant value has already been extracted. At 31 December 2023 these
holdings represented c. 6% of Adjusted NAV, down from 10% at the end of 2022
following the successful sale of Duck Creek in January 2023 at a 53% uplift,
and further secondary sales in some of the other holdings.
Q How are credit markets performing and what does this mean for AGA?
A European and North American broadly traded secondary loan markets
have seen a tightening of spreads through 2023. Three-year spreads for trading
US first lien loans tightened by c.141bps to an average of 474bps over Libor
and EU loans tightened by c.170bps to c.535bps over Euribor.
Tightening of a similar magnitude has been observed in the public and private
primary issuance markets AGA has been active in. Simultaneously private equity
deal activity remained relatively subdued in 2023.
What this means is that, in the current market context of low volumes and
tight returns, credit investors that have differentiated investment
capabilities will deliver better returns as they can access opportunities with
excess spreads through differentiated sourcing, and avoid losses through
sector expertise and private equity style diligence. Apax's integrated
approach, where there are no barriers between Private Equity and Credit teams,
positions AGA well to access better risk adjusted credit returns and the Debt
portfolio outperformed in the year, delivering a Total Return of 11.8% in the
twelve months to 31 December 2023.
Q Finally, how do you think about the market environment in the next
10 years vs the last 10 years?
A The tide has definitely turned and the era of 'levered beta', where
it was possible to generate strong returns by riding the markets, is gone.
Instead, we're back to a similar reality to the one we saw post the Global
Financial Crisis, where alpha generation through business improvement is
required to generate superior returns.
For those players with experience and the right operating capabilities geared
towards alpha generation, this is an exciting time and we think there are good
opportunities and fund vintages to come.
Performance review
AGA Adjusted NAV movements
AGA's Adjusted NAV was €1,288m at 31 December 2023 (FY22: €1,299m),
translating to an Adjusted NAV per share of €2.62 cents / £2.27 pence.
Movement in Adjusted NAV was driven by a €51.5m increase in NAV of the Debt
portfolio followed by a €38.4m increase in NAV of the Private Equity
portfolio. The increase in NAV was offset by FX movements and the dividend
payment to shareholders of €65.3m in line with the policy to distribute 5%
of NAV per annum.
Since IPO, AGA has paid out c.34% of its 31 December 2023 NAV in dividends to
shareholders.
FY 2023 Adjusted nav development (€m)
Adjusted NAV 31 December 2022 1,299.4
Private Equity 38.4
Debt Investments 51.5
Derived Equity 3.2
Cost and other movements (6.8)
Dividends paid (65.3)
Performance fee(1) (6.6)
FX (26.2)
Adjusted NAV 31 December 1,287.6
1. Performance fee reflects the movement in the accounting of the
performance fee reserve in the period to 31 December 2023
Contributions to Total NAV Return
Total NAV Return was 4.1% (6.1% constant currency) for FY 2023. The Debt
portfolio was the main contributor to Total NAV Return followed by the Private
Equity portfolio.
Return contribution for Private Equity was primarily driven by earnings growth
across the underlying portfolio companies. While the Debt portfolio benefitted
from an attractive income yield as well as spreads tightening during the year.
FX movements were mainly driven by the EUR strengthening against the USD by 3%
in the twelve months to 31 December 2023.
AGA's investment strategy has delivered Cumulative Returns of 71.0% over the
last five years or 12.8% on an annualised basis(1).
FY 2023 Total nav Return contributions (%)
Private Equity 3.0%
Debt Investments 4.0%
Derived Equity 0.2%
Cost and other movements (0.6)%
Performance fee(2) (0.5)%
FX (2.0)%
Total NAV Return(3) 4.1%
1. Cumulative Return calculated based on the movement in Adjusted NAV
per share taking into account any dividends paid during the respective period.
5-year annualised return represents IRR return. Further details on p.118 of
the glossary
2. Performance fee reflects the performance fee reserve payable at 31
December 2023
3. Total NAV Return means the movement in the Adjusted NAV per share
over the period plus any dividends paid
Valuation methodology
In Private Equity, the Apax Funds predominantly use a comparable-based
valuation methodology. Fair value of the Apax Funds' private investments is
largely determined using public trading comparatives and/or transaction
comparables as appropriate.
Public stock, including the positions in previously IPO'd portfolio companies,
is valued at the closing share price of the portfolio company as at 31
December 2023.
Equity values are calculated based on a relevant earnings metric multiplied by
applicable valuation multiples, and after taking into account portfolio
company debt (average at 31 December 2023: 4.6x)(1).
Equity values are also net of NAV facilities used in some of the underlying
holding structures. These have been put in place for Apax IX and Apax X, and
both to replace more volatile margin loan structures and to generally optimise
cashflows to investors and rebalance risk.
At 31 December 2023, the total of these facilities on a look-through basis was
c.8% of Adjusted NAV.
Debt Investments are valued with reference to observable broker quotes where
available and/or models using market inputs.
Spotlight on Private Equity valuations
Uplifts at exit demonstrate robustness of methodology and value in AGA's
Private Equity portfolio.
Buyout funds
AEVII 24%
AVIII 19%
AIX 35%
AX 49%
Strategic specific
ADF 40%
AMI 152%
Uplifts on exit compares to the previous unaffected valuation i.e. the last
carrying value of an investment or 'undisturbed' value before the impact of a
potential transaction.
1. Net debt/EBITDA multiple representing 77% of Private Equity portfolio
NAV. Calculation excluded companies where EBITDA was not meaningful such as
financial services or companies with negative EBITDA, or high growth business
valued on a revenue basis. Due to these adjustments, the comparatives may not
be on a like-for-like basis.
Commitments and funding
At 31 December 2023 the Private Equity portfolio represented 74% of AGA's
invested portfolio and AGA was a limited partner in 11 Apax Funds, providing
exposure to c.80 private equity portfolio companies.
AGA Assets and Commitments (€m)
Outstanding commitments to the Apax Funds (together with recallable
distributions) reduced by c.€86m in the twelve months to 31 December 2023 to
c.€919m at the end of the period.
As most of the Apax Funds operate capital call facilities to bridge capital
calls from investors for periods of up to 12 months, AGA has significant
visibility on future calls resulting from these commitments, facilitating the
Company's liquidity planning.
At the period-end, AGA had cash (including net current assets) of c.€94m in
anticipation of capital calls from Apax XI, ADF II, and AGI and the dividend
payable in Q1 2024. AGA also had a RCF of €250m which was undrawn at the end
of 2023.
AGA calls and distributions
Despite a generally more challenging exit environment AGA has, in the last
three years, received total distributions from the Apax Funds of c.€593m
compared to calls made of c.€484m.
Balance Sheet
Private Equity €891m
Debt Investments €294m
Derived Equity €16m
Cash(1) €94m
RCF €250m
Unfunded commitments €919m
1. Represents net current assets (inclusive of cash and excluding financial
liabilities at FVTPL)
Portfolio Review
Access to a portfolio of "hidden gems"
AGA aims to offer shareholders superior long-term returns by providing access
to a portfolio of "hidden gems". These are mostly private companies that
shareholders can't buy elsewhere.
They are typically mid-market businesses that operate globally across the core
Apax sectors of tech & digital, services, healthcare, and
internet/consumer.
AGA also has a portfolio of predominantly Debt investments. This is a unique
feature of AGA and absorbs capital not invested in Private Equity, generates
additional returns and income for shareholders whilst also providing
robustness to the Company's balance sheet and reducing cash drag.
At 31 December 2023 74% of AGA's invested portfolio was in Private Equity, 25%
in Debt, and the remaining 1% invested across three remaining listed equity
positions. The portfolio was also well diversified across sectors, where Tech
& Digital made up the largest exposure at year-end. In Private Equity, the
portfolio is balanced across Apax Fund vintages, giving shareholders exposure
to both older Funds in the harvesting phase and more recent Funds that are
currently being invested.
Invested portfolio by asset type
Private Equity 74%
Debt Investments 25%
Derived Equity 1%
Invested portfolio by sector
Tech & Digital 41%
Services 27%
Healthcare 15%
Internet & Consumer 17%
Private Equity Lifecycle(1)
Investing 40%
Maturity 38%
Harvesting 22%
1. Represents % of commitments of respective funds in each lifecycle stage
Portfolio review - Private Equity
"All-weather" investment strategy well-suited to generate alpha
The Apax Funds' investment strategy is grounded in enduring and proven
disciplines: diversification, backing businesses with strong underlying
economic motors, and driving 'alpha' through business improvement.
Furthermore, it is a strategy that, for the most part, produces businesses
where public market, strategic, or private equity exits are viable.
'Alpha' is measured by judging firstly, the extent to which the Apax funds'
portfolio companies accelerate their growth during the ownership period and,
secondly, the extent to which the valuation multiples re-rate faster than, or
relative to, their peers. This approach has the benefit of neutralising the
effect of market 'beta' and as such is a better measure of business quality
improvement during the funds' ownership.
24%
Average discount to peers at entry(1)
1. Apax analysis of discount/premium of Apax VIII, Apax IX and Apax X
portfolio company multiples at entry against trading multiples of relevant
peer companies as determined by Apax and weighted by invested capital
Top 30 portfolio companies
The Apax Funds' investment strategy is sector led, with deal teams focused on
identifying opportunities across four attractive sectors. AGA's Private Equity
portfolio reflects this strategy with the largest sector being Tech &
Digital, followed by Services, Healthcare and Internet/Consumer.
At 31 December 2023 the top 30 portfolio companies represented 63% of AGA's
Adjusted NAV and 72% of the Private Equity portfolio.
Private Equity Total Return Total Private Equity portfolio
2.4% / 4.5% €890.7m
FY 2023 / FY 2023 constant currency 31 December 2023
Tech & Digital Services
Valuation €m % of NAV
IBS Software 35.2 3%
Bonterra 33.4 3%
Odido 28.3 2%
Lutech 27.1 2%
Paycor 24.7 2%
Infogain* 21.8 2%
EcoOnline 20.5 2%
ECI 16.0 1%
Coalfire 16.0 1%
Services
Valuation €m % of NAV
Assured Partners (AIX) 58.7 5%
TOI TOI & DIXI 45.0 3%
PIB Group* 44.8 3%
SavATree 31.9 3%
Safetykleen Europe 30.6 2%
Oncourse Home Solutions 29.4 2%
Authority Brands (AX) 26.2 2%
Lexitas 20.6 2%
Palex 19.4 1%
Alcumus 16.6 1%
Healthcare
Valuation €m % of NAV
Candela 34.1 3%
Vyaire Medical* 27.0 2%
Rodenstock 25.2 2%
Healthium 17.6 1%
Eating Recovery Center 15.7 1%
Internet/Consumer
Valuation €m % of NAV
Trade Me* 37.9 3%
Cole Haan 32.0 3%
Cadence Education 25.7 2%
Bazooka Candy Brands 25.5 2%
Nulo 16.7 1%
Ole Smoky Distillery 15.7 1%
* denotes overlap with Debt Investments portfolio and Derived Equity portfolio
Well diversified across the private equity lifecycle
The Private Equity portfolio is well diversified across the private equity
lifecycle, with 40% in the investment phase, 38% in the maturity phase, and
22% in the harvesting phase.
At 31 December 2023, AGA's largest exposure was to Apax X which is now 95%
invested and committed, having closed 25 investments, with the remaining
capital mainly reserved for follow-on investments.
Looking at the funds in the investment phase, Apax XI made its first five
investments in 2023 and, in December 2023, Apax Global Impact held
a final fund close with commitments of c.$0.9bn.
The buyout funds in the harvesting phase continue to focus on identifying
opportunities to exit their remaining portfolio companies at attractive
valuations.
Investment phase
40%
Apax XI
AGA NAV: €4.1m
Distributions: €0.0m
% of AGA PE portfolio: 0%
Vintage: 2022
Commitment: €198.4m + $490.0m
Invested and committed: 12%
Fund size: TBC²
Apax Digital II
AGA NAV: €8.9m
Distributions: €0.0m
% of AGA PE portfolio: 1%
Vintage: 2021
Commitment: $90.0m
Invested and committed: 23%
Fund size: $1.9bn
AMI II
AGA NAV: (€0.5m)
Distributions: €0.0m
% of AGA PE portfolio: 0%
Vintage: 2022
Commitment: $40.0m
Invested and committed: 8%
Fund size: TBC²
Apax Global Impact
AGA NAV: €6.0m
Distributions: €0.0m
% of AGA PE portfolio: 1%
Vintage: 2022
Commitment: $60.0m
Invested and committed: 24%
Fund size: $0.9bn
MATURITY PHASE
38%
Apax X
AGA NAV: €447.3m
Distributions¹: €45.1m
% of AGA PE portfolio: 50%
Vintage: 2020
Commitment: €199.8m + $225.0m
Invested and committed: 95%
Fund size: $11.7bn
Apax IX
AGA NAV: €268.0m
Distributions¹: €397.8m
% of AGA PE portfolio: 30%
Vintage: 2016
Commitment: €154.5m + $175.0m
Invested and committed: 94%
Fund size: $9.5bn
AMI
AGA NAV: €14.9m
Distributions¹: €59.2m
% of AGA PE portfolio: 2%
Vintage: 2015
Commitment: $30.0m
Invested and committed: 88%
Fund size: $0.5bn
Apax Digital
AGA NAV: €53.6m
Distributions¹: €21.9m
% of AGA PE portfolio: 6%
Vintage: 2017
Commitment: $50.0m
Invested and committed: 103%
Fund size: $1.1bn
HARVESTING PHASE
22%
Apax VIII
AGA NAV: €60.9m
Distributions¹: €595.5m
% of AGA PE portfolio: 7%
Vintage: 2012
Commitment: €159.5m + $218.3m
Invested and committed: 110%
Fund size: $7.5bn
Apax Europe VII
AGA NAV: €25.2m
Distributions¹: €91.4m
% of AGA PE portfolio: 3%
Vintage: 2007
Commitment: €86.1m
Invested and committed: 108%
Fund size: €11.2bn
Apax Europe VI
AGA NAV: €2.3m
Distributions¹: €13.7m
% of AGA PE portfolio: 0%
Vintage: 2005
Commitment: €10.6m
Invested and committed: 107%
Fund size: €4.3bn
1. Represents all distributions received by AGA since 15 June 2015
2. Apax XI and AMI II have yet to hold their final closes
Earnings growth was the main driver of performance
Earnings growth across the Private Equity portfolio companies remained the
main driver of performance despite a more challenging economic backdrop.
Earning growth was offset by negative movements in comparables, mainly from
Thoughtworks, Paycor, and Viasat, where the end-of-period share price was used
to value the companies.
The increase in management fees accrued during the period largely reflects
AGA's $700m commitment to the latest Apax global buyout fund in 2022. Private
Equity fund returns typically exhibit a J curve pattern in the early years,
where initial fees and expenses outweigh gains as the fund has only commenced
investing. We would expect this to dampen over time as the Fund continues to
invest.
FX movements were mainly driven by the EUR strengthening against the USD.
Private Equity Performance (%)
Movement in underlying portfolio companies' earnings 17.8%
Movement in net debt(1) (3.3%)
Movement in comparable companies' valuation multiple(2) (4.0%)
One-off and other(3) (1.4%)
Management fees and carried interest accrued by the Apax Funds(4) (4.6%)
FX (2.1%)
LTM Total Return 2.4%
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. Includes adjustments for dilutions from management incentive plans (as a
result of growth in the portfolio's value) and costs related to NAV facilities
4. This also includes movements in the performance fee reserve of the Eligible
Private Equity portfolio, if applicable. This was nil for the twelve months to
31 December 2023
Continued momentum across the portfolio
The Private Equity portfolio continued to perform well and average LTM EBITDA
growth across portfolio companies was 18% at 31 December 2023, broadly in line
with the prior year.
As a result of the comparables based valuation methodology for Private Equity
portfolio companies, it is not surprising that valuation multiples have come
down since December 2021. In the year to 31 December 2023 multiples decreased
slightly from 17.2x to 16.6x at year-end, mainly reflecting negative movements
from the Apax Funds' listed holdings, and particularly Thoughtworks, Viasat,
and Paycor. Share prices for these investments trended up in Q4 but not
sufficiently to offset declines earlier in the year. At 31 December the Apax
Funds' listed exposure represented c.7% of the Private Equity portfolio, down
from 14% at the end of 2022.
The Apax Funds have generally used lower levels of leverage than the market,
with the average across AGA's Private Equity portfolio of 4.6x net debt/EBITDA
at the end of 2023. c.82% of portfolio companies have maturities extending
beyond 2027.
LTM EBITDA growth¹ EV/EBITDA multiple¹ Net Debt/EBITDA¹
Dec-21 35.3%
Dec-21 23.2x
Dec-21 4.2x
Dec-22 18.5% Dec-22 17.2x Dec-22 4.8x
Dec-23 18.0% Dec-23 16.6x Dec-23 4.6x
EV/EBITDA multiple¹
Dec-21 23.2x
Dec-22 17.2x
Dec-23 16.6x
Net Debt/EBITDA¹
Dec-21 4.2x
Dec-22 4.8x
Dec-23 4.6x
1. Gross Asset Value weighted average of the respective metrics across the
portfolio. Investments can be excluded for reasons such as: investments in the
financial services sector; companies with negative EBITDA (or moving from
negative to positive EBITDA in the case of growth metrics); investments that
are written off and companies where EBITDA is not meaningful for
company-specific reasons.
Investment activity picked up in H2 2023
Investments
AGA deployed c.€95m on a look-through basis across ten new investments
during the year. The majority of this capital was invested in the second half,
as the outlook improved, and more compelling opportunities emerged. Apax XI
made four new investments in IBS Software, Palex, Bazooka Candy Brands, and
OCS/Finwave. Apax XI also signed one further investment in WSGN before
year-end. The Apax Global Impact Fund made two investments in Swing Education
and GAN Integrity and the Apax Digital Fund II made one new investment in
Petvisor.
Exits
In what was generally a difficult exit environment, the Apax Funds realised
six investments at an average uplift of 20% to previous unaffected valuations
and an average Gross MOIC of 1.6x in the twelve months to 2023. The Apax Funds
also continued to reduce public positions and holdings in Paycor and Baltics
Classifieds Group were sold down in the period. AGA received total
distributions of c.€90m, primarily from these exits.
Total invested(1) Total distributions Gross MOIC(2) Average uplift(3)
€95m €90m 1.6x 20%
1. AGA's investment cost / realisations on a look-through basis. Amounts
remain subject to close until investments have closed
2. Average Gross MOIC and Gross IRR calculated based on the expected
aggregate cash flows in EUR since inception. Individual Gross MOIC by
investment calculated based on return in the Funds underlying currency or
where AGA invests in two currency sleeves it represents the EUR return unless
otherwise stated
3. Valuation uplifts on exits are calculated based on the total actual or
estimated sales proceeds and income as appropriate since the last Unaffected
Valuation. Unaffected Valuation is determined as the fair value in the last
quarter before exit, when valuation is not affected by the exit process (i.e.
because an exit was signed, or an exit was sufficiently close to being signed
that the Apax Funds incorporated the expected exit multiple into the quarter
end valuation). Where applicable, average uplifts of partial exits and IPO's
includes proceeds received and the closing fair value at period end
Investments
TEch & Digital Internet / consumer SErvices TEch & Digital services
January 23 March 23 May 23 June 23 July 23
Magaya Zoo Eretz IBS Software Swing Education Palex Medical
· --€6.9m · €2.4m · €26.0m · €2.0m · €16.9m
· ADF II · AMI II · AXI · AGI · AXI
· Digital freight software platform · Israel's leading pet products wholesaler · Provider of modern software solutions to · Online marketplace that connects schools and substitute teachers · A leading distributor
and retailer
the global travel and logistics industry
of medical technology equipment and solutions in Southern Europe
tech & Digital tech & Digital tech & Digital Internet / consumer services
August 23 October 23 October 23 November 23 December 23
Chavat Daat GAN Integrity Bazooka Petvisor OCS/ Finwave
· €0.7m · €3.1m · €19.5m · €3.3m · €14.0m
· AMI II · AGI · AXI · ADF II · AXI
· Private specialty veterinarian hospital · Provider of third-party and employee-centric ethics and compliance · Portfolio of non-chocolate confectionary brands · Veterinary and pet services business management and Italian finance software provider
for household pets software
client engagement software platform
in the centre of Israel
Exits
TEch & Digital services services TEch & Digital Internet / consumer
January 23 February 23 July 23 July 23 September 23
Duck Creek Shriram Global-e Go Global Travel Manappuram Finance Ltd.
· 5.2x Gross MOIC/ · 0.8x Gross MOIC · 35.6x Gross MOIC / 23% Uplift · 2.8x Gross MOIC/ · 1.1x Gross MOIC/
53% Uplift
(14%) Discount
13% Uplift
3% Uplift
· AMI
· AVIII · AVIII
· AMI · AIX
· Provider of cross-border e-commerce solutions
· Software provider to property and casualty insurers · Non-bank finance company focused on · Supplier of search engine technologies · Non-bank finance company
the micro enterprises segment in India
and related services
for travel industry
Internet / consumer
December 23
Matches Fashion
· 0.0x Gross MOIC/ (100%) discount
· AIX
· A global luxury
e-commerce platform
Sustainability Governance at Apax
Sustainability is embedded throughout the Apax Funds' investment process, from
due diligence through to the Funds' ownership and exit.
Philosophy
Apax's governance philosophy in Private Equity emphasises that all investment
team members should actively integrate responsible investing into their daily
tasks. The management teams of portfolio companies, along with their boards,
bear the ultimate responsibility for sustainability performance. This
responsibility is supported by specialists from the OEP, informed by
materiality and guided by the Sustainability Committee.
Approach
The Sustainability Committee convenes monthly to review matters across the
firm and the portfolio. The Committee is made up of nine members from across
the firm who each bring valuable perspectives and considerations to help
management and deal teams navigate the ecosystem and unlock value throughout
the investment lifecycle.
Embedding sustainability in the Private Equity investment lifecycle
Pre Investment
Due diligence & gap analysis
· Due diligence:
Sustainability due diligence is conducted, reviewed by members of the
sustainability and compliance teams and incorporated into the final investment
committee documentation.
· Gap analysis:
Gap analysis with key diligence findings and Apax' sustainability priority
areas is performed to determine remediation actions post investment.
YEAR 1
oNBOARDING
· Onboarding
Onboarding: Portfolio companies are onboarded on Apax data platforms and
introduced to the Apax team and programme.
· Remediation:
A roadmap is developed to address identified areas of remediation.
YEAR 2 - 3
Monitoring & reporting
· Monitoring & Assessing: sustainability performance is reviewed
regularly with deal teams and through check-ins with management.
The OEP team engages with and supports portfolio companies on specific
initiatives on a case by case basis.
YEAR 3 - 4+
· Reporting:
Annual Apax portfolio company sustainability survey conducted to track
performance. KPIs are shared with the Apax Funds' investors via an online data
platform and also published in the Apax Sustainability Report.
YEAR 5
Exit preparation
· Engagement:
Engagement around portfolio company sustainability reporting & disclosure
to maximise value.
Governance and cybersecurity at Apax
Spotlight
Apax recognises that the backbone of corporate success is robust governance.
Companies with sound governance standards foster transparency and
accountability, gaining the trust of shareholders, employees, and customers
while minimising financial, legal, and reputational risks.
In terms of approach, Apax deal teams evaluate the governance structures of
potential Private Equity investments, emphasising the need for strong
anti-corruption frameworks, clear codes of conduct, and rigorous cybersecurity
protocols. New portfolio companies, especially those with nascent governance
practices, receive support to establish and implement these policies,
particularly core anti-bribery and anti-corruption measures, within their
first year in the portfolio.
ClearBank's cybersecurity leadership
Case study: Private Equity
The Apax Digital Funds invested in ClearBank, one of the fastest-growing UK
tech companies, in 2022. At the time of launch, ClearBank was the first new
clearing bank in the UK in over 250 years. It is a regulated bank and the only
next generation payments provider with direct access to all banking payment
schemes in the UK.
"Our customers are hyper aware of security, and we receive extremely thorough
due diligence questionnaires from our customers."
Bernard Wright | CISO ClearBank
As both a regulated bank, and a truly cloud-native bank with a mission to
revolutionise the financial payment space through cloud technology,
cybersecurity is inherently important to ClearBank as a business, from both a
commercial and regulatory perspective. With a customer base of over two
hundred financial institutions and fintech businesses, the Company needs to be
well prepared against all threats.
With this in mind, Mark Beith, Partner at Apax, spoke with Bernard Wright,
Chief Information Security Officer (CISO) at ClearBank about the firm's
cybersecurity journey to date, the criticality of good cyber governance as a
regulated bank, how Apax and ClearBank have collaborated on cybersecurity
policy, and his views on the impact of generative AI in this space.
Case study: Private Equity
"I think a real value-add is being a part of the Apax network and the ability
to knowledge share with the portfolio."
Bernard Wright | CISO ClearBank
Q Tell us about your approach to cybersecurity at ClearBank,
particularly as you have developed from a "start-up" to regulated bank.
A ClearBank was founded nearly eight years ago and was the first new
clearing bank in the UK for over two centuries. Much of our early years were
spent focused on gaining our license from the Bank of England, which we were
granted in 2017. As a cloud-based bank, this was a particular challenge, as
both the regulator and the payment schemes we needed to connect to had
concerns around the security of cloud-based operations. We spent a lot of time
educating our stakeholders around controls and security in the cloud.
Fast forward to today, we have gone from 200 people, and a security team of
seven, to over 700 people today and a security team of nearly 30. Our approach
to cybersecurity has naturally grown with the organisation, and we have added
expertise across the various security disciplines to ensure we are always
ahead of the curve, particularly around identity, access and control, data,
and future threats.
Q You clearly need to evidence your security standards to the
regulator, but as a 'bank for banks', how important is cybersecurity from a
commercial perspective?
A It is extremely important. Our customers are hyper aware of
security, and we receive extremely thorough due diligence questionnaires from
our customers. They rightfully want to know details about everything
security-related, from our development practices to our access permissions and
how our code is released. Given the regulated environment we operate in, we
must be able to evidence our security operations.
Q What are your areas of focus currently?
A We have several areas of focus. As our brand has grown, and our
visibility has increased, we've seen a real increase in attention from 'bad
actors'. This has put a focus on scaling our security team and we are
constantly evaluating areas where we need specific expertise. We're also
focused on cultural change. We do mostly all of our own development, and so we
have put a large emphasis on development security operations, bridging the gap
between security and our engineers. This ensures that security is baked-in
from the very beginning of any project. Separately, a big focus for the
organisation is the international build-out, and this presents its own
challenges from a security perspective, given the varying rules and
regulations within Europe and beyond.
Q How have you worked with the Apax team to drive forward your cyber
strategy
A We work closely with Apax's Operational Excellence Practice,
particularly Apax's technology and cybersecurity specialist. Early on
post-investment we held several sessions with the Apax team who shared their
insights and helped us identify gaps and plug into their control framework. I
think a real value-add is being a part of the Apax network and the ability to
knowledge share within the portfolio. Often, organisations can be cagey with
sharing information that concerns cybersecurity, and so the Apax network gives
access to useful information, including third party recommendations, updates
on tools, and so on.
Q Finally, any thoughts on the impact of Artificial Intelligence
("AI") on security?
A There's a huge amount of noise on all forms of AI at the moment.
There was a lot of education needed at the beginning. We also had to question:
what is our ethics policy concerning AI? This was something we had to address
and pull together. What we have done is run a number of 'hackathon' sessions
for our internal technology teams focused on AI, addressing it is an
opportunity rather than just a potential risk. A number of interesting ideas
have come out of that in regard to how we can improve our internal processes,
and that work is ongoing.
Q: Mark Beith, Partner at Apax
A: Bernard Wright, CISO ClearBank
Creating a business of scale through a carveout and day-1 combination
Case Study: Private Equity
OCS / Finwave
In August 2023, Apax XI invested in OCS, an Italian consumer finance software
provider servicing Italian banks and financial institutions. Concurrent with
the transaction, Apax XI also acquired the proprietary fintech and credit
management software division Finwave from Lutech, an Apax X portfolio company,
and combined it with OCS.
"The combination of OCS and Finwave will create a truly unique, European
financial software platform of scale, with huge potential for future growth."
Gabriele Cipparrone | Partner at Apax
The combination of OCS and Finwave creates a €100 million revenue European
financial software platform of scale. Together, the companies will leverage
their collective expertise and talent to accelerate the development of
innovative software solutions to support the evolving needs of financial
institutions and operators. As a combined group, OCS and Finwave will be
better positioned to serve their customers in Italy and internationally, with
a large offering covering consumer finance, corporate finance and capital
markets software and solutions.
Both OCS and Finwave are considered "hidden gems", with Apax XI acquiring them
at Italian mid- market valuations. There is therefore significant scope to
drive a re-rating closer to European financial services technology providers
at exit.
Why is this an Apax Funds' deal?
· Software is one of Apax's main subsectors where the Funds have a strong
track record, having deployed c.$7.6bn across 27 deals.
· Complex carveout and day-1 combination: OCS was acquired from founders
and a sponsor whereas Finwave was carved out of Lutech, an Apax X portfolio
company.
· Apax has strong market experience in Italy with past investments in
Engineering and Lutech.
· Mid-market deal with multiple levers of value creation, including tech
modernisation, greater scale and diversification of the combined group.
% of AGA NAV AGA valuation
1% €14.0m
at 31 December 2023 at 31 December 2023
Unlocking value through separation
Case Study: Private Equity
Oncourse Home Services
In December 2021, Apax X acquired the homeowner services subsidiary of
American Water Works via a carveout.
The subsidiary, now rebranded to Oncourse Home Solutions ("OHS"), provides
various warranty protection programmes and other home services to residential
customers across the US. It services 1.5 million homeowners across 43 states
and Washington, D.C.
Carveouts are complex transactions where a new business is created through the
separation of a subsidiary from a much larger business. Often they're under
resourced units but with potential for value creation and over the last seven
years the Apax OEP has been building out their capabilities in this area.
At the time of the acquisition of OHS, Apax X had tracked the company for 18
months and identified it as a high-quality business with multiple organic and
inorganic value creation levers available to drive growth. Additionally, the
utilities home warranty sector represents an attractive market given its high
margins, high retention rates, high barriers to entry and ample opportunities
for cross-sell.
"The Apax Funds have deep domain experience across the home services market
and insurance and warranty product dynamics, with prior investments in
Authority Brands, Assured Partners and Hub for example."
Ashish Karandikar | Partner at Apax
Building on the initial investment thesis around inorganic growth through
strategic M&A, in February 2024, OHS, agreed to acquire and carveout the
Consumer Energy Appliance Service Plan business from CMS Energy (NYSE: CMS).
The transaction is an opportunity for OHS to quickly build scale and diversity
its range of products, partnerships, geographies and revenue mix, unlocking
significant cross-sell opportunities.
% of AGA NAV AGA valuation
2% €29.4m
at 31 December 2023 at 31 December 2023
Portfolio review - Debt Investments
Strong performance in 2023
Capital not invested in Private Equity is primarily invested in Debt
Investments. This portfolio absorbs excess liquidity not invested in Private
Equity, thereby limiting cash drag, producing additional returns, and
enhancing the robustness of AGA's balance sheet to support unfunded
commitments to the Apax Private Equity Funds. It also provides an additional
source of funding to support the dividend payment.
As at 31 December 2023, AGA held €294.2m of Debt Investments, representing
25% of the Total Invested Portfolio. The portfolio primarily comprises Debt
Investments in companies and sectors where Apax can leverage insights from its
private equity activities. The integrated approach of having no barriers
between Private Equity and Credit teams helps position the portfolio to access
better risk adjusted credit returns. Whilst individual investments are
identified through a bottom-up process, the portfolio is actively managed
top-down from a risk and liquidity perspective. Exposure to positions where
the outlook was more uncertain was being actively reduced.
In the year to 31 December 2023, the Debt portfolio achieved a strong Total
Return of 11.8% (14.4% constant currency). Over the last five years, the
portfolio has achieved a 45.9% cumulative constant currency Total Return,
versus 32.5% for the S&P/LSTA Leveraged Loan Index.
FY 2023 Debt Investments performance (%)
Income 10.9%
Realised gains 1.8%
Unrealised gains 3.6%
Performance fee(1) (1.9%)
FX (2.6%)
LTM Total Return 11.8%
1. Performance fee reflects the performance fee reserve payable at 31
December 2023
Debt Total Return Total Debt Investments
11.8% €294.2m
FY 2023 at 31 December 2023
Continued exposure to more liquid instruments
The largest position in the Debt portfolio represents c.2% of AGA's Adjusted
NAV, and 61% of the Debt investments are invested in first lien loans.
Syndicated first lien loans tend to be more readily tradeable when compared to
debt instruments that are more junior in the capital structure, and we believe
the current proportion of first lien loans held is appropriate in the context
of the Private Equity commitments made by AGA.
AGA also maintained higher liquidity balances in 2023 in anticipation of calls
from the Apax Funds.
92% of Debt Investments were invested in floating rate loans to minimise
duration risk. With base rates having increased, the portfolio generated a
10.4% income yield. As spreads tightened in the year and the second half of
the year saw rates stabilise, there was an uptick in fair value of the
portfolio whilst the average yield to maturity of the overall portfolio was
steady at 12.0% at 31 December 2023, compared to prior year-end (12.1% at 31
December 2022).
In 2023 AGA invested €45.2m across four new Debt positions and received
€100.6m from 10 full and partial disposals.
In addition to the Debt portfolio, AGA also has a small exposure to Derived
Equity, which represented 1% of the invested portfolio at 31 December 2023. In
the year, AGA exited two positions, with three positions remaining in the
portfolio valued at €15.6m. The portfolio achieved a Total Return of 14.8%
(16.8% constant currency) in FY 2023.
First lien term loan
Valuation €m % of NAV
PIB Group* 22.8 2%
Exact Software 15.2 1%
Neuraxpharm 15.1 1%
Theramex 15.0 1%
Infogain* 14.8 1%
Vyaire Medical* 14.0 1%
Precisely Software 13.4 1%
WIRB-Copernicus Group 13.3 1%
PCI 10.6 1%
Mitratech 9.0 1%
Navicure 8.8 1%
Aptean 6.6 1%
PSSI 6.6 <1%
Parts Town 6.1 <1%
Therapy Brands 6.0 <1%
* Denotes overlap with the Private Equity portfolio
second lien term loan
Valuation €m % of NAV
Confluence 16.8 1%
Aptean 15.2 1%
Precisely Software 12.9 1%
Therapy Brands 12.2 1%
Trade Me* 11.8 1%
Mitratech 11.7 1%
MDVIP 6.8 <1%
Syndigo 4.4 <1%
Other
Valuation €m % of NAV
MindBody 10.0 1%
Engineering Bonds 10.0 1%
Confluence 5.1 <1%
3. Governance & Risk Management
Contents
Chairman's introduction
Long-term success
Dear Shareholder,
On behalf of the Board, I am pleased to introduce the Company's corporate
governance statement on p.47 and p.48.
Promoting long-term success
This will be my last year as Chair of AGA - a role I have had the privilege to
hold since the Company's 2015 IPO. Today the Company is well diversified and
well-positioned to take advantage of future opportunities. During the year
under review, the Board of Directors has acted to promote the long-term
success of the Company for the benefit of shareholders whilst having due
regard to the matters set out in section 172 of the UK Companies Act 2006. You
can read more about this on p.12. This was also confirmed by the internal
Board evaluation conducted in 2023, more details of which can be found on
p.46.
Our Board of Directors
The Company has a strong, fully independent Board of experienced 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 strategy and investment policy of the Company and
overseeing its day-to-day activities. Biographies of the Board of Directors,
including details of their relevant experience and current appointments, are
available on p.42 to p.44 and the Company's website at:
www.apaxglobalalpha.com/who-we-are/board-of-directors/
At 31 December 2023, the Board was composed of 60% male and 40% female
Directors.
In October 2023, the Directors announced that Karl Sternberg had accepted an
invitation to join the Board as a Non-Executive Director and a member of AGA's
Audit Committee with effect from 1 March 2024. He brings significant
investment management and Investment Trust experience, and he is expected to
succeed me as Chairman when I retire later this year. Coinciding with Karl
joining the Board, Chris Ambler has decided to retire as a Non-Executive
Director of the Company after nearly nine years in the role. I want to take
the opportunity to thank Chris for his long-standing commitment and
contribution to the Company.
AGM / Discontinuation vote
Our ninth AGM will be held at 11.15 am (UK time) on 1 May 2024 at East Wing,
Trafalgar Court, Les Banques, St Peter Port, Guernsey, Channel Islands, GY1
3PP.
In common with many 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 2024 AGM. To ensure the
Company continues in its current form, the Board of Directors recommend that
shareholders vote against the Discontinuation Resolution, which all of the
Directors intend to do with respect to their own shareholdings.
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
(http://www.apaxglobalalpha.com) .
Shareholders will again be able to attend the AGM either in person, or via a
telephone dial-in to listen to the AGM. Questions can be submitted in advance
to the Company Secretary by email at: AGA-admin@aztecgroup.co.uk For more
information about the AGM visit:
www.apaxglobalalpha.com/investors/investor-centre/
(http://www.apaxglobalalpha.com/investors/investor-centre/)
Compliance with the AIC Code, the UK Corporate Governance Code, and the GFSC
Code
The Directors recognise the importance of sound corporate governance and, as a
closed-ended investment Company, have adopted the Association of Investment
Companies ("AIC") Code of Corporate Governance (the "AIC Code"), which has
been endorsed by the Financial Reporting Council.
The Board considers that reporting against the principles and recommendations
of the AIC Code, which incorporates the UK Corporate Governance Code (the "UK
Code") and the Guernsey Financial Services Commission Finance Sector Code of
Corporate Governance (the "GFSC Code"), provides better information to
shareholders. I am pleased to report that for the year under review, we have
consistently applied the principles of good governance contained in the AIC
Code and you can find more details on this on the subsequent pages.
You can find a copy of the AIC Code on the AIC website at: www.theaic.co.uk
(http://www.theaic.co.uk)
Tim Breedon CBE | Chairman
4 March 2024
Governance at a glance
The Board aims to promote the Company's long-term success and to preserve and
strengthen stakeholder confidence in our business integrity. This is achieved
through the application and maintenance of the highest standards of corporate
governance.
Board diversity
Number of Board members Percentage of the board
Male 3 60%
Female 2 40%
Minority ethnic background - -
The Board acknowledges the importance of diversity for the effective
functioning of the Board which helps create an environment for successful and
effective decision-making. The Board currently comprises of 40% women with
Susie Farnon acting as the Senior Independent Director and Chair of the Audit
Committee. The Company does not currently comply with the ethnic diversity
target set out in the Listing Rules. However the Board continues to keep this
under review in the context of planned Board succession opportunities. The
Board has adopted a Board Management Policy which includes issues relating to
diversity. In view of the nature, scale and complexity of the Company, the
Board believes a formal diversity policy for the Company is not necessary at
this time. Diversity of the Board is further considered on at least an annual
basis through the Board evaluation process.
Major Board activities in 2023
Major decisions taken by the Board and its Committees during 2023 included:
· Conducted a review of the Company's strategy and determined that it
remained fit for purpose despite changes in the macroenvironment.
· Comprehensive search for and appointment of a new Non-Executive Director
and future Chair.
· Thorough review of AGML's credit strategy and capabilities.
· Discussion and review of capital allocation in the context of future
Private Equity calls and the capacity of AGA's RCF and debt portfolio.
· Refinancing of the Company's Revolving Credit Facility "RCF".
· Review and amendment to Directors' fees.
Election and re-election of Directors at the 2024 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 2024 AGM.
· As announced in October 2023, Karl Sternberg has joined the Board as a
new Non-Executive Director, effective 1 March 2024. His biography is available
on the Company's website:
www.apaxglobalalpha.com/about-us/board-and-governance
(http://www.apaxglobalalpha.com/about-us/board-and-governance)
· Tim Breedon has indicated that he wishes to retire from the Board in
2024, at which point he will have completed nine years in the role. It is
intended that Karl Sternberg will succeed him as Chairman of Apax Global Alpha
in the second half of 2024, allowing for an appropriate handover period.
· After nearly nine years as Non-Executive Director, Chris Ambler retired
on 1 March 2024. It is proposed to shareholders that Tim Breedon, Susie
Farnon, Mike Bane, and Stephanie Coxon be re-elected and that Karl Sternberg
be elected at the 2024 AGM.
Leading a responsible business
A summary of the Directors' attendance at meetings which they were eligible to
attend is provided below. Eligibility to attend the relevant meetings is shown
in brackets.
Total Board Total Audit Committee
Tim Breedon 5 (5) n/a
Susie Farnon 5 (5) 9 (9)
Chris Ambler 5 (5) 9 (9)
Mike Bane 5 (5) 9 (9)
Stephanie Coxon 5 (5) 9 (9)
· 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 they have
been appointed. Such committees are referred to as "other" committee meetings
· 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
AGA Board of Directors
Tim Breedon Susie Farnon Chris Ambler
Chairman Non-Executive Director, Non-Executive Director
Senior Independent Director,
Tenure
Chair of Audit Committee Tenure
8 years, 8 months Tenure 8 years, 8 months
8 years, 5 months Retired 1 March 2024
Mike Bane Stephanie Coxon
Non-Executive Director Non-Executive Director
Tenure Tenure
5 years, 6 months 3 years, 9 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.; Quilter plc.
Qualifications
Graduate of Oxford University. MSc in Business Administration from the London
Business School.
Susie Farnon
Non-Executive Director, Senior Independent Director, Chair of Audit Committee
Tenure
8 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: Real Estate Credit Investments Ltd.; Bailiwick
Investments Limited; Ruffer Investment Company 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
8 years, 8 months, Retired 1 March 2024
Skills and experience
Chris Ambler joined the AGA Board on 28 April 2015. He has experience in a
number of senior positions in the global industrial, energy and materials
sectors working for major corporations including ICI/Zeneca, The BOC Group and
Centrica/British Gas, as well as in strategic consulting roles.
Current appointments
Chief Executive of Jersey Electricity plc; Non-Executive Director of:
Foresight Solar Fund Limited.
Qualifications
Graduate of Queens' College, Cambridge; MBA from INSEAD; Chartered Director;
Chartered Engineer;
Member of the Institution of Mechanical Engineers.
Mike Bane
Non-Executive Director
Tenure
5 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 25 years and has served as
President of the Guernsey Society of Chartered and Certified Accountants.
Current appointments
Non-Executive Chair of HICL Infrastructure plc.; Non-Executive Director of:
ABRDN Property Income Trust Limited (Formerly Standard Life Investments
Property Income Trust Limited).
Qualifications
Mathematics graduate of Magdalen College, Oxford University. Chartered
Accountant.
Stephanie Coxon
Non-Executive Director
Tenure
3 years, 9 months
Skills and experience
Stephanie joined the AGA Board on 31 March 2020. She is a Fellow of the
Institute of Chartered Accountants in England and Wales and is a non-executive
director on several London listed companies. Prior to becoming a Non-Executive
director, Stephanie led the investment trust capital markets team at PwC for
the UK and Channel Islands. During her time at PwC, she specialised in
advising FTSE 250 and premium London listed companies on accounting, corporate
governance, risk management and strategic matters.
Current appointments
Non-Executive Director of: JLEN Environmental Assets Group Limited.; PPHE
Hotel Group Limited; International Public Partnerships Limited; PraxisIFM
Group Limited. Board member of The Association of Investment Companies.
Qualifications
Fellow of the Institute of Chartered Accountants in England and Wales.
An effective Board
Our Board is composed of highly skilled professionals who bring a range of
expertise, perspectives and corporate experience to our boardroom. In
accordance with the AIC Code, the role of the Board is to promote the
long-term sustainable success of the Company, generate value for shareholders,
and contribute to wider society.
Compliance with the AIC Code, the UK Code, and the GFSC code
Compliance with the principles and recommendations of the AIC Code enables the
Directors to satisfy the requirement to comply with the UK Code and the GFSC
Code where relevant.
As an externally managed investment Company the UK Corporate Governance Code
provisions relating to the role of the Chief Executive, Executive Directors'
remuneration, employees, and need for an internal audit function are not
relevant to AGA and the Company has therefore not reported further in respect
of these provisions. This position is reassessed on an annual basis.
An internal evaluation of the Board was undertaken in 2023, following the
external evaluation conducted in 2021 which concluded that the Board continued
to display a strong corporate governance culture and a high degree of
effectiveness.
Considering the nature, scale, and complexity of the Company, AGA has made
certain exceptions to the AIC Code, including:
- Management engagement committee
AGA does not have a Management Engagement Committee. The Board as a whole
fulfils this function and regularly reviews the performance of the Investment
Manager, other service providers, and relevant fee arrangements.
- Nomination committee
All duties expected of the Nomination Committee are carried out by the Board
and the establishment of a separate Nomination Committee is considered to be
unnecessarily burdensome given the scale and nature of the Company's
activities and the current composition of the Board.
- Remuneration committee
The Company does not have a Remuneration Committee as it does not have any
executive officers. The Board as a whole considers matters relating to the
Directors' remuneration and it is satisfied that any relevant issues that
arise can be appropriately considered by the Board or by the Company's
shareholders at AGMs.
Responsibilities
The Board
The Board is primarily responsible for setting the Company's strategy for
delivering long-term value to our shareholders and other stakeholders,
providing effective oversight of the Investment Manager with respect to the
execution of the investment strategy and ensuring the Company maintains an
effective risk management and internal control system.
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.
Biographies of the members of the AGA Investment Committee are available on
the Company's website at:
www.apaxglobalalpha.com/about-us/board-and-governance?tab=investment-committee
(http://www.apaxglobalalpha.com/about-us/board-and-governance?tab=investment-committee)
The Investment Manager
AGA has entered into an Investment Management Agreement with AGML to manage
the investments 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 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 2023 and has determined that it is in the interests of the
shareholders to continue with AGML's appointment as Investment Manager.
Biographies of the Directors of AGML are available on the Company's website
at:
www.apaxglobalalpha.com/about-us/board-and-governance?tab=investment-manager
(http://www.apaxglobalalpha.com/about-us/board-and-governance?tab=investment-manager)
Statement of independence
AGA's Board of Directors is comprised entirely of independent Non-Executive
Directors. As such it complies with the AIC Code's recommendation regarding
Board composition which sets out that at least half the Board of Directors of
a UK-listed company, excluding the Chairman, should comprise Non-Executive
Directors determined by the Board to be independent in character and judgement
and free from relationships or circumstances that may affect, or could appear
to affect, the Directors' judgement.
In addition to this provision the Code stipulates that a majority of the Board
of Directors should be independent of the Investment Manager. AGA continued to
comply with this requirement throughout the reporting period.
Independence is determined by ensuring that, apart from receiving 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. All of AGA's Directors are
considered to be independent of the Investment Manager.
The AIC Code also recommends that the Chairman should meet certain
independence criteria as set out in the AIC Code on appointment.
Board evaluation
In accordance with the Board management policy, the Company conducted an
internal Board evaluation exercise in 2023, having commissioned an external
review in 2021. The evaluation was managed by the Company Secretary and the
results indicated that the Board continues to operate effectively. There were
a small number of recommendations as to how the Board could improve further
the quality of its oversight of the business of the Company and these will be
considered for implementation in 2024.
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 regarding 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.
However, in response to feedback from shareholders, an ordinary resolution is
proposed at each AGM concerning approval of the dividend policy of the
Company.
EU alternative investment fund managers directive ("AIFMD")
Please refer to p.110 and p.111 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/about-us/board-and-governance
(http://www.apaxglobalalpha.com/about-us/board-and-governance)
Greenhouse gas emissions
All of the Company's activities are outsourced to third parties. As such, the
Company does not have any physical assets, property, employees or operations
of its own and does not generate gas or other emissions reportable under the
Companies Act 2006 (Strategic Report and Directors' Report) Regulations 2013.
Any greenhouse gas emissions linked to the Company relates to the Director's
travel necessary to carry out their duties. Since 2021, the Company's carbon
emissions have been offset via Carbon Footprint Ltd. Under the Listing Rule
15.4.29(R), AGA, as a closed-ended investment Company, is exempt from
complying with the Task Force on Climate-related Financial Disclosures.
Further details of the Investment Manager's approach to responsible investment
practices and ESG standards can be found on p.29 to p.35.
Modern slavery act statement
AGA has a number of outsourced and third party vendor relationships, the most
significant of which are the Investment Manager and Apax. When selecting third
party suppliers, AGA will assess their reputation and how well established
they are in their field. Risk-based due diligence on AGA's critical third
parties is conducted on an annual basis and any modern slavery issues
identified are discussed by the Board. See AGA's website for the Company's
Modern Slavery and Human Trafficking Statement:
www.apaxglobalalpha.com/modern-slavery-act/
Stakeholder engagement
As highlighted in the Section 172 statement on p.12, the Company does not have
any employees and is entirely externally managed. Therefore, the primary
stakeholders consist of its shareholders, suppliers, community, and the
environment.
Shareholder support and engagement is critical to the continued success of the
business and the achievement of our objectives. The Board is committed to a
culture of openness and regular dialogue with shareholders, and it seeks to
take into account the needs and priorities of shareholders during all
discussions and decision-making. Contact details for shareholder queries can
be found on p.108 and the Company's website at:
www.apaxglobalalpha.com/contact (http://www.apaxglobalalpha.com/contact)
In addition to assisting the Company to deliver on our objectives, effective
relationships with our service providers help the Company to operate in a
controlled and compliant manner. Further details of our service providers
engagement can be found on p.12 and p.13.
The Board believes investing responsibly is important in protecting and
creating long-term value. The Board recognises that the incorporation of
material sustainability considerations can help inform the assessment of
overall risk and opportunities. Further details can be found on p.11 and in
our Responsible Investment policy which is available on our website at:
www.apaxglobalalpha.com/sustainability
(http://www.apaxglobalalpha.com/sustainability)
Corporate Governance Statement
2023 Key activities
Key activities of the Board
The Board met five times during the year.
Additional meetings were arranged as necessary for the Board to properly
discharge its duties.
An overview of some of the Board's activities is provided here.
Principal Strategic Objectives
1 Deliver over-the-cycle target Total NAV Return of 12-15%,
including a dividend of 5% of NAV
2 Continue to invest in Private Equity, providing shareholders with exposure to
the Apax Funds for long-term growth
3 Use Debt Investments as an effective capital management tool with an
attractive return
4 Remain fully invested whilst maintaining liquidity risk within appetite
Strategy and financing
Held a strategy day with a range of key topics including:
· High-level exploratory discussions to challenge whether the strategy
remains fit for purpose, including considering of alternative approaches
· Review and discussions around AGA's credit and private equity portfolios
and their performance in the medium and long-term
Regularly reviewed the Company's strategy and financial position, including:
· Entered a new multi-currency Revolving Credit Facility to replace the
prior RCF which reverted to a conventional fixed-term arrangement
· Capital allocation priorities given increasing share price discount to
NAV
Search for and appointment of a new Non-Executive Director
Risk Management
· Reviewed the Company's risk appetite statement and principal risks
· Performed a review of the Company's internal financial controls
Stakeholder engagement
· Hosted the AGM on 3 May 2023
· Hosted a Chairman's corporate governance roadshow
· Held a Capital Markets Day for investors and analysts
· Commissioned additional research from Hardman & Co
Governance
· Participated in an internal evaluation of the Board's effectiveness to
identify areas for improvement and inform training plans
· Undertook a formal annual review of key service providers
· Received regular updates from the Company Secretary on regulatory and
corporate governance matters
Corporate Governance Statement
2023 calendar of events
JAN FEB MAR APR MAY JUN
Board meetings √ √ √ √ AGM √
Key dates FY22 Results Q1 Results Capital Markets Day
Dividend paid √
JUL AUG SEP OCT NOV DEC
Board meetings √ √
Key dates Interim Results Board Strategy Day Q3 Results
New RCF signed
Dividend paid √
Directors' duties
In 2023, 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
Chairman of the Board of directors
Tim Breedon fulfils the role of independent Non-Executive Chairman of the
Board of Directors.
Role overview
The Chairman is responsible for the leadership of the Board, the creation of
conditions necessary for overall Board and individual Director effectiveness
and ensuring a sound framework of corporate governance, which includes a
channel for shareholder communication.
Responsibilities
· chairing the Board and general meetings of the Company, including
setting the agenda of such meetings;
· promoting the highest standards of integrity, probity and corporate
governance throughout the Company, and in particular at Board level;
· ensuring that the Board receives accurate, timely and clear information;
· ensuring effective engagement between the Board, the Company's
shareholders and other key stakeholders;
· facilitating the effectiveness of the contributions and constructive
relationships between the Directors of the Company;
· ensuring that any incoming Directors of the Company participate in a
full, formal and tailored induction programme; and
· ensuring that the performance of the Board, its Committees and
individual Directors is evaluated at least once a year.
Chairman of the Audit Committee
Susie Farnon fulfils the role of Chairman of the Audit Committee. The Audit
Committee is appointed under terms of reference from the Board of Directors,
available on the Company's website at:
www.apaxglobalalpha.com/about-us/board-and-governance
(http://www.apaxglobalalpha.com/about-us/board-and-governance)
Role overview
The Chairman of the Audit Committee is appointed by the Board of Directors.
The role and responsibility of the Chairman of the Audit Committee is to set
the agenda for meetings of the Audit Committee and, in doing so, take
responsibility for ensuring that the Audit Committee fulfils its duties under
its terms of reference.
Responsibilities
· reviewing in detail the content of the interim report and the annual
report, the work of the service providers in producing them and the results of
the external audit;
· reviewing the findings of the audit with the external auditor; including
a discussion of the major issues arising from the audit;
· overseeing the selection and review processes for the external auditor,
considering and making recommendations to the Board on the appointment,
reappointment and removal of the external auditor and the remuneration of the
external auditor as well as on the annual audit plan, including all proposed
materiality levels;
· 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 Company's internal control and financial and operational
risk, management systems, whistleblowing, and fraud; and
· monitoring the risks faced by the Company and conducting a robust
assessment of the principal risks in order to implement the relevant controls
to manage or mitigate these risks.
Non-Executive Directors
Role overview
The Non-Executive Directors have a responsibility to ensure that they allocate
sufficient time to the Company to perform their responsibilities effectively.
Accordingly, Non-Executive Directors are required to make sufficient effort to
attend Board or Committee meetings, to disclose other significant commitments
to the Board before accepting such commitments and to inform the Board of any
subsequent changes. In determining the extent to which another commitment
proposed by a Non-Executive Director would have an impact on their ability to
sufficiently discharge their duties to the Company, the Board will give
consideration to the extent to which the proposed commitment may create a
conflict with:
· their time commitment to the Company;
· a direct competitor of the Company, the Investment Manager or the
Investment 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.
Responsibilities
· Shareholders are provided with the opportunity to elect and re-elect the
Non-Executive Directors on an annual basis at the AGM of the Company and to
review their remuneration in doing so. The role of the Non-Executive Directors
includes, but is not limited to:
· constructively challenging and developing proposals on strategy;
· appointing service providers based on agreed goals and objectives;
· monitoring the performance of service providers;
· reviewing the risks disclosed within the Company's risk framework and
proposing additional controls for risk management and mitigation; and
· satisfying themselves of the integrity of the financial information and
that financial controls and systems of risk management are robust and
defensible.
Senior Independent Director
Susie Farnon fulfils the role of Senior Independent Director ("SID").
Role overview
The position of the SID provides shareholders with someone to whom they can
turn if they have concerns that have not or cannot be resolved through the
normal channel of the Chairman. The SID is available as an intermediary
between fellow Directors and the Chairman. The role serves as an important
check and balance in the governance process.
Responsibilities
· providing a sounding board for the Chairman and serving as an
intermediary for the other Directors when necessary;
· being available to shareholders if they have concerns about contact
through the normal channel of the 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.
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/about-us/board-and-governance
(http://www.apaxglobalalpha.com/about-us/board-and-governance)
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;
- disclosure panel policy;
- a social responsibility policy;
- a share dealing code;
- an insider dealing and market abuse policy;
- a policy on the provision of non-audit services; and
- a Responsible Investment policy
Administrator and Company 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 2023 were 1.8% (31 December 2022: 1.5%),
reflecting an increase in management fees following AGA's $700m commitment to
Apax XI, Apax's latest global buyout fund. The Company's ongoing charges are
calculated in line with guidance issued by the AIC. They comprise 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 included in the financial statement can be found
on p.116.
Management and performance fees
Management fees for the year to 31 December 2023 represented 1.4% of NAV and
performance fees were 0.5% of NAV. 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. Please see p.115
for more information about fees.
Revolving credit facility
AGA had a €250m revolving credit facility with Credit Suisse AG, London
Branch, since November 2018 which featured an evergreen term, with a rolling
minimum notice period of two years. In January 2023, AGA received notice that
the RCF will revert to a conventional fixed-term arrangement with an expiry
date of 10 January 2025. On 5 September 2023 AGA entered into a new
multi-currency RCF of €250m with SMBC Bank International plc and JP Morgan
Chase Bank, N.A., London Branch, replacing the facility held with Credit
Suisse AG. The new RCF was undrawn at 31 December 2023 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 UK Packaged Retail and Insurance-based Investment
Products Regulation and the EU Packaged Retail and Insurance-based Investment
Products Directive Regulation, AGA's latest Key Information Documents (UK KID
and EU KID) are available on the Company's website at:
www.apaxglobalalpha.com/investor-centre/key-information-documents
(http://www.apaxglobalalpha.com/investor-centre/key-information-documents)
Board attendance
A summary of the Directors' attendance at meetings which they were eligible to
attend is provided below. Eligibility to attend the relevant meetings is shown
in brackets.
BOARD TOTAL TOTAL AUDIT COMMITTEE
Tim Breedon 5 (5) n/a
Susie Farnon 5 (5) 9 (9)
Chris Ambler 5 (5) 9 (9)
Mike Bane 5 (5) 9 (9)
Stephanie Coxon 5 (5) 9 (9)
- 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 they have
been appointed. Such committees are referred to as "other" committee meetings.
- 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 2023 to 31 December 2023.
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 nine times
in the year from 1 January 2023 to 31 December 2023.
Election and re-election of directors at the 2024 AGM
In accordance with the Company's Articles of Incorporation and the principles
of the AIC Code, and with the exception of Chris Ambler who retired from the
Board on 1 March 2024 after nearly nine years in the role, all Directors of
the Company will offer themselves for re-election at the 2023 AGM.
In 2023, Russel Reynolds Associates Ltd, an independent external consultancy
firm, was appointed to conduct the search for a new Non-Executive Director.
Post year-end, on 1 March 2024, Karl Sternberg, was appointed. Karl was a
founding Partner of Oxford Investment Partners, which was acquired by Towers
Watson in 2013. Prior to that, he held a number of positions at Morgan
Grenfell/Deutsche Asset Management, including as Chief Investment Officer for
Europe, Australia, and Asia Pacific. Karl has significant investment trust
experience, and he is currently Chairman of Clipstone Industrial REIT plc,
Monks Investment Trust plc and a NED of Herald Investment Trust plc(1) and
Jupiter Fund Management plc.
Tim Breedon has indicated that he wishes to retire from the Board in 2024, at
which point he will have completed nine years in the role. It is intended that
Karl Sternberg will succeed him as Chairman of AGA in the second half of 2024,
after allowing for an appropriate handover period.
Following the successful evaluation of the Board (see p.46), it is proposed to
shareholders that Tim Breedon, Susie Farnon, Mike Bane, and Stephanie Coxon be
re-elected and that Karl Sternberg be elected at the 2024 AGM.
Discontinuation vote
In common with many 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 put forward at the 2024 AGM. To ensure
the Company continues in its current form, the Board of Directors recommends
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
(http://www.apaxglobalalpha.com)
IPO lock-up arrangements
Certain existing and former Apax employees acquired shares in the Company
under a share-for-share exchange agreement at IPO. 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. Of the ten-year
locked-up shares held by Apax executives, a further tranche of 20% of the
Company's ordinary shares was released on 15 June 2023, with a further 40% of
locked-up shares due to be released in two tranches over the next two years.
1. On 22 February 2024, Herald Investment Trust plc announced that Karl
Sternberg will retire from the board at the conclusion of the AGM in April
2024
Audit Committee report
I am pleased to present the Audit Committee report for 2023 detailing the
activities undertaken this year to fulfil its responsibilities.
The main areas of activity for the Audit Committee have been:
· reviewed its terms of reference against the requirements of the Minimum
Standard for Audit Committees and External Audit issued by the FRC (the
"Standard"). The Audit Committee is of the view that an early adoption of the
Standard would enhance their terms of reference but also the internal
processes put in place by the Company in relation to auditor evaluation and
reporting. The Audit Committee will also consider the requirements of the
Standard when undertaking an audit tender. Following the review, the Audit
Committee concluded that the terms of reference and internal processes remain
fit for purpose. An annual assessment of the terms of reference and internal
processes against the Standard will be conducted to identify any potential
shortcomings;
· reviewed in detail the content of the interim report and this annual
report, the work of the service providers in producing them and the results of
the external audit;
· considered 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;
· kept 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;
· conducted an annual review of the audit quality and 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, and the suitability and independence of the
external auditor;
· kept under review the risk management and control framework with the
assistance of the Investment Manager and the Company Secretary;
· met 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
· met 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;
· kept under review the ESG initiatives and reporting, and commitment to
Responsible Investing.
The scope of the Committee with respect to internal control does not include
controls relating to risks 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.
Susie Farnon | Chair of the Audit Committee
4 March 2024
Role of the Audit Committee
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 52. The
Chairman of the Company, Tim Breedon, whilst not required to attend meetings
of the Audit Committee, does so on occasion, particularly those meetings in
which 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/about-us/board-and-governance
(http://www.apaxglobalalpha.com/about-us/board-and-governance)
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
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 are set out overleaf.
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 Audit Committee focus on Private Equity, Debt Investments and unlisted
Derived Equity which are illiquid and valued less easily.
At each quarterly valuation point, and particularly at the year-end, members
of the Audit Committee 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 Private Equity Investments, Debt Investments and Derived
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 basis for calculation of the performance fee due to the Investment Manager
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 considers it important by nature.
The Audit Committee has commissioned and received a specific report on the
calculation of the fee prior to payment. At 31 December 2023, a performance
fee of €6.6m was payable.
External audit
KPMG has been the Company's external auditor since 2015. As is good practice,
the contract is reviewed regularly and put out to tender every 10 years and a
review will take place in the second half of 2024. During the year, and up to
the date of this report, the Audit Committee has met formally with KPMG on 5
occasions. Additionally, the Chairman and other members of the Audit Committee
met them informally on a number of occasions during the period. These informal
meetings have been held to ensure the Audit Committee is kept up to date with
the progress of their work and that their formal reporting meets their 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 2023 and in their audit for the year ended 31
December 2023. 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 audit quality and
effectiveness of KPMG as the Company's external auditor.
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.
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 reappointment at the next AGM.
Risk management, internal controls, and corporate risks
An outline of the risk management framework and principal risks is provided on
p.62 to p.65.
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 of
which they are responsible. The Audit Committee undertakes an annual review of
the internal control reports from each of its key service providers. In
addition, the key processes and controls of APFS are reviewed by Aztec and the
outcome of this review is considered by the Audit Committee annually. The
Audit Committee has not identified any areas of concern as a result.
Additionally the Audit Committee recognises that the UK Corporate Governance
Code may include additional responsibilities for the Board and is keeping this
under review.
FRC review of 2022 Annual Report
In November 2023, the Company received a letter from the FRC, requesting
clarification on the Company's use of APMs and valuation of private equity
investments. The FRC was satisfied with the Company's response but recommended
that further disclosures on the use of APMs in the future may be helpful to
shareholders. As a result, further details have been included on page 73 of
the 2023 Annual Report.
The FRC sets out the scope and limitations of their review below:
Our review is based on your Annual Report and Accounts and does not benefit
from detailed knowledge of your business or an understanding of the underlying
transactions entered into. It is, however, conducted by staff of the FRC who
have an understanding of the relevant legal and accounting framework.
This, and any subsequent letter, provides no assurance that your Annual Report
and Accounts are correct in all material respects; the FRC's role is not to
verify the information provided to it but to consider compliance with
reporting requirements. Our letters are written on the basis that the FRC
(which includes its officers, employees and agents) accepts no liability for
reliance on them by the company or any third party, including but not limited
to investors and shareholders.
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.
Unadjusted differences in the financial statements
The external auditor, KPMG, has reported to the Audit Committee that they
found one reportable difference during the course of their audit work. The
difference arose in an area of judgement, was immaterial and was not
indicative of control deficiencies.
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. A social responsibility policy covering
anti-bribery and corruption 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 p.61.
Directors' remuneration report
Directors are remunerated in the form of fixed fees
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 2023 to 31 December 2023
received the fees detailed on the next page.
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 Board currently comprises five Directors. The Directors are entitled to be
reasonably reimbursed for expenses incurred in the exercise of their duties as
Directors. There having been no changes to Directors' fees since IPO, it was
determined that an increase of 11% should be applied effective from 1 July
2023. No change was made to the Chairman's fee. Details are set out in the
table below.
Director Position Annual Fees Fee increase (GBP) Annual Fees effective from
2022 (GBP)
1 July 2023 (GBP)
Tim Breedon Chairman 125,000 - 125,000
Susie Farnon Audit Committee Chair 55,000 6,000 61,000
Chris Ambler NED 45,000 5,000 50,000
Mike Bane NED 45,000 5,000 50,000
Stephanie Coxon NED 45,000 5,000 50,000
Total 315,000 21,000 336,000
Expenses paid to the Directors in the period are listed in the table below
Remuneration policy
The Company's remuneration policy is that fees payable to Directors should
reflect the time they spend on the Company's affairs and the responsibilities
they bear.
The fees should also be sufficient to attract, retain, and motivate Directors
of a quality required to run the Company successfully.
Directors' fees and expenses for the year to 31 December 2023
Director Fees (GBP) Expenses (GBP) Fees (EUR) Expenses (EUR)
Tim Breedon 125,000 422 143,843 485
Susie Farnon 58,000 1,161 66,744 1,341
Chris Ambler 47,500 1,562 54,661 1,785
Mike Bane 47,500 1,473 54,661 1,695
Stephanie Coxon 47,500 284 54,661 328
Total 325,500 4,902 374,570 5,634
Directors' holdings at 31 December 2023
Voting rights % of voting rights
Director Class of share Shares held Direct Indirect Direct Indirect
Tim Breedon Ordinary shares of NPV(1) 70,000 70,000 - 0.014% -
Susie Farnon Ordinary shares of NPV(1) 43,600 43,600 - 0.009% -
Chris Ambler Ordinary shares of NPV(1) 33,796 33,796 - 0.007% -
Mike Bane Ordinary shares of NPV(1) 18,749 18,749 - 0.004% -
Stephanie Coxon Ordinary shares of NPV(1) 10,000 10,000 - 0.002%
1. No par value
Directors' report
The Directors submit their annual report together with the audited financial
statements of the Company for the year ended 31 December 2023.
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 5.64 pence per share as a final
dividend in respect of the financial period ended 31 December 2023 (2022: 5.82
pence). An interim dividend of 5.70 pence was paid on 3 October 2023 (2022:
6.00 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/about-us/board-and-governance?tab=board-of-directors
(http://www.apaxglobalalpha.com/about-us/board-and-governance?tab=board-of-directors)
The Non-Executive Directors do not have service agreements.
Power 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, which can be found in full on the Company's
website at: www.apaxglobalalpha.com/about-us/board-and-governance
(http://www.apaxglobalalpha.com/about-us/board-and-governance)
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 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 Guidance 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' interest 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
Guidance and Transparency Rules of the interests in its issued ordinary shares
as at 31 December 2023 detailed in the table on the right.
Table of shareholders over 5% at 31 December 2023(1)
Voting rights % of voting rights
Shareholder. CLASS OF SHARE Shares held Direct Indirect Direct Indirect Threshold
Berlinetta Limited Ordinary shares of NPV(2) 28,778,552 28,778,552 - 5.9% - 5%
Rathbones Group PLC Ordinary shares of NPV(2) 27,988,583 27,988,583 - 5.7% - 5%
Witan Investment Trust Ordinary shares of NPV(2) 27,890,000 27,890,000 - 5.7% - 5%
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
2. No par value
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;
· Apax Partners Funds Services Limited ("APFS") and Apax Partners LLP
Services Agreement for investor relations services;
· 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 three post-balance sheet events:
· on 1 March 2024, Karl Sternberg was appointed Non-Executive Director of
the Board. On the same day, Chris Ambler resigned as a Director, having served
on AGA's Board for nearly 9 years.
· On 1 March 2024, the Company's revolving credit facility was extended by
six months, with a new expiry date of 4 September 2026.
· on 5 March 2024, the Board of Directors announced a dividend of 5.64
pence per share in respect of the financial period ended 31 December 2023.
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 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 at the 2024
AGM 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.
As is good practice, the contract is reviewed regularly and put out to tender
every ten years and a review will take place in the second half of 2024.
AGM
The next AGM will be held on 1 May 2024 at 11.15 am (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 2024 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 (http://www.apaxglobalalpha.com)
Shareholders will be able to attend the AGM in person or dial in remotely to
listen to the AGM. Shareholders 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
4 March 2024
Viability statement
The Directors have duly considered the risks facing the Company
The company's main corporate objective is to provide shareholders with capital
appreciation from its investment portfolio and regular dividends. 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 p.63 to p.65. 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 emerging and 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
2026. 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, and
commitments to existing and future Apax Funds. The stress testing examines the
potential impact of the principal risks occurring individually and together.
These projections are based on the Investment Manager's expectations of future
investment performance, income, and costs. The viability assessment covers a
period of three years, which reflects the average holding period of Debt
Investments and the expected period between the launch of new buyout funds by
Apax.
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. As at 31 December 2023, the RCF was undrawn. Diversification
of the portfolio, split between Private Equity and Debt Investments, also
helps the Company withstand the 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 believe 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 was
six years, and it was automatically renewed on 15 June 2021 for another three
years.
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 2024 AGM. Following recent investor feedback and the result of the
2021 AGM, where 99.8% of votes cast supported a continuation of the Company,
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
p.77.
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;
and
· 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 by:
Tim Breedon CBE
Chairman
4 March 2024
Susie Farnon
Non-Executive Director
4 March 2024
Risk management framework
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 more detailed review is done at least annually.
The risk governance framework is designed to identify, evaluate and mitigate
the risks deemed 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 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 and Audit Committee consider existing and emerging
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.
The Board approves commitments to new Private Equity funds whilst the
remaining investment decisions are taken by the Investment Manager within
parameters of authority approved by the Board, while separate risk functions
within the Investment Manager support and review decision-making.
Risk assessment
In assessing each category of risk, the Board considers systemic and
non-systemic risks as well as the control framework established to reduce the
likelihood and impact (the "residual risk rating") of individual inherent
risks. The Board does not consider political risk in isolation but
incorporates it within its consideration of other principal risks. The Board
is not, practically, in a position to consider every risk. However, where
possible, it does seek to identify, 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, assesses 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 were to 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. There were no
emerging risks identified in the period.
Though not included in the key principal risks highlighted on the following
page, the Board does monitor ESG within its risk register. The Board assesses
its impact on the wider Company risks, including performance risk, and
reputational risk and reviews the mitigating measures in place.
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:
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: Market risk
FR3: Portfolio risk
SB4: Economic environment
Operational
OP1: Continuity risk
OP2: Service provider risk
Financial and portfolio
FR1: Liquidity risk
FR2: Currency risk
FR3: Portfolio 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
↑ Increase
↔ No change
↓ Decrease
Item Risk Current year assessment Mitigating measures Risk status
SB1 Company performance The Company had a Total NAV Return of 4.1% during the period with both the · Performance, positioning and investment restrictions are analysed and ↔
Private Equity and Debt Investments portfolios contributing to returns - monitored constantly by the Investment Manager
The target return and target dividend yield are based on estimates and please refer to the performance review section from p.17 to p.20 for further
assumptions. details. · Investment performance is reviewed, challenged, and monitored by the
Board. The Board continues to monitor emerging risks that may impact the
Company's performance
The actual rate of return and dividend yield may be lower than targets.
SB2 Discount to NAV The Company's shares continued to trade at a discount to NAV during the year, · The Company returns capital to shareholders via the existing dividend ↔
with the rolling one-year discount exceeding 23% throughout the year. The policy of 5% of NAV p.a. Any additional mechanism of returning capital to
Persistent high discount to NAV and market pressure for companies to implement increase is partly attributable to broader equity market volatility. shareholders is kept under review in the context of the Company's available
share buyback programmes may create dissatisfaction amongst shareholders.
liquid resources
· The Board receives weekly reports from its corporate broker and updates
In light of the widening discount, the Board undertook a detailed review of from the Investment Advisor's investor relations team on a quarterly basis
the Company's capital allocation policy in the context of future Private
Equity calls and the capacity of AGA's RCF and Debt portfolio. · These reports provide insight into shareholder sentiment, movements in
the NAV and share price discount and an assessment of discount management
strategies if required
SB3 Market risk Central banks continued to increase interest rates during the year as they · The Board has delegated viability/cash flow projections and modelling to ↔
tried to cool down inflation. the Investment Manager. They include the impact of increased borrowings under
Increases in borrowing costs negatively impact NAV.
a number of stress test scenarios and note that even if fully drawn the impact
of increased borrowing costs are offset by the invested Debt portfolio
The Board noted that although AGA's revolving credit facility is floating
rate, the potential impact is limited as it is not used for structural
leverage and was undrawn at 31 December 2023. Additionally, the Company's Debt
Investments portfolio is primarily invested in floating rate instruments which
re-fix regularly and any upward changes to interest rates tend to have a
positive impact on interest income.
For more details on the potential impact on the underlying Private Equity
portfolio companies see p.15 and p.16.
SB4 ECONOMIC ENVIROnMENT Geopolitical uncertainty remained heightened, persistent inflation and · The Board receives quarterly reports from its Investment Manager and the ↑
interest rate rises all contributed to a volatile macroeconomic environment, Investment Advisor on performance and asset allocation
Increasing inflation, geopolitical uncertainty, and the potential impact of however the second half of the year saw inflation slowing and growth is
interest rate movements on equity valuations could lead to increased NAV expected to remain sluggish. · The underlying Private Equity portfolio is diversified across
volatility. sub-sectors which are less affected by the impacts of inflation and
geopolitical uncertainty
OP1 Continuity risk During the year, the Company's key service providers reported that their · All key service providers have in place business continuity procedures ↔
business continuity plans remained in place and that they have remained which are tested on a regular basis and are subject to minimum regulatory
Business continuity, including that provided by service providers, may be appropriate and effective. standards in their jurisdictions
impacted by a natural disaster, cyber-attack, infrastructure damage or other
"outside" factors.
OP2 Service provider risk Control failures at key service providers are reported and reviewed. No · The Board conducts a formal review of all key service providers on an ↔
material issues were brought to the Board's attention or identified as part of annual basis
Control failures at key service providers may result in decreased service the formal review conducted by the Board and no issues were reported resulting
quality, loss of information, information security breach, theft or fraud. in a reduction in the consequence rating. · 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 recognises the macroenvironment surrounding the Apax Funds has been · Cash flow modelling is prepared and tested under various stress test ↔
volatile and uncertainty remains going forward into the next year. The Apax scenarios
Decreases in the value of investments due to market weakness may affect the Funds continued to see good levels of investment activity. See p.27 for more
pace and value of realisations, leading to reduced liquidity and/or ability to details. · Revolving credit facility is available in the event of substantial
maintain credit facilities and meet covenant requirements.
liquidity issues
· The investing Apax Funds operate capital call facilities which provide
The Debt Investments portfolio has benefitted from the increased interest good visibility of future expected calls
rates resulting in higher levels of income for the Company, remaining a
reliable source of cash flow. · A higher proportion of the Debt Investments portfolio is invested in
first lien instruments which have better liquidity
· The majority of the Debt Investments portfolio is invested in floating
The Board regularly assesses liquidity in highly stressed conditions as part rate instruments providing a strong income yield
of its assessment to continue as a going concern. Further details are given in
the viability statement on p.60.
FR2 Currency risk The depreciation of the US dollar against the Euro led to weaker returns being · The Investment Manager has implemented an investment framework to manage ↔
reported in the year than were achieved by the investment portfolio in local and monitor the investment portfolio of the Company
The Company has established a global investment mandate and has appointed an currency terms. The Company's sensitivity to movements in exchange rates is
Investment Manager whose policy is to not hedge currency exposures. Movements explained in detail in note 12. · Currency exposure analysis and monitoring forms part of the investment
in exchange rates create NAV volatility when the value of investments is framework
translated into the Company's reporting currency (the Euro).
· 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 Company's Debt
Risk of error, process failure or incorrect assumptions lead to incorrect Investments portfolio is valued based on broker quotes and/or models which use · The review process includes a meeting with the Board and Investment
valuation of portfolio holdings. market inputs. Advisor where the key assumptions are challenged and explained
· AGA valuations are reviewed by the Company's auditors in June and
audited in December each year
4. Financial Statements & Shareholder Information
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 2023, the statements of profit or loss and other comprehensive
income, changes in equity and cash flows for the year then ended, and notes,
comprising material 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 2023, 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 the FRC Ethical Standard as required by the Crown Dependencies'
Audit Rules and Guidance. We believe that the audit evidence we have obtained
is a sufficient and appropriate basis for our opinion.
Key audit matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were
of most significance in the audit of the 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 2022):
The risk Our response
Valuation of financial assets and liabilities held at fair value through Basis: Our audit procedures included:
profit or loss ("Investments")
As at 31 December 2023, 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 debt and equities in public and private Internal Controls:
Financial assets - €1,200,989,000 companies ("Debt Investments" and "Derived Equity" respectively).
We assessed the design and implementation of the Investment Manager's review
Financial liabilities - (€495,000) control in relation to the valuation of Investments.
The Company's holdings in Private Equity Investments (representing 74% of
Investments) are valued based on the net asset values provided by the
(2022 Financial assets - €1,241,200,000) underlying funds' general partners, adjusted if considered necessary by the Challenging managements' assumptions and inputs including use of KPMG
Board of Directors, including any adjustment necessary for carried interest. valuation specialists:
(2022 Financial liabilities - (€6,063,000))
For Private Equity 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 1% of Investments) are general partners. For the majority of Private Equity Investments, we obtained
Refer to p.54 in the Role of the Audit Committee, note 3 (Initial recognition 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
and subsequent measurement
adjustment, we considered: the basis of preparation together with accounting
policies applied; and whether the audit opinion was modified.
of financial instruments), (Critical accounting estimates and judgements),
note 8 (Investments) and note 13 The Company's holdings in unquoted debt and equities (representing 25% of
(Fair value estimation). Investments) are valued based on models that take into account the factors
relevant to each investment and use relevant third-party market data where For Debt Investments and Derived Equity, we used our own valuation specialist
available. to independently price 100% of quoted equities and 100% of Debt Investments
based on third-party data sources.
Risk:
Assessing disclosures:
The valuation of the Company's Investments is considered a significant area of
our audit, given that it represents the majority of the net assets of the We also considered the Company's disclosures (see note 4) in relation to the
Company and in view of the significance of estimates and judgements that may use of estimates and judgements regarding the fair value of investments and
be involved in the determination of fair value. 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 €26,000,000,
determined with reference to a benchmark of net assets of €1,294,164,000, of
which it represents approximately 2% (2022: 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% (2022: 75%) of materiality for the financial
statements as a whole, which equates to €19,500,000. 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 €1,300,000, 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; and
· 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 any 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 sector
experience and through discussion with management (as required by auditing
standards), and from inspection of the Company's regulatory and legal
correspondence, if any, 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 (p.60) 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 risks disclosures describing these risks and
explaining how they are being managed or mitigated; and
· the directors' explanation in the Viability Statement (p.60) 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 p.60 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 p.61, 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
(http://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
4 March 2024
Financial statements \ statement of financial position
AT 31 DECEMBER 2023 NOTES 31 DECEMBER 2023 31 DECEMBER 2022
€'000 €'000
Assets
Non-current assets
Financial assets held at fair value through profit or loss ("FVTPL") 8a 1,200,989 1,241,200
Total non-current assets 1,200,989 1,241,200
Current assets
Cash and cash equivalents 101,375 67,966
Investment receivables 2,540 1,699
Other receivables 2,217 429
Total current assets 106,132 70,094
Total assets 1,307,121 1,311,294
Liabilities
Financial liabilities held at FVTPL 8a 495 6,063
Investment payables 10,773 3,980
Accrued expenses 1,689 1,875
Total current liabilities 12,957 11,918
Total liabilities 12,957 11,918
Capital and retained earnings
Shareholders' capital 14 873,804 873,804
Retained earnings 413,784 425,572
Total capital and retained earnings 1,287,588 1,299,376
Share-based payment performance fee reserve 10 6,576 -
Total equity 1,294,164 1,299,376
Total shareholders' equity and liabilities 1,307,121 1,311,294
Tim Breedon CBE | Chairman Susie Farnon | Chair of the Audit Committee
4 March 2024 4 March 2024
31 DECEMBER 2023 31 DECEMBER 2023 31 DECEMBER 2022 31 DECEMBER 2022
AT 31 DECEMBER 2023 NOTES € £ EQUIVALENT(1) € £ EQUIVALENT(1)
Net Asset Value ("NAV") ('000) 1,294,164 1,121,924 1,299,376 1,150,390
Performance fee reserve 10 (6,576) (5,701) - -
Adjusted NAV ('000) 1,287,588 1,116,223 1,299,376 1,150,390
NAV per share 2.64 2.28 2.65 2.34
Adjusted NAV per share 2.62 2.27 2.65 2.34
31 DECEMBER 2023 31 DECEMBER 2022
AT 31 DECEMBER 2023 % %
Total NAV Return 4.1% (7.4)%
1. The sterling equivalent has been calculated based on the GBP/EUR exchange
rate at 31 December 2023 and 31 December 2022, respectively
The accompanying notes form an integral part of these financial statements.
ALTERNATIVE PERFORMANCE MEASURES
AGA uses the Alternative Performance Measures of Adjusted NAV and Total NAV
Return to enhance transparency for shareholders. The purpose is to show
shareholders the NAV which is due to them, net of the performance fee reserve.
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.
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 divided by 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.
Tim Breedon CBE | Chairman Susie Farnon | Chair of the Audit Committee
4 March 2024 4 March 2024
Financial statements \ statement of profit or loss and other comprehensive
income
YEAR ENDED YEAR ENDED
31 DECEMBER 2023 31 DECEMBER 2022
FOR THE YEAR ENDED 31 DECEMBER 2023 NOTES €'000 €'000
Income
Investment income 37,545 24,476
Net gains/(losses) on financial assets at FVTPL 8b 29,555 (119,740)
Net gains/(losses) on financial liabilities at FVTPL 8c 2,643 (6,063)
Realised foreign currency gains 439 1,276
Unrealised foreign currency losses (210) (74)
Total income/(loss) 69,972 (100,125)
Operating and other expenses
Performance fee 10 (6,576) (22)
Management fee 9 (3,363) (3,712)
Administration and other operating expenses 6 (3,328) (2,797)
Total operating expenses (13,267) (6,531)
Total income/(loss) less operating expenses 56,705 (106,656)
Finance costs 11 (3,054) (3,150)
Profit/(loss) before tax 53,651 (109,806)
Tax charge 7 (173) (231)
Profit/(loss) after tax 53,478 (110,037)
Other comprehensive income - -
Total comprehensive income/(loss) attributable to shareholders 53,478 (110,037)
Earnings/(loss) per share (cents) 15
Basic and diluted 10.89 (22.41)
Adjusted(1) 10.81 (22.41)
1. The Adjusted earnings per share has been calculated based on the
profit/(loss) attributable to ordinary shareholders over the weighted average
number of ordinary shares in issue adjusted for performance shares awarded on
a liquidation basis at 31 December 2023 and 31 December 2022, respectively, as
per note 15
The accompanying notes form an integral part of these financial statements.
Financial statements \ statement of changes in equity
SHAREHOLDERS' CAPITAL TOTAL CAPITAL AND RETAINED EARNINGS RETAINED EARNINGS SHARE-BASED PAYMENT PERFORMANCE FEE RESERVE TOTAL
FOR THE YEAR ENDED 31 DECEMBER 2023 NOTES €'000 €'000 €'000 €'000 €'000
Balance at 1 January 2023 873,804 425,572 1,299,376 - 1,299,376
Total comprehensive income attributable to shareholders - 53,478 53,478 - 53,478
Share-based payment performance fee reserve movement 10 - - - 6,576 6,576
Dividends paid 16 - (65,266) (65,266) - (65,266)
Balance at 31 December 2023 873,804 413,784 1,287,588 6,576 1,294,164
SHAREHOLDERS' CAPITAL TOTAL CAPITAL AND RETAINED EARNINGS SHARE-BASED PAYMENT PERFORMANCE FEE RESERVE TOTAL
RETAINED EARNINGS
FOR THE YEAR ENDED 31 DECEMBER 2022 NOTES €'000 €'000 €'000 €'000 €'000
Balance at 1 January 2022 873,804 607,873 1,481,677 8,390 1,490,067
Total comprehensive income attributable to shareholders - (110,037) (110,037) - (110,037)
Share-based payment performance fee reserve movement 10 - - - (8,390) (8,390)
Dividends paid 16 - (72,264) (72,264) - (72,264)
Balance at 31 December 2022 873,804 425,572 1,299,376 8,390 1,490,067
The accompanying notes form an integral part of these financial statements.
Financial statements \ statement of cash flows
YEAR ENDED YEAR ENDED
31 DECEMBER 2023
31 DECEMBER 2022
FOR THE YEAR ENDED 31 DECEMBER 2023 NOTES €'000 €'000
Cash flows from operating activities
Interest received 37,341 23,577
Interest paid (834) (521)
Dividends received 250 1,815
Operating expenses paid (9,247) (6,038)
Tax paid (6) -
Capital calls paid to Private Equity Investments (89,821) (194,380)
Capital distributions received from Private Equity Investments 90,549 227,821
Purchase of Debt Investments (38,367) (53,640)
Sale of Debt Investments 100,665 39,752
Sale of Derived Equity 10,663 3,476
Net cash from operating activities 101,193 41,862
Cash flows used in financing activities
Financing costs paid (2,813) (2,822)
Dividends paid (64,761) (71,070)
Purchase of own shares - (8,412)
Revolving credit facility drawn 11 55,446 17,393
Revolving credit facility repaid 11 (55,446) (17,393)
Net cash used in financing activities (67,574) (82,304)
Cash and cash equivalents at the beginning of the year 67,966 108,482
Net increase/(decrease) in cash and cash equivalents 33,619 (40,442)
Effect of foreign currency fluctuations on cash and cash equivalents (210) (74)
Cash and cash equivalents at the end of the year 12a.ii 101,375 67,966
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 an 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 2023 to 31 December 2023 and
were authorised for issue by the Board of Directors of the Company on 4 March
2024.
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.
INVESTMENT ENTITY
The Company has determined that it meets the definition of an investment
entity in accordance with IFRS 10 "Consolidated Financial Statements" and is
therefore required to account for subsidiaries that also qualify as investment
entities at FVTPL. It does not consolidate such entities.
Under the definition of an investment entity, all three of the following tests
must be satisfied:
· obtains funds from one or more investors for the purpose of
providing these investors with investment management services;
· commits to its investors that its business purpose is to invest
funds solely for returns from capital appreciation; investment income, or both
(including having an exit strategy for investments); and
· measures and evaluates the performance of substantially all of its
investments on a fair value basis.
The Directors consider that the Company meets the three requirements and has
therefore accounted for its investment entity subsidiaries at FVTPL. See note
4 for further details.
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 4 March 2024,
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 and the
longer-term strategy of the Company. The impact of inflation and geopolitical
uncertainty was also considered by the Directors; and whilst the long-term
effect remains to be seen, it was noted that the direct impact on the
Company's ability to meet its liabilities as they fall due has been limited to
date. 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 third time at the AGM in May 2024
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 a Discontinuation Vote will be passed. Accordingly, no provisions have
been made for costs that might arise if the Company were to be liquidated,
wound-up or otherwise restructured.
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 AND SUBSEQUENT MEASUREMENT OF FINANCIAL INSTRUMENTS
The Company designates all financial assets and financial liabilities, except
loans payable, investment payables, 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. Subsequently, these financial assets and financial liabilities are
recognised at fair market value. 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.
FAIR VALUE 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 three main investment portfolios that are split between
"Private Equity Investments", "Debt Investments" and "Derived Equity". Private
Equity Investments comprise primary and secondary commitments to, and
investments in, existing Private Equity funds advised by the Investment
Advisor. Debt Investments comprise investments in debt and investments in
subsidiaries. Derived Equity Investments comprise investments in listed and
unlisted 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 Investments 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 (for which there are insufficient,
reliable pricing data) is calculated based on models that take into account
the factors relevant to each investment and use applicable 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 in subsidiaries is considered to be the NAV of
the underlying subsidiaries calculated by measuring the fair value of the
subsidiaries' assets and liabilities at fair value in accordance with the
Company's accounting policies. The fair value of the underlying investments
held are included within the Debt Investments disclosures as relevant.
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" 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 three (2022: two)
separate portfolios, Private Equity Investments, Debt Investments and Derived
Equity. 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. This is a change from the two
segments identified in the previous years. See note 5 for the basis of the
change. The Company has a fourth administration segment for central functions
which represents general administration costs that cannot be specifically
allocated to the three 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 initially at fair value and subsequently
measured at amortised cost. At each reporting date, the Company measures the
loss allowance on investment receivables at an amount equal to the lifetime
expected credit losses if the credit risk has increased significantly since
initial recognition. If, at the reporting date, the credit risk has not
increased significantly since initial recognition, the Company measures the
loss allowance at an amount equal to 12 month expected credit losses.
Significant financial difficulties of the counterparty, probability that the
counterparty will enter bankruptcy or financial reorganisation and default in
payments are all considered indicators that a loss allowance may be required.
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 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 approves the payment of a dividend. Dividend income of €0.2m (31
December 2022: €1.8m) from equity securities designated at FVTPL has been
recognised in the statement of profit or loss and other comprehensive income
in the current year.
NET GAINS AND LOSSES ON FINANCIAL ASSETS AND LIABILITIES AT FVTPL
UNREALISED GAINS AND LOSSES
Net change in Debt Investments and Derived Equity 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 Debt Investments and Derived Equity 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 Debt Investments and Derived Equity 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
Investments 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 investment's
expected holding 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, 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 in 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/(LOSS) PER SHARE
Earnings/(loss) per share is calculated based on the profit/(loss)
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 2023. Additionally, it has reviewed and assessed changes to
current accounting standards issued by the IASB with an effective date from 1
January 2024; 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) Estimates
The estimate that has the most significant effect on the amounts recognised in
the Company's financial statements relates to valuation of 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.
(ii) 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. See note 3 for further
details. The Company also notes that the assessment of the Company as an
investment entity is an area of judgement.
(iii) Assessment of the Company as an investment entity
The Board of Directors believes that the Company meets the definition of an
investment entity per IFRS 10 as the following conditions exist:
· the Company has obtained funds from investing shareholders for the
purpose of providing them with professional investment and management
services;
· the Company's business purpose, which was communicated directly to
investors, is investing for returns from capital appreciation and investment
income; and
· all of the Company's investments are measured and evaluated on a
fair value basis.
As the Company believes it meets all the requirements of an investment entity
as per IFRS 10 "Consolidated Financial Statements", it is required to measure
all subsidiaries at fair value rather than consolidating them on a
line-by-line basis.
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. The
Company's segment Derived Investments have been disclosed as two separate
segments, Debt Investments and Derived Equity. These investment segments
follow different investment strategies as monitored 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 and to
provide investors with better transparency on the two respective investment
strategies within this portfolio. Comparative segmental data has been restated
to show this additional level of granularity.
REPORTABLE SEGMENTS
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME PRIVATE EQUITY DEBT DERIVED CENTRAL FUNCTIONS(1) TOTAL
FOR THE YEAR ENDED 31 DECEMBER 2023
INVESTMENTS
INVESTMENTS
EQUITY
€'000 €'000 €'000 €'000 €'000
Investment income - 34,293 250 3,002 37,545
Net gains on financial assets at FVTPL 17,873 9,032 2,650 - 29,555
Net gains on financial liabilities at FVTPL 2,643 - - - 2,643
Realised foreign exchange (losses)/gains - (115) 51 503 439
Unrealised foreign currency losses - - - (210) (210)
Total income 20,516 43,210 2,951 3,295 69,972
Performance fees(2) - (6,014) (562) - (6,576)
Management fees (123) (3,156) (84) - (3,363)
Administration and other operating expenses - (93) (36) (3,199) (3,328)
Total operating expenses (123) (9,263) (682) (3,199) (13,267)
Total income/(loss) less operating expenses 20,393 33,947 2,269 96 56,705
Finance costs - - - (3,054) (3,054)
Profit/(loss) before taxation 20,393 33,947 2,269 (2,958) 53,651
Tax charge - (173) - - (173)
Total comprehensive income/(loss) attributable to shareholders 20,393 33,774 2,269 (2,958) 53,478
PRIVATE EQUITY DEBT DERIVED CASH AND TOTAL
INVESTMENTS
INVESTMENTS
EQUITY
OTHER NCAs(3)
STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2023 €'000 €'000 €'000 €'000 €'000
Total assets 891,236 296,397 15,541 103,947 1,307,121
Total liabilities (495) (10,773) - (1,689) (12,957)
NAV 890,741 285,624 15,541 102,258 1,294,164
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
3. NCAs refers to net current assets of the Company
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME PRIVATE EQUITY DEBT DERIVED CENTRAL FUNCTIONS(1) TOTAL
FOR THE YEAR ENDED 31 DECEMBER 2022 (RESTATED)
INVESTMENTS
INVESTMENTS
EQUITY
€'000 €'000 €'000 €'000 €'000
Investment income - 23,138 1,815 (477) 24,476
Net gains on financial assets at FVTPL (101,900) (20,643) 2,803 - (119,740)
Net gains on financial liabilities at FVTPL (6,063) - - - (6,063)
Realised foreign exchange (losses)/gains - (544) - 1,820 1,276
Unrealised foreign currency losses - - - (74) (74)
Total (loss)income (107,963) 1,951 4,618 1,269 (100,125)
Performance fees(2) - (22) - - (22)
Management fees (143) (3,436) (133) - (3,712)
Administration and other operating expenses - (154) (12) (2,631) (2,797)
Total operating expenses (143) (3,612) (145) (2,631) (6,531)
Total (loss)/income less operating expenses (108,106) (1,661) 4,473 (1,362) (106,656)
Finance costs - - - (3,150) (3,150)
(Loss)/profit before taxation (108,106) (1,661) 4,473 (4,512) (109,806)
Tax charge - (231) - - (231)
Total comprehensive (loss)/income attributable to shareholders (108,106) (1,892) 4,473 (4,512) (110,037)
PRIVATE EQUITY DEBT DERIVED CASH AND TOTAL
INVESTMENTS
INVESTMENTS
EQUITY
OTHER NCAS(3)
STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2022 (RESTATED) €'000 €'000 €'000 €'000 €'000
Total assets 877,021 342,338 23,540 68,395 1,311,294
Total liabilities (6,063) (3,980) - (1,875) (11,918)
NAV 870,958 338,358 23,540 66,520 1,299,376
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
3. NCA refers to net current assets of the Company
GEOGRAPHIC INFORMATION
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME NORTH AMERICA EUROPE REST OF WORLD TOTAL
FOR THE YEAR ENDED 31 DECEMBER 2023
€'000 €'000 €'000 €'000
Investment income 28,341 7,729 1,475 37,545
Net gains on financial assets at FVTPL 12,757 10,948 5,850 29,555
Net gains/(losses) on financial liabilities at FVTPL 2,366 1,020 (743) 2,643
Realised foreign exchange (losses)/gains (125) 510 54 439
Unrealised foreign currency losses - (210) - (210)
Total income 43,339 19,997 6,636 69,972
Performance fee (4,581) (1,454) (541) (6,576)
Management fee (2,512) (721) (129) (3,363)
Administration and other operating expenses - (3,328) - (3,328)
Total operating expenses (7,093) (5,503) (671) (13,267)
Total income less operating expenses 36,246 14,494 5,965 56,705
Finance costs - (3,054) - (3,054)
Profit before tax 36,246 11,440 5,965 53,651
Tax charge - (173) - (173)
Total comprehensive income attributable to shareholders 36,246 11,267 5,965 53,478
STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2023 NORTH AMERICA EUROPE REST OF WORLD TOTAL
€'000 €'000 €'000 €'000
Total assets 702,302 577,662 27,157 1,307,121
Total liabilities - (12,462) (495) (12,957)
NAV 702,302 565,200 26,662 1,294,164
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME NORTH AMERICA EUROPE REST OF WORLD TOTAL
FOR THE YEAR ENDED 31 DECEMBER 2022
€'000 €'000 €'000 €'000
Investment income 19,893 2,984 1,599 24,476
Net (losses)/gains on financial assets at FVTPL (67,759) (44,137) (7,844) (119,740)
Net losses on financial liabilities at FVTPL (4,379) (1,020) (664) (6,063)
Realised foreign exchange (losses)/gains (533) 1,817 (8) 1,276
Unrealised foreign currency losses - (74) - (74)
Total (loss)/income (52,778) (40,430) (6,917) (100,125)
Performance fee (13) 49 (58) (22)
Management fee (2,830) (711) (171) (3,712)
Administration and other operating expenses - (2,797) - (2,797)
Total operating expenses (2,843) (3,459) (229) (6,531)
Total (loss)/income less operating expenses (55,621) (43,889) (7,146) (106,656)
Finance costs - (3,150) - (3,150)
(Loss)/Profit before tax (55,621) (47,039) (7,146) (109,806)
Tax charge - (231) - (231)
Total comprehensive (loss)/income attributable to shareholders (55,621) (47,270) (7,146) (110,037)
STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2022 NORTH AMERICA EUROPE REST OF WORLD TOTAL
€'000 €'000 €'000 €'000
Total assets 752,094 511,671 47,529 1,311,294
Total liabilities (4,441) (6,813) (664) (11,918)
NAV 747,653 504,858 46,865 1,299,376
6. ADMINISTRATION AND OTHER OPERATING EXPENSES
YEAR ENDED YEAR ENDED
31 DECEMBER 2023
31 DECEMBER 2022
NOTES €'000 €'000
Director's fees 375 362
Administration and other fees 679 692
Corporate and investor relations services fee 9 485 512
Deal transaction, custody and research costs 129 166
Legal and other professional fees 633 209
General expenses 772 623
Auditors' remuneration
Statutory audit 179 173
Other assurance services - interim review 59 54
Other assurance services - agreed upon procedures 17 -
Total administration and other operating expenses 3,328 2,791
Included in legal and other professional fees was €0.5m of legal fees
related to the refinancing of the revolving credit facility during the year.
Included within general expenses was €0.01m of fees relating to the audit of
Alpha US Holdings L.P, see note 8b for further information.
The Company has no employees and there were no pension or staff cost
liabilities incurred during the year.
7. TAXATION
The Company is exempt from taxation in Guernsey under the provisions of the
Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 and is charged an annual
exemption fee of £1,200 (31 December 2022: £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 2023, the Company had a net tax expense of €0.2m (31 December
2022: €0.2m), related to tax incurred on debt interest in the United
Kingdom. No deferred income taxes were recorded as there are no timing
differences.
8. INVESTMENTS
8A. FINANCIAL INSTRUMENTS HELD AT FVTPL
YEAR ENDED YEAR ENDED
31 DECEMBER 2023
31 DECEMBER 2022
€'000 €'000
Private Equity Investments 890,740 870,958
Private Equity financial assets 891,235 877,021
Private Equity financial liabilities (495) (6,063)
Debt Investments(1) 294,213 340,639
Derived Equity 15,541 23,540
Closing fair value 1,200,494 1,235,137
Financial assets held at FVTPL 1,200,989 1,241,200
Financial liabilities held at FVTPL (495) (6,063)
1. Included in Debt Investments and throughout the financial statements is the
fair value of the debt investment held by the subsidiary, see note 8(d) for
further details
YEAR ENDED YEAR ENDED
31 DECEMBER 2023
31 DECEMBER 2022
€'000 €'000
Opening fair value 1,235,137 1,348,410
Calls 89,699 194,380
Distributions (90,431) (228,316)
Purchases 45,154 57,186
Sales (111,263) (10,720)
Net gains/(losses) on financial assets at FVTPL 29,555 (119,740)
Net gains/(losses) on financial liabilities at FVTPL 2,643 (6,063)
Closing fair value 1,200,494 1,235,137
Financial assets held at FVTPL 1,200,989 1,241,200
Financial liabilities held at FVTPL (495) (6,063)
8B. NET GAINS/(LOSSES) ON FINANCIAL ASSETS AT FVTPL
YEAR ENDED YEAR ENDED
31 DECEMBER 2023
31 DECEMBER 2022
€'000 €'000
Private Equity financial assets
Gross unrealised gains 75,229 145,601
Gross unrealised losses (87,465) (260,095)
Total net unrealised losses on Private Equity financial assets (12,236) (114,494)
Gross realised gains 30,109 12,595
Total net realised gains on Private Equity financial assets 30,109 12,595
Total net gains/(losses) on Private Equity financial assets 17,873 (101,899)
Debt Investments
Gross unrealised gains 15,248 3,061
Gross unrealised losses (7,837) (17,784)
Total net unrealised gains/(losses) on Debt Investments 7,411 (14,723)
Gross realised gains 4,644 797
Gross realised losses (3,023) (6,717)
Total net realised gains/(losses) on Debt Investments 1,621 (5,920)
Total net gains/(losses) on Debt Investments 9,032 (20,643)
Derived Equity
Gross unrealised gains 6,055 13,978
Gross unrealised losses (439) (5,313)
Total net unrealised gains on Derived Equity 5,616 8,665
Gross realised gains - -
Gross realised losses (2,966) (5,863)
Total net realised losses on Derived Equity (2,966) (5,863)
Total net gains on Derived Equity 2,650 2,802
Total net gains/(losses) on investments at fair value through profit or loss 29,555 (119,740)
8C. NET GAINS/(LOSSES) ON FINANCIAL LIABILITIES AT FVTPL
YEAR ENDED YEAR ENDED
31 DECEMBER 2023
31 DECEMBER 2022
€'000 €'000
Private Equity financial liabilities
Gross unrealised gains 3,386 -
Gross unrealised losses (743) (6,063)
Total net unrealised gains /(losses) on Private Equity financial liabilities 2,643 (6,063)
8D. INVESTMENTS IN SUBSIDIARIES
The Company established two wholly-owned subsidiaries in 2021 for investment
purposes. In accordance with IFRS 10, these subsidiaries have been determined
to be controlled subsidiary investments, which are measured at fair value
through profit or loss and are not consolidated. The fair value of these
subsidiary investments, as represented by their NAV, is determined on a
consistent basis to all other investments measured at fair value through
profit or loss.
The table below describes these unconsolidated subsidiaries. The maximum
exposure is the loss in the carrying amount of the financial assets held.
NAME OF SUBSIDIARY FORMATION DATE TYPE OF FUND PROPORTION OF OWNERSHIP INTEREST AND VOTING POWER HELD PRINCIPAL PLACE OF BUSINESS AND PLACE OF INCORPORATION NAV INCLUDED IN INVESTMENTS AT FVTPL
€'000
Alpha US Holdings L.P. 21 October 2021 Special purpose entity 100% United States of America 9,888
Alpha US GP LLC 12 October 2021 Special purpose entity 100% United States of America -
The Company transferred an investment in a Debt Investment to Alpha US
Holdings L.P. during 2021. Net flows from subsidiaries are summarised below.
Total fair value has also been included in Debt Investments above as related
to the debt portfolio.
YEAR ENDED YEAR ENDED
31 DECEMBER 2023
31 DECEMBER 2022
€'000 €'000
Opening fair value 9,598 8,908
Fair value movement on investment subsidiaries 290 690
Closing fair value 9,888 9,598
Debt investment held at FVTPL 9,988 9,660
Other net current liabilities (100) (62)
Closing fair value 9,888 9,598
8E. INVOLVEMENT WITH UNCONSOLIDATED STRUCTURED ENTITIES
The Company's Private Equity Investments are considered to be unconsolidated
structured entities. Their nature and purpose is to invest capital on behalf
of their limited partners. These Private Equity Investments pursue
sector-focused strategies, investing in four key sectors: Tech & Digital,
Services, Healthcare and Internet/Consumer. The Company commits to a fixed
amount of capital, in the form of a commitment to these Private Equity
Investments, which may be drawn (and returned) over the life of the fund. The
Company pays capital calls when due and receives distributions from the
Private Equity Investments , once an asset has been sold.
The liquidity risk section of note 12 summarises outstanding commitments and
recallable distributions to the 11 underlying Private Equity Investments held
which amounted to €919.3m at year-end (31 December 2022: €1,005.1m). The
fair value of these were €890.7m at 31 December 2023 (31 December 2022:
€871.0m), whereas total value of the Private Equity funds was €21.7bn (31
December 2022: €21.3bn). 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 TRANSACTION
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 and performance fees.
Management fees earned by the Investment Manager decreased in the year to
€3.4m (31 December 2022: €3.7m), of which €0.8m was included in accruals
at 31 December 2023. The 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 Derived Equity and 1.0% per annum on the fair value of Debt Investments.
The Investment Manager is also entitled to a performance fee. The 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 arises. Further details are included in
note 10.
The IMA automatically renews every three years unless written notice to
terminate the IMA is served one year in advance of the renewal date by either
the Investment Manager or the Company (by a special resolution). 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 2022: €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 2022: €0.5m) was paid by the Company in
respect of administration fees and expenses, of which €0.3m (31 December
2022: €0.3m) was paid to APFS.
Separately, the Company entered into a 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 €0.5m (31 December 2022: €0.5m) was paid by the Company to APFS.
At 31 December 2023, the Company has an intercompany balance outstanding with
the subsidiary Alpha US Holdings L.P. of €0.1m. This relates to
administration fees incurred by the subsidiary and paid by the Company. See
note 8(d) for further details.
Post year-end, there were changes to the composition of the Board of Directors
and Audit Committee. On 1 March 2024, Chris Ambler retired from the Board and
Audit Committee and Karl Sternberg was appointed as a new Non-Executive
Director to both the Board and Audit Committee. At the time of signing Karl
(or any person that may be a connected party to Karl) holds 19,000 shares. The
table below summarises shares held by the Directors:
31 DECEMBER 2023 % OF TOTAL SHARES IN ISSUE 31 DECEMBER 2022 % OF TOTAL SHARES IN ISSUE
Tim Breedon 70,000 0.014% 70,000 0.014%
Susie Farnon 43,600 0.009% 43,600 0.009%
Chris Ambler 33,796 0.007% 33,796 0.007%
Mike Bane 18,749 0.004% 18,749 0.004%
Stephanie Coxon 10,000 0.002% 10,000 0.002%
A summary of the Directors' fees and expenses is set out on p.57 of the
report.
10. PERFORMANCE
31 DECEMBER 2023 31 DECEMBER 2022
€'000 €'000
Opening performance fee reserve - 8,390
Performance fee charged to statement of profit or loss and other comprehensive 6,576 22
income
Performance fee settled - (8,412)
Closing performance fee reserve 6,576 -
The performance fee is 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. The table below
summarises the performance fee hurdles and percentage payable by eligible
portfolio.
NET PORTFOLIO PERFORMANCE
TOTAL RETURN HURDLE¹
FEE RATE
Debt Investments 6% 15%
Derived Equity 8% 20%
Eligible Private Equity Investments 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 2023, the performance fee payable to the
Investment Manager was €6.6m. This is expected to be settled by purchasing
the Company's shares equivalent to the value of the performance fee accrual
and transferring them to the Investment Manager to settle the performance fee
accrued at 31 December 2023 (31 December 2022: €0.0m).
At 31 December 2023, 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 new multi-currency revolving credit facility of
€250m with SMBC Bank International plc and JPMorgan Chase Bank, N.A., London
Branch, on 5 September 2023, for general corporate purposes replacing the
facility held with Credit Suisse AG, London Branch. The new facility has an
initial term of 2.5 years, the interest rate charged is SOFR or EURIBOR plus a
margin between 300-335bps and a non-utilisation fee of 115bps per annum. The
facility was drawn once during the year and fully repaid by 31 December
2023.
On 1 March 2024 the facility was extended by six months, with a new expiry
date of 4 September 2026, with no changes to the terms noted above.
Summary of finance costs are detailed in the table below:
YEAR ENDED YEAR ENDED
31 DECEMBER 2023
31 DECEMBER 2022
€'000 €'000
Interest paid 446 114
Arrangement fee 75 900
Non-utilisation fee 2,533 2,136
Total finance costs 3,054 3,150
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 year. There were no covenant breaches during the year. As at 31
December 2023 the facility was undrawn (31 December 2022: €Nil).
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, Debt Investments and Derived Equity as shown in the table
below:
31 DECEMBER 2023 31 DECEMBER 2022
€'000 €'000
Private Equity Investments 74% 71%
Private Equity financial assets 74% 72%
Private Equity financial liabilities 0% -1%
Debt Investments 25% 27%
Derived Equity 1% 2%
Total 100% 100%
Private Equity Investments have a limited lifecycle as the average legal term
of a fund is ten years, unless extended by investor consent. The Company
actively manages Debt Investments and Derived Equity and realises these as
opportunities arise. This facilitates liquidity planning and allows the
Company to meet calls as they become due from Private Equity Investments and
other liabilities where necessary.
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 2023 and 31 December 2022, the Company's custodians were ING and
HSBC, both with A- credit ratings.
The Company considers concentration risk and noted that though it follows a
sector-focused strategy, with four key sectors, the Private Equity
Investments' underlying portfolios, Debt Investments and Derived Equity are
diversified within each key sector, operate in a number of different
geographic regions and are also diversified by vintage.
12A. 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 2023 31 DECEMBER 2022
€'000 % OF NAV €'000 % OF NAV
Debt Investments 294,213 23% 340,639 26%
Cash and cash equivalents 101,375 8% 67,966 5%
Investment receivables 2,540 0% 1,699 1%
Other receivables 2,217 0% 429 0%
Total 400,345 31% 410,733 32%
12A.I. 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:
31 DECEMBER 2023 % OF DEBT % OF NAV 31 DECEMBER 2022 % OF DEBT INVESTMENTS % OF NAV
INVESTMENTS
RATING (S&P) €'000 €'000
B 30,181 10% 3% 39,211 12% 3%
B- 96,080 33% 7% 138,303 41% 11%
CCC+ 6,801 2% 1% 20,261 6% 2%
CCC 77,128 26% 6% 60,648 17% 5%
N/R¹ 84,023 29% 6% 82,216 24% 6%
Total 294,213 100% 23% 340,639 100% 26%
31 DECEMBER 2023 % OF DEBT % OF NAV 31 DECEMBER 2022 % OF DEBT INVESTMENTS % OF NAV
INVESTMENTS
RATING (S&P) €'000 €'000
First Lien term loan 177,324 61% 14% 230,221 67% 18%
Second Lien term loan 91,852 31% 7% 95,432 28% 7%
Convertible debt 9,988 3% 1% 9,660 3% 1%
Senior secured note 9,952 3% 1% - 0% 0%
PIK note & other 5,097 2% 0% 5,327 2% 0%
Total 294,213 100% 23% 340,639 100% 26%
1. Not currently rated by S&P
The Investment Manager also reviews the Debt Investments' industry sector
direct concentration. The Company was exposed to concentration risk in the
following industry sectors. A wider analysis of key sector concentration risk
is included in note 12c.iv.:
31 DECEMBER 2023 % OF DEBT INVESTMENTS % OF NAV 31 DECEMBER 2022 % OF DEBT INVESTMENTS % OF NAV
€'000 €'000
Tech & Digital 178,163 61% 14% 166,554 49% 13%
Services 35,594 12% 3% 64,545 19% 5%
Healthcare 68,625 23% 5% 97,631 29% 8%
Internet/Consumer 11,831 4% 1% 11,909 3% 1%
Total 294,213 100% 23% 340,639 100% 26%
12A.II. 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 2023 31 DECEMBER 2022
€'000 €'000
Cash held in banks A 71 3,397
Cash held in banks A- 154 582
Cash held in banks BBB+ 32,595 63,987
Cash held in money market funds AAA 68,555 -
Total 101,375 67,966
The Company's cash is held with RBS International, HSBC, ING and JP Morgan,
Goldman Sachs and Deutsche Bank money market funds.
12A.III. 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.
12B. 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 three portfolios, Private Equity Investments, Debt
Investments and Derived Equity. Each portfolio has a different liquidity
profile.
The Debt portfolio has 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.
Derived Equity 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. Unlisted equity may not be readily realisable due to an inactive
market.
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. Reporting from these Private
Equity Investments provides reasonable visibility of calls for this period.
The table below summarises the maturity profile of the Company's financial
liabilities, commitments, and recallable distributions at 31 December 2023
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.
UP TO 3 MONTHS 3-12 MONTHS 1-5 YEARS TOTAL
31 DECEMBER 2023 €'000 €'000 €'000 €'000
Investment payables 10,773 - - 10,773
Accrued expenses 1,689 - - 1,689
Private Equity Investments outstanding commitments and recallable 27,420 110,130 781,781 919,331
distributions
Debt Investment commitments - 5,656 - 5,656
Total 39,882 115,786 781,781 937,449
UP TO 3 MONTHS 3-12 MONTHS 1-5 YEARS TOTAL
31 DECEMBER 2022 €'000 €'000 €'000 €'000
Investment payables 3,980 - - 3,980
Accrued expenses 1,875 - - 1,875
Private Equity Investments outstanding commitments and recallable 15,816 85,302 904,030 1,005,148
distributions
Debt Investment commitments - 2,245 - 2,245
Total 21,671 87,547 904,030 1,013,248
The Company has outstanding commitments and recallable distributions to
Private Equity Investments as summarised below:
31 DECEMBER 2023 31 DECEMBER 2022
€'000 €'000
Apax Europe VI 225 225
Apax Europe VII 1,030 1,030
Apax VIII 14,475 14,713
Apax IX 29,694 30,157
Apax X 67,993 107,914
Apax XI 642,294 656,143
AMI Opportunities 6,491 9,977
AMI Opportunities II 35,346 37,366
Apax Digital Fund 7,541 10,637
Apax Digital Fund II 69,357 80,938
Apax Global Impact 44,885 56,048
Total 919,331 1,005,148
At 31 December 2023, the Company had undrawn commitments and recallable
distributions of €919.3m (31 December 2022: €1,005m). Within 12 months,
€137.6m (31 December 2022: €101.1m) is expected to be drawn mainly due to
Apax XI, Apax Digital Fund II and Apax X. Additionally, the Company expects
draw downs of €5.7m from Debt Investments in the next 12 months for delayed
draw and revolving credit facility debt positions held.
As explained in note 11, the Company has access to a revolving credit facility
up to €250.0m to bridge short term liquidity including to meet calls from
Private Equity Investments or settle Debt Investments and Derived Equity.
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.
12C 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.
12C.I. PRICE RISK
The Company is exposed to price risk on its Private Equity Investments, Debt
Investments and Derived Equity. 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 investment 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 2023, the main price risks for the Company's
portfolio were assessed to be market uncertainty due to inflation and
geopolitical uncertainty. 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:
BASE CASE BULL CASE (+20%) BEAR CASE (-20%)
31 DECEMBER 2023 €'000 €'000 €'000
Financial assets 1,200,989 1,441,187 960,791
Financial liabilities (495) (396) (594)
Change in NAV and profit 240,099 (240,099)
Change in NAV (%) 19% -19%
Change in total income 343% -343%
Change in profit for the year 449% -449%
BASE CASE BULL CASE (+20%) BEAR CASE (-20%)
31 DECEMBER 2022 €'000 €'000 €'000
Financial assets 1,241,200 1,489,440 992,960
Financial liabilities (6,063) (4,851) (7,276)
Change in NAV and profit 247,027 (247,027)
Change in NAV (%) 19% -19%
Change in total loss -247% 247%
Change in loss for the year -224% 224%
12C.II. CURRENCY RISK
The Company is exposed to currency risk on those investments, cash, interest
receivable and other non-current assets which are denominated in a currency
other than the Company's functional currency, which is the euro. The Company
does not hedge the currency exposure related to its investments. The Company
regards its exposure to exchange rate changes on the underlying investments as
part of its overall investment return and does not seek to mitigate that risk
through the use of financial derivatives. The Company is also exposed to
currency risk on fees which are denominated in a currency other than the
Company's functional currency.
The Company's exposure to currency risk on net assets is as follows:
EUR USD GBP INR HKD NZD CHF TOTAL
AT 31 DECEMBER 2023 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Financial assets and liabilities at FVTPL 470,533 684,967 33,163 - - 11,831 - 1,200,494
Cash and cash equivalents 84,275 14,769 2,260 71 - - - 101,375
Investment receivables - 139 - - - - - 139
Interest receivable 434 1,584 - - - 383 - 2,401
Other receivables 2,177 - 40 - - - - 2,217
Investment payables (10,773) - - - - - - (10,773)
Accrued expenses (1,689) - - - - - - (1,689)
Total net foreign currency exposure 544,957 701,459 35,463 71 - 12,214 - 1,294,164
EUR USD GBP INR HKD NZD CHF TOTAL
AT 31 DECEMBER 2022 €'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Financial assets and liabilities at FVTPL 429,859 753,388 31,199 351 8,431 11,909 - 1,235,137
Cash and cash equivalents 35,551 28,696 321 3,397 - - 1 67,966
Investment receivables - 632 - - - - - 632
Interest receivable - 1,067 - - - - - 1,067
Other receivables 351 - 78 - - - - 429
Investment payables (3,980) - - - - - - (3,980)
Accrued expenses (1,875) - - - - - - (1,875)
Total net foreign currency exposure 459,906 783,783 31,598 3,748 8,431 11,909 1 1,299,376
The Company's sensitivity to changes in foreign exchange movements on net
assets is summarised below:
BASE CASE BULL CASE (+20%) BEAR CASE (-20%)
31 DECEMBER 2023 €'000 €'000 €'000
USD 701,459 841,751 561,790
GBP 35,463 42,556 28,370
INR 71 85 57
NZD 12,214 14,657 9,771
Change in NAV and profit 149,842 (149,842)
Change in NAV (%) 12% -12%
Change in total income 214% -214%
Change in profit for the year 280% -280%
BASE CASE BULL CASE (+20%) BEAR CASE (-20%)
31 DECEMBER 2022 €'000 €'000 €'000
USD 783,783 940,539 627,026
GBP 31,598 37,918 25,278
INR 3,748 4,498 2,998
HKD 8,431 10,117 6,745
NZD 11,909 14,291 9,527
CHF 1 1 1
Change in NAV and profit 167,895 (167,895)
Change in NAV (%) 13% -13%
Change in total loss -168% 168%
Change in loss for the year -153% 153%
12C.III. 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 €395.6m (31 December 2022:
€408.6m). The analysis below assumes that the price remains constant for
both bull and bear cases. 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:
BASE CASE BULL CASE (+500BPS) BEAR CASE (-500BPS)
31 DECEMBER 2023 €'000 €'000 €'000
Cash and cash equivalents 101,375 106,444 96,306
Debt Investments 294,213 308,924 283,327
Change in NAV and profit 19,779 (15,955)
Change in NAV (%) 2% -1%
Change in total income 28% -23%
Change in profit for the year 37% -30%
BASE CASE BULL CASE (+500BPS) BEAR CASE (-500BPS)
31 DECEMBER 2022 €'000 €'000 €'000
Cash and cash equivalents 67,966 71,364 64,568
Debt Investments 340,639 357,671 328,035
Change in NAV and profit 20,430 (16,002)
Change in NAV (%) 2% -1%
Change in total loss -20% 16%
Change in loss for the year -19% 15%
12C.IV. 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 PRIVATE EQUITY INVESTMENTS % OF DEBT INVESTMENTS % OF DERIVED % OF PRIVATE EQUITY INVESTMENTS % OF DEBT INVESTMENTS % OF
EQUITY
DERIVED EQUITY
31 DECEMBER 2023 31 DECEMBER 2023 31 DECEMBER 2023 31 DECEMBER 2022 31 DECEMBER 2022 31 DECEMBER 2022
Tech & Digital 35% 61% 0% 37% 49% 0%
Services 31% 12% 67% 31% 19% 42%
Healthcare 12% 23% 0% 12% 29% 36%
Internet/Consumer 22% 4% 11% 20% 3% 9%
Other 0% 0% 22% 0% 0% 13%
Total 100% 100% 100% 100% 100% 100%
12D. CAPITAL MANAGEMENT
The Company's capital management objectives are to maintain a strong capital
base to ensure the Company will continue as a going concern, maximise capital
appreciation and provide regular dividends to its shareholders. The Company's
capital comprises non-redeemable ordinary shares and retained earnings.
The ordinary shares are listed on the London Stock Exchange (APAX). 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. When considering share buybacks, the Board will also take into
account market sentiment and the trading of its peer group.
13. FAIR VALUE ESTIMATION
13A. INVESTMENTS MEASURED AT FAIR VALUE
IFRS 13 "Fair Value Measurement" 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 2023:
LEVEL 1 LEVEL 2 LEVEL 3 Total
ASSETS AND LIABILITIES €'000 €'000 €'000 €'000
Private Equity financial assets - - 891,235 891,235
Private Equity financial liabilities - - (495) (495)
Debt Investments 9,952 274,273 9,988 294,213
Derived Equity 10,329 - 5,212 15,541
Total 20,281 274,273 905,940 1,200,494
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 2022:
LEVEL 1 LEVEL 2 LEVEL 3 TotalTOTAL
ASSETS AND LIABILITIES €'000 €'000 €'000 €'000
Private Equity financial assets - - 877,021 877,021
Private Equity financial liabilities - - (6,063) (6,063)
Debt Investments - 330,979 9,660 340,639
Derived Equity 18,390 - 5,150 23,540
Total 18,390 330,979 885,768 1,235,137
IFRS 13 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.
13b. Significant unobservable inputs used in measuring fair value
The Company values its holdings in Private Equity Investments based on the NAV
statements it receives from the respective underlying funds.
The Company values Debt Investments 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 fair value of investments in subsidiaries is considered to be the NAV of
the underlying subsidiaries which includes the fair value of investments held
net of other net current assets or liabilities. The fair value of the
underlying investments held are included within the Debt Investments
disclosures as relevant.
The Company values unquoted equities in the Derived Equity portfolio using
recent transaction data where applicable or models that utilise comparable
company multiples applied to budgeted and historical earnings.
Movements in level 3 investments are summarised in the table below:
YEAR ENDED 31 DECEMBER 2023 YEAR ENDED 31 DECEMBER 2022
PRIVATE EQUITY INVESTMENTS DEBT INVESTMENTS DERIVED EQUITY TOTAL PRIVATE EQUITY INVESTMENTS DEBT INVESTMENTS DERIVED EQUITY TOTAL
€'000 €'000 €'000 €'000 €'000 €'000 €'000 €'000
Opening fair value 870,958 9,658 5,152 885,768 1,012,855 8,908 9,570 1,031,333
Additions 89,699 - - 89,699 194,380 - - 194,380
Disposals and repayments (90,431) - - (90,431) (228,316) - (7,098) (235,414)
Realised gains/(losses) on financial assets 30,109 - - 30,109 12,595 - (6,931) 5,664
Unrealised (losses)/gains on financial assets (12,238) 330 60 (11,848) (114,493) 750 9,611 (104,132)
Unrealised gains/(losses) on financial liabilities 2,643 - - 2,643 (6,063) - - (6,063)
Transfers into level 3 - - - - - - - -
Closing fair value 890,740 9,988 5,212 905,940 870,958 9,658 5,152 885,768
Financial assets held at FVTPL 891,235 9,988 5,212 906,435 877,021 9,658 5,152 891,831
Financial liabilities held at FVTPL (495) - - (495) (6,063) - - (6,063)
The unrealised losses attributable to only assets and liabilities held at 31
December 2023 were €9.2m (31 December 2022: €110.2m ).
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 31 DECEMBER 2023 VALUATION €'000 31 DECEMBER 2022 VALUATION €'000
UNOBSERVABLE INPUTS
Private Equity financial assets NAV adjusted for carried interest NAV The Company does not apply further discount or liquidity premiums to the NAV 891,235 877,021
statements.
A movement of 10% in the value of Private Equity Investments would move the
NAV at the year-end by 6.9% (31 December 2022: 6.7%).
Private Equity financial liabilities (495) (6,063)
Debt Investments The Company holds a convertible preferred instrument, the value of which is Probability of conversion On a look-through basis the Company held one debt position (31 December 2022: 9,988 9,660
determined by the probability weighted average of the instrument converting or one) which had probability of conversion of 60% applied.
not converting at the valuation date
A movement of 10% in the conversion percentage would result in a movement of
0.0% on NAV at period end (31 December 2022: 0.0%).
Derived Equity Comparable company earnings multiples and/or precedent transaction analysis Comparable company multiples The Company held two equity positions (31 December 2022: two) which were 5,212 5,150
valued using comparable company multiples. The average multiple was 8.9x (31
December 2022: 8.5x).
A movement of 10% in the multiple applied would move the NAV at year-end by
0.1% (31 December 2022: 0.1%).
14. SHAREHOLDERS' CAPITAL
At 31 December 2023, the Company had 491,100,768 ordinary shares fully paid
with no par value in issue (31 December 2022: 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 2022.
The Company has one share class; however, a number of investors are subject to
lock-up periods, which restricts them from disposing of ordinary shares issued
at admission. For investors which had five-year lock-up periods at admission,
all of these shares have been released following the fifth anniversary on 15
June 2020. For investors with ten-year lock-up periods, 20% of ordinary shares
were released from lock-up on 15 June 2021, with a further 20% being released
annually until 15 June 2025. Additionally, performance shares awarded to the
Investment Manager are subject to a one-year lock-up from date of receipt.
15. EARNINGS AND NAV PER SHARE
YEAR ENDED YEAR ENDED
EARNINGS 31 DECEMBER 2023 31 DECEMBER 2022
Profit/(loss) for the year attributable to equity shareholders: €'000 53,478 (110,037)
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 basis1 3,545,262 -
Adjusted shares(2) 494,646,030 491,100,768
Earnings/(loss) per share (cents)
Basic 10.89 -22.41
Diluted 10.89 -22.41
Adjusted 10.81 -22.41
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-end adjusted for the performance fee reserve and then divided by the
current number of ordinary shares in issue. At 31 December 2023, the Adjusted
NAV per share for both methodologies resulted in an Adjusted NAV per share of
€2.62 respectively. In the prior year, there was no performance fee accrued
and therefore Adjusted NAV per share remained the same as NAV per share at
€2.65.
At 31 December 2023, there were no items that would cause a dilutive effect on
earnings per share (2022: Nil). 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.
31 DECEMBER 2023 31 DECEMBER 2022
NAV €'000
NAV at end of year 1,294,164 1,299,376
NAV per share (€)
NAV per share 2.64 2.65
Adjusted NAV per share 2.62 2.65
16. DIVIDENDS
YEAR ENDED 31 DECEMBER 2023 YEAR ENDED 31 DECEMBER 2022
DIVIDENDS PAID TO SHAREHOLDERS DURING THE YEAR €'000 € £'000 £ €'000 € £'000 £
Final dividend paid for 2022/2021 32,462 6.61c 28,582 5.82p 37,417 7.59c 31,234 6.36p
Interim dividend paid for 2023/2022 32,804 6.63c 27,993 5.70p 34,847 7.09c 29,466 6.00p
Total 65,266 13.24c 56,575 11.52p 72,264 14.68c 60,700 12.36p
YEAR ENDED 31 DECEMBER 2023 YEAR ENDED 31 DECEMBER 2022
DIVIDENDS PAID TO SHAREHOLDERS DURING THE YEAR €'000 € £'000 £ €'000 € £'000 £
Final dividend proposed 32,364 6.59c 27,698 5.64p 32,462 6.61c 28,582 5.82p
Interim dividend paid 32,804 6.63c 27,993 5.70p 34,847 7.09c 29,466 6.00p
Total 65,168 13.22c 55,691 11.34p 67,309 13.70c 58,048 11.82p
On 4 March 2024, the Board approved the final dividend for 2023, 5.64 pence
per share (6.59 cents euro equivalent) (2022: 5.82 pence per share (6.61 cents
euro equivalent)). This represents 2.5% of the Company's euro NAV at 31
December 2023 and will be paid on 4 April 2024.
On 5 September 2023, the Board approved an interim dividend for the six months
ended 30 June 2023, 5.70 pence per share (6.63 cents euro equivalent) (2022:
6.00 pence per share (7.09 cents euro equivalent)). This represents 2.5% of
the Company's euro NAV at 30 June 2023 and was paid on 3 October 2023.
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 2023.
17. SUBSEQUENT EVENTS
Post year-end, there were changes to the composition of the Board of Directors
and Audit Committee. On 1 March 2024, Chris Ambler retired from the Board and
Audit Committee and Karl Sternberg was appointed as a new Non-Executive
Director to both the Board and Audit Committee.
On 1 March 2024 the revolving credit facility was extended by six months, with
a new expiry date of 4 September 2026.
On 4 March 2024, the Board approved the final dividend for 2023, 5.64 pence
per share (6.59 cents euro equivalent) (2022: 5.82 pence per share (6.61 cents
euro equivalent)). This represents 2.5% of the Company's euro NAV at 31
December 2023 and will be paid on 4 April 2024.
Shareholder Information \ Administration
Directors Administrator, Company Secretary
(all Non-Executive)
and Depositary
Tim Breedon CBE (Chairman) Aztec Financial Services (Guernsey) Limited
Susie Farnon (Chair of the Audit Committee) PO Box 656
Chris Ambler (retired 1 March 2024) East Wing
Mike Bane Trafalgar Court
Stephanie Coxon Les Banques
Karl Sternberg (appointed 1 March 2024) St Peter Port
Guernsey GY1 3PP
Registered office of the Company Channel Islands
PO Box 656 Tel: +44 (0)1481 749 700
East Wing AGA-admin@aztecgroup.co.uk
Trafalgar Court www.aztecgroup.co.uk
Les Banques
St Peter Port Corporate broker
Guernsey GY1 3PP Jefferies International Limited
Channel Islands 100 Bishopsgate
London EC2N 4JL
Investment manager United Kingdom
Apax Guernsey Managers Limited
Third Floor, Royal Bank Place Registrar
1 Glategny Esplanade Link Asset Services
St Peter Port Mont Crevelt House
Guernsey GY1 2HJ Bulwer Avenue
Channel Islands St Sampson
Guernsey GY2 4LH
Investment advisor Channel Islands
Apax Partners LLP Tel: +44 (0) 871 664 0300
1 Knightsbridge enquiries@linkgroup.co.uk (mailto:enquiries@linkgroup.co.uk)
London www.linkassetservices.com (http://www.linkassetservices.com/)
SW1X 7LX
United Kingdom
www.apax.com
Independent auditor Enquiries
KPMG Channel Islands Limited Any enquiries relating to shareholdings on the share register (for example,
transfers of shares, changes of name or address, lost share certificates or
Glategny Court 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
St Peter Port shareholders to manage their shareholding electronically.
Guernsey GY1 1WR
Channel Islands Investor relations
Enquiries relating to AGA's strategy and results or if you would like to
arrange a meeting, please contact:
Association of investment companies - AIC
Katarina Sallerfors
The AIC is the trade body for closed-ended investment companies. It helps its
member companies deliver better returns for their investors through lobbying, Investor Relations - AGA
media engagement, technical advice, training, and events.
Apax Partners LLP
www.theaic.co.uk
1 Knightsbridge
London
Dividend timetable
SW1X 7LX
Announcement: 5 March 2024
United Kingdom
Ex-dividend date: 14 March 2024
Tel: +44 (0) 207 872 6300
Record date: 15 March 2024
investor.relations@apaxglobalalpha.com
Payment date: 4 April 2024 (mailto:investor.relations@apaxglobalalpha.com)
Earnings releases
Earnings releases are expected to be issued on or around 4 May and 2 November
2023. The interim results for the six months to 30 June 2022 are expected to
be issued around 6 September 2023.
Stock symbol
London Stock Exchange: APAX
Shareholder Information \ 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, (ii) Debt 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, (iii) Derived Equity which represent
limited investments in equity, primarily in listed companies. The Company will
typically follow the Apax Group's core sector and geographical focus in making
Debt Investments and Derived Equity, which may be made globally.
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 Debt Investments and Derived
Equity 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.
DEBT INVESTMENTS
These investments may include among others: (i) direct and indirect
investments in debt instruments, including public and private debt which may
include sub-investment grade and unrated debt instruments; (ii) investments in
the same or different types of debt instruments in portfolio companies of the
Apax Funds; and may include (iii) acquisitions of Debt Investments from Apax
Funds or third-parties.
DERIVED EQUITY
These investments may include among others: (i) direct and indirect
investments in equity, including equity in private and public companies; (ii)
co-investments with Apax Funds or third parties; (iii) investments in
restructurings; and (iv) 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 Debt Investment or Derived Equity; and
· in aggregate, not more than 20% of the Gross Asset Value is
intended to be invested in Derived 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.
Shareholder Information \ AIFMD
Alternative Investment Fund Managers Directive ("AIFMD")
STATUS AND LEGAL FORM
The Company is a Non-EU Alternative Investment Fund ("AIF")1, 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 by the AIFM. The AIFM does not have any
employees, however, it does have a board of directors comprising five people,
three 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; and
· "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 three 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. Other than
described below, 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 · contractual arrangement in place for their services
x2 persons
· 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 x3 persons · the services principally 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 employee's duties. Where separate remuneration is made to a director via a
contractual arrangement for their services this is detailed in the disclosed
remuneration value
Variable remuneration · the AIFM may receive performance shares in the AIF (as
part of its performance fee shares awarded) and may choose to award a
proportion of those shares to the APG employees as directors of the AIFM or to
other employees of the Apax Group on a discretionary basis
QUANTITATIVE DISCLOSURES
The table below shows the breakdown of remuneration for the fiscal year ended
31 December 2023, for the directors:
Total The total amount of fixed remuneration for the reporting period paid by the £240,000
AIFM to its directors
Performance shares The total number of performance shares awarded free from consideration during -
the year
Carried interest Not applicable to the AIF(1)
1. The AIF will not pay carried interest, which can be confirmed in its
prospective
SUSTAINABLE RISK FINANCE DISCLOSURE REGULATION (2019/2088) (THE "DISCLOSURE
REGULATION")
The AIFM makes the following disclosures in accordance with Article 6(1) and
Article 7(2) of the Disclosure Regulation:
INTEGRATION OF SUSTAINABILITY RISKS
The policy of the AIFM on the integration of sustainability risks in its
investment decision-making process is to rely on the responsible investment
and sustainability policies and procedures of Apax Partners LLP (the
"Investment Advisor") as set out
at: www.apaxglobalalpha.com/investment-portfolio/sustainability/
(http://www.apaxglobalalpha.com/investment-portfolio/sustainability/)
In line with the above policy, the AIFM and the Investment Advisor on which
the AIFM relies, has determined that sustainability risks are relevant to the
AIF. It has reached this determination, having had regard to the types of
investments that may be made in accordance with AIF's investment policy and
objectives and has concluded that environmental or social characteristics and
sustainable investments are relevant but are not a key objective for the AIF.
It has therefore assessed that investments on behalf of AIF are likely to be
subject to specific sustainability risks and that the AIF returns may be
impacted.
The portfolio of the AIF comprises different direct and indirect investments
that may change over time as a result of specific investment decisions made
and accordingly the identification and assessments of risks, including
sustainability risks, will take place on an investment-by-investment basis.
The Investment Advisor's assessment (on which the AIFM relies) is that
integration of sustainability risks in investment decisions, combined with a
diversified portfolio, is appropriate for the AIF. In light of its investment
objective and strategy, this should help mitigate the potential material
negative impact of sustainability risks on the returns of the AIF. Although
there can be no assurance that all such risks will be mitigated in whole or in
part, nor identified prior to the date the risk materialises.
TRANSPARENCY OF ADVERSE SUSTAINABILITY IMPACTS
The Investment Advisor does not consider the adverse impacts of investment
decisions on sustainability factors in the manner prescribed by article 4 of
the Disclosure Regulation. Article 4 of the Disclosure Regulation requires
fund managers to make a clear statement as to whether or not they consider the
"principal adverse impacts" of investment decisions on sustainability factors.
Although the Investment Advisor takes sustainability and ESG very seriously
the Investment Advisor could not gather and/or measure all of the data on
which it expects to be obliged by article 4 of the Disclosure Regulation to
report, or could not do so systematically, consistently, and at a reasonable
cost to investors. This data gap is not expected to change in the short-term.
This is because: (i) various underlying issuers (which may be global, and many
not public interest entities) are not obliged to, and overwhelmingly do not
currently, report by reference to the same data; or (ii) the underlying
investments and issuers are still in the process of considering their
mandatory data collection and disclosure requirements.
TAXONOMY REGULATION DISCLOSURE
The investments underlying this financial product do not take into account the
EU criteria for environmentally sustainable economic activities.
MATERIAL CHANGES
Other than the new Disclosure Regulation, there have been no material changes
to the information disclosed under Article 23 of the AIFMD in the prospectus
of the Company other than the previously disclosed announcements regarding the
new multi-currency revolving credit facility RCF on 6 September 2023 and
directorate changes on 2 October 2023.
QUARTERLY RETURNS SINCE 1Q19
TOTAL RETURN1 (EURO) RETURN ATTRIBUTION
PRIVATE EQUITY INVESTMENTS DEBT INVESTMENTS DERIVED PRIVATE EQUITY INVESTMENTS DEBT INVESTMENTS DERIVED PERFORMANCE FEE OTHER TOTAL NAV RETURN
EQUITY
EQUITY
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%
1Q21 13.7% 6.4% 18.3% 8.5% 1.6% 0.7% (0.2%) (0.2%) 10.4%
2Q21 9.5% 1.4% 8.2% 6.1% 0.4% 0.3% (0.1%) (0.2%) 6.5%
3Q21 13.6% 3.4% 6.5% 9.1% 0.9% 0.3% (0.2%) (0.2%) 9.9%
4Q21 (0.6%) 2.7% (3.7%) (0.4%) 0.7% (0.1%) (0.1%) (0.2%) (0.1%)
1Q22 (3.1%) 2.8% (0.7%) (2.0%) 0.6% 0.0% (0.2%) (0.1%) (1.7%)
2Q22 (2.6%) 0.7% (10.0%) (1.8%) 0.1% (0.2%) 0.2% (0.2%) (1.9%)
3Q22 3.0% 6.0% (2.9%) 2.1% 1.6% (0.1%) (0.3%) (0.1%) 3.2%
4Q22 (8.2%) (6.2%) 8.0% (9.9%) 1.8% 0.5% 0.5% (0.2%) (7.3%)
1Q23 1.8% 2.8% 4.3% 1.2% 0.9% 0.1% (0.1%) (0.2%) 1.9%
2Q23 0.1% 2.6% (2.2%) 0.1% 0.9% 0.0% (0.2%) (0.2%) 0.6%
3Q23 (1.7%) 5.6% (3.4%) (1.0%) 1.4% 0.0% (0.2%) (0.3%) (0.1%)
4Q23 2.1% 0.9% 14.6% 1.5% 0.2% 0.2% 0.1% (0.1%) 1.9%
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%
2021 41.0% 13.4% 37.5% 25.0% 4.0% 1.3% (0.7%) (0.9%) 28.7%
2022 (11.3%) 2.7% (7.4%) (7.3%) 0.6% (0.1%) 0.0% (0.6%) (7.4%)
2023 2.4% 11.8% 14.8% 1.6% 3.3% 0.2% (0.5%) (0.5%) 4.1%
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
TOTAL RETURN1 (CONSTANT CURRENCY) RETURN ATTRIBUTION
PRIVATE EQUITY INVESTMENTS DEBT INVESTMENTS DERIVED PRIVATE EQUITY INVESTMENTS DEBT INVESTMENTS DERIVED PERFORMANCE FEE OTHER2 FX3 TOTAL NAV RETURN
EQUITY
EQUITY
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%
1Q21 9.6% 2.5% 14.1% 6.0% 0.7% 0.6% (0.2%) (0.2%) 3.5% 10.4%
2Q21 10.2% 1.9% 9.2% 6.6% 0.5% 0.4% (0.1%) (0.2%) (0.7%) 6.5%
3Q21 11.8% 1.5% 5.4% 7.9% 0.5% 0.2% (0.2%) (0.1%) 1.6% 9.9%
4Q21 (2.3%) 1.0% (5.9%) (1.5%) 0.3% (0.1%) (0.2%) (0.2%) 1.6% (0.1%)
1Q22 (5.4%) 0.3% (2.1%) (3.6%) 0.2% 0.0% (0.2%) (0.2%) 2.1% (1.7%)
2Q22 (6.1%) (3.7%) (12.5%) (3.9%) (1.0%) (0.3%) 0.2% (0.2%) 3.3% (1.9%)
3Q22 (1.6%) 0.4% (6.7%) (1.0%) 0.4% (0.1%) (0.3%) (0.2%) 4.4% 3.2%
4Q22 (2.1%) 1.1% 14.6% (1.5%) 0.0% 0.3% 0.3% (0.2%) (6.2%) (7.3%)
1Q23 2.6% 3.9% 4.9% 1.8% 1.2% 0.1% (0.1%) (0.2%) (0.9%) 1.9%
2Q23 0.4% 3.1% (2.5%) 0.3% 1.0% 0.0% (0.1%) (0.2%) (0.4%) 0.6%
3Q23 (3.6%) 3.4% (3.8%) (2.3%) 1.0% (0.1%) (0.2%) (0.3%) 1.8% (0.1%)
4Q23 4.9% 3.9% 16.1% 3.3% 1.0% 0.2% (0.1%) 0.1% (2.6%) 1.9%
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%
2021 34.6% 6.9% 30.2% 21.0% 2.3% 1.1% (0.7%) (0.9%) 5.9% 28.7%
2022 (14.8%) (1.7%) (8.6%) (9.5%) (0.4%) (0.2%) 0.0% (0.6%) 3.3% (7.4%)
2023 4.5% 14.4% 16.8% 3.0% 4.0% 0.2% (0.6%) (0.5%) (2.0%) 4.1%
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
Portfolio allocation since 1Q19
PORTFOLIO ALLOCATION1 PORTFOLIO NAV (€M) NAV (€M)
PRIVATE EQUITY INVESTMENTS DEBT INVESTMENTS DERIVED EQUITY NET CASH AND NCAS PRIVATE EQUITY INVESTMENTS DEBT INVESTMENTS DERIVED EQUITY NET CASH AND NCAS TOTAL NAV TOTAL ADJUSTED NAV
1Q19 68% 18% 11% 3% 669.5 178.9 112.0 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
1Q21 64% 25% 4% 7% 830.7 322.8 46.1 99.9 1,299.5 1,296.6
2Q21 66% 28% 4% 2% 916.6 388.6 50.6 29.0 1,384.8 1,380.3
3Q21 68% 23% 3% 5% 1,016.1 348.8 51.5 73.2 1,489.6 1,483.0
4Q21 68% 20% 2% 10% 1,012.9 304.6 30.9 141.7 1,490.1 1,481.7
1Q22 65% 23% 2% 10% 918.4 327.1 30.7 145.7 1,421.9 1,419.6
2Q22 63% 24% 2% 11% 877.2 337.5 27.4 150.1 1,392.2 1,392.2
3Q22 66% 26% 2% 6% 922.4 369.6 24.9 89.3 1,406.2 1,402.1
4Q22 67% 26% 2% 5% 871.0 340.6 23.6 64.2 1,299.4 1,299.4
1Q23 69% 27% 2% 2% 887.7 343.6 24.4 37.3 1,293.0 1,291.4
2Q23 66% 26% 1% 7% 858.9 341.7 13.8 87.4 1,301.8 1,298.7
3Q23 67% 22% 1% 10% 849.5 283.2 13.1 124.1 1,269.9 1,264.2
4Q23 69% 23% 1% 7% 890.7 294.2 15.6 93.7 1,294.2 1,287.6
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 42.8 55.5 1,080.6 1,080.6
2021 67% 24% 3% 6% 944.1 341.2 44.8 86.0 1,416.0 1,410.4
2022 65% 25% 2% 8% 897.2 343.7 26.7 112.3 1,379.9 1,378.3
2023 68% 24% 1% 7% 871.7 315.7 16.7 85.6 1,289.7 1,285.5
1. For annual periods the average weighting over four quarters used
Summary of fees
There is no layering of fees and there are no fees charged on cash.
For the Private Equity portfolio, fees are paid at the level of the Apax
Funds. As AGA is typically a sizeable investor in each of the Apax Funds, it
benefits from fee discounts also made available to other investors of similar
size.
On Debt Investments and Derived Equity, AGA pays a management fee plus a
performance fee if the return hurdle is met.
MANAGEMENT FEES
Debt Investments 1.0%
Derived Equity and Eligible Private Equity(3) 0.5%
The above summarises the fees paid on Debt Investments, Derived Equity, and
Eligible Private Equity. The fee is calculated and paid quarterly in arrears
to AGML.
PERFORMANCE FEES
NET PORTFOLIO TOTAL RETURN HURDLE PERFORMANCE FEE RATE
Debt Investments 6% 15%
Derived Equity and Eligible Private Equity(3) 8% 20%
The performance fee is calculated based on the overall gains or losses net of
management fees and Direct Deal costs in each financial year. The performance
fee is 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.
Separate to this is carried interest which is accrued at the level of the Apax
funds. As AGA is a limited partner in these funds, Private Equity NAV reported
by AGA is already net of this number and no additional performance fee is
charged by AGA.
3. Eligible Private Equity represents less than 2% of NAV and relates to
secondary stakes in Apax Europe VI and Apax Europe VII acquired by AGA
KEY TERMS
Eligible Portfolio means the Debt Investments, 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.
Ongoing charges in the reported period
Ongoing charges are calculated in line with guidance issued by the AIC. They
comprise 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 is set out
on the left.
Note that these calculations differ from those provided in the Key Information
Document ("KID") which are prepared in line with guidance issued under the
Packaged Retail and Insurance-based Investment Products Regulations. Key
difference is the periods based on which these charges are prepared.
ALL IN €'000 TOTAL PER STATEMENT OF EXCLUDED FROM AIC INCLUDED IN AIC
OPERATING COSTS
PROFIT OR LOSS AND OCI
ONGOING CHARGES
ONGOING CHARGES
Performance fee 6,576 6,576 -
Management fee 3,363 - 3,363
Admin and other expenses 3,328 611 2,717
Other admin and operating expenses 2,566 - 2,566
Deal transaction, custody and research costs 129 129 -
Legal and other professional fees 633 482 151
Total 13,267 7,187 6,080
Finance costs 3,054 3,054 -
Total costs 16,321 10,241 6,080
Look-through management fees¹ 17,644
Total ongoing charges 23,724
Average NAV² 1,291,634
% of Average NAV 1.8%
1. Represents management fees of the Apax Funds
2. Represents the average of five quarter-end reported NAVs from 31
December 2022 to 31 December 2023
Glossary
ADF means the limited partnerships that constitute the Apax Digital Private
Equity fund.
ADF II means the limited partnerships that constitute the Apax Digital II
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.
AGI means the limited partnerships that constitute the Apax Global Impact
Fund.
AGML or Investment Manager means Apax Guernsey Managers Limited.
AI artificial intelligence.
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.
AMI II means the limited partnerships that constitute the AMI Opportunities II
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.
AXI means the limited partnerships that constitute the Apax XI Private Equity
fund.
Aztec or Aztec Group means Aztec Financial Services (Guernsey) Limited.
Capital Markets Practice or CMP consists of a dedicated team of specialists
within the Apax Partners Group having in-depth experience of the leveraged
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 Debt Investments.
Cumulative Return calculated on the movement in Adjusted NAV per share taking
into account
any dividends paid during the respective period whilst annualised Cumulative
Return calculated based on the internal rate of return ("IRR") using the
opening Adjusted NAV, dividend paid and closing Adjusted NAV for the period
stated.
Debt Investments comprise investments including primary investments in public
and private debt. In each case, these are typically identified by Apax
Partners as part of its private equity activities.
Derived Equity comprise investments including primary investments in 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 means Earnings before interest, tax, depreciation and amortisation.
Eligible Portfolio means the Debt Investments, Derived Equity and Eligible
Private Equity Investments portfolios.
Eligible Private Equity means the Private Equity Investments 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.
ESG means Environmental, social and governance.
EV means Enterprise value.
FRC Financial Reporting Council.
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 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 the underlying Private Equity, Gross 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, Debt Investments and Derived Equity, 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 means Initial public offering.
KPI means Key performance indicator.
LSE means London Stock Exchange.
LTM means Last twelve months.
Market capitalisation is calculated by multiplying the share price at a
particular date by the number of shares in issue on the same date. The euro
equivalent is translated using the exchange rate at the reporting period
date.
MOIC Multiple of invested capital.
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 accounting
policies.
NTM means Next twelve months.
OCI means Other comprehensive income.
Ongoing charges are the Company's ongoing charges which are calculated in line
with guidance issued by the AIC. They comprise 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 is set out on p.116.
Operational Excellence Practice or OEP means 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.
Performance fee reserve is the estimated performance fee reserve calculated in
line with the Investment Management Agreement.
Portfolio Total Return means the sub-portfolio performance in a given period,
and 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.
RCF means Revolving Credit Facility.
Reporting period means the period from 1 January 2023 to 31 December 2023.
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, divided by 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, the sub-portfolio performance
in a given period can be evaluated by taking the 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.
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).
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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